Beer v. Landman

• Decision Date: 27 June 1895
• Citation: 31 S.W. 805
• Parties: BEER et al. v. LANDMAN.
• Court: Texas Supreme Court

31 S.W. 805

BEER et al. v. LANDMAN.

Supreme Court of Texas.

June 27, 1895.

Error to court of civil appeals of Third supreme judicial district.

Action by D. Landman against H. & B. Beer and others to enjoin defendants from collecting certain notes, and that a decree be entered canceling a principal note, and ordering the return of collateral notes. From a decree in accordance with the prayer of the bill, affirmed by the court of civil appeals (30 S. W. 64, 726), defendants bring error. Reversed.

Robert H. Rogers and J. B. Scarborough, for plaintiffs in error. L. W. Campbell, for defendant in error.

DENMAN, J.

On account of dealings in cotton futures between D. Landman, appellee, and H. & B. Beer, appellants, closed in December, 1891, appellee owed appellants $1,004 on open account, to secure which he indorsed and delivered to them two negotiable vendor's lien notes, hereinafter mentioned; and in August, 1892, he executed to the latter, in settlement of said open account, his two promissory notes for $525 each, one of which was subsequently paid, leaving the two collateral notes with them as security. Before the filing of this suit, appellants, H. & B. Beer, residents of Louisiana, through their attorneys, Scarborough & Rogers, instituted suit in the county court of McLennan county against appellee, Landman, on said principal note, the same being then past due. Thereupon appellee filed this suit in the district court, before the maturity of one of the collateral notes, alleging that the principal notes were given in settlement of a balance due by him to H. & B. Beer on a gambling transaction arising out of speculation in cotton futures, and asking the court to enjoin appellants and their said attorneys from collecting said principal or collateral notes, and that on final hearing a decree be entered canceling the principal note, and ordering the delivery over to appellee of said collateral notes; all of said notes being in the possession of said attorneys, within this state, for collection. The trial court issued the temporary injunction as prayed for, whereupon appellants dismissed said cause in the county court, and answered herein, denying the illegality of the cotton transaction, and offering to deliver the two collateral notes upon payment of the principal note. The trial court, upon conflicting testimony, found that the consideration for which the principal note was given was a balance due upon a gambling transaction, and entered a decree canceling said note, and ordering the delivery of said collateral notes to the appellee, Landman, which decree having been affirmed by the court of civil appeals, appellants have brought the case to this court upon writ of error.

Two assignments are made in this court, as follows, to wit: "(1) The court of civil appeals erred in holding that the testimony supported the finding of the court below that the note was founded on a gambling transaction, for there is no evidence in the record to justify or excuse such finding. (2) Admitting that this was an illegal transaction, and that the Beers cannot recover judgment on the principal note, still the court was in error in holding that Landman, in a case like this, can recover from the Beers the possession of the collateral notes."

In regard to the first assignment of error, it is sufficient to say that there was evidence supporting the finding of the court below and the court of civil appeals to the effect that the note was executed for the balance on a gambling transaction, and, this being a question of fact, this court has no jurisdiction to revise their finding.

This brings us to the consideration of the second and last assignment of error above stated. In order to properly understand the point to be determined, it will be well to state that it does not involve the question as to whether, or under what circumstances, equity will lend its aid to cancel an executory contract, founded upon an illegal consideration, as in case of the principal note above referred to, but it involves the sole question as to whether equity will interfere or lend its aid to cancel an executed contract, on the ground that the consideration thereof was illegal; for there can be no doubt that the indorsement and delivery of the negotiable notes to appellants, as security, vested in them the legal title thereto and a qualified interest therein. Thus, Landman, a party to the unlawful transaction, equally guilty with H. & B. Beer, having vested in the latter the legal title and qualified interest in said collateral notes, seeks to have a court of equity divest such title and interest out of the latter, and reinvest him therewith, on the ground of the unlawfulness of the transaction. He does not seek the aid of a court of equity in making a defense to an executory agreement, but seeks its aid in attempting to disturb property rights conferred by him upon his accomplice. Where two persons guilty of participation in an unlawful transaction are in pari delicto, as in this case, neither a court of law nor a court of equity will aid either to recover or reinvest himself with any title or interest which he, in consideration of such unlawful contract, has vested in the other, but will leave them in the same condition as to vested interests as they, by their own acts, have placed themselves. Thus, Parke, B., in Scarfe v. Morgan (1838) 4 Mees. & W. 280, where a mare was delivered by plaintiff to defendant as security for a debt unlawfully contracted on Sunday, said: "This is not the case of an executory contract (both parties were in pari delicto); it is one which has been executed, and the consideration given. And although, in the former case, the law would not assist one to recover against the other, yet if the contract is executed, and the property, either special or general, has passed thereby, the property must remain,"—and refused to allow plaintiff to recover. In the leading case of Taylor v. Chester (1869) L. R. 4 Q. B. 313, it was held that the plaintiff, having deposited with the defendant the half of a £50 bank note, as a pledge to secure the payment for wine, etc., supplied to plaintiff by defendant in a brothel kept by her, to be there consumed in a debauch, could not recover such half note, the court saying: "Plaintiff's argument was based upon the hypothesis that, in spite of the finding of the jury, the plaintiff was entitled to recover by virtue of his property in the half note, and that it was the defendant alone who set up an immoral transaction as the answer to the plaintiff's claim." This argument appears to us to be founded upon an entirely erroneous view of the facts. The plaintiff, no doubt, was the owner of the note, but he pledged it by way of security for the price of meat and drink provided for, and money advanced to, him by the defendant. Had the case rested there, and no pleading raised the question of illegality, a valid pledge would have been created, and a special property conferred upon the defendant in the half note, and the plaintiff could only have recovered by showing payment or a tender of the amount due. In order to get rid of the defense arising from the plea, which set up an existing pledge of the half note, the plaintiff had recourse to the special replication, in which he was obliged to set forth the immoral and illegal character of the contract upon which the half note had been deposited. It was therefore impossible for him to recover except through the medium and by the aid of an illegal transaction to which he was himself a party. Under such circumstances, the maxim, "In pari delicto, potior est conditio possidentis," clearly applies, and is decisive of the case. In the case of King v. Greene (1863) 6 Allen, 139, where plaintiff had pledged his watch to secure an unlawful livery bill, the court refused to allow him to recover the same, saying: "It is true that the law would not enable ...