Case Name: WILLIAM G. SHAW v. JOHN W. CARPENTER and Others
Court: Vermont Supreme Court
Jurisdiction: Vermont
Decision Date: 1881-10
Citations: 54 Vt. 155
Docket Number: 
Parties: WILLIAM G. SHAW v. JOHN W. CARPENTER and Others.
Judges: Taft, J., desires me to say that he concurs in the views I have expressed, except in regard to the sale of the cider being illegal, on which point he concurs in the views of the majority of the court.
Reporter: Vermont Reports
Volume: 54
Pages: 155–171

Head Matter:
WILLIAM G. SHAW v. JOHN W. CARPENTER and Others.
[In Chancery.]
Consideration, part Legal, part Illegal. Mortgage.
Notes were given, secured by mortgage, the consideration being the good will, fixtures and stock of a business, the two latter specified in inventories upon which each article with its price was separately carried out. A part of the stock sold and specified in the inventory was lager beer, cider, ale, porter and alcohol. On petition to foreclose by an assignee for value and without notice of the notes and mortgage. Held,
1. That the sale of the cider was legal, because not made in a “place of public resort ” within the meaning of the statute ; and that whether it is such place is a question of fact to be found by the court below, upon the evidence.
2. That the sale of the.lager beer was legal, because made before the statute of 1878 prohibiting it was passed, the master finding from the evidence that it was not intoxicating.
3. That the sale of the ale, porter and alcohol though damaged and unsalable, was illegal.
4. That, the articles illegally sold and their value being certainly ascertainable, the contract is divisible, and mortgage may be foreclosed for the amount of the legal sales.
5. R. L. s. 3800 — sale of cider — construed.
Petition to foreclose a mortgage. Heard on petition, answer, general replication, and the report of a special master, at the September Term, 1880, Chittenden County, Taft, Chancellor. The court ordered, proforma, that a decree of foreclosure be rendered against the defendants, for $51.71. The master found the following:
Said mortgage was given by the defendants, except Rodney and Mary Howard, subsequent mortgagees, on the 24th day of July, 1872, to Beniamin D. Peterson, securing the sum of $3,337.81, specified in four promissory notes of even date — the first being for the sum of $937.81, and the others for $800 each, signed by the defendant, J. W. Carpenter, and payable to said Peterson or order with interest annually, in one, two, three and four years after date.
The last of said notes fell due on the 24th day of July, 1876, and alone remained unpaid at the time of the commencement of foreclosure proceedings. . . . ,
Said note amounted on the 24th day of December, 1880, to the sum ot $1,094.80.
Said notes and mortgage were given for, and to secure the purchase price of certain property sold on the same day by Peterson to Carpenter, set forth in a bill of sale executed by Peterson, which was, in part, as follows :
“In consideration of $3,387.81 received of J. W. Carpenter, I, Benj. D. Peterson do hereby sell, transfer and assign unto said Carpenter the good will of a certain business for bottling cider, soda and mineral waters, now carried on by me in Burlington, together with all the stock, tools, bottles, machinery and fixtures, now in use in said business, as specified in certain inventories hereto attached, and I agree to deliver to said Carpenter the gross amount of property described in said inventories, which said inventories are signed with my name.”
This assignment was drawn by the petitioner acting as the attorney for said Peterson, who brought the inventories to the office of the petitioner for that purpose.
I find that upon the execution of the assignment, that instrument and the inventories were pinned together by the petitioner, but that he neither read nor examined said inventories, nor was aware of their contents any further than was indicated by the assignment.
Upon these inventories the various articles sold were separately carried out with a separate price for each item, the footings of the several pages of the inventories being brought forward upon the last page where the aggregate correctly appears at the sum of $3,221.81. To this was added an item of $116, without stating what the same was for, and thereby increasing the amount to $3,337.81, the amount named in the assignment and mortgage. -
Prom said inventories so attached to said assignment it appears that a portion of the property so sold to Carpenter, and forming a part of the consideration of said notes, consisted of cider, lager beer, ale and porter (the bottling of which was likewise a part of said business), together with one gallon of alcohol. Said sale was made in Burlington, Vermont, and neither Peterson nor Carpenter were agents for the sale of liquor under the statute.
On the 28th day of October, 1872, and before the maturity of any of said notes, said Peterson sold them, together with said mortgage, to the petitioner, who purchased them in good faith for an adequate consideration (paying thereior the siim of $3,239.65, being the agreed value between* tliem), believing them to be fully based on a valid and legal consideration, and not suspecting that any illegal element entered into the consideration. Said notes were endorsed by Peterson, upon said transfer, waiving demand and notice.
