Case Name: John Doty et al. v. The Knox County Bank of Mount Vernon
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1865-12
Citations: 16 Ohio St. 133
Docket Number: 
Parties: John Doty et al. v. The Knox County Bank of Mount Vernon.
Judges: Brinkerhopf, C. J., and Scott, White, and Welch, JJ., concurred.
Reporter: Ohio State Reports, New Service
Volume: 16
Pages: 121–131

Head Matter:
John Doty et al. v. The Knox County Bank of Mount Vernon.
1. Where the whole or a part of the consideration of a bill of exchange is ille* gal, the whole bill is void.
2. Where such bill is given for two distinct considerations, neither of which is unlawful, and one is valid, but the other is void at common law or by statute, as between the parties thereto, the bill will be held valid to the extent of the good consideration, and void as to the rest.
3. The act of 1854, prohibiting, while in force, the circulation of foreign bank-bills of a denomination less than ten dollars, rendered void only such contracts as were given *for, or related directly to, such bank-bills; therefore, where a bill of exchange was given in renewal of several others, all of which were valid, except one that was rendered void by said act, such renewed bill was void to tbe extent only of tbe invalid consideration, and! good as to tbe balance.
4. Where a judgment was rendered by warrant of attorney on such renewed bill, for the full amount thereof, and, on a proceeding to vacate such judg ment, under the provisions of the code, the amount of such void considera tion was remitted therefrom by leave of the court, such proceeding wai, properly dismissed without vacating the judgment.
Error to the district court of Knox county.
At the November term, 1855, of the court of common pleas of Knox county, the Knox Couhty Bank of Mount Yernon recovered a judgment against Stephen Doty, Morgan B. Doty, George T. Noe, and John Doty, for the sum of $4,244.66, and costs, upon a certain bill of exchange for $4,000, drawn by them on the city of New York. The judgment was entered by confession on a warrant of attorney.
On the 7th of February, 1856, John Doty and George T. Noe, the plaintiffs in error, filed their petition to vacate the judgment and for leave to defend, alleging, in substance, the following grounds of defense:
1. That the bill was executed by them as sureties, and was signed in blank as to date, amount, and time of payment, with the understanding on their part that it was to be given in renewal of a certain $2,000 bill held by the bank.
2. That they were not duly notified of the non-payment of th& bill.
3. That in discounting the bill, the bank paid out thereon bank-bills of a less denomination than ten dollars, that were not issued in the State of Ohio, nor made payable in the State of Ohio, and that the-same were paid out by the bank for the purpose of circulation.
4. That illegal interest was' included in the bill.
The bank answered, denying each-alleged ground of defense, and every material averment setting up the same.
The case was heard at the April term, 1856, upon testimony, and the court found as follows:
That at the time the bill of exchange, upon which the judgment in the petition mentioned was rendered, was drawn, another bill' for $3,000 was drawn by Stephen Doty and others, *in favor of the defendant; that the only consideration of these two bills was a certain other bill, then past due, for $7,162, drawn May 31,. 1855, by Stephen Doty and others, in favor of defendant, the differ ence, to wit, $162, having been otherwise paid. That the consideration of the bill of $7,162, was sundry other bills of Stephen Doty and' others, then past due, among which was a bill for $1,800, drawn» by Stephen Doty and others, in favor of the defendant, on the 6th' day of February, 1855. That in the discount of the bill of $l,800r there is reasonable ground to believe that the defendant paid out foreign bank-bills of a less denomination than ten dollars, contrary to the statute in such case provided. That all the several other-items of consideration of the bill of $7,162, were good and valid in law. That the bill of $1,800 entered into and formed a part of the consideration of the first-named bills of $4,000 and $3,000, in the-, proportion which they bear respectively to the bill of $7,162. That the portion of such consideration which entered into the bill of $4,000, upon which the judgment in the petition mentioned was rendered, was $1,028.58, and to that extent the court was of the opinion that the bill of $4,000 was without consideration, and 'to-that extent the plaintiffs had a valid defense to the action. That none of the other grounds alleged in the petition were proved, and that the allegations of the petition as to them were not true. That by reason of said want of consideration, the judgment in the petition described, was rendered for $1,101.57 more than was then due-the defendant upon the bill of $4,000.
Whereupon the defendant, by counsel, appeared in open court and offered to remit upon the judgment, as of its date the sum of $1,101.57, and by leave of the court the remittitur was entered.
