[ocr errors]

field in Holman v. Johnson, 1 Cowp. 341, decided in 1775, that "the objection that a contract is immoral or illegal as between the plaintiff and defendant sounds at all times very ill in the mouth of the defendant. It is [151]not for his sake, however, that the objection is ever allowed; but it is founded in general principles of 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 this: Ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act.'

The cases upholding this doctrine are numerous and emphatic. Indeed, there is really no dispute concerning it, but the matter of controversy in this case is as to the extent to which the doctrine should be applied to the facts herein. Many of the cases are re: ferred to and commented upon in the opinion delivered in the case in 139 U. S. 24 [35: 55], already cited. The right to a recovery of the property transferred under an illegal contract is founded upon the implied promise to return or make compensation for it. For illustrations of the general doctrine as applied to particular facts we refer in the margin to a few of the multitude of cases upon the subject.†

or paid for. The former is impossible. The
property has substantially disappeared. It
has become incorporated with the business
and property of the plaintiff, and cannot be
separated. Compensation must therefore be
made. What, then, is the measure of com-
pensation? Clearly, we think, the value of
the property when received, together with
its earnings since, less the amount paid as
rent. In ascertaining the value the annual
rental may be considered, but it does not af-
ford a conclusive nor an entirely safe measure
of value because the unlawful consideration
(that the Central Company would abstain
from exercising its franchises) entered into it.
For the same reason the earnings cannot be
measured by the rent. The value of the
property and earnings must be ascertained
from a careful examination of the property,
the business. and its earnings at the time
they passed into plaintiff's hands and subse-
quently. It is not their value to the plain-
tiff we want, but to the defendant; in effect,
what is lost by parting with them. The
value of both property and earnings may
have been worth more to the plaintiff with
the business united, but this cannot be con-

Acting under these directions of the court,
the master in his opinion said:

"Passing to the consideration of the main ex-question raised in the present reference, viz., what the Central Transportation Company lost by the transfer of its property to the Pullman *Company, the measure of damages[153] as determined by the court requires the mas

"(1) What was the value to the Central Transportation Company in 1870 of the property transferred?

"(2) What was earned by the Pullman Company between January 1, 1870, and January 1, 1885, from the use of the property transferred?

They are substantially unanimous in pressing the view that in no way and in no channels, directly or indirectly, will the courts allow an action to be maintained for the recovery of property delivered under an illegal contract where, in order to maintain such re-ter to ascertain: covery, it is necessary to have recourse to that contract. The right of recovery must rest upon a disaffirmance of the contract, and it is permitted only because of the desire of courts to do justice as far as possible to the party who has made payment or delivered property under a void agreement, and which in justice he ought to recover. But courts [152]will not in such endeavor permit *any recovery which will weaken the rule founded upon the principles of public policy already noticed. We may now examine the record herein and learn the grounds for the recovery which has been permitted, and determine therefrom whether the judgment in favor of the Central Company should be in all things affirmed or if not, then how far the liability of the cross defendant extends, and, if possible. what should be the amount of the judgment against it.

In referring the case to the master for the purpose of taking the account between the parties the learned district judge stated the principle upon which the liability of the cross defendant rested. He said:

"(3) The difference between the amount so received by the Pullman Company and the rental paid by it to the Central Transporiation Company for the above period.

"(4) The total amount to be paid by the Pullman Company, as of January 1, 1885, deduced as above, together with interest thereon from January 1, 1885, to date of final decree.".

