Kittle v. DeLamater

| Neb. | Jan 15, 1874

Gantt, J.

This action is founded on a promissory note made by Kittle, the defendant in the district court and plaintiff in error here, at New York, April 10, 1872, by which he promises to pay to the order of Asher & Adams,, one thousand dollars, sixty days after date, at the Park Bank, New York; and De Lamater, the plaintiff in the district court and defendant in error here, alleges that before the note became due, it was transferred and delivered to him by endorsement. Battle, in his answer, denies the transfer of the note before it became due, and that De Lamater ever was the owner of the same; and alleges that the note was by him given to Asher & Adams, on a contract between him and them, wherein they agreed to print and publish for him a large number of maps, which were to be numbered respectively from one upwards, and agreed to print on said maps a lottery scheme, to be known as the Eureka Map Lottery Scheme for the distribution of 258 prizes by chance, varying from $50 to $20,000; and that of the amount received on the sale of the maps, $100,000 were to be devoted to the founding of a National Institute for the relief of travelers in distress, and $100,000 to the purchasers of the Eureka Maps. And he further alleges that the contract was made with said Asher and Adams for the purpose of disposing of property in Nebraska, by drawing or lottery, and they knew that such was the object of such scheme, and that they aided and assisted him in preparing said scheme and agreed to publish the same. And he further alleges, that the said Asher & Adams wholly failed to comply with their contract and that he never received the maps; and further pleaded the statute of New York, prohibiting raffling and lotteries, which makes it a highly penal offense to “ open, set on foot, carry on, promote or draw, publicly or privately, any lottery, game or device of chance, of any nature or kind whatsoever, or by whatsoever name it may be called, for the purpose of exposing, setting to sale, or disposing of any houses, lands, tenements or real estate, or money, goods, or things in action,” and providing further that “no person shall by printing, writing, or in any other way, publish an account of such illegal lottery, game or device, stating when or where the same is to be drawn, or the prizes therein, or any of them, or the price of a ticket or share therein, or where any ticket may be obtained therein, or in any way aiding or assisting in the same; whoever offends against this provision shall be deemed guilty of a misdemeanor,” which is punishable by fine and imprisonment. The replication denies each allegation of the answer, except the law of New York on the subject of lotteries, which is admitted as stated in the answer. Upon these pleadings the cause went to trial by a jury.

In the consideration of the questions raised by the assignment of errors, it may first be observed, that in law it seems clear that the contract to print and publish the Eureka Map and lottery' Scheme, as alleged in the answer, and the execution of the note by the plaintiff in error to Asher & Adams, must all be taken as one transaction, and as constituting but one contract. Wing v. Cooper, 37 Vermont, 178. Now the first question presented for our consideration is: Does the contract come within the statute of New York prohibiting lotteries, etc? Is the entire cpntract, as between the plaintiff in error and Asher & Adams, void under the statute?

The record shows that the contract to print and publish the Eureka lottery scheme was made, and the note was executed and made payable in New York, and without any terms for the performance of any one act in respect to the subject matter of the contract or payment of the note elsewhere. Therefore, so far as the entire contract is concerned, it must be governed by the laws of the state of New York; for it is a well established rule of law that, unless a contract is by its terms to be performed in another state, it must be governed by the laws of the place where it is made.

It is said that “ the lex loci operates not only in respect to the nature, obligation, and construction of contracts, and the formalities and authentications requisite to the valid execution of them, but also as to their discharge.” 2 Kent. Com., 459.

It is a general rule that whatever constitutes a good defense by the law of the place where the contract is made, or is to be performed, is equally good in every other place where the question may be litigated. Jewell v. Wright, 30 New York, 264.

The statute makes it a penal offense to set on foot, to promote, either publicly or privately, any lottery, or to print, write, or in any other way to publish an account of any such illegal lottery, stating the prizes therein or any of them, or the price of a ticket or sha/re therein, or in any way to aid or assist in the same. The plaintiff in error substantially alleges that Asher & Adams contracted to primt andpublish the maps for the purpose of disposing of property hy drawing or lottery, knowing such was the object of the scheme, and that they also aided and assisted him in preparing said scheme. I am of the opinion that these allegations, if true, clearly brings the entire contract within the prohibitions of the statute in respect to the contracting parties. And this construction of the contract, I think, is sustained by the decisions of the courts of New York. Charles v. The People, 1 New York, 184.

It is true that in Tracy v. Talmage, 14 New York, 176, Selden, J., says, “I consider it as entirely settled by the authorities that it is no defense to an action brought to recover the price of goods sold, that the vendor knew that they were bought for an illegal purpose;” and Lord Mansfield has said, “ The seller indeed knows what the buyer is going to do with the goods'; but the interest of the vendor is totally at an end, and his contract complete by the delivery of the goods.” Undoubtedly this is the law in respect to the sale of goods in the common and ordinary course of trade, and numerous authorities could be cited in support of it. But in Tracy v. Talmage, supra, the rule is also clearly enunciated, that if it is made a part of the contract that the goods shall be used for such illegal purpose, or if the vendor has done some act in aid or furtherance of the unlawful design, there cannot be a recovery. The learned Justice says, that “where the seller does any act which is calculated to facilitate the smuggling, such as packing the goods in a particular manner, he is regarded as particeps crimwms, and cannot recover.”

In Waymall v. Reed, 5 T. R., 590. Buller, J. says, that “ this cause does not rest merely on the circumstances of the plaintiff’s knowledge of the use intended to be made of the goods; for he actually assisted the defendant in the act of smuggling, by packing the goods up in a manner most convenient for that purpose.”

