Woodson v. Hopkins

• Decision Date: 27 February 1905
• Citation: 85 Miss. 171,37 So. 1000
• Court: Mississippi Supreme Court
• Parties: SAUL T. WOODSON v. JEREMIAH R. HOPKINS

37 So. 1000

85 Miss. 171

SAUL T. WOODSON v. JEREMIAH R. HOPKINS

Supreme Court of Mississippi

February 27, 1905

FROM the chancery court of Warren county, HON. WILLIAM P. S VENTRESS, Chancellor.

Hopkins appellant, was complainant, and Woodson, appellee, defendant in the court below. From a decree in complainant's favor the defendant appealed to the supreme court. The facts are fully stated in the opinion of the court.

Reversed and bill dismissed.

McLaurin & Thames, and McLaurin, Armistead & Brien, for appellant.

Appellant's contention in this case is that the bill seeks to sustain appellee in carrying on an illegal business against the laws and public policy of the state, and that, this being true, he has no standing in equity under the rule, that he does not come into equity with clean hands. This proposition relates entirely to the right of the plaintiff to maintain this suit without reference to any acts of the defendant at all, and our first inquiry in this case is, What is the attitude of Hopkins, appellee, complainant in the court below, and whether or not he has any standing before this court, and will this court entertain or inquire into the acts of the defendant at all? If it be true that appellee, complainant in the court below, is undertaking to seek the aid of a court of equity to carry on an illegal business contrary to the laws and public policy of the state of Mississippi, on this fact when once discovered, the court of its own motion would dismiss his bill and deny the relief. The doctrine that every plaintiff must come into a court of equity with clean hands has special reference to the question of conducting an illegal business and the enforcement of illegal contracts. By reference to 1 Pomeroy's Eq. Jur., 438, the court will find the following: "Another very common occasion for invoking the principle (of clean hands) is illegality. Wherever a contract or other transaction is illegal and the parties thereto are in contemplation of law in pari delicto it is a well-settled rule, subject only to a few special exceptions depending on other considerations of policy, that a court of equity will not aid a particeps criminis either by enforcing the contract or obligation while it is yet executory, nor by relieving him against it, by setting it aside, nor by enabling him to recover the title and property which he has parted with by this means. The principle is thus applied in the same manner when the illegality is merely malum prohibitum, being in contravention to some positive statute, and when it is malum in se, and as being contrary to public policy or to good morals."

Hopkins cannot demonstrate to the court that he has any claim whatever against Woodson without resort to the illegal business carried on by him under the name of Shaw & Co., and the authorities are uniform that wherever an illegal business is being conducted, if in the assertion of any right the complaining party is compelled to resort to the illegal business to prove his rights to relief, then all relief will be denied him by the courts. This principle is announced in the leading case of Gilliam v. Brown, 43 Miss. 641.

The court will bear in mind that this case does not present the question of any executed transactions. There is no allegation in the bill that there are any funds in the hands of Woodson which have come into his hands through executed contracts carried on in such illegal business. On the contrary, the answer denies that there are funds arising from any transactions in carrying on the business of Shaw & Co. in the hands of said Woodson.

On page 660 of the case of Gilliam v. Brown, the court will find the following language: "The general principle laid down in a great number of cases is to this effect: that if the contract grows out of an illegal act a court of justice will not enforce it, but if the promise be unconnected with the illegal act and is founded on a new consideration, it is not tainted by the act."

