Story Case

The Western and Indiana Railroad Company paid William Anson, an attorney, $10,000 under an agreement whereby he promised to use this money to improperly influence the passing of a law at Springfield, the state capital. After Anson acquired this money, he refused to carry out his contract and use the money as stipulated. The railway company brought suit to recover for its loss. Can it recover?

Ruling Court Case. Bernard Vs. Taylor, Volume 23 Oregon Reports, Page 416, Volume 18 Lawyers' Reports Annotated, Page 859

Taylor and others had arranged for a foot race to be run by and between Anderson and Grant at an agreed time. Having made the arrangement, bets upon the two contestants were solicited. Bernard decided that he would like to wager some money on the race. So he deposited $500 in gold with Taylor on a bet that Grant would win the race. Before the time set for the event, Bernard became suspicious. He feared from what he had heard, after he put up his money, that the race was "fixed"and that it was not to be a fair and just contest. He went immediately to Taylor and demanded the return of his money. Taylor refused to give it to him. Thereupon, Bernard brought this action to recover his money.

Taylor contended that, since it was a wagering contract, the Courts should give relief to neither.

Decision

Wagers are inconsistent with the established interests of society and are in conflict with the morals of the age. They are, therefore, void on the ground of public policy. While such a contract is still executory, however, either party may rescind the contract and recover any property he may have put up; but if the contract is executed, nothing paid or delivered under the agreement can be recovered. In this case the wager was not executed at the time Bernard demanded the return of his money. He repented in time and is entitled to recover his money.

Mr. Chief Justice Lord said in part: "The general rule is, that the law will not interfere in favor of either party in pari delicto - in equal wrong - but will leave them in the condition in which they are found, from motives of public policy. There is no doubt, where money has been paid on an illegal contract which has been executed, and both parties are in pari delicto, the courts will not compel the return of the money so paid. But the cases show an important distinction is made between executory illegal contracts and executed illegal contracts. While the contract is executory, the law will neither enforce it, nor award damages, but the party, paying the money or putting up the property, may rescind the contract and recover the money or the property. If the contract is already executed, nothing paid or delivered can be received back. This arises out of the distinction between an action in affirmance or an illegal contract, and one in disaffirmance of it. In the former, such an action cannot be maintained, but in the latter, an action may be maintained for money had and received. The reason is that the plaintiff's claim is not to enforce but to repudiate an illegal transaction".

Judgment was given for Bernard.

Ruling Law. Story Case Answer

The general rule, undoubtedly, is that the Courts will assist neither party in enforcing an illegal agreement.

The policy of the law is to discourage the making of such agreements. The policy is best effectuated by leaving the parties without any court remedy. If one party has paid money under an illegal agreement, the general rule is that he may not recover it, even though the other does not perform his part of the contract. Also, if one party performs his part of the contract which is illegal, the other party may not be compelled to perform his part. A distinction is taken between contracts which are illegal, because of the nature of the transaction, contracts termed bad in themselves, and contracts which are illegal merely because they are prohibited. In the latter case, if the illegal contract is still executory, it is said that, if one of the parties repents of the transaction before it is executed, he may recover what he has paid under the contract. Thus, in the Court Case, gambling contracts were not generally held void at Common Law, but are now generally forbidden by statute. Bernard repented before the race was run, and the Court held that he was entitled to recover the money he had placed as a bet upon the outcome of the race.

In the Story Case, the railroad cannot recover because the contract is illegal by nature, bad in itself, because it was against public welfare.