Mechanics' Ins. Co. of Philadelphia v. C.A. Hoover Distilling Co.

• Decision Date: 04 November 1910
• Docket Number: 3,371-3,383.
• Citation: 182 F. 590
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: MECHANICS' INS. CO. OF PHILADELPHIA et al. v. C. A. HOOVER DISTILLING CO.

182 F. 590

MECHANICS' INS. CO. OF PHILADELPHIA et al. v. C. A. HOOVER DISTILLING CO.

Nos. 3,371-3,383.

United States Court of Appeals, Eighth Circuit.

November 4, 1910

Syllabus by the Court

It is no defense to a contract that has been performed by the promisee that the promisor knew that the agreement or its performance might aid the promisee to violate a law or a public policy, when the promisor did

not combine or conspire with the promisee to accomplish that result and did not share in the benefits of such a violation.

Section 2423 of the Code of Iowa, which prohibits the maintenance of actions for the recovery of intoxicating liquor or its value with certain exceptions, is inapplicable to actions in the national courts and ineffective to prevent their maintenance.

Jurisdiction as affected by state laws, see note to Barling v. Bank of British North America, 1 C.C.A. 513.)

Charles B. Obermeyer and A. C. Parker (N. T. Guernsey and W. E Miller, on the brief), for plaintiffs in error.

John F Lacey (W. R. Lacey, Walter C. Burrell, James A. Devitt, and Wm. McNett, on the brief), for defendant in error.

Before SANBORN and VAN DEVANTER, Circuit Judges, and REED, District judge.

SANBORN Circuit Judge.

The C. A. Hoover Distilling Company made whisky for about three years and placed it in a bonded warehouse at Oskaloosa in the state of Iowa. It procured from many insurance companies policies of insurance against fire upon it. On May 15, 1908, it burned. The Hoover Company brought actions on the policies; 15 of these actions were consolidated and tried together in the court below, verdicts and judgments were rendered against the companies, and 13 of them are challenged by the writs of error in these cases.

The first reason given in the printed argument of counsel for the insurance companies for a reversal of these judgments is that the contracts of insurance were against the prohibition policy of the state of Iowa and were not actionable because the whisky was made and stored in that state and was intended for sale therein. But this defense was not available without pleading under Code Iowa, Sec. 3629, and the decisions of its courts (Riech v. Bolch, 68 Iowa, 526, 527, 27 N.W. 507), which, under the act of conformity, govern the pleadings, practice, and proceedings in these actions (Rev. St. Sec. 914 (U.S. Comp. St. 1901, p. 684)), and it was not pleaded. Moreover, it was not presented by any request for an instruction sustaining it at the close of all the evidence; but, on the other hand, the first request made by the defendants after the trial closed ignored it and asked the court to charge the jury that the plaintiff in each of these cases was entitled to recover the actual cash value of the whisky burned not exceeding the cost of replacing it with material of like kind and quality. The only ruling during the trial upon this defense which is presented by the requisite exception and assignment of error to enable us to consider it is the refusal of the court at the close of the plaintiff's evidence to grant a motion to direct a verdict in favor of the insurance companies. But the defendants waived that objection and exception by their subsequent introduction of evidence on the merits of the case in their own behalf (United States Fidelity & Guaranty Co. v. Board of Commissioners, 145 F. 144, 150, 76 C.C.A. 114, and cases there cited), and they estopped themselves from presenting the contention they now urge to defeat the judgments by their request of the court at the close of the trial to instruct the jury that the plaintiff was entitled to recover the cash value of the whisky not exceeding the cost of replacing it. Parties may not avail themselves of errors which they have themselves committed, or which they have induced the referee or judge who tried their case to make. Walton v. Chicago, St. Paul, M. & O. Ry. Co., 56 F. 1006, 1008, 6 C.C.A. 223, 225; National Loan & Investment Co. v. Rockland Co., 94 F. 335, 336, 36 C.C.A. 370, 371; Chase v. Driver, 92 F. 780, 786, 34 C.C.A. 668, 674.

