Court Opinion

ID: 6585521
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:42:55.347456+00
Date Added: 2024-06-11T15:57:27.122400
License: Public Domain

Tyr&r, J.,
dissenting. I am not able to concur with the majority of the judges in some of the views above expressed.
It is true that the orator did not intend that the defendant should acquire title to' the securities that were placed in his name; that there was no delivery of them, and that the defendant obtained possession of them wrongfully and against the will of the orator. Do’ these facts take the case out of the *149general rules above stated, so that the orator can have a decree for a return of the property?
It is elementary that while a court of equity will endeavor to- enforce justice in transactions between parties, it will act upon the rule that he who comes into a court of equity must come with clean hands. This is declared to be a most important and even universal rule affecting the entire administration of equity jurisprudence as a system of reme•dies and remedial rights, i Pom. Eq. Jur. § 398. It is indeed held, as Pomeroy says in the following section, that this broad principle must be taken with reasonable limitations; that it does not apply to every unconscientious act on the part of the plaintiff; that it does not extend to any misconduct, however gross, which is unconnected with the matter in litigation and with which the opposite party has no> concern; and quoting from § 399: “When a court of equity is appealed to for relief it will not go outside of the subject-matter of the controversy and make its interference to depend upon the character and conduct of the moving party in noi way affecting the equitable right which he asserts against the defendant, or the relief which he demands.” But in § 404, he says * * *; “any really unconscientious conduct, connected with the controversy to which he is a party, will repel him from the forum whose very foundation is good conscience.”
Applying this rule to the case in hand, it cannot be held that the defendant’s wrongful act was not connected with the orator’s transactions in placing the securities in the defendant’s name for the confessed purpose of escaping taxation upon them. On the contrary, the conversion of the property by the defendant to- his own use was the result of the orator’s fraudulent plan. All the steps taken by the orator must be considered, — the formation of the purpose to avoid taxation, *150the taking of the securities in the defendant’s name, stating his residence as Boston to. mislead the listers, the orator’s omission to place the securities in his sworn inventory, depositing them within the defendant’s reach and the appropriation of them by the latter, constituted one transaction, the last act being the outcome of the former ones. The orator’s wrongful acts enabled the defendant to appropriate the securities to his own use.
The opinion of the majority is not placed upon the ground that the defendant’s act in appropriating the funds in question to' his use was disconnected from the orator’s acts, so as to bring the case within the rule in Pomeroy, but it rests upon another rule in equity stated in the opinion. In our judgment the orator is not entitled to the benefit of that rule, for though in his bill he only alleged that his property was in the hands of the defendant who refused to return it, and the answer alleged' no fraud, yet the orator in order to prove his case before the master frankly stated his reasons for placing the property in the defendant’s hands and thus disclosed his fraud. When the case came into* this Court upon the master’s report the orator’s fraudulent purpose and acts at once appeared.
We are aware that it has been held in some cases that to disentitle the orator to* the benefit of the rule, the fraud must be made an issue in the pleadings and established by proof, but such a holding cannot be sound in principle, for, applied to this case, it in effect says to the orator that though he admits that he placed the property in the defendant’s name for the purpose of escaping his share of the burden of taxation and he thereby subjected himself to a heavy penalty under V. S. 414, he is entitled to relief because it was not necessary that the fraudf should appear in order to make out his case.
*151As strict a rule should be adopted in this case as is held in suits that are brought to enforce contracts made in violation of statutes, or in cases where one party seeks to be relieved from an illegal contract and the doctrine of in pari delicto• applies, and expressions of courts in such cases are pertinent.
In Bank of U. S. v. Owens, 2 Pet. 538, a suit to enforce an illegal contract, it is said in the opinion: “Courts are instituted to carry into effect the laws of the country; how can they become auxiliary to the consummation of violations of law ? There can be no civil right where there can be no- legal remedy, and there can be no legal remedy for that which is itself illegal.”
In Hall v. Cappell, 7 Wall. 542, a suit brought to enforce a contract void as against public policy: Justice Swayns, commenting on the instructions of the court below, that the illegality had been waived by the act of the defendant, says, ‘ Tn such cases there can be no waiver. The defence is allowed not for the sake of the defendant but of the law itself.’ ! Again, 1 ‘Whenever the illegality appears, whether the evidence comes from one side or the other, the disclosure is fatal to the case. No1 consent of the defendant can neutralize its effect. A stipulation in the most solemn form to waive the objection would be tainted with the vice of’the original contract and void for the same reasons. Where the contamination reaches, it destroys. The principle to be extracted from all the cases is, that the law will not lend its support to a claim founded on its own violation.” See also Bank v. Lanier, 11 Wall. 369. In Hanauer v. Woodruff, 15 Wall. 439, the Court said: “When a contract is thus connected by its consideration with an illegal transaction a court of justice will not aid its enforcement. It is sometimes said that *152the test whether a demand connected with an illegal transaction :'is capable of being enforced at law, is, whether the plaintiff '-requires any aid from the illegal transaction to establish his case. This test was given in Simpson v. Bloss by the Court of Common Pleas, in England. But it is too narrow in its terms and excludes many cases where the plaintiff might establish his case independently of the illegal transaction, and yet would find his demand tainted by that transaction. He might, in some instances, establish his case by showing a simple loan of money, or a simple sale of goods, yet the court would hold the contract of loan or sale to be invalid if at the time the money was loaned or the goods were sold he knew they were to be used for' an illegal and criminal transaction, and the contract was made to further its execution.” Bartle v. Nutt, Admr. of Coleman, 4 Pet. 184.
