There are occasional dicta to the effect that no claim will be allowed by the courts which cannot be established without proof of an illegal transaction.3 In most of the cases the claim sought to be enforced was for the breach of the illegal contract itself or of a contract collateral to or in some way connected with the illegal contract. But in Taylor v. Chester,1 the rule was applied to a claim sounding in quasi contract, and it was declared that "The true test for determining whether or not the plaintiff and the defendant were in pari delicto is by considering whether the plaintiff could make out his case otherwise than through the medium and by the aid of the illegal transaction." 2
11903, 189 U. S. 423, 425; 23 S. Ct. 512, (unauthorized purchase of bonds by bank officer).
2 See also Kiewert v. Rindskopf, 1879, 46 Wis. 481, 484; 1 N. W. 163, (money obtained to be paid on an illegal contract). But see Plaisted p. Palmer, 1874, 63 Me. 576, (sale of horse on Sunday); Robeson v. French, 1846, 12 Met. (Mass.) 24; 45 Am. Dec. 236, (horse trade on Sunday); Northrup v. Foot, 1835, 14 Wend. (N. Y.) 248, (sale of horse on Sunday).
3 See Simpson v. Bloss, 1816, 7 Taunt. 246, (wager); Fivaz v. Nicholls, 1846, 2 C. B. 501, (agreement to suppress prosecution); McMullen v. Hoffman, 1898, 174 U. S. 639, 654; 19 S. Ct. 839, (secret agreement between bidders); Butler v. Agnew, 1908, 9 Cal. App. 327, 332; 99 Pac. 395, (secret agreement between vendor's agent and purchaser); Roselle v. Beckemeir, 1896, 134 Mo. 380; 35 S. W. 1132, (lottery); Woodworth v. Bennett, 1871, 43 N. Y. 273; 3 Am. Rep. 706, (illegal agreement between bidders); Swan v. Scott, 1824, 11 Serg. & R. (Pa.) 155, (land lottery); Columbia Bank, etc., Co. v. Haldeman, 1844, 7 Watts & Serg. (Pa.) 233; 42 Am. Dec. 229, (bond to indemnify stakeholder); Holt v. Green, 1873, 73 Pa. St. 198; 13 Am. Rep. 737, (violation of revenue law; cf. Johnson v. Hulings, 1883, 103 Pa. St. 498; 49 Am. Rep. 131, sale by unlicensed broker); Packer & Field v. Byrd, 1905, 73 S. C. 1; 51 S. E. 678; 6 L. R. A. (N. S.) 547, (monopoly) ; Wald's Pollock, ."Contracts" (Williston's ed.), 497.
Whether or not the rule is of value in determining the enforceability of contracts collateral to or indirectly relating to illegal transactions,3 as a test for determining the question of par delictum it has been condemned by judges and commentators alike and is obviously without merit.4 Aside from its artificiality in subordinating a question of substance to one of form, it would unquestionably operate with marked inequality and injustice. In many cases the rule would prevent the relief of persons who are the victims of actual fraud or oppression, or who are intended to be protected by the law which makes the contract illegal. For in order to establish the right to restitution, a plaintiff must prove the circumstances under which he conferred the benefit. This means that he must put the contract in evidence, and if the contract were unlawful on its face he would thereby establish the fact that he was in pari delicto, regardless of the circumstances of the formation of the contract and of the purpose of the law in prohibiting it. Occasionally, on the other hand, it would enable the plaintiff to recover though in reality quite as guilty as the defendant. For instance, if A were to pay money to B under a lawful contract, but subsequently were to agree with B that B should expend it in an unlawful joint attempt to make a "corner" in a certain stock, A might obtain relief upon the ground that he was not in pari delicto. He would establish a claim against B by proving the lawful contract, and although B were to put in evidence the unlawful contract subsequently entered into, the court would be obliged to hold that A, since he did not resort to the illegal contract to prove his case, was not as guilty as B.1 Sec. 144. (3) Plaintiff withdraws before accomplishment of illegal purpose: Locus poenitentiae. - It is frequently said that one who pays money or transfers property under a contract malum prohibitum may recover the same if he rescinds the illegal contract before it is executed.2 A more accurate statement of the rule, however, is that one who withdraws before the illegal object is accomplished is entitled to recover.3 For in which it was held that plaintiff could recover because the contract the true purpose of this exception to the general rule is to prevent, not the execution of the contract, but - what may be quite different - the consummation of the contemplated violation of law. Thus, one who enters into a contract on Sunday, in violation of the statute, should under no circumstances be permitted to recover, for the violation of law is complete the moment the contract is made (post, Sec. 153). So, one who, for the purpose of enabling a company to have a fictitious credit in case of inquiries at their bankers, places money to their credit under an agreement that it shall not be used for the general purposes of the company but returned to the lender, cannot recover the money upon the company becoming insolvent.1
1 1869, L. R. 4 Q. B. 309, (wine supplied to brothel). See also Herman v. Jeuchner, 1885, 15 Q. B. D. 561, (indemnity of surety); Short v. Bullion-Beck, etc., Co., 1899, 20 Utah 20; 57 Pac. 720; 45 L. R. A. 603, (contract in violation of eight-hour law).
