Case Name: STEWART et al v. WRIGHT
Court: United States Court of Appeals for the Eighth Circuit
Jurisdiction: United States
Decision Date: 1906-06-21
Citations: 147 F. 321
Docket Number: No. 2,138
Parties: STEWART et al v. WRIGHT.
Judges: 
Reporter: Federal Reporter
Volume: 147
Pages: 321–349

Head Matter:
STEWART et al v. WRIGHT.
(Circuit Court o£ Appeals, Eighth Circuit.
June 21, 1906.)
No. 2,138.
1. Evidence — Simula» Facts — Conspiracy to Defraud.
Where, In an action to recover money alleged to have been obtained from plaintiff by means of a confidence game, it was charged that there was a conspiracy between the defendants to deprive persons of their money by fraud and deceit, evidence as to other eases of a similar character to that in which plaintiff was defrauded, in which defendants acted in concert for the same purpose, was admissible.
[Ed. Note. — For cases in point, see vol. 20, Cent. Dig. Evidence, § 405.]
2. Corporations — Torts of Officers — Liability.
Where a banking corporation, knowing that defendant B. and his associates were engaged in a confidence game, assisted in the furtherance of the scheme, both by representing to the victims as they were brought in that B. was a man of standing, entitled to credit, and by lending B. banking facilities, with which alone he was enabled to conduct his scheme and collect drafts, etc., drawn by the victims before payment could be stopped, and. the officers of the bank themselves, with knowledge that ihe victims were to he defrauded, drew drafts for such victims, and telegraphed to other banks to ascertain the victims’ responsibility, the hank as a corporation was liable as a party to the scheme.
3. Action — Grounds — Fraudulent Transaction — Recovery of Money —Paettceps Orimtnis — In Pari Delicto.
B. and Ms associates, who were confidence men engaged in enticing others to their city and swindling them out of their money by means of pretended foot races, induced the plaintiff to come and while there to wager money represented as belonging to B. upon the result of such a race upon promise of a percentage of the expected winnings. It was falsely represented to plaintiff that the foot race bad been fixed so that B. would certainly win. It was also represented that the men with whom the wagers were made were wealthy miners, whereas in fact they were not miners, but were secretly associated with B., and were members of his band of swindlers, as were also the foot racers. B. pretended to act as stakeholder, and to secretly withdraw moneys from the stakes from time to time, and to pass them to plaintiff to be again wagered. Plaintiff was a’so induced to wager his own money upon the pretended foot race. Plaintiff did not win, and it was never intended by the swindlers that he should win. All of the acts and pretenses of B. and ills associates were false _ and fraudulent, and were part of a prearranged and frequently practiced scheme to defraud. Held that, although the plaintiff thought that he was participating in a sellóme to defraud others, that he was doing so existed not in fact, but only in his own mind, and all that he did operated solely to defraud himself; that he was not particeps criminis in any unlawful proceeding, and was not in pari delicto with the swindlers who defrauded him, and was not deprived of his right to recover his money.
4. Same.
Plaintiff haying made no attempt to enforce the contract or recover the fruits thereof, but having repudiated the same and sued to recover tile money of which lie was defrauded, he was not deprived of such remedy by the maxim ex dolo malo non oritur actio.
Sanborn, Circuit Judge, dissenting.
In Error to the Circuit Court of the United States for the Southwestern Division of the Western District of Missouri.
This was an action by Wright against Joseph C. Stewart, James P. Stewart, and the Exchange Bank of Webb City, a Missouri corporation, to recover the sum of $5,100, alleged to have been obtained from him by false and fraudulent pretenses. A jury was waived, and the cause was tried by the Circuit Court, which made a ‘general finding, and rendered judgment in favor of the plaintiff. Wright v. Stewart (C. C.) 130 Fed. 905.
W. R. Robertson and A. E. Spencer, for plaintiffs in error.
J. W. Halliburton (Samuel McReynolds and Hiram W. Currey, on the brief), for defendant in error.
Before SANBORN, HOOK, and ADAMS, Circuit Judges.

Opinion:
HOOK, Circuit Judge.
The charge in the petition is that the defendants, Stewart and the bank, acting in combination and concert with a number of swindlers and confidence men, obtained from the plaintiff, Wriglit, the sum of $5,100, and that it was accomplished by means of a pretended foot race, the result of which was secretly arranged in advance, and by inducing the plaintiff through various false pretenses to place his money temporarily in the possession of one Boatright, the leader of the swindlers, who pretended to be acting as a stakeholder in the betting,-and who promised to return the money so soon as it served the temporary purpose of relieving him (Boat-right) from a false and simulated embarrassment arising out of the manipulation of the stake money in his hands.
