Sampson v. Shaw

Ames, J. The agreement to operate in the stock of the Malden and Melrose Horse Railway Company was relevant and material to the defence, and the auditor ruled correctly in deciding that the evidence tending to prove it was admissible. It can hardly be denied that such a contract as that described in the auditor’s report would be illegal and fraudulent. No association to carry out such a purpose would be recognized, at law or in equity, as having any of the legal incidents of a copartnership. Neither party, as against the other, can enforce what remains to be done, or correct what has been done, under a contract, or rather a conspiracy, of that description. 3 Greenl. Ev. § 90, and cases cited. The auditor, therefore, ruled very correctly “ that said agreement for operating was illegal and void, and that the parties did not become copartners by force of the agreement, or of any acts done in pursuance thereof.” But it does not by any means follow that the defendant cannot set up any acts done under the agreement, in .answer to the plaintiff’s claim. On the contrary, although it is very clear that the law [150] will not aid one party to an illegal contract, to enforce it, so far as it remains executory, against the other, it is equally clear that it will not interfere “ to restore the party who has paid money upon it.” Ball v. Gilbert, 12 Met. 397. In other words, the law will not help either party. The defendant claims the benefit of the familiar maxim, in pari delicto, melior est conditio possidentis. If he can prove that Thaxter, at the plaintiff’s request, had actually appropriated and paid part of the balance in his hands upon the joint enterprise, to that extent he makes an answer to the plaintiff’s claim. He insists that the funds were left in Thaxter’s hands with the understanding and agreement that Thaxter was to apply them, so far as should be found necessary, to the payment of the plaintiff’s share of the expenses of the joint enterprise; that in fact they were appropriated by the plaintiff himself to that object, so far as they should be wanted; and that, although the plaintiff had the right to disaffirm the contract, revoke the authority, and reclaim the funds, yet, as he never did so, all moneys actually paid out by Thaxter for him and from his funds, on the joint scheme, stand on the same footing as if paid by the plaintiff with his own hand. We think that this view of the law is entirely correct, and that the defendant has a right to set up in answer to the plaintiff’s claim, as far as they will go, any and all payments actually made by Thaxter or by Thaxter. & Company under the “ cornering ” agreement, if made on the plaintiff’s account, by his authority, or with his consent. As between Thaxter and the plaintiff, there are no particular equities in favor of the latter that would entitle him to get back the money that has been laid out upon an unsuccessful enterprise by or for him, and thus to throw the whole loss upon his associates. This case seems to fall within the rule so clearly laid down in Ball v. Gilbert, 12 Met. 397. King v. Green, 6 Allen, 139. White v. Franklin Bank, 22 Pick. 181. It is difficult to distinguish the case in principle from an action against a stakeholder in a wager. The wager is an illegal contract. The losing party may reclaim his deposit from the stakeholder, provided he gives notice and revokes the authority [151] before the money is actually paid over to the winner. McKee v. Manice, 11 Cush. 357. We think the defendant has a right to'have the question of fact passed upon, and that a new trial must be had to ascertain what exact sum, or whether any sum, belonging to the plaintiff, remained in the hands of Thaxter after deducting any and all sums which the defendant can prove that the testator paid under the “ cornering ” agreement, on the plaintiff’s account, by his direction or with his consent. The defendant, however, insists that the whole fund in Thax ter’s hands was placed at his disposal by the plaintiff, without any limitation, to be used' at discretion in execution of the illegal common purpose, and that the action cannot be maintained as to any portion of the fund, on the ground that money lent for an illegal purpose cannot be recovered back by the lender. He claims that the plaintiff agreed to pay his proportion ; that he set apart and appropriated a particular fund from which his share of the payments was to be made, and that he substantially authorized Thaxter to use the whole of it, if he thought fit, in carrying the scheme through. But this appears to be, strictly speaking, a question of fact rather than law. If the plaintiff advanced and lent the whole fund, with directions merely that the unexpended balance, if there should be any, should be repaid, he cannot recover, for the reason above stated. But if the direction given was merely that Thaxter from time to time should take from the fund enough to pay the plaintiff’s proportion of the expenses incurred and investments made, to such extent as the necessities of the speculation should require, the unexpended balance in Thaxter’s hands would not be considered as paid by the plaintiff on an illegal contract, but would be recoverable in this action. It is argued on the plaintiff’s behalf that the claim which he makes is for money had and received, traced distinctly to Thaxter’s hands, and held by a contract tainted with no illegality; that the defendant, in order to resist the claim, is obliged to set up an illegal agreement, and rely upon it, and that this necessity is the test as to the equality of the delict. However ingenious this suggestion may be, it can hardly prevent the court [152] from taking the whole transaction together, and considering what it is in substance and effect. The application of the maxim, in pari delicto, &c., does not depend upon any technical rule as to which party is the first to urge it apon the court in the pleadings. In practice, it is usually insisted upon by the defendant in answer to a primd facie case. The objection founded upon the fact that, during a part of the time covered by the various accounts rendered, Thaxter and Bouvé were partners, is disposed of by the provisions of the Gen. Sts. c. 97, § 28, under which the suit may properly be brought against the estate of Thaxter, as if the contract sought to be enforced had been joint and several. See Burnside v. Merrick, 4 Met. 544; Curtis v. Mansfield, 11 Cush. 152. It is possible, also, that, upon the evidence reported, the auditor may have found as a matter of fact that, by arrangement among all concerned, it had been made the separate debt of Thaxter, according to the rule in Wild v. Dean, 3 Allen, 579. Neither is the fact that the estate has been represented insolvent any bar to the prosecution of the suit, so far as to ascertain how much, or whether anything, is due to the plaintiff, although it is a very good reason for not allowing execution to issue. Gen. Sts. c. 99, § 20. Verdict set aside.