Baird v. Howison

ANDERSON, J.

Regardless of the status of the parties prior to the execution of the transfer dated December 15, 1.899, the complainant by said transfer recognized the property as belonging to Howison, and thereby released all claim or interest that he may have had in same, and must therefore rely upon the letter exhibited to him by Lavender, when he excuted the transfer, for the purpose of fixing any claim or trust upon the property in his favor. The letter was contemporaneous with the transfer, and the two documents formed but parts of the same transaction; and, conceding that the letter created a trust in favor of Baird to one-half of the propertv after Howison was paid all money expended by Mm, with interest, and all money advanced to the complainant, it must fail, because the transfer Aims made to hinder and defraud the creditors of Baird, and the fraud aves participated in by both parties to the contract. There can be but little doubt that the transfer Avas made to defraud the creditors of Baird. Howison testified that Baird told him they Avere after him, and in the letter to Lavender is this expression: “Go to Braehead, and take inclosed lease from the University, and get him to turn it over to me as my agent, and date it back to Avithin 20 or 30 days after the lease Avas executed. His creditors are going to make an effort to reach Mm at Brahead.” The letter containing this expression Avas exhibited to the complainant at the time he made the transfer, and is the document upon Avhich he must rely to establish any claim in or to the property. Lavender testified that Baird came to see him on Sunday, before he heard from Howison, and told him he Avished to make the property over, as his creditors Avere after him. He Avas eager to make it without delay, and wanted to do so that day, but Avas advised by Lavender to meet hifii at Blocton the next day, as it avouIc! not be valid if made on Sunday.

It is true the complainant attempts to shoAv Ms solvency, but upon cross-examination virtually admits that he was insolvent, and that there was a judgment against him; and the conclusion is almost irresistible that he made the transfer in order to hinder' and defraud his creditors. The transfer having been made for a fraudulent purpose, and the fraud having been participated in by both parties, a court of equity will leave them to the consequences of their misdeeds. The maxim applies, “In’ pari delicto, melior est conditio possidentis.”— Brantley v. West, 27 Ala. 542; Smith v. Johnson, 37 Ala. 633; Clark v. Colbert, 67 Ala. 92; Barnes v. Starr, 64 Conn. 136, 28 Atl. 980; 1 Pom. Eq. 398, 404; 9 Cyc. 546; Cadmen v. Homer, 18 Ves. 11. “The rule just quoted, that he who comes into equity must come with clean hands, is a broad one. It includes within its operation several other maxims, frequently acted upon in courts of equity, as ‘Ex turpi causa non actio oritur;’ ‘ex dolo malo non oritur actio;’ ‘jus ex injuria non oritur;’ ‘in pari delicto, portior eat conditio defendentis.’ The fundamental reason upon which each of these maxims seem to rest is that a party does not come into court with clean hands to whose cause either of these maxims may be justly applied.” And again the court says: “A very numerous class of cases within the same equitable doctrine is where the contract or other act is substantially a fraud upon the rights, interests, or intentions of third persons. In a case of this kind relief is refused to a plaintiff on the ground that he does not come into court with clean hands. The general rule is that parties to a contract must act, not only bona fide between themselves, but that they shall not act mala fide in respect to other persons who stand in such relation to either as to be affected by the contract or its consequences.” — Barnes v. Starr, supra; Pom. Eq. § 881; Lord Hardwicke, in Chesterfield v. Jansen, 2 Ves. Sr. 156-157. Says the court in the case of Clemens v. Clemens, 28 Wis. 637, 9 Am. Rep. 531: “The principle or policy of the law, therefore, is to reject the suit of and reprove the plaintiff for his wrong, not to reward the defendant. The plaintiff must be punished, even though it may be at the expense of allowing the defendant, an equally guilty party, to obtain most unjust and unfair advantage for himself. The suit of the party, compelled to seek the aid of the court in order to obtain the fruits of his owm fraud or wrong, must be dismissed, although it may result in unjustly giving to the other equally culpable party the entire benefit of them.”

It is contended by appellant that fraud is not available as a defense to this bill, because not properly raised in the lower court. It is true that, as a general rule, fraud, the statute of frauds, estoppel, and defenses of that character, must be set up by plea or answer, unless the infirmity appears on the face of the pleading, when it can be raised by demurrer. — Jones v. Peebles, 130 Ala. 269, 30 South. 564: Shakespeare v. Alba, 76 Ala. 351. So, too, has it been held that fraudulent conveyances are binding inter partes, but void as to creditors and purchasers. There is a line of decisions holding that, where parties seek the enforcement of contracts viola five of the law, contrary to public policy or founded upon an illegal or immoral consideration, and the fact appears from the evidence, whether pleaded or not as a special defense, the court will of its own motion refuse to enforce such an agreement, even should both parties consent to its enforcement. — Wilde v. Wilde, 37 Neb. 891, 56 N. W. 724. In the case of Hall v. Coppell, 7 Wall. 558, 19 L. Ed. 244, the Supreme Court of the United States uses this language: “The instruction given to the jury, that if the contract was illegal the illegality has been waived by the reconventional demand of the defendant, was founded upon a misconception of the law. In such case there can be no waiver. The defense is allowed, not for the sake of the defendant, but of the law itself. The principle is indispensable to the purity of its administration. It Avill not enforce Avhat it has forbidden and denounced. The maxim, ‘Ex dolo malo non oritur actio/ is limited by no such qualification. The proposition, to the contrary, strikes us as hardly worthy of serious refutation. Whenever the illegality appears, Avhether the evidence comes from the one side or the other, the disclosure is fatal to tlie case. No consent of the defendant can neutralize its effect. A stipulation in the most solemn form to waive the objection would be attended with the vice of the original contract and void for the same reason. Wherever 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 upon its violation.” — Morck v. Abel, 3 Bos. & P. 35; Armstrong v. Toler, 11 Wheat. 258, 6 L. Ed. 468; Collins v. Blanterm, 1 Smith’s Leading Cases, 630, and notes. The last cases were cited with approval by our court in the case of Boyd v. Barclay, 1 Ala. 34, 34 Am. Dec. 762.

There are cases in which our court has held that fraud can be waived as a defense; but those cases were where the parties were not in pari delicto and the fraud was not of such a character as to render the transaction void or violative of the law. Section 2156 of the Code of 1896 pronounces void all contracts made to hinder or defraud creditors; and section 4756 makes such conveyances a criminal offense. Of course, such contracts are valid inter partes, as the parties cannot resort to- law to release themselves from the result of their own misconduct. Nor will the courts enforce such contracts at the instance of a party who has participated in the fraudulent transaction. — Glover v. Walker, 107 Ala. 540, 18 South. 251; May v. May, 33 Ala. 205; King v. King, 61 Ala. 479. We do not wish to be understood as holding that in certain instances and under certain circumstances fraud as a defense need not be specially pleaded; but we do hold that, where a party resorts to a court of equity to euforce a right growing out of a contract which is fraudulent and void and as to -which the parties are in pari delicto, the court will deny relief when the fraud is discovered from the evidence, whether specially pleaded or not.

The decree of the chancery court is affirmed.

Affirmed.

Tyson, O. J., and Simpson and Denson, JJ., concur.