Haynes v. Rudd

Hardin, J. : The jury have found that the plaintiff made his negotiable note on time, conditioned to pay the defendant $250 to compound a crime, and that the defendant, before it was due, for value transferred it to a bona fide holder, and that the plaintiff was compelled to pay it to the holder. The plaintiff did not voluntarily pay the money to get up his note. He had no defence against it that would avail him against a bona fide holder for value without notice of its origin and consideration. (Grines v. Hellenbrand, 6 N. Y. S. C. R. [T. & C.], 620; Hill v. Northrup, 4 id., 120.) It would have been otherwise if non-negotiable. (Conderman v. Hicks, 3 Lansing, 111.) The act of the defendant, in transferring it to the bona fide holder, was such as to compel the payment of it by the plaintiff. True, he had made the note, and in and by it he promised to pay the money to the payee or the subsequent holder. The payee [479] had agreed to violate the statute against receiving anything “ to compound or conceal any offence.” (2 R. S., 714 [Edm. ed.], § 12.) But, so long as it remained in the hands of the payee, it was a void promise. The alleged consideration was a defence of which he could avail himself. There was no payment — no parting with money to the payee. Clearly, if the plaintiff had parted with money voluntarily to the amount of the note, he could not have maintained an action against the payee to recover it back. (Daimouth v. Bennett, 15 Barb., 541; Sharp v. Wright, 35 id., 236; Gray v. Hook 4 Comst., 449; Knowlton v. Congress and Empire Spring Co., 57 N. Y., 518.) The fact that it was a voluntary payment, would have defeated a recovery under the ma.vim of potior conditio defendentis. But when the note was put by the defendant into the hands of the bona fide holder that placed it beyond the power of the maker of the note to refuse .to pay it, and as he did not pay it of his own volition, but because the law compelled the payment thereof, he was not a party willingly parting with a consideration based upon an illegal promise. (Gilmour v. Thompson, 49 How., 200.) The case of Loomis v. Cline (4 Barb., 453) is authority for saying that the note was void in the hands of the payee, and that the court would interfere and restrain its circulation and transfer*, and to prevent its passing into the hands of a bona fide holder, where its payment would be coerced by the law, and that the coui’t would order it delivered up by the payee and canceled. “ His assent, under the fear of prosecution and imprisonment, was not of that voluntary character which gives life and efficacy to the form of a contract.” (Id., 455.) The case of Tracy v. Talmage (14 N. Y., 162) is cited, but we.do not see that it aids in the solution of the question presented here. If it was held that the mere knowledge that property (bonds) was to be used for an unauthorized and illegal purpose, was not a defence to an action for the purchase-price thereof. In the case of Hull v. Rugels et al. (56 N. Y., 425), it was approved, and the court also held that when the party making sale of property, to be used in violation of law, had so arranged it that the violation of the law was facilitated, a recovery could not be had, and, therefore, that the action for prize candies put up [480] so as to facilitate a violation of the law against raffing could not be upheld. In Oneida Bank v. Ontario Bank (21 N. Y., 490) it was held that an action for money had and received would lie, although the post-dated certificates given, upon which the money was obtained, were prohibited and invalid. The principle laid down in Nellis v. Clark (20 Wend., 24; S. C., 4 Hill, 424, and other cases) that where a party has transferred his property to defraud his creditors he cannot maintain an action to recover back the property so transferred, is pressed upon us as decisive of this case. f But in that and similar cases the condition of the defendant is hold to be superior, and that the court will not aid a party who has been guilty of a wrong in voluntarily parting with his property or money. The case in Woodworth v. Bennett (43 N. Y., 273) is cited where four parties had formed a conspiracy to violate the canal laws, and but of that conspiracy one had received $400 ; it was held that one of the four could not have a recovery for his fourth share, as the action could not be sustained without the aid of the illegal agreement to obtain the money by means of the confederation or illegal firm, and, therefore, the court would not allow a recovery which would assert the illegal contract by means of which the money was obtained. > In the case in hand the party does not seek to support his action by adopting and affirming the illegal corrupt contract to pay the money. It is rather a disaffirmance of it, a disregard of the void agreement to pay, a renunciation of it, and of the promise contained in the note, standing up and saying although I unlawfully agreed, and unlawfully promised in my note, I did not pay my money away voluntarily ; but the defendant, by means of the transfer of my note, coerced and compelled me to pay away my money, which I now ask him to return by restoring to me in damages its equivalent. He does not meet my claim by a good consideration as the aliment of my promise, and, therefore, he cannot stand on my unlawful agreement, and my equally unlawful note. [481] In my locus pmnitentice I disaffirmed my unlawful contract. I have been coerced by moral duress to give a note, and been compulsorily made to pay it to a third party, and now I demand to be placed back where the duress took effect upon me. Money paid upon a wager is recoverable per force of the statute • therefore, in such actions it is no answer to say it was voluntarily lost or parted with. But for the statute the voluntary payment would be a defence to a claim to recover it. (See 15 Barb., supra, and Knowlton v. C. and E. Spring Co., supra, 57 N. Y.) We must, therefore, yield our assent to Gilmour v. Thompson (49 How., 200, and the numerous cases there cited) upholding recoveries for money involuntarily paid upon notes given to secure payments, over and above the composition percentage, in violation of public policy, and in fraud of creditors, where such notes had passed before maturity into the hands of bona fide holders for value, and apply the principle laid down in these cases to the one here before us. (Smith v. Eaff, 2 M. & S., 160.) The result at the circuit was in accordance with the views expressed above, and upon the force of the principles stated in the authorities referred to, we must sustain the recovery and affirm the judgment. Talcott, P. J., and Smith, J., concurred. Judgment and order affirmed.