23 W. Va. 522 | W. Va. | 1884
The law question involved in this cause is, whether when two parties enter into a contract the purpose and effect of which is, that something by the terms of the contract is to be done which is contrary to public policy or. is fraudulent, and both of the parties to such contract are equally guilty, will a court either of law or of equity enforce such contract ? An examination of the authorities shows, that the proper answer to this question is, that as a general rule neither a
As a general rule the reason why upon such fraudulent or' vicious contract neither the courts of law nor of equity will render either party any relief is, that it is obvious, that in refusing relief to either party in such a case the courts very generally adopt the best rule of discouraging the making of such contracts, and it is for this reason and not because the defend-' ant in such a case has any claim on his own account to any favor from the court, that the rule is generally ádopted, that the court in such a ease will furnish the plaintiff no redress. But if in a particular case it can be clearly shown, that the observenee of the rule that the plaintiff will be furnished no relief in such a case would tend to encourage such-fraudulent aud vicious practices by really giving effect to the objects, which the parties had in contemplation when such fraudulent and vicious schemes were devised, then the courts will not apply the rule, but will permit such fraudulent plaintiff to recover not because of any favor that the court is disposed to show him, but simply because in such a peculiar case the public policy requires, that such recovery or relief should he had against the fraudulent defendant. It rarely happens however, that public policy requires the courts to render relief to the plaintiff’on such fraudulent-or vicious contract, as it is obvious that as a general rule a party wishing to commit a fraud or to do or cause to be done something contrary to public policy can be most, effectually prevented from making a contract with an accomplice to carry out such fraud or vicious object, if he knows that by so doing he puts himself in the power of such fraudulent aud vicious accomplice ; and generally if the law will give him no relief against such fraudulent accomplice, though he commits ever so outrageous a violation of good faith with him, it puts him in the power of his fraudulent accomplice, and thus discourages him in entering into such fraudlent contracts. To show that these are correct views of the law it is only necessary to review the Virginia and 'West Virginia cases.
In Wise v. Craig, 1 H. &. M. 578, the court affirmed a decree of the chancellor but gave no opinion, and we cannot therefore know with any certainty what were' really their views. From the argument of counsel in the case we might perhaps inter, that the plaintiff' was guilty of no fraud, or that perhaps hemight have been unaware of the fraud of the defendant, which was gross. It may at any rate be safely said, that it was apparent that the parties were not in pari delicto. Relief was given the plaintiff in that case, but it cannot be said to throw any light, or if any, very little on the question we are considering.
In Chamberlayne et al. v. Temple, 2 Rand. p. 384, it was decided, that a voluntary or fraudulent conveyance was good between the parties, though made to delay, hinder and defraud creditors. This is in accordance with the almost uni
The next Virginia case oil this subject is, Starke’s Ex’or v. Littlepage, 4 Rand. 368. This case is an excellent illustration of the law on this subject as we have stated it. The syllabus of this caséis: “The rule in pari delicto potior est conditio defendentis, does not apply, where the policy of the law requires that a fraudulent or vicious conveyance should be enforced, and therefore when a debtor makes a fraudulent conveyance the fraudulent grantee may enforce such conveyance in a court ol law, and the debtor will not be allowed to defeat the claim by proving the fraud.” This case was decided by a divided court, one of the judges (Coalter) holding, that the maxim above quoted, which is of such general application, ought to-be applied even in such a case, and-if such grantee is forced to be the plaintiff, whiclqhe thinks can rarely occur, the court ought not to grant him relief by enforcing such fraudulent contract; but -Judge Green, who delivered the opinion of a majority of the eotirt thought otherwise. In that case the debtor, whose slaves were sold under an execution, furnished money to a friend to buy them at the sheriff’s sale. The friend was to buy them in his own name, and the execution was returned satisfied by the sale of these negroes to this third party. He at once according to his understanding with the debtor gave the 'negroes to the debtor, but as they would have been liable to be levied on by other judgment-creditors of this debtor, to avoid this, the debtor executed to this friend a memorandum certifying, that he held these slaves on certain terms, which he had agreed on with the owner of them, (his friend who had nominally bought them at the sale,) and that he was responsible to him for their hire. This memorandum was renewed every five years. The evident object of it being, that if any judgment-creditor of this debtor levied on these slaves the debtor might say he hired them of this friend, and this friend could satisfy every one that he was the owner of, these negroes by showing the return of the sheriff, that he had bought them at this sheriff’s sale, and by this memorandum that the real owner of them, the debtor, was not the owner of them but hired them.
