Veazey v. . Allen

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Before proceeding to discuss the question whether the contract, under which the plaintiff makes his claim, is void as being repugnant to public policy, it may be well to fix the point of view from which it is to be considered. The learned counsel for the appellant asserts that it makes a vital difference in the case whether the referee's decision is to be regarded as a determination upon the merits, or whether it is to be treated simply as a nonsuit. It appears that after the plaintiff had rested his case, counsel for the defendants moved for a dismissal of the complaint on various grounds, one of them being that the contract testified to by the plaintiff was void as against public policy. After this motion had been made and discussed, the referee twice adjourned the further hearing of the case, when he made his decision in the short form, in which he finds and decides "that the defendants are entitled to judgment herein against the plaintiff dismissing the plaintiff's complaint," and directs judgment accordingly, "upon the ground that each of the agreements set forth in the complaint was and is contrary to public policy and void, and that the plaintiff, therefore, has no cause of action against the defendants upon either of said agreements." As the "agreements" referred to in the decision are all of the same character and involve but one question, we shall refer to it as a single contract.

In form, and according to the decided cases, the referee's decision was simply a nonsuit, and the plaintiff is entitled to have it so treated. (Scofield v. Hernandez, 47 N.Y. 313;Place v. Hayward, 117 N.Y. 487; Raabe v. Squier, 148 N.Y. 81. ) Such a decision gives a defeated plaintiff the right to have it reviewed in the light of the facts and inferences most favorable to him. In the case at bar this question is one of form rather than substance because, in either event, the ultimate question to be decided is whether the contract made by the parties under the conditions and circumstances testified to by the plaintiff is valid or void.

This contract is assailed on the ground of public policy. Lord BROUGHAM defined public policy as "that principle of the law which holds that no subject can lawfully do that which has a tendency to be injurious to the public or against the public good, which may be termed the policy of the law, or public policy in relation to the administration of the law." In many of its aspects the term "public policy" is but another name for public sentiment and, as that is often transitory or shifting, it lacks the permanency upon which fixed principles of law are, or should be, based. There are, however, other phases of public policy which are as enduring and immutable as the law of gravity. One of them is that, as applied to the law of contracts, courts of justice will never recognize or uphold any transaction which in its object, operation or tendency is calculated to be prejudicial to the public welfare. That sound morality and civic honesty are corner stones of the social edifice is a truism which needs no re-enforcement by argument. It may, therefore, be taken for granted that whenever our courts are called upon to scrutinize a contract which is clearly repugnant to sound morality and civic honesty, they need not look long for a well-fitting definition of public policy, nor hesitate in its practical application to the law of contracts. This is no new doctrine, for it was the law in the time of Lord Chief Justice WILMOT, when he said, "It is the duty of all Courts of Justice to keep their eye steadily upon the interests of the public, even in the administration of commutative justice; and when they find an action is founded upon a claim injurious to the public and which has a bad tendency to give it no countenance or assistance in foro civili." (Low v.Peers, p. 378, Wilmot's Notes.)

Let us now look at the contract which the plaintiff seeks to enforce in this action. It is, in effect and substance, a contract to pay the plaintiff the whole, or a part, of the profits resulting from speculations in the stock of a corporation, undertaken by the defendants pursuant to advance information furnished them by the plaintiff, as to the probable course and developments of a congressional investigation into the affairs and methods of said corporation, instituted and encouraged by the plaintiff as a prosecuting witness, and in other ways. The investigation was intended to and did seriously impair the reputation of said corporation and resulted in a substantial decline in the market price of its stock. This was the end aimed at in said contract. The plan agreed upon between the plaintiff and the defendants contemplated the sale, at a given price, of stock which they did not have, but which they expected to be able to purchase at a lower price in consequence of the investigation referred to. The anticipated profit was to be the difference between the selling and purchasing price of the stock. The allegations of the complaint suggest the great extent to which the plaintiff believed he was to be benefited by the defendants' operations under this contract, and the answer admits enough to prove that plaintiff's interest in it was, at least, a substantial one. The fidelity and zeal with which the plaintiff performed his part of the contract is clearly shown by the voluminous telegraphic and written correspondence which appears in the record. In its final effect we have here a case in which it is alleged and proved that the consideration of the contract sought to be enforced is the fruit of a legislative investigation, instituted, prosecuted and encouraged by the plaintiff. That such a contract is one which, in its object, operation and tendency, is calculated to be prejudicial to the public welfare, ought not to be doubted for a moment. Why? Not because the plaintiff was in fact necessarily dishonest or corrupt in instituting and prosecuting the investigation; nor yet because the charges preferred against the offending corporation were not true, but because the plaintiff voluntarily acquired a pecuniary interest in the result of the investigation, which might subject not only him, but through him others, to the temptations and allurements which human experience has proven to be potent in sacrificing sound morality and honesty to that greed and cupidity which not infrequently beget perjury, bribery and other moral delinquency, incompatible with the public weal.

