Court Opinion

ID: 6585520
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:42:55.339586+00
Date Added: 2024-06-11T15:57:27.117664
License: Public Domain

Typer, J.
The following are the material facts found by the master: The orator resided and practiced law in Underhill about thirty years; he was town clerk twenty-four years, postmaster eleven years, and made from all these sources an annual income of $1,200 to $1,500. He and his wife were poor when they moved to that town, but by industry and economy accumulated several thousand dollars prior to her death in 1900-. Their son, the defendant, was born in 1873, and Is now a lawyer in Boston, Massachusetts-. Mrs. Monahan was a capable woman and assisted her husband in his profession and his public offices. She had the care of the funds of the two offices, also, of her own earnings, and to some extent the earnings of her husband, though without any express agreement between them. She kept these *136funds, and sometimes moneys collected by her husband, in a bureau drawer, which seems to have been the only place in the house for keeping money and valuable papers. Mr. and Mrs. Monahan and the defendant each had a key and access to' the drawer, but by an understanding between the husband and wife the latter had the general care and custody of the drawer and its contents but not to the exclusion of the husband. No books of accounts nor memoranda were kept to show the amount of money placed in the drawer, nor does it appear how much each contributed to- the amount thus ■accumulated. In 1889 and 1891 Mrs. Monahan earned $94, ;as superintendent of schools and as a member of the board •of education.
In March, 1892, Mrs. Monahan began to make deposits in her name in a savings bank and continued toi make them until her death. They varied in amounts from small sums to $650.
In 1896 one Batchelder applied to- the orator for a loan, and negotiations were had between Mr. and Mrs. Monahan and himself upon the subject. The loan was agreed upon, and the orator requested his wife to see that the papers were properly made, which she did, talcing Batchelder’s note and a chattel mortgage running to the defendant, who afterwards •learned of the transaction, took the note and mortgage into •his possession, accepted two renewals of them, finally collected •the amount,due, used some of the money for his mother’s comfort in her sickness and deposited the remainder to his credit in a savings bank. The orator did not know that his son had taken the Batchelder papers until he was looking ■over the papers in the drawer in December, 1899.
In 1897 one Whipple applied to the orator for a loan and it was agreed by Mr. and Mrs. Monahan that it should *137be made. The latter, at her husband’s suggestion, temporarily borrowed $675 on her own note and turned out her savings bank book as collateral security for the loan; the money was handed to Whipple who gave mortgage notes for $800, which included a former loan of $125, and made the notes and a mortgage running to the defendant. A loan of $200 was made to Whipple the August following, making his entire debt $1,000. The orator and his wife took part in drafting the notes and the mortgage, which were placed in the drawer.
The orator was employed to foreclose a mortgage against one Agan, in 1897, but paid the debt himself and took new notes and a mortgage running to the defendant. The orator made or assisted in making all the papers relative to this transaction. The first of these notes and the first year’s interest upon the others were paid to him, and he temporarily used the other Agan note as security for the payment of money that he had occasion to borrow. When he paid the borrowed money he returned the notes to the drawer. The defendant did not know of this transaction until some months after it was made, but later pn without his father’s knowledge he had one of the notes and the mortgage with him in Boston. In the fall of 1899, in default of payment, this mortgage was foreclosed, but the suit was settled by Agan’s deeding the property to the defendant. The orator was several times solicited to sell this property, but he replied to applicants that it was his son’s and he would have to convey it. -
There was no agreement between the orator and his wife that she should have the salary received from the post-office, nor the fees for recording papers, nor for drawing legal documents, which service she often performed and received pay for.
*138The orator knew that his wife kept a bank account in her name and did not in any way interfere with her so1 doing. They and their son lived in entire harmony, and the parents were ágreed' in giving the son a good education in high schools, the University of Vermont, and the law school of Boston University.
The orator and the defendant never had any conversation between them respecting these securities until after Mrs. Monahan’s death.
