Donley v. Tindall , 32 Tex. 43 ( 1869 )

Hamilton, J.

In this and other cases now pending in this court in .which suits were brought upon written obligations for money, without specifying either coin or currency, the defense has been interposed that the real undertaking was to pay in Confederate money, or that the consideration for which the obligation was given was for the obligations of the Confederate States, usually called Confederate money. There would be no difficulty in the expression by the court of a unanimous opinion if the facts pleaded in the several cases appeared upon the obligations sued on. There is, however, a difference of opinion as to tlie admissibility of such a plea, and. of parol proof to sustain it.

The rule contended for by Mr. Justice Lindsey is, I think, too stringent, even in its application to written obligations legal in their character, and altogether untenable when the contract is illegal.

There can be no controversy as to the general principle of the admissibility of extrinsic evidence to explain written instruments. The uncertainty and ambiguity of wills have furnished a vast number of examples of the necessity of resorting to this rule for their true interpretation.

Wigram on Extr. Ev., 59, lays down this proposition, as deduced from the English cases: “ Every claimant under a will has a right to recpiire that a court of construction, in the execution of its office, shall, by means of extrinsic evidence, place itself in the situation of the testator, the meaning of whose language it is called upon to declareand in the preceding page says: “ there seems to be no material distinction between wills and other instruments in this respect.” This principle applies also in case of uncertainty as to the subject or object of a deed, as, for example, where an estate is conveyed by a particular name, there must be evidence to show what land is known by the name used.

The general rule that all parol agreements and negotiations touching the subject matter of a written contract between the parties, anterior to or cotemporaneous with the execution of the instrument, are to be regarded as merged in it, is admitted.

But the case under consideration furnishes, I think, by long and well established authority, a notable exception to this general rule. There is no difficulty in understanding the reason why the general rule does not apply to subsequent agreements by parole changing or varying the terms of the written contract; they are not within the rule because they did not exist at the time the written contract was entered into, and therefore could not be included; the law regarding the written instrument as embracing the entire contract as understood at the moment of its execution. But this is only predicated of contracts legal in their character, and the rule cannot be invoked to cover, protect, enforce or give effect by judicial sanction to such contracts as may be shown by extrinsic evidence to have been entered into contrary to public policy, to public morals, or other cause which, if expressed upon their face, would stamp them with illegality.

In Cowen & Hill’s Notes to Phil. Ev., part 2, note 304, it is said: “ The rule confining the operation of parol evidence within the limits of strict exposition or interpretation assumes that the instrument has a legal existence and is valid.” “ Testimony, to show it to be void, is always pertinent, no matter who are the parties or in what court the question arises.” “ Deeds, however, can not be avoided on all the grounds which apply to simple contracts. Hence, what might be a relevant enquiry as to the latter would not necessarily be in respect to .the former. But in regard to illegality of consideration, both will usually be found to stand upon the same footing in this particular.”

It is not my purpose (because it is not necessary in this ease) to discuss the correctness of the proposition with respect to deeds. There are, however, a number of respectable authorities in its support. In the case of Dale v. Rosevelt, 9 Cowen R., 310, a deed was avoided upon proof that the consideration ivas simonical; and in other cases where the consideration was the sale of an office; money won at play; or generally for anything either mala in se, mala prohibita, contrary to public policy, etc., etc.

So it was expressly held in the case of Phelps v. Decker, 10 Mass., 274. In that case it was broadly laid down “ that by the common law deeds of conveyance or other deeds made contrary to the provisions of a general statute, or for an unlawful consideration, or to carry into effect a contract unlawful in itself, or in consequence of any prohibitory statute, are void ab initio, and may be avoided by plea; or on the general issue non e<>t faction the illegality may be given in evidence.”

But this in a later case (11 Mass. R., p. 315) has been overruled, and the position assumed that a deed of conveyance could not, as such, be avoided by a party on the ground of having been made in consideration of a felony having been compounded. But the distinction is clearly drawn between bonds and contracts sought to he enforced and actual conveyances of lands or other property.