For some years there existed in Webb City, Mo., an organization - styled an athletic club, the ostensible purpose of which was the promotion of athletic sports and pastimes. It was really an organized band of swindlers, some of whom masqueraded as wealthy miners, and so notorious did the)' become that they were commonly known in the community as the "Buckfoot gang," and their continued operations became an intolerable public scandal. The only branch of their operations with which we are concerned is the fake foot racing, so called. Their plan was to entice men of means to Webb City, and deprive them of their money by various pretexts and devices in connection with foot races, the result of which was always secretly prearranged. Complaints and protests from the victims were sometimes met by threats, with a show of force. Their operations covered a wide territory, extending from Iowa to Texas, and they had a regular staff of decoys in the field. The victims were selected with great care, and various stories were told to induce them to go to Webb City. Their vanity and sympathy were sometimes played upon, and always their cupidity and desire for ill-gotten gain. Some of them were falsely assured at the outset that they were not expected to hazard their own money upon the races, but were told that it would be well for them to take along letters of credit or drafts, to impress the others at Webb City with their responsibility and financial " standing. Sometimes. the scheme outlined to the intended victims was that they assist in doing an act of justice to a foot racer of great merit who had been unfairly treated in the past, and who intended to match himself with one backed by the club, whom he could easily defeat. At other times the pretended purpose was to enable Boatright, the chief of the swindlers and the president of the club, to discipline his co-members, who were getting beyond his control, and this was to be accomplished by winning their money on a foot race, the result of which was prearranged, and after thus demonstrating that they were at his mercy the money should be returned. Sometimes the victim was induced to bet upon what he was led to believe was a certain and assured result of a foot race. In other instances he was to be a stakeholder, and in still others, as in the case at bar, he was, upon a promise of a percentage of the winnings, to handle and bet the money secretly furnished him by Boatright, who was to act as stakeholder, and pretended that h'e did not wish it known that he was doing the betting. But, however the scheme varied in its details, the ultimate purpose always in view was to beguile the victim to bring money or to arrange that drafts be honored by his home bank; to get actual possession of his money by some pretext or another when at Webb City, and in doing so to place him in such a position that to complain or make trouble for them he would have to admit his own moral obliquity. They seemed to be vaguely aware of the maxim "in pari delicto," and prepared to use it as a shield of defense. To induce a victim to bring letters of credit or drafts, or to arrange for the honoring of drafts by his home bank, it was represented that the advent of a stranger upon the scene, possessed, apparently, of considerable means, was essential to the consummation of the scheme. By slow, cautious, and progressive approach, and with the wiles employed by confidence men, they generally succeeded in securing the trust of the victim, and he was induced to go to Webb City with otie or more of the decoys. In some Instances, as in the case at bar, they were met outside of the city by Boatright, who would hand the victim several thousand dollars in currency to wager upon a race, the result of which was alleged to lie not in doubt. One of the numerous conspirators would then accompany the victim to the defendant bank to see that the money was safely deposited there, and it would be suggested to him that he exhibit to the bank officials, the Stewarts, proof of his own financial resources. He would then be conducted or directed across the street to a saloon, where the subject of foot racing would be casually mentioned, and where he would be introduced to Boatright as though they had met for the first time. The members of the band would quickly gather, aud they would then adjourn to a room above the saloon, represented to be the headquarters of the club. A foot race would be arranged, the betting* would grow fast and furious, and large sums of money would apparently be wagered. The victim would bet the money which had been given him by Boatright, and the latter would from time to time secretly pass him sums taken from the stakes or money which had airead} been wagered, and the victim would in turn wager them upon the result of the proposed race. Then someone with a quarrelsome and truculent manner would claim that he had made a bet which' had not been recorded, and would demand a count of the money in the hands of Boatright in order to prove his assertion. Boatright, who is said to have been a consummate actor, would appear to be in great distress, and in fear of the vengeance of the others should they discover that he had abstracted money from the stakes and handed it to the stranger to be wagered. The victim would then be induced by Boatright's pleading to make drafts upon his own bank, which would be cashed at the defendant bank, and the money would be placed, as he supposed temporarily, in the hands of Boatright, to relieve the latter from his embarrassment. When this was done the disturbance would cease, and, if there was no chance to secure more money from the victim, the betting would be closed, the money would be quicldy placed in a satchel, and deposited in a place safe from the reach of the victim — sometimes in 'the defendant bank. The crowd would then adjourn to the place where the pretended foot race was to be run, and the man who the victim thought would win the race would fall down or otherwise fail in his pretended endeavor. It would then be claimed that the victim had wagered his money on the race, and if he evinced a disposition to make trouble revolvers would be drawn, and he would be cowed into submission. This was but one of the various methods employed to rob the victims of their money. The details of the scheme were frequently changed to suit the exigencies of the particular case, but the result was always the same. No stranger ever won anything, and none ever escaped without being defrauded. In some cases their money was given up under circumstances almost amounting to duress. We need not further particularize the facts in Wright's case, except to say that, while protesting that he was being robbed and demanding the return of his money, he was. nevertheless induced to hold one end of the string at the pretended foot race.
