Dixie Rubber Co. v. Catoe

• Decision Date: 22 November 1926
• Docket Number: 25864
• Citation: 110 So. 670,145 Miss. 342
• Court: Mississippi Supreme Court
• Parties: DIXIE RUBBER CO. v. CATOE et al. [*]

110 So. 670

145 Miss. 342

DIXIE RUBBER CO. v. CATOE et al. ^[*]

No. 25864

Supreme Court of Mississippi

November 22, 1926

Division B

Suggestion of Error Overruled Jan. 3, 1927.

APPEAL from circuit court of First district, Hinds county, HON. W H. POTTER, Judge.

Action by the Dixie Rubber Company against E. V. Catoe and others. Judgment for defendants, and plaintiff appeals. Affirmed.

Affirmed.

J. C. Street, and Gardner, Odom & Gardner, for appellant.

The defenses sought to be interposed are absolutely without any merit. The first defense, that the Dixie Rubber Company did not qualify under the blue sky laws of Mississippi and Tennessee and for that reason violated the law, is without merit because these very defendants, as the proof shows, were at that time, at the time of the application both in Mississippi and in Tennessee, president, secretary and treasurer, and directors of the Dixie Rubber Company. If the proper license was not taken out, whose fault was it? They were in charge of the business and the law required them to attend to its business. If there was any failure to take out the proper license to do business in these states, and as a result Mr. Cadenhead sold stock in violation of the law, then these defendants, we submit, are the ones who should suffer and be made to pay the penalty and not the Dixie Rubber Company.

The defense of the failure to comply with the blue sky laws of Tennessee and Mississippi comes with poor grace, to say the least, from these defendants at this late day as a defense to this suit. The failure to comply with the law, if this is a defense, was due to their failure, their neglect, because they were in charge of the business and should have seen that the law was complied with, if it was necessary to do so. Are they to be permitted to take advantage of their own wrong, a maxim well recognized? We say not.

The question as to whether or not this contract was legal or illegal is not a factor in this case, and has no bearing whatever on the merits of this case, because the question of the illegality of this contract has no place or bearing whatever in this case. Mr. Cadenhead was an embezzler and as such executed this bond to cover his embezzlement, and these sureties, officers and directors of the company, knowing all about the condition of the business, voluntarily signed this bond and guaranty, thereby making themselves responsible for this indebtedness, from which we can see no escape. Portner v. Kirschner, 69 Pa. St. 47, and 47 A. S. R. 925, covers our case like a blanket and gives a complete answer to every contention made by the defendants. See also R. C. L., page 997; Bibb v. Hitchcock, 49 Ala. 468, 20 Am. Rep. 288; Cass County Bank v. Bricker, 33 A. S. R. 649; Johnston v. Allen, 22 Fla. 224, 1 A. S. R. 180; Barrett v. Weber, 125 N.Y. 818, 31 Am. Dec. 603, 49 Am. Rep. 35 Am. Dec. 387.

Forrest G. Cooper, Hays & Whitten and Gardner, Brown & Stingily, for appellees.

I. The original contract was beyond all question void. Did these renewals and comprises change its character? The original contract being void, no valid agreement could be made to rest upon the same consideration. They are all valid so long as they can be traced back and made to depend upon the original illegal consideration. Collins v. McCargo, 6 S. & M. 128 at 134; Adams v. Rowan, 8 S. & M. 824; Martin v. Terrell, 12 S. & M. 575; Kountz v. Price, 40 Miss. 341; Wooten v. Miller, 7 S. & M. 380; Torrey v. Grant, 10 S. &. M. 89; Coulter v. Robertson, 14 S. & M. 18.

The consideration for the second contract being only the indebtedness incurred under the first contract, which was a contract to violate the law, the second contract is without consideration, and is void and unenforcible.

II. The proposition just discussed is very similar to the question herein involved. There the principle is placed on the idea that there is no valid consideration for the contract. Here the idea is that the original contract being a contract to violate the law, the evil of that contract was brought on down and into the new contract, so that it, too, is a contract to violate the law. Collins v. McCarto, 6 S. & M. 128.

III. The second contract, irrespective and independent of the first contract, is a contract made in violation of the criminal law for the reason that it is a contract to sell stock in the state of Mississippi at less than par, and a contract to sell stock on a changed plan without complying with the blue sky law. It, however, in addition, is a contract to pay twenty-five per cent commission on the first five hundred thousand dollars of stock sold.