I find that shortly after the sale of said business and property to Carpenter, and before the petitioner had bought the notes, he, said Carpenter, olaimed to said Peterson, that said cider, ale and porter were sour, damaged and unsalable, and that the damage to him in .consequence was $500; that said claim was the subject-matter of several interviews between them until it was finally settled on the 24th day of April, 1873, by the payment by Peterson to Carpenter of the sum of $200, in full settlement for such damage. This adjustment between Carpenter and Peterson was made alter said petitioner had purchased the notes and mortgage, was not endorsed upon said notes nor applied in reduction of them; and was based wholly upon the deteriorated condition of said goods; said sum being agreed upon as a reimbursement of the inventory prices paid therefor, exclusive of the prices paid for the bottles and casks containing the same. No claim was set up or repayment made on account of any illegality of consideration in the purchase price of said property. . . .
Of the property sold by Peterson to Carpenter and forming a part of the consideration of said notes, I find there were the following goods in kind and amount: lager beer, $23.94; cider, $422; ale, $209.38; porter, $6.72; alcohol, $2.25. There was much controversy as to what portion and how much of the said items was “ intoxicating liquor ” within the meaning of chapter 94.
The master finds from the evidence as a matter of fact that the lager beer so sold to Carpenter was not an intoxicating drink.
The cider in question was an intoxicating drink, but whether the sale was illegal under the provisions of chapter 94 is submitted to the court upon the following facts found:
This establishment was for the bottling of cider, soda and other prepared beverages for the market, having an office and office equipments connected therewith. It was a sort of warehouse, where the cider and other drinks were prepared and stored in bulk, and where the bottles and machinery and appliances for bottling and transportation were kept.
The cider was there put up in bottles, some of it being prepared at the proper stage, by adding a stated quantity of fish sounds jelly to arrest fermentation, and when clear was bottled in champagne bottles; all for the market. The addition of this preparation to the cider did not, however, change the essential nature or quality of the drink. There were no conveniences for selling any drinks to be drank on the premises; and none were so sold or drank. The business consisted for the most part in selling these drinks, including the cider, at wholesale to dealers living out of town, orders being received therefor by mail, and being filled by delivering the same, packed, at the express office or depot for transportation.
Some of said goods were sold in town, there being a delivery wagon belonging to .and connected with said business; but I find that such sales were made by soliciting and receiving orders at wholesale therefor from customers at their places of business, where said orders were delivered by the vendor or his messenger; and that people did not resort to said establishment for the purpose of procuring or purchasing said goods, o'r generally for any purpose.
Whether the sale of the ale and porter was contrary to the provisions of the statute is submitted to the court upon the following facts found:
The ale was in a damaged condition when sold by Peterson to Carpenter. and had deteriorated into what is sometimes called “ stock ale,” and had become and was sour, unpalatable, not salable or marketable.
The porter was also in a similar condition, but I further find that neither of these had lost any of their intoxicating properties in the change, —both of which I find are intoxicating liquors in their natm-al condition.
As to the alcohol. I find that the same was legitimately on hand and used by Peterson only for the manufacture of syrups for soda (a nonintoxicating drink prepared at the establishment), it being necessary to use alcohol to cut or dissolve the oils used in making the requisite syrups, and that the same was transferred to Carpenter as a part of the necessary materials for continuing said business.
M. R. Tyler, for the defendants.
The orator needs no aid from the court of equity, as his note was endorsed, and he has his remedy against the endorser. Bow-yer v. Bampton, 2 Stra. 1153; Edwards on Bills & N. 337, 352; Chitty on Bills, 86. The sale of the cider, being at a place of public resort was illegal; also, of the ale, alcohol and porter. The partial illegality of the consideration of the note vitiates the whole note. There is a distinction between want or failure, and illegality of consideration. Want or failure of consideration in part would affect a promise only pro tanto, but partial illegality destroys it in toto. 14 Gray. 522 ; 88 Mich. 278 ; 39 Ga. 85 ; 8 Mass. 51; Chitty on Con. 60, 61, 426, 664, n., 692.
The contract was entire and for one gross sum; and whether the consideration of the promise be entire or not, the promise itself unquestionably is, and if any part of the entire promise is illegal, the whole promise is void. The consideration of the note was entire and cannot be separated. Chitty on Cont. cited above; Crawford v. Morrell, 8 Johns. R. 253 ; Loomis v. New-hall, 15 Pick. 167 ; Bridge et al. v. Hubbard, 15 Mass. 96 ; Kendall v. Robertson, 12 Cush. 56; Bowen v. .Buck, 28 Yt. 308 ; Cobb v. Cowdery, 40 Yt. 25 ; Hinman v. Woodruff, 11 Yt. 592 ; Leering v. Chapman, 22 Me. 488 ; Scott v. Grilmore, 3 Taunton, 226 ; Carlton v. Whitcher, 5 N. H. 196 ; Hindes v. Chamberlain., 6 Ñ.H. 225 ; Ohitty’s Bills, p. 87 ; Parson’s on Con., vol. 2, p. 19; Hooker v. LePalos, 28 Ohio St. 251.
