author: Mr. Justice Scott

text:
    Burns Archer et al. v. The Terre Haute and Indianapolis Railroad Company.

      Filed at Mt. Vernon January 18, 1882

      Rehearing denied May Term, 1882.

    1. Jurisdiction in chancery—remedy at law. Where a party has a full and adequate remedy at law, a court of equity will not assume jurisdiction, but will remit the party to whatever remedy or defence he may have in the courts where such matters are properly cognizable.
    2. Injunction—to restrain collection of taxes—remedy at law. A court of equity will not enjoin a county collector from applying for judgment against the right of way of a railroad company for taxes due on its capital stock, on the ground the complainant claims to have succeeded to such company’s rights, the defence, if any, being available at law, and this especially when the complainant has obligated itself by contract to pay such taxes.
    3. Same—where railroad company having the use of another road agrees to advance money to the latter to pay its taxes. A court of equity will not give a party relief against that which it is his duty to do, by contract or otherwise. So, where a complainant corporation has agreed with a railway company, for a consideration, to make advances to pay its taxes, when necessary to maintain its organization, and has been put into possession of all its property, it will not be allowed to enjoin the collection of such taxes which are proper and legal, on the assumed ground of its ownership of the property.
    4. Same—whether foreign corporation may complain of tax against a domestic corporation. A foreign corporation can not interfere by bill to enjoin taxes legally or illegally assessed, under the laws of this State, against a domestic corporation, unless the former will itself be injuriously affected by the collection of such taxes, as to its property or otherwise.
    5. Taxation—as to ownership of property—not lost by contract for its use, etc. A contract between two railroad companies, whereby one is to take charge of the road of the other, with all its equipments, and operate the same as a continuous line with its own line, and exercise all the rights and privileges of the other under its franchise, for a consideration named, does not change the ownership of any of the property of the latter company, and the rolling stock of such company is liable to distraint for taxes assessed upon its capital stock. Parting with the possession and use of a thing does not always imply a parting with the absolute ownership.
    6. Kailroad—power to lease to a foreign corporation—a charter construed. Without enabling legislation a railroad company possesses no power to lease its road to a foreign corporation, and surrender its road and franchises into its control.

      7. Under an amendment to a railroad charter, providing that the company shall have power to consolidate and connect its road with any other continuous line of railroad, either in this State or in the State of Indiana, upon such terms as may be agreed upon between the companies uniting or connecting, and for that purpose giving full power to the company to make and execute such contracts with any other company as will secure the object of such consolidation or connection, the domestic corporation can only do one of two things: either consolidate its road with another railroad in this or the State of Indiana, or maleé an agreement for connection with such road, so as to secure a continuous line. Under such law it has no power to lease its road to a foreign railroad company.
    8. Same—contract, whether for consolidation, or merely a connection with another road. A contract between a railroad company of this State and a railroad company of Indiana, provided that upon the completion of the two roads to the State line, so as to connect, the Indiana company should take charge of and operate the road in this State, with its equipments, for 999 years, for which it was to be allowed sixty-five per cent of the gross receipts from all traffic moved on the line, or business done thereon, as a consideration for working and maintenance expenses, the remaining thirty-five per cent to be appropriated—first, to the payment of interest on the first and second mortgage bonds of the Illinois company, according to their priority; and second, all the surplus of said thirty-five per cent to be paid over to the Illinois company semi-annually, to be disposed of by it for the benefit of its stockholders; also, that if the thirty-five per cent should not, for any cause, be sufficient in amount to protect the interest on the mortgage bonds, and the sinking fund therefor, as they matured, together with the payment of the taxes, and proper costs of maintaining organization, so that the rights of stockholders might be preserved, then, in that event, the lessees should advance for the company whatever might be needed, to be accounted under yearly averages of the lease during the contract: Held, that the agreement was not a lease of the Illinois road, nor a contract of consolidation, but one of connection between the two roads, only, leaving the Illinois corporation the owner of the road, the franchise, and all its rolling stock, though in the use and under the control of the Indiana company.
    Appeal from the Circuit Court of Effingham county; the Hon. William C. Jones, Judge, presiding.
    Messrs. Wise & Davis, for the appellants:
    The pretended lease from the St. Louis, Vandalia and Terre Haute Eailroad Company to the Terre Haute and Indianapolis Eailroad Company is null and void. Bess. Laws of 1865, p. 102.

      The lease being null and void, appellee can only be regarded as the servant of the St. Louis, Vandalia and Terre Haute Railroad Company, or as the custodian of its property. Thomas v. Railroad Co. 11 Otto, 71; Ottawa, Oswego and Fox River Valley R. R. Co. v. Black, 79 Ill. 262; Flays v. Ottawa, Oswego and Fox River Valley R. R. Co. 61 id. 422.
    The State has the common law right to sue for taxes. Ryan v. Gallatin County, 14 Ill. 78; Dunlap v. Gallatin County, 15 id. 7; Town of Geneva v. Cole, 61 id. 398.
    If the lease be valid, the appellee, having therein agreed to advance for the lessor company sufficient funds to pay the taxes assessed against the latter company, is liable to a suit in behalf of the State and said counties for said taxes under said agreement, the same being for the benefit of the authorities entitled to the taxes. Hartford Fire Ins. Co. v. Olcott, 97 Ill. 439, and cases therein referred to on page 454; Illinois Fire Ins. Co. v. Stanton, 57 id. 354; Gantzert v. Hoge, 73 id. 32; Rogers et al. v. Herron et al. 92 id. 583.
    Messrs. Decius & Everhart, for the appellant John W. Goodwin, in addition to the foregoing points, made the following among others:
    As a general rule a court of equity will not interfere to restrain a tax on the ground alone that the tax is illegal.' 3 Wait’s Actions and Defences, 719, 721.
    This same tax has been held by this court to be legal. St. Louis, Vandalia and Terre Haute R. R. Co. v. Swrrell, 88 Ill. 535; Hopkins, Receiver, v. Taylor, 87 id. 436.
    The legality of taxing capital stock has repeatedly been sustained by this court. Porter v. Rockford, Rock Island and St. Louis R. R. Co. 76 Ill. 565; Huck et al. v. Chicago and Alton R. R. Co. 86 id. 352; Chidago, Burlington and Quincy R. R. Co. v. Siders, 88 id. 320.
    It makes no difference to the public in which name the assessment of taxes is made. A general or special property is sufficient. Kennedy v. St. Louis, Vandalia and Terre Haute R. R. Co. 62 Ill. 396.
    A foreign corporation has not the right to take control of the rights, property and franchises of a domestic corporation, and place itself, by lease or otherwise, between the taxing power and its property.
    It is well settled that a court of equity will never entertain a bill to restrain the collection of a tax, or an officer from collecting the same, except in eases where the tax is unauthorized by law, or when it is assessed upon property not. subject to taxation. Cook County v. Chicago, Burlington and Quincy R. R. Co. 35 Ill. 460; Village of Nunda v. Village of Chrystal Lake, 79 id. 311.
    Mr. S. S. Whitehead, for the appellant Burns Archer:
    If appellee’s claim is based upon the hypothesis of title to the property, either real or personal, it is fully estopped by its acts and conduct in inducing the assessment to be made against the lessor company. Baker v. Pratt, 15 Ill. 571, citing Welland Canal Co. v. Hathaway, 8 Wend. 483; Degell v. Odell, 3 Hill, 218; Leeper v. Hersman, 58 Ill. 218; Chicago and Alton R. R. Co. v. Shea, 64 id. 471.
    The trustees of a railroad company, if they do business in the name of the company, are liable to be sued in that name, and their property, i. e. the property of the trustees, is responsible for the liabilities incurred by the railroad company while its trustees are transacting business under that name. Wilkinson et al. v. Fleming, 30 Ill. 353.
    Lessees of railroads have always been held responsible for .the obligations of the lessors, when those obligations affect the public. Illinois Central R. R. Co. v. Kanouse, 39 Ill. 278; Toledo, Peoria and Warsaw Ry. Co. v. Rumbold, 40 id. 143; 1 Redfield on Railways, (5th ed.) 618-620; Chicago and Rock Island R. R. Co. v. Whipple, 22 Ill. 105; Ohio and Mississippi R. R. Co. v. Dunbar et al. 20 id. 623; Peoria

      and Rock Island Ry. Co. v. Coal Valley Mining Co. 68 id. 489.
    The Terre Haute and Indianapolis Railway Company is, while lessee, the St. Louis, Vandalia and Terre Haute Railroad Company. West v. St. Louis, Vandalia and Terre Haute R. R. Co. 63 Ill. 545.
    Messrs. Gilmore & White, Mr. T. J. Golden, and Mr. Jno. G. Williams, for the appellee:
    The contract of February 10, 1868, between the St. Louis, Vandalia and Terre Haute Eailroad Company and the Terre Haute and Indianapolis Eailroad Company is valid. Both parties thereto had full authority under the law to execute it. Private Laws of 1867, sec. 13, p. 678.
    That contract vested in appellee the absolute ownership of the rolling stock or equipment received by it under the contract.
    The Terre Haute and Indianapolis Eailroad Company acquired its title to the possession of the property embraced in this contract, free from the lien of taxes assessed against the capital stock of the St. Louis, Vandalia and Terre Haute Railroad Company in 1873, 1874 and 1875. Gaar, Scott & Co. et al. v. Hurd, 92 Ill. 315; Binkert v. Wabash Ry. Co. 98 id. 203.
    Equity will interfere to prevent a sale of property which will create a cloud upon the real owner’s title thereto. Christie et al. v. Hale, 46 Ill. 117; Groves et al. v. Webber, 72 id. 606.
    Equity will also interfere to prevent a multiplicity of suits, or to prevent a simple trespass, if there be danger of irreparable injury. Deming et al. v. James, 72 Ill. 78; Ryan v. Brown et al. 18 Mich. 197; Osborn v. Bank, 9 Wheat. 738; McCreary v. Sutherland, 23 Md. 471; Binkert v. Wabash Ry. Co. 98 Ill. 203; High on Injunctions, sec. 796.
    Mr. John T. Dye, also for the appellee.
   Mr. Justice Scott

delivered the opinion of the Court:

The hill in this case was exhibited by the Terre Haute and Indianapolis Eailroad Company, a corporation existing under the laws of the State of Indiana, in the circuit court of Effingham county, and as amended was against the collectors of taxes in several counties named, and was to enjoin taxes levied for State, county, and other purposes, on the capital stock of the St. Louis, Vandalia and Terre Haute Eailroad Company, for the years 1873 to 1875, both years inclusive. At the same time the taxes were levied on the capital stock of the company, taxes for the same purposes, for the same years, and by the same authorities, were also levied on the tangible property of the company. The bill contains an allegation the taxes assessed on the tangible property of the company have been paid by complainant; but whether they have or not, no relief is asked against such taxes. On the hearing in the circuit court, on the issues formed by the pleadings, and on consideration of the evidence submitted by the respective parties, the court decreed substantially the relief asked by the bill. As the litigation concerns the public revenue, the collectors of the several counties named as defendants have brought the case directly to this court on appeal.