Was the connection of the defendants with those practices sufficiently established by the evidence? There was substantial evidence to the following effect: The Exchange Bank is a corporation organized under the laws of Missouri. The capital stock was almost wholly owned by James P. Stewart, Joseph C. Stewart, and W. C. Stewart, and they composed the board of directors of the corporation. Joseph C. Stewart was president and James P. Stewart was cashier. Both the president and* the cashier knew, and had known for years, of the character of the operations of Boatright and his associates. They knew that no victim who was decoyed by them to Webb City ever escaped without loss. This was a notorious fact, and it was generally recognized in the community in which they lived. They also knew that the foot races were mere pretenses, and were a part of the scheme to defraud. The victims who were decoyed to Webb City were induced to meet the cashier soon after their arrival. They frequently made inquiries as to Boatright's standing and responsibility, and in every instance in which they did so they were informed, in substance, that Boatright was a trustworthy man, and that reliance could be placed in what he said. This, of course, was false, and was known to be so when the recommendation was given. When the victims deposited in the bank the money Boatright had given them, and exhibited their letters of credit to the cashier, information was given by him that money could be obtained on them. In various instances telegraphic inquiries were made in the name of the bank as to the financial standing of the victims, and whether drafts drawn by them would be honored. Facilities were furnished at the bank enabling them to obtain money, and the officers knew the purpose for which it was being obtained, and that Boatright and his associates would soon get it from them. The cashier of the bank even prepared drafts and checks for the victims to sign, and instead of sending them for collection through correspondent banks, which might be by a circuitous route that would consume time, they would be sent direct to the bank upon which they were drawn, with the result that they were generally honored and paid before payment could be stopped. In one instance the stake money held by the victim, together with some of his own money, which he had been induced to place with the stakes as a guaranty of his good faith and responsibility, was handed to the cashier for safe-keeping, and wdien the usual climax arrived, and the victim protested that he had not wagered his money, the cashier took the side of Boatright and his party in the discussion. A suit upon a draft upon which payment had been stopped was withdrawn by the bank after a defense had been interposed asserting the criminal connection of the bank and its cashier with the swindling scheme. It was quite a common thing for members of Boatright's organization to accompany the victims on their journeys to the bank to see that they did not escape. Some of the disturbances which arose after the fraud was discovered occurred in the bank. The bank was the depository of the moneys used in the operations of Boatright and his associates. In the case at bar Wright informed the cashier of what was going on. The cashier told him that he could obtain money on liis letter of credit; also that Boatright was all right. He afterwards prepared the checks for Wright's signature, and gave him the money, which was soon taken from him.
All of this can lead to but one result. It is certain that had it not been for the bank with its facilities and the aid and assistance of its controlling officers the swindling operations could not have been carried on successfully. The bank was a necessary link in the scheme to defraud. Its name, character, and influence were constantly employed to give Boatright a false standing- with his victims. Its corporate instrumentalities were knowingly used in the perpetration of the fraud, and in making it difficult, if not impossible, for them to protect themselves after the discovery of the imposition practiced upon them. Without the active, affirmative assistance of the bank and its officers Boatright and bis associates could not have successfully conducted their schemes for so many years. The evidence is overwhelming as to the active connection of James P. Stewart, the cashier, and we are of the opinion that it is also sufficient to uphold the finding of the Circuit Court against" Joseph C. Stewart, the president. There was evidence tending to show that he was at the. bank daily; that he knew Boatright and his most prominent associates, the character of the business they were engaged in, and that the checks and drafts of their victims were being cashed by the bank for use in the foot-racing transactions. ' He knew of litigation that had ensued over the transactions and, notwithstanding all of this, he allowed the bank of which he was president to be actively employed in the consummation of the frauds. He admitted, in the absence of the cashier, that at one time Boatright and his party had accounts in the bank, and that there was an arrangement by which the bank charged up to those accounts the amounts of the defaulted drafts of their victims wch it had cashed. There can be no explanation of this except upon the theory that the bank and its officers were aiding and assisting the others in the perpetration of their frauds. The admission referred to was distinctly one of complicity. There was also proof that, even after Boatright and his associates had ceased having open accounts in the bank, the latter was still protected by them from loss upon defaulted drafts. There was evidence tending to show these facts, and in our opinion it is sufficient.
In these fraudulent operations the bank was not a mere third party, pursuing the lawful tenor of its way and confining itself to its legitimate business. On the contrary, it was an active participant in the scheme, and its aid and assistance were most helpful. While it did not decoy the various victims to Webb City, nevertheless after their arrival it assisted in despoiling them. The cashier of the bank had charge of one important station in the scheme. As one after another of the victims, some of them doubting and hesitating, were convoyed to.the bank and presented to him,'he did his part by falsely vouching for the character of Boatright, and so purposely and designedly encouraged them to proceed. Thereafter the bank, through its managing officers, took advantage of the physical and mental condition of the victims, at times of distress and alarm, which its cashier had materially assisted in creating, and employed its corporate facilities in such a way that their money was transferred from their distant homes to Webb City with the knowledge that it would surely be taken from them. No other agency than a bank could have fulfilled this part in the scheme; it was peculiarly suited to the task. The respect with which a bank and its officers are generally regarded and the confidence reposed in them by the public were utilized in a cunning and effectual way.. With full knowledge of the methods of the other conspirators and their designs, born of past experience and participation, the managing and controlling authority of the bank assisted in the accomplishment. Had the cashier told the truth regarding the character of Boatright ; had he informed the inquiring victims of the plan that was afoot against them; had he refused to draw the checks and drafts and to cash them; had the president and cashier of the bank declined to allow it to be employed as an agency in obtaining information as to the financial worth of the victims and in bringing the money within the reach of the other conspirators to be stolen — the scheme would have been shorn of most of its potency.
