Kuhl v. M. Gally Universal Press Co. , 123 Ala. 452 ( 1898 )

SHARPE, J.

-The original bill seeks the foreclosure of a mortgage on real estate given to secure certain promissory notes made by defendant to one Charles Sehimpf and by him endorsed to the Clawson Slot Machine Company, and by that company transferred together with the mortgage to the' complainant.. The debt originated in the purchase by Scliimpf of 300' dice throAVing slot machines at thirty-five dollars each from complainant’s transferor, together with the exclusive right with certain exceptions to use and dispose of the macliines in certain designated States. In the first contract ifi which the machine company was represented by one Blanekensee, the machines were to be shipped to such points as Schimpf might designate with a sight draft attached to the bill of lading to be paid on delivery. After a few weeks, a number having been shipped and only a part of them having been paid for and delivered, another agreement was made — the Machine Company then acting through its secretary, one Cross — whereby the remainder of the machines were to be delivered upon the orders of Schimpf, who then made a partial payment of three thousand dollars and gave for the balance his several notes endorsed by the defendant Mrs. Kuhl who also, to further secure the notes, gave a mortgage upon her property described in the bill.

Subsequently the machines having been delivered and three of those notes having been paid, others were past due and unpaid, and a new agreement was made according to which the unpaid notes and the mortgage were surrendered, and in their place were substituted notes made by the defendant to Schimpf and endorsed by him to the Machine Company, that company taking a new mortgage executed to it by the defendant upon the same property embraced in the old mortgage, and Schimpf then transferred the machines to the defendant: Of the last mentioned notes three were paid and the remainder are the same here involved.

Defense is made under the statute which declares that “all contracts founded in whole or in part upon a gambling consideration are void,” (Code, §2163); and the cross-bill seeks relief against the enforcement of the notes and mortgage.

The dice throwing machines were plainly gambling devices. Their use and adaptation, as disclosed by the proof, was to determine by a chance throw of dice, whether the person depositing his money in the slot should lose the money or win cigars. In Loiscau v. State, 114 Ala. 34, the operation of a similar machine was described, and it was said that those playing against them were guilty of gambling.

The sale of an article adapted to such use is not in itself illegal, and under the weight of authority it may lie assumed that the mere knowledge on the part of the vendor that the article will probably be used for gambling will not render the contract of sale invalid. If, however, the vendor goes beyond the act and purpose of making a sale, and by making it actively aiid purposely participates in the promotion of the illegal use, he becomes particeps ci'imiuis and cannot recover upon the contract of sale.—Bickel v. Sheets, 24 Ind. 1; Rose v. Mitchell, 6 Col. 102, 45 Am. Rep. 520; Hill v. Spear, 50 N. H. 253, 9 Am. Rep. 205; Skiff v. Johnson, 57 N. H. 475.

The generally established rule independent of -statute 'is that contracts made in furtherance of gambling transactions, though not immediately involving a wager, are void as against public policy.—Authorities, supra; Embery v.Jemison, 131 U. S. 336; Irwin v. Williar, 110 U. S. 499; Helber v. Schantz, 109 Mich. 669; Johnson v. Clark, 51 N. Y. Supp. 238; Spurgeon v. McElwaine, 27 Am. Dec. (Ohio) 266; Graves v. Johnson, 15 L. R. A. 834.

That- such is the nature of the contract involving the original sale of the slot machines, the evidence is convincing. It appears that shortly before the trade in question Blanckensee had placed a machine in Scliimpf’s saloon in Mobile, had explained to him its use .and contracted to pay him for cigars which Scliimpf was to supply to settle the machine’s losses and also, to pay Scliimpf ten per cent of the profits which he represented to be about sixty per cent, sometimes amounting to forty dollars per day for a single machine. Several other machines had then been placed in operation in Mobile under similar contracts with others. Having thus interested Scliimpf-, Blanckensee sold him for cash eighteen machines including the going machines in Mobile and the’contracts he had for their use. He then sold Scliimpf the 300 machines and the territorial right, agreeing at the same time to assist Scliimpf in placing a supply in Birmingham, which agreement be carried out by visiting Birmingham with Scliimpf, and placing for him .about thirty machines under contracts similar to those made in Mobile. Having thus inaugurated the game, the Machine Company guarded it from interference by posting a standing offer of reward for the apprehension of persons tampering with or robbing a machine which offer was maintained, after Schimpffs purchase. On one occasion thereafter the company actually paid such a reward of twenty-five, dollars and explained its motives to Schimpf, saying: “Our object was to benefit you, thinking that in that way the police force would understand that we mean to be honorable in our transactions and they would not be prejudiced against us. We thought it would he a great help to you in placing machines in Mobile. Kindly inform us what effect it has. had, if any.”