"It has been observed that the test whether a demand connected with an illegal act can be enforced is, whether the plaintiff requires any aid from the illegal transaction to establish his case." And on page 661, et seq.: "Subjecting the case at bar to this test, it is manifest that the demand of W. T. Brown against his brother's estate must be traced back to the illegal traffic in the cotton, putting the claim in the simplest form of speech, and it takes this legal form." We contend, if the court please, that Hopkins can prove no rights to the court which are entitled to any protection whatever without falling within the test set forth in the above quotation, which is by having a resort to the illegal business of Shaw & Co. In other words, he can predicate no rights arising out of the business of Shaw & Co. which would not involve the question of the manner of conducting the business of Shaw & Co., and that would bring to the knowledge of the court the fact that said business is carried on in violation of law, and therefore the court would at once decline to enforce any contracts or any rights, legal or equitable, growing out of such illegal business. Said Hopkins could not show the business relations existing between him and Woodson in reference to the business of Shaw & Co. without it becoming at once pertinent to inquire what kind of a business was that of Shaw & Co., in order to determine the status and rights of the respective parties, and when this is done the court necessarily becomes aware of the fact that the business of Shaw & Co. is illegal, and the doctrine of hands off at once applies. Replevin was instituted for all tangible property, as shown by the original bill.

On page 664 of the same opinion of Gilliam v. Brown, the court says: "So long as an illegal contract is in fieri in the course of execution, neither party can have a remedy grounded upon it, either for its enforcement or for damages for any breach of it," citing authorities. The court goes on in that opinion, and holds that where the contract has been executed, and one party is in possession of all the gain, then such party will not be heard to plead the illegality of such contract against a division of the gains, because, says the court, all the harm that can enure to the public by an infraction of the law has already accrued. But in this case this point does not arise, and it is not claimed in the bill that the defendant, Woodson, is in possession of any gains arising out of the conduct of the illegal business, but that he is claiming said business as his own, and undertaking to carry it on without reporting the conduct of it to the said Hopkins. It can make no difference that this suit is one in chancery, for, says the court in the same case above mentioned, "This can make no difference, for a court of equity will no more lend its aid to an iniquitous transaction than a court of law."

In the case of McWilliams v. Phillips, 51 Miss. 196, the court held, as stated in the syllabus, "Where all the parties participate in the violation of law, the court will not, where the contract is executed, interfere for the relief of either party, but will leave them in their respective conditions. Where the contract is executory, the court will likewise refrain from lending its aid to carry it into effect." On this same point will be found the case of Wooten v. Miller, 7 Smed. & M., 380.

W. J. Voller, and Catchings & Catchings, for appellee.

It is contended that even admitting that Hopkins could recover his property in a court of law, notwithstanding the alleged illegality of the business, a court of equity will not grant him any relief upon the maxim that "he who comes into equity must come with clean hands."

The article of the Am. & Eng. Ency. Law on illegal contracts, from which most of the authorities cited by counsel were obtained, contains an elaborate description of what constitutes illegality in a contract in the sense of that chapter, and it is significant that it is not even suggested that contracts are illegal in that sense because they are usurious.

Illegal contracts cannot be enforced. Contracts evidencing loans of money at usurious interest can be enforced, except as to the interest provided for. Indeed, unless the defendant in a suit on a usurious contract pleads usury, the contract will be enforced as a whole. In the case of an illegal contract, or an immoral contract, the court will itself refuse to grant relief, although the illegality or immorality of the contract be not specially pleaded.

We submit that the very contracts which Woodson made as the agent of Hopkins, calling for usurious interest from the borrowers, were not in themselves illegal in the sense in which the cases cited by counsel used that term. How, then, can it be that a contract of employment can be adjudged so illegal as to be unenforceable merely because the employment contemplated the exacting of usurious interest from third persons?

An examination of our statute on the subject of usury demonstrates that it was not intended to make the contract illegal. Section 2348, Code 1892 after defining what shall constitute the legal rate of interest, declares, "And if a greater rate of interest than ten per centum shall be stipulated for or received in any case, all interest shall be forfeited, and may be recovered back, whether the contract be executed or executory."

The only penalty imposed upon the making of usurious contracts is the forfeiture of the interest, and this penalty can only be enforced by the party from whom the usurious interest is exacted. The statute gives no right to any third person to assert any right or maintain any defense upon the ground of usury, and this was the rule at common law.

"It is well settled by a multitude of decisions...