The bill contains an allegation the taxes levied and assessed on the capital stock of the St. Louis, Vandalia and Terre Haute Eailroad Company, for the years 1873, 1874 and 1875, have been added to the amounts assessed in the several counties for the year 1878 on the property of the same corporation. A willingness is expressed by the bill to pay the taxes for the year 1878, but the several officers charged with the collection of taxes insist on collecting, with the taxes of 1878, the taxes remaining unpaid for the former years, as previously stated. The litigation, therefore, has respect only to the taxes assessed on the capital stock of the St. Louis, Vandalia and Terre Haute Railroad Company for the years 1873, 1874 and 1875. By the bill, the validity of the taxes for those years is challenged, on account of some irregularity on the part of the Board of Equalization; but as the objection is not pressed upon the attention of the court in the argument, it will not be necessary to remark on this branch of the case, further than to say that similar objections taken to assessments on the capital stock of railroad corporations have been held in former decisions of this court to be unavailing, and the taxes decided to be valid. As the discussion proceeds, the taxes assessed on the capital stock of the St. Louis, Vandalia and Terre Haute Eailroad Company will be treated as valid assessments, and as valid and subsisting liens on the property of that corporation.

It is a proposition so plain it will not be controverted, that a foreign corporation may not interfere, by bill, to enjoin taxes, legally or illegally assessed under the laws of this State, against a domestic corporation, unless the corporation complaining will itself be injuriously affected by the collection of such taxes, as to its property or otherwise. Two causes are assigned as grounds for 'relief,—first, the several collectors claim the right to collect the taxes assessed on the capital stock of the St. Louis, Vandalia and Terre Haute Railroad Company, for the years before mentioned, by distraint and sale of property, of which complainant obtained possession under a contract entered into with that company on the 10th day of February, 1868, and under which it still holds the • property, and unless restrained, defendants will enforce their demands; and second, it is said defendants unlawfully set up a pretended right to advertise for judgment and sale to pay such taxes, property acquired by complainant of the St. Louis, Vandalia and Terre Haute Eailroad Company, known and designated as right of way, and that unless restrained defendants will take judgment against such right of way and proceed to sell it. The doing of either act it is charged defendants propose to do, it is alleged, will work irreparable injury to complainants.

The property it is charged defendants are about to distrain for the payment of such taxes, is conceded to be the rolling stock with which the railroad of the company owing the taxes was originally equipped. That property, it seems, came into the possession of complainant under the contract of February 10, 1868, before mentioned, on the completion of the St. Louis, Vandalia and Terre Haute Railroad, some time in the year 1870, and has ever since been in its control. The question most elaborated is, whether complainant has such an' ownership in the rolling stock in its possession as will be protected from seizure for the payment of taxes owing by the corporation to which it previously belonged. It is to be observed the bill contains no allegation of ownership of such property in complainant, nor is the character of its interest therein defined. It is referred to as property “in possession” of complainant, as having been acquired under the contract of February 10, 1868; but no definition is given of the interest claimed, whether as lessee, or owner, or otherwise. It will perhaps assist to a better understanding of the case if the principal provisions of the contract under which complainant obtained possession of the rolling stock and line of road owned by the St. Louis, Vandalia and Terre Haute Railroad Company shall be first noted. That portion of the contract deemed necessary to an understanding of the questions discussed may be briefly stated.

It is set forth that in consideration complainant would, without delay, construct a first-class railroad, being an extension of the road it then owned from Indianapolis to Terre Haute, from the latter city to the State line of Indiana, upon such location as would connect properly and directly with the St. Louis, Vandalia and Terre Haute Railroad at the State line of Illinois, it being desirable such lines of road, when connected, should be operated by the Terre Haute and Indianapolis Railroad Company, it was agreed that upon the completion of the road between East St. Louis and the Indiana State line on the route projected, complainant should take charge of and- operate the same, with its equipments, for a period of nine hundred and ninety-nine years, for which complainant was to be allowed sixty-five per cent of the gross receipts from all traffic moved over the line, or business done thereon, as a consideration for working and maintenance expenses, the remaining thirty-five per cent to be appropriated, first, to the payment of interest on the first and second mortgage bonds of the St. Louis, Vandalia and Terre Haute Railroad Company, according to their priority; and second, all the surplus of said thirty-five per cent to be paid over to the St. Louis, Vandalia and Terre Haute Bailroad Company, semi-annually, to be disposed of by it for the benefit of its stockholders.

It was further provided, if the thirty-five per cent should not, from any cause, be sufficient in amount to protect the interest on the mortgage bonds and the sinking fund therefor, as they matured, from time to time, together with the payment of taxes and proper costs of maintaining organization so the rights of stockholders may be preserved, then, in that event, the lessees shall advance for the company whatever amount may be needed, to be accounted for under yearly averages of this lease during the contract. It was also further agreed, complainant should enjoy all the rights, powers and privileges of the St. Louis, Vandalia and Terre Haute Bailroad Company, so far as the same may be needful to maintain and operate the road; also, to impose and collect tolls and rates of transportation, and to do all other acts and things as fully and effectually as that corporation could do if operating the road itself, it being always understood and agreed the gross proceeds from through or joint traffic, or business, shall be divided on the pro rata basis per mile for the distance moved on the road of each party.

It will be noticed the parties themselves treat the instrument signed by them as a “contract, ” or “lease, ” and in the body of the writing the words “lease” and “lessee” are used; but it will hardly bear the latter definition, and yet find any sanction in the law for the making. The general law of 1865 made it unlawful for any railroad company of Illinois to consolidate its road with any railroad out of the State, or to lease its road to any railroad company out of the State, without having first obtained the written consent of all the stockholders of such railroad company residing in this State. There is no pretense the St. Louis, Vandalia and Terre Haute Railroad Company had the written consent of all or any of the resident stockholders, obtained before the execution of the contract of February 10, 1868. Even if a subsequent ratification could be regarded as equivalent with precedent consent, the evidence of a ratification at the stockholders’ meeting in 1872 is not so satisfactory as to give it any force. It does not appear whether any of the resident stockholders were present at that meeting. It was a stockholders’ meeting, but whether they were residents of this State is not proven, nor can any presumptions be indulged they were, or that any of them were residents of this State. Outside of the terms of the enabling law it is obvious a railroad company possesses no power to lease its road to a foreign corporation, and surrender its road and franchises into its control.

Counsel refer to section 13 of the act of 1867, amendatory of its charter, as conferring power upon the Illinois company contracting, to make the agreement of February 10, 1868. That section, it will be noticed, confers no power on the company to lease its road to a foreign corporation, and surrender to such corporation its franchises. . By that act it was provided the company shall have power to consolidate and connect its railroad with any other continuous line of railroad, either in this State, or in the State of Indiana, upon such terms as may be agreed upon between the companies uniting or connecting, and for that purpose full power was given to the company to make and execute such contracts with any other company as would secure the object of such consolidation or connection. It is plain that under this amendment to its charter the company could only do one of two things: either consolidate its road with another railroad in this State or in the State of Indiana, or make an agreement for connection with such road, so as to secure a continuous line. The agreement of February 10, 1868, was not for the consolidation of the roads of the companies signing it. Both corporations retained their separate existence, and it does not appear it was ever contemplated the two roads should be merged into one, and both corporations pass to one management. The very terms of the agreement are inconsistent with the idea of consolidation. It follows, then, it was simply a contract for connecting the railroads of the respective companies, so as to secure a continuous line between distant terminal points. Both companies signing the agreement had full authority from the States creating such corporations to make such an agreement, and placing that construction upon it, the contract is valid, otherwise it would be void, because ultra vires.

Construing the agreement, as must be done, as a contract between the companies for connecting their respective railroads, so as to secure a continuous line between certain points, what interest did complainant acquire under the contract in the rolling stock and franchises of the Illinois contracting company? The simplest definition, and the one most consistent with the end to be attained, is the right of possession and use,—that is, the right to use.the rolling stock for carrying passengers and conveying freights over the road, and, under the franchise, to impose and collect fares and tolls. That is the plain reading of the contract. Consistently with this construction the ownership of the rolling stock and franchise remained in the company, as before the making of the contract. Parting with the possession and use of a thing does not always imply a parting with the absolute ownership. The fact the possession and the use are parted with for a period of such duration, should the contract be performed, as that the tangible property would of necessity become worthless, does not change the character of the transaction. The franchise, the privilege of which is contracted for, is property as enduring as the contract itself. It would hardly be insisted the company had, by its contract with complainant, parted with the ownership of the franchises conferred upon it by the State. It is therefore clear the ownership of the rolling stock and the franchise remained in the company, subject only to the management by complainant, consistently with the terms of the contract. It is still the - property of the tax-debtor, and distraining the tangible property of the company for the payment of its taxes is, in no sense, taking-complainant’s property to pay taxes owing by another company.