The plaintiffs thereupon moved the court to vacate the judgment and set the case for trial, claiming, among other things, that the facts found by the court rendered the bill of $4,000 wholly void» in law; but, the court being of a contrary opinion, overruled the motion.
The remittitur being entered, the petition was dismissed at the-costs of the bank. The plaintiffs excepted, and filed a petition in error in the district court to reverse the order and ^judgment of the common pleas. The judgment was affirmed in the district court at July term, 1801; and the plaintiffs now prosecute this, proceeding to reverse the judgment of the latter court.
T. W. Bartley and W. H. Smith, for plaintiffs in error:
The act of May 1, 1854, “ to prohibit the circulation of foreign bank-bills of a less denomination than ten dollars ” (52 O. L. 83)r was in force when the bill for $4,000 originated. That bill was _given, in part, for the one for $7,162; the latter bill had incorporated in it the $1,800 bill, in the discount of which the bank paid foreign bank-bills of less denomination than ten dollars, contrary to the statute; hence the consideration for the $4,000 bill was in part illegal; consequently, the bill was absolutely void. The $1,800 bill was not simply void by the statute, but its discount was a penal offense, .and the illegality entered into and tainted the $7,162 bill, and the taint of the offense was not avoided by the circuity of the renewal by the bill sued on. A part of the consideration still related to the illegal transaction, and based a credit thereon, and was, therefore, in contravention of the provision in section 2 of the statute, that all contracts in relation thereto should be null and void.
The question here is not that of a promise to do two things, one •of which is illegal; nor is it the question of upholding a contract upon a consideration in part merely void. A distinction is made between a consideration merely void and one illegal in this regard. Partial illegality of consideration vitiates the whole instrument and renders it entirely void, whether the illegal part of the consideration be distinctly severable from the legal part or not. There is a •distinction between a mere want or failure of consideration, or a consideration otherwise merely void, and a consideration illegal and ■void because of illegality. A consideration in part merely void, but not expressly malum prohibitum, can invalidate the promise only pro tanto. Parish v. Stone, 14 Pick. 198. But it seems to be well ■settled, by the great weight of authority, that partial illegality of consideration, whether severable or not, destroys the obligation ■entirely. Collins v. Merrill, 2 Met. (Ky.), 163; 3 Bibb, 500; 6 Dana, 91; 8 B. Mon. 98; 9 Ib. 90; Deering v. Chapman, 22 Maine, 488; *Hunt v. Knickerbocker, 5 Johns. 327; Greenaugh v. Balch, 7 Greenl. 462; Wheeler v. Russell, 17 Mass. 258; 5 B. & C. 406; Kepner v. Kelfer, 6 Watts, 231; Wright v. Geer, 1 Root, 474; Mitchell v. Smith, 4 Dall. 269; Roby v. West, 4 N. H. 287; 1 Taunt. 136; Bliss v. Negus, 8 Mass. 51; 5 N. H. 196; 6 N. H. 225; Cro. Eliz. 199; 3 Taunt. 226; 1 Term, 227, 359; Comyn’s Dig., Assumpsit, B. B. ; 11 East, 502; 7 Term, 200; 2 Tent. 223; 8 Johns. 253; Loomis v. Newhall, 15 Pick. 167; Parsons on Cont. —; Chitty on Cont. (5 Am. ed.), 417, 427, 692, 694; Met. on Cont., Amer. Jurist, Nos. 43,45 ; Higgins v. Pitt, 4 Exch. 324; Trovinger v. McBurney, 5 Cow. 253; Baldwin v. Palmer, 10 N.Y. 232; Jones v. Waite, 35 E. C. L. 130; Woodruff v. Hinman, 11 Vt. 592; Gamble v. Grimes, 2 Cart. (Ind.), 392; 9 Vt. 23, 310; Armstrong v. Toler, 11 Wheat. 258; Perkins v. Cummings, 2 Gray, 258; Adams v. Rowan, 8 S. & M. 624; Orr v. Lacey, 2 Doug. (Mich.), 230; Miller v. Harden, 32 Ala. 30; Stanley v. Nelson, 28 Ala. 514; Bates v. Watson, 1 Sneed, 376 ; Nutter v. Stoner, 48 Maine, 163.
