Huncke v. Francis

The Chief Justice. The action was brought in the. court below by Francis, the defendant in error, to recover from Huncke the sum of $300, deposited in his hands, as stakeholder, by Francis, as a wager with a third party, upon the event of a horse race. The principal question involved in the various errors assigned is whether, by the laws of tin's state, the action can be maintained. The statute declares the bet illegal and void. Nix. Dig. 315, §§ 17, 21. The rule is well settled, that where tire wager is illegal, .either party may recover from the stakeholder the. money by him deposited, even after the wager is decided against him, provided he demanded the return of the stake before the money had been actually paid over, after the event, to the winner. Chitty on Con. (ed. 1855) 542; 2 Parsons on Con. 139. Tins rule is sustained by numerous cases, both English and American, most of which will be found collected in notes to the authorities just cited. „ By the recent decisions in the State of New York, it seems to be settled, that a party to the bet cannot recover back the deposit from the stakeholder, unless he give notice not to pay it over before the happening of the event upon which the bet depends. Yates v. Foot, 12 J. R. 1; Fowler v. Van Surdam, 1 Denio 560; Morgan v. Groff, 4 Barb. S. C. R. 528; Like v. Thompson, 9 Barb. S. C. R. 315. The ground upon which these cases rest is, that the bet being decided, the contract is partially executed, and that the law will not relieve against an executed illegal contract. The English authorities, however, are clear that when the wager is illegal, the money deposited may he recovered by the depositor, after the bet is decided, if demand is made before it is paid over to the winner. It was so held by Oh. Just. Kent, in a very elaborate opinion, in which the court concurred, in Vischer v. Yates, 11 Johns. R. 23. The same view was adopted by the Supreme Court of this state in Moore v. Trippe, Spen — 57 — cer 263, and will be found to be supported by many of the American eases. Aside from this diversity of opinion upon the simple point whether the money can be recovered after the wager has been decided, there is no conflict whatever of authority upon the right of the party to an illegal wager to recover the amount deposited from the stakeholder. The authorities are numerous and uniform. The rule of the common law is perfectly well settled. It is not understood that the common law rule is at all drawn in question. It is insisted, however, that the rule is inapplicable to the present case, inasmuch as, by the statute of this state, the stakeholder of money wagered upon the running, pacing, or trotting of horses is declared guilty of a misdemeanor. The mere act of stakeholding is made unlawful. The deposit of the money in the hands of the stakeholder being criminal, and the parties being in pari delicto, the stakeholder cannot, it is said, recover back his money. The conclusion rests upon a misapplication of the legal principle by which the question is controlled. In the first place, the parties are not, so far as the question of criminality is concerned, in pari delicto. The statute makes the stakeholder alone indictable. The party making the deposit is guilty of no misdemeanor by the mere act of depositing the stakes. The fact of making the bet is illegal, but making the deposit in the hands of the stakeholder involves, on the part of the depositor, no additional criminality. So far, therefore, as the criminality of the act is concerned, the depositor stands precisely in the situation in which he stood before the passing of the statute making the stakeholder indictable. It is true that the fact of stakeholding being declared by the statute a misdemeanor, depositing the money in the hands of the stakeholder, though not criminal, is a violation of the spirit and policy of the law-—and so it was before the statute declared the stakeholder guilty of a misdemeanor. The bet was illegal—the holding of the — 58 — stakes was ancillary to this illegal act, and was in clear contravention of the spirit and the policy of the law which declared the het illegal. But, that the argument may be presented in its greatest force, let it be conceded that (he payment of the money to the stakeholder is in direct violation of law. The simple question, then, presented is, whether money paid not only upon an illegal contract, but in violation of law, can be recovered back while that contract remains unexecuted. Clearly the contract cannot be enforced. The court will never lend its aid to enforce the execution of a contract illegal in itself or against the policy of the law. Nor, on the other hand, if the illegal contract be executed, will the court lend its aid to restore the money paid upon such illegal contract. Here the maxim applies, in pari delicto potior est conditio possidentis. But the contract being unexecuted, the illegal purpose for which the money was paid not having been effected, may the money be recovered