As respects the other ground assigned for relief, should the right of way be advertised, and the several collectors' should apply for judgment against it for taxes due from the company for the years mentioned, any defence that could be made, either by complainant or the tax-debtor, could be more appropriately made in the several county courts where such proceedings may be instituted. Where a full and adequate remedy is provided in a court of law, equity will not assume jurisdiction, but will remit the party to whatever remedy or defence he may have 'in the courts where such matters are properly cognizable.

There is another reason, having great force, why this bill should be dismissed. It is, because equity will not give a party relief against that which it is his duty to do. It has already been stated that if the thirty-five per cent to be paid to the St. Louis, Vandalia and Terre Haute Railroad Company should, from, any cause, not be sufficient to protect the interest on the mortgage bonds, and sinking fund therefor, as they mature, from time to time, together with the payment of taxes and proper costs of maintaining organization so that the rights of stockholders might be preserved, then it became the duty of complainant to “advance for the company” whatever amount might be needed, to be accounted for under yearly averages during the period of the contract. No explanation could make this clause of the contract better understood than it is by its plain reading, giving to the words employed the meaning usually attached to them. Clearly it was the intention of the parties to the agreement that both the organization of the St. Louis, Vandalia and Terre Haute Eailroad Company and its property should be preserved for the benefit of its stockholders. The mortgage bonds were to be provided for as they matured, from time to time, and the taxes upon the tangible and intangible property of the company should be paid, to the end it might not be subjected to sale for the payment of either the mortgage bonds or the taxes assessed against it. That was indispensable to the preservation of the railroad property for the benefit of the stockholders and complainant. As both corporations had a vital interest in the preservation of the property, the contract in this respect is a most reasonable one for the security of both parties. It is plainly expressed, that in case the thirty-five per cent, for any reason, should not be sufficient in amount to protect the property in the particulars mentioned, complainant was obligated to “advance for the company” whatever amount might be needed,—not to loan the money to the company, as the argument assumes, but to “advance it for the company.” Advance it to whom, for the company? Evidently to the parties entitled to receive it. This is a most valuable privilege for complainant, otherwise it would have no mode of securing the property for its benefit under the contract. If the money was to he loaned to it, the debtor company might fail to apply it in reduction of the indebtedness charged upon the property, to the prejudice of complainant. It is only by advancing the money needed to parties entitled to receive, as the. contract provides, that complainant can preserve the property for its own use under the contract, or for the benefit i- of the stockholders in the ■ debtor company. The taxes involved are a legal charge upon the property of the company owing them. It is admitted by the bill the thirty-five per cent has not been, and is not, sufficient to pay all the amounts chargeable to the company for the purposes specified. The very contingency has arisen, when it becomes the duty of complainant to advance the money needed for—not to—the company for payment of these taxes. It makes no difference whether the taxes were assessed on the capital stock or the tangibleproperty of the-company. It is as much the duty of complainant to pay one tax as the other. Had complainant performed its agreement in this regard, no 'necessity would have existed to invoke the aid of a court of equity in the premises. . As before remarked, under the former decisions of this court no defence could be made to tliese taxes on its capital stock by i¡he company, and certainly complainant can urge no objection the tax-debtór could not urge. That which concludes the party owing the taxes will be equally conclusive upon all others, no matter how interested. Equitably complainant is entitled to no relief.

The decree of the circuit court will be reversed, and the bill dismissed for want of equity.

Decree reversed.

Mr. Justice Scholfield took no part in the consideration of this case.


source: Caselaw Access Project

author: Mr. Chief Justice Craig

license: Public Domain

text:
    Allen Gooch v. Heney W. Green.

      Filed at Springfield March 28, 1882.

    1. Infant—right to impeach decree. Where a decree is rendered against a minor defendant, he is entitled to his day in court, whether the right is reserved in the decree or not; and he may, even during his minority, by his next friend or guardian, file an original bill to impeach the decree, either for fraud or error appearing on its face.
    2. The fact that a decree in a suit for partition was rendered by the agreement and consent of a minor defendant’s guardian, will not preclude the minor from bringing a bill to impeach it. It is error to render a decree against a minor, unless it be on proof of the allegations of the bill.
    3. Chancery—general demurrer to hill—its effect where any good grounds for relief appear. Where a bill in chancery sets forth various grounds of relief or claims to the interposition of the court, and the defendant files a general demurrer, or moves to dismiss for want of equity, the demurrer or motion should be overruled if any of the grounds or claims be proper for its jurisdiction.
    4. Bill of review—is matter of right—when it will lie. An original bill, in the nature of a bill of review, may be brought for the purpose of impeaching a decree for fraud. It is a matter of right, and may be filed at any time, unless barred by the statute, without the leave of court, and may be brought for fraud in fact or fraud in law.
    5. Partition—must he according to interest of the parties. Where a decree for partition finds six-sevenths of the land in the petitioner, and one-seventh in the defendant, the commissioners appointed to divide the land have no authority, under then appointment, or by the statute, to give the petitioner more than his share as found in the decree, and require him to pay therefor a certain sum of money, and a decree confirming such report is erroneous.
    6. Same—fraudulent action of commissioners. It is the duty of commissioners, on partition, to make a, fair and impartial division of the lands according to the rights and interests of the parties, as declared by the judgment of the court; and if they, in the discharge of their duty, are influenced and governed by one of the parties in interest, to assign to him all the valuable and productive lands, and to the other party land of inferior quality, and less in quantity than his share, such action will be fraudulent, and will not he binding on the party injured thereby.

      Wbit of Ebbob to the Circuit Court of Cumberland county; the Hon. Wílliam C. Jones, Judge, presiding.
    Mr. E. Callahan, for the plaintiff in error:
    That an infant, who is aggrieved by the decree of a court of chancery, may file an original bill for redress on arriving at his majority, or before, by his next friend, counsel cited Loyd v. Malone et al. 23 Ill. 43; Kuchenbeiser v. Beckert et al. 41 id. 172; Richmond v. Tayleur, 1 P. Wms. 736; Newland v. Gentry, 18 B. Mon. 671; Voss v. Allen, 52 Ill. 478; Mitford’s Pleadings, 113; Ewell’s Leading Cases on Infancy, 237; Bingham on Infancy, 131.
    Messrs. Decius & Evebhaet, for the defendant in error:
    The motion to strike the bill from the files is much the same, in its nature and scope, as a demurrer. Emerson v. Western Union R. R. Co. 75 Ill. 176.
    The motion questions the plaintiff’s right to file such a bill, and the sufficiency of the bill. The first reason assigned for the motion is, that the bill sets up facts not appearing in the original case, and was filed without leave. Getzler v. Saroni, 18 Ill. 517.
    The second is, that it is not shown that plaintiff in error has complied with the decree, and if the defendant has performed his part, there is no offer to place him in the same condition he was. before executing the decree. The complainant seeking equity should do equity, and pay back what he has received. Horner v. Zimmerman et al. 45 Ill. 14; Griggs v. Gear, 3 Gilm. 2.
    Third, that the record shows the decree complained of was entered by consent of the legal guardian, therefore the decree can not be reviewed by bill of review, original bill, appeal or writ of error. Armstrong et al. v. Cooper, 11 Ill. 540; Flagler v. Crow, 40 id. 414; Strubher et al. v. Belsey,
      79 id. 307; Hass v. Chicago Building Society, 80 id. 248; Fellers et al. v. Rainey, 82 id. 114.
    Mr. E. Callahan, for the plaintiff in error, in reply:
    A demurrer, or a motion to dismiss a hill for want of equity, raises no question as to the right to file the bill, but denies that the bill states a case calling for the interposition of a court of equity,—while a motion to strike a bill from the files assumes that the bill is wrongfully filed, and that the court has no right to inquire into its merits.
    It is insisted that as the decree was entered by consent, it can not be reviewed in any mode. None - of the authorities cited to sustain this point involves the rights of an infant.
    That an infant can not bind himself by consent or contract, and can not be bound by the admissions, etc., of his guardian, counsel cited the following among other authorities : Bliss et al. v. Perryman, 1 Scam. 486; Cole v. Pennoyer, 14 Ill. 158; Mathes v. Dobschuetz, 72 id. 438; Davidson v. Young, 38 id. 145; Chicago, Rock Island and Pacific R. R. Co. v. Kennedy et al. 70 id. 350; Tuttle v. Garrett, 16 id. 354; Field v. Allen, 27 id. 119; Waugh v. Robbins, 33 id. 183; Barnes v. Hazelton, 50 id. 431.
    Infants can not be prejudiced by the misstatements or omissions of their guardian in his answer for them. Tyler on Infancy, 172.
   Mr. Chief Justice Craig

delivered the opinion of the Court:

This was a bill in equity, brought by Allen Gooch, an infant, by Mary Ingle, his guardian, against Henry W. Green, to impeach a decree of the circuit court of Cumberland county, which was rendered in a proceeding instituted by Henry W. Green against Allen Gooch, to partition certain lands owned by them in common. The bill prayed that the court review, reverse, and set aside' all the proceedings in the partition suit occurring after the judgment of partition, including the report of the commissioners and the order and decree of the court made on the coming in of said report; that commissioners might be appointed to make division and partition of the lands under the provisions of the statute, and for general relief. In the circuit court the defendant appeared, and entered a motion to strike the bill from the files, for certain reasons in the motion specified. The court sustained the motion and dismissed the suit.

Whether the court, on the motion to dismiss, held that the bill could not be maintained by the complainant, or treated the motion as a demurrer, and held that the allegations, of the bill were insufficient, we are not advised. In either event, however, we are of opinion that the decision was wrong.

This is not strictly a bill of review, as intimated by counsel for defendant in the argument, and hence the authorities cited, which control the practice where a bill of review is filed, can not control here; but as we understand the -record this is an original bill, brought by a minor to impeach a decree for fraud and error appearing on the face of the decree. The right of a minor to maintain a bill of this, character was settled in Loyd v. Malone, 23 Ill. 43, where the authorities were reviewed, and it was expressly decided that an infant might file an original bill to impeach a decree for fraud or error appearing on the face of the decree. This was followed by Kuchenbeiser v. Beckert, 41 Ill. 172, where it was held, that where a decree has been rendered against a minor defendant, he is entitled to his day in court, whether the right is expressly reserved in the decree or not; and he may, even during his minority, by his next friend or guardian, file an original bill to' impeach the decree, either for fraud or error appearing on its face. If, then, there was error or fraud in the decree, the complainant had the right to bring his bill.