Curtis & Scribner, for defendant in error:
There not having been any illegal currency paid out on the discount of the bill, it follows that it was not void. A large portion of the consideration was found by the court to be good. If it had-been proved to a jury that the $1,800 bill was discounted. in illegal, currency, the simple result would have been that that particular bill would have been declared void, and to the extent that it formed the consideration of the $3,000 and $4,000 bills, that those bills were without consideration; but the failure of consideration would have • operated no further. The other items of consideration were good' and lawful.
The plaintiffs in error insist that the bill of exchange upon which the original judgment was rendered, was entirely void. In other • words, they claim that a partial failure or want of consideration, has-the same effect upon the instrument as a partially illegal consideration.
Herein lies their error. Had the bill been discounted partly in illegal currency,'their theory might have been correct. But this, was not the case.
^Suppose A holds two notes upon B for $1,000 each, one given for a valid consideration and the other void as founded on an illegal transaction. He takes a new note for $2,000, and gives up-the old notes. What is the effect? Simply that, to the extent of the good note for $1,000, the new note is valid; and to the extent of the void note there is a want of consideration.
This is consonant to reason, to principle, and to the authorities.. 2 Kent’s Com. *467; 1 Parsons on Contr. *379; Story on Contr. sec. 627; 11 Cush. 6; Morris v. Way, 16 Ohio, 469; Brannock v. Brannock, 10 Iredell, 428; Chitty on Contr. (9 Am. ed. *613), note 2; State v. Findley, 10 Ohio, 54; Parish v. Stone, 14 Pick. 198; 2 Pick. 98; Crisp v. Gamel, Cro. Jac. 127; Bradburne v. Bradburne, 1 Cro. Eliz. 149; King v. King, 2 Cromp. Mees. & Ros. 48 ; Denno v. Knott, 7 Mees. & Wels. 142.

Opinion:
Day, J.
This petition in error brings in review a judgment of the court of common pleas, in a proceeding under the 534th section of the code of civil procedure, which authorizes courts to modify or vacate their own judgments, for causes therein specified.
The plaintiffs in that proceeding were required, by the 536th section of the code, to " set forth the judgment or order, the grounds to vacate or modify it, and the defense to the action." By the next section, the court is authorized to " first try and decide upon the .grounds to vacate or modify a judgment or order, before trying or deciding upon the validity of the defense." In section 538, it is provided that " a judgment shall not be vacated on motion or petition, until it is adjudged that there is a valid defense to the action in which the judgment is rendered."
The court found that the proof did not sustain any of the alleged grounds for vacating the judgment, except that it was taken for more than was legally due to the plaintiff therein, thus bringing the case within the provisions of the ninth clause of said section 534. The court, moreover, found the amount of excess for which said judgment was rendered above the sum due, which the plaintiff therein remitted.
*The judgment, having been thus reduced by the remittitur, was, upon the finding of the court, for no more than was due to the plaintiff therein, and, therefore, there no longer remained a •statutory ground for its vacation; nor, indeed, under the holding .of the court, could it be " adjudged that there was a valid defense to the action in which the judgment was rendered," as is required to be done by said section 538, before such judgment can be vacated.
The petition of the plaintiffs in said proceeding was, therefore, iproperly dismissed; unless, under the facts as found by the court, the bill, on which the judgment was rendered, was 11 wholly void in law," as claimed by the plaintiffs.
This is the question presented for our determination, and is decisive of the case.
, The judgment was rendered on a bill for $4,000, which, it is claimed, was vitiated by an illegal consideration. Numerous authorities cited by counsel for plaintiffs show that, if the whole or ,any part of the consideration of the bill was illegal, or grew directly out of an unlawful transaction, then the bill is entirely void, 'll Wheat. 258. Nor is this disputed. But the question is, whether the case, upon the facts as shown by the record, comes within the principle stated. Was the consideration of this bill illegal, or directly connected with an unlawful transaction ?
At the time the bill was drawn by the plaintiffs in favor of the defendant, another for $3,006 was also given to the defendant.- The only consideration of these two bills was another bill, past -due, for $7,162, drawn May 31, 1855—the difference of $162 having been otherwise paid. The consideration of the last-named bill was sundry other bills. overdue, among which was one for $1,800, drawn in favor of the defendant, February 6,1855. In the discount of the bill for $1,800, the court substantially found that the "defendant paid out foreign bank-bills of a less denomination than ten dollars.
The act of May 1, 1854 (Laws of Ohio, 1854, page 83), to prohibit the circulation of such bank-bills was then in force, and rendered it " unlawful for any person, firm, or body corporate to pass, transfer, or circulate " bills of that description.