The master proceeded to determine the value in 1870 of the property then transferred. In ascertaining it he said:

"The value of the stock on the street is a positive indication of the estimate placed on the property by the public. That it is not entirely a satisfactory measure of value must be conceded, but in the judgment of the master, supported as it is by the best inde"The property must therefore be returned pendent estimate that the evidence affords, Coppell v. Hall, 7 Wall. 542 [19:244]; Con- | Insurance Company v. Caldwell, 3 Wend. 296; gress & E. Spring Company v. Knowlton, 103 Atcheson v. Mallon, 43 N. Y. 147 [3 Am. Rep. U. S. 49 [26:347]; Logan County Nat. Bank v.678]; Leonard v. Poole, 114 N. Y. 371 [4 L. R. Townsend, 139 U. S. 67 [35:107]; St. Louis, V. A. 728]; Spell v. Dwight, 120 Mass. 9: Davis v. &T. H. Railroad Company v. Terre Haute & Old Colony Railroad Co. 131 Mass. 258 [41 Am. I. Railroad Company, 145 U. S. 393, at 408, 409 Rep. 221]; Holt v. Green. 73 Pa. 198 [13 Am. [36:748, 754, 755]; Manchester & L. Railroad Rep. 7371; Johnson v. Hulings, 103 Pa. 498 [49 Company v. Concord Railroad Corp. 66 N. H. Am. Rep. 131]; Thomson v. Thomson, 7 Ves. 100 (9 L. R. A. 689, 3 Inters. Com. Rep. 319]; Jr. 470; Sykes v. Beadon, L. R. 11 Ch. Div. 170; White v. Franklin Bank, 22 Pick. 181: Utica Brooks v. Martin, 2 Wall. 70 [17:732).

[ocr errors]


it should be accepted as the fairest criterion | man Company, nor were the shares of the
of value."
capital stock of the Central Company, all of
which remained in the hands of its original
owners. The probable prospective capacity
for earnings also enters largely into mar-[155]
ket value, and future possible earnings again
depend to a great extent upon the skill with
which the affairs of the company may be
managed. These considerations, while they
may enhance the value of the shares in the
market, yet do not in fact increase the value
of the actual property itself. They are mat-
ters of opinion upon which persons selling
and buying the stock may have different

"It is the value of the property at the time it should have been returned that the Pull-views. A liability to return or make comman Company should be charged with. In-pensation for property received cannot be asmuch as this value would be difficult of properly extended so as to include other conascertainment by the transportation com-siderations than those of the actual value pany except by reference to the value in of that property. 1870, it was considered proper to direct the In this particular case a consideration eninquiry to the latter date. Presumably the tering into the market value of the shares value increased; the evidence fully justifies must have been the probability or possibility the presumption. If it decreased, the Pull-of renewals of the contracts owned by the man Company could and should have shown company for the use of its cars upon the [154]it. The master's *valuation in 1870 is there- railroads of the companies with which it had fore to be taken as the value in 1885, when such contracts and the possibility of extendthe property should have been returned. The ing its business in the future under contracts payment of this sum, with interest from Jan- with other railroads. These considerations, uary 1, 1885, seems necessary to a just set- while they affect more or less the value in tlement, treating the value of the use and the market of the shares of a corporation, do the rents paid prior to that date as balancing not constitute the value of the property each other. A decree may be prepared ac- which a party impliedly promises to pay for cordingly, dismissing the exceptions and con- upon the agreement being determined void firming the report." under which the property was received. The faith which a purchaser of stock in such a company has in the ability with which the company will be managed, and in the capaci ty of the company to make future earnings, may be well or ill-founded. It is but mat We are of opinion that the court erred in ter of opinion which in itself is not property. the manner of ascertaining the value of the While the value of the property is one of the property transferred by the Central Com-material factors going to make up the marpany. The market value of its stock was ket value of the stock, yet it is plainly not not a proper measure of the value of the the sole one. Mere speculation has not unproperty, and such error resulted in largely commonly been known to exercise a potent increasing the supposed value of the property influence on the market price of stock. The which the cross defendant was under liability capacity to make any future earnings in this case by the lessee arose out of the transThe capital stock of this corporation had fer of the property to it and grew out of the been increased from an original amount of lease itself, and that capacity would there$200,000 in 1862 to $2,200,000 in 1870. Dur-fore be partly founded upon the illegal coning this time it had been doing an increasing tract and could not otherwise exist. and a profitable business, and it was supposed that such business might increase in the future. The market price of the shares of stock in a manufacturing corporation includes more than the mere value of the property owned by it, and whatever is included in that price beyond and outside of the value of its property is a factor which in a case like this cannot be taken into consid-ket value of the shares of this stock as a

Judgment based upon the value of the property at $2,552,000 on the 1st of January, 1885, with interest from that time, was therefore entered, and it amounted, as stated, to the sum of $4,235,044.

to account for.