This brings us to a consideration of the allegations of the bill. The bill, it will be observed, contains several distinct grounds of relief, and if any one of them is well founded in equity, the court erred in sustaining the motion to dismiss, which is to be treated as a general demurrer.

It is a rule in equity proceedings, where the bill sets forth various claims to the interposition of the court, and the defendant files a general demurrer, the demurrer should be overruled if any of the claims be proper for its jurisdiction; and a demurrer to the whole of a bill, containing some matters relievable and others not, will be bad, unless it be for multifariousness. Brown v. Hogle, 30 Ill 119; Story’s Eq. Pleadings, sec. 443.

It appears from the allegations of the bill, that in the partition decree six-sevenths of the lands were decreed to Henry W. Green, and one-seventh to complainant, Allen Gooch; that George Moreland, Samuel S. Yanaway, and Joseph Havens, were appointed commissioners to apart and divide the lands according to the rights of the parties, as found by the decree. Under this decree it was the manifest duty of the commissioners to set off six-sevenths of the lands to Green, and one-seventh to Gooch. This, however, they failed to do, but, on the contrary, they set off to Green, as appears by the report, more than six-sevenths of the lands, and in order to compensate Gooch for this disregard of duty, they required Green to pay him, in cash, $150. The commissioners had no authority, under the statute, to make such a division of the lands, and the decree confirming the report was erroneous.

A minor can not sell and convey his lands, nor can the court properly decree a sale of lands belonging to a minor, except upon an application for that purpose in the mode provided by the statute. The effect of the decree, however, rendered in this case, was to divest the minor of the title to a portion of his lands. It in effect transferred a portion of the lands to Henry W. Green, for the sum of $150. It may be that the land transferred by the commissioners to Green was not worth more than the amount allowed him; but that does not affect the question. They had no authority, under the decree, or the statute under which they acted, to take any part of the land that, belonged to the minor, and for a consideration in money transfer it to another. When the report of the commissioners' was submitted to the court, showing, as it did, this unauthorized act, the court should have set the report aside. This was not, however, done, but a decree of confirmation was rendered, and in our judgment this error, of itself, is enough to impeach the decree.

But it will not be necessary to rest the decision on this ground alone. The bill contains the following allegation: “That said commissioners, in making such partition, could have assigned to complainant a just, fair and equal one-seventh part of said lands, but in disregard of their obligation and duty they acted under the direction of the said Henry W. Green, and made such division of said lands as he requested, assigning to him all the lands that were valuable and productive, and to complainant lands of inferior quality, and less than one-seventh the number of acres contained in said lands.” If this allegation be true (and its truth is admitted by the motion to dismiss), the action of the commissioners was fraudulent, and can not be held binding on complainant. It was the duty of the commissioners to make a fair and impartial division of the lands, according to the rights and interests of the parties, as declared by the judgment of the court. If the commissioners, in the discharge of their duty, were influenced and governed by one of the parties in interest, as alleged in the bill, such action would be fraudulent, and could not be held binding on the complainant.

The bill contains other allegations, which, if true, show good ground for relief in a court of equity. But it will not be necessary to consider them here, as enough has been adverted to to show that the bill contained allegations sufficient to entitle complainant to the relief prayed for in the bill.

Much stress has, however, in the argument, been placed on the fact that the decree sought to be impeached was rendered by agreement. That fact can have no bearing here, as an infant is not bound-or concluded by an agreement. In a proceeding in chancery a decree can not properly be rendered against a minor, unless it is founded upon and sustained by the evidence. It is erroneous to take a decree pro confesso against a minor, nor can a decree be properly rendered by the agreement of a guardian that the allegations of a bill are true. The correct rule upon this subject is laid down in Quigley v. Roberts, 44 Ill. 503, where it is declared that a decree can not be rendered against a minor unless it be in proof of the allegations of the bill. The fact, therefore, that the decree in question was rendered by an agreement of the guardian of complainant, did not preclude him from bringing a bill to impeach it.

It is also urged that the bill was properly dismissed, as it was filed without leave of court. An original bill, in the nature of a bill of review, may be brought for the purpose of impeaching a decree for fraud. It is a matter of right, and may be filed at any time, until barred by the statute, without the leave of court, and may be brought for fraud in fact or fraud in law. Griggs v. Gear, 3 Gilm. 2.

Other objections were made to the bill, but it will not be necessary to consider them here. We are satisfied that the hill, although not drawn as skillfully as it might be, contains enough, if the allegations be true, to authorize the court to grant the relief prayed for in the bill.

The decree of the circuit court will be reversed, and the cause remanded.

Decree reversed.


author: Mr. Justice Mulkey Mr. Justice Sheldon Mr. Justice Mulkey:

text:
    The St. Louis National Stock Yards v. The Wiggins Ferry Company.

      Filed at Mt. Vernon January 18, 1882

      Rehearing denied May Term, 1882.

    1. Law and fact—and what is reviewable in the Supreme Court. Where the terms of a contract are specifically determined, then the meaning or legal effect of such contract presents a pure question of law, and the court alone is permitted to construe it. But where not only the legal effect of the agreement upon the controversy in hand is to be determined, but also the terms of the agreement itself are to be ascertained from extrinsic proofs, there is presented a mixed question of law and fact, to be determined by the jury, under proper instructions from the court, and when such question has passed through the Appellate Court this court has no right to review it.
    2. It is not necessarily true, that where in the attempt to establish what were the terms of an agreement by extrinsic proofs there was no conflict in the testimony, the question becomes purely one of law. The evidence tending to establish a contract may be all on one side, and yet may be of such character as to leave the question as to whether a legal contract was in fact made or not, in extreme doubt, and in such case the question as to the malting of the contract, and the purport of its terms, together with its legal effect, is a mixed question of law and fact, and when the decision thereon in the trial court has been affirmed by the Appellate Court, that decision is conclusive upon this court.
    -3. Same—;jury in civil cases not to determine questions of law. It is not to be understood that in the submission to a jury of a mixed question of law and fact, the jury, in any civil case, is to determine what the law is, except as it receives it from the court. Many issues are necessarily so made up as to involve matters' of law as well as of fact, and the whole matter is then properly submitted to the jury as a mixed question of law and fact,—but in disposing of the issue the jury is bound to act upon the law as given to it by the court, and apply it to the facts, as found, under guidance of the court.

      4. Estopped in pais—available only in equity. Estoppels in pais affecting permanent interests in land can only be made available in a court of equity. They can not be allowed as a defence in an action of forcible detainer.
    5. Fobcibde detainee—is an action at law. The action of forcible detainer, while it is not a common law action, is an action at law, relating to real property.
    6. Statutory remedies—whether at law or in equity. When the legislature creates a new statutory remedy, w'hether a case brought under it will belong to the law or equity side of the court will depend upon the nature of the proceeding and the special provisions of the statute creating it. Ordinalily, these statutory proceedings belong to the law side of the court, and that is universally the case where nothing appears in the act to indicate a contrary intention.
    Appeal from the Appellate Court for the Fourth District ;—heard in that court on appeal from the Circuit Court of St. Clair county; the Hon. William H. Snyder, Judge, presiding.
    Mr. John B. Bowman, for the appellant:
    A plaintiff, to recover in forcible detainer, is no longer limited, as at common law, to eases where the relation of landlord and tenant exists, but the statute brings within this action other causes. Rev. Stat. ch. 57, sec. 2.
    This action, if it lies at all, is given in either the second or fifth class of section 2 of the act.
    That the agreement under which appellant entered was not a mere license, revocable at pleasure, as contended for by appellee, counsel examined and commented upon the authorities relied on, and distinguished them from this case. Among them are the following: Dunstedter v. Dunstedter, 77 Ill. 580; Woodward v. Seeley, 11 id. 157; Kimball v. Yates, 14 id. 464; Walker v. Wilson, 52 id. 352.
    To maintain the action under the fifth class named in the statute, it must appear that appellant obtained possession under an agreement to purchase, and has failed to comply with its terms. This is not shown.
    Counsel also contended that possession was taken under a verbal agreement of sale, and that appellant had complied with its terms by making valuable improvements beneficial to the appellee. That a moneyed consideration was not necessary to sustain the contract, he cited 3 Washburn on Real Property, 370; Violent v. Patton, 5 Cranch, 150.
    ■ If a principal reaps the fruits of an act of his agent within the apparent scope of his authority, he is liable for the misconduct by which those fruits were produced. Bock-

      ford v. Railroad Co. 65 Ill. 224; Wharton on Agency, sec. 468; Wharton on Evidence, sec. 1170.
    A corporation, like an individual, may he estopped and bound by the appearance of authority it gives its agents. Potter on Corporations, see. 508, note; Wharton on Evidence, sec. 1175.
    Mr. E. A. Halbert, for the appellee,
    first contended that there is no question of law in the ease,—that it was a controverted question of fact whether the permission given by Clubb was to occupy the premises temporarily or permanently, and that this fact was found against the appellant, and such finding was affirmed by the Appellate Court.
    That appellant’s entry was under a mere license, revocable at pleasure, counsel cited Dunne v. Trustees, 30 Ill. 578; Walker v. Wilson, 52 id. 352; Kamphouse v. Gaffner, 73 id. 460; Desloge et al. v. Pearce, 38 Mo. 588; Hatfield v. Central Railroad Co. 5 Dutch. 571; Fryer v. Warne, 29 Wis. 511; Fentiman v. Smith, 4 East, 109; Rex v. Inhabitants, etc. 4 M. & Sel. 562; Bryan v. Whistler, 8 B. & Cress. 288; Clute v. Carr, 20 Wis. 559; French v. Owen, 2 id. 184.
    That an easement can not be created by parol, or by a writing not under seal, see Goddard on Easements, p. 88; Dainneen v. Rich, 22 Wis. 550; Huff v. McCauley, 53 Pa. St. 206; Fahr v. Dean, 26 Mo. 116; Dark v. Johnson, 55 Pa. St. 164; Mmnford v. Whitney, 15 Wend. 380; Pitkin v. Long Island Ry. Co. 2 Barb. Ch. 221.
    If the defendant has any equities, which we deny, they can not be set up in defence in an action at law. Such defence is available in equity only. Wheeler v. Frankenthal, 78 Ill. 124; Fleming v. Carter, 70 id. 286; Warner v. Hale, 65 id. 396; Kamphouse v. Gaffner, supra.

