Fidelity Funding Co. v. Vaughn

Opinion of the court by Pancoast, J.: The principal, if not the only, contention in the court below in this case was that the contract or certificate issued to the defendant in error was in itself illegal and void, because it was a lottery and a fraud. It was contended that the lottery features consisted of: First, the prize feature of the contract: Second, the certainty in value of return being dependent upon chance, the chance features being the writing of new contracts, and lapsation, both of which are contingencies over which the parties had no control and which they could not forecast, the fraud features of the contract being that the business of the company would not finance out. It might be well, before discussing the legal features in this controversy, to pause for a moment and state that the government has issued a fraud order against this company and that all of its business subsequent thereto has been conducted through the express companies instead of the mail. Some twelve different assignments of error are argued in the brief of the plaintiffs in error, but, owing to the conclusions we have reached, only three are of importance. All the remaining assignments are subordinate to and depend upon the" others. *24 It seems strange that, in the light of the numerous decisions of the various courts bearing upon this class of contracts, any company organized for the transaction of such •business as is provided in the certificates of this company, would undertake to persuade a court of justice that the contract under consideration was not a lottery. Without going into the contract in detail, it is sufficient to say it partakes in all its essential features of the numerous contracts that have “been before the several courts and have been universally held to be lotteries, embracing the elements of procuring through lot or chance, by the investment of a sum of money, some greater amount of money. The contract is' ''Iso fraudulent upon its face, for it promises to each investor what cannot be ¡performed. It takes the money of one investor to pay another, with no prevision for the ultimate repayment of those whose money is thus taken. It promises to pay large profits from the business which are not earned nor expected to be earned in the business and with no capital or property for such payment. It makes absolute promises of payment when their performance and the liability to perform them depend upon contingencies which the company can neither perform or foretell. It depends upon the broken promises of some investors for the means to pay others, and the extent of this is a contingency known to be beyond the control or forecast of the company. • The ability to pay the older investors depends entirely upon the amount of new business solicited and the fact that it will require more than one new share solicited to pay one old share, the new business solicited must constantly increase at a high progressive rate in order to make such payments, *25 and, it being impossible to continue this indefinitely, the end must come sooner or later, and when it does come, the more successful the business up to that time, the greater and more wide-spread will be the loss. In other words, when a member drops out, his money goes to those who remain. The first class feed upon the second, the second upon the third, and so on until the collapse. In the language as stated in Public Clearing House v. Coyne, 121 Fed. Rep. 929, “It is a literal demonstration of the old saying, "The devil take the hindmost.’ ” Indeed, it has not the elements of fairness of the old-style lottery, for in such case it was fairly understood by the investor that there was an element of chance, and, while there was some chance of getting something for nothing, it was also understood that there must be some blanks; while in the case of this company it is represented that the investor will receive fifty per centum profit on his investment and that there will be no blanks drawn. Yet the vice of the plan is that many must fail in order that all the continuing certificates shall mature, the inducement being that those who may be strong enough to survive will find their profit in the weakness, misfortunes and discouragements which cause a large number of their associates to fall by the wayside. As bearing upon the different features of this question, the following cases are cited: State ex rel. Prout, Atty. Gen. v. Nebraska Home Co., 92 N. W. 765; W. U. v. McDonald, 59 Fed. Rep. 563; Horner v. The U. S., 147 U. S. 462; McLaughlin v. National Mutual Bond and Investment Company, 64 Fed. Rep. 911; Peltz v. Supreme Chamber O. of F. U. (N. J. Eq.) 19 Atl. 668; State v. New Orleans Debenture *26 Redemption Company, 51 La. Ann. 1827, 26 So. 586; S. C. & G. R. R. Co. v. A. S. R. Co. 33 S. E. 36; State v. Interstate Co., 52 L. R. A. 530; In Re National Indemnity & E. Co., 21 Atl. 879; U. S. v. Durland 65 Fed. 408; Randall v. State, 42 Tex. 585; People v. Elliott, 74 Mich. 264; McLanahan v. Mott, 73 Hun. 131. The next question of importance is as to whether or not the court erred in rendering judgment against the defendant, C. Romander. Romander was the active agent of the company and solicited the purchase of the certificates which are the basis of this action. He personally induced the defendant in error to enter into the illegal contract. He was the one who perpetrated the fraud- in this particular instance. In cases of this kind, both principal and agent are wrongdoers. No matter how small or great the wrong or advantage, there will be no justification for its commission. Weber v. Weber, 42 Mich. 569. The agency in such cases is no protection, nor is the fact that some one else received the benefit of his wrongful act. It is immaterial that the authority was delegated to some one else. It is immaterial whether one who commits the wrongful act acts for himself or for another, he is none of the less a wrong-doer. Johnson v. Barber, 51 Am. Dec. 416; Reinhard on Agency, section 314; Campbell v. Hillman, 15 B. Mon. 508; Am. and Eng. Ency. of Law, vol. 1, p. 1135. The only remaining proposition which it is necessary to notice as is to the intervener, Leneve. He was allowed to intervene in this case, setting up the fact that he was the owner of the money garnisheed. The facts, as disclosed by the record, are that the defendant, Romander, had received *27 a cheek ox draft from the company with, which it was intended to pay a claim belonging, as shown by the books or records of the company, to F. S. Slagle, for $962., bnt in which it is alleged that Slagle had no interest and that Leneve was the owner thereof. The amount of money sent to the agent, Romander, was $1443., $962 of which it is claimed was to pay the claim of Leneve, and the remainder to pay another claim. This draft was deposited in the Oklahoma City National Bank to the credit -of Romander and was in that condition when the garnishee process was issued and served. It seems evident that this money, no matter from what source it had been derived, was the money of the company which the company sent to its agent, and which its agent still retained by depositing it in his oto name in the bank. . It had, therefore, not been segregated in any way, but was still under the control of the company or its agent, subject to the check of Romander. It was not in such a condition that any principle of trust could attach thereto. Until the amount had been „paid out by Romander or some other agent of the company to Leneve, Leneve could have had no more interest in this particular money than in any other fund belonging to the company. No matter what might have been the intention of the company for the payment of the certificates which it is claimed by Leneve belonged to him, he was in exactly the same position of the other certificate-holders, in that they each held the company’s promise to pay, and until the payment was actually made, the money, no matter from what source it was derived, belonged to the company. The court below, therefore, very properly sustained the demurrer to Leneve’s evidence, as from his own evidence he was not the owner of the money garnisheed. *28 No error appearing in the record, the judgment of the court below, will be affirmed. Burford, C. J., Burwell, J., and Garber, J., dissenting; all the other Justices concurring.