#### Gehres, Appellant, *v.*Ater, Appellee.

(No. 30804

Decided May 21, 1947.)

*91*Mr. W. T. Reed,*for appellant.

*Mr. J. F. Outright*and *Mr. Edtvard W. Barrett,*for appellee.

Hart, J.

The principal question of law presented is whether the facts pleaded in the plaintiff’s amended petition show that the action was not- brought within the period allowed by the statutes of limitation.

The defendant takes the position that the plaintiff, in delivering his bond to the defendant, lost it pursuant to plaintiff’s unlawful agreement to pay money lost at gaming, which agreement Section 5965, General Code, declares void; that any cause”of action to recover it arose immediately upon the delivery of the bond; and that such cause of action was barred by virtue of the statutes of limitation as to gambling, Section 5966 *et seq.,*General Code, and by the statute of limitation as to conversion.

The plaintiff contends that this is not a suit to recover money or other thing of value lost at gaming; that the bond was delivered as security for the payment of his gambling debt which is void under the statute; that the pledge agreement was likewise void for lack of consideration; that by reason of those circumstances the defendant became a gratuitous bailee of the bond subject to its redelivery on demand; that the plaintiff made such demand on October 15, 1940; and that as a result of noncompliance with such demand a cause of action, for conversion arose to which the four-year limitation, prescribed by'Section 11224, General Code, is applicable. .

The judgments of the Common Pleas Court and the *92Court of Appeals in this case result in an unjust enrichment of the defendant. They permit him, by his own wrongful act of conversion, not only to have payment of the plaintiff’s gambling debt but the proceeds of plaintiff’s bond of a value of over double the amount of the debt. Such a result should not obtain unless the applicable rules of law clearly decree otherwise.

At common law one who makes a wager-with another may always withdraw from the wager and retain or recover his property or money before it goes into the hands of the winner, even after the result of the wager is known. So long as the title to the property or money has not passed to the winner, the loser may repudiate the wager and retain his money or property or recover it in a common-law action.

This principle* of law is illustrated in cases where the parties to a wager have placed their property or money in the hands of a stakeholder to await the result of the wager, and the loser, before his property is delivered or his money is p'aid to the winner, demands its return. One who places money or property in the hands of a stakeholder may, while such money or property remains in the stakeholder’s hands, withdraw his wager or repudiate the illegal contract, under which the money or property was deposited, and demand the return of such money or property, and if the stakeholder refuses to return the money or property the loser may bring an action against him for its recovery. *Thornhill*v. *O’Rear,*108 Ala., 299, 19 So., 382, 31 L. R. A., 792; *Williams*v. *Kagy,*176 Ark., 484, 3 S. W. (2d), 332; *Hardy*v. *Hunt,*11 Cal., 343; *Alford*v. *Burke,*21 Gra., 46, 68 Am. Dec., 449; *Kearney*v. *Webb,*278 Ill., 17, 115 N. E., 844, 3 A. L. R., 1631; *Reynolds*v. *McKinney,*4 Kan., 94, 89 Am. Dec., 602; *Martin*v. *Francis,*173 Ky., 529, 191 S. W., 259, L. R. A. 1918F, 966, Ann. Cas. 1918E, 289; *Gilmore*v. *Woodcock,*69 Me., 118, 31 Am. *93Rep., 255; *Pabst Brewing Co.*v. *Liston,*80 Minn., 473, 83 N. W., 448, 81 Am. St. Rep., 275; *Beaver*v. *Bennett,*29 Neb., 812, 46 N. W., 161, 26 Am. St. Rep., 415; *Clemmer Motor Co.*v. *Towler,*179 Tenn., 295, 165 S. W. (2d), 581; *Tarleton*v. *Baker,*18 Vt., 9, 44 Am. Dec., 358.

Permitting sncb a recovery is not a recognition of the illegal contract bnt a recognition of the right to repudiate it. *Kearney*v. *Webb, supra.*That rule is applicable even though there is a statute declaring gambling contracts void. *Diggie*v. *Higgs*(1877), 2 Ex. D., 422, 46 L. J. Q. B., 721, 37 L. T., 27, 42 J. P., 245, 25 W. R., 777, C. A.