   Mr. Justice Mulkey

delivered the opinion of the Court:

This was an action of forcible detainer, brought by the Wiggins Ferry Company, in the St. Clair circuit court, against the St. Louis National Stock Yards, to recover a strip of land near East St. Louis, occupied by an embankment and railroad track, known as the “stock yard connecting track.” The complaint is in the usual form, charging that appellee is entitled to the possession of the premises, and that appellant, after demand made, unlawfully withholds the same from appellee. To this complaint appellant filed a plea formally traversing the charge “of unlawfully withholding possession of the premises,” and upon this issue the cause, by agreement of parties, was tried by the court without the intervention of a jury, resulting in a finding and judgment in favor of appellee, and this judgment was affirmed on appeal to the Appellate Court, and the ease comes here on further appeal.

It is a conceded fact that the premises in controversy, subject to the easement claimed by appellant, belong to appellee, and that in the summer of 1875, appellant, under a verbal agreement of some character with S. C. Clubb, the general manager of appellee, entered upon the same, and constructed thereon, at a considerable cost, the embankment and railway track in question. The agreement being verbal, and no one pretending to give the language or the exact terms used by the parties, its real character, and the purport of the terms finally agreed upon, together with its legal effect, presented a mixed question of law and fact, which was necessarily determined by the trial court from all the evidence before it, and the judgment of that court having been affirmed by the Appellate Court, its decision must be accepted as final upon that question.

It was contended, upon the one hand, that the evidence established a mere license, and on the other hand, that it showed a contract of sale of the right of way. Whether it established the one or the other, depended upon what inferences might fairly be drawn from the various statements of witnesses, and the facts and circumstances attending the transaction, ancl the. question-in either case is as clearly a conclusion of fact, susceptible of proof, as the alleged promise of the defendant in an ordinary action of indebitatus assumpsit, where the promise alleged in the declaration is only -inferred from proof of such facts and circumstances as show a legal liability. It is true, where the terms of a contract are specifically determined, then the meaning or legal effect of such contract presents a pure question of law, and the court alone is permitted to construe it. But where, as in the present case, not only the legal effect of the agreement upon the controversy in hand is to be determined, but also the terms of the agreement itself are to be ascertained from extrinsic proofs, then the whole matter, as a mixed question of law and fact, should be submitted to the jury, under proper instructions from the court. The jury having been waived in this case, its functions were performed by the court, under the agreement of the parties.

It is not to be understood, from anything we have said, the jury is, in any civil case, to determine what the law is, except as it receives it from the court. Yet many issues are necessarily so made up as to involve matters of law as well as fact, and the whole matter is then properly submitted to the jury as a mixed question of law and fact; but in disposing of the issue, the jury is bound to act upon the law as given to it by the court, and apply it to the facts, as found, under the guidance of the court. In short, the jury in all civil cases ascertains the facts, and affords or denies relief through its verdict, according to law as the same is given to it by the court.

By reference to the Forcible Entry and Detainer act it will be perceived there are but six classes of cases in which the action will lie, and it is clear the present case can not be maintained unless it is brought within the second or fifth class. The second class includes all cases, where the entry was peaceable and the possession is unlawfully withheld, and the fifth class extends only to cases where a vendee “having obtained possession under a verbal or written agreement to purchase lands or tenements, and having failed to comply with his agreement, withholds possession thereof after demand in writing by the person entitled to such possession. ”

The present action is brought upon the hypothesis that the verbal agreement under which appellant entered was a mere license, revocable, on notice, at the pleasure of appellee. If, as claimed by appellant, the evidence establishes a contract of sale of the right of way, the action clearly could not be sustained without showing a failure on the part of appellant to perform its part of the agreement, as contemplated by the fifth clause of the second section of the act above mentioned, and we find nothing in the record to warrant such a claim. It follows, therefore, the only theory upon which" the action can be maintained, if at all, is, as claimed by appellee, that the agreement or understanding in question was a mere license, and we are warranted in concluding the trial and Appellate courts so found, on the familiar principle courts of review will indulge in all reasonable presumptions to sustain the judgment and proceedings reviewed.

Assiuhing, then, as we do, that the entry of appellant was by virtue of a mere license, the question, and indeed the only question, presented for determination, which we deem necessary to notice, is, whether, under the circumstances of this case, appellee is estopped from revoking such license, and if so, whether the estoppel can be made available in the present action. In the view we take of the latter branch of the question, we do not deem it necessary, or even proper, to consider the first, for we are of opinion, even conceding the estoppel, it can not be made available in this proceeding. We are aware of the fact that there is considerable conflict in the authorities upon this subject, and that the tendency of modern decisions is to give effect to equitable estoppels affecting real estate, in the legal forum as well as in courts of equity. Yet it is believed the decided preponderance of authority is the other way, and it must he confessed that to allow such estoppels to avail in a court of law, where, ordinarily, only legal titles can be considered, is a wide departure from the fundamental principles which distinguish legal from equitable rights, and which require all permanent interests in land to pass by some solemn, formal mode of conveyance. But whatever the rule may be elsewhere, it is well settled by the repeated decisions of this court, that estoppels in pais affecting permanent interests in land can only be made available in a court of equity. Wales v. Bogue, 31 Ill. 464; Mills v. Graves, 38 id. 466; Blake v. Fash, 44 id. 302.

Indeed, counsel for appellant in effect admits that such is the law of this State, but seeks to avoid it on the alleged ground that an action of forcible detainer is not a common law action, but a mere statutory proceeding,—hence it is concluded the rule .does not apply. It is true, this is not a common law action, but it does not therefore follow the rule in question is not applicable. While it is not a common law action, it is nevertheless an action at law, relating to real property, and hence an equitable estoppel can not be made available in such action. Our circuit courts have two sides to them,—the law side and equity side,—and all cases, of necessity, must belong to one side or the other, or, in other words, must be cases at law or in equity; and while all of them may be tried before the same presiding officer, yet he presides in two distinct characters, namely, as a judge of a common law court in the one case, and as a chancellor of a court of equity in the other, and the two sides of the court are in effect and in theory of law two distinct courts. When the legislature creates a new statutory remedy, whether a case brought under it will belong to the law or equity side of the court will depend entirely upon the nature of the proceeding and the special provisions of the statute creating it. Ordinarily, these statutory proceedings belong to the law side of the court, and are universally so where nothing appears in the act to indicate a contrary intention. Greenup v. Sewell, 18 Ill. 54.

The act under which -this proceeding is brought determines the classes of cases in which the action will lie, the requisites of the complaint, the form of the plea, the manner of service, gives the right of trial by jury, and by the 11th section it is expressly provided, that “trials under this act, in courts of record, shall be the same as in other eases at law in such courts.” Thus it will be perceived this is clearly a proceeding at law.

An action of forcible detainer being, as we have just seen, in the strictest sense a proceeding at law, and an estoppel in pais affecting real estate being an equitable right, cognizable only in a court of equity, it follows that the circuit court, conceding the existence of the estoppel claimed, properly refused to allow it as a defence to the present action.

The judgment of the Appellate Court is affirmed.

Judgment affirmed.

Mr. Justice Sheldon

dissents, upon the point that an es-

toppel in pais affecting real estate can only be availed of in a court of equity.

Subsequently, upon an application for a rehearing,- the following additional opinion was filed:

Mr. Justice Mulkey:

In refusing the application for a rehearing in this case, though out of the usual course, we deem it proper to again notice the point mostly relied upon by the appellant for a reversal of the judgment of the court below.

It was earnestly urged on the appeal, and also again upon the petition for a rehearing, that the evidence shows a contract of purchase of "the right of way, and that as there has been no failure to perform the contract on the part of the appellant, the action of forcible detainer does not lie. To this position it is replied, in the opinion heretofore filed in the case, that whether such a contract of purchase was made, was a mixed question of law and fact, to be determined by the judge who, sitting in the capacity of a jury, tried the case in the circuit court. But it is 'urged again, that there is no conflict-in the testimony relating to the alleged contract of sale, and hence it is contended the question becomes purely one of law. This position is not necessarily true, as has been determined by numerous decisions of this court. The evidence tending to establish a contract may be all on one side, and yet may be of such a character as to leave the question as to whether a legal contract was in fact made or not, in extreme doubt; and in such case, where the question has passed through the Appellate Court, as is the case here, this court clearly has no right to review it. The present case illustrates this view of the matter as well as any that could be selected, and for this purpose let us assume the question as to whether a valid contract of purchase of the right of way was in fact made or hot, is before us.

First, it is to be observed that the alleged contract is between two corporations, and hence it follows it could only have been made by their respective agents, duly authorized to bind the company by such a contract. It appears from the testimony of Iinox, who acted on behalf of appellant, that S. C. Clubb, who assumed to act for the Wiggins Ferry Company, was then the general manager of that company. Now, it is clear this court can not say, as a matter of law, that Clubb, as general manager, had the right, in the absence of any proof of authority to do so, to bargain and sell the* company’s real estate, or any permanent interest therein. Whether he could lawfully make such a sale, depended entirely upon whether the company had conferred upon him the requisite power for that purpose. This was purely a question of fact for the trial court. Upon looking into the record we find no evidence of such authority having been conferred upon Clubb, and "if we were permitted to pass upon this question, which we clearly are not, we would unhesitatingly hold that the evidence failed to show any authority on the part of Clubb to make the contract in question, and doubtless the trial court came to this conclusion. However this may be, it will be thus seen that in either view of the case this court is not in a position to afford appellant any relief. If, as a matter of fact, appellee has so acted as to estop it from enforcing its legal rights by causing a removal of the track of appellant from the premises, its remedy is not here,—it must go into an equitable forum, where matters of this kind are properly cognizable. Whether any such estoppel exists, is a matter which is not now before us, and is one about which we express no opinion.

