Supreme Court of Canada
Clark v. Hagar, 22 S.C.R. 510
Date: 1894-02-20
S.R. Clark (Defendant)
Appellant;
and
Eliza Hagar (Plaintiff)
Respondent.
1893: November 6, 7; 1894: February 20.
Present: Fournier, Taschereau, Gwynne,
Sedgewick and King JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR
ONTARIO.
Conveyance—Illegal or immoral
consideration—Intention of grantor—Character of grantee—Pleading.
Under the judicature Act of Ontario an action
for foreclosure is not to be regarded as including a right to recover possession
of the mortgage premises as in ejectment, and the rule that in such action the
plaintiff may obtain an order for delivery of possession does not apply to a
case in which the mortgage sought to be foreclosed is held void and plaintiff
claims title as original owner and vendor.
Under said Judicature Act, as formerly, the
plea to an action on a contract that it was entered into for an immoral or
illegal consideration must set out the particular facts relied upon as
establishing such consideration.
Quœre: Can the
purchaser of the equity of redemption set up such defence as against a
mortgagee seeking to foreclose or is the defence confined to the immediate
parties to the contract?
A contract for transfer of property with
intent by the transferor, and for the purpose, that it shall be applied by the
transferee to the accomplishment of an illegal or immoral purpose is void and
cannot be enforced; but mere knowledge of the transferor of the intention of
the transferee so to apply it will not avoid the contract unless, from the
particular nature of the property, and the character and occupation of the
transferee, a just inference can be drawn that the transferor must also have so
intended. Judgment of the Court of Appeal affirmed, Taschereau J. dissenting.
APPEAL from a decision of the Court of Appeal
for Ontario affirming the judgment of the Divisional Court in favour of the
plaintiff.
The material facts of this case are full set out
in the judgment of the court and may be summarized as follows:—
[Page 511]
The plaintiff, Hagar, had sold a house to one
Jennie O’Neill who was, to the knowledge of the plaintiff, a prostitute. A
mortgage was given for part of the purchase money and plaintiff brought an
action against said O’Neill and the defendant Clarke to whom the equity of
redemption had been conveyed to foreclose it. At the trial defendants did not
appear and judgment for possession of the land was given against them. Clarke
then applied for and obtained a new trial on affidavits showing that part of
the purchase money on the sale to O’Neill was for the good will of the house as
a house of ill-fame and he claimed, therefore, that the mortgage was void to
the extent of such immoral consideration. The present appeal was from a
decision of the Court of Appeal holding the mortgage valid.
Clarke, appellant in person. The courts
will not aid the enforcement of an immoral or illegal contract. Harris v.
Fontaine;
Furlong v. Russell;
Smith v. Benton;
Peoples Bank v. Johnson.
As to the right to plead illegality not appearing
on the face of an instrument see Collins v. Blantern; Bonisteel v. Saylor; Jones v. Merionethshire Building Soc.
The appellant referred also to Windhill Local
Board v. Vint; Sprott
v. United States; Hanauer
v. Doane.
Armour Q.C. for the respondent. The acts
constituting illegality should be set out in the defence. In re Vallance: Gray v. Mathias; Hall v. Palmer; Waugh v. Morris.
[Page 512]
On the merits the learned counsel referred to Taylor
v. Bowers; Roberts
v. Roberts; Pawson
v. Brown.
The judgment of the majority of the court was
delivered by:
GWYNNE J.—This is an action for foreclosure of a
mortgage instituted by the mortgagee against the mortgagor and the appellant,
to whom the mortgagor sold and conveyed the premises, subject, however,
expressly to the mortgage and to payment of the moneys thereby secured. The
plaintiff, having at the trial waived all relief against the mortgagor, we may,
under the circumstances, treat the appellant, who is solely seized of the
equity of redemption, as the sole defendant. In his statement of defence he
alleged that the consideration for the execution of the mortgage was illegal
and immoral, and that therefore the mortgage was void and of none effect. To
this the plaintiff replied, denying what was so alleged, and saying that if it
should be found that the consideration was illegal the mortgagor was a party
thereto, and that neither she nor the appellant, her grantee of the premises,
could set up such a defence to plaintiff’s claim. The case came down for trial
in October, 1890, when the defendant applied for a postponement of the trial,
upon grounds which did not appear to the learned trial judge to be sufficient.
Thereupon the case proceeded, and no defence being offered judgment for
foreclosure of the mortgage, as prayed by the plaintiff’s statement of claim,
was rendered for the plaintiff Subsequently a motion for a new trial was made
to the Chancery Division of the High Court of Justice, founded upon affidavits
of the mortgagor and the appellant, to the
[Page 513]
effect in substance that the mortgage was
executed to secure payment of part of the purchase money of a dwelling house
purchased from the mortgagee by the mortgagor, who was, as the mortgagee well
knew, a prostitute, and that $2,000 of the purchase money for the house was in
the contract of purchase and sale estimated as the value of the house as a
house of prostitution, for the good-will, as it is called, of the house as a
house used for purposes of prostitution. Upon these affidavits the court made
an order that upon payment by the defendant to the plaintiff, on or before the.
27th of February then next, of the full amount found due for debt, interest and
costs by the judgment for foreclosure rendered in the action, less the interest
not then yet accrued, and less the sum of $2,000 of principal money and the
interest thereon, together with the costs of the motion to set aside the
judgment, the judgment should be set aside, and the court thereby further
adjudged that upon the said 27th of February there would be due to the
plaintiff for balance of principal money $1,625, and for balance of interest
$140.17, and for taxed costs up to judgment $206.02, and for subsequent costs
$115.39, amounting together to $2,086.58, and the court did further order that
upon payment of that sum to the plaintiff, on or before the said 27th day of
February, the plaintiff should execute and deliver to the defendant a release
of the mortgage, save as to the amount of $2,000, for principal and interest
thereon from the 5th December, 1889, and the court did further order that upon
such payment being made then a new trial should be had, and that in default of
such payment the motion to set aside the judgment for foreclosure should be
dismissed. Upon this order being made the now appellant paid the said sum of
$2,086.58 in pursuance of the order, and the case came down again for trial in
April, 1891, before Street
[Page 514]
J., when the mortgage was put in, and its
execution being admitted the plaintiff’s case closed, whereupon counsel for the
defence opened the defence as follows, as stated in the appeal case as
presented to us:—
The contention (he said) is that this
mortgage was given as part of the purchase money of the house No. 32 Albert
St., Toronto. As a defence to this action the defendants set up that the house
was bought to the knowledge of the plaintiff by the mortgagor for the purpose
of carrying on a house of ill-fame—that part of the consideration was the good‑will
of the place as a house of ill-fame and therefore being an illegal
consideration the plaintiff cannot recover. The amount paid is the full value
of the place at the time it was bought and we say the amount in dispute now,
$2,000, was for the good-will of the place.