As the market value of the shares of this
stock was made up to some extent, at least,
of certain factors which the lessee cannot,
under the rules of law, be held responsible for
in this case, it follows that such value cannot
furnish a safe guide in measuring the respon-[156]
sibility of the lessee in an utterly void lease.
The court therefore erred in taking the mar

proper or just measure of the value of the
property transferred.

eration in determining the liability of the
cross defendant. Whatever that something
may be it is not that kind of property which
was delivered or that can be returned or
compensation made in lieu of its return. It
is not property at all within the meaning of
the word as understood in such a case as this.
The value of the franchise for one thing en-
ters into the computation of market value.
This was, of course, not assigned to the Pull-the use of its cars on their roads; (c) patents

We must therefore take the property that
actually was transferred and determine its
value in some other way than by this resort
to the market price of the stock. The prop-
erty transferred consisted (a) of cars, bed-
ding, etc.; (b) contracts which the Central
Company owned with railroad companies for

He accordingly reported the value of the property when received as $58 a share (the par value being $50 per share or a total par value of $2,200,000) making the total market value of the shares $2.552,000, which sum he reported as the value of the property trans


When the report came before the court, exceptions having been taken, among other things, to the findings of the value of the property when delivered, the court said:

[ocr errors]

covering the construction and use of sleeping rental that was paid by the lessee included cars owned by the Centra. Company and by compensation for use, and to that extent the it transferred under the lease to the Pullman transaction was closed and the compensation Company; and (d) $17,000 in cash. It seems paid up to the time when the contracts themto us these values must be taken separately, selves had expired, which was prior to the because, for reasons hereafter suggested, the time when the lease was declared void and value of the contracts and patents does not payment of rent ceased. There is no principle enter into the problem. with which we are familiar that will permit the value of those contracts when assigned to the Pullman Company to enter into and form a part of the value of the property for which the company is to make compensation, when from the nature of the thing itself, its value necessarily, and from the simple passage of time, decreased daily, and upon the arrival of the date named for the expiration of the contract it ceased to have any value.

We think the contracts were not extended

As to the value of the cars. We agree with the court below that it is now impossible to decree their return, for the reasons stated. They have substantially disappeared. The property has become incorporated with the business and property of the Pullman Company. Compensation therefore must be made. The master found that the value of the cars as vehicles, together with their equipment, at the time of the transfer, was $710,846.50. This is probably a pretty high figure judging|by the legislative *extension of the charter of[158] from the whole evidence in the case upon that the Central Company by the act of 1870. subject, yet still we are inclined to think that Some of these contracts were to last during the master was justified in arriving at the corporate life of the Central Company. that sum. We take this value for the reason At the time they were made the charter of the that the Pullman Company agreed in the lease company would expire in twenty years from to keep the cars in good order and repair, and December 30, 1862, or on December 30, 1882. renewed and reconstructed as often as might We do not think the contracts meant that be needful during the whole term of the lease. they were to cover any further time to which During the fifteen years elapsing from 1870 the legislature might thereafter extend the up to January, 1885, no violation. of the charter of the company. Some language to terms of the lease by either party is com- that effect would have been contained in the plained of, and we think the whole transac- contracts if such had been the meaning of the tion between the parties during those fifteen parties. All the contracts had therefore exyears must be treated as closed, so that no pired by the end of 1882. examination should be made in regard to anything that happened within that time. We must assume the provisions of the lease were fully carried out by both parties, particularly as no complaints were made of nonperform[157]ance. We therefore assume the cars were kept in good order, and when necessary were reconstructed and renewed up to January, 1885. The value at that time may be taken to be as great as the master found it to be for 1870. It is very probable the assumption is not in accordance with the fact, and that the property had greatly depreciated. But as we refuse to look into the transactions between the parties during that period, we will hold the value in 1885 to have been the same as in 1870, on the presumption that the Pullman Company fulfilled its obligations between those dates. What rule of compensation should be deduced from such finding will be alluded to hereafter.

