Case ID: misc_59/html/0273-01.html
Source: Caselaw Access Project
Author: {"author": "Bischoff, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Albert Akers, Plaintiff, v. Mutual Life Insurance Company of New York, Defendant.
    (New York Supreme Court, Special Term,
    May, 1908.)
    Pleading — Demurrer — In general — Objections on face of pleadings in general.
    Contracts — Validity of contracts — Effect of invalidity or illegality — Parties to contract not in pari delicto.
    The provisions of section 89 of the Insurance Law (L. 1902, cli. 690), which was repealed in 1906, prohibiting certain insurance corporations from making contracts with employees for more than twelve months, were continued by section 34 of chapter 362 of the Laws of 1906.
    Where it does not appear upon the face of the complaint in an action against an insurance company that the defendant was organized under the Insurance Laws of the State, or that it is engaged in the business of life insurance, the objection to the validity of a contract of employment for more than twelve months cannot be raised by demurrer.
    The provisions of the Insurance Law forbidding such a contract and affixing a penalty to the making thereof and declaring it to be a crime, such contract is not ultra vires hut malum prohibitum; but the inhibition is operative upon the insurance corporation only and not upon one entering into an agreement with the corporation for services neither malum in se nor malum prohibitum, and the parties are not in pari delicto, and the employee may recover for the value of his services as upon an implied assumpsit.
    In an action by the employee upon the express contract, where it appears by the complaint that the plaintiff rendered services to the defendant at its request, though for want of an allegation of the value of the services the plaintiff could only recover nominal damages, a cause of action upon an implied assumpsit is stated; and the complaint is not obnoxious to the objection, taken by a demurrer, that it does not state facts sufficient to constitute a cause of action.
    
      Action to recover the balance of salary alleged to have accrued under a contract of employment with the defendant. Demurrer for insufficiency of the facts pleaded to constitute a cause of action.
    Donald McLean, for plaintiff.
    James McKeen, for defendant.
   Bischoff, J.

As amended at the hearing of this cause, by consent of counsel for the respective parties, the complaint sets forth that on or about the 11th day of November, 1903, the plaintiff and the defendant entered into an agreement whereby the latter employed the former for a period of three years, beginning on the 1st day of January, 1904, at a salary equal to $100 per month, and additional compensation for special services; that the plaintiff entered upon the employment and duly performed his part of the agreement for the entire period; and that the defendant after due demand has refused payment of the salary for the last ten months. To this complaint the defendant has demurred upon the ground of defect in substance, the particular criticism of the pleading being, as appeared upon the argument, that it exhibits an agreement in violation of the Insurance Law of this State (Laws of 1902, chap. 690), section 89 of which reads as follows: “No such corporation (a life insurance corporation doing business in this State) shall make any agreement with any of its officers, trustees or salaried employees whereby it agrees that for any services rendered or to be rendered thereafter by such official, trustee or employee, he shall receive any salary, compensation or emolument that will extend beyond a period of twelve months from the date of such agreement or contract.” It is' contended for the plaintiff that the repeal of the provision of the Insurance Law quoted (Laws of 1906, chap. 362, § 28) removed the bar of illegality in the way of the enforcement of the agreement (White Water Valley Canal Co. v. Vallette, 21 How. U. S.] 414, 425; Washburn v. Franklin, 35 Barb. 599; Central Bank v. Empire Stone Dressing Co., 26 Barb. 23), but in this counsel has obviously overlooked section 34 of the law of 1906, by which the provision was continued, it having merely been transferred from one section to a new one added to the Insurance Law as section 98. Suth. Stat. Const., § 142. The demurrer, however, must in any event be overruled, since the relevancy of the Insurance Law to the agreement pleaded is not apparent. I may presume from the fact, as alleged, that the defendant is a corporation organized under and existing by virtue of the laws of this State, .that it is authorized to do business in this State, and I may know as a matter of fact that it is engaged in the business of life insurance, but I cannot take judicial notice of its