This latter is the special point for the purpose
of establishing which the new trial was granted to the defendant, and after
hearing all the evidence offered in support of this contention the learned
trial judge set aside the evidence of the mortgagor as not worthy of belief
when wholly unsupported by other evidence as he found it to be, and the learned
judge found as a matter of fact that the market value of the house at the time
of the sale was at least $5,000 at which sum it could readily have been sold to
other persons, and that the character of the house formed no element in the
consideration paid for it and that nothing took place to induce the belief that
the purpose of the sale was other than that of turning $5,000 worth of land
into that sum of money, and accordingly he rendered judgment for foreclosure in
favour of the plaintiff. Against this judgment the appellant appealed, and the
judgment having been maintained in the Ontario Courts the case comes before us
upon appeal from the judgment of the Court of Appeal for Ontario.
Before entering into the case of the appellant,
who argued his appeal in person, it will be convenient here to notice certain
objections taken by the learned counsel for the plaintiff which if well founded
go
[Page 515]
to the root of the right of the appellant to be
heard at all upon his appeal. His contention is that since the Administration
of Justice Act of 1873, whereby the courts of law and equity were made
auxiliary to each other, an action instituted as the present was against the
mortgagor and the appellant as purchaser of the mortgaged premises subject to
the mortgage had a threefold aspect, and was to be regarded as three separate
actions, namely, besides being an action for foreclosure of the mortgage that
it was at the same time an action against the mortgagor upon the covenant in
the mortgage to pay the mortgage money and as against the appellant an action
in the nature of ejectment for recovery simply of possession of the land
mortgaged; but neither in the act of 1873 nor in the Ontario Judicature Act, nor
in the rules passed by the judges under the authority of that act can I find
anything in support of the contention. But on the contrary, rule 341 of the
Supreme Court of Judicature puts the question beyond all doubt if any could
exist. By that rule, which has the force of an act of the legislature, it is
enacted that: No cause of action shall unless by a leave of a court or a judge
be joined with an action for the recovery of land except a claim in respect of
mesne profits or arrears of rent or double value in respect of the premises
claimed or any part thereof and damages for breach of any contract under which
the same or any part thereof is held, or for any wrong or injury to the
property claimed. And although it is by subsec. (a), of that rule
declared that the rule should not prevent a plaintiff in an action for
foreclosure or redemption from asking for and obtaining judgment or an order
against the defendant for delivery possession of the mortgaged premises to the
plaintiff, either forthwith, or on or after a final order for foreclosure or
redemption, yet it is there expressly
[Page 516]
provided that such an action should not be
deemed to be an action for the recovery of land within the meaning of the rule.
Since the Judicature Act all the courts, no doubt, administer legal and
equitable principles in all suits properly framed for the purpose, but the act
countenances no such confusion of remedies and principles as the form of action
in triplicate suggested would introduce. There are some observations of Lord
Justice Cotton in Clements v. Matthews,
and Joseph v. Lyons
pertinent upon this point. In those cases it was decided that neither detinue
nor an action for conversion would lie for the recovery of chattels acquired by
a mortgagor after the execution of a chattel mortgage which professed in
express terms to pass to the mortgagee after acquired chattels although, as
decided in Holroyd v. Marshall,
equity does give relief in such a case upon a suit properly framed. In the
former of the above cases the Lord Justice said:—
It is true that every court now administers
and deals with the rights of parties having regard to law and equity but the
legal position and the equitable position are still different and distinct.
And in the latter he says:—
It was not intended that legal and
equitable interests should be identical but that the court should administer
both legal and equitable principles.
Such principles being those applicable to the
case as framed.
The purpose for which the contention was made
was in order to open to the plaintiff this further contention made by her
learned counsel, viz.:—that although the plaintiff should fail in obtaining
judgment for foreclosure of the mortgage upon the ground that the mortgage was
void by reason of illegality in the consideration for which it was executed,
still that she might and
[Page 517]
should have in the action so failing a judgment
to recover, as in ejectment, possession of the land comprised in the mortgage
so adjudged to be void. This contention is rested upon the judgment in Doe
D. Roberts v. Roberts, but
obtains no support whatever from that judgment which as relied upon in the
argument seems to me to have been misunderstood. That action was instituted in
pursuance of an order of the Court of Equity Exchequer in Roberts v. Roberts. The bill there was filed by the devisee
of one George Roberts for, the purpose of setting aside a deed executed by the
testator to the defendant and for a re-conveyance of the premises thereby
demised. The deed was alleged in the bill to have been executed to the
defendant for the consideration expressed therein of natural love and
affection, but that it was in truth executed upon the express promise and
assurance of the defendant that the deed when executed should be merely nominal
and that as to any beneficial interest in the property the defendant would be a
mere trustee of the testator. The bill then alleged that on the execution of
the deed the testator delivered it to the defendant and though it had ever
since been in his possession yet the testator retained all the title deeds and
other writings relating to the property in his own possession, and that neither
the defendant nor any other person had ever made use of the deed, nor was the
defendant ever in occupation of any part of the property, nor did he in any way
derive any advantage from the conveyance, the testator having continued in
possession until the time of his death. The defendant in his answer alleged
that being for many years much addicted to field sports and not being qualified
to kill game he had been threatened with prosecutions, and that he therefore
applied to the testator, who was his
[Page 518]
brother of the half blood, to qualify him which
the testator agreed to do, and for that purpose executed the deed mentioned in
the bill. The defendant denied however that the deed was executed for the sole
purpose of affording him a qualification to kill game, but alleged that the
testator in executing the same had it also in view to secure the property to
the defendant after testator’s decease. He admitted that no use had ever been
made of the deed and that the property had always continued in the possession
of the testator. From the evidence it clearly appeared that the intention of
the testator in executing the deed was solely to give the defendant a
qualification to kill game. The Lord Chief Baron during the argument said:—
If the deed be void the plaintiffs want no
re-conveyance. They might defend themselves in ejectment and I can render them
no assistance.