In the case at bar, the delivery of the bond by the plaintiff to the defendant was not in payment of the gambling debt, but was merely an attempt to secure its payment. The plaintiff alleges in his petition, and we are bound by the facts alleged therein, that “he deposited with the defendant a certain * * * bond * * * to secure the payment of an alleged debt * * * for money lost in a game of chance * * * which debt the plaintiff was not legally or morally bound to pay.” Those allegations present no implication of payment. “Pledge” and “conversion,” set out in the petition, are wholly inconsistent with “payment.”

One of the necessary elements of a contract of pledge is a valid and effectual debt or obligation to the pledgee. *Gray*v. *Thomas,*163 S. C., 421, 161 S. E., 743. Since the claimed debt of the plaintiff to the defendant was void as a gambling debt, there was no valid consideration for a contract of pledge. All gambling contracts are specifically made void by Section 5965, General Code. Title to the bond did not pass to the defendant but remained in the -plaintiff. In fact, the defendant acquired no interest whatsoever in the bond. *Brinley*v. *Williams,*189 Okla., 183, 114 P. (2d), 463. See *Holman v. Ringo,*36 Miss., 690.

*94. On this subject, 41 American Jurisprudence, 591, Section 11, says:

> “If the obligation which is purported to be secured is invalid or ineffectual for any reason — for example, lack of lawful consideration — effect will not be given to the transfer of property which purports to secure it [J. *E. Burke & Co.*v. *Buck,*31 Nev., 74, 99 P., 1078, 22 L. R. A. (N. S.), 627]. Accordingly, where it appears that, shares of stock were transferred to secure a gaming debt, the conclusion is that the transferee cannot be considered as having the rights of a pledgee.” Citing *Menardi*v. *Wacker,*32 Nev., 169, 105 P., 287. See annotation, 22 L. R. A. (N. S.), 627.

The defendant in the instant case became a mere custodian of the bond and the plaintiff, still invested with title, could repudiate the alleged contract of pledge and recover his bond on demand immediately or at any time within the appropriate period of limitation. Only where payment has been made or where a contract in violation of the' gambling laws of the state has been executed by performance is the loser in a gaming transaction precluded from rescinding the transaction and recovering Ms money or property. *Cooper*v. *Rowley,*29 Ohio St., 547, 549. Section 5966, General Code, precludes recovery beyond six months only where the loser *“pays*[the money wagered] or *delivers it*[other thing of value wagered] or a part thereof, *to the winner.”*(Italics supplied.)

These principles have been enunciated by text writers and are supported by judicial authority.

> “The broad principle * # * that when parties enter into an illegal agreement the courts regard them as *in pari delicto*and consequently will leave them where they find them, affording no relief to either of them either in law or equity, is subject to a number of exceptions, one of which is that where a contract pro*95Mbited by law is not *malum in se,*bnt *malum prohibitum,*and bas not been fully executed, either party may rescind the contract and have relief in justice both in law and equity. The principle upon which the exception is made is that the policy is best subserved by granting a *locus penitentiae*to a party, and by permitting him to disaffirm the contract, prevent the execution of it,.and authorize the party so disaffirming to recover money paid or grant to him equitable relief against the enforcement of the contract. * * *

> “This broad rule has also been varied by statutory changes which allow money won by gaming or betting to be recovered at law by the loser, *but independent of the statute so long as the illegal acts remain wholly unexecuted, the party parting with his money may repent, abandon his contract and recover bach the money paid,*the law’s aim being to prevent wrong doing by encouraging such repentance and abandonment.” (Italics supplied.) 9 Ohio Jurisprudence, 386, 387, Section 163. See annotation, 3 A. L. R., 1635; *Brown*v. *Timmany,*20 Ohio, 81; *Stevens*v. *Cincinnati Times-Star Co.,*72 Ohio St., 112, 154, 73 N. E., 1058, 106 Am. St. Rep., 586; 2 Restatement of Contracts, 1122, Section 605.