In January, 1899, when the defendant was at home on a vacation, he took from the bureau the Whipple and Batch-elder notes and mortgages and one of the Agan notes and the mortgage and carried them to Boston, but after a time replaced them, with the exception of the Batchelder loan, in the drawer, where they remained until after his mother’s death, when he again took them into his possession and has retained them- ever since, though requested by the orator to return them. He had collected the Batchelder debt before his mother’s death.
None of this money was earned by Mrs. Monahan in any business carried on by her upon her separate account; her husband never gave her any money to . hold as her separate property, and it does not appear that he regarded any of the money that was from, time to time placed in the bureau as hers; on the contrary, the money derived from the various sources was not kept separate but was mixed together, and none of it came from the defendant.
I. Upon the findings it must be held that all the money in controversy was the orator’s. The fact that his wife assisted him in his business and in caring for the money which was the product of their joint labor did not make it her property. Even the $94 earned by her was the orator’s in the *139absence of a-n agreement between them that it should be hers. Potter v. Potter, 64 Vt., 298, 23 Atl. 856; Re Estate of Brown, 65 Vt. 331, 26 Atl. 638; Re Hall's Estate, 70 Vt. 458, 41 Atl. 508. The deposits of money in the savings bank by Mrs.. Monahan in her' name, in the circumstances stated by the master, did not change the ownership from her husband to-herself. These deposits were consistent with the manner in which the husband and wife transacted business and with the care which she took of the money that they earned together.
Cases cited" by the defendant, where the wife before and during coverture received property by gift or inheritance-which was regarded by her husband as her separate estate,, are not in point. While from such deposits the prima facie inference may be that a gift was intended by the husband to the wife, that inference may be rebutted and overcome byparol proof to the contrary, and a resulting trust arise in favor of the husband. Wallace v. Bowens, 28 Vt. 638; Bent v. Bent, 44 Vt. 555. This rule applies to the savings bank deposits, made in the wife’s name and to the fact of the mortgages and. the Agan deed being taken in the name of the defendant. Walston v. Smith, 70 Vt. 19, 39 Atl. 252.
It was held in Keniston v. Keniston, 56 Vt. 680, that “while courts of equity give full effect as between the parties, to gifts by husband to wife, they require clear and incontrovertible evidence to establish such gifts as a matter of intention and fact.” In that case the Court remarked that the-master had found neither a gift nor an intention to give. See McClusky v. Provident Institution for Savings, 103 Mass. 300.
II. The master finds that the orator thought he was. being taxed too high in Underhill; that the taxation was *140unjust, and that it was his intention not to be taxed upon these securities in that town. In the supplemental report it is stated that the orator’s intention was a personal one with reference to his not being taxed thereon, and that he did not intend that the defendant should not return said loans wherever the same ought to be legally taxed, but we consider that this does not change the original finding.
The orator’s testimony about the Whipple mortgage is reported as follows: “The listers, a year or two before that, had raised my list $400 ; it did not please me nor 'Mrs. Monahan; we rather thought it was unjust. Edward had just entered the Boston Law School, and I proposed that we take the mortgage in his name, setting him up as of Boston, Mass., that the listers would not attempt to place that mortgage in the list. It was done so.” He further stated that he caused the Batchelder and Agan mortgages and the Agan deed to be made running to' his son for the same purpose.
All of the property in controversy was taxable to' the orator in Underhill, and it was his legal duty to place it in his inventory each year after the securities were respectively taken. This he did not do; but caused them to be made payable to: the defendant, to prevent their being taxed to himself in that town. The defendant entered the Boston law school in October, 1896, but did not change his residence from- Underhill to Boston until April, 1899.
The orator claims in his bill that his acts in taking these securities in the defendant’s name created a resulting trust in the latter, and he prays the court to' declare it a trust and by its decree terminate it and order that the property be returned to the orator.