At the close of the argument he said:—
I do not think that I can interfere in this
case without first referring it to a court of law. My present opinion is that
it is not void at law.
Then pronouncing judgment on a subsequent day he
said:—
It appears that the conveyance was made for
the purpose of giving the defendant a qualification to kill game, and I feel
myself at a loss to know in what manner I am to grant relief. I don’t think the
plaintiffs are entitled to a re-conveyance—the deed was executed maturely—the
grantor knew the effect of it. There was no fraud between the brothers, with
respect to them the whole transaction was perfectly fair. But it appears by the
evidence that the object of the deed was to give to the defendant the
appearance of a qualification and that it was executed for no other purpose.
That was a fraud on the law and I cannot conceive what right that gives the
plaintiffs to come to a court of equity to call for a re-conveyance. It is said
nothing was done under the deed, but I cannot see the distinction.
And again:—
It appears to me that it is not in the
power of equity to call back a deed so given. It has been urged that the deed
is void at law and I will not shut out that question. If it be void the
plaintiffs have a
[Page 519]
complete defence at law and I have no
objection to retain the bill for a year for the purpose of giving them an
opportunity to try that question.
Accordingly a decree was made whereby the
defendant in the equity suit was ordered to proceed to the trial of an action of
ejectment which had been stayed by injunction in the equity suit until the
hearing and this is the action of ejectment which is reported in 2. B. &
Ald. 367. The only object of that trial and the sole question in it was whether
or not the deed was void at law. The court entertained no doubt upon the point,
and it is difficult to conceive that there could be any. The statute which
required all persons killing game to have a certain qualification in real
property did not declare any deed executed for the purpose of giving a
qualification to kill game to be void; nor even that a deed giving an interest
in real property sufficient to give the qualification should be void if
executed in pursuance of an agreement that as between the parties to the deed
it should be regarded as intended only to give the appearance of qualification
for the purpose of protecting the grantee from prosecutions; but that for any
other purpose, or as to any beneficial interest in the premises purported to be
conveyed by the deed to the grantee, the deed should be deemed to be of no
force or effect. As between the parties themselves to the deed it was perfectly
good. It was competent to give a good qualification. The only fraud relied upon
was one wholly collateral to the deed, namely, that although the deed was
competent to give the qualification, yet there was a secret agreement between
the parties that it never should be used except to prove the qualification and
that it should not be regarded by the grantee as passing to him any beneficial
interest, save only to prove his qualification to kill game. Holroyd J. held
the case to be similar to that
[Page 520]
of Hawes v. Loader, wherein it was held that as between the
parties to a deed it could not be avoided by showing that it was executed for
the purpose of defeating creditors, such deeds being only by the ‘statute made
void as against creditors. Abbott C.J. proceeded wholly upon the case of Montefiori
v. Montefiori, which
he held to be expressly in point. Now that case was that a person who had given
his brother a promissory note for a large sum of money for the purpose of
promoting the brother’s marriage by representing him to be a man of means,
could not after the marriage maintain a bill to have the note given up, nor
could he defend an action on the note by showing it was given without
consideration. Lord Mansfield C.J. rested his judgment upon the following
principle; he says:—
The law is that where upon proposals of
marriage third persons represent anything material in a light different from
the truth even though it be by collusion with the husband they shall be bound
to make good the thing in the manner in which they represented it. It shall be
as represented to be.
Therefore, in Doe Roberts v. Roberts the grantor having by the deed represented
the grantee to be the owner of the property which constituted his qualification
to kill game, “it shall be as represented to be,” and the grantor is estopped
from proving an agreement to the contrary effect, which if given effect to
would be at variance with the deed. The grantee shall hold the property and the
grantor shall not be permitted to say that it was agreed that the deed should
not pass to the grantee the beneficial estate which it purported to pass. The
principle upon which Montefiori v. Montefiori proceeded and which Abbott C.J., made the
foundation of his judgment in Doe Roberts v. Roberts25, is
thus stated by Lord Chancellor Thurlow, in Neville v. Wilkinson.
[Page 521]
The Court, he says, proceeded upon the
single ground that where one brother has given to another a note for £1,730, to
enable him to make a contract of marriage, he could not revoke it. It amounted
to a contract to perform what he had done.
And Doe Roberts v. Roberts25
is thus referred to by Sir J. Plumer, Master of the Rolls in Cecil v.
Butcher.
If the deed is complete whether it is a
qualification to sit in Parliament or to kill game as in Roberts v. Roberts, the party cannot be heard to allege his
own fraudulent purpose, it being a fraud upon the law to attempt to give
another a qualification without making him owner of the estate. He is estopped
from confining the operation of the deed by averring that he had such a
purpose.
That is, that the grantee, while having the
property conveyed for the purpose of having a qualification, should not be the
owner of the estate. The principle of Doe Roberts v. Roberts25
as here explained is that a grantor is estopped from setting up a secret oral
agreement to defeat the operation of the express terms of his own deed. In Bessey
v. Windham
where it was decided that an assignment of goods in fraud of creditors is valid
as between the parties to the deed, Lord Denman C.J., delivering judgment,
proceeded upon the authority alone of Doe Roberts v. Roberts, while in the latter case, as already
shown, Holroyd J., proceeded upon the authority of Hawes v. Loader, wherein the same point Was decided as in Bessey
v. Windham. These
cases, therefore, may well be held to be based upon the same principle, and
that the principle of estoppel. So in Phillpotts v. Phillpotts, which was the case of an action of
covenant upon an annuity deed, wherein it was held that the defendants’
executors were estopped from pleading that the deed was made fraudulently and
collusively between the testator and the plaintiff, for the purpose of
multiplying voices, in order to increase the electorate of certain
[Page 522]
counties at the parliamentary elections therein,
and subject to a secret trust and condition that no estate or interest should
pass beneficially to the plaintiff by the deed. Jervis C.J. says:—
It is to my mind exceedingly difficult to
discover any distinction between this case and that of Doe Roberts v.