> *" The courts allow a party who, though he is in pari delicto, repudiates the agreement while it is executory to recover whatever he has given thereunder,*the recovery being, not under the agreement, but in'disaffirmance of it, on a promise implied or a right existing independently thereof. Accordingly, it has been held in many cases that where the matters called for in the agreement that render it illegal do not involve moral turpitude, but .are merely *mala prohibita,*either party, while it remains executory, may disaffirm it on account of its illegality and recover back money or property that he has advanced under it. So long as it is *96entirely unexecuted in that part which the law forbids, there is a *locus poenitentiae.”*(Italics súpplied.) 12 American Jurisprudence, 732, Section 216; 2 Restatement of Contracts, 1122, Section 605; *Congress & Empire Spring Co.*v. *Hnowlton, Jr., et al., Admrs.,*103 U. S., 49, 26 L. Ed., 347; *Bernard*v. *Taylor,*23 Ore., 416, 31 P., 968, 37 Am. St. Rep., 693, 18 L. R. A., 859; *Harrington*v. *Boschenski,*140 Md., 24, 116 A., 836.

Since the deposit of the bond was made under a mutual mistake of law or under circumstances which transferred no title to the defendant, his possession of the bond did not become wrongful, in the sense that there was a denial of plaintiff’s title to it, and the statutes of limitation did not begin to run in his favor until the plaintiff demanded the return of the bond (6 American Jurisprudence, 425, Section 340) or until the defendant denied the title of the plaintiff to the bond by its conversion.. See annotation, 47 A. L. R., 183; *In re Parsell’s Estate,*184 Mich., 522, 151 N. W., 714, Ann. Cas., 1917A, 1160; *Reizenstein*v. *Marquardt,*75 Iowa, 294, 39 N. W., 506, 9 Am. St. Rep., 477, 1 L. R. A., 318; *Whitehead*v. *Gormley,*116 Okla., 287, 245 P., 562, 47 A. L. R., 171, and annotation; *Bogle’s Admr. v. Thompson,*230 Ky., 538, 20 S. W. (2d), 173.

The demand for the return of the bond was made on the 15th day of October 1940 and the petition was filed on the 14th day of April 1944, within the four-year period of limitation provided in Section 11224, General Code. On the other hand, the petition does not show that the conversion of the bond by the defendant occurred more than- four years before the filing of the petition. The presumption would be that the conversion occurred within the period of limitation and, therefore, the demurrer to the petition should have been overruled.

The judgment of the Court of Appeals is reversed *97and the cause is remanded to the Common Pleas Court for further proceedings according to law.

*Judgment reversed.*

Weygandt, O. J., Sohngen and Stewart, JJ., concur.

Turner, Matthias and Zimmerman, JJ., dissent.

Matthias, J.,

dissenting. Under the common law there is no right of recovery of losses sustained in gambling transactions. It is said in 24 American Jurisprudence, 455, Section 79:

“Independent of statute,<the modern rule is that there is no remedy for the loser where money or property is delivered in payment of or on account of a gambling contract or transaction, since the law will not lend its aid to a party in either the execution or the rescission of such a contract, the maxim, *1 ex turpi causa non oritur actio,*’ applying, and the loser being regarded as *in pari clelicto*with the winner in such cases. Any recovery by the loser from the winner is dependent upon statute.”

It is well settled in this state that money or property lost at gaming can be recovered only by virtue of the express provisions of statute and by action instituted within the time therein expressly limited. *Roll*v. *Raguet,*4 Ohio, 400, 418; *Thomas*v. *Cronise,*16 Ohio, 54; *Hoss*v. *Layton,*3 Ohio St., 352, 357; *Harper v. Crain,*36 Ohio St., 338, 343, 38 Am. Rep., 589; *Cooper*v. *Rowley,*29 Ohio St., 547, 548.

In *Cooper*v. *Rowley, supra,*it was stated by Boynton, J., after making the 'observation that repayment of money lost by wager will not be enforced:

> “On the other hand, the rule has been long and firmly established, that where a contract, contrary to public policy or sound morality, or involving a viola*98tion of the criminal laws of the state, has been executed by the performance of its stipulations, the parties being *in equali delicto,*the court, in the absence of statutory requirement, will withhold all remedial aid, and leave the parties just where it finds them.”

