Turle v. Sargent

Decision Date16 December 1895
Docket Number9594--(173)
CourtMinnesota Supreme Court

Appeal by plaintiff from an order of the district court for St Louis county, C. L. Lewis, J., denying a motion for a new trial. Affirmed.

Order affirmed.

McCordic & Crosby and Billson, Congdon & Dickinson, for appellant.

The fact that the giving of the original note was induced by the agreement of Turle not to institute criminal proceedings against Hooker, did not invalidate the note. Where a criminal prosecution has not been instituted, even an express agreement not to institute such proceedings is not illegal unless it be also shown that in fact a criminal offense had been committed. Steuben Co. Bank v. Mathewson, 5 Hill, 249; Swope v. Jefferson F. Ins. Co., 93 Pa. 251; Deere v. Wolff, 65 Iowa 32, 21 N.W. 168; Catlin v. Henton, 9 Wis. 476; Schultz v Catlin, 78 Wis. 611, 47 N.W. 946. The original note being given as collateral security for the indebtedness of Hooker, was supported by sufficient consideration. Close v. Hodges, 44 Minn. 204, 46 N.W. 335; Lundberg v. Northwestern Elevator Co., 42 Minn. 37, 43 N.W. 685; Combination S. & I. Co. v. St. Paul City Ry. Co., 47 Minn. 207, 49 N.W. 744; Rosemond v. Graham, 54 Minn. 323, 56 N.W. 38; Haugan v. Sunwall, 60 Minn. 367, 62 N.W. 398; Bank of Montreal v. Richter, 55 Minn. 362, 57 N.W. 61; American L. & T. Co. v. Billings, 58 Minn. 187, 59 N.W. 998; 1 Daniel, Neg. Inst. §§ 184, 185, 825-827, 832; Jones, Pledges, §§ 107, 108, 110, 111, 113, 114; Colebrook, Collat. Secur. §§ 10, 20, 22; Swift v. Tyson, 16 Pet. 1; Railroad Co. v. National Bank, 102 U.S. 14; 30 Am. Law Reg. pp. 698, 699, 704. The transaction involving the giving and acceptance of the original note, even though as collateral security, being completely executed, it was immaterial whether there was a consideration supporting it. Turle's right to the security became vested and complete even though the giving of the security was a voluntary matter. The security being once perfected cannot be avoided for want of a new consideration. Close v. Hodges, supra, 206; American L. & T. Co. v. Billings, supra. If the original note was supported by a consideration, even though held as collateral security only, its surrender was a sufficient consideration for the notes given in its place. 1 Daniel, Neg. Inst. § 827; Colebrook, Collat. Secur. § 15. Notes given in place of the original note, including the note in suit, were not affected by any illegal agreement which Turle may have entered into at the time of the execution of the original note. See 1 Daniel, Neg. Inst. § 207; Wald's Pollock, Cont. 322. The test whether a demand connected with an illegal transaction is capable of being enforced at law is whether the plaintiff requires the aid of the illegal transaction to establish his case. Armstrong v. American Ex. Bank, 133 U.S. 433, 10 S.Ct. 450; Swan v. Scott, 11 S. & R. 155; Chase's Exrs. v. Burkholder, 18 Pa. 48; Woodworth v. Bennett, 43 N.Y. 273; Chitty, Cont. 972 (11th Ed.) c. IV, § 1, note d, and cases cited. Faikney v. Reynous, 4 Burr. 2069; Armstrong v. Toler, 11 Wheat. 258; Smith v. Barstow, 2 Doug. (Mich.) 155, and cases cited; Feret v. Hill, 15 C. B. (80 E. C. L.) 207; Anheuser-Busch Brewing Assn. v. Mason, 44 Minn. 318, 46 N.W. 558; Tracy v. Talmage, 14 N.Y. 162; Read v. Anderson, L. R. 13 Q. B. D. 779, 783; Gresham v. Morrow, 40 Ga. 487; Drake's Ex'r v. Chandler, 18 Gratt. 909; Mason v. Campbell, 27 Minn. 54, 6 N.W. 405; Early v. Mahon, 19 Johns. 147; Gwinn v. Simes, 61 Mo. 335; Cronyn v. Griffiths, 18 Up. Can. Q. B. 396; Robinson v. Green, 3 Metc. (Mass.) 159; Hartford F. Ins. Co. v. Chicago, M. & St. P. Ry. Co., 62 F. 904; Ewell v. Daggs, 108 U.S. 143, 2 S.Ct. 408; Greenhood, Pub. Pol. rules 14 and 28. The notes given subsequent to the first, and especially the note in suit, constituted new contracts, based upon legally adequate consideration, and not upon any unlawful inducements. Neibles v. Minneapolis & St. L. Ry. Co., 37 Minn. 151, 33 N.W. 332, and cases cited; Leake, Cont. 533, and cases cited; Pollock, Cont. 158; Haigh v. Brooks, 10 A. & E. 309; Smith v. Smith, 13 C. B. (N. S.) 418; Begbie v. Phosphate Sewage Co., L. R. 1 Q. B. D. 679; Westlake v. Adams, 5 C. B. (N. S.) 248; Edgeware Board v. Harrow Gas Co., L. R. 10 Q. B. 92; 1 Addison, Cont. 2-14; Johnston v. Allen, 22 Fla. 224; Wolford v. Bowen, 57 Minn. 267, 59 N.W. 195.

