Woodworth v. Bennett

This is the second time this case has been before this court, upon substantially the same state of facts. The only point presented is, whether the $100 which had been paid by one Harroun to the plaintiffj for the use and benefit of the defendant, should be allowed as a set-off to the claim proved by the plaintiff in this suit. On the first trial, before a referee, he disallowed this claim, and reported in favor of the plaintiff. Upon an appeal to this court, the judgment was reversed, and a new trial ordered; and the point seemed to us then so *376clear, and the error so manifest, that the reversal was made substantially upon the argument, and no written opinion was prepared. The new trial to.ok place at the circuit, before Justice Morgan, and he has rendered a judgment for the defendant following the opinion of the general term, from which judgment the plaintiff has now taken an appeal, and submits the case to our farther consideration. It is not the custom of this court to hear a re-argument in a case where its judgment has been deliberately given and announced, and we should not be justified in departing from that rule in this case, but for the fact that we rendered the judgment without accompanying it with the reasons upon which it was founded, and out of deference, in part, to the elaborate .argument of the counsel for the plaintiffj and the great earnestness and evident sincerity with which his views are urged.

The facts so found by the judge, present the following ease. The plaintiff and defendant, together with Stephens and Truesdell, (the latter of whom was an engineer on the canals,) had sold out a bid for some public work on the canal to one Harroun, who gave, upon such purchase, his note for $400 to the plaintiff, one quarter of which was to be paid to each of the said four parties. The note was duly paid to the plaintiff and he paid over to Stephens and Truesdell, respectively, their shares, retaining his own, but refused to pay the $100 to the defendant, agreeing, however, to apply the same upon their mutual dealings when they should come to a settlement. It is this $100 which forms the subject of the set-off* claimed in this case, and the judge, as a conclusion of law from these facts, finds that although the sale of the bid was illegal.and void, yet that when Harroun gave his note on that consideration and for the benefit of all the parties, and afterwards paid it to the plaintiff, he could not set up the illegality of the sale of the bid to Harroun, to avoid the payment of the one *377fourth thereof to the defendant, and the set-off was consequently allowed.

The counsel for the plaintiff expends a large amount of labor and learning to prove that the contract of partnership between the plaintiff, the defendant, Stephens and Truesdell was illegal, contrary to public policy, and made in contravention of the statutes of the state, and therefore incapable of being enforced between the parties to the same. The counsel might have saved himself this unnecessary expenditure of strength, because the decision of the case proceeds upon a concession of the entire illegality of that transaction. Nothing is clearer than that, being so, it could not have been enforced between the immediate parties; that is to say, Harroun could have successfully resisted the payment of the note, and the defense of the illegality of the transaction out of which the note arose, would have'been a perfect defense to an action brought to collect it. But this he failed, or did not choose to do. If there was to be “ honor among thieves,” he proposed to maintain his to the extent of paying what he had agreed to pay, leaving the plaintiff to distribute the spoil rateably among those entitled to it. Having done this, the partnership was functus officio—it had accomplished its whole work, and nothing remained to be done to carry out its objects, or further its designs. Thenceforth the plaintiff became a mere depositary of the money for the benefit of those entitled to share in it, among whom was the defendant. It was, in effect, money had and received to the use of the defendant, and which the plaintiff, in addition to his original obligation as substantially a stakeholder, had promised to pay to the defendant. He cannot be permitted to escape from this obligation upon the' plea that he received this money as the fruit and result of an illegal transaction; and being himself in that transaction particeps criminis with the defendant, the latter has no better stand*378ing than he, and is not entitled to reclaim the money thus paid to the plaintiff for his use.

It seems indeed somewhat of a solecism in morals that no one but a participator in the offense shall be permitted to avail himself of the illegality of a transaction, for his protection from responsibility in respect to it, but such is the undoubted rule when the transaction itself is directly in issue and is sought to be enforced. The courts have adopted this rule in part' for their own, protection, and to avoid being obliged to play the role of an umpire among felons, and aid one' knave at another’s expense, and for the benefit of Mm who equally comes into court with soiled garments and unwashed hands. But to go farther than this, and to hold that after the illegal contract has been fully performed, and no aid /is sought to uphold and enforce it, a party who has received money paid in execution of the contract for the benefit of another, shall be allowed to fall back on the illegality of the original transaction to screen him from the discharge of what is a mere agency, would be refining, beyond any reasonable degree, and carrying the immunity of a participant in such prior illegal transaction to a needlessly, fastidious and even romantic extent.