In the case of *Harper*v. *Crain, supra,*Johnson, J., in speaking of the transaction therein involved, which arose from a wager, used this language:

> “The statute prohibits such contracts, and gives a right of action to recover back to the loser.

> “Independent of this statute, there was no remedy for the loser, where the money or property had been delivered, as the law would not lend its aid to a party either in the execution ' or rescission of such a contract. ’ ’

What then are the plaintiff’s rights under the statutes applicable to losses at gaming:

Section 5965, General Code, provides:

> “All promises, agreements, notes, bills, bonds or other contracts, mortgages or other securities, when the whole or part of the consideration thereof is for money or other valuáble thing won or lost, laid, staked, or betted at or upon a game of any kind, or upon a horse race or cock fight, sport or pastime, or on a wager, or for the repayment of money lent or advanced at the time of a game, play, bet or wager, for the purpose of being laid, betted, staked or wagered, are void and of no effect. ’ ’

Section 5966, General Code, provides in part:

> “If a person, by playing a game, or by a bet or wager, loses to another money or other thing of value, and pays or delivers it or a part thereof, to the winner thereof, such person so losing and paying or delivering, within six months after such loss and payment or delivery, may sue for and recover such money or thing of value or part thereof, from the winner thereof, with costs of suit. # * *”

*99Section 5967, General Code, provides as follows:

> “A person who expends money or thing of. value, or incurs an obligation for the purchase of or to procure a lottery or policy ticketj hazard or chance, or an interest therein, in or on account of a lottery, policy, scheme of chance, game of faro, pool or combination, keno or scheme of gambling, or a person dependent for support upon or entitled to the earnings of such person, or a citizen for the use of the person so interested, may sue for and recover from the person receiving such money, thing of value or obligation, the amount thereof, with exemplary damages, which shall not be less than fifty dollars nor more than five hundred dollars * * V’

Section 5968, General Code, provides:

> “In the prosecution of such actions, the plaintiff need only allege that the defendant is indebted to the plaintiff, or received to the plaintiff’s use, the money so lost and paid, or *converted the goods won of the plaintiff*to the defendant’s use, whereby the plaintiff’s action accrued to him, without setting, forth the special matter.” (Italics ours.)

Section 5969, General Code, provides:

> “If a person losing money or thing of value as provided in section fifty-nine hundred and sixty-six of this chapter, Wthin the time therein, specified, and without collusion or deceit, does not sue, and effectively prosecute, for such money or thing of value, any person may sue for and recover it, with costs of suit, agains [against] such winner thereof, for the use of such person prosecuting such suit.”

It has been held that under statutory provisions substantially the same as existing Section 5966, General Code, a person who loses money in the manner indicated may, even after the, six-month period prescribed by what is now Section 5966, General Code, *100prosecute an action to recover such loss provided the action is brought within the one-year statute applicable to penalties or forfeitures. See *Cooper*v. *Rowley, supra,*and Section 11225, General Code.

The statutory provisions above recited, with the exception of Section 5967, General Code, have been in existence in substantially the same form since 1831.

The plaintiff seeks the aid’ of the court to avoid the adverse effect of his gambling transaction and endeavors to procure for himself the benefits afforded by the favorable provisions of the statutes hereinabove quoted without conforming to the restrictions and limitations thereby imposed. ■ The .plaintiff is entitled to such» relief only by the grace of such statutory provisions and only upon the conditions and within the limitations therein clearly prescribed. Since the action was not brought, within the limitation of time prescribed, such action is barred.

It is the view of the minority that even if the four-year statutory limitation for conversion (Section 11224, General Code) apply, plaintiff must fail in this action for the reason that concededly the gambling transaction, of which the delivery of the bond to the defendant was a part, was unlawful and void, and consequently if an action in conversion was maintainable such cause of action immediately aróse. That was January 15, 1940, and this action was brought April 19, 1944. In any event, therefore, the plaintiff has by lapse of time lost his right to maintain such action.

The judgment of the Court of Appeals, affirming the judgment of the Court of Common Pleas sustaining the demurrer to plaintiff’s amended petition and dismissing his cause, is correct and should be affirmed.

Turner and Zimmerman, JJ.,

concur in the foregoing dissenting opinion.