Mexican International Banking Co. v. Lichtenstein

• Citation: 37 P. 574,10 Utah 338
• Decision Date: 27 July 1894
• Docket Number: 480
• Court: Utah Supreme Court
• Parties: MEXICAN INTERNATIONAL BANKING COMPANY, A CORPORATION, RESPONDENT, v. HENRY LICHTENSTEIN, APPELLANT. [1]

37 P. 574

10 Utah 338

MEXICAN INTERNATIONAL BANKING COMPANY, A CORPORATION, RESPONDENT, v. HENRY LICHTENSTEIN, APPELLANT. ^[1]

No. 480

Supreme Court of Utah

July 27, 1894

APPEAL from the District Court of the Third Judicial District, Hon S. A. Merritt, Judge.

Action by the Mexican International Banking Company, a corporation existing under the laws of the Republic of Old Mexico against Henry Lichtenstein for money had and received, being a balance in defendant's hands of the proceeds of the sales of lottery tickets. The case was originally tried before Hon C. S. Zane, Judge, who instructed the jury to find a verdict for defendant. Hon. S. A. Merritt having succeeded Hon. C. S Zane, granted plaintiff a new trial, from which defendant appeals.

Reversed and remanded.

Mr. Frank Pierce, for appellant.

Only one question is raised by this appeal. Could the plaintiff recover of defendant the money collected from the sale of lottery tickets even though he was agent of the plaintiff? The transaction was criminal under the laws of California. 4 Deering Penal Code, § 321. Lex loci contractus controls. It is unlawful (1) for the plaintiff, either by itself, or through an agent, to engage in any lottery scheme, Deering's Code, § 319; (2) to send lottery tickets to San Francisco, 26 U.S. Stat. 465; (3) to sell these tickets in California, Deering's Code, § 321; (4) to collect of the citizens of California money from the sale of the tickets, Deering's Code, § 321; (5) to receive money from the sale of the tickets, Deering's Code, §§ 322-324. Should the courts legalize defendant's transaction, the plaintiff may continue his business in Old Mexico beyond the reach of the criminal law by appointing agents throughout this country and then compelling them to account for the money they receive, which belongs to the citizens where collected. The court finds the parties in pari delicto, and will leave them as it finds them. Each took part in an unlawful scheme to sell lottery tickets in California. These tickets expressed no value. The plaintiff has parted with nothing. Why should it be permitted to collect this money which belongs to the purchasers of tickets. Carry out the maxim, in pari delicto, potior est conditio defendentis, in equal fault, the stronger is the situation of the defendant. Only two cases can be found similar to the case at bar, Lanahan v. Patterson, 1 Flip. 410; Udell v. Metcalf, 5 N.H. 396. In the first case Patterson sold lottery tickets for Lanahan and gave his due bill for the money he had received. On refusing to pay the due bill, his principal sued him. The court held, under the laws of Tennessee, which prohibited the sale of lottery tickets, that the contract cannot be enforced. In the other case, the court held that the tickets were sent to be sold in violation of law and that both parties were at fault and that it would leave them where it finds them. Plaintiff contends that the agent cannot set up the illegality of the transaction as an excuse for not paying over the money. Our answer to this argument is (a) the perpetrator of a fraud can have no agent in his fraud in the proper sense of the term. (b) The plaintiff has not parted with anything of value. He furnished no value to defendant or to the purchasers of tickets. (c) The funds in the hands of the defendant, if any, belong to the purchasers of the tickets and not to plaintiff. The employment of an agent to sell tickets in a lottery is void. Mechem on Agency, § 38; Rolfe v. Delman, 7 Rob. (N.Y.) 80; Mechem, § 541-45.

Mr. C. Ira Krebs and Mr. S. H. Lewis, for respondent.

