W. S. Weed & Co. v. Cuming

Opinion by Beebek, J., This is a suit between private individuals. It is upon a contract of insurance, made by the defendant and several other individuals and firms, in which the defendant agrees to-pay plaintiff a certain sum in case of his loss by fire. It is-agreed that a loss has occurred, and that plaintiff has performed all the conditions required by the policy to entitle him to payment. The plaintiff’s right to recover arises because the defendant has promised, in the contract of insurance, to pay him. The breach of thus promise to pay is, therefore, the cause-of action. The defense is based upon the Act of February 4, 1870, P. L. 14, the first section of which provides that such contracts as the one sued upon “ shall be void,” and the second section of' which provides that the person issuing such a .contract shall be deemed guilty of a misdemeanor and upon conviction shall pay a fine not exceeding a certain sum. ■ These facts raise the question whether an action will lie-upon a contract which the legislature has declared shall be void if made. This question has been determined in the negative by our Supreme Court nearly one hundred years since, in the case of Mitchell v. Smith, 1 Binn. 110, s. c. 4 Dall. 269. In fact that case went further, for it decided that a contract for [417] the sale of lands in Pennsylvania under the Connecticut title was void, even though the Act of April 11,1795,3 Sm. L. 209, neither expressly says so nor contains a clause prohibiting it, but simply because said act imposed a penalty upon parties entering into such a contract. In our present case the plaintiff is much worse off, in that his contract has been declared void in terms. That case simply established the rule that had been long maintained in England. The general rule may be said to be that whenever the evidence in a given case shows that the contract sued upon has been declared void by statute, the court will, of its own motion and without request from the party interested and even against his wishes, refuse to allow a recovery. The reasons for this rule are set forth at large in that case and need not be repeated here. The rule has been consistently followed by our later cases, and a lucid discussion of them will be found m Fowler v. Scully, 72 Pa. 456. We are not unmindful of the fact that Fowler v. Scully has been in effect overruled by the Supreme Court of the United States in Union National Bank v. Matthews, 98 U. S. 621. It was not, however, overruled upon any grounds that will benefit the plaintiff in this case. Both the opinion and the cases cited to sustain it show that all that the court meant to say was that the act of congress forbidding national banks to take mortgages as security for future indebtedness did not clearly show an intent to declare all such mortgages void. It was held that where the authority to contract depended upon the question of regularity of organization or of power conferred by the charter, a party who has had the benefit of the contract cannot be permitted, in an action founded upon it, to question its validity. That the result was determined largely by the terms of the act of congress is evident from the decisions cited to sustain it, to the effect that the statute must be examined as a whole to see whether the makers intended that a contract made in violation of it should be void. In our present statute there is no room for interpretation. The language is as plain as it is possible to make it, and its strength is increased by its brevity. It says such contract shall he void. This is the legislative intent and it is our duty to so declare. We cannot agree with the learned court below in holding that this case is to be determined by those cases which hold that the doctrine of ultra vires shall not be allowed to prevent [418] a recovery oil a contract where it appears that the party sought to be charged has received the fruits of that contract. Such cases are abundant and illustrate perhaps the triumph of the law of estoppel over that of ultra vires. The cases where the law of ultra vires must give way to the law of estoppel are easily distinguished from the present case. An act may be ultra vires because no authority is given in the charter to do it, or because the charter forbids it to be done, but an inhibition arising from a mere failure to authorize, or from a direction not to do a particular thing, is altogether different from the command of a penal statute forbidding a certain contract to be issued, providing that it shall be void if issued, and making-one who issues it guilty of a misdemeanor or crime. Moreover the doctrine of ultra vires is inseparably connected with the idea oí a corporation and its rights and liabilities and as this is a contest between private individuals we think it only confuses the case to attempt to apply the principles of that doctrine, or those that overthrow that doctrine, to a case of this kind, where the defense is, not that the contract was ultra vires, but that it was a misdemeanor to make it, that is to say, an offense against the criminal law of the state. We agree with Mr. Justice Agnew, in Fowler v. Scully, supra, in discussing the reasons which induce courts to refuse to aid illegal transactions in any respect, where he says, “ There is, therefore, no room for equitable presumptions, or estoppels, in cases of illegal contracts.” We do not think it necessary to discuss or attempt to point out the difference between the cases relied upon by the learned court below and the present case. We have already said that those illustrating how the doctrine of ultra vires must give way, under proper circumstances, to the doctrine of equitable estoppel cannot rule this case, where the defense is not that the contract is ultra vires. Those decided on other grounds are easily distinguished from the present case, for in none of them was it decided that a contract could be recovered on, which a statute flatly declared to be void and made the person who executed and issued it guilty of a misdemeanor. In fact it is clear from the opinion of the learned court below that it agreed that the law was as we have found it to be. Our difference is that we cannot agree that the fact that defendant received and retained the premium took this case out from under the opera [419] tion of the rule, as the court below thought it did. Our first case of Mitchell y. Smith, supra, shows that this fact makes no difference, for the defendant in that case was in possession of the land for which he gave the note on which suit was brought. He retained the land, refused to pay the note given for it, and was sustained by the Supreme Court in this refusal. It only remains to consider whether the demand connected with this illegal transaction is capable of being enforced at law, the test of which is said to be whether or not the plaintiff requires the aid of the illegal transaction to establish his case. In our recent case of Allen v. Line, 11 Pa. Superior Ct. 517, we said: “ In the cases cited on this subject it is frequently said that the plaintiff will fail if the evidence shows that he needs the aid of the illegal transaction to establish his case, but we cannot take this to mean that the mere introduction of evidence of the illegal transaction defeats the plaintiff. The question still remains, does he need the evidence to prove his case ? ” It is plain that the plaintiff in this present suit must prove that the defendant’s promise to pay the loss, found nowhere but in the void policy, has been made and broken. He can only prove that it was made by putting in evidence the policy, but when he shows its existence he also shows that it is void. As he cannot recover on a void contract he must necessarily fail. Judgment reversed. • Peb Ctjbtam, January 17, 1900: The above opinion was written by Judge Beebeb during his term of office as a member of this court, the case having been duly assigned to him for that purpose. It is now adopted and filed as the opinion of the court.