In defense of the bank and its officers it is said:
'•If one sees another about to fall into a pit, ordinary humanity would induce him to cry out and warn him of I he thingor. But i lie duty is of that imperfect kind, of which conscience is the only sanction." Brannock v. Bouldin, 4 Ired. 61.
That is true, but it docs not apply to him who assists in preparing the pathway to the pit, and speeds the. victim on his way. We would seem to lack perception of the true nature of tilings were we to be deceived or blinded by the screen of pretense which the conspirators raised to mask their operations. Courts should be as astute to discover and discern the truth as the guilty are to conceal it.
In the consideration of this case the court was not confined to what was said and done to Wright. The charge in the petition is one of conspiracy between the defendants and Boatright and his more active associates, and for proof of such a charge resort was properly had to other cases of a similar character in which concert of action appeared. The going of Wright to Webb City and his departure was but an episode in a long chapter, and it is not to be expected that in his experiences alone will lie found all of the proof of the complicity of the bank and its officers.
There is no difficulty in the legal aspect of the case, so far as the bank is concerned. A wealth of ancient precedent may be found in the common law declaring an almost complete immunity of corporations from liability "for the torts of their officers and agents, and its influence may also be discerned in some of the earlier decisions of this country. The rationale of the doctrine was that such intangible and impersonal beings, existing only in contemplation of law, and without intelligence and corporeal form, could be guilty of no wrong that implied an evil intent or malicious motive. But all this has been discarded for more than a half a century, and the rule now prevailing is that in respect of liability for the tortious acts of its controlling officers and agents there is no substantial difference between a corporation and a natural person, even in cases in which fraud or malicious intent in fact must be proved. While a corporation has no brain to contrive, no tongue to deceive, and no hands with which to strike, it employs in its service the brains and tongues and hands of others; and as it can only operate through natural persons, there is, as there logically should be, a correlative responsibility for the acts of those persons in the course of the corporate business and of their employment, and for any malicious and evil intent with which such acts are attended.
A few of the multitude of authorities will he sufficient to illustrate the wide range of the modern doctrine. Corporations have been held liable in these cases by attributing to them the conduct of their officers and agents: Assault and battery with a deadly weapon by a railroad company (Railway v. Harris, 122 U. S. 597, 7 Sup. Ct. 1286, 30 L. Ed. 1146); libel by a railroad company (Railroad v. Quigley, 21 How. 202, 16 L. Ed. 73); fraud and deceit, assault and battery, malicious prosecution, nuisance, and libel (National Bank v. Graham, 100 U. S. 699, 702, 25 L. Ed. 750); fraud by a municipal corporation in reports of distilled spirits to revenue collector (Salt Lake City v. Hollister, 118 U. S. 256, 6 Sup. Ct. 1055, 30 L. Ed. 176); fraud and deceit by a manufacturing company (Butler v. Watkins, 13 Wall. 457, 463, 20 L. Ed. 629); maintenance of a nuisance (Railroad v. Baptist Church, 108 U. S. 317, 2 Sup. Ct. 719, 27 L. Ed. 739); assault and battery by an express company (Southern Ex. Co. v. Platten, 36 C. C. A. 46, 93 Fed. 936); malicious prosecution by a manufacturing company (Copley v. Sewing Machine Co., 2 Woods, 494, Fed. Cas. No. 3213); boycotting by a corporation of which the members were mercantile firms' (Hartnett v. Plumber's Supply Assn., 169 Mass. 229, 47 N. E. 1002, 38 L. R. A. 194); malicious prqsecution by a savings bank (Reed v. Home Savings Bank, 130 Mass. 443, 39 Am. Rep. 468); false representations as to corporate stock by a manufacturing company (Dorsey Machine Co. v. McCaffrey, 139 Ind. 545, 38 N. E. 208, 47 Am. St. Rep. 290); false imprisonment by a national bank (Wachsmuth v. Nat. Bank, 96 Mich. 426, 56 N. W. 9, 21 L. R. A. 278); conspiracy between a bank through its president and a merchant to defraud those of whom latter purchased goods (Johnston Fife Hat Co. v. National Bank, 4 Okl. 17, 44 Pac. 192). It is also well settled that a corporation cannot escape liability upon a plea that the tortious acts were ultra vires. Railroad v. Quigley, 21 How. 202, 16 L. Ed. 73; Merchants' Bank v. State Bank, 10 Wall. 604, 645, 19 L. Ed. 1008; County of Calhoun v. Emigrant Company, 93 U. S. 124, 130; 23 L. Ed. 826; National Bank v. Graham, 100 U. S. 699, 702, 25 L. Ed. 750; Salt Lake City v. Hollister, 118 U. S. 256, 6 Sup. Ct. 1055, 30 L. Ed. 176; Railway v. Harris, 122 U. S. 597, 7 Sup. Ct. 1286, 30 L. Ed. 146; Railway Co. v. Howard, 178 U. S. 153, 160, 20 Sup. Ct. 880, 44 L. Ed. 1015; Alexander v. Relfe, 74 Mo. 517; Zinc Carbonate Company v. First National Bank, 103 Wis. 125, 79 N. W. 229, 74 Am. St. Rep. 845.