The application for a rehearing is denied.

Rehearing denied.


author: Mr. Justice Mulkey Mr. Justice Dickey,

text:
    Joseph Penn v. James A. Bornman et al.

      Filed at Mt. Vernon January 18, 1882

      Rehearing denied May Term, 1882.

    1. Contract—legality. The general rule is, that all contracts made in violation of an express statutory provision are inoperative and void, and no recovery can be had upon them though the defendant is a party to the violation of the law, in the absence of fraud or bad faith on his part upon which to found an estoppel.
    2. Same—loan by bank to a director in violation of its charter, is illegal. Under a provision in a bank charter that “no director of said corporation shall be indebted to said corporation, either directly or indirectly, or individually, at any time, to an amount greater than seventy-five per centum of the capital stock held by such director, in good faith as his own,” it is held, that a director can not enter into a valid contract with the bank, as guarantor or indorser, without regard to his ownership of stock and in violation of such provision, and no recovery can be had by the bank under such a contract against him or his -estate. The prohibition in such case applies to the bank as well as to the directors.
    3. The distinction in some of the old cases between malum prohibitum and malum in se has long since been exploded, and the rule is now well established that no agreement to do an act forbidden by statute, or to omit to do an act enjoined by statute, is binding.
    4. A provision in a bank charter prohibiting the directors from besoming indebted to the bank, is not purely personal to the directors, but it is equally a mandate to the bank, which it is as much bound to observe as the directors themselves. It goes directly to the power or capacity of both the bank and directors to enter into any engagement or agreement by which the latter may become indebted to the former. »
    5. Conflict of laws—rulings of Supreme Court of United States— when not binding on this court. The decisions of the Supreme Court of the United States, while entitled to great respect, are not of binding authority on this court in the construction of one of our own statutes, especially when such construction is at variance with the previous decisions of this court.
    Appeal from the Appellate Court for the Fourth District;— heard in that court on appeal from the Circuit Court of St. Clair county; the Hon. Geo. W. Wall, Judge, presiding.
    Mr. E. A. Halbert, Mr. E. L. Thomas, and Mr. C. F. Noetling, for the appellant:
    The directors of a bank are not the corporation itself, but the agents, and in a certain sense trustees. A trustee or officer of a bank who has committed a breach of trust, can not avail himself of a provision designed to prevent such breach, in order to defeat a recovery of money obtained by him or through him in violation of his trust. Richmond Bank v. Robinson, 42 Maine, 589; Bond v. Central Bank, 2 Ga. 92; Smith v. Bank, 18 Ind. 328; Lester v. Howard Bank, 33 Md. 558; O’Hara v. National Bank, 77 Pa. 96; Bly v. National Bank, 79 id. 453; Allan v. Freedman’s Bank, 14 Fla. 413; Little v. O’Brien, 9 Mass. 423; Bates et al. v. Bank of Alabama, 2 Ala. 460; Bemus v. Becker, 2 Kan. 229; Hughes v. Bank of Somerset, 5 Litt. (Ky.) 46; Shoemaker v. National Mechanics’ Bank, 2 Abbott, (U. S.) 416; Stuart v. National Bank, id. 424; Bank of the United States v. Dandridge, 12 Wheat. 64; Fire and Marine Bank of Milwaukee v. Detroit and Milwaukee R. R. Co. 17 Wis. 372; Bissell v. Michigan Southern R. R. Co. 22 N. Y. 258; Commercial Bank of Manchester v. Nolan, 7 How. 508; Banks v. Poitiaux, 3 Rand. 136; Planters’ Bank v. Sharp, 4 Smedes & M. 74; Grand Gulf Bank v. Ardu, 8 id. 151; Fleckner v. Bank of the United States, 8 Wheat. 338; Steam Navigation Co. v. Weed, 19 Barb. 375; White v. Franklin Bank, 22 Pick. 186; Mott v. United States Ins. Co. 19 Barb. 568; Chester Glass Co. v. Dewey, 16 Mass. 102; Silver Lake Bank v. North, 4 Johns. Ch. 370; Littlewort v. Davis, 50 Miss. 403; Germantown Farmers’ Mutual Ins. Co. v. Dhein, 43 Wis. 420; Bank v. Hammond, 1 Rich. Law, 281; Anglo Australian Life Ass. Co. v. Life and Fire Society, 3 Griff. 53; Rock River Bank v. Sherwood, 10 Wis. 230; Viazil Bank v. Paulk, 40 Maine, 109; Philadelphia Loan Co. v. Towner, 13 Conn. 244; Burns v. Railroad Co. 9 Wis. 457; Sacketts Harbor Bank v. Lewis County Bank, 11 Barb. 213; McCutchem v. Steamboat, 13 Pa. 13; Union Hill Gold Mining Co. v. Rocky Mountain National Bank, 96 U. S. 640; Elder v. First National Bank of Ottawa, 12 Kan. 238; Bradley v. Bank of State, 20 Ind. 528; Southern Bank v. Williams, 25 Ga. 534; Harris v. Runnels, 12 How. 79; Jack The People, 19 Ill. 57; Manufacturing Co. v. Carny, 54 N. H. 321; United States Trust Co. v. Brady, 20 Barb. 121; Field on Corporations, secs. 263-268; Angell & Ames on Corporations, sec. 264; 2 Chitty on Contracts, 976; Morse on Banking, 16, 561; Herman on Estoppels, sec. 580; National Bank v. Case, 99 U. S. 633.
    Messrs. Hay & Knispel, also for the appellant:
    One who has borrowed money of a bank, can not defeat a recovery against him for the same on the ground that the bank, in making the loan, exceeded its corporate powers, or acted otherwise improperly or illegally. Morse on Banking, 16; Bank of Middlebury v. Brigham, 33 N. H. 621; Bradley
      v. Bank of State, 20 Ind. 528; Bates v. State Bank, 2 Ala. 451; Bend v. Bank of Georgia, 2 Kelly, 92; Parish v. Wheeler, 22 N. Y. 494; Smith v. Bank of State, 18 Ind. 527; Planters’ Bank v. Sharp, 4 Smedes & M. 75; Shoemaker v. National Mechanics’ Bank, 2 Abbott, (U. S.) 416; 31 Md. 396; Stewart v. National Union Bank, 2 Abbott, (U. S.) 424; Elder v. First National Bank, 12 Kan. 238; Allison v. Hubbell, 17 Ind. 559; Southern Bank v. Williams, 25 Ga. 524; Moreland & Willis v. State Bank, Breese, 264; Lester v. Howard Bank, 33 Md. 558; Richmond v. Robinson, 42 id. 589; Cannons. McNab, 48 Ala. 49; Allen v. Freedman’s Savings and Trust Co. 14 Fla. 418 ; O’Hara v. Second National Bank, 77 Pa. St. 96.
    Messrs. Wilderman & Hamill, for the appellees:
    Sec. 11, of the charter of the People’s Bank of Belleville, (vol. 1, Private Laws 1869, p. 194,) reads: “No director of said corporation shall be indebted to said corporation, either directly or indirectly, or individually, at any time, to an amount greater than seventy-five per centum of the capital stock held by such director in his own name, in good faith as his own. ”
    That the language of the act is imperative, and not merely directory, counsel cited Pearce v. Morrice, 2 Ad. & Ellis, 84 ; New York Fireman’s Ins. Co. v. Ely, 5 Conn. 560; DeGroot v. Van Duzer, 20 Wend. 390; In re Jaycox et al. 12 Blatch. Ch. 209; Leavitt v. Yates, 4 Edw. Ch. 182; Swift v. Beers, 3 Denio, 70; Wheeler v. Russell, 17 Mass. 258; Miller v. Post, 1 Allen, 434.
    All contracts made in violation of the terms of a negative prohibitory statute, imperative in its character, are void. Linn v. State Bank, 1 Scam. 87; Munsell v. Temple, 3 Gilm. 96; Nash v. Monheimer, 20 Ill. 217; Bester v. Wathen, 60 id. 138; Linder v. Carpenter, 62 id. 309; Lewis v. Headley, 36 id. 433; Mutual Health Association v. Rosenthal, 55 id. 85; Carroll v. City of East St. Louis, 67 id. 568; Starkweather
      v. American Bible Society, 72 id. 50; Metropolitan Bank v. Godfrey, 23 id. 579; Village of Dwight v. Palmer, 74 id. 395; Bank of the United States v. Owens, 2 Pet. 527; Tiffany v. Boatmens’ Savings Institution, 18 Wall. 384; Rust v. Wallace, 4 McLean’s Ch. 8; Davis v. Bank of River Raisin, id. 387; McLean v. Lafayette Bank, 3 McLean, 587; Root v. Goddard, id. 102; Bank of Chillicothe v. Sivayne, 8 Ohio, 257; Creed v. Commercial Bank, 11 id. 489; Creed v. Reed, 11 id. 498; Spalding v. Bank of Muskingum, 12 id. 544; Miami Exporting Co. v. Clark, 13 id. 1; Bank of Wooster v. Stevens, 1 Ohio St. 233; Preble County Bank v. Russell, id. 313; Orr v. Lacey, 3 Doug. 330; Hulbert v. Britain, id. 191.
    Counsel also cited Law v. The People, 87 Ill. 385; Fuller v. Chicago, 89 id. 282: East St. Louis v. East St. Louis Gas Light and Coke Co. 98 id. 415; State Board of Agriculture v. Citizens’ Horse Ry. 47 Ind. 407; Lyons v. Orange A. and M. R.R. Co. 33 Mo. 18; Buchanan v. Litchfield, 103 U. S. 378.
   Mr. Justice Mulkey

delivered the opinion of the Court:

This is an appeal from the Appellate Court for the Fourth District, affirming a judgment of the circuit court of St. Clair county, disallowing a claim of $130,000, in favor of Joseph Penn, as assignee of the People’s Bank of Belleville, against the estate of Conrad Bornman, deceased.