Roberts31. It may be that a deed may be bad so far as concerns
the law of Parliament and yet as between the parties it may not be competent
for either to set up its invalidity; the very point was discussed where though
the jury expressly found that the parties never intended anything to pass by
the deed the Court of Queen’s Bench held the deed to be operative to convey an
interest in the goods upon the principle laid down in Doe Roberts v. Roberts31.
And upon the same principle he maintained that
the deed in Phillpotts v. Phillpotts34 might be supported.
Williams and Talfourd JJ. concurred that Doe Roberts v. Roberts31
was conclusive upon the point that the defendants, executors of the grantor,
were estopped from setting up the secret understanding that the deed should not
operate beneficially to the grantee. The same doctrine was affirmed in Bowes
v. Foster, where
Doe Roberts v. Roberts31 was put upon this ground that the
transfer was made for the purpose of giving to the transferree a qualification
to kill game, and the property therefore passed by the deed, and having passed
it was not competent for the defendants claiming under the grantor to allege
that the conveyance was made merely to give the semblance of a qualification
but in reality upon a secret trust beneficially for the grantor, and that in
such a case the transferree in violating the secret agreement was guilty only
of a breach of honour and not of a legal obligation. The case of Doe Roberts
v. Roberts is
plainly referable to the principle that to an action founded upon a deed which
as between grantor and grantee passed the property the grantor and those
claiming under him are estopped from setting
[Page 523]
up that the deed was executed upon a secret
agreement that it should not operate to give to the grantee the beneficial
interest purported by the deed to be given. The principle applied was the same
as that applied inter partes in the case of a deed of conveyance of
property in fraud of creditors; it therefore can have no application where the
defence if established is that the instrument upon which an action is founded
was void ab initio as made in violation of the principles of the common
law.
Then it was contended upon the authority of Simpson
v. Bloss, and
other cases which have proceeded upon the authority of that case as Cannan
v. Bryce, McKinnell
v. Robinson, and
other cases of that class, that the test whether a demand connected with an
illegal transaction is capable of being enforced at law is whether the
plaintiff requires any aid from the illegal transaction to establish his case;
and the contention is, that as the plaintiff is not required in the present
action to prove the consideration for the mortgage sought to be foreclosed, but
upon proof of the mortgage establishes her case, she cannot be said to require
any aid from the illegal transaction to establish it.
In Simpson v. Bloss38 the
action was in indebitatus assumpsit founded upon mutual promises, where
the plaintiff had to prove, in support of his case, the consideration for
defendant’s promise sued upon. Cannan v. Bryce39 was in like
manner an action in indebitatus assumpsit founded upon mutual promises.
At the trial a verdict was rendered for the plaintiff, subject to the opinion
of the court upon a case stated wherein all the circumstances of the
transaction were set out, by which it appeared that the defendant’s promise to
repay money lent was made upon an illegal consideration,
[Page 524]
without relying upon which the plaintiff could
not recover, and so it was held that he could not recover. McKinnell v.
Robertson was
also an action in indebitatus assumpsit for money lent, and on account
stated; the defendant pleaded to the whole declaration that the money was lent
for the purpose of the defendant illegally playing and gaming therewith at the
illegal game of hazard. To this plea the plaintiff demurred upon the ground
that the plea did not cover the count upon an account stated, but the plea was
held to be good and judgment was given accordingly. But in Taylor v. Chester the action was in detinue for half a £50
Bank of England note. Defendant pleaded that the half note was deposited as a
pledge in security for a sum of money due from the plaintiff to the defendant,
and which was still due and unpaid. To this plea the plaintiff was obliged to
reply that the alleged debt in the plea mentioned in justification of detention
of the half-note was incurred for wine and suppers supplied by the defendant in
a brothel and disorderly house kept by the defendant, for the purpose of being
consumed there, etc., etc. There Millar J., delivering the judgment of the
court, says:—
The true test for determining whether or
not the plaintiff and defendant were in pari delicto, is by considering
whether the plaintiff could make out his case otherwise than through the medium
of the illegal transaction to which he was himself a party.
And he proceeds:
Had no pleading raised the question of
illegality a valid pledge would have been created and a special property
conferred upon the defendant in the half-note, and the plaintiff could only
have recovered by showing payment or tender of the amount due. In order to get
rid of the defence arising from the plea which set up an existing pledge of the
half‑note the plaintiff had recourse to the special replication, in which
he was obliged to set forth the immoral and illegal character of the contract
upon which the half-note had been deposited. It was there-
[Page 525]
fore impossible for him to recover except
through the medium, and by the aid, of the illegal transaction to which he was
himself a party.
And so it was held that he could not recover being
himself in pari delicto.
What is meant in this case, and in all cases as
to the application of the test is, that in every case, whether in indebitatus
assumpsit or in an action upon a bond, note or other instrument, it appears
either by admission on the pleadings, or in the evidence given upon the issues
joined upon the pleadings in the case, that the action is connected with an
illegal transaction to which the plaintiff was a party, the question arises
whether he can or cannot succeed in his action without relying upon the illegal
transaction. If he cannot, the action fails; if he can, it prevails. But it
never has been held, nor so far as I have been able to find hitherto contended,
that in an action upon a note or other instrument in security for money
requiring primâ facie no evidence of consideration the plaintiff is
entitled to recover upon the mere production of the instrument, notwithstanding
that the defence is that the instrument sued upon was executed for an illegal
consideration in respect of a transaction to which the defendant was himself a
party. Such a proposition could not be maintained without reversing a legion of
cases from Guichard v. Roberts, down
to Windhill Board of Health v. Vint,
which establish that illegality in the consideration of an instrument, whether
under seal or not, to enforce which an action is brought, not only may be
pleaded, but if it does not appear upon the plaintiff’s own pleading must be
pleaded.
