1. Where the issue of bills as a currency (except by banking
institutions) is prohibited, a municipal corporation has no power,
without express authority, to issue such bills; and if it does
issue them, the holders thereof cannot recover the amount, either
in an action on the bills themselves or for money had and
received.
2. Especially is this so, where the receiving, as well as
issuing, of unlawful bills is expressly prohibited.
3. A law authorizing and requiring the redemption of such bills,
passed by the legislature of one of the late Confederate states in
aid of the rebellion, cannot be recognized or enforced.
4.
Semble that a bank or other private corporation
issuing bills contrary to law, might be compelled to pay the holder
in an action for money had and received, although the bills
themselves were void, if the receiving of the bills were not
expressly prohibited.
5. But if the receiving as well as issuing were prohibited, both
parties would be
in pari delicto, and no action could be
sustained for the amount of the bills.
Page 79 U. S. 350
6. The law as to the recovery of money paid on an illegal
contract stated and defined.
A statute Virginia passed in 1854, and reproduced in the code of
1860, thus enacts:
"SECTION 15. All members of any association or company that
shall trade or deal as a bank or carry on banking without authority
of law, and their officers and agents therein, shall be confined in
jail not more than six months, and fined not less than $100, nor
more than $500."
"SECTION 16. Every free person [
Footnote 1] who, with intent to create a circulating
medium, shall issue, without authority of law, any note or other
security, purporting that money or other thing of value is payable
by or on behalf of such person, and every officer and agent of such
person therein, shall be confined in jail,"
&c.
"SECTION 17. If a free person pass or receive in payment any
note or security, issued in violation of either of the two
preceding sections, he shall be fined not less than $20 nor more
than $100."
"SECTION 19. In every case where a note of a less denomination
than $5 is offered or issued as money, whether by a bank,
corporation, or by individuals, the person, firm, or association of
persons, corporation, or body politic so issuing, shall pay a fine
of $10."
By the charter of the City of Richmond, [
Footnote 2] that city "may contract or be contracted
with," and is endowed generally with "all the rights, franchises,
capacities, and powers appertaining to municipal corporations." The
charter also provides that
"The council of the city may in the name and for the use of the
city contract loans and cause to be issued certificates of debt or
bonds. [
Footnote 3] "
Page 79 U. S. 351
In this state of things, the City of Richmond, in April, 1861,
upon the breaking out of the rebellion, passed an ordinance for the
issue by the city of $300,000, of corporation notes of $2, $1, 50
cents, and 25 cents, and the notes were accordingly issued, the
city receiving in exchange the bank notes of the state then in
circulation, between which and gold the difference at the time,
compared with what it became subsequently, was small; five percent
to ten percent
On the 19th March, 1862, and the 29th of the same month and
year, a so-called "Legislature of Virginia," the body being
composed of representatives from parts of the state in rebellion
against the federal government, passed an act, by whose language
the issue of the sort of notes in question was made valid, and the
city obliged to redeem them.
In October, 1868, the rebellion being now suppressed, and the
city refusing to pay the notes, one Thomas and others, holders of a
quantity of them, brought assumpsit against the City of Richmond,
in the court below, to recover certain ones which they held. The
declaration contained a special count on the notes and the common
money counts. The defendants pleaded the general issue and the
statute of limitations. A jury being waived, the case was tried by
the court, which found:
1st. That the notes were void when they were issued, because
they were issued to circulate as currency, in violation of the law
and policy of the state of Virginia, and
2d. That the said notes were not made valid or recoverable by
the acts of the 19th March, 1862, and 29th March, 1862, or either
of them, because the said acts were passed by a legislature not
recognized by the United States, and
in aid of the
rebellion.
The court accordingly gave judgment for the defendant. To review
that judgment, the case was brought here by the plaintiff.
Page 79 U. S. 353
MR. JUSTICE BRADLEY delivered the opinion of the Court.
First. The Court finds as a fact that the notes upon which the
present action is brought were issued to circulate as currency,
and, as matter of law, that this was in violation of the law and
policy of Virginia, and that therefore the notes were void.
The first question is whether the issue of notes as currency by
the Common Council of the City of Richmond, in April, 1861, was
against the law and policy of Virginia. The issue of notes as a
common currency, or circulating medium, is guarded with much
jealousy by all governments as touching one of its most valuable
prerogatives, and as deeply affecting the common good of the
people. Almost every state has stringent laws on the subject, and
it may be said to be against the public policy of the country to
allow individuals or corporations to exercise this prerogative
without express legislative sanction. The State of Virginia, like
all the other states, had a law of this kind in operation at the
time the notes in question were issued. The issue of the notes in
question was clearly in violation of this law, and it will be
perceived that the 17th section makes the receipt of such notes in
payment, as well as the issue and passing of them, a penal
offense.