But it is said that Wright should be denied relief because of the maxim "In pari delicto potior est conditio defendentis." It was an essential part of the scheme to defraud that the victim should be led on by degrees to place himself in such a position that he. would be prevented from having recourse to the courts. And this defense, so contrived in advance, is now produced for recognition, and it is said that, the plaintiff being equally culpable with the conspirators, a court of justice should therefore leave him where it finds him. It must be admitted that when Wright left his home for Webb City he thought he was going to participate in an unlawful scheme to defraud others. ¡But, after all, it amounted to nothing more than a mere belief on his part. That he was betting upon a foot race at Webb City was but a figment of his imagination. In reality there was no betting and no foot race, and it was not intended that there should be. It was all a pretense and a sham. He was merely a puppet, who was acting the will of the conspirators to his own undoing. The real design behind the scenes was one in which Wright did not participate except as the victim. If he was particeps criminis, it was to an offense against himself. Boatright and his associates sought Wright in his home, awakened in him a desire for wrongful gain that might other wise have remained dormant, inspired in his mind an unfounded idea that he was going to secure it, and then by fraud and false pretenses deprived him of his money. We are unable to agree with counsel that the victim was in equal wrong with those who despoiled him merely because, at their instance, and as a result of their wiles, be entertained a purpose which it was never intended he should consummate. To hold otherwise would be to accord too much weight to the unsubstantial, and to enable those whose active occupation was swindling to successfully avail themselves of the false position in which, as part of their predetermined scheme, they succeeded in placing others they intended to defraud. Courts of justice should not thus reward criminal ingenuity. This is not a case in which, two persons having conspired to rob an innocent third, one of the two robs the other. The pretended miners, who were members of the counterfeit athletic club, and against whose wealth Boatright falsely assumed to direct his designs, were in fact his criminal accomplices. They were confidence men, not miners. They, as well as the defendants, played their part in the scheme to defraud, the whole machinery of which was employed, not against themselves, but against their victim.
We Eire also of the opinion that, viewing the conduct of Wright in its most reprehensible light, nevertheless the interest and welfare of the public would be better subserved by causing the loss to fall upon those who aided and assisted in criminal practices followed as an occupation than by the punishment of the individual victim. It would be doubtful wisdom to extend encouragement to organizations of confidence men, who prey upon the public, by allowing them the use of the rule "in pari delicto" as a shield of defense, when a part of the scheme they employ is to place those they seek and then defraud in the position they rely on.
These conclusions are abundantly supported by authority. The rule which declares that when parties are in equal wrong the position of the defendant is the better, and that the courts will not allow their machinery to be used for the relief of one who has been defrauded' in a corrupt or illegal transaction in which he participated, is based not upon statutory provisions, but upon general principles of public policy. It is therefore not for the sake of the defendant that the rule is enforced, but to promote the general good. And when the objection is urged by the defendant, or is suggested by the court of its own motion, two questions present themselves for consideration: Were the parties in equal wrong, or was there such fraud, deceit, oppression, or inequality as challenges the attention of a court of justice? If they Eippear to be in equal wrong, will nevertheless a wise regard for the general welfare be better subserved by the punishment of the defendant than by denial of relief to the complaining party? In 1 Story, Eq. Jur. § 300, it is said:
"And indeed in cases where both parlies are in delicto, concurring in an illegal act, it does not always follow that they stand in pari delicto, for there may be, and often arc, very different degrees in their guilt. One party may act uiider circumstances of oppression, hardship, undue influence, or great inequality of condition or age, so that his guilt may be far less in degree than that of his associate in the offense. And. besides, there nmy be on the part of the court itself a necessity of supporting the public interests or public policy in many cases, however reprehensible the acts of the parties may he."
The same doctrine is recognized by Pomeroy:
"Even when the contracting parties are in pari delicto, the courts may interfere from motives of public policy. 'Whenever public policy is considered as advanced by allowing either party to sue for relief against the transaction, then relief is given to him.'" 2 Pomeroy Eq. Jur. § 941.
In Reynell v. Sprye, 1 De G. M. & G. 660, 679, it was said:
"But where the parties to a contract against public policy, or illegal, are not in pari delicto (and they are not always so), and where public policy is considered as advanced by allowing either, or, at least, the more excusable of the two, to sue for relief against the transaction, relief is given to him, as we know from various authorities, of which Osborne v. Williams, 18 Ves. 379, is one."
In Osborne v. Williams, 18 Ves. 379, there was an illegal contract between a father and son, by which the former obtained from the latter moneys paid him for public services. Sir William Grant, master of the rolls said:
"Courts both of law and equity have held that two parties may concur in an illegal act without being deemed to be in all respects in pari delicto. I consider this agreement as substantially the mere act of the father. lie put up to sale a situation, which the young man would naturally be desirous of obtaining, and could obtain only upon the terms prescribed by his father."
To the same effect are Atkinson v. Denby, 6 H. & N. 778, 30 L. J. Ex. 361; Smith v. Cuff, 6 M. & Sel. 160; Morris v. M'Cullock, (2d Ed.) Amb. 432. In the note to this case others are cited in which relief was granted on ground of public policy though parties were in pari delicto. See, also, Goldsmith v. Bruning, 1 Eq. Ca. Ab. 89.