There remains now the question which was argued
by the appellant with much ability, namely, whether he has pleaded and proved
sufficient to establish
[Page 526]
his contention that the mortgage was void ab
initio by reason of illegality in the consideration for which it was given.
In considering this question a point arises
which in view of the very peculiar circumstances of this case cannot be
overlooked. The defence is one of which it may be said that it is without a
parallel in the reported cases. The appellant purchased from the mortgagor the
property mortgaged at what he himself considered to be its fair market value
such value being nearly $2,000 in excess of the amount for which the plaintiff
had sold the property, and he paid to the mortgagor only the difference between
the amount remaining upon the security of the mortgage and the amount so fixed
by himself as the value of the property to him purchasing it as he admits he
did upon speculation and in the expectation that by reason of the erection of a
large public building for a city hall and other purposes of the city of Toronto
in the immediate neighbourhood it would become much more valuable as other
property which he had purchased in the neighbourhood and had sold at a large
advance had proved to be a good speculation. He took from the mortgagor a
conveyance of the property subject expressly to the mortgage and to the payment
of the sum of $3,700 and interest which in the deeds under which the appellant
claims title is stated to be due under the mortgage and by that deed he
covenanted with the mortgagor his grantor that he would pay off and discharge
the mortgage. By this deed the appellant acquired no legal estate in the
mortgaged premises but an equity of redemption therein only, that is to say,
the right, by paying the moneys secured by the mortgage, to acquire the legal
estate. Upon an action being instituted by the mortgagee to foreclose this
mortgage he sets up by way of defence and for the purpose of evading payment of
[Page 527]
the money secured by the mortgage that the
consideration for the execution of the mortgage was illegal and immoral and
that the mortgage therefore is void and of no effect. Now the deed executed by
the mortgagee conveying the property in fee simple to the mortgagor constituted
the consideration for the execution of the mortgage. If then the consideration
for the execution of the mortgage was illegal and immoral and the mortgage
therefore void, the deed and the estate thereby conveyed which constituted that
consideration must be null and void; yet the appellant’s argument before us was
to the effect that his succeeding in establishing the mortgage to be void for
the reason suggested would be to vest in him the land which he had purchased
expressly subject to the mortgage discharged from the mortgage. The case
therefore may truly he said to be one sui generis and without parallel
in the reported cases. In Holman v. Johnson Lord Mansfield lays down the principle
upon which the court proceeds in respect of contracts that are immoral and
illegal. As between the parties to the illegal contract, he says:
The objection that a contract is immoral
and illegal as between plaintiff and defendant sounds at all times very ill in
the mouth of the defendant. It is not for his sake, however, that the objection
is ever allowed, but it is founded on general principles of public policy which
the defendant has the advantage of, contrary to the real justice as between him
and the plaintiff, by accident, if I may so say; the principle of public policy
is ex dolo malo non oritur actio.
Now, here it is to be observed: 1st. That the
language is applied as between the immediate parties to the illegal or immoral
contract, who, in the case of such a contract, are in pari delicto, and
the test as to the plaintiff’s right of recovery where such a defence is set up
by the other party to the contract is whether the
[Page 528]
plaintiff is or is not in pari delicto
with the defendant. It does, I must say, seem to me to be an unwarranted
extension of the rule so laid down by Lord Mansfield, not supported by any
decided case, to apply it to the case of a mortgagee seeking to foreclose a
mortgage given to secure purchase money of land sold by the mortgagee, against
a bonâ fide purchaser for valuable consideration from the original
vendee, whose deed of conveyance from such vendee subjects the premises and the
estate therein transferred to such purchaser, in express terms, to payment of
the mortgage and the moneys secured thereby. And it is to be observed, 2nd.
That in order to procure the court to abstain from enforcing a contract upon
its face perfectly good and for valuable consideration the objection must be
taken by the defendant. Now, although when properly taken as required by the
recognized course of proceedings in the particular action, and established by
legal evidence, the court does not act in the interest of, or for the sake of,
the defendant making the objection, but upon principles of public policy, by
which the defendant may obtain an advantage over the plaintiff, contrary to the
real justice of the case, and so by accident, as it were, yet before he can
obtain such even accidental advantage against the real justice of the case he
must take the objection by a plea specially stating the particular facts relied
upon as constituting the immorality or illegality, so that the court may see
upon the record that the facts pleaded, if proved, do constitute illegality in
the contract or instrument sued upon; and also in order that the evidence
offered in support of the plea may be confined to the particular facts so
pleaded. No public policy would justify a court in withholding its aid to
enforce a deed executed upon its face for good and valuable consideration,
except upon its being shown by the facts specially pleaded and proved in the
action
[Page 529]
wherein the deed is sought to be enforced, that
it is void as illegal or immoral. Prior to the passing of the Judicature Act
the invariable rule was that the facts relied upon as constituting the
illegality relied upon as a defence to an action upon a contract must be specially
pleaded. In Colborne v. Stockdale
it was held that a plea of illegality in a bond, that it was given for money
won at play, ought to state at what game, that it was like a usurious or
simoniacal contract where the agreement must be shown, for that it was matter
of law and that the court should have the means of judging whether the facts
stated constituted illegality; and in Mazzinghi v. Stephenson, it was held that a plaintiff was entitled
to recover upon such a bond where the defendant failed to prove that the money
for which the bond was given was won at the particular game stated in the plea,
viz., “faro.” To the like effect as to the necessity of particularity in the
statement of the facts relied upon as constituting illegality are Hill v.
Montagu;
Potts v. Sparrow; Martin
v. Smith; Fenwick
v. Laycock; Cooke
v. Stratford; Allport
v. Nutt; and Grizewood
v. Blane. In
this latter case the court unanimously held that the facts relied upon as
making the contract illegal must be specially pleaded; that illegality must not
be stated by simple, inexplicit allegation, but that the plea should contain an
allegation of facts which would enable the court to say whether or not they
constituted illegality, and for that purpose that the facts should be expanded
on the record.
