Bell v. Quin — 4 N.Y. Super. Ct. 146

Majority

p. 146

Bell v. Quin.

Headnote

Where an act is expressly prohibited by a statute, all contracts growing out of its performance are void.

So- a promissory note given by one of two parties to the other, for the latter’s share of the profits received by the former in a transaction forbidden by law, cannot be recovered by the payee or his voluntary assignee.

The charter ofxa municipal corporation enacted that no member of the common council, during his official term, should be interested in any contract, the expenses or consideration whereof was to be paid under any ordinance of the common council. A member of the board was interested with the defendant, in a contract for supplying the corporation with coal, and received the defendant’s note for half the profits of the contract. Held, that his assignee could not recover the ■ note against the defendant.

Sept. 15 ;

Oct. 7 1848.

■ Assumpsit, on a promissory note for $1178 24, made by the defendant, dated August 17th, 1842, payable on demand to the order of Williams & Ferguson, and by them indorsed in blank.

The cause was tried June 15th, 1848. The note and indorsement were proved, upon which the plaintiff rested.

The defendant then called as a witness, George Ferguson, Jr., who testified that he was one of the firm of Williams & Ferguson, in 1842. The note was given for their share of the profits on a contract made by the defendant with the Commissioners of the Alms House of the city of New York, for the delivery of coal to the alms house. At the time the contract was made, and when the note was given* David F. Williams, the other member of the firm, was the assistant alderman of the fourth ward of the city of New York.

The defendant then read and proved in evidence the contract referred to, which was signed by the defendant and by the chairman of the Alms’ House Commissioners. It was dated June 3d, 1842, and thereby the defendant was to deliver three thousand tons of coal of 2240 pounds, at certain prices, and Mr. Williatos was to be the judge of the quality of the coal.

It was admitted that the coal was delivered in pursuance of the contract, and payment therefor received by the defendant.

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Ferguson further testified that the contract was made after his firm had agreed with the defendant. The note was assigned to the plaintiffs in January, 1843, for the benefit of creditor’s.

Cross-examined, he testified that their bargain with the defendant was not in writing. Their firm had had the previous contract with the alms house, but this year Mr. Williams being a member of the board of assistant aldermen, would not take the contract, and the witness had concluded to propose for it individually, but did not on the defendant’s agreeing that if he got the contract, W. & F. should receive half the profits. Williams & Ferguson were to attend to purchasing the coal, and were to share half the losses and half the profits. They loaned the defendant money for expenses, which he subsequently paid back. Mr. Williams went to Pottsville on the matter of purchasing the coal. They had a settlement with the defendant, of their claim growing out of the contract, and the note in suit was given on that settlement. The defendant attended to the delivery of the coal, and paid all the expenses. He alone was known in the transaction. There was nothing but a computation of the profits brought into the settlement, and the note was given for half of the net profits.

The defendant then proved that the expenses of the alms house were included in the appropriations of the year 1842, by an ordinance of the common council.

The testimony being closed, a verdict was taken for the plaintiffs, subject to the opinion of the court.

S. P. Nash, for the plaintiffs.

The facts proved by the defendant do not invalidate the note in the hands of the plaintiffs.

1. The note was given for money in the hands of the defendant, received to the use of the payees, and he cannot set up the illegality of the executed contract on which he received it. (Tenant v. Elliot, 1 Boss. & Pull, 3; Farmer v. Russell, ibid. 296; and see Faikney v. Reynous, 4 Burr. 2069; Petrie v. Hannays, 3 Term R. 418 ; and Armstrong v. Toler, 11 Wheat 258 .)

2. The prohibition in the city charter is merely directory, the

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violation of which should be punished by removal from office. There is nothing in the charter which looks to the avoiding of contracts as the means by which the prohibition is to be enforced. But if so, that remedy should be confined to the party wronged, the corporation. (Brown v. Duncan, 10 B. & Cr. 93.)

3. The prohibition in the charter, is merely a municipal regulation in a private statute, not a public general law, and a contract in violation of it is not void. (Ex parte Dyster, in re Moline, 1 Merivale, 155 ; S. C. 2 Rose Bank. Cases, 349; Kemble v. Atkins, 1 Holt, 427, and reporter’s note; see also Johnson v. Hudson, 11 East, 180; Hodgson v. Temple, 5 Taun. 181; Brown v. Duncan, above cited.)

That the statute is a private one. (See Com. Dig. Tit. Parliament R. 7.)

A statute which relates to a particular place, or town or county, is a private statute ; (4 Coke’s Rep. 76 ; Skin. 350; 1 Bl. Comm. 86.)

Finally, the contract itself is not illegal or in contravention of any statute or rule of law; but it is said to be invalid, by reason of the participation in it of one who was under a temporary incompetency or disability so to participate. The rule relied on does not apply to such cases.

This case differs from such as were immoral, or for a matter prohibited.

All the illegality was wiped away by the only party who could legally take advantage of it, the corporation.