It is admitted that the former may be avoided, but the latter, it is said, “ are to be treated in all cases as actual transfers, so far as the immediate parties are concerned, and governed by the same rule a.s the payment of money or the delivery of a chattel.”

That this case lays down the correct rule I am well satisfied. The principle inflexibly observed in such cases is that courts will neither aid in the execution of an illegal executory contract nor relieve a party who lias executed it. A deed is not a bond or simple contract which remains to be executed, but is a thing done, and when done contrary to the prohibitions of the law, or when it consummates an illegal contract, the law leaves the party executing it to the consequences of his illegal act. And for this very reason it is that courts will permit the defense of illegality to be made; not certainly for the purpose of aiding or benefiting the defendant, but because they will not be instruments in their execution.

In the case of the Inhabitants of Worcester v. Eaton, 31 Mass., just referred to, the court, after reviewing at considerable length the English authorities upon the subject, state the result in this language: “ It appears, then, to be the settled law in England, and we are satisfied that it is also the law here, that where two parties agree in violating the laws of the land, the courts will not entertain the claim of either party against the other for the fruits of such an unlawful bargain. If one holds the obligation or promise of the other to pay him money, or do any other valuable act, on account of such illegal transaction, the party defendant may expose the nature of the transaction to the courts and the law will say, ‘ our forms and rules are established to protect the innocent and to vindicate the injured, not to aid offenders in the execution of their unjust projects;’ and if the party who has foolishly paid his money repents his folly and brings his action to recover it back, the same law will say to him, 'you have paid the price of your wickedness, and you must not have the aid of the law to rid you of an inconvenience which is a suitable punishment of your offense.’ ”

The law and the courts which administer it are entirely indifferent as to which of the parties to an illegal contract is the loser—one or both, it matters nothing. If it be a suit to recover money paid, a chattel delivered, or real property conveyed by deed, upon an illegal consideration, the rule is the same as if the contract had been executory and the action was to compel payment, delivery or conveyance; in either case the halls of justice are closed to such a litigant. This view of the question, it seems, is not satisfactory to some very able and very just minds, because it permits a party to plead his own wrong or infamy, as the case may be, and thereby obtain an unconscientious advantage over his adversary, from whom, perhaps, he has received some valuable consideration for the execution of the instrument, the payment of which he resists. This is undoubtedly true; but it is equally true that the law does not undertake in such cases to settle any question of conscience as between the parties. The courts are called upon to perform a higher duty than to settle questions of honor between wrongdoers; they are to protect society from the influence of contracts made in disregard of morality—-the public weal from suffering detriment on account of obligations executed in violation of law; and -to sustain, defend and protect the Government in its full integrity against any agreement, undertaking or promise, which is founded in whole or in part upon or in consideration of anything which expressly or impliedly, or directly or indirectly, d&nies its full and complete authority as sovereign over this and all the other States of the Union. The parties to such a contract are presumed in law to know its character when they enter into it. If they speculate upon the chances of the failure of the Government whose laws they disregard and whose authority they contemn, they must now learn at least the law can not respect that which is illegal, and that courts will never give effect to a contract which looks, however remotely or contingently, to the destruction of the Government.

This character of case is very unlike that in which a party seeks to recover back property, or to evade the payment of money, which was conveyed or promised fraudulently as to creditors. In the latter case there is no violation of law in the act itself; that is to say, the contract is not illegal as between the parties, but only as to creditors, who may take advantage of it.

The thing conveyed or promised is legally the subject of contract, and whether with or without consideration may be sold or promised, and when the question of recovering back property thus conveyed or resisting the payment of money promised is raised, the party who conveyed or promised will not be heard to plead Ms intention to defraud his creditors. Society has no interest in protecting him against his intended fraud upon his creditors, but the very reverse, and so the rule is that he shall not be permitted to deny his act.