Now upon what principle can it be urged that the lessee should compensate the lessor for the value of these contracts when delivered to it when it had paid for the use, and the property was of such a nature that it became valueless by mere limitation of time? In 1885 they had gone out of existence, and, of course, had no value. The basis for a recovery of property or compensation for its value, in cases of illegal agreements, rests upon the implied contract to return it or pay for it, because there is no right in the party in possession to retain it. If at the time when otherwise it would or ought to be returned it has ceased to exist by virtue of the termination of its legal existence, how can it be returned? How can a promise to return or make compensation therefor be implied in the case of a contract having but a limited time to run, and the value of which diminishes daily until the contract itself and its value are wholly extinguished by expiration of time, and where the use of this intangible right during its existence was fully paid for by the party to whom it was assigned? There is no implication of a promise to make any further compensation for such a species of property than is made by paying for its use while it remained in legal existence. When that time expired the value was gone, and while it lived it had been paid for.

We next come to consider the various contracts. They were entered into with different railroad companies for certain definite periods, and their time of expiration was stated in the contracts themselves. They were valuable only as they were used by the lessee, and its right to use them sprang from and was determined by the lease itself. They were assigned to the lessee for the purpose of enabling it to avail itself of the rights therein created and to use the cars with the consent We have been able to find no case where of the railroads to which the contracts ap- any principle was laid down which would auplied. Whether any use was made of these thorize or justify a recovery of the value of contracts or not they became daily less valu- property at the time of delivery, which, beable as they daily neared their termination. fore its return became proper, had passed out The use made of them did not impair their of existence by limitation of time, and the[159) value. The passage of time did that. The use of which was paid for during its lifetime.

sel,and that such expenses constituted a claim
for general average, notwithstanding the
abandonment of the ship was not attributed
to a peril of the sea, but to the fault of the
master and crew. The decree was affirmed.
The case of Crowley v. Saint Freres, 10
Revue Internationale du Droit Maritime, 147
also came before the French court of cassa-
tion in 1894. In this case, an English ship,
the Alexander Lawrence, on voyage from
Calcutta to Boulogne, with a cargo of jute,
took fire through the carelessness of a sailor.
The ship put into Port Louis, an intermedi-
ate port, with the cargo still burning, and ex-be had against her. But where the faults of
tinguished it, subsequently arriving at her
port of destination. By a clause in the char-
ier party the ship was exonerated from re-
sponsibility for negligence. It was held that
the expenses of putting into the port of ref-
uge should be classed as general average, and
not as particular average, as it had been held
by the court below. The decree of that court
(of Douai) was therefore reversed.

curred through negligence, but where by the
bills of lading the owners of the ship were not
responsible for that negligence."

These are all the cases I have been able to
find directly upon the question under consid-
eration, but there is a class of analogous
cases which, I think, have a strong bearing
in the same direction. It is well known that
by the law of England a ship is not respon-
sible to another for a collision brought about
by the negligence of a compulsory pilot. Of
course where such ship is solely to blame the
rule is easy of application. No recovery can

the two vessels are mutual, a different ques-
tion arises; and in the case of The Hector, L
R. 8 Prob. Div. 218, it was held that, where a
collision occurred by the mutual fault of two
vessels, and one of such vessels had on board
a compulsory pilot, whose fault contributed
to the accident, the owner of that vessel was
entitled to recover a moiety of the damages
sustained by her without any deduction on
A case arising from the same disaster to account of the damage sustained by the
the Alexander Lawrence, between the owners other; in other words, she was not respon-
and the underwriters (11 Revue Inter-sible for any portion of the damage done to
nationale, 41), subsequently came before the
court of appeals of Orleans, on appeal from
the tribunal of commerce of Boulogne, where
a similar ruling was made, and the expenses
of putting into port classed as general aver-
age under the stipulation in the charter
party, although in the absence of such stipu-
lation they would have been chargeable to
the ship.