In Cannan v. Bryce, 3 Barn and Ald., 179. Abbott, J. says, that “ it will be recollected that I am speaking of a case wherein the means were furnished with a full knowledge of the object to which they were to be applied, and for the express purpose of accomplishing that object.” Lightfoot v. Tennant, 1 Bos. and Pull., 551. McKinnall v. Robinson, 3 Mees, cmd Wels., 434.

I think the rule of law is well established in reason and upon sound policy, as well as by authority, that in a contract for the sale of goods in the common and ordinary course of trade, with knowledge merely of the purpose for which they are intended, the vendor cannot set up his own illegal intent as a bar to an action for the recovery of the purchase money; but that where the unlawful purpose enters into and forms a part of the contract, payment cannot be enforced.

But it is contended that the defendant in error is an innocent holder of the note, and that it was endorsed to him before it became due. How did he obtain it ? It is said that he took it in part payment of an old debt dne to him from Asher & Adams. But was the note endorsed before due and delivered to him, or in good faith deposited in. the hands of a third person for him?

To constitute a valid endorsement there must also be a delivery and acceptance by the endorsee of the note. This doctrine appears to me to be so well expressed in Clark v. Sigourney, 17 Conn., 519, that I adopt it as a sound principle of law. The court says: “ It is a universal principle, applicable to every contract, whether executed or executory, evidenced by a written instrument, that the instrument must be delivered by the party making the transfer or promise, to the party to whom it is made, and be accepted by the latter; the delivery by the former being evidenced by his assent to the transfer or promise, and the acceptance of the latter, the evidence of his consent to receive it; and both unitedly showing the meeting of the minds of the parties in the transaction, which is the consummation of the contract.

The delivery however may not be expressly proved, since it may.be and usuallyis, presumed from the circumstances, and especially from the fact that the instrument is in the hands of the party to whom it purports to have been made; a presumption however which may be disproved.

On principle, therefore, the mere act of writing the name on the back of the note, is not sufficient to constitute an endorsement of it; but to complete it as such, the further act of delivery of it by him to the person to whom a title in it is intended to be transferred is necessary.” Adams v. Jones, 12 Adl. and El., 455. Marston v. Allen, 8 Mees, and Wels., 494. Clarke v. Boyd, 2 Ohio, 60.

But again it is contended that the note is good in the hands of the endorsee, though it may not be valid as between the original parties. This is true as a general principle of law, but there are exceptions to this general rule and these exceptions may, perhaps, be embraced in three classes.

The first is when the note is transferred by endorsement after it becomes due. In such case the endorsee takes the note, subject to all the equities existing between the original parties. In the second class, the endorsee may not be implicated in, or privy to, the original transaction between the parties, yet there can be no recovery on the notes, if the contract was founded on an illegal consideration, prohibited by some positive statute, or the performance of which is malum in se; and the third class is when “ the endorsee is implicated in or privy to the original transaction, and on that account the promissor is permitted to set up any defense which would have availed against the promisee. Because the holder’s knowledge of that part of the original transaction, which would render the note invalid between the first parties to it, prevents him from being defrauded, and makes him rely solely on the responsibility of the endorser. This reliance is the consequence and not the cause of the notes being discredited.” Perkins v. Challis, 1 New Hamp., 255. Aspinwall v. Commissioners, 20 How. 379. Tracy v. Talmage, 14 New York, 176. Pars. Contr., 381.

But in the third class of exceptions in order to make the defense available, it must clearly appear that the endorsee had notice of such circumstances as would have avoided a recovery on the note in the hands of the original promissee. And it is said that the question whether the endorsee had notice, is one which must be fairly submitted to the jury to determine. Hull v. Auqustine, 23 Wis., 385.

Now according to the principles of law which seem to be well settled, I am of opinion that the whole evidence in respect to the contract between the original parties, and in respect to the endorsement and delivery of the note by Asher & Adams to the defendant in error should have been admitted and submitted to the jury for them to determine.

The record shows that the plaintiff in error having testified to a conversation between him and Asher & Adams, in regard to the Eureka Map transaction, at which time the defendant in error was present and wrote a receipt from Asher & Adams to the plaintiff in error for'the note in question, the following questions were propounded to him, which were objected to, and the objections were sustained by the court, to which rulings of the court the plaintiff in error then excepted, viz:

1. State whether or not during the conversation between you and Asher & Adams, in the presence and in the hearing of De Lamater, any maps were exhibited containing the lottery scheme set out in your answer? 2. State whether or not, at any time prior to the alleged transfer of this note, and subsequent to the making of the same, you had any conversation with De Lamater, or in his presence and hearing, by which he was advised and informed of the fact that the note was executed in payment of the maps and lottery scheme set up in your answer? 3. What knowledge, if any, had De Lamater before the alleged transfer of the note, that this note was given in payment for the printing of a map containing a lottery scheme in the state of New York? 4. What was the consideration of this note? 5. State what was the contract between you and Asher & Adams concerning the maps and lottery scheme for which the note was given?

To maintain his defense it was necessary for Kittle to clearly prove that the note was given upon an illegal contract, positively prohibited by law, or, if the case came within the third class of exceptions named, where the original transaction would render the note invalid between the first parties, then to prove De Lamater’s implication' in, or full knowledge of, tbe circumstances of tbe original contract before he received tbe note, if be received it before it became due. Hence, I think tbe court erred in sustaining tbe objections to tbe above questions.

If tbe contract was an illegal one, prohibited by law, tbe answers to tbe questions propounded to tbe witness might tend to disclose such fact. And certainly it was competent for Kittle to show that De Lamater bad been before be received tbe note, fully informed and advised -of tbe circumstances between Kittle and Asher & Adams, and bad full knowledge of tbe nature and character of tbe contract between them, upon which tbe note was given.

Tbe judgment of tbe district court must be reversed, and cause remanded for further proceedings.

Reversed and remanded.

Chief Justice Lake concurs.