2 Opinion of Mellor, J., p. 314.
3 In Hanauer v. Woodruff, 1872, 15 Wall. (U. S.) 439, 443, an action upon a note given in consideration of illegal bonds, the Supreme Court declared that this test "is too narrow in its terms and excludes many cases where the plaintiff might establish his case independently of the illegal transaction, and yet would find his demand tainted by that transaction." See also Coppell v. Hall, 1868, 7 Wall. (U S.) 542; Baltimore, etc., R. Co. v. Diamond Coal Co., 1899, 61 Ohio St. 242; 55 N. E. 616.
4 Plaisted v. Palmer, 1874, 63 Me. 576, (sale of horse on Sunday); Sampson v. Shaw, 1869, 101 Mass. 145; 3 Am. Rep. 327, (agreement, for a corner); Keener, "Quasi-Contracts," p. 275; Scott, "Cases on Quasi-Contracts," p. 686, note.
1 See Sampson v. Shaw, 1869, 101 Mass. 145; 3 Am. Rep. 327. In this case the court said (p. 152): "The application of the maxim, in pari delicto, etc., does not depend upon any technical rule as to which party is the first to urge it upon the court in the pleadings."
2 Lowry v. Bourdieu, 1780, Doug. 468, 471, (insurance without interest); Tappenden v. Randall, 1801, 2 Bos. & Pul. 467, 471, (wager); Spring Co. v. Knowlton, 1880, 103 U. S. 49, 60, (ultra vires issue of stock); MeCutcheon v. Merz Capsule Co., 1896, 71 Fed. 787, 795; 19 C. C. A. 108; 37 U. S. App. 586, (ultra vires agreement to combine); White v. Franklin Bank, 1839,22 Pick. (Mass.) 181, (ultra vires contractof bank); Skinner v. Henderson, 1846, 10 Mo. 205, 207, (lease of preemption right); Brown v. Timmany, 1851, 20 Ohio 81, 86, (Sunday contract); Bernard v. Taylor, 1893, 23 Or. 416, 422; 31 Pac. 968; 18 L. R. A. 859; 37 Am. St. Rep. 693, (wager on foot race); McCall v. Whaley, 1909, 52 Tex. Civ. App. 646; 115 S. W. 658, (contract to influence a public officer); Deaton v. Lawton, 1905, 40 Wash. 468; 82 Pac. 879, 880; 111 Am. St. Rep. 922, (contract by unlicensed physician to render services).
3 Taylor v. Bowers, 1876, 1 Q. B. D. 291, 300, (delivery of goods to defraud creditors); Herman v. Jeuchner, 1885, 15 Q. B. D. 561, (indemnity of surety: overruling Wilson v. Strugnell, 1881, 7 Q. B. D. 548,
This opportunity to withdraw from an illegal contract and recover the value of a benefit conferred in its performance is called locus poenitentiae. It exists without reference to the question of par delictum,2 being offered, not for the purpose of saving the plaintiff from hardship, but with the hope of preventing the violation of law. The wisdom of the doctrine has occasionally been doubted,3 and in a few cases it has been had not been executed); Wasserman v. Sloss, 1897, 117 Cal. 425, 430; 49 Pac. 566; 38 L. R. A. 176; 59 Am. St. Rep. 209, (stocks advanced for bribery); Eastern Expanded Metal Co. v. Webb, etc., Co., 1907, 195 Mass. 356; 81 N. E. 251, (labor and materials furnished in construction of lower part of building: plans for roof contravened statute).
1 In re Great Berlin Steamboat Co., 1884, 26 Ch. D. 616, 620, ("The object," said Lindley, L.J., "for which the advance was made was attained as the company continued to have a fictitious credit till the commencement of the winding-up. After that I think it was too late for the Appellant to repudiate the bargain and claim the money."). See also Herman v. Jeuchner, 1885, 15 Q. B. D. 561.
2 Spring Co. v. Knowlton, 1880, 103 U. S. 49, 60. In this case Woods, J., said: "The rule is applied in the great majority of cases, even when the parties to the illegal contract are in pari delicto, the question which of the parties is more blamable being often difficult of solution and quite immaterial."
This is not always understood. See Wright v. Stewart, 1904, 130 Fed. 905.
3 See Kearley v. Thomson, 1890, 24 Q. B. D. 742, 746, (Money paid to secure discharge in bankruptcy. "It is remarkable," says Fry, L.J., after quoting from the opinion of Mellish, L.J., in Taylor v. Bowers, 1. Q. B. D. 291, "that this proposition is, as I believe, to be found in no flatly rejected,1 but in one or the other of the two forms in which it is stated above, it has been very generally adopted.