From these established rules of practice counsel endeavor to escape on the ground that the manufacture and sale of whisky is against the policy of the state of Iowa, that its possession is presumptively illegal (Sommer v. Cate, 22 Iowa, 585; Walker v. Shook, 49 Iowa, 264), that section 2423 of the Code of Iowa provides that no action shall be maintained for the recovery of possession of any intoxicating liquor, or the value thereof, except in cases where persons owning or possessing such liquor with lawful intent may have been illegally deprived of the same, that the insurance of whisky aids in the defiance of the public policy of prohibition and is, therefore, illegal, and that the courts without pleading, objection, or exception ought to refuse to enforce an illegal contract of this nature. Notwithstanding the prohibition policy of the state of Iowa, its laws authorize the sale and storage for sale of intoxicating liquors upon the payment of specified taxes upon certain conditions with which parties often comply, so that whisky may be lawfully kept, stored, and sold in that state. Code Iowa, Secs. 2432, 2448. Conceding, however, that the general policy of the state is to forbid its manufacture or sale, and conceding that its possession, in the absence of proof of a lawful intent-- and there was no such proof in this case-- was evidence of an illegal purpose and rendered its possession unlawful, it does not follow that its insurance against fire was either illegal or violative of the prohibition policy of the state. This whisky was stored in a bonded warehouse, and the insurance of it against fire neither violated nor had any direct tendency to violate the policy of the state which forbade its manufacture and sale. While the whisky remained stored, it could be neither made nor sold. If the whisky burned, it could not be thereafter sold, and neither the payment nor the contract to pay its value in the event that it was burned could make its manufacture, storage, or sale after the burning possible. Even if these contracts of insurance had the effect to make the business of the manufacture and sale of the liquor less hazardous, and in that way to encourage the conduct of that business, nevertheless that encouragement was not the chief purpose or direct effect, but was a mere incident of the indemnity against loss by fire which the policies were made to secure. The laws of Iowa contain no express prohibition of the insurance of intoxicating liquors against fire, its Supreme Court had sustained a contract for such insurance (Erb v. Fidelity Ins. Co., 99 Iowa, 727, 733, 69 N.W. 261), there was no moral turpitude in the making or the performing of this contract, and the mere fact that an agreement, the consideration and performance of which are lawful, incidentally assists one in evading a law or a public policy, is no bar to its enforcement (Hanover National Bank v. First National Bank, 109 F. 421, 425, 48 C.C.A. 482, 486; Jefferson v. Burhans, 29 C.C.A. 481, 85 F. 949; Kansas City Hydraulic Press Brick Co. v. National Surety Co., 167 F. 496, 500, 93 C.C.A. 132, 136). And it is no defense to a contract that has been performed by the promisee that the promisor knew that the agreement or its performance might aid the promisee to violate the law or to defy the public policy of the state when the promisor neither combined nor conspired with the promisee to accomplish that result, nor shared in the benefits of such a violation. Jenson v. Toltec Ranch Co., 174 F. 86, 91, 92, 98 C.C.A. 60, 65, 66; Wald's Pollock on Contracts (3d Ed.) 485; Armstrong v. Toler, 11 Wheat. 258, 273, 6 L.Ed. 468; Armstrong v. American Exchange Bank, 133 U.S. 433, 10 Sup.Ct. 450, 33 L.Ed. 747; Hanover National Bank v. First National Bank, 109 F. 421, 48 C.C.A. 482; Waterbury v. McKinnon, 146 F. 737, 77 C.C.A. 294, 296; Ingraham v. National Salt Co., 130 F. 676, 681, 65 C.C.A. 54, 59; Taylor v. Mining Company, 79 Cal. 285, 287, 21 P. 753; Illinois Trust & Sav. Bank v. Pacific Ry. Co., 117 Cal. 332, 49 P. 197, 201; Holman v. Johnson, 1 Cowp. 341; Faikney v. Reynous, 1 Burr. 2069; Pellecat v. Angell, 2 Crompt., Mees. & Ros. 311; Hodgson v. Temple, 5 Taunt. 181; Marion Trust Co. v. Crescent Loan & Investment Co., 27 Ind.App. 451, 61 N.E. 688, 691, 87 Am.St.Rep. 257; Wright v. Hughes, 119 Ind. 324, 21 N.E. 907, 909, 12 Am.St.Rep. 412; First National Bank v. Dovetail Body & Gear Co., 143 Ind. 550, 40 N.E. 810, 812, 52 Am.St.Rep. 435; Tracy v. Talmage, 14 N.Y. 162, 67 Am.Dec. 132; Thompson v. Lambert, 44 Iowa, 239, 245.

The provision of the state statute which forbids the maintenance of any action for the recovery of any intoxicating liquor or its value, except where persons owning or possessing it with lawful intent have been illegally deprived of it, found in section 2423 of the Code of Iowa, was not intended to apply to and does not affect suits and proceeding in the federal courts. A state is without power to prohibit or condition the exercise by citizens of different states of their respective rights to institute and defend their suits in the national courts and to invoke the independent judgment of these courts upon their controversies in the cases and in the manner prescribed by the Constitution and laws of the United States which are the supreme law of the land. The jurisdiction of these courts was not granted by, and it cannot be revoked, annulled, or impaired by, the law or act of any state. Payne v. Hook, 7 Wall. 425, 430, 19 L.Ed. 260; Barber Asphalt Paving Co. v. Morris, 66 C.C.A. 55, 58, 132 F. 945, 948, 67 L.R.A. 761; Butler Bros. Shoe Co. v. United States Rubber Co., 156 F. 1, 84 C.C.A. 167, and the cases there cited.

The policies of insurance were not prohibited by...