the other vessel, but might recover the half
of her damages from such other vessel. Said
the master of the rolls, in delivering the opin-

*"With regard to the Augustus, she was[202] found to blame for the collision, therefore she is, in the first instance, liable to pay all the damage which the Hector has suffered. With regard to the Hector, it is found that her The same question came before the tri- owners are not to blame, but that her navibunal of commerce of Antwerp, Belgium, in gation was to blame; but that was the fault the case of The Steamer Alacrity, 11 Revue of the pilot. The owners are not liable for Internationale, 123, where the cargo was held this default, therefore they are not liable for to contribute to the expenses of putting into anything to the owners of the Augustus. a port of refuge, in consequence of a colli- What is the result? That the liability of the sion due to the fault of the captain, the ship-owners of the Augustus is declared to have owner being exonerated by his contract from the consequences of this fault. In this case the parties had stipulated that general average expenses should be payable under the York-Antwerp rules, and that the ship should not be responsible for the faults of [201]the captain or crew. It was held that, by the Belgium law, parties might contract with reference to these rules, which declared the expenses of putting into a port of refuge general average; that there was no difference between such expenses when occasioned by an inevitable accident or in consequence of the It seems to me that the cases above cited fault of the captain; that the parties having show an almost uniform trend of opinion stipulated that the ship should be exonerated against the principle laid down by the court from the consequences of such fault, the own-in this case. I do not contend that the deers of the cargo were bound for their contrib-cisions of the English, French, and Belgian utory shares.

From the case of The Mary Thomas [1894] P. 108, it would seem that the Dutch law is different; but it was said by Mr.Justice Barnes in this case (p. 116) that if the question had arisen in this country (England) "the point could hardly have occurred, as it has done, because it has already been decided by Lord Hannen, in the case of The Carron Park, that the cargo owners would be liable for the contribution in general average under circumstances where the accident had oc

been proved, but the liability of the owners of the Hector is disproved, and they are dismissed from the suit. Therefore no balance is to be calculated; the owners of the Hector are not liable for a single pennyworth of the damage done to the Augustus. The owners of the Augustus must go against the pilot and get what they can out of him; but the Hector is entitled to succeed."

See also Dudman v. Dublin Port and Docks Board, Ir. Pep. 7 C. L. 518; Spaight v. Tedcastle, L. R. 6 App. Cas. 217.

courts should be recognized by us any further than their course of reasoning commends itself to our sense of justice; but upon questions of maritime law, which is but a branch of international law, I think the opinions of the learned and experienced judges of these courts are entitled to something more than respectful consideration. It is for the interest of merchants and shipowners, whose relations and dealings are international in their character, that the same construction should, so far as possible, be placed upon the

law maritime by the courts of all maritime | pensation up to March 31, 1383, case No. nations, and I am compelled to say that I see 13733, in the court of claims, and has never no reason for creating an exception in this sued any oflicer nor brought any other suit than that before this present petition.


"Your petitioner prays for an account of the full and entire number of the said cart

[203]WILLIAM WHEELER HUBBELL, Appt., ridges made or used by the defendant, its



(See S. C. Reporter's ed. 203-210.)

officers or employees in its service, or for distribution to the states, since the said March 31, 1883, to be separately stated when ordered, and for leave to make the same a part of this petition when precisely ascertained

Dismissal upon the merits-estoppel in sub- by amendment.
sequent action-res judicata.

