Story Case

In the days when the "gold brick" fraud was often practiced on the unwary, Katz and Lamb agreed to split the proceeds of all the money they could fleece from victims. It was agreed that Katz should work into the grace of prospective purchasers, and Lamb should sell the fake brick. They carried on a remunerative "business" for several years, and had a fair sized bank account in the name of Lamb. Then Lamb refused to share with Katz. Katz tried in every way to get his part of the illgotten gains, and finally brought suit for it. Should he be allowed to recover?

Ruling Court Case. Atkins Vs. Johnson, Volume 43 Vermont Reports, Page 78; Volume 5 American Reports, Page 260

Atkins, who is the plaintiff in this action, was the editor and proprietor of a weekly newspaper, published in Vermont. Johnson came to him one day, and asked him if he would publish an article, entitled "A Jack At All Trades Exposed." The article was basely false, and highly defamatory of one Gregory, concerning whom it was written. At first, Atkins was reluctant to publish it, but Johnson assured him that the whole article was true, and that a perfect defense could be made to any suit that might be brought by Gregory. With this assurance, Atkins published the article, promising Johnson not to reveal his authorship. After it was published, Gregory visited Atkins and demanded to know the author. Atkins refused to tell him until he had consulted Johnson again. Johnson then agreed that he would pay any and all expenses incurred by Atkins in defending any suit, if Atkins would promise not to reveal his name as author. Atkins so agreed. Gregory brought suit against Atkins and recovered judgment, which Atkins was compelled to pay. Atkins then demanded reimbursement from Johnson, which Johnson refused. This suit was then brought to recover the expenses incurred by Atkins.

Johnson contended that the object of the contract was illegal in that it was an agreement to publish a libel, and such being the case no recovery could be had on the agreement Mr. Chief Justice Pierpont delivered the opinion of the Court: "In this case, these persons in the outset conspired to do a wrong to one of their neighbors, by publishing a libel upon his character. The publication of a libel is an illegal act upon its face. This, both parties are presumed to have known. The publication, not only subjects the party publishing to a prosecution by the person injured for damages, but also to public prosecution by indictment".

"Both these parties knew that they were arranging for and consummating an illegal act, one that subjects them to legal liability, hoping, to be sure, that they might defeat it; but Atkins, fearing that they might not be able to do so, sought to protect himself from the consequences by taking a contract of indemnity from Johnson. This being so, the law will not interfere in aid of either. It will not inquire which of the two is the more in wrong, but will leave them as it finds them".

Judgment was, therefore, given for Johnson.

Ruling Law. Story Case Answer

Any agreement which contemplates the commission of a crime or civil wrong is void and unenforcible. The commission of crimes and civil wrongs were forbidden by the Common Law. Consequently, any agreement which contemplated the commission of such was void. At Common Law it was both a civil and criminal offense to publish a libel whereby the public peace might be disturbed, and the reputation of a person injured. So, any agreement which contemplated the publication of a libel was void. This is illustrated by the Court Case of Atkins vs. Johnson. Likewise, any agreement to divide the profits of a fraudulent transaction is void and unenforcible. In the Story Case, Katz has no remedy. In such a case, the Court will not condescend to settle differences between thieves and scoundrels.