The question is whether or not the case falls within the general rules in equity, that the court will not enforce a trust *141springing out of the complainant’s own fraud; that a party will not be relieved from the consequences of his own fraud; that one who has conveyed property to defraud his creditors has not such an equity as will entitle him or his heirs to relief. 14 Am. and Eng. Ency., 2nd Ed., 275, 278. Peaslee v. Barney, 1 D. Chip. 331, 6 Am. Dec. 743. In the latter case it was held that it was not competent for an administrator to impeach and set aside an act done by his intestate in his life time in conveying his property to defraud his creditors.
It appears that there was no agreement or understanding between the orator and the defendant that the securities should be taken in the name of the latter; that the orator did not deliver nor intend to deliver the securities to' the defendant, and that the defendant took possession of them without the orator’s consent or knowledge and refused to return them when requested; that if the defendant had not appropriated them to his use the orator could at any time have taken them from the drawer and held them as his own property.
The essential allegations in the bill are that the securities were taken in the defendant’s name without his knowledge; that he held them in trust for the orator; that he surreptitiously took them into his possession and refused to surrender them. The prayer is that the securities may be declared to be held in trust by the defendant for the orator, and that the orator’s rights thereto may be enforced. The answer in substance is that the moneys that went into the securities were not the orator’s but were in part the defendant’s though mainly his mother’s, and that he acquired all his mother’s interest by her will which had been duly proved. No claim 1 of a fraudulent conveyance by the orator was made in the> answer. The issue made in the pleadings was in respect to the title to the property. A majority of the judges are there*142fore of the opinion that the case falls within the well settled rule in equity, that where a party is not required to disclose his fraud in making out his case, he can have relief if entitled to it upon grounds alleged and proved. This rule was adopted by Lord Mansfield in Hulman v. Johnson, Cowp, 343, where he said:
“The objection that a contract is immoral or illegal as between the plaintiff and the defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake that the objection is ever allowed, but it is founded 'on the general principles of policy, which the defendant has the advantage of contrary 'to the real justice between himself and the plaintiff.” In Simpson v. Bloss, 7 Taunt. 246, the Court also; recognized the test whether a demand connected with an illegal act can be enforced is whether the plaintiff requires aid from' the illegal transaction to establish his case. There the suit was brought to recover upon an illegal wager upon a horse race.
In Swan v. Scott, 11 Sergeant & Rawle, 155, the plaintiff obtained an award of arbitrators against the defendant, founded on an illegal lottery transaction, and afterwards, the defendant gave the plaintiff his bond in satisfaction of the award. In a suit brought upon the bond it was held that the defendant could not go beyond the award and show that the demand for which it was obtained originated in an illegal transaction. The Court said: “The test whether a demand connected with an illegal transaction is capable of being enforced at law, is whether the plaintiff requires the aid of the illegal transaction to establish his case. If the plaintiff cannot open his case without showing that he has broken the law, the Court will not assist him, whatever his ■claim in justice may be upon the defendant.” This test *143has been repeated in the following cases: Thomas v. Brady, 10 Barr, 170; Scott v. Duffy, 14 Pa. 20; Evans v. Dravo, 24 Pa. 65.
In Gilliam, Exr., v. Brown, 43 Miss. 641, a question was considered respecting a contract for carrying cotton through the enemy’s lines in time of war, which acts were in violation of the laws of the United States. In discussing the case the Court said: “It is well settled that after the
illegal contract has been executed, one party in possession of all the gains and profits resulting from the illicit traffic and transactions, will not be tolerated to interpose the objection that the business which produced the fund was in violation of law.”
It is observed in the opinion in that case that there has been an increasing tendency in Courts to treat the new promise as unconnected with the original contract so as to escape from the unjust consequences of the application of the general rule, that if a contract grows out of an illegal act a court of justice will not enforce it. The following cases are cited: Armstrong v. Tollar, 11 Wheat, 269; Craig v. Missouri, 4 Pet. 410; Roby v. West, 4 N. H. 290; Patterson v. Nicholas, 3 Wheat. 204; Wooten v. Miller, 7 S. & M. 385; Wheeler v. Russell, 17 Mass. 258; Sheffner v. Gordon, 12 East, 304; Brooks v. Martin, 2 Wall. 79; McBlair v. Gibbs, 17 How. 236; Tennant v. Elliot, 1 Bos. & Pul. 3; Turner v. Russell, 2 Bos. and Pul. 296.