E. Norton, for the defendant.

I. The note in suit is void, because it grew out of an illegal transaction. (Story on Promissory Notes, § 189.)

1st. The transaction was illegal, because prohibited by the charter of the city of New York. (Session Laws of 1830, pp. 126, 128, § 11 & 18. Chitty on Bills, 114, (Springfield ed. 136.)

The cases cited on the other side were of agents, who were not permitted to set up illegality, to avoid paying over money received by them.

The arrangement, wjtli tfce. defendant, was made by the

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payees before he contracted with the city, so that although in form his contract, it was in fact the contract of all three.

2d. The transaction was illegal, because contrary to public policy. (Chitty on Bills, 95 ; Cole v. Gower, 6 East, 110.)

II. The note is void for want of a good and valuable consideration. If it were truly the defendants contract, and not W. & F.’s, there was no consideration.

III. Any defence to the note may be set up against the present holders, as it was past due when it was transferred; and it was not transferred for a present consideration.

The plaintiffs stand in the place of Williams & Ferguson, and cannot recover, unless the latter could have maintained a suit upon this note at the time they executed the assignment.

The amended charter of the city of New York provides that “ no member of either board,” (of the common council,) “ shall, during the period for which he was elected, be directly or indirectly interested in any contract, the expenses or consideration whereof are to be paid under any ordinance of the common council.” (Laws of 1830, ch. 122, § 11.)

In direct contravention of this statute, and of his duty as a member of the board, Mr. Williams- was interested in the contract for supplying the alms house with coal; and while by the contract he was made the judge of the quality of the coal in behalf of the city, by the secret arrangement with the defendant, he was to aid in purchasing and supplying it in fulfilment of the contract.

We have no doubt that the note, given for the share of the profits to which his firm was entitled in this illegal transaction, is void between the original parties. It is void, both because its consideration was the fruit of a positive violation of law, and because the transaction itself was against sound morals and the public interests.

The cases to which we were referred by the plaintiff’s counsel, are not sufficient to sustain his positions. In that of Tenant v. Elliot, 1 B. & P. 3, the defendant was not a party to the illegal contract. He received the money as the plaintiff’s

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agent, and it was held that he could not set up an illegality to keep back the money from his principal. The case of Farmer v. Russell, 1 ibid. 296 , was decided on the same ground, and was not designed to extend the doctrine farther than it had been held in the previous decision. In Faikney v. Reynous, 4 Burr. 2069, the plaintiff had lent money to the defendant to pay the latter’s half of a difference they had jointly lost in illegal stock jobbing, and a bond was given for its repayment. The bond, was adjudged good, because the plaintiff was not concerned in the use which the defendant chose to make of the money advanced. The court said the bond did not appear to have been given on an illegal consideration. In Petrie v. Hannay, 3 T. R. 418, the King’s Bench, against the opinion of Lord Kenyon, decided, that one party who with the consent of the other, paid the joint loss incurred in such a transaction, to a broker, whom they had employed to settle and pay the difference lost; could maintain a suit against the other party for his moiety of the money. This decision was one of doubtful authority at the time, and scarcely sustainable upon that in 4 Burr. 2069, on which solely it was reposed by the majority of the court.

It has since been entirely overturned in England by the cases of Steers v. Lashley, 6 T. R. 61; Aubert v. Maze, 2 B. & P. 371; and Cannan v. Boyce, 3 B. & Ald. 179. Indeed, Steers v. Lashley, is directly in point against the plaintiffs in the case at bar.

We were referred to two or three other modern cases in England, as feeing in favor of a recovery. The courts there appear occasionally to have strained a point, where the infringement of law was peculiarly venial, and injustice might ensue from enforcing the principle. And in one of them, (Brown v. Duncan, 10 B. & Cres. 93,) where one partner had omitted to comply with certain revenue regulations, and had violated another, in transacting the business for which his firm brought the suit; the firm was allowed to recover, because there was no fraud upon the revenue. The court distinguished between that case and those where the object of the statute infringed, was the protection of the public, such as the usury act, the act against stock-

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jobbing; and the hite. And the court said some of the prior-cases were decided on that distinction.

In Armstrong v. Toler, ( 11 Wheat. 258 ,) the court on the authority of the cases in 4 Burrow, 1 Bos. & Puller, and 3 Term Reports, sustained a recovery on the particular transaction ; at the same time assenting to the principle, that a contract growing immediately out of an illegal act; or connected with its consideration, though a new contract, cannot .be enforced in a court of justice.

The plaintiff further contended that the prohibition in the city charter was a mere municipal regulation‘in a private statute, and therefore a contract in violation of it, is not void. We will not say what the consequence would be, if the prohibition were found in an ordinance of the corporation instead of the statute law. The case in 1 Merrivale, to which we were referred, is in favor of the position that the contract would be void in that event, if positively forbidden, and the ordinance were authorized by the charter. The party in 1 Merrivale, was relieved, because there was not an express prohibition, but the city of London had enacted that if the party did the act, he should incur a certain penalty.

We repeat that the note in question is void, and the plaintiffs cannot recover.

Judgment for the defendant.

Cases cited

Armstrong v. Toler 11 Wheat 258 SCOTUS 1826-03-06 p. 147, p. 151