Sloss v. Holland

The action was brought upon a promissory note. Among the allegations found in the answer is this$ “That the consideration if any for said instrument [referring to said promissory note] was and is contrary to the policy of law and contrary to good morals, in this: that the said twenty-five hundred dollars was on the date aforesaid invested by

In such case, the law permits an inquiry into the intention of the parties as to how the money shall be used, and, if it be found that a violation of the law is contemplated, the process of the court is not open to either party to enforce any pecuniary obligation that may seem to arise out of the transaction. Each must be content to rely upon the other’s sense of honor and responsibility for the enforcement of any promise or supposed obligation. Of course, in ordinary transactions, it is of no concern of the courts what disposition is made of money borrowed, but not so when it is loaned for the express purpose of aiding in the violation of the criminal law. Such intention vitiates the whole transaction, and the contract is regarded as utterly without legal efficacy. Many cases might be cited to the point, but it is sufficient to refer to a few decisions of our supreme court.

In Fuller v. Hutchings, 10 Cal. 523 , [ 70 Am. Dec. 746 ], the validity of a check given for a gambling debt was in controversy. The court said: “As to all persons except a bona fide holder without notice, the cheek is void. The statute so expressly declares, and such would be the rule of law independent of the statute. . . . With checks, as with promissory notes, the presumption is that they are given upon a Valid consideration, but this presumption being rebutted, the neces

Santa Clara Valley Mills & Lumber Co. v. Kayes, 76 Cal. 387 , [ 9 Am. St. Rep. 211 , 18 Pac. 391 ], involved a contract for the manufacture and sale of lumber executed for the purpose of increasing the price of lumber, limiting its supply, etc. -It was said:' “The general rule is, that an illegal contract is absolutely void and cannot form the basis of judicial proceedings. This is equally so in law and equity. The illegality vitiates the contract between the immediate parties, as well as in respect to third parties. A contract tainted with the vice of illegality creates no obligation, not because of the rights of the parties to it, but because the public is interested.”

In Chateau v. Singla, 114 Cal. 91 , [ 55 Am. St. Rep. 63 , 33 L. R. A. 750 , 45 Pac. 1015 ], the action was for the dissolution of a partnership and for an accounting. The partnership was formed to carry on the business' of letting furnished apartments for the purpose of prostitution. The court declared: “If this contract of copartnership had for its purpose the letting of apartments for purposes of prostitution, and if the business of the copartnership, as pleaded by the answer, was the doing of this precise thing, then the copartnership contract was illegal, against good morals, against public policy, and against the express mandate of the statute, and equity would no more entertain an action founded on such a contract foi the relief of either of the parties to it, than it would entertain an action between two thieves for an equitable division of their plunder. A void contract, a contract against public policy or against the mandate of the statute, may not be made the foundation of any action, either in law or in equity.”

Union Collection Co. v. Buckman, 150 Cal. 159 , [ 119 Am. St. Rep. 164 , 11 Ann. Cas. 609, 9 L. R. A. (N. S.) 568 , 88 Pac. 708 ], involved a promissory note given for a gambling debt. The court said: “At the outset, therefore, it may be stated that it is clear that under the settled law of this state the consideration for such notes was contra bonos mores and unlawful (Civ. Code, secs. 1607, 1667), and, that McMahon (the payee) could not have recovered thereon.” It was further held in that ease that' a renewal note given in place of the original

We have a similar situation here. The case would be no different in principle if the action were for an accounting or for money had and received. The unlawful purpose for which the money was loaned to defendants is an inseparable part of the consideration for the note and renders the contract against public policy and void under the plain provisions of the statute. Accepting the theory either of a loan or of an investment, the result is the same.

In the absence of the evidence we must assume, of course, that the intention of the parties as to the use of the money was as contended for by respondents.

The judgment is affirmed.

Chipman, P. J., and Hart, J., concurred.