The note and security given therefor, being absolutely void in their inception, under the act of 1852, even a bona fide holder cannot recover thereon. Chitty on Bills, 83, 88; Dougl. 735; 2 Stra. 11, 53 ; 1 Stark, 385; 47 Yt. 702.
William Gr. Shaw, for the orator.
The petitioner is a bona fide holder of the note ; and, as such, he is entitled to all the benefits which the law confers on such holders of negotiable instruments. 1 Dan. Nego. Instruments, s. 807 ; 32 Yt. 828 ; Powers v. Ball, 27 Yt. 662 ; Clark v. Pease, 41 N. JEL 414; 9 Gray, 329. Among those benefits is the right to recover of the maker of such a note the full amount thereof without regard to the partial or total failure or illegality of the consideration as between the original parties, unless by some statute all securities given for such consideration are declared to be void, or some equivalent statutory language is used.
I respectfully submit that Streit £ Co. v. Sanborn, 47 Vt. 702, is not sustained by authority. In the case of such bona fide holder the action is not for the value of the liquor, it is not for the consideration for which the note was given, but is an action on the security itself, independent and regardless of the consideration. A negotiable note without any consideration is just as valid in thfe hands of such a holder as if it was given on a perfect and complete consideration. 12 Cush. 156 ; Chitty on Con. 614 and cases cited.
Why is it not just that the petitioner should recover to the same extent that Peterson could in general assumpsit ?
And in that mode of adjustment, or any other, why may not the plaintiff claim that the prior payment by Carpenter on that sale of the amount of the first three notes, has covered all the illegal part of the goods which in any event is less than any one of the notes, and that the illegally sold goods having been paid for, the note remaining unpaid represents only legally sold goods ?
Or, if that is not correct, surely the illegal consideration should be disti'ibuted pro rata among all the notes, and the last note should bear only its proportional part thereof.
The mortgage is valid whenever, and in whose soever hands, the the note is valid. Taylor v. Page, 6 Allen, 86.
The sale ot the cider was legal. State v. Pratt, 34 Yt. 323.

Opinion:
The opinion of the court was delivered by
Royce, Ch. J.
This cause was heard upon the report of a special master appointed to ascertain and report the amount due on the mortgage described in the petition.
It appears from the report that on the 24th day of July, 1872, one Benj. D. Peterson, who was then engaged in the business of bottling cider, soda, and mineral waters, at the city of Burlington, sold the good will of the business and all his stock, — tools, bottles, machinery, and fixtures, then in use by him in said business, as specified in certain inventories, which were signed by the said Peterson, to the defendant Carpenter.
Upon said inventories the various articles sold were separately carried out, with a separate price for each item. The footings of the separate pages were brought forward upon the last page, where the aggregate correctly appeared of the sum $3221.81. To this . amount an item of $116 was added, which was included in the note first due. It is not found what the consideration for that item was. The good will of the business was included in the sale, and was not estimated in the inventory. It is probable that it may have been estimated by the parties at that time. For the amount so ascertained the defendant Carpenter executed four promissory notes payable to said Peterson, or order, and secured the same by the mortgage sought to be forclosed. Said notes have all been paid, but the last, which was for $800 ; and that fell due on the 24th of July, 1876. ' The interest on that note was paid to the 24th of July, 1876.
On the 28th day of October, 1872, and before the maturity of any of said notes, Peterson sold them and the mortgage for an adequate consideration to the petitioner ; the petitioner, then believing the notes to be based on a valid and legal consideration, and not suspecting that any illegal element entered into the consideration.
Of the property sold by Peterson to Carpenter, and which formed a part of the consideration of said notes, the master has found there were the following goods, in kind and amount: Lager beer, $23.94; Cider, $422 ; Ale, $209.38 ; Porter, $6.72; Alcohol, $2.25.
The defendant Carpenter claims that if any part of the consideration for the notes was illegal, they are void ; that no recovery could be had upon them ; and that a court of equity cannot grant any relief to the petitioner.
