Swords v. Owen — 34 N.Y. Super. Ct. 277

Majority

p. 277

CHARLES H. SWORDS and WILLIAM BETTY, Plaintiffs and Appellants, v. ADONIRAM J. OWEN, Defendant and Respondent.

Headnote

Under the act of 1833, prohibiting persons from transacting business under fictitious names, and making the violation thereof an offense punishable by fine, contracts made by persons doing business under a firm name, in which the designation “ and Company ” or “&Co.” represents no actual partner or partners, are void.

Before Monell, Freedman and Curtis, JJ.

Decided March 30, 1872.

Appeal from an order overruling a demurrer to one of the defenses.

The complaint aHeged that “ the plaintiffs were co-partners, doing business in the city of New York, under the firm, name and style of Swords, Betty & Co.” It then alleged, as a cause of action, the employment of the plaintiffs by the defandant, as his brokers, to purchase certain shares of stock; the purchase of such stock; the neglect and refusal of the defendant to take

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the same, and a loss thereupon to the plaintiffs of three thousand dollars.

The defendant, for a third defense, averred, upon information and belief, that all the alleged transactions were wrongfully, unlawfully and wickedly made by the plaintiffs in carrying on and transacting business, including that set forth in their complaint, under the firm-name and designation of Swords, .Betty & Co., and that the designation “& Co.” did not then and there represent an actual partner nor partners, and that said firm were carrying on business in the city of New York, and said copartnership was not a commercial copartnership, located and transacting business in foreign countries ; neither had such copartnership used such name of Swords, Betty & Co., and the business conducted by it at any time thereafter continued by some one, nor by any of the copartners, nor by their assigns or appointees; neither was any certificate signed and acknowledged before any officer of law, authorized to take acknowledgments of deeds, declaring the persons dealing under said name of Swords, Betty & Co., with their places of abode, nor was such certificate filed with the clerk of the city and county of New York, in which their principal place of business then and there was; neither was the same published in any newspaper in this State; neither had said copartnership business relations with foreign countries.

To this defense the plaintiffs demurred for insufficiency.

The court at special term overruled the demurrer, and the plaintiffs appealed.

Mr. R. M. Huntley, for appellant.

Mr. D. M. Porter, for respondent.

In 1833 the legisla

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ture enacted a statute embracing the following two sections (L aws of 1833, chap. 281):

“§1. Wo person shall hereafter transact business in the name of a partner not interested in his firm; and where the designation ‘and Company’ or ‘ & Co.’ is used, it shall represent an -actual partner or partners.

“ § 2. Any person offending against the provisions of this act, shall, upon conviction thereof, be deemed guilty of a misdemeanor, and be punished by a fine not exceeding one thousand dollars.”

The act is entitled, “Ara act to prevent persons from transacting business under fictitious names” Literally, the statute prohibits the transaction of business in the name of a partner not interested in the firm, and requires that the designation “and Company ” or “ & Co.” shall represent an actual partner. A violation of the statute is deemed, upon conviction, a misdemeanor, punishable by fine. The prohibition does not, nor does the penalty, in terms, apply to contracts made by such firms, and does not, therefore, in terms, declare such contracts void; but the act makes it unlawful for any person or persons to transact business by or in the name of a fictitious firm.

The answer alleges that the contract upon which the cause of action arose was made by the plaintiff in carrying on and transacting business under the firm-name of “Swords, Betty & Co.and that the addition of “ & Co.” did not then represent an actual partner; and the allegation is admitted by the demurrer to be true.

The contract, then, was made by a person while unlawfully using a prohibited style, the using of which was a criminal offense, punishable by fine.

It is not necessary that a penal statute should contain prohibitory words. A penalty implies a prohibition, and every act done against it is not only illegal, but absolutely void (Hallett v. Novion, 14 J. R. 290).

The prohibition is against transacting business;

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and it renders it unlawful for a person to conduct Ms business under the designation of “and Company” or “ & Co.” unless such addition represents an actual partner; and such person cannot make any executory contract, whatever, which can be enforced by Mm, while using such prohibited title.

It would be impossible to give significance and effect to the statute, unless it was adjudged to apply to all business transacted under the unauthorized name ; and, therefore, to all contracts made in the name or when using the prohibited style, rendering all such business transactions and contracts absolutely void.