But the charter of the City of Richmond has been referred to for
the purpose of showing that the common council had power to issue
such notes. One of the grants of power relied on is, that the city
is made a corporation with power to contract and be contracted
with, and generally with "all the rights, franchises, capacities,
and powers appertaining to municipal corporations." In a community
in which it is against public policy, as well as express law, for
any person or body corporate to issue small bills to circulate as
currency, it is certainly not one of the implied powers of a
municipal corporation to issue such bills. Such a corporation "can
exercise no power which is not, in express terms, or by fair
implication, conferred upon it." [
Footnote 4] Another clause
Page 79 U. S. 354
of the charter to which reference has been made authorizes the
council to borrow money and to issue the bonds or certificates of
the city therefor. But this cannot be seriously urged as conferring
the right to issue such bills as those now in suit. Such city
securities as those authorized by the charter are totally different
from bills issued and used as a currency or circulating medium. The
distinction is well understood and recognized by the whole
community. A power to execute and issue the one class cannot,
without doing violence to language, be deemed to include power to
issue the other. We do not hesitate to say, therefore, that the
Common Council of Richmond had no power or authority to issue such
paper, and that they could not bind the city thereby.
It is contended, however, that although the notes themselves
should be deemed void, yet the city received the money therefor,
and ought not, in conscience, to retain it, and therefore that the
action can be maintained on the count for money had and
received.
If the defendant were a banking or other private corporation,
and had issued notes contrary to law, and had incurred penalties
therefor, no penalty being imposed upon the receiver or holder of
the notes, this argument might be sound. In the case of
Oneida
Bank v. Ontario Bank, [
Footnote 5] in which the defendant had issued post notes
contrary to a statute of New York, it was held that the holder
could recover the money advanced therefor. "The argument for the
defendant against this position," says Chief Justice Comstock
"rests wholly on the idea that Perry, in receiving the postdated
drafts, was as much a public offender as the bank or its officers
issuing them. . . . But such were not the relations of the parties.
. . . Whatever there was of guilt, in the issuing of the drafts, it
was the creature of the statute. . . . By that authority, and that
alone, the bank is prohibited from issuing, but not the dealer from
receiving; and the punishment is denounced only against the
individual banker,
Page 79 U. S. 355
or the officers, agents, and members of the association. . . .
If the issuing of the drafts was prohibited, and if they were also
void, Perry nevertheless had a right to demand and recover the sums
of money which he actually loaned to the defendant."
This is in accordance with the general principles of law on this
subject. Lord Mansfield, in
Smith v. Bromley, as long ago
as 1760, laid down the doctrine, which has ever since been
followed, in these words:
"If the act be in itself immoral, or a violation of the general
laws of public policy, both parties are
in pari delicto,
but where the law violated is calculated for the protection of the
subject against oppression, extortion, and deceit, and the
defendant takes advantage of the plaintiff's condition or
situation, then the plaintiff shall recover. [
Footnote 6]"
In that case the plaintiff had given the defendant money to sign
her brother's bankrupt certificate, and she was allowed to recover
it back, the law prohibiting any creditor from receiving money for
such a purpose. Whilst the general principle has been frequently
recognized, the application of it to particular cases has been
somewhat diverse. Mr. Frere, in his note to
Smith v.
Bromley, [
Footnote 7] thus
sums up the result of the cases: a recovery can be had, as for
money had and received (1st) where the illegality consists in the
contract itself, and that contract is not executed -- in such case
there is a
locus poenitentiae, the
delictum is
incomplete, and the contract may be rescinded by either party; (2d)
where the law that creates the illegality in the transaction was
designed for the coercion of one party and the protection of the
other, or where the one party is the principal offender and the
other only criminal from a constrained acquiescence in such illegal
conduct -- in such cases there is no
parity of delictum at
all between the parties, and the party so protected by the law, or
so acting under compulsion, may at any time resort to the law for
his remedy, though the illegal transaction be completed. [
Footnote 8]
Page 79 U. S. 356
Now in cases of bills or other obligations illegally issued by a
banking or other private corporation, which has received the
consideration therefor, it would enable them to commit a double
wrong to hold that they might repudiate the illegal obligations,
and also retain the proceeds. Hence, where the parties are not
in pari delicto, actions are sustained to recover back the
money or other consideration received for such obligations, though
the obligations themselves, being against law, cannot be sued on.