Now the Judicature Act has made no difference in
this respect for by rule 399 of the General Rules passed
[Page 530]
under the authority of the act it is enacted
that pleadings shall contain a concise statement of the material facts upon which
the party pleading relies. Under a similar rule in England it was decided, in Hanmer
v. Flight, that
the facts from which the court is to judge the result must be stated. So a
statement of claim which merely alleged that a good donatio causa mortis
had been made to the plaintiff without stating the facts relied upon as
constituting the donation was held bad.
The form of setting up the defence as invariably used in practice under the
Judicature Act appears from the statement of defence in Windhill Board of
Health v. Vint.
The plea of the appellant which merely alleged
that the consideration for the execution of the mortgage in the statement of
claim mentioned was illegal and immoral was a bad plea as presenting no facts
relied upon as constituting illegality or immorality. It is true that the
plaintiff did not take any objection to the plea for this defect; but when
after a regular judgment of foreclosure in favour of the plaintiff in the
action the appellant applied to the court for a special indulgence to be
granted to him, namely, that the regular judgment should be set aside and a new
trial given to him to enable him to prove that $2,000 of the purchase money for
the house sold by the plaintiff to the mortgagor, and for securing which the
mortgage was given, was for what has been called the good-will of the house, or
a value attached to it as a house of ill‑fame, and that the residue of
the purchase money or $2,000 was the agreed value of the premises irrespective
of such so called good-will; and when he accepted the new trial upon condition
of paying the balance of the
[Page 531]
money remaining due upon the security of the
mortgage and availed himself of the special indulgence so granted to him, and
went down to try the truth of the allegation as to the $2,000—part of the
purchase money—and wholly failed to establish the matter alleged in respect
thereof, no principle of law or public policy requires the court to entertain a
further objection made ore tenus, not set out on the record, namely,
that in the evidence offered to establish the contention to try which alone the
appellant was granted the indulgence of setting aside a regular judgment, and
in which he failed, it sufficiently appeared that the person to whom the house
was sold by the plaintiff, and by purchase from whom the appellant claims, was
to the knowledge of the plaintiff a prostitute, and that the plaintiff knew or
had reason to know or believe that the purchaser of the house intended when the
house should be conveyed to her to continue to lead therein her dissolute and
immoral life. “Whether these facts, assuming them to be established, would or
would not make void the mortgage given to secure part of the purchase money bonâ
fide agreed upon as being the fair marketable value of the house, I can see
no principle of law or public policy requiring the court to relax the rules of
law governing the mode of presenting a defence of that kind to an action upon a
mortgage given for such purchase money for the purpose of permitting the
appellant, after judgment against him upon the point upon which alone the court
granted the new trial, to raise such new contention. In my opinion, however,
the cases relied upon by the appellant do not support this new contention
assuming it to be open to him.
In Lloyd v. Johnson, where the action was for work and labour
bestowed by the plaintiff in washing clothes for a prostitute, which were used
by her for
[Page 532]
the purpose of appearing in public places in
pursuit of her immoral calling, the plaintiff having knowledge of her being a
prostitute, and of the purpose to which the articles washed were applied, it
was held that such ‘ knowledge did not disentitle the plaintiff to recover for
his work and labour.
In Lightfoot v. Tenant the plea to an action on a money bond
alleged that the bond was given for the price of goods sold by the plaintiff to
the defendant for a purpose the facts of which were specially stated, and which
were contrary to the provisions of an act of Parliament, and the plea being
proved it was held that the plaintiff could not recover.
In Paxton v. Popham, to an action on a bond, a plea that the
bond was given to cover the price of goods illegally (stating the facts
constituting the illegality) contracted to be sold and shipped in contravention
of an act of Parliament, was held upon demurrer to be a good plea in bar of the
action.
In Bowry v. Bennet, in an action for the value of clothes
furnished to the defendant, the defence was that the defendant was, as was well
known to the plaintiff, a woman of the town and that the clothes were furnished
to her for the purpose of enabling her to carry on her business of
prostitution. Lord Ellenborough held that the plaintiff must not only be shown
to have had notice of the defendant’s way of life but that he had expected to
be paid from the profits of defendant’s prostitution, and that he had sold the
clothes to enable her to carry it on, and the plaintiff recovered.
In Hodgson v. Temple Lord Mansfield held that the mere selling
goods knowing that the buyer would make an illegal use of them is not
sufficient to deprive the vendor of the right of just payment.
[Page 533]
In Langton v. Hughes the case was of drugs sold with the
knowledge that they were bought for the purposes of being used in a manner prohibited
by act of Parliament, and it was held that as the act also expressly prohibited
the causing or procuring the drugs to be so used, the sale with knowledge that
the goods were bought for the purpose of being so used was a causing or
procuring them to be so used within the prohibition in the act, and that
therefore the plaintiff could not recover the price of goods so sold.
In Cannan v. Bryce the plea was that the money sued for was
lent for the express purpose of enabling the defendant to pay certain losses
incurred in illegal stock jobbing transactions; and it was held that the
plaintiff could not recover money lent for the express purpose of accomplishing
an illegal object.
In McKinnell v. Robinson, to an action of indebitatus assumpsit
for money lent, the plea was that the money was lent for the purpose of
defendant illegally playing and gaming therewith at hazard. On demurrer the
plea was held a good plea in bar, upon the principle, “not for the first time”
(as said by Lord Abinger on delivering judgment) “laid down but fully settled
in the case of Cannan v. Bryce64 namely that the repayment of
a sum of money lent for the express purpose of accomplishing an illegal object
and of enabling the borrowers to do a prohibited act cannot be enforced.
In Jennings v. Throgmorton the action was in assumpsit for the use
and occupation of rooms let to defendant as weekly tenant. After the tenant
entered the plaintiff became aware that she lived by prostitution. Abbott C.J.
charged the jury that if the plaintiff after he became aware of the defendant’s
mode of living suffered her to occupy the premises for the express pur-
[Page 534]
pose of continuing a life of prostitution, and
that the demand sued for accrued afterwards, he could not recover.