In commenting upon these cases the Court said in conclusion : “Whilst affording this relief the Courts are not obnoxious to the imputation of giving effect to illegal contracts or encouraging immoral acts. In all these cases the violation of law has already been accomplished, and one party is found in possession of money which belongs to another, and no *144detriment can arise further by raising an assumpsit to pay it over to the principal.”
In Phalen v. Clark, 19 Conn. 421, the facts were as follows : The plaintiff being the assignee of a lottery granted by the State of Rhode Island and the proprietor of all the tickets in the lottery not sold at the time of drawing, entrusted the defendant, who was residing at Hartford, Conn., and then was and for a long time had been the agent of the plaintiff for the sale of tickets, with a large number of tickets to sell or return. At the time of the drawing of the lottery one of the tickets so held by the defendant drew a prize of $30,000. By a fraudulent combination with one Pinney the defendant obtained information of that fact in advance of the mail, -and in his return of sales the plaintiff included such prize ticket as having been sold to Pinney before the drawing. The defendant and Pinney afterwards caused this ticket to be presented to the plaintiff for payment of the prize, representing Pinney as the bona fide owner thereof, and the plaintiff, being ignorant of the fraud, paid the prize. On a bill in chancery brought by the plaintiff against the defendant and Pinney to recover back the money so paid it was held that the agency of the defendant to sell terminated with the drawing of the lottery, and that he thereupon became a mere depositary; that the fraudulent combination between the defendant and Pinney and the consequent injury to the plaintiff were entirely independent of any act in which the plaintiff had participated, prohibited by the laws of Connecticut, and consequently that the plaintiff was not precluded from a recovery on the ground of his being in pari delicto.
In the opinion the Court remarked: “We suppose it to be a well settled doctrine, that, if a plaintiff requires any aid from an illegal transaction to establish his demand, he *145cannot recover it; or in other words, if he is unable to support it without relying upon an unlawful agreement between himself and the defendant, he must fail. But if the parties have been engaged in business, either mailum in se., or merely prohibited by law, yet if the cause of action be unconnected with the illegal act, and is founded upon a distinct and collateral consideration it will not be affected by their former unlawful conduct.”
Feret v. Hill, 80 Eng. Com. Law, 207, is in point. There the plaintiff obtained of the defendant a lease of premises by means of a false representation that he intended to- carry on a lawful trade therein. Having obtained possession, the plaintiff converted them to an illegal use, and the defendant forcibly expelled him. It was held that the plaintiff might maintain ejectment; that the fraudulent misrepresentation and the subsequent illegal use of the premises were not sufficient in law to avoid the lease. In the opinion it was said: “The plaintiff is not calling upon the Court to1 enforce any agreement at all. The agreement was an agreement on the part of the defendant to demise certain premises to the plaintiff for a given term., When the instrument was executed, and possession was given under it, it received its full effect: no aid of a court of justice was required to enforce it. This action of ejectment is brought, not for the purpose of enforcing the agreement, but the plaintiff asks the Court to1 afford him a remedy against one who has extruded him from a lawful possession. There is therefore a manifest distinction between this case and those where the Court was called upon to assist the plaintiff in enforcing an agreement, the object of which was to do an illegal act, as in Ritchie v. Smith. In that case both the plaintiff and defendant were parties to an agreement, the very object and intention of which was, to enable one of them to commit an infraction of the law.”