The decisions in our State courts strongly support the views I have expressed, and quite uniformly hold that all transactions prohibited by statute are void.

In Hallett v. Novion (supra), an act of Congress had made it a misdemeanor, punishable by fine and imprisonment, for a person to fit out and arm any ship or vessel with intent to employ her in the service of any foreign power, &c. The act contained no words of prohibition, but the court held, as before quoted, that a penalty implied a prohibition, and every act done against it, void.

In Pennington v. Townsend ( 7 Wend. 276 ), an act of the legislature made it unlawful for any person or association to keep an office for transacting banking business, $c., unless expressly authorized by law, giving a penalty. In the act there was no clause declaring void the securities taken. The action was upon , a check which had been discounted by an unauthorized banking association ; and the court held the transaction void under the statute. Judge Nelson, in referring to the proposition that the penalty was the only consequence of a violation of tiie act, says, “ there is no distinction between an act malum prohibitum and malum in se. Both are equally forbidden and unlawful ; and I will add, both are immoral, and cannot be the found

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ation of a civil right, that will be enforced in a court of justice.”

In Griffith v. Wells ( 3 Den. 226 ), the action was to recover for liquor sold to a person not having a license. The act of the legislature did not, in terms, prohibit the sale of liquors without a license, nor declare the act illegal. It only inflicted a penalty upon the offender. But the court held the contract to be illegal, and no action would lie to enforce it.

An analogous case was decided in the New York common pleas (Ferdon v. Cunningham, 20 How. Pr. 154 ), where a contract for service by a public cartman was held to be void, the cartman not having a license, as required by a city ordnance, which merely affixed a penalty for keeping or using a public cart, without first obtaining a license therefor.

Best v. Bander ( 29 How. Pr. 489 ), although only a special term decision, is strongly in point.

The action was for goods sold. The defense was, that the sellér was engaged in the business of peddling, without a license, in violation of the revenue laws of the United States. The court overruled a demurrer to the defense, holding that the penalty in the act implied a prohibition, rendering the contract of sale void. In that case the distinction which is suggested in some of the cases (Griffith v. Wells, supra, and Bell v. Quin, 2 Sandf. 150 ), between a license for revenue only and such as have in view the protection of health or morals, or the prevention of fraud, is repudiated.

In Hoyt v. Allen ( 2 Hill, 322 ), although the decision was as to the sufficiency of the pleading, there is an intimation, which, taken in connection with the reporter’s note, sustains the principle of all the foregoing cases. And the principle is further supported by the case of the U. S. Bank v. Owens (2 Peters, 627), where a contract was held void as being in violation of the charter of the bank forbidding the taking of more than six per cent, interest.

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Under authority of the cases cited, we must hold the transaction set forth in the complaint to be illegal and void, and not enforceable in a court of justice; and, therefore, that the matter set up in the answer constitutes a defense to the action.

It is impossible, I think, to apply the distinction in this case claimed by the respondent’s counsel, that this is a mere collateral transaction, not connected with, but remote from the prohibited act. Such distinction is clearly defined in the cases he has referred to, where it is held, that if the illegality does not form any portion of the contract, but is merely collateral, and capable of complete separation from it, the contract is binding.

The distinction, however, cannot be made available in this case.' The illegal act is the transacting of business. Business cannot be transacted except by and under contracts, express or implied, executory or completed. Every executory contract made in transacting business, must necessarily, therefore, be void under the prohibition against transacting business under a fictitious firm name. Any other application of the statute would render it wholly ineffectual, as the design of the legislature, as expressed in the title of the act, was to prevent persons from transacting business under fictitious names.

In their complaint the plaintiffs aver,- that at the time they made the contract with the defendant, they were doing business under the firm name of “ Swords, Betty & Co.,” and the answer alleges that the transaction was made with the plaintiffs while unlawfully transacting business under such fictitious firm name.

These several allegations are, in my opinion, sufficient to bring the case within the provisions of the statute prohibiting the transaction of business in the name of a partner not interested in the firm.

,The order appealed from should be affirmed, with costs.

Cases cited

Pennington v. Townsend 7 Wend. 276 N.Y. Sup. Ct. p. 280
Ferdon v. Cunningham 20 How. Pr. 154 N.Y.C.P. p. 281
Best v. Bauder 29 How. Pr. 489 N.Y. Sup. Ct. p. 281