In Roby v. West, 4 N. H. 285, the Court used this language: “The principle, that no court shall aid men, who found their cause of action upon illegal acts, is not only a well settled, but a most salutary principle. It is fit and proper that those who' make claims which rest upon violations of the law should have no rig'ht to be assisted by a court of justice.”
In Wheeler v. Russell, 17 Mass. 258, the Court declared this rule: “Where the contract is declared void by statute, or is to do a thing directly prohibited under a penalty, or against the policy of the law generally, the case is plain. So where the consideration arises out of, or is indirectly connected with, the violation of some great principle of public policy, the contract is in many cases void. But where the consideration arises out of or is remotely connected with what is merely malum prohibitum, the contract is not necessarily void.”
Taylor v. Chester, 4 Queen’s Bench 307, has been cited: There the plaintiff sued to recover a bank note that he had *153deposited with the defendant as a pledge to secure the payment of money due from him to the defendant. The sum «due was for wine and suppers furnished to the plaintiff by the defendant in a brothel -kept by the latter to be there consumed in a debauch. The declaration alleged only the bailment of the note; that it was to be redelivered on request, a request, and a refusal to return the note. The defendant pleaded that the note had been deposited to secure the payment of money advanced by and then due her. The plaintiff replied the purpose for which the note had been deposited. Mellor, J., in delivering the opinion of the Court said: “The maxim, in pari delicto, is as thoroughly settled as any proposition of law can be.' It is a maxim of law, established, not for the benefit of the plaintiffs or defendants, but founded on the principles of public policy, which will not assist a plaintiff who has paid over money or handed over property in pursuance ‘of an illegal or immoral contract, to' recover it back, for the courts will .not assist an illegal transaction in any respect,” citing Lord Ellenborough in Edgar v. Fowler, 3 East 222, and Lord Mansfield in Holman v. Johnson, Cowp., 343. The Court further said: “In order to get rid of the defence arising from the plea which set up an existing pledge of the note, the plaintiff had recourse to the special replication in which he was obliged to set forth the immoral and illegal character of the contract upon which the note had been deposited. It was therefore impossible for him to recover except through the medium and by the aid of an illegal transaction to which he was himself a party.”
The case last cited is a strong authority in support of our contention. It is true that the plaintiff’s fraud appeared in the pleadings; but in most cases, and in all cases tried upon the general issue, the plaintiff’s fraud would not appear until he *154put in his testimony. Can it then be maintained that the plaintiff’s fraud thus coming to- the knowledge of the court will not defeat his right of recovery?
The disfavor with which courts regard suits founded upon claims tainted with fraud and upon schemes to- avoid taxation is illustrated in Mitchell v. Board of Commissioners, Leavenworth, Kan., 91 U. S. 206. There the facts were-, that personal property including money on deposit, was listed for taxation as of March 1 each year. The p-laintiff in error had a large balance of money to his credit in a bank, and on the 28th day of February gave his check therefor payable to himself in United States notes that were exempt from, taxation. They were paid to- him- and he enclosed them in a sealed package and placed them for safe keeping in the vault of the bank. March 3rd he withdrew the package and deposited the notes to his credit. This was done for the sole purpose of escaping taxation upon his money. The taxing officers however, on discovery of the facts, assessed the money in the bank and the plaintiff filed a bill in equity to- restrain the collection of the tax, alleging that the money had been converted into United States notes before the day on which it was to be listed. The Supreme Court of the State dismissed the bill o-n the ground that, “a court of justice, sitting as a court of equity, will not lend its aid for the accomplishment of any such purpose.” The Supreme Court of the United States affirmed the decree and held that “a court of equity will not knowingly use its extraordinary powers to promote any such scheme as this plaintiff devised to- escape his proportionate share of the burdens of taxation.”
This case must be governed by the rule that governs suits brought to- obtain a reconveyance of property conveyed to defraud creditors. In such cases, “The door of the court of *155equity is shut against such a claimant.” Notes to 1 Pom. Eq. 401; Moore v. Jordan, 46 Am. Dec. 641; Dent. v. Furguson, 132 U. S. 50; Hildebrand v. Willig, N. J. Eq., 53 Atl. R. 1035; 14 Am. & Eng. Ency., 275; Roberts, Admr. v. Lund, 45 Vt. 82.
We think that upon the facts found by the master, by reason of the orator’s fraudulent acts he is not entitled to the relief prayed for. The holding of the Court in Ransom v. Burlington, 111 Ia. 77, is applicable here: “While one may lawfully dispose of his property to escape taxation, * * * the law will not uphold any mere manipulation, under the guise of disposition,' the only effect of which is to defeat a tax.” Shotwell v. Moore, 129 U. S. 590.

We think the bill should have been dismissed.

Start and Stafford, JJ., concur in the dissenting opinion..