The precise questions now before us were presented upon similar facts to the Supreme Courts of Missouri and Arkansas. Hobbs v. Boatright, et al. (Mo. Sup.) 93 S. W. 934, and Lockman v. Cobb (Ark.) 91 S. W. 546. In the Hobbs Case the Missouri court affirmed a judgment against the Exchange Bank and Stewart, its cashier, upon evidence which is said by that court to be substantially the same as in the case now before us. Hobbs was one of the numerous victims of Boatright and his co-conspirators. Referring to the general rule, that court said that it "should not be applied in a case in which to withhold relief would to a greater extent offend public morals." And it put this question and answered it against the defendants:
"Will we promote good morals to say to this gang and their friends and abettors, you have so debauched and degraded your victim that the law will not touch him or hear his complaint; therefore you may go free, keep what you took from him, and look out for another victim?"
In the Arkansas case Cobb was defrauded by some of Boatright's active assistants, who seem to have engaged for the time being in business on their own account. The methods employed were like those in the case at bar, and the same defense was urged against recovery. The Supreme Court of that state said:
"In vlmt wrong or crime wore the plaintiff and defendants in pari delict o? If any, it was a conspiracy by the defendants to defraud the plaintiff and to steal his money; -to obtain by deceit and falsehood 1 lie money of plaintiff by inducing him to believe that a foot race was to be mil, and that they were actually wagering their money, one against the other, upon it; and to induce him to believe he was betting upon a foot race. He did not participate in this conspiracy, and could not possibly have done so. By fraud and deceit they caused him to make a pretended wager, and mbbed him of his money, pretending that he had lost it. He might have intended to wager if he had the opportunity, but intention without any act to carry it into effect does not constitute a crime or a wrong, and he was not in pari delicto with the defendants."
hi Hinsdill v. White, 34 Vt. 558, the defendant falsely and fraudulently represented to plaintiff that he had certain evidence that her son had burglarized his house, and by means thereof he induced her to pay him money for his agreement not to prosecute. Upon learning of the fraud, she sued to recover the money. The court said:
"The consideration and object of the contract and payment of the money were in contravention of law, and to this extent the parties were in equal fault; but the plaintiff was induced to enter into it and to pay the money by the false and fraudulent representations of the defendant. In such case are the parties to be regarded as in pari delicto, so that the law will regard them as equally reprehensible, and refuse to interfere?"
It was held:
"That when one has by fraudulent means induced another to pay him money, lie cannot shield himself from paying it back by saying that both parties had an illegal end in view in the transaction."
That courts will take notice of the different degrees of culpability and act accordingly was recognized in Harrington v. Grant, 54 Vt. 236.
In Smith v. Blachley, 188 Pa. 550, 41 Atl. 619, 68 Am. St. Rep. 887, a physician who attended a girl during an illness represented to her father and a neighbor who had a son that the illness was due to a criminal operation; that a humane society, having learned of it, was about to institute a prosecution against the members of both families; that he could hush the matter up if they would give him •83,000 to hand to the agent of the society. After repeated urging, they gave him the money. Some years afterwards it. was learned that all of his representations were false, and that he had pocketed the money. Suit was brought for its recovery. The contention now urged upon us found favor with the trial court. It said:
"They [the plaintiffs] cannot be heard to say that he committed a fraud upon them by failing to consummate an arrangement which was in itself a fraud upon the administration of justice. The plaintiffs are the parties, who, to maintain their action, are compelled to uncover and invoke the aid of the corrupt agreement. This being the case, they cannot profit by it, either directly, as the foundation of an action, or by using it to toll the statute."
But the Supreme Court of Pennsylvania said:
"It is argued that, even if no crime was actually committed by plaintiffs, yet there was an intent to commit one when they paid the money to Blachley, and hence, even if their agent defrauded them, they cannot recover it back. As we have noticed, the intended crime was an impossible one. When conduct susceptible of two constructions is proven, the intent often determines its criminality; but an intent not carried out by an act, or which is impossible of execution by an act, is not punishable. The law takes no cognizance of an intent existing only in the mind, nor does it impose, as a penalty for such intent, immunity to him who has plundered one guilty of it."
In Gorringe v. Read, 23 Utah, 120, 63 Pac. 902, 90 Am. St. Rep. 692, the court set aside a conveyance executed by a woman to prevent the prosecution of her husband as for a felony. He had stolen property of small value, and it was falsely represented to her that he had committed a penitentiary offense. It was said:
"It is no doubt true, as a general proposition, that a court of equity, acting on the maxim, 'In pari delicto potior est conditio defendentis et possidentis,' will not interpose to aid parties who are concerned in unlawful transactions or agreements; but where public policy requires relief to be given, and when the parties, though in delicto, are not in pari delicto — as when at the time of the transaction the complainant was under undue influence, hardship, oppression, or great inequality of condition or age existed, and acted involuntarily — the maxim does not apply."