A contract which contemplates a violation of the criminal statute cannot be enforced in the state of Mississippi. Woodson v. Hopkins, 85 Miss. 177; Mitchell v. Campbell, 111 Miss. 806; Town of Jackson v. Bowman, 39 Miss. 671; Wooton v. Miller, 7 S. & M. 355; Hoover v. Pierce, 26 Miss. 627; Black v. McMurray, 56 Miss. 217; Dean v. McClendon, 30 Miss. 343.

Appellant concedes that a contract to violate the statute will not be enforced. But, the appellant says, these bondsmen are estopped to set up the viciousness of this contract and its consequent invalidity by reason of the fact that they were parties to it.

It is immaterial that the parties were in pari delicto. In such cases the court will not, whether the contract has been executed or not, interfere for the relief of either party, but will leave them in their respective conditions. Where the contract is executory, they will likewise refrain from lending aid to carry it into effect. Woodson v. Hopkins, 85 Miss. 126; McWilliams v. Phillips, 51 Miss. 196; Lemorius v. Myer, 71 Miss. 523; Ballew v. Williams, 109 Miss. 74.

"Even though a part of a contract be good and a part be bad, unless the good be wholly separated from the bad and wholly independent of it, the whole instrument is void." Wilkinson v. Reilley, 47 Miss. 306; Cotton v. McKenzie, 57 Miss. 418.

IV. The second contract was a contract to violate the law and is unforcible. Neither contract is enforcible even against the principal, and if not against the principal, certainly not against his bondsmen, his sureties, his guarantors, or whatever they may be called. Of course, if the contract is illegal, forbearance, extension of time and none of the other considerations of this nature will give it any validity. Lindsey v. Sellers, 26 Miss. 169; Newell v. Fisher, 11 S. & M. 431.

In a few cases like Gilliland v. Brown, 43 Miss. 64; Howell v. Jolly, 68 Miss. 323; Andrews v. Brewing Co., 74 Miss. 362, the court without overruling the rule well established even then, held that suit might be maintained to recover the proceeds of an executed contract. These cases, however, were overruled by Woodson v. Hopkins, 85 Miss. 171. Neither of the cases, it will be noted had overruled any former case. Their history is fully discussed in the Woodson case.

The judgment of the court below ought to be affirmed.

Argued orally by T. K. Riddick and A. F. Gardner, for appellant, and Carl Stingily, Forrest G. Cooper, and Ed Franklin, for appellee.

OPINION

ANDERSON, J.

Appellant, Dixie Rubber Company, a corporation, organized under the laws of Mississippi with its domicile in Memphis in the state of Tennessee, brought this action in the circuit court of the First district of Hinds county, against appellee L. C. Cadenhead and the other appellees, as sureties, to recover on a bond executed by appellees in favor of appellant for fifty-two thousand one hundred twenty-nine dollars and sixty cents. There was a trial on the pleadings and evidence, resulting in a directed verdict for appellees and a judgment accordingly, from which judgment appellant prosecutes this appeal.

We deem the following a sufficient statement of the case to develop the question which we decide, the decision of which question disposes of the appeal and renders it unnecessary to decide any other question in the case:

Appellant was incorporated under the laws of the state of Mississippi. It had its domicile and principal place of business in Memphis in the state of Tennessee. Appellant provided for the issuance of a large amount of stock, and entered into a contract with appellee Cadenhead, by which it agreed to give him the exclusive sale of its entire issue of stock, and pay him a commission therefor of twenty-five per cent. of the entire sales accepted and approved by the company, whether the purchasers thereof paid for the same or not. Putting it differently, by the terms of the contract appellant agreed that appellee Cadenhead should have the right to take out of all cash collections made by him for the sale of stock in the company, a sum equal to twenty-five per cent. of the aggregate amount of his stock sales. The contract was in writing. Appellee Cadenhead sold a large part of appellant's issue of stock, the most of which was sold in the states of Mississippi and Tennessee. Out of the collections on stock sold by him he retained, under his contract with appellant, in round figures, the sum of forty-four thousand dollars which represented alone his commissions of twenty-five per cent. on stock sold on which either no payments were made or not sufficient payments to cover his commissions. Appellant complied with neither the stock sales laws of Mississippi (Laws 1916, chapter 97) or Tennessee (Acts 1913, 1st Ex. Sess. chapter 31, as amended) commonly known as the Blue Sky Law. As stated, most of appellant's stock that was sold was sold in those states. Having failed to get permits to sell its stock in Mississippi and Tennessee, under the laws of those states appellant had no right to sell its stock in those states. Therefore, under the laws of both Mississippi and Tennessee, appellant's contracts for...