Winton v. Freeman , 102 Pa. 366 ( 1883 )

Mr. Justice Paxson

delivered the opinion of the court, March 26th 1883.

This was an issue in the court below to test the validity of a judgment entered upon a note given by Oscar F. Freeman, defendant in error, to 0. W. Freeman, and by the latter assigned to W. W. Winton for the Second National'Bank of Scranton. The bank claimed to hold it as collateral for the indebtedness-of 0. W. Freeman.

The note was one of a series of four notes of $2,500 each, and it was not denied that they were collusively given to hinder and delay the creditors of C. W. Freeman. After the note in controversy had been transferred to the bank the two Free-mans became alarmed at the possible consequences of the fraud, and as far as was in their power, traded back, to use their own expression, and three of the notes were surrendered to Oscar F. Freeman. The bank, however, did not surrender the note in controversy, and the defendant applied to and obtained a rule in the court below to open the judgment, and this issue was framed to try the question of its validity. The jury under the rulings of the court returned a verdict for the defendant.

It is settled by numerous authorities that there is no more binding consideration known to the law than the mutual fraud of the parties. The books ■ are full of cases where a party to the fraud has sought relief in the courts from the consequences of his unlawful act, but the decisions have been uniformly adverse to such applications.. It is not the province of the law to help a rogue out of his toils. The rule is to leave the parties where it finds them, giving no relief and no countenance to contracts made in violation of statutes : Hershey v. Wei ting, 14 Wright 240 ; Evans v. Dravo, 12 Harris 62. It follows that the defendant would have no defence to this note as against 0. W. Freeman the obligee or payee. The learned judge of the court below, however, was of opinion, and so instructed the jury, that if the bank had knowledge of the fraud and afterwards took the note, it became a party to the fraud and -could not recover. The fallacy of this ruling is obvious. The note is good as between the parties, for the reason that the maker cannot set up his fraud as a defence. If he cannot set it up against the payee, neither can he set it up against the bank, and the inquiry whether the bank had knowledge of the fraud was wholly irrelevant.

Nor does the question of a failure of consideration arise in the case. There never was any bona fide consideration given for these notes. The transaction was a fraud, the object of which was to hinder and delay the creditors of C. W. Freeman. There never was a delivery, actual or constructive, of the goods for which the notes were supposed to be given, nor was it intended that-there should be. Had there been no fraud, the failure of consideration could have been inquired] into. But just here the law steps in and says that the intended fraud is a binding consideration, and that although Oscar F. Freeman received no benefit whatever for the note, he cannot be allowed . to impeach it on that ground. This may seem hard, but it is •just. The rule is founded upon the highest considerations of public policy and must be sternly enforced in order to keep men honest.

If the bank had agreed to the rescission of the arrangement between the Freemans, and had cancelled or surrendered the note, the ease would have been different. But it did neither. There was no evidence to submit to the jury that it surrendered the note, or agreed upon a sufficient consideration to do so. The jury shauld have been instructed to find a verdict for the plaintiff.

Judgment reversed and a venire facias de novo awarded.