*A portion,, at least, of the consideration of the bill for $1,800 was such inhibited bank-bills, and was, therefore, illegal; and, under the principle before stated, the bill was wholly void. But, aside from this, the condition of paper discounted as this was, is fixed by the fifth section of said act, which provides that " all notes, and other securities or obligations, discounted in whole or in part by any bank, banker or bankers, broker or brokers, with, or by paying out the unlawful paper, the circulation of which is by this act prohibited, shall be void, and no action shall be maintained to enforce the'collection thereof."
There was then, in the renewal of the bill of $1,800, with others, amounting together to $7,162, a failure of consideration for the bill of the latter amount to the sum of $1,800, the amount of the void bill; and there was the same failure of consideration in the two bills of $4,000 and $3,000, given in renewal of the unpaid balance of the bill for $7,162.
If the bill for $1,800 was simply void, and therefore constituted no consideration for the bill given in the renewal thereof, and the remaining consideration of the new bill was valid, the law is well settled that it would be good to the amount of the valid consideration ; and the two bills given in renewal of the latter would be good fro tanto, each in its proportion to the valid consideration.
In the ease of Parish v. Stone, 14 Pick. 198, it was held: "'Where a promissory note is given upon two distinct and inde pendent considerations, and one is a consideration which, the law deems valid and sufficient to support a contract, and the other not,, the note will be apportioned as between the original parties, or such as have the same relative rights, and the holder will recover to the extent of the valid consideration, and no further; and where-the parts of the note are not respectively liquidated and definite, the question, what amount was founded on one consideration and. what on the other, is to be settled by the jury upon the evidence."
Upon these principles, the court of common pleas, after finding that the consideration for said bills was valid, except the amount of said void bill, properly proceeded to determine " upon the evidence,r what amout of said invalid bill ^entered into the bill on which the judgment was rendered; and, if that part of the consideration of that bill was simply void or invalid, and not illegal, the court, properly refused to set aside the judgment after it was reduced byremittitur to the amount of the valid consideration of the bill on which it was based.
But it is claimed that, at least, a part of the consideration of the bill for $4,000, was illegal as well as void; and that the same illegality infected this bill, that rendered the bill for $1,800 void. There is certainly a wide difference between the two transactions-out of which these bills respectively originated. For one, unlawful bank-bills were passed; for the other, no money of any kind was-paid. In the giving of one of these bills, the parties committed an unlawful act, subjecting them to severe penal forfeitures; but, when-the other was executed between them, no illegal act was done. The paper given for unlawful bank-bills, is not declared, by the-statute, to be also unlawful, but it is thereby simply rendered void. Nor does the statute attach a penalty or forfeiture to either the payment or renewal of paper which it thus declares to be void. The-voluntary payment of the void bill would not have been either unlawful or immoral; and, certainly, there could be no more turpitude-in a naked promise to pay it.
In the discount of the bill for $1,800, unlawful bank-bills were-paid therefor; and, therefore, however small the amount was that entered into the consideration of the bill, the statute, nevertheless, rendered the whole bill void. The statute had no other effect upon the bill discounted with the forbidden paper, than to destroy it in law, or render it void ; so that it could neither.be enforced by collection, nor become a valid consideration for another contract or bill. The bill was dead when given, and the statute gave it no second life or effect beyond itself. The first bill was given for unlawful money, but the next bill, to the amount of $1,800, was given for the first bill, and for no other thing or act done. The first bill was, itself alone, the only consideration of $1,800 of the next; and, if that bill was valid, the consideration was good; but if it was void, then the consideration therefor, to that extent, failed. Herein rests the distinction between the *two bills; the first was, in part, based upon an illegal transaction; the second was not an unlawful transaction, but was based, in part, upon a void consideration; and the legal effect of the two transactions was, to make one bill void in toto, and the other pro tanto.
When the consideration is in no part illegal, but only invalid either by the common law or statute, the rule is stated by Chancellor Kent as follows: 11 When the transaction is of such a nature that the good part of the consideration can be separated from that which is bad, the courts will make the distinction; ' for the common law doth divide according to common reason; and having made that, void that is against law, lets the rest stand.' The general and more-liberal principle now is, that whether any matter, void even by statute, be mixed up with good matter, which is entirely independent of it, the good part shall stand, and the rest held void; though if the part which is good depends upon that which is bad, the whole-instrument is void." 2 Kent's Com. *467.
