Swords v. Owen

By the court, Monell, J. —In 1833, the legislature enacted a statute embracing the following two sections (Laws of 1833, chap. 281). u Section 1. No person shall hereafter transact business in the name of a partner not interested in his firm, and where the designation 11 and Company,” or “ & Co.” is used, it shall represent an actual partner or partners. “ Section 2. Any person offending against the provisions of this act, shall, upon conviction thereof, be deemed guilty of a misdemeanor, and be punished by a fine not exceeding one thousand dollars.” The act is entitled u an act to prevent persons from- transacting business under fictitious names.” Literally, the statute prohibits the transaction of business in the name of a partner not interested in the firm, and requires that the designation “and Company,” or u and Co,” shall represent an actual partner. A violation of the statute is deemed, upon conviction, a misdemeanor punishable by fine. The prohibition does not, nor does the penalty, in terms apply to contracts made by such firms, and does not, therefore, in terms declare such contracts void, but the act makes it unlawful for any person or persons to transact business by, or in the name of, a fictitious firm. The answer alleges that the contract, upon which the! cause of action arose, was made by the plaintiff, in carrying on and transacting business under the firm name of “ Swords, Betty & Co.,” and that the addition of “ & Co.” did not then represent an actual partner; and the allegation is admitted by the demurrer to be true. The contract, then, was made by a person •while unlawfully using a prohibited style, the using of which was a criminal offense, punishable by fine. It is not necessary that a penal statute should contain prohibitory words. A penalty implies a prohibition, and every act done against it, is not only illegal, but absolutely void (Hallett agt. Novion, 14 J. R., 290). [185] The prohibition is against transacting business; and it renders it unlawful for a person to conduct his business under the designation of “ and Company,” or u & Co.,” unless such addition represents an actual partner; and such person cannot make any executory contract whatever, which can be enforced by him, while using such prohibited title. It would be impossible to give significance and effect to the statute, unless it was adjudged to apply to all business transacted under the unauthorized name; and, therefore, to all contracts made in the name, or when using the prohibited style, rendering all such business transactions and contracts absolutely void. The decisions in our state courts strongly support the views I have expressed,' and quite uniformly hold, that all transactions prohibited by statute ar.e void. In Hallett agt. Novion (supra) an act of congress had made it a misdemeanor, punishable by fine and imprisonment, for a person to fit out and arm any ship or vessel with intent to employ her in the service of any foreign power, &c. The act contained no words of prohibition, but the court held, as before quoted, that a penalty implied a prohibition, and every act done against it is void. In Pennington agt. Townsend, (7 Wend., 276), an act of the legislature made it unlawful for any person or association to keep an office for transacting banking business, &c., unless expressly authorized by law, giving a penalty. In the act there was no clause declaring void the securities taken. . The action was upon a check which had been discounted by an unauthorized banking association; and the court held the transaction void under the statute. Judge Nelson, in referring to the proposition that the penalty was the only consequence of a violation of the act, says, “ there is no distinction between an act malum prohibitum and malum in se. Both are equally forbidden and unlawful, and I will add, both are immoral, and cannot be [186] the foundation of a civil right, that will be enforced in a court of justice.” In Griffith agt. Wells, (3 Denio, 226), the action was to recover for liquor sold by a person not having a license. The act of the legislature did not, in terms, prohibit the sale of liquors without a license, nor declare the act illegal. It .only inflicted a penalty upon the offender. But the court held the contract to be illegal, add no action would lie to enforce it. An analagous case was decided in the N. Y. common pitas (Ferdon agt. Cunningham, 20 How., 154), where a contract for service by a public cartman, was held to be void, the cartman not having a license, as required by a city ordinance, which merely affixed a- penalty for keeping or using a public cart, without first obtaining a license therefor. Best agt. Bauder (29 How., 489), although only a spécial term decision, is strongly ' in point. The action was for goods sold. The defense was, that the seller was engaged in the business of peddling, without a license, in violation of the revenue laws of the United States. The court overruled a demurrer to the defense, holding that the penalty in the act implied a prohibition, rendering the contract of sale void. In that case, the distinction which is suggested in some of the cases (Griffith agt. Wells, supra, and Bell agt. Quinn, 2 Sandf., 150), between a license for revenue only, and such as have in view the. protection of health or morals, or the prevention of fraud, is repudiated. In Hoyt agt. Allen, (2 Hill, 322), although the decision was as to the sufficiency of the pleading, there is an intimation which, taken in connection with the reporter’s note, sustains the principle of all the foregoing cases. And the principle is further supported by the case of the U. S. Bank agt. Owens, (2 Peters, 527), where a contract was held void as being in violation of the charter of the bank, forbidding the taking of more than six per cent, interest. Under the authority of the cases cited, we must hold the [187] transaction set forth in the complaint to be illegal and void, and not enforceable in the court of justice; and, therefore, that the matter set up in the answer, constitutes a defense to the action. It is impossible, I think, to apply the distinction in this case, claimed by the respondent’s counsel, that this is a mere collateral transaction, not connected with, but remote from, the prohibited act. Such distinction clearly defined in the cases he has referred to where it is held, that if the illegality does not form any portion of the contract, but is merely eollatteral, and capable of complete separation from it, the contract is binding. The distinction, however, cannot be made available in this case. Tqe illegal act is the transacting of business. Business cannot be transacted except by and under contracts express or implied, executory or completed. Every executory contract made in transacting business, must, necessarily, therefore, be void under the prohibition against transacting business, under a fictitious firm name. Any other application of the statute would render it wholly ineffective, as the design of the legislature as expressed in the title of the act, was, to prevent persons from transacting business.under fictitious names. In their complaint the plaintiffs aver, that at the time they made the contract with the defendant, they were doing business under the firm name of “ Swords,. Betty & Co.,” and the answer alleges that the transaction was made with the plaintiffs, while unlawfully transacting business under such fictitious firm name. These several allegations, are, in my opinion, sufficient to bring the case within the provisions of the statute prohibiting the transacting of business in the name of a partner not interested in the firm. The order appealed from should be affirmed, with costs.