Schimpf was inexperienced in the business and the service of Blanckensee in starting the business doubtless' formed a material inducement to the purchase. It was as much a part of the consideration as was the value of the machines. The Machine Company Avas bound by the contract of its agent, and its attitude as a promoter of the gambling business is reasonably established.

The first notes and mortgage given represented the balance due upon the same contract, so that the illegality of consideration was carried into-them. When she gave the notes and mortgage here involved, the defendant’s liability was only as endorser on the first notes and as the inaker of the first mortgage. The surrender of those first papers and an extension of time of payment formed the only consideration moving from the Machine Company to her for the second papers. Long prior to their execution the company had parted with all its interest in the machines, and their transfer to defendant was a consideration moving to her only from .Schimpf. Whatever taint of illegality existed in the first notes and mortgage infected the last notes and mortgage, and the same defense can be made to the last as to the first. Embry v. Jamison, supra; Hynds v. Hays, 25 Ind. 31.

•Illegality of .consideration for negotiable paper arising merely from its being offensive to public policy does not affect the rights of an innocent holder for value; but the rule is otherwise when the instrument is made absolutely void by statute as in contracts founded in whole or in part on a gambling consideration.—Manning v. Manning, 8 Ala. 138; Saltmarsh v. Tuthill, 13 Ala. 390; Finn v. Barclay, 15 Ala. 626; Hawley v. Bibb, 69 Ala. 52.

But it is contended for. tlie complainant that though the contract he contra bonos mores as in furtherance of gambling, it is not a gambling contract within the meaning of the annulling statute; and that, therefore, complainant should be protected as an innocent holder of the notes. The moral. principle which the contract offends is precisely that which the statute is designed to protect. The terms of the statute do not require its restriction to actual wagers or to contracts made in settlement of'betting losses. Such has not been its interpretation in this court.

The case of Hawley v. Bibb, supra, involved a bill filed by a transferee of a bill of exchange to foreclose a mortgage given to secure the bill, the consideration of which was a loan of money furnished the borrower as a stake with which to engage in the buying and selling of cotton futures. Upon the ground that the contract was gov* erned by the laws of New York it was held enforceable here; hut it was said that “if the contract had contemplated that the money should have been advanced and loaned in this State upon transactions made here, the bill of exchange would fall within the interdiction of the statute and would he void even in the hands of an innocent holder for Amine.’’

In Peet & Co. v. Hatcher, 112 Ala. 514, a similar transaction was under consideration by this court, and the case of Hawley v. Bibb was referred to approvingly as shoving that the statute was applicable to such a case.

The principle so declared in those cases is apjilicable. to the transaction here involved, and the conclusion follows that the notes and mortgage in suit must he held void under the statute referred to.

Ordinarily courts of equity will refuse assistance to all the parties to an illegal transaction. But section (588 of the (lode extends the jurisdiction of courts of equity “to all cases founded on a gambling consideration so far as to sustain a bill of discovery and grant relief.” The policy of this statute is not to aid a loser hut to discourage gambling; and accordingly the courts are bound to exercise the jurisdiction and to relieA'e in proper cases without imposing upon the party seeking it the usual condition of doing; equity.—Finn v. Barclay, supra; Cheatham v. Young, 5 Ala. 353. Therefore, under the cross-hill the notes and mortgage must be declared void unconditionally; but the decree will also direct the delivery up of 125 machines to the complainant according to the defendant’s offer made in her cross-hill.

The decree appealed from will he reversed and a decree here dismissing the original bill, and granting relief under the- cross-hill as has been indicated. The appellee will pay the costs in this court and in the chancery court. • ■

Beversed and rendered.