But it is claimed that the act before referred to, does more than make the original paper, which was given directly for the unlawful bank-bills, void; that it also renders the bills that were given therefor, and in renewal thereof, unlawful. If this be so, then upon the principles before stated, the result must follow, though it work the forfeiture of the further valid consideration of the renewed bill,, much larger than the first.
This a court will hesitate to do, unless it comes within the dear-requirements of the statute.
Foreign bank-bills of a less denomination than ten dollars, are called in the statute, "unlawful paper;" and it is made, thereby, unlawful to pass or receive such bank-bills in any form; and the-act provides "forfeitures" for so doing. But the statute nowhere declares the paper given for such bank-bills to be unlawful; nor does it provide penalties for giving or taking the same, further than to render all such securities void. This is as far as the statute goes ¿ and, having declared such securities not illegal but void only, leaves them, as we have seen, to stand upon the principles of the Acomuno n law, which " doth divide according to common reasonand ¡'lets that stand which is based uj>on a valid consideration.
It is further claimed that, although the bill on which the judg* nnent was rendered may not be unlawful, it is still rendered void by sthe 2d section of said act. That section is as follows :
" Sec. 2. That all bank-bills of less denomination than ten dollars, -unless issued by, and made payable at one of the banks of this state, in accordance with the laws of this state, and shall not directly or indirectly, be paid out or received in payment of any tax, debt, judgment, decree, fine, or amercement, or other demand whatever; and ¿all such unlawful paper shall be held in this state to be worthless, ;and all contracts in relation thereto null and void; and any disbursements or payments or exchange for other property of value, ¡made or attempted to be made therewith, of no effect whatever."
The 1st section declares it to bo unlawful to pass, transfer, cir«culate, or receive such foreign bank-bills; and the 3d and 4th provide for the " forfeitures " for so doing. It is apparent, from the whole scope of the 2d section, that its only purpose is in further.ance of the object of the act, to prevent the circulation of such unlawful paper, by declaring it to be worthless, and in annulling all transactions, so far as they are accomplished by such unlawful -paper. It would seem that the purpose was, to make all payments with such paper, and contracts in direct relation thereto, as worthless as the statute declares the paper itself to be. Certainly no pur•pose is clearly indicated in this section to go further and work forfeitures, to an unknown extent, of paper that sustained no relation whatever to the worthless bills, though they might become evidenced 'by the same security. This view is fortified by the provision in the 5th section, that, as to bankers and brokers, all securities discounted " in whole or in part " by paying out the unlawful paper, " the circulation of which is by this act prohibited, shall be void." There would seem to be no necessity for this provision, if a more comprehensive meaning was intended by the 2d section; much less was there any reason for limiting it to bankers and ^brokers, or for specifying them, if everybody and all contracts were brought within the provision of the 2d section.
But it may well be doubted whether, since specific provision is :made for paper discounted by bankers and brokers, it was intended to embrace this class of securities among tbe contracts mentioned in the 2d section. However that may be, there can be but little doubt, since it was the object of the statute to prevent the " circulation " of the inhibited paper, that its full purpose was accomplished by rendering null and void the security upon which it was put in circulation; and that it never was intended to affect subsequent transactions, based on other valid considerations further than the law affects any void consideration. It was, at most, but intended to render those contracts void, which directly related to the worthless paper. To give the statute a broader construction would open,the door to forfeitures not clearly declared therein, and would extend the statute beyond its purpose, and result only in injustice between the parties, and subserve no public interest.
But the bill for $7,162 was given in renewal of bills that never were tainted with the unlawful paper, except the amount of $1,800; and we have seen that, as to that amount, it was strictly given for the bill of $1,800, and not for the worthless money; and had no " relation " to that, only by construction. But forfeitures are not wrought out by construction.
It is enough to render the bill void that was directly related to the worthless bank-bills, and that brought them into circulation. This will fully subserve the spirit and letter of the act. To go further and forfeit a much larger amount of paper that had no relation whatever to any prohibition of the statute, aixd no relation to any paper rendered void by it, except that it eventually becomes evidenced by the same security, in the language of Lord Ellen-borough, upon a similar question, in the .case of Kerrison v. Cole (8 East, 231), "would be going beyond the reason and object of the legislature in order to work injustice."
Judgment affirmed.
Brinkerhopf, C. J., and Scott, White, and Welch, JJ., concurred.