This decision it seems to me was right, for had it been otherwise decided this fraudulent debtor would by this arrangement have defeated and defrauded his creditors, and yet by relying on his own fraud proving it he would still have retained Jais slaves and had the use of them as if the owner. Though it but rarely happens, that the court will enforce a fraudulent contract in favor of a plaintiff, yet as Judge Green in his opinion in this case says: “If it be necessary, in order to discountenance such transactions, to enforce a fraudulent contract at law or relief against it in equity, it will be done though both the parties are in pari delicto.”- See p. 372.
It is admitted, that as a general rule the court will not aid a plaintiff, a party to such fraudulent contract, either to enforce it at law or to be relieved from it in equity, because in refusing to do so in almost all cases it most effectually discourages such fraudulent transactions; but in particular cases as this one in 4 Rand, it is obvious, that to refuse to enforce this fraudulent contract would bo to encourage such fraudulent arrangements, as such refusal would have made the fraudulent' scheme of the debtor a perfect success. It is true this could only be defeated by giving to the fraudulent plaintiff in that case these negroes, though he had never paid a cent for them. But this is better in the view of the courts than by holding otherwise to encourage and make successful
A few other cases have arisen, in which courts of law or of equity have enforced such fraudulent contracts, because their enforcement was for the public good, as in such peculiar cases such fraudulent transactions were most discouraged by such enforcement. As examples of this character I may refer to Montefiori v. Montefiori, 1 Blacks. R. 363. In this case a note was given by A. to his brother in order, that he might pass himself for a wealthy man, and thus succeed in marrying a certain lady. After the marriage the obligor in this note reclaimed this note, and the husband would not give it up. The matter was referred to arbitrators, who decided that the note should he surrendered as nothing was really due upon it. But despite this award .the husband refused to give up the note. A motion was made to set aside the award by the husband, though the husband, who held this note, was as guilty of the fraudulent transaction, out of which it arose, as the obligor in the note. The basis of this decision seems to he, that this note was regarded as null and void by the courts because it originated in a fraud. But such decision would greatly encourage frauds of this character. The marriage having been promoted by such fraud, and having been consum mated, it could not be set aside, and if this fraudulent note could not be enforced, the result would be that such frauds could be practiced with perfect impunity by both the parties engaged in the fraudulent transaction. The party seeking the wife would procure her by such fraud, and his accomplice, if not compelled to pay the note, would in no manner be prejudiced.
Upon precisely the same ground the case of Gay v. Wendem, 2 Freem. Rep. 101, was decided. A brother gave to
The next Virginia case hearing on the question which we are discussing is James v. Bird’s Adm’r, 8 Leigh 510, in which it was held, that a party, who to hinder and delay his creditors fraudulently conveys his property to another, can not except under peculiar circumstances maintain a bill in equity to rescind the contract. The grantor' and grantee being generally in pari delicto, neither is entitled to come into equity. This case alone is I think conclusive of the case before us. The plaintiff in this ease has ,no more pretence for asking a court of equity to enforce this fraudulent contract, which he asks to be enforced, than the plaintiff in that case had a right to ask the rescission of the fraudulent contract appearing in that case; both contracts were made for the obvious purpose of hindering, delaying and defrauding the creditors of the plaintiff, and in neither case is there any pretence, that the debtor had not voluntarily and without any opposition on the part of his accomplice entered into the fraudulent contract; and the well established maxim in pari delicto potior est conditio defendmtis, was justly applicable.