We do not deem it necessary to make an extended statement of the facts of this case in order to present our views upon the legal question which controls it. We say question, for in the view we take of the case the whole controversy turns upon a single controverted point. It is sufficient to state, generally, that in 1874 the Belleville Nail Mill Company borrowed of the People’s Bank of Belleville a large amount of money, including the sum in controversy. This loan was evidenced by a number of instruments in the form of inland bills of exchange, most of which were drawn by Conrad Bornman and James C. Waugh, as president and secretary, respectively; of the Belleville Nail Mill Company, upon and accepted by F. H. Pieper, as the company’s treasurer, and were indorsed in blank by Bornman and Waugh. The others were drawn by Waugh and Bornman upon Pieper, as treasurer, in the same way, the only difference being, the latter were payable to Bornman as president, and by him indorsed to the bank. These instruments were renewed from time to time, until finally the company became insolvent, and Bornman died, leaving the matter unsettled, when they were presented for allowance against his estate, with the result already stated. It further appears," that at the time of borrowing the money, and of the execution of the instruments in question, Bornman and Pieper were directors of the bank, the latter being also its president, and that the charter of the bank contained a provision declaring that “no director of said corporation shall be indebted to said corporation, either directly or indirectly, or individually, at any time, to an amount greater than seventy-five per centum of the capital stock held by such director in his own name, in good faith as his own. ”

No question is made as to the- power or right of the company to borrow, or of the bank to lend, the money, nor is the supposed liability of Bornman’s estate placed upon the ground that he was a stockholder of the bank to the amount of the indebtedness at the time it is claimed to have occurred ; but the simple inquiry is, could Bornman, being a director of the bank, notwithstanding the absolute prohibition in its charter, without regard to his ownership of stock, enter into a valid contract with it as guarantor or indorser of the Nail Mill Company’s paper,—or, in other words, could the bank, in palpable violation of this express prohibition in its charter, go on and contract, ad libitum, with its directors, and yet be permitted to recover, just as though its charter contained no such provision? We put the question in this form for the reason we sée no special circumstances in the case that take it out of the general rule that all contracts made in violation of an express statutory provision are inoperative and void, and no recovery can be had upon them.

Upon a careful examination of the • record we have been unable to discover any evidence of overreaching, fraud or bad faith on the part of Bornman upon which to found an estoppel, or, indeed, anything exceptionable in his conduct at all, outside of the simple fact that he, like the bank, was a party to an agreement prohibited by its charter, and if this of itself affords matter of estoppel which deprives his legal representatives of the defence of illegality in the contract, it is manifest such a defence could not successfully be interposed in ■any case where the agreement, as in this case, is simply prohibited by statute, and to so hold would, under the pretense of construction, be in effect abrogating that provision of the charter by judicial legislation.

In 2 Parsons on Contracts, p. 186, the author, in discussing the illegality of a contract as a defence, says: “That the illegality of a contract is in general a perfect defence must be too obvious to need illustration. It may be regarded as an impossibility by act of law, for it would be absurd to punish a man for not doing, or, in other words, to require him to do, that which it forbids his doing. ” Strictly speaking, there can be no such a thing as an illegal contract. Viewed from a purely legal aspect, it is manifestly a contradiction of terms, for it is an elementary and fundamental principle of the law of contracts that the agreement between the parties must be one which the law permits to be made, or, in other words, it must be a lawful agreement. Bush on Contracts, sec. 458.

Anson, in his work on Contracts, p. 144, says: “A statute may render an agreement illegal in one of two ways,—by express prohibition, or by penalty. It may say, in so- many words, that contracts of a certain sort are illegal or void, or both, and where it thus expressly avoids a contract, or makes it illegal, no doubt can arise as to the intention - of the legislature. ” The case in hand falls within the first class mentioned by this author. It is illegal by reason of being expressly prohibited, and therefore leaving no question as to the intention of the legislature. Where the legislature has simply denounced a penalty against the thing agreed to be done, then the prohibition is a matter of legal inference, which has given rise to a number of very nice distinctions, about which the authorities are by no means in harmony, and which are unnecessary to be noticed here, as they have no application to the question before us. Those cases which hold that where a penalty only has been imposed, both the agreement and penalty may be enforced, have the merit, at least, of giving the statute some .effect; but where the thing agreed to be done is simply prohibited without the imposition of a penalty, and the agreement is nevertheless enforced, it is manifest the statute is given no effect whatever. As before stated, such a construction simply abrogates it.

In 5 Bobinson’s Practice, p. 398, the author says: “It is clear no right of action can spring out of an illegal contract,— that no action will lie upon a contract made in violation of a statute, or of a principle of the common law. ”

The distinction in some of the old cases between malum prohibitum and malum, in se, has long since been exploded, both in this country and England. Cannon v. Bryce, 3 Barn. & Ald. 179, (5 Eng. C. L.); Aubert v. Maze, 2 Bos. & Pul. 371; Bank of United States v. Owens, 2 Peters, 539. In the latter case it is said by Johnson, J.: “There can be no civil right where there can be no legal remedy, and there can be no legal remedy for that which is itself illegal. ”

In 7 Wait’s Actions and Defences, p. 64, it is said: “The rule is now well established that no agreement to do an act forbidden by statute, or to omit to do an act enjoined by statute, is binding, ”—citing De Begins v. Armistead, 10 Bing. 110; Cope v. Rowlands, 2 Mees. & W. 153; D’Allex v. Jones, 37 Eng. L. & Eq. 476; Clark v. Protection Ins. Co. 1 Story’s C. C. 109; Kottwitz v. Alexander, 34 Tex. 689; Coburn v. Odell, 30 N. H. 540; Milton v. Hoden, 32 Ala. 30; McWilliams v. Phillips, 51 Miss. 196; Hooker v. De Palos, 28 Ohio St. 251; Durgin v. Dyer, 68 Me. 143. Upon this general proposition the authorities might he multiplied almost indefinitely.

Linn v. State Bank of Illinois, 1 Scam. 87, was an action of debt, brought by the bank against Linn, upon a note given by him to the bank in consideration of a loan of its notes or bills, which had been issued and emitted, under its charter, in contravention of the 10th section of article 1 of the constitution of the United States, and it was held there could be no recovery. Here, the illegal act was prohibited by a constitutional provision, but there is no difference-in this respect between a statutory and constitutional prohibition, provided the legislature acts within the scope of its authority.

Nash v. Monheimer, 20 Ill. 215, was an action brought on a wager upon the speed of a certain horse, which was tested in presence of the parties within the corporate limits of a city, and it was held there could be no recovery, on the ground the trial of the speed of the horse within the corporate limits of the city was forbidden by ordinance. In this case the court, referring approvingly to Armstrong v. Taylor, 11 Wheat. 258, says : “And the rule was laid down by the Supreme Court

of the United States, that where the contract grows immediately out of, and is connected with, an illegal or immoral act, a court of justice will not lend its aid for its enforcement. ”

The .case of Lewis v. Headley, 36 Ill. 433, holds there can be no recovery upon a promissory note, given in consideration of the bills of a foreign bank, of a less denomination than five dollars, to be used and circulated by one of our own banks in contravention of a statute of this State forbidding the circulation of such bills. This will be found a very strong case against the right of recovery by appellant in the case before us. The maker of the notes sued on had accepted and received as money the small notes of the foreign bank, and had fully enjoyed the benefits of them as of so much money, and he was without question equally guilty with the plaintiff in violating the statute forbidding the circulation of such notes, and yet, in conformity with the well settled rule on this subject, it was held there could be no recovery.

The Cincinnati Mutual Health Assurance Co. v. Rosenthal, 55 Ill. 85, was an action brought by the company upon a note given by the defendant “for stock in the company, and for premium, subject to the call of the directors of the company, ” and it was held there could be no recovery, on the ground the company was a foreign corporation, and had commenced business in violation of the statute which forbids all foreign insurance companies from doing business here until the requirements of the law applicable to such companies have been complied with. In this case it is said: “When the legislature prohibits an act, or declares it shall be unlawful to perform it, every rule of interpretation must say that the legislature intended to interpose its power to prevent the act, and, as one of the means of its prevention, that the court shall hold it void. This.is as manifest as if the statute had declared that it should be void. To hold otherwise would be to give the person or corporation the same rights in enforcing prohibited contracts as the good citizen who respects and conforms to the law. ”

The case of Starkweather v. American Bible Society, 72 Ill. 50, may be referred to as illustrative of the strictness with which this court has uniformly held corporations,-as well as individuals, to an observance of the legislative will. In that case it was held a statutory provision of the State of New York prohibiting a corporation of that State from taking land by devise, would be binding on such corporation here, whether the laws of this State permitted such a devise or not. It was insisted in that case that the prohibition was personal to the testator, and as statutory laws can have no extraterritorial force, a testator residing in this State could not he affected by the provision in question. But that view was not accepted. On the contrary, it was held the prohibition directly affected' the capacity of the company to take lands by devise. So we hold, in the present case, that the provision in the bank’s charter prohibiting the directors from becoming indebted to the bank is not merely personal to the directors, but that it is equally a mandate to the bank, which it is as much bound to observe as the directors themselves. Indeed, it goes directly to the power or capacity of both the bank and directors to enter into any engagement or agreement by which the latter may become indebted to the former. Any other construction would render the provision of the charter entirely inoperative.