But just here counsel for the plaintiff interjects the suggestion that he is entitled to all the favorable inferences that may be drawn from the testimony; that since his efforts to procure an investigation were begun before the making of the contract in suit it is not to be presumed that he was or could be improperly influenced, or that he would be led to improperly influence others, by the financial interest which he subsequently acquired in the results of the investigation. It is true that under the rule entitling the plaintiff to all the favorable inferences that may legitimately be drawn from the testimony, we must assume that plaintiff's first efforts to procure a legislative investigation of the corrupt and evil methods of the "Whisky Trust" were innocent and commendable, but it is equally true that before his laudable efforts had borne any fruit he changed his status from that of a disinterested citizen to that of an interested party. His original purpose, to protect and preserve the legitimate business with which he had long been identified, against the unlawful and insidious encroachments of an unscrupulous corporation, was commendable and worthy. Had he persevered in his first designs and motives their effect upon the public would have been above criticism. But favorable inferences cannot stand against positive testimony. It is in evidence that before the plaintiff's early efforts to obtain governmental aid had promised any results, he entered into the contract in suit. Over his own signature the plaintiff declared his inability to proceed without financial aid, and later on, in the same unequivocal manner, he admitted that pursuant to the contract under discussion he instituted the investigation, at his own expense and efforts furnished the testimony, and procured the result which eventuated in the profit which he now seeks to recover. It is, as the referee herein has well said, "the right of every citizen to petition a legislative body in respect to any existing matter or condition of things within its jurisdiction, which may be prejudicial to his personal rights or interests, or which he may deem to be a public evil, and to lay before the body, by proper means and in a proper manner, the grounds of his complaint and his reasons for demanding its intervention."

Had the plaintiff maintained the attitude of such a petitioner he could not now be criticised. But when he has voluntarily abdicated that position for one in which his every movement is coupled with an interest that cannot be disassociated from ultimate gain or loss, depending in some degree upon the success of his own efforts, it is not difficult to see that he is no longer purely an advocate for the public good, but an interested party seeking to further his own ends by means that may be, if they are not in fact, immoral, corrupt and destructive of public welfare. Although there are no cases directly in point, we think the principle underlying these views is sustained by many authorities. In Mills v. Mills (40 N.Y. 546) the action was brought to enforce specific performance of a contract to convey land, the consideration for which was the plaintiff's agreement to give all the aid in his power * * * and to use his interest, influence and exertions to procure the passage of a law granting to the defendant and others the right to build and operate a railroad. In holding the contract void this court said: "It is not necessary to adjudge that the parties stipulated for corrupt action or that they intended that secret and improper resorts should be made. It is enough that the contract tends directly to those results. It furnishes a temptation to the plaintiff to resort to corrupt means or improper devices to influence legislative action." In Atcheson v. Mallon (43 N.Y. 147) it was held that an agreement between parties tending to lessen rivalry in bidding upon public work was void as against public policy, even though it did not appear that the agreement was actually detrimental to public interests. In Richardson v.Crandall (48 N.Y. 348) the plaintiff was engaged in furnishing men to fill the quotas of certain counties for military service under a call from the president. The defendant as provost marshal exacted from the plaintiff a bond that the men furnished would not desert. It was held that any discretion which the provost marshal had should have been exercised, uninfluenced by the security exacted, and the taking of the pledge was, therefore, against public policy. To the same effect is Tool Company v. Norris (2 Wall. 54), where it was held that an agreement to procure from the government a contract for firearms was offensive to public policy and, therefore, void. So, a contract for "lobby services" to secure the passage of a bill providing for the payment of a claim, has been held void by the Supreme Court. (Trist v.Child, 21 Wall. 441.) In Meguire v. Corwine (101 U.S. 108) it was held that a contract between A and B, whereby the former agreed to secure the appointment of the latter as special counsel in certain government cases, and to assist him in the defense thereof, upon the consideration that A should have one-half of the fee received by B, was contrary to public policy. To the same effect is Oscanyan v. Arms Co. (103 U.S. 261).

The authorities relied upon by the plaintiff appellant are distinguishable from the case at bar and those cited in support of the judgment herein. It is a fundamental principle of the common law that what a person may lawfully do for himself he may do through his agents and servants. Early in the history of this court that principle was applied to a contract by which one party agreed, for compensation, to aid another in prosecuting a claim against the state. This court said: "A party who has a claim against the State may employ persons to present and urge it, with proofs and arguments, before the tribunal authorized to act upon it. This is not within the principle which renders agreements to compensate a person for privately soliciting individual members of the legislature, or other public bodies, to act in favor of a claim or measure, void." (Sedgwick v. Stanton, 14 N.Y. 289.) Similar cases in the Supreme Court are Russell v. Burton (66 Barb. 539), and Cary v. Western Union Tel. Co. (20 Abb. N.C. 337). In Chesebrough v. Conover (140 N.Y. 382), which is strongly relied upon by the plaintiff, this court reiterated the rule that "it is the right of every citizen interested in any proposed legislation to employ, and agree to pay, an agent to draft a bill, and fairly and openly to explain it to a legislative committee, or any member of the legislature, and ask to have it introduced; and a contract which does not call for more, and services under it which do not go further, are not against policy." In that case there was, however, a question of fact as to what the agreement was, and that question was fairly submitted to the jury under proper instructions. By their verdict for the plaintiff the jury decided that the contract was one for purely professional services, and it was in the light of this finding that the judgment was sustained, although this court took occasion to say: "If the plaintiff was employed to render what are commonly called lobby services in procuring legislation desired by the defendant, then he should have been defeated in his action. Such contracts are condemned as against public policy, and the rules applicable to them are laid down in many decisions." (Citing cases.)

The foregoing list of cases might be swelled by many others to illustrate the variety of conditions under which questions of public policy have had to be considered in determining the validity of contracts; but enough have been cited to show how different is the case at bar from all others that we have seen, and how obviously applicable to the contract in suit is the principle of public policy which forbids the enforcement of such contracts as may in their nature be injurious to the public. This is not the case of a person employed in a professional capacity to work openly and publicly in a matter of legislative concern, but of a man who agrees to furnish the testimony for a legislative investigation, in exchange for a share of the profits which such an investigation will produce to one who is favored with inside and advance information as to its probable progress and effect.

The judgment below should be affirmed, with costs.

PARKER, Ch. J., GRAY, HAIGHT, MARTIN, JJ. (and CULLEN, J., in result), concur; BARTLETT, J., not voting.

Judgment affirmed.