In Gas Light Co. v. Turner in an action upon the covenant in a lease
for payment of rent the plea was that the premises were demised for express
purpose of violating an act of Parliament in the manner specially stated in the
plea—upon demurrer the plea was held to be good, Tindal C.J. saying:—
The allegation that the tenements and
premises were demised to the defendant for the express purpose, &c.,
&c., necessarily implies and even in a more especial manner declares that
the express purpose was the purpose of the party who made the demise viz., the
plaintiff.
And with reference to an argument urged on
behalf of the plaintiff that if the defendant should succeed on the plea the
consequence would follow that he could hold the premises for the whole term
granted by the lease free from rent he answered:—
If an ejectment were brought by the lessors
to recover possession on the ground that the lease was void it would be
difficult for the lessee to maintain his right to hold under the lease after
having pleaded in the present action that the indenture was void and obtained
the judgment of the court in his favour on that plea.
In Ritchie v. Smith the action was in assumpsit for the use
and occupation by the defendant of certain premises under a written agreement;
plea that the agreement, setting it out at length, was made for the express
purpose of enabling one of the defendants, party to the agreement, to
contravene the provisions of a statute passed for the protection of public
morals, showing the manner of contravention. The facts alleged in the plea
being proved it was held that the plaintiff could not recover, Williams J.
saying:—
This is an agreement by which the plaintiff
co-operated with other persons for the avowed purpose of contravening and
evading the pro-
[Page 535]
visions of an act having for its object the
protection and advancement of public safety and morals.
In Smith v. White the question arose in relation to a lease
of premises which had been used as a brothel. Kindersley V.C., proceeded upon
the cases of Jennings v. Throgmorton
and Bowry v. Bennet, in
which latter case, however, he is erroneously reported to have said that the
plaintiff was held to be not entitled to recover. In his judgment, however, he
rests upon the same principle which enabled the plaintiff to succeed in Bowry
v. Bennet71 and the defendant in Jennings v. Throgmorton70.
He there says—
It cannot be doubted that in the present
case the plaintiff knew that the means of paying the high rent which was to be
paid for the premises would be derived from the profits of the immoral trade
carried on in the house, and although he had no lien on these profits he
expected to be paid out of them, and knew that unless the tenant carried on
such trade he would not be able to pay the rent.
In Feret v. Hill, with reference to a lease of premises
acquired by a lessee with the intention of using the premises as a brothel, it
is said that no intention existing in the lessee’s mind could make the lease
void.
In Pearce v. Brooks, in an action for the use of a brougham
had under an agreement between plaintiff and defendant for the purpose, the
plea was that the agreement was made for the supply of a brougham to be used by
her as a prostitute, which she was known to the plaintiff to be, and to assist
her, as the plaintiff also well knew, in carrying on her immoral vocation. The
question was as to whether the evidence supported the plea. At the trial
Bramwell B., put the case to the jury thus:—
That in some sense everything which was
supplied to a prostitute is supplied to her to enable her to carry on her
trade, as, for instance» shoes sold to a street walker, and that the things
supplied must not be
[Page 536]
merely such as would be necessary or useful
for ordinary purposes, and also be applied to an immoral purpose, but that they
must be such as would, under the circumstances, not be required except with
that view.
And he submitted certain questions to the jury
which they answered by finding that the brougham was used by the defendant as
part of her display to attract men, and that the plaintiff knew it was supplied
to be used for that purpose. Upon this finding a verdict was entered for the
defendant, with leave for the plaintiff to enter a verdict for him for 15
guineas. Upon the argument of a motion to that effect it was held that the
finding of the jury supported the allegation in the plea that the brougham was
supplied to the defendant to be used by her as a prostitute, and to assist her
in carrying on her immoral vocation. During the argument Bramwell B., after stating
what his charge had been, as above, added:
The jury, by the mode in which they
answered the question, showed that they appreciated the distinction, and on
reflection I think they were entitled to draw the inference which they did.
They were entitled to bring their knowledge of the world to bear on the facts
proved. The inference that a prostitute (who swore that she could not read
writing) required an ornamental brougham for the purpose of her calling, was as
natural a one as that a medical man would want a brougham for the purpose of
visiting his patients, and the knowledge of the defendant’s condition being
brought home to the plaintiffs, the jury were entitled to ascribe to them also
the knowledge of her purpose, which, being established, was sufficient to
support the allegation in the plea, to the effect that the brougham was
supplied by the plaintiffs to the defendant to be used by her as a prostitute,
and to assist her in carrying on her immoral vocation.
So regarding the case Pollock C.B. says:—
If evidence is given which is sufficient to
satisfy the jury of the fact of the immoral purpose and of the plaintiff’s
knowledge of it and that the article was required and furnished to facilitate
that object, it is sufficient.
And Martin B. says:—
[Page 537]
The real question is whether sufficient has
been found by the jury to make a legal defence to the action under the third
plea.
Then stating the substance of that plea he
adds:—
If therefore there is evidence that the
brougham was to the knowledge of the plaintiffs hired for the purpose of such
display as would assist the defendant in her immoral occupation the substance
of the plea is proved and the contract was illegal.
And he added:—
As to Cannan v. Bryce I have a strong impression that it has
been questioned to this extent that if money is lent the lender merely handing
it over into the absolute control of the borrower, although he may have reason
to suppose that it will not be employed illegally he will not be disentitled
from recovering. But no doubt if it were part of the contract that the money
should be so supplied the contract would be illegal.
This language implies that the learned Baron
considered that the evidence that the plaintiff knew that the defendant was a
prostitute and that she hired the brougham to be used by her in attracting men
and in assisting her to carry on her immoral vocation, for which purpose alone
in her condition in life she could have been supposed to require such an
article, was equivalent to a contract for the letting by the plaintiff of the
brougham to her for that purpose. And so Pollock C.B., agreeing with what had
fallen from Martin B. as to the case of Cannan v. Bryce,75
says:—
If a person lends money but with a doubt in
his mind whether it is actually to be applied to an illegal purpose it will be
a question for the jury whether he meant it to be so applied, but if it were
advanced in such a way that it could not possibly be a bribe to an illegal
purpose and afterwards it was turned to that use neither Cannan v. Bryce75
nor any other case decides that this act would be illegal.
