93 Ga. 520 | Ga. | 1893
Tompkins ’was sued by Compton upon two promissory notes -executed by Tompkins and Woodson at Sheffield, Alabama, May 28th, 1888, one payable to Compton or order, the other payable to Graves or order and indorsed by Graves to' Compton. The defendant filed special pleas, setting up, among other grounds of defence, that the consideration of the notes sued on was illegal. A general demurrer to these pleas was sustained, and the defendant excepted. .
We think the pleas,contain a good defence, in so far as they rest upon the element of illegality. It appears from -the allegations therein, that the defendant -was president of the Sheffield Street Railway Company, a corporation in Alabama, and that the plaintiff and Graves were stockholders of the Sheffield & Tuscumbia Street Railway Company, a competing corporation of
Under the laws of Alabama, in the absence of express statutory authority, there can' be no. consolidation of the stock of one corporation with that of another so as to create a consolidated company composed of the stockholders of both corporations; and to attempt such a scheme over the objection or anticipated objection of a minority of the stockholders in either corporation is illegal and contrary to public policy. (See Nathan v. Tompkins, supra; Memphis & Charleston R. Co. v. Woods, 7 Lawy. Rep. Annot. 605.) On this point there was no contest in the argument before us; but it was contended that the illegality of the attempted consolidation did not affect the consideration of the notes, (1) because the parties to whom the notes were given had a right to sell their stock and to be paid for it, no matter what use the purchasers may have intended to
In the State in which this contract was made, it has been held that a'sale is rendered illegal on the part of the seller, as well as on the part of the buyer, if the seller knows that the buyer’s purpose is to apply the subject of the sale to an unlawful use. Milner v. Patton, 49 Ala. 423 (overruling Thedford v. McClintock, 47 Ala. 647); Oxford Iron Co. v. Spradley, 51 Ala. 175; Ware v. Jones, 61 Ala. 293. “ Mere knowledge of the illegal purpose,” says Brickell, C. J., in the case first cited, “ is all the law requires, to pronounce judgment against the contract. This is the rigid rule of the common law, from which there should be no departure.” And so Mr. Benjamin states the law to be, in his work on Sales, where it is said: “The sale of a thing in itself an innocent and proper article of commerce, is void when the seller sells it knowing that it is intended to be used for an immoral or illegal purpose. In several of the earlier cases, something more than this mere knowledge was held necessary, and evidence was re-required of an intention on the vendor’s part to aid in the illegal purpose, or profit by the immoral act. The later decisions overrule this doctrine.” (See Bennett’s edition, 1892, §892 et seq.) In the notes- to that work, however, in the edition referred to, it is said (p. 504), that “ generally the vendor of an article which may be lawfully sold- or used for some purpose, can recover the price although it be bought to use for some unlawful purpose, unless the vendor participated in and intended to aid in carrying out that unlawful use. Mere knowledge on his part that the vendee intended and expected to' use it for an unlawful purpose (if the two elements can be distinguished from each other) will not avoid
In either view of the law it is clear that the sale now under consideration was illegal as to all parties to the contract. According to the pleas, the parties who sold the stock not only knew of the intended consolidation, but by the terms of the contract were to share in the fruits of it. It is equally clear, if the notes were given, as the pleas allege, in' adjustment of a demand for tbe one hundred shares of “contemplated consolidated stock,” or its estimated value, that the notes are tainted with the illegality which attached to the original contract. “ A contract executed in consideration of a previous illegal one or in compromise of differences growing out of it, is like that whereon it rests, illegal and incapable of being enforced.” Bishop on Contracts, §488; Greenhood on Public Policy, rule 10, p. 8; Wilson v. Bozeman, 48 Ala. 71. If the allegation referred to is true, the giving of the notes amounted simply to an undertaking by one of the parties to an illegal contract, in the fruits of which both parties were to share and which had failed to bear some of the anticipated fruits, to compensate the other party for his disappointment.
There is no merit in the contention that the defendant cannot defend by setting up his own unlawful conduct. See Howell v. Fountain, 3 Ga. 182; Carey v. Smith, 11 Ga. 547; Bugg v. Towner, 41 Ga. 318; Harrison v. Hatcher, 44 Ga. 642; Heineman v. Newman, 55 Ga. 262. In the case of Bugg v. Towner, supra, it is said: “It is objected that the defendant should not be heard to set up the illegality of the transaction for his own benefit. The reply is, that courts sustain such a defense, not for the sake of the defendant, but upon general principles of public policy. In Holman v. Johnson, Cowper, 343, Lord Mansfield uses the following language, which has heretofore been approved and adopted by this court as a
.The note to Graves having been taken by the plaintiff with full knowledge of the facts, it was taken subject to all the defences which might be urged against the original payee. Judgment reversed.