Jones v. Hanna

Paterson, J.

The findings show that the defendant Hanna, while acting as executrix of the last will of Peter N. Hanna, deceased, procured an order of sale of personal property belonging to the estate. On the day of the sale she entered into an agreement with the plaintiffs that they should buy the property offered for sale “for her account and risk,” and advance the purchase price; that she would pay them two and one half per cent commission on the amount of the purchase, and five per cent on the amount of sales they might thereafter make. She further agreed to “ guarantee them against loss or damage,” give them possession of the goods until other security was furnished, and pay them interest on the amount advanced at the rate of nine per cent per annum. In pursuance of this agreement the plaintiffs purchased the goods for her benefit, using the name of one Haynes as purchaser. Plaintiffs thereupon removed the property from the place of sale to defendant Hanna’s store, and began to sell the same for her benefit.

On the thirteenth day of September, 1883, and while the greater portion of the personal property so purchased was at the Olay Street store undisposed of, plaintiffs required of the defendant Mary L. Hanna security under the agreement of September 6, 1883, and thereupon she made and executed her promissory note for ten thousand dollars, and procured the defendant William Bihler to indorse it, and thereafter to deliver it to the plaintiffs.

After adding to the figures $29,957, — the amount paid for the goods and advanced by plaintiffs, — the commissions of plaintiffs in purchasing and selling the property, and interest on the advances, and deducting therefrom the proceeds, less the expenses of making the sales, a balance remained due the plaintiffs of $9,281.49. Upon the surrender of the prior note, the defendant Hanna made, executed, and delivered the note in controversy, indorsed by the defendant Bihler, who had full notice of all the facts.

The court found that “plaintiffs had actual knowledge and notice before and at the time of the execution of the agreement of September 6, 1883, that the defendant Mary L. Hanna was the duly appointed, qualified, and acting executrix of said estate, and that the object and purpose of making the said agreements and transactions was to realize as large a sum as possible for the estate, and also to make a profit to herself out of the personal property to be bought in, and which was actually bought in, at said sale.”

Judgment was entered in favor of the plaintiff, and the defendant Bihler has appealed on the judgment roll-alone.

Upon the facts stated, the judgment is erroneous, and must be reversed. The contract out of which this transaction arose is unlawful and void,—void because it is in aid of an act expressly prohibited by law, and because it is contrary to the policy of express law.

Section 1576 of the Code of Civil Procedure provides: “Ho executor or administrator must, directly or indirectly, purchase any property of the estate he represents, nor must he be interested in any sale.”

It is a universal rule that courts will not aid parties in the enforcement of contracts thus interdicted by the law.

Our code provides: “ That is not lawful which is,— 1. Contrary to an express provision of law; 2. Contrary to the policy of express law, though not expressly prohibited; or 3. Otherwise contrary to good morals.” (Civ. Code, sec. 1167.)

Wharton says that “a contract whose object is to violate a statute will not be enforced by the courts of the state by which the statute was enacted.....A party who goes into an illegal enterprise risks all he puts in, and cannot, in case of his confederates proving untrue or the adventure miscarrying, recover back his advances.” ' (Wharton on Contracts, secs. 354, 360.)

Here all the parties went into the transaction with their eyes open. The plaintiffs expected a share in the profits of a scheme prohibited by law. As said in Bowers v. Bowers, 26 Pa. St. 74: “The question here is not upon the legality of the administration, but upon the sufficiency of the consideration for the defendant’s promise; and as that, in its very nature, endangered the purity of the trust, the law will not sanction it.” The contract upon which the note in suit is based was made for the benefit of Mrs. Hanna and plaintiffs, although the court finds that it was made “to realize as large a sum as possible for the estate.” The result to the estate in any particular transaction is immaterial. The rule is one of universal application; it is founded upon public policy, and should be rigidly enforced by courts, because it “stands upon our great moral obligation to refrain from placing ourselves in relations which ordinarily excite a conflict between self-interest and integrity.” (Michoud v. Giroud, 4 How. 555. See also the following authorities: Danielwitz v. Sheppard, 62 Cal. 339; Swanger v. Mayberry, 59 Cal. 91; Edwards v. Estell, 48 Cal. 194; Gardner v. Tatum, ante, p. 370; Porter v. Jones, 52 Mo. 399; Saltmarsh v. Beene, 4 Port. 283; 30 Am. Dec. 525; Blasdel v. Towle, 120 Mass. 447; Ohio L. I. & T. Co. v. M. I. & T. Co., 11 Humph. 1; 53 Am. Dec. 742; Slocum v. Wooley, 43 N. J. Eq. 451; Dillon v. Allen, 46 Iowa, 299; 26 Am. Rep. 145; Bowers v. Bowers, 26 Pa. St. 74; 67 Am. Dec. 398.) The question involved is much broader than those raised in the cases to set aside probate sales and enforce trusts relied on by respondent.

Plaintiffs’ contention, that defendant . Bihler is estopped under section 3116 of the Civil Code from taking advantage of the facts relied upon, cannot be sanctioned. The respondents did not take the note without notice, and they are not bona fide holders. Section 3116 of the Civil Code has not added any new liability of an indorser,— certainly not in favor of those who are not bona fide holders. The note in suit was given in pursuance of the original and unlawful contract; it is “the other security” referred to in the written agreement. Under such circumstances any defense which the maker might make may be urged by the indorser. (Davis v. Seeley, 38 N. W. Rep. 901; Smith v. Silsby, 55 Cal. 470; 3 Kent’s Com. *80; 1 Daniel on Negotiable Instruments, sec. 164.)

There are other points made by respondents, but we do not deem it necessary to consider them in this opinion.

Judgment reversed, and cause remanded, with directions to enter judgment in favor of defendant.

Sharpstein, J., Works, J., Fox, J., and Beatty, 0. J., concurred.