charter, and the complaint does not allege that the defendant was organized under the Insurance Laws of this .State or that it is engaged in the business of life insurance. Speaking demurrers are no part of our system of pleading (Abbott Tr. Br. PL, §§ 10, 11), and without an affirmative allegation, therefore, that the defendant is engaged in the life insurance business the defect of the complaint to which the demurrer is pointed does not appear. Waiving this infirmity, however, in the defendant’s attack of the complaint, and assuming that the defendant is a life insurance corporation and engaged in the business of life insurance in this State, I must still conclude that the complaint is not demurrable upon the ground urged. Giving to the language of section 89 (98) of the Insurance Law of 1892 its broader significance, and holding with the defendant that the agreement set forth in the complaint is comprehended thereby, it was malum prohibitum, and, therefore, illegal, void and unenforcible. The agreement was not only expressly inhibited, but its making was visitable with a penalty. Section 53 of the law provided that “Any corporation or person violating any provision of the insurance law shall forfeit to the people of the state the sum. of five hundred dollars for every such violation unless a different sum is specifically provided for the violation by the provisions of this chapter. Such sum, when collected, shall be paid into the treasury of the state.” This section was repealed in 1906 (chap. 326, § 14) and the following substituted for it: “ Section 53. Any corporation or person violating any provision of the insurance law, except where such violation constitutes a felony, shall, in addition to any penalty otherwise prescribed for such violation, be guilty of a misdemeanor.” The case at bar, therefore, is not one where the agreement was ultra vires merely, that is, in excess of the corporation’s contractual capacity, in which case the corporation would be estopped from asserting the invalidity of the agreement upon the other contracting party’s performance (Whitney Arms Co. v. Barlow, 63 N. Y. 62; Holmes, Booth & Hayden v. Willard, 125 id. 75-80; Linkauf v. Lombard, 137 id. 417, 423; Seymour v. S. F. Co. Assn., 144 id. 333; Bath Gas Light Company v. Claffy, 151 id. 24; Parish v. Wheeler, 22 id. 494; King v. Brown, 2 Hill, 485), but one where the agreement is illegal because prohibited. Where an agreement is malum prohibitum, it is unenforcible by either party against the other if the parties are in pari delicto. Griffith v. Wells, 3 Den. 226; Peck v. Brown, 10- N. Y. 294; Bell v. Quin, 2 Sandf. 146; Connolly v. Union Sewer Pipe Co., 184 H. S. 540, 548; Higgins v. McCrea, 116 id. 671, 686; McMullen v. Hoffman, 174 id. 639, 654; Harris v. Runnels, 53 id. (12 How.) 79 ; Burek v. Taylor, 152 id. 634, 649; Gibbs v. Balt. Consol. Gag Co., 130 id. 397; Tracy v. Talmadge, 14" N. Y. 162; Curtis v. Leavitt, 15 id. 9. But as I read the provisions of section 89 (98) of the Insurance Law, the inhibition to agree for a period in excess of twelve months is operative upon the insurance corporation only. The corporation is prohibited from making the agreement, and the persons ” intended to be subjected to punishment for a violation of the law (§ 53) are those only who essay to act in the corporation’s behalf. This is the plain meaning of the language employed, and the rules of construction admit of no other. “ Laws imposing a penalty and giving penal actions must, like other statutes, receive a reasonable construction. While they cannot be enlarged by construction, effect will be given to the intent of the Legislature, as deducible from the language employed; but they will not be extended by implication to cases not fairly within the intent, as declared by the words.” Verona Central Cheese Co. v. Murtaugh, 50 N. Y. 314, 317. See also Hathaway v. Johnson, 55 id. 93; Hintermister v. First Hat. Bank, 64 id. 213, 215. “ There can he no constructive offense, and before a man can he punished his case must he plainly and unmistakably within the statute.” Fuller, O. J., in United States v. Lacher, 134 U. S. 628. “ Laws which create a crime ought to he so explicit that all men subject to their penalties may know what acts it is their duty to avoid. Before a man can be punished, his case must be plainly and unmistakably within the statute.” Blatchford, J., in United States v. Brewer, 139 U. S. 288. “ It is axiomatic that statutes creating and defining crimes cannot be extended by intendment, and that no act, however wrongful, can be punished under such a statute unless clearly within its terms.” Brewer, J., in Todd v. United States, 158 U. S. 282. It was the evident design of the Legislature to restrain life insurance corporations from incurring any obligations toward its officers, trustees