back in disaffirmance of the contract? It was urged, upon the argument, as a legal principle, that money paid in violation of law cannot be recovered back. The legal principle is directly the reverse. Money paid upon an unlawful contract, while that contract continues executory, may be recovered back. The principle cannot be stated more clearly than in the language of Mr. Comyn: “ When money has been paid upon an illegal contract, it is a general rule that, if the contract be executed, and both parties are in pari delicto, neither of them can recover from the other the money so paid ; but, if the contract continues executory, and the parly paying the money be desirous of rescinding it, he may do so, and recover back his deposit by action of indebitatus assumpsit for money had and received. And this distinction is taken in the books, namely, where the action is in affirmance of an illegal contract, the object of which is to enforce (he performance of an engagement prohibited by law, clearly such an action can in no case be maintained • but when — 59 — the action proceeds in disaffirmance of such a contract, and instead of endeavoring to enforce it, presumes it to be void, and seeks to prevent the defendant from retaining the benefit which he derived from an unlawful act, then it is consonant to the spirit and policy of the law that the plaintiff should recover. 2 Comyn on Con. 109. In Jaques v. Golightly, 2 Black. R. 1073, the action was brought to recover back premiums paid by the plaintiff to the defendant for insuring lottery tickets in violation of law. A verdict was rendered for the plaintiff. On a motion for a new trial, the defendant’s counsel insisted that the contract was void and illegal, by the statute 14 Geo. 3, ch. 76, and the plaintiff entitled to no relief, because parti ceps criminis and knowingly transgressing a public law. But the court unanimously held that the verdict was right. Mr. Justice Blaekstone'says these lottery acts differ from the stock-jobbing act of the 7 Geo. 2, ch. 8, because there both parties are made criminal and subject to penalties. But here (on the part of the injured) the contract on which he was paid his money is not criminal, but merely void: and therefore, having advanced his premium without any consideration, he is entitled to recover it back. This case was held to be good law in Jaques v. Withy and Reid, 1 Hen. B. 65. In Lowry v. Bourdieu, Doug. 468, the action was brought to recover a premium of insurance paid on a gaming policy, prohibited by the statute 19 Geo. 2, ch. 37. It was objected that both parties being equally guilty of a breach of the law, the plaintiff could not recover. A verdict was taken, under the direction of Lord Mansfield, for the defendant; but the next morning he expressed a doubt of the propriety of his opinion, and a rule to show cause was granted. The point insisted upon was, that the contract was executory. Mr. Joseph Buller, who concurred in sustaining the verdict, says, “There is a sound distinction between contracts executed and executory; and if an action is brought with a view to rescind a contract, you — 60 — must do it while the contract continues executory, and then it can only be done on the terms of restoring the other party to his original situation. If the plaintiffs had brought their action before the risk was over and the voyage finished, they might have had a ground for their demand ; but they waited till the risk had been completely run.” In other words, till the contract was completely executed, and the money in the hands of the defendant, in accordance with its terms. See Mansfield’s note. In Munt v. Stokes, 4 Durn. & E. 561, the action was brought by executors to recover back money paid by their testator upon a respondentia contract prohibited bylaw. “In the case of illegal contracts,”says Mr. Justice Buller, “one party cannot recover against the other on the contract itself; but if he come to rescind the contract he may recover back so much as has been paid. If the party come into a court of justice to enforce an illegal contract, two answers may be given to his demand, the one, that he must draw justice from a pure fountain, and the other, that potior est conditio possidentis. Such would have been this case if the plaintiffs had not paid the money, and an.action had been brought on the contract. But the plaintiffs having paid the money, the question is, whether the defendants retain it against conscience. The same principle will be found recognized and adopted in Tappenden v. Randall, 2 Bos. & Pul. 471; Aubert v. Walsh, 3 Taunt. 