1. When a case is dismissed upon an opinion
filed and certain findings of fact, it will be
presumed to have been dismissed upon the
merits and that such dismissal covered every
question put in issue by the pleadings.
2 The dismissal of a suit for infringement of
a patent is a complete estoppel in favor of

"Your petitioner further claims a just com-[204]
pensation for the making or use by the de-
fendant, its authorized officers or employees,
for its service, of his said patented invention
of cartridge, to wit: he claims the sum of one
hundred and ten thousand dollars due to him
on this behalf by the United States from the
31st March, 1883, up to May 31, 1888.
"And he prays for judgment for all

the successful party, in a subsequent action
upon the same state of facts except for a sub-making or use of his said patented invention
sequent period of infringement, even if the
new action is based on a different theory.
& Neither a motion for a new trial which was
overruled in the former case, nor an applica-
tion for an appeal which was never allowed
or perfected, will prevent the judgment from
being res judicata.

[No. 198.]

Argued April 13, 14, 1898. Decided May 31,

APPEAL from a judgment of the Court of Claims dismissing the petition of William Wheeler Hubbell for judgment against the United States for compensation for making and using by the defendant and its officers and employees, of plaintiff's patented invention for an improvement in cartridges. Affirmed.

See same case below, 20 Ct. Cl. 354.

Statement by Mr. Justice Brown:
This was an appeal from a judgment of the
court of claims dismissing the petition of
William Wheeler Hubbell, who, as patentee
of an "improvement in cartridges," claimed
that the United States had manufactured and
used cartridges covered by his patent under
an implied contract to pay a reasonable roy-
alty therefor.

from the said 31st March, 1883, to said 31st May, 1888, by the defendant, its authorized officers or employees in its service, or on its behalf, in pursuance of law, in the sum of one hundred and ten thousand dollars, with leave to amend his petition in this behalf when the precise numbers have been duly reported by the proper departments of the United States."

Upon the trial of this case the court of claims made, amongst others, the following finding:

"The facts in this case are the facts already found in case No. 13793, between the same parties as to the same subject-matter, except as to the time since the beginning of the other action, during which time, to wit, from the beginning of the other action to the beginning of this action, the government manufactured cartridges of the same form and kind as those described in these findings, known as the 'reloading' cartridge, in which said case No. 13793 the following proceedings were had and the following facts were found, which facts are now found herein and are hereto annexed, as follows, to and including finding 8.” The 9th finding is as follows:

"The following are, in substance, the proceedings had in case No. 13793 between the same parties:

"April 19, 1883.
"May 18, 1883.
filed by allowance
"June 4, 1883.
"July 25, 1883.
filed and allowed.

Petition filed.

Amendment to petition
of judge at chambers.
Traverse filed.
Amendment to petition

Ine petition contained, amongst others,
the following allegations: That "your pe
titioner is the first and original inventor of
an improvement in cartridges, for which let-
ters patent of the United States were granted
to him in due form of law, and, according to
law, dated and issued the 18th day of Febru-
ary, A. D. 1879, vesting in him the exclusive
right to make, vend, and use the same for
seventeen years from the date thereof.
"Your petitioner has pending a suit for com-' for facts and brief filed.

NOTE. As to consequence of a nonsuit or!
dismissal of complaint,-see note to Homer v.
Brown, 14: 970.

As to what constitutes infringement of pat ent; similarity of devices; designs; combina tions; machincs; construction of patent,-see note to Royer v. Coupe, 36: 1073.

"October 2, 1884.
filed and allowed.
"December 15, 1884.
tion allowed.

"January 10, 1885.

Amendment to petition

Amendment to peti

Claimant's requests

As to damages for infringement of patent; treble damages,-see note to Hogg v. Emerson, 13: 824.

As to what questions are concluded by rea judicata,-see note to Wiese v. San Francisco Musical Fund Soc. (Cal.) 7 L. R. A. 577.

« ForrigeFortsett »