Lowenburg v. Klein

Decision Date04 April 1921
Docket Number21683
Citation125 Miss. 284,87 So. 653
CourtMississippi Supreme Court
PartiesLOWENBURG v. KLEIN et al

APPEAL from chancery court of Warren county, HON. E. N. THOMAS Chancellor.

Suit by Joseph Lowenburg against Joseph Klein and others for an injunction. From a decree dissolving a preliminary injunction and dismissing the bill, plaintiff appeals. Affirmed in part and reversed in part.

Decree affirmed in part, and reversed in part.

Anderson, Vollor & Kelly, for appellant.

While this action is in form asking for affirmative relief, it is in nature strictly a defensive one.

Mr Pomeroy, in the 2nd Volume of the Fourth Edition of his great work on Equity Jurisdiction, in discussing this whole question, applicable not only to the proposition in hand, but to several of the others, uses this language, under the head of In pari delicto--generad rules.--"The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation. The rule has sometimes been laid down as though it were equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other. This doctrine, though true in the main, is subject to limitations and exceptions which it is the special object of the present inquiry to determine. As applications of this principle, the following rules may be regarded as settled, where the parties are in pari delicto. If the contract had been voluntarily executed and performed a court of equity will not, in the absence of controlling motives of public policy to the contrary grant its aid by decreeing a recovery back of the money paid or property delivered, or a cancellation of the conveyance or transfer. As long as the contract is executory, it cannot be enforced in any kind of action brought directly upon it; the illegality constituting an absolute defense. As an application of the same doctrine merely in a different form, while the agreement is executory, courts of equity my relieve the debtor or promising party by ordering the written instrument and other securities to be surrendered and cancelled, and by granting the ancillary remedies of injunction, discovery, and the like. Whenever the circumstances are such that the defensive remedy at law would not be equally certain, perfect, and adequate, this jurisdiction will be exercised. The equitable relief so conferred does not violate the general maxim concerning parties in pari delicto; on the contrary, it carries that maxim into effect. It has already been shown that the maxim, rightly interpreted, does not require the condition of the parties, with respect to the substituting executory contract, to remain unchanged and undisturbed. The remedy of cancellation or injunction, under the circumstances, is simply the equitable proceeding identical with the setting up the illegality as a defense to defeat a recovery at law, and thus get rid of the contract as a binding executory obligation. The parties are left undisturbed as to their property rights." Section 940, pages 1992 to 1997.

2. The contract involved in this proceeding, while against public policy and illegal, is executory and not executed, and, as already seen in the quotation from Mr. Pomeroy, supra, the rule is very different in the two cases. The rule as to executory contracts, where the parties stand in pari delicto is, that while they cannot be enforced either by specific performance or by an action for damages on account of the breach, either party may stop the consummation of the contract on his part by an action to rescind and recover back what may have been paid by him in consummation of the transaction. Especially is this true when the proceeding, as the one at bar, is to stop the payment of the money, or the cancellation of a check given in pursuance of the illegal transaction. 2 Pomeroy (4 Ed.), secs. 940 & 941; Spring Company v. Knowlton, 103 U.S. , 26 L.Ed. 347; 3 Comyn on Contracts, 361; 2 Parsons on Contracts, page 746; Block v. Darling, 140 U.S. , 35 L.Ed. 476; Bernhard v. Taylor (Ore.) 31 P. 968. Citing many authorities in suppore of the doctrine. See, also, Hazard v. Coyle (R. I.), 48 A. 442, 443 & 444; Day v. Lown, 51 Iowa 364, 1 N.W. 786; Cleveland, etc., Ry. Co. v. Hirsch (C. C. A.), 204 F. 848-858; 2 Words & Phrases (2 Series), pp. 990, 991; McCutcheon v. Capsule Co., 145 U.S. 470, 36 L.Ed. 748.

The rule is thus announced in 23 Cyc., page 343, paragraph D: "Although an executory contract for the illegal sale of liquor may be rescinded and partial payments reclaimed, yet if the contract had been fully executed, no action will lie, at common law, to recover back the price or value of the liquor. " This is practically a "goose" case, and covers the facts in this case like a blanket.