Then Pigott B. said:—
I think that the jury were entitled to call
in aid their knowledge of the usages of the day to interpret the facts proved
before them. If a woman who is known to be a prostitute wants an ornamental
brougham there can be very little doubt for what purpose she requires it. It
can-
[Page 538]
not be necessary that the plaintiff should
look to the proceeds of the immoral act for payment, the law would indeed be
blind if it supported a contract where the parties were silent as to the mode
of payment, and refused to support a similar contract in the rare case where
the parties were imprudent enough to express it. The plaintiff knew the woman’s
mode of life and where the means of payment would come from.
These observations were applied to an allegation
in the plea, that the agreement for letting the brougham was made by the
plaintiffs in the expectation that the defendant would pay the plaintiffs the
moneys to be paid by the agreement out of her receipts, of which expectation
being entertained by the plaintiffs there was no express evidence, but as it
would seem, sufficient evidence in the opinion of the learned Baron from which
that inference if it had been necessary might have been drawn. The judgment in
this case does not extend the principle involved in Cannan v. Bryce, The Gas Light Co. v. Turner, or any other of the cases above cited. It
merely lays down the rule that for the purpose of proving an allegation in a
plea that an article for the price or use of which an action is brought was
supplied by the plaintiff to the defendant to be used by her in the pursuit of
an illegal and immoral purpose, and to assist her in accomplishing such illegal
and immoral purpose, the jury should take into consideration the nature of the
article supplied and the condition in life of the person to whom it was
supplied, and the question whether the article supplied was such as under the
circumstances in evidence might be required for some necessary purpose other
than the illegal purpose, or on the contrary could only be required for such
illegal purpose, and that in order to enable them to draw a proper inference
from the facts in evidence they were entitled to apply their knowledge of the
world as bearing upon those facts, and, it having been proved that
[Page 539]
the plaintiffs knew the defendant to whom they
had let an ornamental brougham to be a prostitute, were, in the exercise of
their knowledge of the world, justified in finding that the plaintiffs who
supplied the brougham to the defendant knew that it was supplied by them to be
used by her as part of her display as a prostitute and to attract men. The
judgment of the court in the case is that such finding proved the plea, and so
in effect was equivalent to an express finding that the brougham was let as
alleged in the plea to be so used, that is to say for the purpose of being so
used by the defendant, and so the case came within Cannan v. Bryce, Gas Light Co. v. Turner, and other similar cases.
In Fisher v. Bridges in the Exchequer Chamber it was pleaded
and proved that the bond upon which the action was brought was given to secure
payment of the consideration money for lands sold and conveyed by the plaintiff
to the defendant for the express purpose of being sold, and upon an express
agreement entered into between the plaintiff and the defendant that the lands
so conveyed should be sold, by the defendant by lottery in contravention of two
acts of Parliament by which not only were all lotteries prohibited, but all
sales of houses, lands, &c., by lottery were declared to be absolutely
void.
Now the principles involved in, and to be
collected from, all of the above cases are as it appears to me—
1st. That a plea setting up as a defence to an
action upon a contract entered into or an instrument under seal or in writing
without seal executed by the defendant, that the contract or instrument upon
which the action is founded was executed for an illegal or immoral purpose or
consideration must state the particular facts relied upon as establishing the
illegality or immorality, and must not merely make the inexplicit allegation
[Page 540]
that the contract was entered into or the
instrument executed upon or for an illegal or immoral purpose or consideration.
2nd. That all contracts entered into between a
plaintiff and defendant and all instruments executed for the purpose of passing
property from the former to the latter, with the intent and for the purpose,
operating in the mind of the transferor, that the property transferred shall be
applied by the transferree in the accomplishment of a purpose which is in
contravention of the principles of the common law or the provisions of a
statute, are void and incapable of being enforced by either of the parties
against the other upon the illegality being made to appear in due form of law
in an action upon the contract or instrument, and that an instrument executed
by the transferee for the purpose of securing to the transferor payment of the
consideration money for the property so transferred is in like manner void and
incapable of being enforced by the transferor against the transferree upon the
illegality being made to appear in like manner.
3rd. Knowledge in the mind of the transferor
that the transferee intended to apply the property when transferred to him to
an illegal purpose will not avoid a contract between the parties or an
instrument which transfers the property from the one to the other unless,
having regard to the particular nature of the property transferred, and to the
condition in life and occupation of the person to whom it is transferred, a
just inference can be drawn from the facts in evidence that the property was so
transferred with the intent and for the purpose, operating in the mind of the
transferor, that the property when transferred should be applied by the
transferee to the illegal purpose alleged in the plea.
Applying these principles to the present case I
am of opinion, for all of the reasons above stated, that the
[Page 541]
appellant has wholly failed in establishing that
the deed executed by the plaintiff to the appellant’s grantor, and which
constitutes the consideration for the execution of the mortgage sued upon and
the root of the appellant’s title to the premises mortgaged, is void. If the
contention of the appellant should prevail I cannot see that it would be
possible for any of these unfortunate creatures who lead a life similar to that
led by the appellant’s grantor to enter into any contract with any person
knowing her character for the purchase in fee of a house to shelter her or for
the purchase of any of the necessaries of life; and the golden rule laid down
in Pearce v. Brooks upon
which case the appellant so much relied would be utterly ignored and set at
naught, namely—that it is necessary in cases like the present to distinguish
between such things as, while being necessary or useful for the ordinary
purposes of life, may also be applied to an immoral purpose, and those which
are such as under the circumstances in evidence would appear not to be required
except for an immoral purpose. No such principle has yet been laid down, or is
sanctioned, by any of the decided cases, and there is not in my opinion any
principle of law or of public morals or of christian morality which could
sanction the affirmation of such a principle.
The appeal must be dismissed with costs.
TASCHEREAU J.—The appellant has, in my opinion,
made a strong, a very strong case. Mr. Justice Meredith’s remarks in the
Divisional Court, also, it seems to me, support the appellant’s legal
propositions. I dissent.
Appeal dismissed with costs.
Appellant in person: R.S. Clark.
Solicitors for respondent: Mowat &
Smyth.
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