The corporation issuing the bills contrary to law, and against
penal sanctions, is deemed more guilty than the members of the
community who receive them whenever the receiving of them is not
expressly prohibited. The latter are regarded as the persons
intended to be protected by the law, and if they have not
themselves violated an express law in receiving the bills, the
principles of justice require that they should be able to recover
the money received by the bank for them. But if the parties are
in pari delicto, as, if the consideration as well as the
bills or other obligation is tainted with illegality or immorality,
as it would be if loaned or advanced for the purpose of aiding in
any illegal or immoral transaction, or if the receiving as well as
passing or issuing the bills is forbidden by law, then the holder
is without legal remedy, and the parties are left to
themselves.
But in the case of municipal and other public corporations
another consideration intervenes. They represent the public, and
are themselves to be protected against the unauthorized acts of
their officers and agents, when it can be done without injury to
third parties. This is necessary in order to guard against fraud
and peculation. Persons dealing with such officers and agents are
chargeable with notice of the powers which the corporation
possesses, and are to be held responsible accordingly. The issuing
of bills as a currency by such a corporation without authority is
not only contrary to positive law, but, being
ultra vires,
is an abuse of the public franchises which have been conferred upon
it; and the receiver of the bills, being chargeable with notice of
the wrong, is
in pari delicto with the officers, and
should
Page 79 U. S. 357
have no remedy, even for money had and received, against the
corporation upon which he has aided in inflicting the wrong. The
protection of public corporations from such unauthorized acts of
their officers and agents is a matter of public policy in which the
whole community is concerned. And those who aid in such
transactions must do so at their peril.
According to these principles, no recovery could have been had
against the city, either on the bills themselves or on a claim for
money had and received. It was against the law of the state to
issue them. It was a penal offense in both the person who paid and
the person who received them, and they were issued by a municipal
corporation which had no power, and which was known to have no
power to issue them.
It was insisted further, however, that the legislature, in
March, 1862, passed laws which authorized, and even required, the
city to redeem these bills. But
Secondly. The court found that these laws were passed by a
legislature not recognized by the United States and in aid of the
rebellion, and therefore that these notes were not made valid
thereby.
The fact thus found, that the laws referred to were passed in
aid of the rebellion, is conclusive on the subject. We have already
decided in
Texas v. White, [
Footnote 9] and just now in the case of
Hanauer v.
Doane, [
Footnote 10]
that a contract made in aid of the rebellion is void, and cannot be
enforced in the courts of this country. The same rule would apply,
with equal force, to a law passed in aid of the rebellion. Laws
made for the preservation of public order, and for the regulation
of business transactions between man and man, and not to aid or
promote the rebellion, though made by a mere
de facto
government not recognized by the United States, would be so far
recognized as to sustain the transactions which have taken place
under them. But laws made to promote and aid the rebellion can
never be recognized by, or receive the sanction
Page 79 U. S. 358
of, the courts of the United States as valid and binding laws.
To recognize them as such would be derogatory to the dignity and
authority of the government of the United States, and would be
setting too light an estimate upon so great an offense.
Judgment affirmed.
[
Footnote 1]
By the express provision of the enactment, the word "person"
includes corporation.
[
Footnote 2]
Chapter 54 of the code of 1849, p. 282, was followed by the Act
of March 30, 1852 (Session Acts, p. 259), and the Act of March 18,
1861 (
ib., 153).
[
Footnote 3]
Sessions Acts, 1852, p. 265, § 46; 1861, p. 169, § 75.
[
Footnote 4]
<|3 Wall. 330|>Thomson v. Lee County, 3 Wall.
330.
[
Footnote 5]
21 N.Y. 496.
[
Footnote 6]
2 Douglas 696, n.
[
Footnote 7]
Ib., 697, a.
[
Footnote 8]
See the cases collected in 2 Comyn on Contracts
108-131; 1 Selwyn's Nisi Prius 87-100; 3 Phillips on Evidence 119;
2 Greenleaf on Evidence § 121, p. 120; Chitty on Contracts 550,
552, 553, and notes.
[
Footnote 9]
<|7 Wall. 700|>7 Wall. 700.
[
Footnote 10]
The preceding case,
supra, <|79 U.S.
342|>342.