. In re Arnold (D. C.) 133 Red. 789. In this case the bankrupts, by representing that they were engaged in conducting a racing stable, betting on races, etc., that they had exceptional facilities for making money by this means, and that their profits enabled them to pay large returns, secured from the public deposits of large sums of money to be used in their business. Among the depositors .was the claimant. His claim was objected to on the ground that the business of the bankrupts was illegal, and he knew it. It was found, however, that many of the most material representations which induced the deposits were entirely false; that the racing was but an incidental feature of their scheme, and that they were really paying the pretended dividends out of the moneys deposited, and not out of profits made. It was contended that the bankrupts and the claimant were engaged in a gambling venture, and were in pari delicto. Judge Adams, now of this court, held that this view was altogether too superficial. He applied the doctrine announced by the Supreme Court of Vermont in Hinsdill v. White, supra, and allowed the claim.
In Catts v Phalen, 2 How. (U. S.) 376, 11 L. Ed. 306, the defendant was employed to draw numbers from a lottery wheel. He secretly employed an outsider to purchase a lottery ticket for him, and when the drawing came off he concealed in the cuff of his coat a false ticket, with numbers corresponding to those on the ticket purchased, and then, slipping it to his fingers, he pretended to have drawn it from the wheel. He received a prize of $12,500. Upon discovery of the fraud an action was brought to recover the money. The case was considered upon the assumption that a legislative act had declared the lottery business to be illegal, and that defense was asserted. The Supreme Court held, however, that the money was paid to and received by the defendant on a false assertion of the fact that he had a ticket which was entitled to a prize; that the contract which the law raised between the parties was not founded on the drawing of the lottery, but on the obligation to refund the money, which had been received by falsehood and fraud, and by the assertion of a drawing which never took place. The court said that to state is to decide such a case, and it was held that the plaintiffs could recover. Man}' other authorities may be found in the opinion of the learned district judge before whom this case was tried. 130 Fed. 905.
The clear distinction between the relation of Wright, upon the one hand, and that of Boatright and his associates, upon the other, to the fraudulent transactions by which the former was deprived of his money is further illustrated by the aspect in which such transactions have been regarded by many of the courts. In accordance with their decisions, Boatright and his associates could have been charged with and convicted of the crime of larceny. It would seem anomalous if Wright were held to be particcps criminis to a larceny of his own money, and equally so if he were held to be in pari delicto with those who stole it. Conduct similar to that under consideration has been held to constitute larceny, even though the fraud or pretense practiced on the victim, and by which he was despoiled of his money, assumed the simulated form of a violation of the law, in which he participated. State v. Skilbrick, 25 Wash. 555, 66 Pac. 53, 87 Am. St. Rep. 784; Doss v. People, 158 Ill. 660, 41 N. E. 1093, 49 Am. St. Rep. 180; Crum v. State, 148 Ind. 401, 47 N. E. 833; Johnson v. State (Ark.) 88 S. W. 905; Loomis v. People, 67 N. Y. 322, 23 Am. Rep. 123; People v. Shaw, 57 Mich. 403, 24 N. W. 121, 58 Am. Rep. 372; People v. Shaughnessy, 110 Cal. 598, 43 Pac. 2; People v. De Graaf, 127 Cal. 676, 60 Pac. 429; Defrese v. State, 50 Tenn. 53, 8 Am. Rep. 1; Hall v. State, 65 Tenn. 522.
It is also contended that a recovery by Wright is precluded by the maxim "ex dolo malo non oritur actio." This contention is in part answered by the authorities already reviewed, and by what we have said concerning the character of the transaction and Wright's connection with it. We are of the opinion that the maxim has no pertinency to a case like that before us. Its meaning is that a court will not lend its aid to one who founds his action upon an immoral or illegal act, and the test of its applicability is whether the plaintiff can make out his case otherwise than through the medium and by the aid of such an act, to which he himself was a party. Must he have the aid of the illegal transaction in order to recover? Has he founded his action upon it? Is he seeking to recover the avails or the results thereof ?
Sir George Jessel thus expressed the doctrine in Sykes v. Beadon, L. R. 11 Ch. Div. 170, 197:
"I think that the principle is clear that you cannot directly enforce an illegal contract, and you cannot ask the court to assist you in carrying it out. You cannot enforce it indirectly; that is, by claiming damages or compensation' for the breach of it, or contribution from the persons making the profits realized from it."
It seems to us quite obvious that this doctrine does not touch the case at bar. This action was not brought to enforce a corrupt or illegal contract, or to secure any of the fruits thereof. Wright does not.so foupd the action. He does not ask the court to recognize the propriety of his transaction, or to award him any portion of the plunder. Pie proceeds, not in affirmance or reliance, but wholly by way of repudiation, and seeks merely a restoration of that which was illegally taken from him by fraud and false pretense. The rule which controls cases like the one at bar is the rule of the lottery ticket case (Catts v. Phalen, supra). It was also expressed by the Supreme Court in National Bank & Loan Co. v. Petrie, 189 U. S. 423, 23 Sup. Ct. 512, 47 L. Ed. 879, where, omitting the citations, it was said:
"The question then is, leaving on one side the averment just quoted from the answer, and assuming that the parties were attempting a transaction forbidden by the law, whether the nature of the attempt prevents one of them from withdrawing from the bargain on the ground of preliminary fraud. If the withdrawal were on the ground of repentance alone, the law might, or might not, leave the parties where it found them. But a person does not become an outlaw and lose all rights by doing an illegal act. The right not to be led by fraud to change one's situation - is anterior to and independent of the contract. The fraud is a tort. Its usual consequence is that as between the parties the one who is defrauded has a right, if possible, to be restored to his former position. That right is not taken away because the consequence of its exercise will be the undoing of a forbidden deed. That is a consequence to which the law can have no objection, and the fraudulent party, who otherwise might have been allowed to disclaim any different obligation from that with which the other had been content, has lost -his right to object because he. has brought about the other's consent by wrong."