*146In Taylor v. Bowers, i Queen’s Bench 291, the plaintiff being in embarrassed circumstances, pursuant to an agreement with another person, delivered his entire stock in trade to that person and took back fictitious bills of exchange. An inventory of the goods was given, but no bill of sale was executed. The object of the transaction was to prevent the plaintiff’s creditors from getting their pay in full. The defendant was a creditor of the plaintiff and was cognizant of the arrangement between him and the other person, who, some months later, executed a bill of sale of the goods h> the defendant for the alleged purpose of securing his debt. But the plaintiff was not a party to the bill of sale, nor did he sanction or know of it. He afterwards demanded the goods and then brought suit. It was held that the fraudulent purpose not having been carried out, the plaintiff was not relying upon the illegal transaction, and was entitled to^ repudiate it and recover his goods; that the defendant got no title because he had knowledge of the original transaction. Cockburn, C. J., in the opinion said: “The action is not founded upon the illegal agreement, nor brought toi enforce it, but, on the contrary, the plaintiff has repudiated the agreement, and his action is founded on that repudiation.” He cited several cases where money had been paid, and goods delivered, under an unlawful agreement, but there having been no further performance of it, it was held that the party paying the money or delivering the goods might repudiate the transaction and recover his money or goods. The judgment was affirmed in the Court of Appeals. James, L. J., remarked: “All the plaintiff has got to say is: ‘These were my goods. I was possessed of them. I have never parted with them to anybody. They are my goods still. I never sold them, and I have never given them to anybody in such a way as to *147deprive myself of the right to possession of them.’ It is the defendant who has got really to show the fraud.”
Taylor v. Chester appears in 6 Eng. Rul. Cas. 477, and the rule is formulated therefrom that: “Where money has been paid under an illegal contract the question whether it can be recovered back depends on whether the parties are in pari delicto; and the test is whether the plaintiff can make out his case otherwise than through the medium! and by the aid of the illegal transaction to which he himself was a party.” Following that case is Diggle v. Higgs, from 46 L. J. Ex. 721-725, where it was held that: “The deposit of a sum of money by two persons in the hands of a third, to abide the event of an unlawful game between the two, is a wager, and not ‘a subscription or contribution to a prize’ within 8 & 9 Viet. c. 109, s. 18. Such a deposit may be recovered by the depositor from the stakeholder, if demanded, before it is paid over to the winner.”
In the latter case the rule is stated that, “But where money has been paid to a stakeholder upon a wagering agreement which is void, but not illegal, by statute, it may be recovered back if demanded before it is paid over to1 the winner.”
Elaborate notes follow these cases and in the English notes it is stated that the principle in Taylor v. Chester underlies those cases where property has been conveyed or given for an immoral consideration; and that if the illegal act has been substantially executed the consideration is irrevocable; but where the illegal act remains unexecuted, the consideration paid for it may be recovered. In the American notes to these cases it is said that in this country as in England, the law leaves parties to an executed illegal contract, when equally in fault, to their fate, and therefore will not sustain an action to recover money paid, or goods or lands delivered under *148such a contract; and numerous cases are cited. In the same notes it is declared that the doctrine of Diggle v. Higgs is supported by a multitude of cases, and is the universal doctrine of the American Courts.
The doctrine in Taylor v. Bowers is approved in Spring Co. v. Knowlton, 103 U. S. 49, where it is held that a party to a contract, the making of which although prohibited by law, is not malum, in se, may, while it remains executory, rescind it and recover money by him advanced thereon tó the other party who> had performed no part thereof. Upon this subject are cited 2 C'omyn on Contracts 361; 2 Parsons, 746; 2 Addison, § 1412; Chitty, 944; 2 Story, § 617; 2 Greenl. Ev. § 111.
The cases above cited, and most of those to be found in the books bearing upon this subject, have arisen upon contracts, and the parties seeking relief were in pari delicto with the defendants in the illegal contracts. But here neither the issue made by the bill and answer nor the facts reported by the master present a case arising from contract. But the rule is as applicable to> this case as it is to cases arising from contracts, for the orator could prove the essential facts in his case without disclosing his fraudulent purpose in having the notes, mortgages and deed made running to the defendant.
The pro forma decree is affirmed, and cause remanded.