In the case of Terrell v. Imboden et als., 10 Leigh 321, the
This principle is also well illustrated in Owen v. Sharp, 12 Leigh 427, where it was decided that when “one makes a fraudulent bill of sale, absolute on its face, of a purchase in order to protect his property from his creditors, but there is a secret trust, that the grantee shall hold the property for the benefit of the grantor’s daughters, the daughters can not establish the secret trust in equity and have a decree for the slaves.” The reasons assigned by Judge Tucker on page 432 for so holding were very sound and are applicable in this case and lead to the refusal of relief to the plaintiff. In Harris v. Harris’s Ex’or, 23 Gratt. the Virginia cases are reviewed and substantially the same views I have expressed are held by the court.
In Troup v. Wood, 4 Johns. Chy. 289, it -was held that an agreement by the owner of kn execution with certain persons to prevent the usual competition at a sheriff’s sale is fraudulent. See also Jones v. Caswell, 3 Johns. Cas. 29, and Cocks v. Izard, 7 Wall. 559.
The Supreme Court of West Virginia has recently decided two cases which bear upon the question involved in the case before us. In one of them, Corrothers v. Harris, supra, President Johnson says:
*541 “Upon a careful consideration of the bill we are compelled to say, that, if all its allegations are true, the plaintiff does not commend himself to a court of equity, rvhich loves justice and fairness. According to the plaintiff's claim what he and his agent, Watson, agreed to do but failed to accomplish, was a selfish scheme to prevent bidding at the trust-sale and to acquire the property at an inadequate price. The poor owner of the land was left entirely out of the case, his interests were not .only not regarded, but according to this claim were plotted against. If the allegations of the bill were true, and if the grantor in the trust-deed was tiño plaintiff in the cause, a court of equity would hasten to his relief; hut it would he loth to lift its hand in relief of one who had entered into a fraudulent scheme to make the property sell at a low price and thus injure the man whose land was about to he sold, or other creditors, who might lose their debts by the accomplishment of such a fraudulent purpose.”
In the other, Maurice v. Devol, supra, this Court decided (see syl. 6) that relief could not be granted on a prayer in an answer for affirmative relief to oue who admits or is shown to have participated in the fraud complained of. Elsewhere the principles laid down in this last case and which we have laid down have been applied; and it has been held, that, where two persons are engaged in a fraudulent transaction to injure others, neither law nor equity except under very peculiar circumstances will interfere to relieve either as against the other from the consequences. See Sims v. Tuffs, 6 C. & P. 207 (25 Eng. Com. L.); Bolt v. Rogers, 3 Paige 157; Hawes v. Leader Brown, 111 Cro. Jac. 270, also Yelv. 196; Steel v. Brown, &c., 1 Taunt. 381; Drinkwater v. Drinkwater, 4 Mass. 354; Carrol, &c., v. Boston Mar. Ins. Co., 8 Mass. 515; Reichart v. Castutor, 5 Binn. 109; Jackson v. Garnsey, 16 Johns. 191; St. John v. Benedict, 6 Johns. Ch. R 111. The general rule is, as we have seen, courts leave the parties to such a fraud in the attitude in which they have placed themselves without relief to either. See Wright v. Wright, 2 Litt. 179; Surlott v. Beddow, 3 Mon. 109; Sickman v. Lapsley, 13 S. & R 224; Smith v. Hobbs, 1 Fairf. 71; Sherk v. Endress, 3 W. & S. 255; Bessey v. Windham, 6 Ad. & El. N. S. 166 (51 Eng. Com. L. R.)