The Village of Dwight v. Palmer, 74 Ill. 295, was a case in which the defendant, being the clerk of the municipal board, entered into a contract with the village to publish the ordinances of the board, and by some contrivance or misunderstanding he obtained from the village treasurer the compensation he was to receive, before performing the labor. The board, being dissatisfied with his course, passed a resolution annulling the contract, and ordering him to refund the money, which he refused to do, but went on and performed the contract, or at least a part of it. The village thereupon brought an action to recover back the $300, on the ground that the original contract was void, by reason of being prohibited by the general Incorporation act of 1872, under which the village was organized, and it was held the action was properly brought, for that reason. This case, in principle, is much like the one before us. The provision of the statute under which the contract between the village and Palmer was held void, is as follows: “No officer shall be directly or indirectly interested in any contract, work or business of the city, or in the sale of any article, the expense, price or eonsideration of which is to be paid from the treasury, or by any assessment levied by any act or ordinance. ” In disposing of this case, Mr. Justice Scott, speaking for the court, said: “This provision is made to apply to villages as well as cities organized under that law. The appellee, being himself a village officer, could make no contract with the trustees to do work for the corporation, to be paid out of the treasury, and hence the alleged contract for printing the ordinance was absolutely void. It was a work of supererogation on the part of the trustees to attempt to rescind it. It had no binding force at all, and whatever was done by appellee under it was done without any authority from the village. ”

In conformity with the rule so strictly adhered to in the foregoing cases, it was held in Fridley v. Bowen, 87 Ill. 151, that a mortgage taken by a national bank to secure a present loan, was, by implication, prohibited by the general Banking act of the United States, and was therefore void. It is true the Supreme Court of the United States has reached a contrary conclusion upon this question, and while we concede the paramount authority of that court to construe all Federal statutes, including the National Bank act, yet when that court, in construing such a statute, reaches a conclusion which is believed to be in direct conflict with the most approved text books, and to be opposed to an almost unbroken current of judicial decisions in this country and England, however great our respect may be for the unquestioned learning and ability of that distinguished tribunal, we can not accept such conclusion as binding authority in construing one of our own statutes, especially when such construction is manifestly at variance with the previous decisions of this court.

"While, therefore, we do not feel at liberty to follow Fridley v. Bowen, supra, in its construction of the National Bank act, yet we fully approve of the general principles announced in it as applicable to analogous cases arising under our own statutes, and we regard what was there said as particularly applicable to the case in hand. Moreover, the reasoning of the court in that case is believed to have been in perfect accord with the current decisions of the Federal courts at that time. Bank of United States v. Owens, supra; Tiffany v. Boatman’s Savings Institution, 18 Ware, (S. C.) 384. Many cases, indeed, might be cited in support of this statement, but it is not important to do so.

Law et al. v. The People ex rel. was a case involving the construction of the first clause of the 12th section of article 9 of the present constitution, which forbids any “county, city, township, school district or other municipal corporation from becoming indebted, in any manner or for any purpose, to an amount, including- existing indebtedness, in the aggregate exceeding five .per centum on the value of the taxable property” of such municipality. It appeared in that case that the city of Chicago, being already indebted to the full amount of this limitation, issued certificates of indebtedness to secure temporary loans to meet the pressing necessities of the city, and it was held that such certificates were invalid, on the ground the city, by reason of this express prohibition, had no power to incur the indebtedness represented by them. Here, although the city had had the full benefit of the loan represented by these certificates, still there could be no recovery, for the reason there was no power on the part of the city to contract the indebtedness. If supposed hardships would justify courts in disregarding plain statutory or constitutional provisions, this, perhaps, would have been a very appropriate case for the court to interpose, but no considerations of this kind were permitted to prevail. 87 Ill. 385.

Fuller v. City of Chicago et al. 89 Ill. 282, is, in its facts, substantially the same as the case just considered, and a similar conclusion, founded on the same reasons, was reached.

In the light of these cases, and many others that might be cited, we can not escape the conclusion that by reason of the prohibition in the bank’s charter there was a total want of power, both on the part of the bank and of Bornman, to so contract as to create an indebtedness from the latter to the former, and hence the circuit court properly disallowed the claim of appellant against Bornman’s estate.

A very able and exhaustive argument has been made in this case by appellant’s counsel, in which numerous authorities have been cited which are claimed by counsel to be at variance with the view here presented. It may be admitted that a few of them are, but it is believed that most of them are not, and may be readily distinguished from the cases we have cited, and such as can not we do not regard as sound on principle, and therefore decline to follow them. It was our purpose at the outset to review at least the most important of them, but we perceive that our discussion of the subject has already been extended to an unwarrantable length, and we must therefore content ourselves with the above statement of our conclusions with respect to them, and we do this the more readily because we regard the question upon which this ease turns as being fully and definitely settled by the previous decisions of this court, whatever might be said with reference to the decisions of other courts.

The judgment of the Appellate Court is affirmed.

Judgment affirmed.

Mr. Justice Dickey,

dissenting:

This statute was not passed for the protection of directors, but for the protection of stockholders and creditors of the bank. In my judgment it can not properly be invoked in defence of a director against the recovery from him, upon his guaranty of payment, of money unlawfully procured from the bank by means of his own unlawful act.

It is no doubt laid down as a general rule that “no right of action can spring out of an illegal contract, ” and that “no action will lie upon a contract made in violation of a statute,” and that “a contract founded on an act prohibited by statute is void. ” This general rule, when applied to contracts which are simply prohibited, and are not declared by statute to be void, rests entirely upon the ground that holding such contracts to be void is the best mode which courts can adopt to give effect to the statute, and to accomplish the end intended by the statute, upon the ground that by so doing courts can best enforce obedience to the statute. The result is reached in all such cases by construction, and that construction is adopted which will most effectually accomplish the intention of the law-maker.

■ In Sedgwick on Statutory" and Constitutional Law, it is said: “The principle which enforces obedience to the laws is carried out by declaring contracts growing out of, or based upon, the infringement of a statute, to be void, the courts refusing to aid either party in enforcing the contract; ” and it is added, that “this is the general course of decisions in England and in this country. ”

This being the foundation of this general rule, it seems to follow that in cases where holding the contract to be absolutely void will not tend to the enforcement of the statute, this general rule can have no proper application. In Wait’s Actions and Defences, p. 65, it is said of this general rule, it is not “applicable where the contract is prohibited for the mere protection of one of the parties against an undue advantage which the other is supposed to possess. ” And it is added, (p. 68,) that “in every instance courts will look to the language and subject matter of the statute, the wrong or evil which it seeks to remedy or prevent, and the purpose sought to be accomplished by the enactment, and if, from all these, it is manifest that it was not intended to render the prohibited act void, the courts will so hold, and construe the statute accordingly.”

Applying these tests, which are entirely in harmony with the principles upon which the general rule rests, it seems obvious that the contract in this case ought not to be declared absolutely void. By the language of the statute the prohibition is expressly directed to the director, and to no one else. The wrong or evil which the statute seeks to remedy or -prevent consists in the practice of directors (having the control of the loans to be made by the bank, and taking advantage of their fiduciary position,) in lending to themselves other people’s money, with an eye to their private interests, rather than that of the stockholders or creditors. The purpose sought to be accomplished by the statute was to put an end to such practices by directors.

In view of all these considerations, can it be said it was the intention of the statute - to provide that in case of a violation of the statute, instead of a penalty being imposed upon the offending director, the director should have a shield of immunity thrown around him, protecting him from an action brought to repair the wrong done in violating the statute ? This does not seem possible. To hold this defence good is to hold that the legislature intended by this statute to leave it in the power of the directors of this bank to lend to each other all the money of the bank, and to provide that having so borrowed the same, no action for the debts so incurred could' be maintained against either of them to recover the money back for the use of stockholders or creditors. No such intention should be attributed to the General Assembly.

Let it be remembered that in all cases where contracts prohibited by statute have been, on that ground, declared void, the result is reached by construction, and that sucli construction rests upon the principle that such ruling enforces obedience to the statute. If, therefore, the case and the statute be such that such ruling does not tend to enforce obedience to the law, no such construction can be indulged. It seems manifest that it would tend much more strongly to the enforcement of this statute to hold that the contract in question is in its nature voidable, but riot void; that the bank may either repudiate the contract, and avoid the same, or adopt and enforce it, as may be best for the interests of its stockholders or creditors; that as against the director the contract is valid, while as against the bank it is voidable. Upon that view, should the officers of the bank lend to one of the directors, in violation of this enactment, a sum of money for five years, taking notes and personal security for the same, the bank might, under such circumstances, repudiate the contract, and sue for and recover the money at once,' or, if more to its interest, might avail itself of the contract as the best means of recovering its money. This would seem a better mode, if the end sought be to promote the object of the statute,—would seem to be more in consonance with the intention of the law-maker,—and a mode much better calculated to enforce obedience to the statute.

There is a general rule that a contract to do that which a statute forbids is void, and so is a contract to omit to do that which a statute requires. This rule may have no exceqriions. The case at bar, however, does not fall within that rule. The statute prohibits the director from incurring the debt. It does not prohibit its payment. It can not be said that Bornman could have violated any statute by paying this debt. His promise to so pay, then, is not a contract to do that which the statute forbids.

Without discussing in detail the many cases where prohibited contracts have been held void, it is thought sufficient to say that an analysis of each will show that in most, and it is believed in all, it will be found that the nature of the case and the statute was such that the enforcement of the statute, and the accomplishment of the purpose of the statute, was apparently more effectually promoted by holding the contract in question a nullity. Such cases afford no support for the decision in this case, which, in its effect, tends to encourage the violation of the statute.

Again, this contract is prohibited “for the mere protection of one of the parties against the undue advantage which the other is supposed to possess.”- This statute is obviously passed “for the mere protection” of the bank “against the undue advantage which” the director “is supposed to possess.” In such case, it is well said, the general rule is not applicable. A director who has violated this law, in a transaction to which he is a party personally on one side, and on the other as the agent of the other party,, acting for that principal, can not be allowed to say that his principal (the bank) is in pari delicto. Let directors understand that by such transactions they may incur liabilities, but can gain nothing as against the bank,—that they have everything to lose and- nothing to gain,—and then its violation will be rare. But -say to them that by such transactions you can incur no liability to pay the debt, and the inducement to them to do that which the statute forbids is much greater than if the statute had never been passed.

Mr. Chief Justice Craig, and Mr. Justice Sheldon, concur in this dissenting opinion.