The court further observed: "Cases where the action is on the illegal contract do not apply." The transaction referred to in this case appears to have been completed, and not one in which one of the parties halted and repented during its progress. When attention is directed to the character of the cases in the Supreme Court which are relied upon to support the defense ex dolo malo, their inapplicability we think becomes apparent. In almost every instance the illegal bargain was the vehicle in which the plaintiff desired the court to move him to judgment. He founded his action upon it, and either directly or indirectly sought its enforcement. It is this that the Supreme Court holds cannot be done. These are the cases:
Hall v. Coppell, 7 Wall. 542, 19 L. Ed. 244. The action was for damages for the breach of a contract by which plaintiff, a British consul at New Orleans, agreed to protect from seizure and confiscation certain cotton then within the lines of the confederate forces, in consideration of a part of the profits when the cotton was sold. The plaintiff issued certificates falsely certifying the cotton was "the property .of a British subject." The action was founded upon the contract, the parties to which "intended to delude and defraud the United States."
In Oscanyan v. Arms Co., 103 U. S. 261, 26 L. Ed. 539, there was a corrupt contract between the consul general of the Ottoman government at the port of New York, and an American company which manufactured arms that in consideration of an agreed commission the former should use his influence with a trusted agent of his gov- < mniciii sent over to purchase arms to induce him to make the purchases of the company. The action was upon the contract to recover the commission.
In Irwin v. Williar, 110 U. S. 499, 4 Sup. Ct. 160, 28 L. Ed. 225, it was held that a broker who knowingly brings parties together for the purpose of wagering or gambling cannot recover for services or for losses incurred by himself.
In Embrey v. Jemison, 131 U. S. 336, 9 Sup. Ct. 776, 33 L. Ed. 172, the same rule was applied to a case in which such losses were the consideration of promissory notes.
In Central Transp. Co. v. Pullman's Car Co., 139 U. S. 24, 11 Sup. Ct. 478, 35 L. Ed. 55, the plaintiff, a quasi public corporation, sued to recover on a lease by which, without authority of law, it stripped itself of property, stipulated against the performance by it of its public duties, and abdicated its corporate functions. The action was in covenant on the instrument by which this was clone.
Pullman's Palace Car Co. v. Central Transp. Co., 171 U. S. 138, 18 Sup. Ct. 808, 43 L. Ed. 108, exhibits another phase of the controversy involved in the case last cited. In this case the lessor was allowed to recover from the lessee the value of the property delivered under the void lease, upon the principle that the right to a recovery of property transferred under an illegal contract is founded upon an implied promise to return or make compensation for it. The recovery was permitted, because it rested upon a disaffirmance instead of upon a reliance on the contract.
McMullen v. Hoffman. 174 U. S. 639, 19 Sup. Ct. 839, 43 L. Ed. 1117, was a suit by one of the parties to an illegal contract founded in fraud, and its object was the recovery of profits, to which complainant claimed to be entitled under the contract. The character of this case is clearly illustrated by the language of the court:
'•In the case before us the cause of action grows directly out of the illegal contract, and if the court distributes the profits it enforces the contract which is illegal.''
In Manhattan Medicine Co. v. Wood, 108 U. S. 218, 2 Sup. Ct. 436, 27 L. Ed. 706, there was a bill in equity to restrain defendants from using an alleged trade-mark and for an accounting of profits. The doctrine of the case was concisely stated as follows:
"A court of equity will extend no aid to sustain a claim to a trade-mark of an article which is put forth with a misrepresentation to the public as to the manufacturer of the article, and as to the place where it is manufactured. both of which particulars were originally circumstances to guide the purchaser of the medicine."
In other words, complainant sought a court of equity to affirmatively perpetuate and enforce a fraud.
In Thomas v. City of Richmond, 12 Wall. 349, 20 L. Ed. 453, a city, without authority of law and against express statutory prohibition, issued bills to circulate as curréncy. It was held that an action would not lie on the bills or for money had and received. This doctrine is affected by considerations of public policy in respect of corporations and their powers.
In Harriman v. Northern Securities Co., 197 U. S. 244, 25 Sup. Ct. 493, 49 L. Ed. 739, the rule in pari delicto was applied, not the rule ex dolo malo, and it was noted that the parties may not be in equal wrong when there has been fraud or oppression on the part of the defendant.
Some other matters are presented by counsel but we find nothing in them sufficient to disturb the conclusion reached.
The judgment of the Circuit Court is affirmed.