The first inquiry is, was the sale of any of the articles above enumerated prohibited by law ? It is found that the lager beer was not an intoxicating drink, and its sale was not then prohibited, the act forbidding its sale having been passed in 1878. The sale of the cider was not illegal, unless the place where it was sold was a place of public resort. The question as to what constitutes a place of public resort, under s. 3800 of R. L., does not appear to have been before this court, except in the case of State v. Pratt, 34th Vt. 323; and in that it was submitted to the jury to find from the evidence whether the place where it was shown the intoxicating liquor was furnished was a place of public resort or not. The sale of spirituous or intoxicating liquor, or of mixed liquor, of which a part is spirituous or intoxicating, is prohibited generally; its sale is made illegal, without reference to the place where the sale is made. The sale of cider is not generally prohibited, and its sale is only made illegal when it is sold at or in a victualling house, tavern, grocery, shop, or cellar, or other place of public resort, or at any place to an habitual drunkard.
If the defendant would avoid payment for the cider, he must show that the sale was an illegal sale, that it was prohibited by law. The only ground upon which it is claimed the sale was illegal is, that it was made at or in a place of public resort. The master has not found that the sale was made at or in the establishment of Peterson, which it is claimed was a place of public resort; or where it, in fact, was made ; or that the cider was in or about that establishment; or where it was, when sold. So that, from what appears in the report, the court cannot hold, as matter of law, conceding that the establishment of Peterson was a place of public resort, that the sale of the cider was illegal. But we do not think the establishment of Peterson was a place of public resort, or, rather, such a place as rendered the sale of the cider illegal by reason of its having been there made.
The words, " place of public resort," in the statute, are used in connection with the victualling house, tavern, grocery, shop, and cellar, in which the selling or furnishing of cider is absolutely prohibited. We all understand that such places are resorted to, to a greater or less extent; and hence they become, and are known as, places of public resort. But in the ascertainment of what is meant by " other places of public resort " we have to inquire as to what places were intended to come within that description. The legislature did not intend to prohibit the sale of cider as an article of commerce. This is evident from the fact that its manufacture and sale are .not generally prohibited. Its sale is only prohibited in particular places, and to an habitual drunkard. And whether a place is a place of public resort must depend upon the evidence which gives character to the place.
. In order to constitute it such a place as would render a sale of cider made at it illegal, it must appear that it was a place resorted to by the public for the purchase of cider. The fact that it is not drank at the place where it is obtained would not probably be regarded as controlling, if it appears that those who want it can and will be supplied at such place. The design of the legislature was to remove the temptation to its use, by putting it out of the power of those addicted to its use to obtain it, to use as a beverage at the places enumerated in the statute.
This establishment was for the bottling of cider and other beverages for the market. It was a sort of warehouse, where cider and other drinks were prepared and stored in bulk; and the eider was put up in bottles for the market, and, when thus prepared was mostly sold at wholesale to dealers out of town, on orders received by mail. Some was sold to wholesale dealers in town, upon orders. There were no conveniences for selling it to be drank on the premises, and none was so sold or drank. And it was not a place that people resorted to for the purpose of buying cider, or that was generally resorted to for any purpose. This, in our judgment, does not show that the establishment was such a place of public resort as was intended by the statute. •
The ale, porter, and alcohol were intoxicating liquors, and, notwithstanding the ale and porter were in a damaged condition and unpalatable, as long as their intoxicating properties remained, it was illegal to sell them. The sale of the alcohol was prohibited ; and the belief of Peterson that it was to be used for a legitimate and proper purpose, connected with the manufacture of a non-intoxieating drink, did not make the sale legal. State v. Pratt, 34 Vt. 323.
The sale of the ale, porter, and alcohol being illegal, the consideration for the notes, as far as the value of those articles went to make up the amount for which the notes were given, was an illegal consideration.
The important question in the case is, as to the effect that such partial illegality of consideration is to have upon the rights of the parties. Robinson v. Bland, administratrix of Sir John Bland, 2 Burr. 1077, has always been regarded as a leading case; and opinions were given in it by Lord Mansfield and Justices Denison and Wilmot. The declaration contained three counts ; the first, upon a bill of exchange ; the second, for money lent and advanced ; and the third, for money had and received. A verdict was found for the plaintiff for ¿£672, the amount of the bill of exchange. It was found that the consideration for the bill of exchange was ¿£300, lent by the plaintiff to Sir John Bland at the time and place of play; and ¿£372 were lost at the same time and place by Sir John Bland to the plaintiff at play. It was held that the ¿£372, part of the consideration for the bill, being for money lost at play, could not be recovered, all such securities being void under the statute ; and that a part of the consideration for the bill being illegal, no recovery could be had under the first count; that the plaintiff was entitled to the ¿£300 lent, and was allowed to recover it, under the count for money lent and advanced.