3. The real and controlling object of the section was to prevent the bank's paying the illegal check given by complainant to Klein. As observed under the head of this proposition, supra, there was never any illegal relation existing between Lowenburg and the bank. The bank had his money on deposit and he had a perfect right to demand that money or stop the payment of this illegal check, drawn on his funds in the bank of Klein. Bernhard v. Taylor, supra, is ample authority to support this proposition. 11 Rose's Notes (Revised Edition), pp. 214, 215, & 216, 3 L. R. A., 679, sec, 208; Drinkall v. Movius State Bank, (N. D.) 57 L. R. A. 341 and Notes.

4. Under the facts the maxim of in pari delicto did not obtain. Only an attempt had been made on the part of complainant to violate the law; but it is fair to say that had Klein complied with his agreement and delivered the whisky to complainant, the law would have been violated, but in all probability the courts would never have known anything about the transaction. However, this was not done. Klein refused to deliver the liquor and attempted, and still is attempting, at the same time, to hold the check and collect the one thousand five hundred dollars without giving a penny worth of anything for it. The most unconscionable proposition, we submit, that could be brought before a court of justice; however as stated, the relation of particeps criminis between the two parties was never consummated, and the maxim of in pari delicto therefore, cannot apply, because the facts show that the complainant never occupied that relation in any particular to Klein. His effort now is to stop the payment of his check to Klein, or his assigns, and get his money back out of the bank where it was legally deposited.

5. The decision of the court while attempting to apply the rule of leaving the parties where they had put themselves, and refusing to grant relief to either, in this decree entirely abrogates the rule, for it in fact gave Klein all the relief he could possibly expect or hope for. It not only allowed him to hold the check and thereby give him the authority to present and collect it, but it also gave him damages in the sum of one hundred fifty dollars for the wrongful suing out of the injunction. Even if the rule applies which the court attempted to enforce, all it could have done under the law would be to deny the recovery and dismiss the case, and thereby leave the parties exactly where they were before the suit was brought If Klein had any advantage by virtue of the transaction, under that view of the case he could retain it, but he had no right to anything more than that. The effect of the decree, we submit, is not only to aid Klein in stealing and collecting the check for one thousand five hundred dollars but is also to award him a premium of one hundred fifty dollars to aid and assist him in that purpose and design. Such a proceeding and its outcome cannot and will not be sanctioned by a court of conscience.

6. This proposition is simply a corollary of the 5th. That is, the court had no right to grant Klein an affirmative decree by awarding him damages to the amount of one hundred fifty dollars or any other sum, for the wrongful suing out of the injunction, and thereby giving him the right of execution to collect the same. This, we submit, in any view of the case, was reversible error.

The case relied on by counsel in the court below was that of Woodson v. Hopkins, 85 Miss. 171. The court is doubtless well acquainted with this case, as it was one of some notoriety at the time it was decided. Judge WHITFIELD, of the supreme bench arose to the heights of his great and brilliant intellect and legal attainment when he delivered this opinion. The real decision in the case, however, is summed up in the syllabus, although the opinion is very lengthy. The syllabus is as follows:

"Equity. Jurisdiction. Fraudulent conduct. Illegal contracts. A lender of money at extortionate rates of interest under contracts which are void as against public policy, who establishes an agency for the carrying on of his nefarious business cannot maintain a suit in equity against one who was placed by him in charge of such business for an accounting where he must call in the aid, directly or indirectly, of the illegal contracts to make out his case. Gilliam v. Brown, 43 Miss. 641. Overruled."

We, therefore, ask the court to reverse the decision and grant a decree here perpetuating the injunction, cancelling the check, and giving appellant the right to go to the bank and get his money if he so desires.

Brunini & Hirsch, for appellee.

By sub-division four of appellant's brief, on page 13 appellant advances this proposition: "Under the facts the maxim of in pari delicto did not obtain. Only an attempt had been made on the part of complaina...

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    • United States
    • Mississippi Supreme Court
    • May 9, 1932
    ...La. Ann. 785; Dole v. Hickey, 67 N.H. 496, 32 A. 761. I think the principle has been settled in this state by the case of Lowenburg v. Klein, 125 Miss. 284, 87 So. 653. that case is not precisely the case at bar, the principles are the same. That case completely negatives the idea that the ......
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