Cardwell v. Kelly.1

• Decision Date: 27 January 1898
• Citation: 28 S.E. 953,95 Va. 570
• Parties: CARDWELL v. KELLY.1
• Court: Virginia Supreme Court

28 S.E. 953

95 Va. 570

CARDWELL

v.KELLY.¹

Supreme Court of Appeals of Virginia.

Jan. 27, 1898.

Corporations—Legality—Estoppel.

In an action by a receiver of an insolvent corporation on a subscription to stock, the subscriber is estopped from denying the legality of the object of the corporation, where the subscription is lawful on its face.

Error to circuit court of city of Richmond.

Action by W. D. Cardwell, receiver, against M. Kelly. From a judgment for defendant, plaintiff brings error. Reversed.

Leake & Carter, for plaintiff in error.

H. R. Pollard, for defendant in error.

RIELY, J. The sole question for decision is whether a subscriber to the stock of a corporation, who was allured to make the subscription by the chance of being allotted a lot or lots in a drawing for distribution of lots of unequal value, can by reason thereof escape the payment of the money due on his subscription, not to the corporation, but to its creditors, whose debts were contracted upon the faith of his and other subscriptions.

It is a fact conceded in the record that the corporation, the Virginia Steel, Iron & Slate Company, is insolvent, and that its creditors cannot be paid their debts unless the assessment of 45 per cent, made by the chancery court of the city of Richmond on its stockholders is collected.

In conformity to the constitution of thestate, the buying, selling, or transferring of tickets or chances In any lottery is prohibited by statute, and a penalty therefor prescribed. Const, art. 5, § 18; Code, §§ 3825, 3826. Whether the scheme out of which this controversy has arisen is within the prohibition of the statute, we express no opinion, as, in the view we take of the case, it is unnecessary to decide that question.

It is a general rule, as stated by an able law writer, that a contract or an agreement cannot be made the subject of an action if it can be impeached on the ground of dishonesty, or as being opposed to public policy—if it be either contra bonos mores, or forbidden by the law. Broom, Leg. Max. 706.

A defendant, against whom it is sought to enforce such a contract, may show its illegality, and a court of justice will decline to lend its aid to enforce a contract thus wrongfully entered into. Where, however, the parties are in pari delicto, but the plaintiff can make out his case without disclosing the unlawful nature of the contract, it Is not a universal rule that the defendant will be allowed to show its illegality for the purpose of defeating the action.

Contracts which are founded upon an illegal consideration, as being immoral or contrary to public good, or which are forbidden by law, are void; and in the language of Chief Justice Wilmot in Collins v. Blantern, 1 Smith, Lead. Cas. 646, "the reason why the common law says such contracts are void, is for the public good." They are injurious to the community, and violative of the policy of the law; and so the courts, having In view the good of the public, and the policy of the law, will not lend their aid to enforce such a contract unless they can see that to do so will defeat the object of the illegal transaction, and promote the interests of society and the policy of the law. But where, in the particular case, It appears that this will be the result of the enforcement of such contract, the maxim, "nemo allegans turpitudinem suam audiendus, " is rigorously applied, and the defendant will not be allowed to plead and prove his own wrong.

In Stark's Ex'rs v. Littlepage, 4 Rand. (Va.) 368, Judge Green, in commenting on the maxim, "in pari delicto, potior est conditio defendentis, " said: "But this rule applies only in eases where the refusal of the courts to aid either party frustrates the object of the transaction, and takes away the temptation to engage in contracts contra bonos mores, or violating the policy of the laws. If it be necessary, in order to discountenance such transactions, to enforce such a contract at law, or to relieve against it in equity, it will be done, though both the parties are in pari delicto. The party is not allowed to allege his own turpitude in such cases, when defendant at law, or prevented from alleging it in equity, whenever the refusal to execute the contract at law, or the refusal to relieve against It in equity, would give effect to the original purpose, and encourage the parties engaging in such transactions."

In a case of the nature of that at bar, the court will be governed In some degree, at least, by its particular circumstances. It will consider whether the good of the public and the policy of the law will be subserved, and the making of such contracts be discouraged, by enforcing the contract in the case before it, or by refusing to do so, and will do the one or the other as will advance the interests of the public and the policy of the law.

It is apparent that to enforce the contract in this case...