Judge Denison says there is a distinction between the contract and security. If part of the contract arises upon a good consideration, and part of it upon a bad one, it is divisible. But it is otherwise as to the security. That, being entire, is bad for the whole.
Judge Wilmot : " As to contracts being good and the security void, — the contracts may certainly be good, though the security be void."
The same principle as to such a security being void was enunciated in Scott v. Gilmore, 3 Taunt. 226. See also Yundt v. Roberts, 5 Serg. and Rawle, 139; Phillips v. Cockayne, 3 Campbell, 119; Edgell v. Stanford, 6 Vt. 551. These two first cases have oftenest been quoted as authority for the rule that has generally prevailed in the English and American courts, that where a part of the consideration for a security is illegal the whole security is void.
The cases referred to by counsel for defendant were all cases where attempts were made to enforce such securities, and the cases of Hinesburgh v. Sumner, 9 Vt. 23, and Woodruff v. Hinman, 11 Vt. 592, were of the same kind. In none of these cases was the court called upon to decide what the effect of holding the security void would be upon the original contract, where that was bad, in part, upon a good and legal consideration.
In Carlton v. Woods, 28 N. H. 290, the question was pre sented. The declaration, in that case, contained counts upon several promissory notes, and a count for goods sold and delivered. The plaintiff agreed to sell the defendant a stock of goods and groceries at cost and freight. A schedule of the articles was made, and the cost of each. The sum total of the cost of all the articles was divided into several parts, and the notes declared upon were given for the same. Among the articles so sold were some spirituous liquors illegally sold, the price of which formed a part of the consideration for the notes. A verdict was taken for the plaintiff, for the cost of the goods remaining unpaid, except the spirituous liquors ; and judgment was to be rendered on the verdict, or it was to be set aside, as the opinion of the court should be. It was held that the counts upon the notes were not maintainable ; that the consideration of the several notes was, in part, illegal, and, therefore, no recovery could be had upon them ; that the legal effect of the contract was, that each article was to be valued separately, and that the sale and delivery of each article formed the consideration for the promise to pay for it; that the contract was divisible ; and, while the separate value of the articles sold could be ascertained, as fixed by the parties, the principle is not readily seen, which would defeat the right of recovery for the stipulated price of that portion, the sale of which was legal; and judgment was rendered on the verdict. The same was substantially held in Walker v. Lovell, in the same volume, 138. The law does not favor any party in evading payment, while he retains the consideration.
The notes which were given for the good will and property sold to Carpenter were all infected with illegality, and the defence of illegality attached to all of them ; so that', if what is now claimed as a defence can be allowed, if proceedings had been instituted to compel payment before anything had been paid, the entire claim could have been defeated, notwithstanding Carpenter had received, and was in the enjoyment of the property, upon the ground that the portion of the property above enumerated was illegally sold. It has somewhere been said, that the declaring such a security void was to be regarded as a punishment of the party for having made an illegal contract.
The loss of the property illegally sold would generally be considered a sufficient punishment, certainly, when the sale was only malum prohibitum, and no wrongful intention appears. But a court of equity could never hold that one might be deprived of his entire fortune, because, in the consideration agreed to be paid for it, there was intermingled some article the sale of which was prohibited.
We regard the case of Carlton v. Woods, supra, as sound law and well sustained by authority. Its application works out just and equitable results, and we shall apply the principles there enunciated in the decision of this case.
Peterson could have recovered against Carpenter in an action of assumpsit, for all that was sold to him, except the ale, porter, and alcohol. The mortgage would be treated as security for the debt due from Carpenter, on account of the property legally sold to him. Peterson might have foreclosed the mortgage, and thus have compelled payment of the debt.
The petitioner, by his purchase of the notes and mortgage, acquired all the rights, legal and equitable, of Peterson. He could maintain a suit at law for his own benefit, in the name of Peterson, or a petition in equity, as assignee of the mortgage, to foreclose it. And in the disposition of such a petition it is the duty of a court of equity, which has been said to be the great sanctuary of plain dealing and honesty, to compel the payment of that portion of the debt that was secured by it, that was legally and fairly contracted.
The decree of the Court of Chancery is reversed and cause remanded, with mandate that a decree be entered for the petitioner for the amount due on the note for $800 described in the petition, with interest after deducting therefrom the sums of $209.38, $6.72, and $2.25, being .for the ale, porter, and alcohol illegally sold,— as of the date of the note. If the amount due cannot be ascertained from the computations made by the master, it is to be ascertained in such manner as the court may direct.