An agent who has received money from, or in behalf of, his principal, cannot defeat an action brought by the principal to recover on the ground that the contract under which the money was paid, or the transaction from which it was realized, or the purpose to which it was devoted, was illegal. Armstrong v. Exchange National Bank of Chicago, 133 U.S. 433-470; The Planters' Bank of Tennessee v. Union Bank of Louisiana, 16 Wall. 483; McBlair v. Gibbs, 17 How. 232; Brooks v. Martin, 2 Wall. (U.S.) 70; Mechem on Agency, § 526; Dunlap's Paley on Agency, p. 62, par. 8; Ewel's Evans Agency, 37n-327n; Story on Agency (7th ed.), p. 620; Wharton's Com'ts on Agency and Agents, § 250; Faikney v. Reynous, 4 Burr. 2069; Farmer v. Russell, 1 Bos. & P. 296; Armstrong v. Toler, 11 Wheat. 258. The agent on receipt of the money of his principal becomes the trustee of the principal, and a new contract arises supported by a legal consideration. The illegal transaction has been consummated. The money has passed into the hands of a third party, who cannot take advantage of the original transaction. Planters' Bank of Tenn. v. Union Bank of La., supra; McBlair v. Gibbs, supra; Brooks v. Martin, supra; Armstrong v. Exchange National Bank of Chicago, supra. The only two cases counsel for defendant cited are not well considered cases, and the principle there enunciated was overruled in subsequent cases. Bank v. Wallace, 61 N.H. 24; Armstrong v. Exchange National Bank of Chicago, supra.

SMITH J. MINER and BARTCH, JJ., concurring in the result.

OPINION

SMITH, J.

The plaintiff is a corporation engaged in the lottery business under the name of the Juarez Lottery, with headquarters in Mexico. It delivered lottery tickets to defendant in San Francisco, to be sold. The defendant accounted to it for something over $ 25,000 of the proceeds of the sales of such lottery tickets, and paid over that amount, but retained and failed to pay over $ 1,682.75. The plaintiff sues to recover this balance for money had and received to plaintiff's use. The defendant, in his answer, claims the tickets were valueless, and that he is not liable. The case was tried by a jury, and after hearing plaintiff's evidence the court instructed the jury to bring in a verdict for the defendant. Motion for a new trial was made by plaintiff; and granted. From the order granting a new trial the defendant prosecutes this appeal.

The evidence of plaintiff proved that it furnished lottery tickets to the defendant, and that the defendant sold them for the plaintiff, and collected $ 1,682.75 which he refused to pay over to the plaintiff. The only question raised by the appeal is, can the plaintiff recover of the defendant the money collected by him from the sale of the lottery tickets which he received from plaintiff, and sold for it? The transaction took place in San Francisco. The laws of California were introduced in evidence, and, among other things, provide (Pen. Code, § 321): "Every person who sells, gives, or in any manner whatever furnishes or transfers to or for any other person any ticket, chance, share or interest, or any paper, certificate or instrument purporting or understood to be or to represent any ticket, chance, share or interest in or depending upon the event of any lottery, is guilty of a misdemeanor." It is not denied that the plaintiff and defendant together set about to deliberately violate this statute, and deliberately intended and contrived together to commit, and did commit, the crime inhibited by it.

The contention on the part of the respondent is that, the defendant being an agent of plaintiff, and having received these lottery tickets as its agent, and having sold them, he cannot question the right of his principal to an accounting by reason of any defect in their title, or for the reason that in fact no value was parted with when the tickets were sold. The proposition, as stated by respondent in his brief, is as follows: "An agent who has received money from or in behalf of his principal cannot defeat an action brought by the principal to recover it upon the ground that the contract under which the money was paid, or the transaction from which it was realized, or the purpose to which it was devoted, was illegal." Many authorities are cited which sustain this proposition. See Planters' Bank of Tennessee v. Union Bank of Louisiana 83 U.S. 483, 16 Wall. 483, 21 L.Ed. 473; McBlair v. Gibbes, 58 U.S. 232, 17 HOW 232, 15 L.Ed. 132; Brooks v....