Thus this bill without any disguise or palliation alleges that S. J. Horn committed a grossly fraudulent act, whereby he prevented his own creditors from having their honest
I need not take time to look up or cite authorities to show, that this contract was fraudulent and contrary to public policy; for it seems to me to he so obviously of this character, that it is only necessary for any lawyer to read the hill at once to pronounce it unquestionably of *this character. But as counsel have cited some authorities to show this I will refer to them. See Hannah v. Fife, 27 Mich. 172; Gibbs v. Smith, 115 Mass. 592; Wooten v. Hinkle, 20 Mo. 290; Gardiner v. Morse, 25 Me. 140; Swan v. Chorpenning, 20 Cal. 182. See also Peek v. List et als., supra. These cases show that this contract would have been regarded as fraudulent, even if its whole purpose had been only to stifle competition in the bidding at this public sale, as it would have been, had it been a sale by the commissioners of the court of property in which S. J. Horn
There are in this case as stated in the bill no peculiar circumstances such as could possibly under the law as we have stated it exempt it from the application of the maxim in pari delic,to potoir est conditio defendentis. The effect of enforcing such a contract would obviously have been to the encouragement of all such fraudulent arrangements. Bor if it had been enforced, both of the parties to this fraudulent arrangement would have effected all that they desired and stipulated for, and both of them -would have greatly profited by their fraud. The circuit court ought therefore to have sustained the general demurrer to the bill and dismissed the same at the plaintiff’s costs. The case is in principle unclistinguishable from a large number of cases, which I have cited, in which the court has refused to aid the plaintiff in enforcing fraudulent contracts. The striking peculiarity in the case is that the plaintiff in his bill, sworn to by S. J. Horn, unblushingly states that S. J. Horn made a most base and fraudulent contract, and that he is so dead to all shame as not to perceive that the making of this contract was most disgraceful to him. His allegation that “he in good faith carried out and fulfilled this contract,” shows to what extent the practice of frauds has obliterated in his mind the capacity to distinguish between a gross fraud and an act of good faith. The Star Foundry Company according to the allegations of the bill was in the eye of the law just as guilty in making this con-contract as S. J. Horn; and if the allegations of the bill are true, there was morally a very slight difference between the conduct of Horn and the president of the Star Foundry Company. lie too was morally and legally guilty’ of a gross fraud. The only difference between them morally was, that this fraud was in pari to delay, hinder and defraud the creditors of S. J. Horn, and he was under a greater moral obligation to refrain from such an act of fraud than was the president of the Star Foundry Company.
Even had there been no fraudulent purpose in the first contract between these parties, the substitution of the name of T. J. Horn a non-resident of the State, who knew' nothing of the transaction, in the place of S. J. Horn the real contracting party with the purpose of delaying, hindering and defrauding the creditors of S. J. Horn would of itself have
I have said that the evidencie satisfied me, that the contract set out in the hill as made between S. J. Horn and the president of said company before the day of sale, was substantially as stated in the hill. In no other way can I explain, why S. J. Horn should demand that the contract should be reduced to writing, and why the most important part of this contract as stated by the plaintiff was thus reduced to writing; and in no other way can I account for the Star Foundry Company by its president signing the memorandum of sale of the carriage factory lot for two hundred and fifty dollars, probably not a fourth of its value. I shall' decline to consider whether the Star Foundry Company would have been justified in refusing to fulfil its written contract, because the terms of it were not, as it claims, complied with in sixty days. The whole conduct of the company shows that they were equally guilty with S. J. Horn in these fraudulent arrangements and contract; and the x’eason the contract is not enforced against the company is not consideration for it, hut only because the public interest demands that such fraudulent contracts should not he enforced by the court.
I. have said but little about T. J. Horn, the plaintiff in this suit; I have said nothing about him, because he is but the nominal plaintiff, the real plaintiff being S. J. Horn. The evidence shows, that he had nothing whatever to do with the making of the contract, which he is seeking to enforce; and that in point of fact he never heard of it in all probability, till after it was reduced to writing and signed. And it may
While the circuit court ought to have dismissed the bill in this cause on demurrer instead of overruling the demurrer, yet, as on the final hearing it dismissed the bill at the plaintiffs costs, none of the parties have a right to complain of its action; and therefore its final decree of April 14, 1882, must be affirmed; and the appellees must recover of the appellant their costs and thirty dollars damages.
Affirmed.