or salaried employees, for services rendered or to be rendered, which should endure for a period longer than twelve months, and this design was carried into effect by declaring any such attempted obligation illegal and unenforeible. However much it may be competent to the Legislature to secure the observance of these restrictions by making their violation by the corporation or an officer of the corporation, acting as such, punishable, it would be unreasonable to impute to it an intention to penalize the act of an individual in his own behalf when entering into an agreement with the corporation for services neither malum in se nor malum prohibitum. The right to contract for his lawful services is the common-law right of every individual and a part of our municipal law. It is subject to legislative regulation which does not transcend constitutional guarantees (Munn v. Illinois, 94 U. S. 134), and the wisdom of any such regulation presents no judicial question. Parol contracts for the sale of real property, for the lease of real property for more than one year, for the sale of chattels exceeding in value fifty dollars, are severally declared to be void, yet it would be commonly regarded as a cruel and most oppressive exercise of power were the Legislature to penalize the parties to such contracts. A life insurance employee’s attempt to dispose of Ms services to the corporation upon employment for more than twelve months is affected with no more moral or legal turpitude than is the conduct of the parties to the parol contracts alluded to, and he should he declared criminal only when legislative language is open to no other reasonable construction. Construing, then, the Insurance Law as operating upon life insurance corporations and persons acting in their behalf, and not upon the employees of such corporations when acting for themselves, I must necessarily conclude that the parties to this action, with regard to the agreement, are not in pari delicto. Thb plaintiff was not proMbited from making the agreement, he violated no law when so doing, the agreement is not malum in se. In such a ease it is the prohibitory law itself * * * which discriminates as to the relative guilt of the parties. The courts do not. determine whether they are in pari delicto by scrutinizing the circumstances of the case, but adopt the distinction marked out by the statute.” Curtis v. Leavitt, 15 M. T. 9, 289. See also Tracy v. Talmadge, 14 id. 162; Keener Quasi Contracts, 271, 273. Therefore, when a contract, otherwise unobjectionable, is prohibited by a statute which imposes a penalty upon one of the parties only, the other is not in pari delicto, and where the contract is not malum in se he may recover as upon an implied assumpsit against the party prohibited or upon whom the penalty is imposed for any money or property which he has advanced upon such contract. Curtis v. Leavitt, supra; Tracy v. Talmadge, supra. In the Tracy case the plaintiff had sold stocks to a banking corporation and accepted payment therefor in notes which the corporation was proMbited from making and issuing under a penalty. It was held that though the contract was illegal and void, and no action would lie upon it, the plaintiff could recover the value of the stocks sold and delivered upon an implied undertaking; that though the plaintiff was a party to the illegal contract' he was not in pari delicto within the rule which forbids the court to.grant to one party to an illegal contract or transaction relief against the other. The Curtis case differed from the Tracy case only in that the transaction was a loan of money upon the prohibited notes, and it was there also held that the plaintiff could recover the money loaned while the notes were void. The deduction from what has been said is, of course, that this action is not maintainable upon the express agreement set forth in the complaint, but it does not follow that the complaint is defective. It sufficiently appears that the plaintiff rendered services at the request of the defendant during the last ten months of the year 1906, and these facts in and of themselves give rise to an implied promise by the defendant to pay what the services were fairly and reasonably worth. True, without an amendment of his pleading, the plaintiff may not be permitted to prove and recover more than nominal damages. But, even so, upon a demurrer for insufficiency the inquiry is not whether the pleading demurred to sets out the cause of action or defense which the pleader had in mind at the time, but whether any cause of action or defense appears therefrom. 6 Ency. of PI. & Pr. 316. If the pleading is sufficient upon any proper theory it is proof against the demurrer. Demurrer overruled, with costs, with leave to defendant to plead over upon payment of costs.

Demurrer overruled.