281; Cotton v. Thurland, 5 T. R. 405. In Perkins v. Savage, 15 Wend. 412, the principle of the English authorities was distinctly recognized. In that case the object of the contract entered into between the parties was to violate the provisions of a public statute. The money had been paid in furtherance of the contract, and the contract in part executed, leaving a balance unexpended in the hands of thé defendant, for which the action was brought. It was held that the action would .not lie. Mr. Justice Nelson, in delivering the opinion of the court, says, “ The money- sought to be recovered was ad — 61 — vanced to the defendant in pursuance of the contract; and it is by virtue of its terms, either express or implied by law that the action must be sustained, if it can be at ali. This is not an attempt by the plaintiff to avail himself of a loeus penitential to retrace his steps, and disaffirm an unlawful agreement while it is yet executory. The illegal purpose or act has been executed, and the effect of a recovery is to enable him to realize a part of the fruits of it by enforcing a performance by the defendant.” It was held that the action could not be maintained, because thereby the provisions of the contract would necessarily be recognized and its provisions enforced. See, also, The Utica Ins. Co. v. Kip, 8 Cowen 24. In Lacaussade v. White, 7 T. R. 535, the doctrine was carried still further, and it was held that where the contract had been fully executed, and the money paid to the winner upon an illegal wager, it might be recovered back in an action of indebitatus assumpsit.' The court held that it was more consonant to the principles of sound policy and justice, that wherever money has been paid upon an illegal consideration, it may be recovered back again by the party who has thus improperly paid it, than by denying the remedy to give effect to the illegal contract. Thid case has been repeatedly overruled, and is certainly not in accordance with the current of authority, inasmuch as the illegal contract was executed. The result of the cases is clearly stated by Mr. Sehvyn, thus: when money is paid by one of two parties to an illegal contract, to the other, in a case where both parties may bo considered as partieeps eriminis, an action cannot be maintained, after the contract is executed, to recover the money. 1 Selwyn’s Nisi Prius 92 (ed 1837.) The English rule, says Mr. Justice Kent, is the true rule on this subject. On the disaffirmance of the illegal and void contract, and before it has been carried into effect, and while the money remains in the hands of the stakeholder, each party ought to be allowed to withdraw — 62 — his own deposit. The court will then be dealing equitably with the case. It will be answering the policy of the law, and [Hitting a stop to the contract before it is perfected. Vischer v. Yates, 11 Johns. M. 31. The American cases fully sustain this doctrine. Is, then, the contract in this case executed? The statute making the stakeholder indictable has not affected the terms or conditions of the contract between the parties to the wager. That contract clearly is not executed. But there is another contract between the parties to the bet and the stakeholder, and that contract which the statute has declared illegal, it is said, is executed by the payment of the money to the stakeholder. If the contract be that the stakeholder should receive the money, and keep it himself, the contract is doubtless executed. But the contract with the stakeholder is, that he shall hold the stakes till the bet is decided, and that he shall then pay them over to the winning party. The stakeholder is indictable for receiving the stakes. His offence is complete by the terms of the statute, but the contract between him and the parties to the bet is not thereby executed. The receipt of the’ money is in fact the consideration of the contract by the stakeholder to pay the money over to the winning party; but until the money is so paid, the contract is not executed. The defendant received this money upon an illegal and void contract. He has no title to it in law or in equity. The illegal purpose for which it was received has not been effected. The plaintiff is here in disaffirmance of the illegal contract, seeking to prevent the defendant from retaining the benefit which he derived from an unlawful act; and the spirit and policy of thedaw require that he. should recover. It seems a remarkable mode of enforcing a public law, to declare that when a party has taken the first step toward its violation, no locus penitentioe shall be allowed him; that having deposited his money for an unlawful — 63 — purpose, he shall not he.permitted to retrace his steps before that purpose has been accomplished. There was, in my judgment, no error in the ruling of the court below, and the judgment should be affirmed. Haines, J. That an executory contract may he rescinded is not denied. The contract in this case was, that the defendant would hold the stakes, and pay them to the winner of the race. Until the money was paid over, the contract was not executed, but remained executory and subject to rescissiou. While it so remained, the plaintiff below forbid the payment and demanded the money of the defendant. On his refusal to pay it, a cause of action accrued to the plaintiff, and, in my opinion, he has a right to recover. No error having been shown to the majority of the court, the judgment stands affirmed.