The difference is that in the one case the subject matter of the contract is illegal, and the contract can not, therefore, be enforced; whereas in the other the subject matter is legal^ and the contract enforced as a penalty for an intended fraud upon third parties.

How it is admitted by those who differ with me on this question that if the character of the agreement as pleaded appeared upon the face of the instrument, there could be no question in that case of its, viciousness and condemnation. I have stated the general rule to be that the operation of parol evidence in cases of written contracts is confined within the strict limits of exposition or interpretation, but have at the same time shown that this rule is based upon the assumption that the instrument has a legal existence, and is valid. This position will he found most amply sustained in the following-cases : Mann v. Eckford’s Executors, 15 Wendall, 518; Parker v. Parmalee, 20 John R., 134; Vrooman v. Phelps, 2 John R. 177; Paxton v. Popham, 9 East., 408. See also the authorities to which these decisions refer.

This is also the rule laid down in 1 Story on Contracts. § 541.

These authorities, in deciding that the real nature of the transaction may be shown, as it respects the parties to the contract, applies only where the contract is in some way sought to be enforced, or while it remains executory. £í A party to an illegal transaction is not allowed by the allegation of his own turpitude to recover back what, in pursuance of a forbidden bargain, he has delivered to the other party, or in any way to avoid the bargain when once executed; ” to such cases the maxim in pari delicto portio est conditio defendentis et possidentis applies.

These authorities from the ablest elementary authors, and opinions in numerous cases by courts of the highest character, are not, so far as I have seen, seriously controverted anywhere, and I must regard their exposition of the law upon the question as the true one.

Mr. Justice Lindsay, in his opinion in this case, has made reference to the seventh section of Ordinance Mo. 11 of the Convention of 1866, which he supposes is relied on by the defendants below to authorize the plea of illegality. The section provides that “ in all suits now pending, or that may be hereafter instituted, upon contracts in writing made since the 2d day of March, 1861, and prior to the 2d day of July, 1865, payable in a dollars and cents,’ parol testimony may be introduced to show that dollars in Confederate or other paper currency were intended, and the marketable value thereof at the time of maturity; and the same rule shall obtain when such currency was the consideration of a contract which is otherwise valid."

I do not know how far the defendants below relied upon this section of the ordinance to support the plea; but this I do know, that it is entirely without reference to this ordinance or any part of it that I regard the plea as good; and I agree with my learned brother that the section quoted is in its letter and purpose in conflict with the constitution and laws of the United States, but I can not concur in his view of the particular provision of the constitution with which it conflicts, to wit: the last clause of the tenth section of the first article, which, among other things, prohibits the States from passing any "law impairing the obligation of contracts.” It must be admitted that his view of the constitutional objection is consistent with the position which he maintains of the legality of the contract sued on against all extrinsic proof.

It is impossible to know what was in the mind of the Convention precisely; but I think it may be assumed that they intended, as tar as they had the power, to authorize the fact of Confederate money as the consideration of the contract or its payment in discharge of an obligation to be pleaded, and its value to be assessed at the time of maturity, etc.; and that the efiect of this should be to limit the recovery to its value in current money. Of course, if my learned brother be right, then this authority to plead the fact would be repugnant to the constitutional provision to which he has referred, provided the rule of construction for which he contends touching the validity of the instrument is itself under the protection of the constitution, so that it can not be changed or in any manner altered. The view which I have taken of the case avoids this latter inquiry. I regard legal contracts, and none others, as being the subjects of protection under the constitution of the United States from State interference, and cannot conceive that an illegal and void contract can either be protected by the one or impaired by the other. The seventh section of the ordinance is in conflict with the constitution because it assumes to give validity to illegcd contracts, not because it seeks to impair those that are valid, and because it. seeks to give value to the promises of a confederation of States entered into in hostility to the national authority and for its final overthrow, which promises were illegal and treasonable in their character, and are not susceptible of being validated by any power in the (rovermnent.

The judgment is affirmed.