It is conceded by the counsel for the plaintiff that, if money has been paid to an agent for the use of a principal, the legality of the transaction, of which the money is the fruit, does not affect the right of the principal to recover the money from the party who has thus received it. That was decided as long ago as the case of Tenant v. Elliott, (1 Bos. & Pul. 3,) in which it was held that where A had received money to the use of B, on an illegal contract between B and 0, he should not be allowed to set up the illegality of the contract as a defense in an action brought by B, for money had and received. The decision is very brief, but it is expressed in the nervous language and with the strong good sense which was characteristic of Mr. *379Justice Buller. “Is the man,” he says, “ who has paid over money to another’s use, to dispute the legality of the original consideration ? Having once waived the illegality, the money shall never again come back to his hands. Can the defendant then in conscience keep the money so paid? For what purpose should he retain it ? To whom is he to pay it over; who is entitled to it but the plaintiff?” In this opinion Eyre, Ch. J. concurred, and the case states the defendant took nothing by his motion.

It is said that this case is shaken, if not overruled, by the case of Farmer v. Russell decided by the same court in the same volume of Bos. & Pul. 296. So far from this, the court recognize fully the doctrine of Tenant v. Elliott, but a doubt being suggested by two of the judges how far the defendant was implicated in the transaction out of which the suit arose, it was sent back for a new trial, and nothing more is heard of it, save in a note at the foot of the case it is said, the defendant paid the money into court, satisfied, doubtless, that he could not succeed in his defense even if he could have proved that he was, as suggested by Chief Justice Eyre, “ mixed up with the original contract.” Buller takes occasion to say that the case could not be distinguished from Tenant v. Elliott, and in relato the point of knowledge and participation by the defendant, he says it is not made out by the evidence, “ nor in-" deed,” he adds, “if it had been, would it have made any difference in the case of an action for money had and received, which is not founded on the illegal contract, but on a ground totally distinct from it. It is immaterial whether the money were paid on a legal or illegal contract. Here the money having been paid to another for the plaintiff’s use, the illegal contract is out of the question.” This is both good sense and good morals, and applied to this case, it indicates the simple duty which the plaintiff had to perform, to wit, to pay over the money placed in his hands as a mere depositary for the use of the defendant, *380and to which neither in morals nor in law, could the plaintiff assert the shadow of a claim. Whatever refinements have been attempted in some more recent cases to do away the authority of these early decisions, they have not attained a standing to which we are compelled to yield. On the contrary, in the very recent case of Merritt v. Millard, in the Court of Appeals, (not yet reported,) the doctrine of Buller is re-affirmed and applied to a case in its general features very similar to the one before us. The case was this. The plaintiff Merritt and one Brewster, had liens upon some real estate which was about to be sold on the foreclosure of a prior mortgage. Millard, the defendant, was acting as the attorney for Brewster, when the latter agreed through him to pay $500,- if Merritt would not bid at the sale. Acting on this agreement Merritt omitted to bid, and Brewster was enabled to secure the property without competition. Subsequent to the sale, and to carry out his agreement, he paid $500 to the defendant for the benefit of Merritt, who, upon application by Merritt, refused to pay it over, and in the action brought to recover it, set up the illegality of the contract of Brewster as a defense, claiming as he did upon the trial, and on the argument in the Court of Appeals, that he was connected with the contract between the plaintiff and Brewster, that he knew the object of Brewster in paying over the money to him to be in furtherance of the illegal contract between them, and that he was acting on behalf of Brewster to complete the original contract. Conceding the illegality of the contract made by Brewster with Merritt to prevent competition on the sale, the defense was overruled, and judgment was given against the defendant Millard, and on appeal to the Court of Appeals it was unanimously affirmed. An extract from the opinion of Judge Mason, which was adopted by the court, will indicate the ground of the decision, and show that the principles announced in that case are applicable to, and govern *381the one at bar. “Whenever,” he says, “the parties have executed a contract for illegal purposes, the court refuses its aid to enable either party to disturb it. Brewster could not be compelled to pay this money, but when he did pay it to the defendant for the plaintiff’s use, it did not lie with the defendant to put the money in his own pocket, and refuse to pay it over. Brewster had the right to waive the defense of the illegality of the contract, and pay the money, and when he had done so and placed it in the defendant’s hands upon the simple trust that he would pay it over to the plaintiff, the law enjoins that duty upon the defendant, and will not permit him to set up this defense. If the money had been paid directly by Brewster to the plaintiff, it is clear that upon the most elementary principles of law, he could retain it, as against Brewster. The money in that case would, in the strictest sense belong to him. Does it not equally belong to him when paid to another for him ?” He then cites in support of these views the cases of Tenant v. Elliott, and Farmer v. Russell, thus indorsing and re-affirming the authority of those cases, and Hamilton v. Canfield, (2 Hall 526,) and Armstrong v. Toler, (11 Wheat. 258,) and adds: “The defendant’s liability arose upon the receipt of the money, and it is entirely separate from and independent of the illegal contract.” It is unnecessary to add any thing beyond this by way of argument, illustration or authority; for the principle stated and enforced covers the whole ground of the attempted immunity in this case, and drives the plaintiff from the covert he seeks under the shadow of the prior consummated and extinguished illegal contract.

The judgment should be affirmed.

Bacon, Foster, Mullin and Morgan, Justices.]