Hamilton v. Canfield — 2 N.Y. Super. Ct. 526

Majority

p. 526

Jas. K. Hamilton, administrator of Oliver G. Kane, deceased, versus Palmer Canfield.

Headnote

The defendant sold a ticket to the intestate, in alottery unauthorized by the laws of this state, which drew a prize of 50,000 dollars. The defendant caused théjprize to be discounted for the intestate, who, upon the close of the transaction, permitted him to retain 10,000 dollars by way of loan, for which the defendant gave his own promissory notes to the intestate. An action for money had and received, being brought to recover the amount thus retained, the defendant set up the illegality of the transaction, under the lottery act, as a defence. Helb, that the loan of the money formed a good consideration for the assumpsit, and that the illegality of the original acts of the intestate and the defendant, in the purchase and sale of the ticket, could not be introduced as a defence to the action.

Assumpsit for money had and received. Plea, the general issue. It appeared from the testimony, introduced on the part of the plaintiff, at the trial of the cause, that the defendant sold to the intestate, during his lifetime, a ticket in the “ Washington Canal Lottery”—a lottery established for the benefit of a company in the district of Columbia. This' ticket having drawn a prize of 50,000 dollars, on the 27th of December, 1826, the defendant procured it to be discounted by Yates & M‘Intyre, the managers of the lottery, on the 5th of January,following,for Kane; and afterwards, having come to a settlement with him, on the 8th of the same month, in relation to the prize, and the amount received for it, Kane permitted the defendant to retain out of the

p. 527

proceeds of the prize, the sum of 10,000 dollars, as a favor, by way of loan, and for this amount the defendant gave three several notes to the intestate.

These notes were produced at the trial, and the defendant admitted that they had never been paid ; but contended that the whole transaction was illegal. That the money received of Kane, related to the sale of a ticket in a lottery unauthorized by law, and that the plaintiff could not therefore recover.

The Chief Justice, (before whom the-cause was tried,) charged the jury, that if the transaction between Kane and the defendant was a mere sale of the ticket, the defendant would be entitled to a verdict; but if it was a payment of the prize, then, that the money borrowed of Kane, after the proceeds of the ticket had passed into his hands, formed a sufficient foundation for the action, and that the plaintiff was entitled to recover. He also charged them to find the fact specially, whether the transaction was a sale or a discounting of the prize.

The jury returned a verdict for 10,000 dollars in favor of the plaintiff, stating, at the same time, that the transaction between the defendant and Kane, was not a sale of the ticket, but a mere discounting and settlement of the prize.

Mr. Jay, on the part of the defendant,

now moved for a new-trial. He contended, that the whole transaction was illegal, and that no cause of action could arise out of it. By the statute of this state, [ss. 42. ch. 206. sec. 3.] it is declared (he said) that any person who shall either sell or purchase a ticket in any lottery unauthorized by the laws of the state, shall be liable to be indicted for the offence, and On conviction, shall be subject to a fine and the costs of prosecution. The selling and purchasing of the ticket in question, was, therefore, by the force of the statute, an illegal - transaction. Kane acquired no title to the ticket by the purchase, and having no legal claim to the prize, he "could not maintain an action to recover the proceeds of it in any shape. To give him a right to claim the money, would be to give validity to a purchase prohibited by law. Kane could claim the money

p. 528

only upon the ground that he was the owner of the ticket; but as Ms claim to that is void by law, so his claim to the proceeds of it must be void also.

Suppose the managers of the lottery had refused to pay the prize, could any action for it have been maintained by Kane? It is very clear, that he could not support any such pretence in a court of justice, considering the provisions of the statute; and as he had no legal claim to the prize, or the ticket, it is difficult to understand how he could maintain an action for the money received out of it, by the defendant. The illegal act lies at the bottom of the whole transaction, and if this action can be maintained, then the purchase of the ticket is made valid. The consideration for the implied promise in this case, springs from the sale of the ticket, or its transfer. But that is not a valid consideration, and it will not, therefore, support the assumpsit. [Carman v. Bryce, 3 Barn. and Ald. 179.]

Mr. Anthon, contra, for the plaintiff, contended,

that although the transaction, as between the original vendor and vendee might have been illegal, and in violation of the lottery act, yet that a third person, who had received a part of the proceeds of the ticket, after the lottery was drawn, by way of loan, could not set up the illegality of the original transaction by way of defence. Kane (he said) before the lottery was drawn, was the owner of the ticket.— After it was drawn, he procured his prize to be discounted by the managers. The defendant, as his agent, received the money, and then, Kane, by way of favor, loaned to the defendant the sum of ten thousand dollars, taking his promissory notes as evidence of the debt. Now, it can never be maintained, that he who borrows money of another, can protect himself against repaying it, by showing that the lender obtained the money by an illegal transaction. The money, as between the newly contracting parties, is not contaminated with the original taint,—and to allow such a defence, would disclose a source of fraud which would not long be left unexplored. [Tenant v. Elliott, 1 Bos. and Pul. 3. Farmer v. Russell, 1 Bos. and Pul. 296. Petrie v. Hannay 3 Term Rep. 418.]

It is very clear, from the facts of this case and the finding of the jury, that the money obtained by the defendant from Yates & MTntyre, as the proceeds of the prize, was money had and received by him for the use of the plaintiff. It was obtained by him as the money of Kane, and so it was treated by the parties. Kane was evidently the owner of the ticket antecedently to the drawing of the lottery, and after the ticket was declared a prize. As the agent of Kane, the defendant undertook to convert the prize into money, and having succeeded in that undertaking, Kane loaned to him 10,000 dollars, being a part of the proceeds of the prize. Whatever there was of illegality in the transaction, as to the sale or purchase of the ticket, was perfectly past at the time of the transaction between the defendant and Kane.

The consideration of the new contract was wholly independent of the sale of the ticket, and in no way connected with that transaction, except that Kane obtained the money loaned to the defendant from that source. This action may, therefore, be maintained, without affirming the illegal transaction; and although Kane could not, perhaps, have enforced his claims for the prize against the managers, yet, having obtained the money for it, a borrower of that money cannot set up the illegal act of Kane in obtaining it, as a legal reason for not repaying the sum borrowed.

The defendant, after he had closed the whole transaction as to the sale of the ticket, and the collecting of its proceeds, borrowed a sum of money of Kane, for which he gave his notes. These notes are evidence of a new contract, arising subsequently to the the illegal transactions connected with the ticket. They remain unpaid. The plaintiff brings them into court, surrenders them up, and demands a repayment of the money loaned. His claim does not rest upon the transaction connected with the ticket, but upon a mere loan of money.

The money borrowed by the defendant, it is true, was at one time, incidently connected with a sale of a ticket in a lottery, unauthorized by the laws of this state, because it was the produce of that ticket. Kane and the defendant may have been liable to an indictment for a violation of the lottery act, and their conduct,

p. 530

in relation to the sale and purchase of the ticket, may have been entirely illegal. But it is too much to say, that the defendant can resist this claim upon the ground that Kane had violated the laws by the purchase of a ticket, and that, therefore, he is exonerated from the repayment of the money borrowed, because it was at one time the fruit of an unlawful transaction.

We are satisfied that this defence cannot be maintained, and the motion for a new trial must therefore be denied.

Motion for a new trial denied.

[E. Anthon, Att’y for the plff. P.