Cash, Williams & Chester, for respondents.

To substantiate their defense, it was not necessary for defendants to show that in fact a crime had been committed, or that criminal proceedings had been instituted. Steuben Co. Bank v. Mathewson, 5 Hill, 249; Catlin v. Henton, 9 Wis. 476; Schultz v. Catlin, 78 Wis. 611, 47 N.W. 946; Gorham v. Keyes, 137 Mass. 583; Gardner v. Maxey, 9 B. Mon. 90; Greenhood, Pub. Pol. pp. 459, 451, note 1; Seear v. Cohen, 45 L. T. N. S. 589 (1881); Welborn v. Norwood, 1 Tex. Civ. App. 614, 20 S.W. 1129; Wegner v. Biering, 65 Tex. 506; Smith v. Steely, 80 Iowa 738, 45 N.W. 912. The original note must rest either upon an illegal consideration or upon no consideration whatever, and the case falls within the precise principle laid down in the cases of Smith v. Steely, supra; Schultz v. Catlin, supra; Security Bank v. Bell, 32 Minn. 409, 21 N.W. 470; Holm v. Sandberg, 32 Minn. 427, 21 N.W. 416; Osborne v. Doherty, 38 Minn. 430, 38 N.W. 111; In re Hess Estate, 150 Pa. 346, 24 A. 676. The mere reducing the amount of a note which is wholly illegal or wholly without consideration is clearly not a consideration for the reduced amount. Collins v. Blantern, 2 Wilson, 341, 1 Smith, Lead. Cas. (9th Am. Ed.) 646, 654; Campbell v. Sloan, 62 Pa. 481; Tate v. Wellings, 3 T. R. 531; First Nat. Bank v. Plankinton, 27 Wis. 177; Wegner v. Biering, supra; Bick v. Seal, 45 Mo.App. 475. See, also, Groesbeck v. Marshall, 44 S. Car. 538, 22 S.E. 743.


*T, C. J. [2]

1. This is an action upon a promissory note of the defendants for the sum of $ 5,826.67, payable to the plaintiff. The defendants admitted the making of the note, but alleged as a defense that there was no consideration for the same; and, further, that it was given in renewal of a former note for $ 8,000, given by defendant William C. Sargent, and that the only consideration for this last note was the agreement of the plaintiff not to prosecute criminally one William T. Hooker for misappropriating the sum of $ 8,000, belonging to the plaintiff. The reply was simply a general denial. Trial by the court without a jury, and judgment ordered for the defendants, and from an order denying his motion for a new trial plaintiff appealed.

The trial court found that no consideration was given for the note in suit, or for any of the notes of which it was a renewal, other than the consideration for the original note of $ 8,000. As to this original note the court found: That for some two years prior to the date thereof -- February 1, 1890 -- the plaintiff and Hooker were partners in business, which was under the management of the latter, but the former furnished all the capital therefor. That while they were such partners Hooker misappropriated about $ 8,000 of the funds of the firm, but in fact, as between the parties, they were the funds of the plaintiff. Thereupon plaintiff threatened the defendant William C. Sargent, the personal friend of Hooker, to cause criminal proceedings to be instituted against him for such misappropriation, unless the matter was adjusted; and that the only consideration for the giving of the original note was the agreement of the plaintiff not to so prosecute him. That this note was not given or taken in payment of Hooker's debt, or the amount of this misappropriation; neither was there any agreement for any extension of time to Hooker for the payment of his debt to the plaintiff in consideration of the giving of the note by the defendant. This note was renewed several times until September 29, 1892, when the sum $ 8,826.67, appearing to be due on the original note as renewed, was voluntarily and without any consideration therefor reduced to the sum of $ 5,826.67, and the note therefor in suit was signed by the defendant William C. Sargent, and indorsed before delivery by his mother, the defendant Mary C. Sargent, solely at his request, and without any consideration.

2. If the evidence justifies the findings of fact, the conclusion that the defendants are entitled to judgment is correct.

The plaintiff, however, while conceding that the evidence supports the finding that the original note was given upon his agreement not to prosecute Hooker, denies that this was an illegal consideration, or that it was the only consideration for the note. As to the first, his claim is that, the plaintiff and Hooker being partners, it was a legal impossibility for the latter to embezzle partnership funds, and therefore his misappropriation of the funds was not a crime, and the agreement not to prosecute him was perfectly harmless. We are not prepared to concede this proposition, either as a question of law or morals. G. S. 1894, § 6710. But we are not called upon to decide the question, for, if the promise not to prosecute was not illegal, because it related to a supposed crime which it was impossible for Hooker to commit, it necessarily follows that a promise to refrain from doing that which it is legally impossible to do cannot be a valid consideration for the execution of a promissory note. Therefore if, as the court has found, there was no other consideration for this original note except such promise, it was wholly without any consideration.

The plaintiff's counsel, however, insists that the inevitable inference from the special facts found by the court is that the note was given as...

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