Court Opinion

ID: 6902186
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:56:04.381473+00
Date Added: 2024-06-11T16:06:12.720175
License: Public Domain

*426Decided September 5, 1911.
On Petition for Rehearing.
[117 Pac. 505.]
Mr. Justice Burnett
delivered the opinion of the court.
As we understand the defendant’s petition for a rehearing of this action, he complains that the effect of ,our decision reversing the judgment of the circuit court is to allow the plaintiff to allege the fraud of the defendant as a cause of action and to recover on proof of the illegality of the transaction narrated in the complaint and testimony. He insists also in substance that, if the plaintiff would recover his bonds because of the vice of the agreement by which he was induced to part with them, he must in so many words confess its unlawfulness and ask to be relieved from its burdens.
3. As to the fraud, it is alleged as the inducement which led the plaintiff to make the contract, whether legal or not. No one seeks to recover damages for fraud, but rather for its hurtful effect. It is a mere incident of the transaction in question. Indeed, for the purpose of recovering property with which the plaintiff may have parted under an agreement void as against public policy, but which is yet executory, it matters not whether he entered into the arrangement by reason of the fraud of the other party or of his own free will and accord. Although in pari delicto, as held in Cone v. Russell, 48 N. J. Eq. 208 (21 Atl. 847), the recanting party may be restored to his own, if the place of repentance has not been passed by the complete execution of the illegal contract. Much more is he entitled to relief if he has been deceived by the other party and drawn into an offense against public policy.
4. Again, it is not necessary as a matter of pleading that the plaintiff should come into a court of. law, prefacing his complaint with a peccavi and a general confession of his faults in the matter in hand, for those are-*427legal conclusions. He has stated all the facts from his standpoint, including the guile of the defendant leading the plaintiff into the situation from which he asks the court to extricate him. On any pleading the party making it is entitled to the benefit of any legal conclusion which may be properly drawn from the facts stated. So in this case, if it can be discerned as a matter of law that the agreement in pursuance of which the plaintiff parted with his bonds was contrary to public policy and hence void, he may rely on the further conclusion that he is entitled to recover the property, provided the unlawful convention is still in the executory stage.
The legal effect of the complaint is that the moving party is proceeding in disaffirmance of the iniquitous agreement in question. That it is yet executory arises from the fact that the delivery of the bonds by the plaintiff is the only act of performance by either party. None of the things to be done by the defendant has yet been performed. While this condition exists, the plaintiff may retrace his steps and by appropriate litigation recover his property; for, if the agreement was void as against public policy, it would not operate to pass the title to one who is a party to the illegal transaction. In Spring Co. v. Knowlton, 103 U. S. 49 (26 L. Ed. 347), the trustees of a corporation devised a scheme to increase its capital stock, whereby on payment of 80 per cent of the par value of the new stock, as called for by the trustees, subscribers to the same should receive fully paid certificates, but in default of meeting all the calls a delinquent should forfeit what he had already paid. Knowlton, a party to this arrangement, paid part of the 80 per cent and failed to pay the remainder. The corporation refused to issue to him the new stock or to repay the money he had advanced. The court sustained him in recovering his payments, on the ground that, although the scheme was void as against public policy *428and he was a party to it, yet, as it was still in part executory, he was entitled to his money. In Cone v. Russell, 48 N. J. Eq. 208 (21 Atl. 847), the complainants had executed a proxy, irrevocable in its terms, empowering the defendants to vote certain shares of stock owned by complainants, so as to accomplish certain results in the management of the corporation issuing the stock— among others, the employment of one of the complainants as manager of the concern at a large salary. The vice chancellor held that, although the complaints were in pari delicto, they were entitled to relief against the illegal agreement, to have the proxy canceled, and to be restored to their former situation. To the same effect is Sheppard v. Rockingham Power Co., 150 N. C. 776 (64 S. E. 894). Many other cases might be cited, but the controlling principle in them all is that, until an agreement void as against public policy is fully executed, either party may retreat, and by appropriate proceeding the courts will restore him as far as possible to his previous estate.
The case of Phoenix Bridge Co. v. Keystone Bridge Co., 142 N. Y. 425 (37 N. E. 562), cited by defendant, is easily distinguishable from the one in hand. There several manufacturing concerns formed an association, agreeing to contribute to a common fund to be used as a guaranty and for other purposes, and providing that, in case of the expulsion of any member, the amount that it had already contributed should be forfeited to the association. The complaint alleged that, without a hearing, the association had found the plaintiff in default, and was about to forfeit the contribution it had made to the guaranty fund, and expel it from the confederation. The prayer was to enjoin the accomplishment of this result. The court held that the agreement, being a combination to enhance prices, was illegal, but refused to grant the plaintiff relief in that suit, because it proceeded in affirmance and support of the void arrangement. In other words, the plaintiff sought to enforce its supposed *429rights under the agreement. The conclusion was that the judgment of the court below, dismissing the suit, “should be affirmed, without prejudice to the commencement of an action by plaintiff, if it be so advised, to recover back moneys it had paid to the association, on the ground that the agreement forming it was illegal.”
The petition for a rehearing is denied.
Reversed: Rehearing Denied.