240 F. 1 | 6th Cir. | 1917
The writ of error is prosecuted by the Western Indemnity Company to reverse the judgment below sustaining defendants’ demurrer and dismissing the petition. The action was based upon a written instrument dated August 15, 1904, whereby the defendants had undertaken to indemnify another company, the Federal Union Surety Company (herein called Federal Company), against loss under a certain bond in the sum of $20,000, bearing date August 11, 1904, given by the Euclid Avenue Trust Company (herein called Euclid Company) of Cleveland, Ohio, as principal, and the Federal Company, as surety, “running to W. S. McKinnon of Ash-tabula, Ohio.” The instrument first mentioned in terms binds defendants to indemnify the Federal Company under the bond of August 11, 1904, and also under any “renewals thereof, or other and new obligations (given) in its place or in lieu thereof.” Later, on December 29, 1904, the Euclid Company, as principal, and the Federal Company, as surety, executed a bond in the sum of $20,000 in favor of the state of Ohio. May 8, 1908, the Euclid Company made an assignment for the benefit of its creditors; and its assignee subsequently paid the state $10,065.12. The state thereafter recovered judgihent against the Fed
The demurrer, sustained below, sets out two grounds: (1) That the facts stated in the petition do not constitute a cause of action; and (2) that “the alleged contract upon which the petition is based is void as against public policy.” The petition shows that when the first bond was given by the Euclid Company and the Federal Company, and the indemnity contract was given by the defendants, as before pointed out, William S. McKinnon was treasurer of the state of Ohio, and that he thereafter continued to hold such office until the date of his death, November 17, 1908; that on or about the time such first bond was executed, August 11, 1904, McKinnon “deposited, of the public moneys of the state of Ohio,” with the Euclid Company, the sum of $20,-000, to be held by that company “as a deposit to the credit of the state of Ohio, and to be repaid to the said state of Ohio upon demand made * * * by the' said William S. McKinnon, treasurer, * * * upon said deposit.” Although the petition does not distinctly state the relations existing between the Euclid Company and the present defendants at the time the Euclid Company’s first bond was given (August 11, 1904), or at the time the defendants” indemnity contract was executed (August 15, 1904), yet it is fairly to be deduced from admitted facts that on those dates, as also at the date of the last bond,-the defendants were officially and pecuniarily related to the Euclid Company. For instance, it is disclosed by the petition: (1) That the Federal Company became surety upon the Euclid Company’s first bond at the “request” of the defendants; (2) that the Euclid Company’s last bond, with the Federal Company as surety, was executed “as a renewal of and in lieu of” the Euclid Company’s first bond and “at the instance of said defendants!’ (such requests, in view of defendants’ promises in the indemnity contract and in the absence as here of allegation to the contrary, give rise to a presumption- that they were throughout officially and pecuniarily related to the Euclid Company); and (3) that, when the second bond was given, defendant Crafts was president and the defendant Thomas secretary-treasurer of the Euclid Company; and, further, we understood counsel to concede at the argument of the cause that Crafts and Thomas were president and secretary-treasurer, respectively, and the other two defendants directors'of the Euclid Company during the period covered by the dates of the instruments above mentioned. If this be a right interpretation of the facts deducible from the record and the concessions of counsel, the grounds of the demurrer, especially the second ground, will be readily understood when considered in connection with the statutory conditions prevailing in Ohio at the times the instruments alluded to were executed.
When the first bond of the Euclid Company, with the Federal Com
The controlling question is whether, in view of the crime involved in the act of depositing the money of the state with the Euclid Company in August, 1904, recovery is allowable at the suit of the Western Company (as the successor in right of the Federal Company) against the defendants upon their indemnity contract of that month.
“But the state, through its legislative department, had power to make such a contract; and just as ample power to ratify one already made without authority. On this demurrer we are hound to suppose it has ratified this contract; and, if it has, the contract has taken effect between parties under no legal impediment to contract, upon a money consideration, and requires nothing to he done in its performance in.violation of any law or of public morals.”
The principle thus recognized finds further support in the settled rule that a state is not bound by the terms of its own general statutes, ex
The defendants by their indemnity contract expressly bound themselves, in consideration of the Federal Company’s execution of the bond of August 11, 1904, to pay to that company an annual cash premium “in advance on the 11th day of August, 1904, (and) in each and every year during the time the (Federal) Company shall be and continue liable upon the said instrument. * * * ” • It is to be presumed that the defendants’ official and pecuniary interests in the Euclid Company would receive a distinct benefit through the deposits of the state funds, and the inhibitory provision of the statute applied whether the deposits were- made “with or without interest.” The consideration therefore which the several parties to the indemnity contract were thus to receive through the consummation of the August transactions necessarily, calls for application of the settled rule that a contract will not be enforced where any part of the consideration is opposed to public policy or otherwise tainted with illegality. As Mr. Justice Holmes said, in Hazelton v. Sheckells, 202 U. S. 71, 78, 26 Sup. Ct. 567 [50 L. Ed. 939, 6 Ann. Cas. 217] :
“Every part of the consideration goes equally to the whole promise, and therefore, if any part of it is contrary to public policy, the whole promise falls.”
See, also, McMullen v. Hoffman, 174 U. S. 639, 654, 19 Sup. Ct. 839, 43 L. Ed. 1117; Oscanyan v. Arms Co., 103 U. S. 261, 268 et seq., 26 L. Ed. 539; Arnold v. Clifford, Fed. Cas. No. 555, C. C., decided by Mr. Justice Story on circuit; Widoe v. Webb, 20 Ohio St. 431, 435, 5 Am. Rep. 664; McQuade v. Rosecrans, 36 Ohio St.
_ It thus becomes unnecessary to consider the claim that a portion of the indemnity contract is applicable to the bond of December 29, 1904, and that this portion alone warrants recovery for the amount of the judgment rendered in the state suit. The complete answer to this is that the present action could not be stated (and it certainly has not been) without disclosing the entire indemnity contract and its evident object and, consequently, the illegality of its consideration. McMullen v. Hoffman, supra, 174 U. S. at page 656 et seq., 19 Sup. Ct. 839, 43 L. Ed. 1117.
The judgment is affirmed.