Court Opinion

ID: 8188669
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:11:30.877917+00
Date Added: 2024-06-11T16:40:31.355107
License: Public Domain

Winslow, J.
The general question presented is whether a transaction such as is alleged in the proposed amended answer is contrary to public policy. The plaintiff owned a valid patent upon a small device designed for use upon buggies and carriages which was of some utility. It was perfectly competent for the plaintiff to sell an exclusive right to wend the device in a given county and take a note therefor, and such note would be valid and enforceable in full (in the *323absence of fraud), notwithstanding the fact that the value of the right sold might be greatly overestimated. A valid patent on a useful article is a sufficient consideration for a note, though the patent may never be profitable. It was also competent for the plaintiff to agree with the defendant that, in case defendant induced others to purchase county rights of sale, he should receive as his compensation a specified part of the purchase price of such rights so purchased. Upon its face the written contract entered into between the parties went little, if any, further than to provide for these two things, and, if the proposed defense were based upon the written contract alone, we should entertain no doubt of the correctness of the judgment. The written contract is similar in most of its essential features to the agency contract involved in the case of J. H. Clark Co. v. Rice, 127 Wis. 451, 106 N. W. 231. In that case, however, the defendant stood upon the written contract, while in the present case an entirely different defense was proposed. By his amended answer he proposed to set up a defense substantially as follows: That the written contract, while containing some of the conditions •of the real arrangement made, was largely a mere cover executed to give appearance of fairness and legality to the arrangement; that neither party contemplated that the right to .sell the device in Gates county was of any real commercial value, or that the defendant would make any effort to make such sales; that the real arrangement was a joint scheme to ■make money by selling similar nominal territorial rights to ■others who should also become parties to the scheme and sell similar territorial rights to still others, and so on — the idea being that fhe process should go on in constantly broadening ■circles as long as purchasers could be found who were foolish ■enough to buy, and thus necessarily leave the ultimate purchasers with nothing to show for' their money or notes save the practically worthless right to sell the patented device in some backwoods county.
*324We axe unable to regard such a project as a legitimate business enterprise. How large would be tbe number of purchasers wbo would be induced by tbe prospect of large returns for little labor to join tbe scheme it is impossible to say or even speculate. Each purchaser would be desirous to get back at least as much as be bad invested. In order to do this, tbe first purchaser under tbe most favorable circumstances would have to sell rights aggregating $1,000, tbe second purchaser would have to sell rights aggregating $2,000, and thus the necessity of finding victims would increase in geometrical progression until tbe purchasers wbo are in tbe tenth place from tbe original purchasers'must, in order merely to reimburse themselves, find others who would pay more than half a million dollars. Of course, it is not likely that the scheme would last so long as this, but, however long it lasts, it will infallibly leave a greater or less crowd of dupes at the end with no opportunity to recoup their losses because the bubble' has at last burst. It contemplates an endless chain of purchasers, or, rather, a series of constantly multiplying endless-chains, with nothing but fading rainbows as the reward of' those who are unfortunate enough to become purchasers the-moment before the collapse of the scheme. While contemplating large gains to the original promoters and early purchasers, it necessarily contemplates losses to the later purchasers ; losses increasing in number with the greater success-of the scheme. According to the allegations of the answer it was not an arrangement to sell patent couplings, nor even an arrangement to sell territorial rights in the patent, but an arrangement to become partners in an enterprise which under the form of selling territorial rights contemplated only the obtaining of easy money from others who were to be induced to pay in their money under the golden prospect of like recoupment from still others, until the mine was exhausted.
Such an enterprise we regard as contrary to public policy and void. Any contract which contemplates or necessarily *325involves tbe defrauding or victimizing of third persons as its ultimate result must be contra bonos mores. Greenhood, Pub. Pol. 152. In its essential.features it is not to be distinguished from the Bohemian Oats Cases or the Coupon Cases, where similar endless chains have been vigorously condemned by the courts. McNamara v. Gargett, 68 Mich. 454, 36 N. W. 218; Davis v. Seeley, 71 Mich. 209, 38 N. W. 901; Merrill v. Packer, 80 Iowa, 542, 45 N. W. 1076; Schmueckle v. Waters, 125 Ind. 265, 25 N. E. 281; Shirey v. Ulsh, 2 Ohio Cir. Ct. 401; Hubbard v. Freiberger, 133 Mich. 139, 94 N. W. 727; Bonisteel v. Saylor, 17 Ont. App. 505. Nor does it avail to say that the patented article was of some utility and value, inasmuch as under the allegations of the proposed answer it is alleged that the right to sell the patented couplings was of merely nominal commercial value on account of the great number of equally useful devices of the same nature, and was not considered in the transaction except as a means of giving it an appearance of validity and honesty. It goes without saying that, if the actual agreement between the parties was such as is in the amended answer set forth and was an agreement against public policy, the parties cannot, by reducing •some unobjectionable parts of it to writing, prevent the reception of parol evidence to show the entire agreement, although it may be inconsistent with the written paper. The rule prohibiting the introduction of parol contemporaneous agreements to contradict or vary a written agreement has no .application to such a situation. It may always be shown by parol that a written contract was made in furtherance of an illegal purpose or object. 1 Elliott, Ev. § 591.
It follows from these considerations that the proposed amended answer stated a defense and should have been allowed.
By the Court. — -Judgment reversed, and action remanded for a new trial.