Court Opinion

ID: 3503223
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:09:59.564289+00
Date Added: 2024-06-11T13:44:52.811933
License: Public Domain

After this case was submitted on briefs, we requested counsel to submit further briefs on the equities between the parties. There is no question but that Federal regulations prevent the transfer of these United States savings bonds, either by way of security or otherwise. Defendants' plan involved a transfer of the bonds as security for a loan. This is shown by the promissory note and agreement under which the bonds were deposited with the defendants by Mrs. Cook: *Page 63 
"If the security afforded by said property (the bonds), shall, * * * be insufficient, said holder (Marks) may without notice * * * enforce the security as aforesaid.
"Enforcement or preservation of any lien hereunder, * * * are hereby waived by the undersigned."
This plan was a plain subterfuge to avoid the consequence of the Federal regulations. As between the parties to this scheme, equity would leave them in the situation in which it found them. Neither of them could successfully urge that they came into equity with clean hands. This rule also bars the plaintiff (Mrs. Cook's husband) from equitable relief.
Counsel for defendants urge that both the plaintiff and the defendants herein are innocent parties to the transaction; that where one of two innocent parties must suffer, the one whose act occasions the loss must stand the consequences. In other words, that the plaintiff, by putting it in his wife's power to collect the money on these bonds, must bear the loss because defendants are entirely innocent parties. The fallacy in this argument rests in the fact that defendants are not innocent parties. They knew the Federal restriction against the very end they sought to accomplish. They conceived a roundabout procedure in order to avoid the effect of the regulation, and this was at its best a mere subterfuge. The bonds are still in defendants' possession, and we cannot say whether the United States treasury department will ultimately recognize any right in defendants to receive any money on them if both of the registered holders (Mr. and Mrs. Cook) refuse to indorse a payment check. The treasury department may still refuse to accept the alleged power of attorney. *Page 64 
Nor can we find that the plaintiff himself has any right to relief in equity. He does not offer to do equity, nor does he come into equity with clean hands. When he took the bonds in the names of himself and his wife, he knew that she then had the same right of ownership as he had. When he gave his wife possession of the bonds, he gave her greater rights than he himself retained, knowing that she could then surrender the bonds and obtain payment without his knowledge or consent. He himself could not thereafter surrender the bonds and obtain payment, not having possession. Through his act, he laid the foundation for the consequences which followed and is not an innocent bystander as to the results. In the opinion of Mr. Justice SHARPE, we would give our approval to this transaction. With this conclusion, I cannot agree. The circuit judge properly held as follows:
"The bonds themselves were issued under regulations well known to all parties in the case that they were not transferable. The method and means employed by the defendant, and the alleged loan which he says he made, were in direct contravention of the terms of the bonds themselves, and also transgressed the purpose and intention of the legislation by authority of which they were issued. * * *
"The attempt to pledge these bonds for the alleged loan is void.
"Sound public policy must condemn such an attempted transaction."
However, the decree entered below directed the defendants to return the bonds to the plaintiff. As hereinbefore indicated, plaintiff is not entitled to this relief from an equity court.
The defendants filed a cross bill asking the court to determine them entitled to a sufficient number of *Page 65 
said bonds to reimburse them for the loan and that plaintiff and his wife be required to execute any instrument necessary to facilitate the payment. However, defendants have the bonds and the United States treasury department will ultimately be called upon to determine who may cash them. Equity will leave them where it finds them.
An order may be entered dismissing both the bill of complaint and the cross bill, but without costs, neither party having prevailed.
NORTH, BUTZEL, and BUSHNELL, JJ., concurred with BOYLES, J. WIEST, J., took no part in this decision.