Johnstown Land Co. v. Brainerd Brewing Co.

HallaM, J. Julesburg, Crow Wing county, is in territory covered by the Chippewa Indian treaty of May 22, 1855, which forbids the introduction of intoxicating liquor into certain “Indian country.” In June, 1913, Jule J amie-son owned a saloon at Julesburg which he was operating in contravention of the treaty. Jamieson was willing to dispose of his saloon, including [293] its stock of liquors, for $10,000. The defendant Brainerd Brewing Company was selling beer to Jamieson, so was the Fitger Brewing Company of Duluth. Colonel Sehall was office manager of the Fitger Company, and, in connection with his duties as such, also looked after some deals for plaintiff. Defendants Hemstead and Boppel were officers of the Brainerd Brewing Company. In 1913 Sehall approached defendants with this proposition: “You fellows go ahead and buy this Jules-burg property and we will finance it and you will make money enough out of it to pay for the whole proposition in two years. * * * I will furnish you part of the money, and the conditions are that we are to split the business in the Julesburg location there, meaning Brainerd beer and Fitger beer.” Defendant accepted this proposition, the purchase was made, the property taken over in the names of Hemstead and Boppel. They gave a mortgage of $5,000 to Jamieson. Plaintiff furnished to defendant the other $5,000, the amount which Sehall agreed to furnish, and defendants turned it over to Jamieson. Defendants gave the note sued on for the amount so advanced to them. When the parties closed the transaction Sehall had a note running to plaintiff already prepared. In explanation, Sehall said: “This is our form of handling this proposition. Instead of giving a note to the Fitger Brewing Company it is made out to the Johnstown Land Company.” After the purchase, the beer business was “split” as originally proposed. The exact relation between the Fitger Company and plaintiff does not appear, but counsel for the plaintiff was assistant secretary of both companies, as well as their attorney. At the close of the testimony the court directed a verdict for plaintiff. Defendant moved for judgment or a new trial. The court, conceiving that it was error to take the case from the jury, granted a new trial. 2. The validity of the prohibitory clause of the treaty of 1855 is assailed. This is clearly a Federal question. The Supreme Court of the Hnited States has held that the prohibitions contained in this clause of the treaty are operative. Johnson v. Gearlds, 234 U. S. 422, 34 Sup. Ct. 794, 58 L. ed. 1383; John Gund Brewing Co. v. Great Northern Ry. Co. 246 U. S. 651, 38 Sup. Ct. 333, 62 L. ed. 921. We follow those decisions and so hold. The contention of the plaintiff that the court in those eases considered only the question whether or not the treaty [294] bad. become obsolete we cannot sustain. 3. The treaty in effect forbids the introduction of intoxicating liquor into this territory under penalty. The introduction of the Fitger Company’s beer and of Brainerd Brewing Company’s beer into this territory was contrary to the terms of this treaty. Any contract in furtherance of the introduction of any beer into this territory was unlawful. 4. Plaintiff claims that it was simply a lender of money and that it was in no sense a participant in the transaction for which the money was to be used. In our opinion this contention cannot be sustained. It is well settled law applicable to cases of sales, that mere knowledge by a vendor of an intent on the part of the vendee to use the goods for an unlawful purpose will not bar a recovery by the vendor on the contract of sale, but, if the vendor in any way aids the vendee in his unlawful design to violate the law, such participation will render void the contract of sale and will bar recovery by the vendor. The participation must be to some extent active. The vendor must do something in furtherance of the vendee’s unlawful design. Anheuser-Busch Brewing Assn. v. Mason, 44 Minn. 318, 46 N. W. 558, 9 L.R.A. 506, 20 Am. St. 580; Hanauer v. Doane, 12 Wall. 342, 20 L. ed. 439. By parity reasoning, it must be held that, when money is borrowed with intent on the part of the borrower to use it for an unlawful purpose, mere knowledge by the lender of such purpose will not bar his recovery of the amount loaned, but, if the lender' participates in the unlawful design or actively aids the borrower in carrying it out, the whole transaction is illegal, and the lender cannot recover the money loaned. Hanover Nat. Bank v. First Nat. Bank, 109 Fed. 421, 48 C. C. A. 482; Merchants Bank of New York v. Spalding, 9 N. Y. 53; Johnson v. McMillon, 178 Ky. 707, 199 S. W. 1070, L.R.A. 1918C, 244. 5. The question in this case is, then, was plaintiff, in this transaction, a participant in the plan or design to introduce beer into.this prohibited territory. Unquestionably Colonel Schall was' an active participant in such plan. The sole purpose of the negotiation which he conducted was the purchase and the continued unlawful operation of a saloon and the sale of intoxicating liquors in prohibited territory. The purpose of the loan which he negotiated was to finance this unlawful project, and to make certain the carrying out of this purpose he made it one of the con [295] ditions of tbe loan that beer — Fitger beer — should he introduced and sold. Plaintiff is in no better position than Schall would have been had he himself made the loan. His relation in general to plaintiff is not important. In this transaction, he and he alone acted for plaintiff throughout. Pursuant to his negotiations, plaintiff advanced the money and accepted therefor the note which he took and which it is now seeking to enforce. Plaintiff accepted the contract that he made. It takes it with all the infirmities with which he burdened it. Upon the uncontroverted evidence the whole transaction was void. The court properly vacated its order for a directed verdict. Defendants have not appealed so we are not confronted with the question whether the court should have directed judgment for defendant instead of granting a new trial. Affirmed.