hand one who has received illegal consideration or performed in whole or in part illegal acts stipulated for in a contract cannot recover reasonable compensation for what he has done; 66 but if a contract is prohibited merely for the protection of a class of persons, such a person may waive the prohibition or by acts estop himself from asserting the invalidity, in which case the court will authorize a recovery on quantum meruit, or quantum valebat.67 To the general rule that an executed transfer cannot be set aside, there are, however, exceptions which may be included either under the head of an unexecuted illegal purpose or of parties not in pari delicto.

§ 1788. Rescission allowed when illegal agreement unexecuted.

Where money has been paid or goods have been delivered in part performance of an illegal agreement, the money or payment for the goods may be recovered so long as the illegal part of the agreement is wholly unexecuted,68 unless the whole agreement involved serious moral turpitude. A common application of this doctrine has already been considered with reference to wagers.69 On the same principle recovery may be had for lawful services though the contract required unlawful services also to be rendered, if the plaintiff withdrew from the transaction before entering upon the unlawful portion of the contract.70

6 Norbeck & Nicholson Co. v. State, 32 S. Dak. 189, 142 N. W. 847, Ann. Cas. 1916 A. 229, and see supra, §§ 1703, 1740.

67 Norbeck & Nicholson Co. v. State, 32 S. Dak. 189, 142 N. W. 847, Ann. Cas. 1916 A. 229.

68 Tappenden v. Randall, 2 B. & P. 467; Taylor v. Bowers, 1 Q. B. D. 291; Kearley v. Thomson, 24 Q. B. D. 742; Spring Co. v. Knowlton, 103 U. S. 49, 26 L. Ed. 347 (but see s. c. 57 N. Y. 518); Block v. Darling, 140 U. S. 234, 35 L. Ed. 476, 11 S. Ct. 832; Wassermann v. Sloss, 117 Cal. 425, 49 Pac. 566, 38 L. R. A. 176, 59 Am. St. Rep. 209; De Leon v. Walsh, 140 Cal. 175, 73 Pac. 813; White v. Franklin Bank,

It will be observed that the right of rescission and recovery of the consideration by a plaintiff must be confined to cases where it is the defendant's promise that is illegal, not the consideration for it; or where a portion only of the consideration is illegal, and that portion is still executory. Where any illegal consideration in an indivisible contract has been given it is clear that nothing, under the terms of the rule, can be recovered.

§ 1789. Parties not in pari delicto.

In some cases rescission of an illegal transaction and recovery of consideration is allowed beyond the limits stated in the preceding section. This is true where the parties are said not to be in pari delicto. The typical case is where one party acts under compulsion of the other. The doctrine originated in cases

proval in Duane v. Merchants' Legal Stamp Co., 231 Mass. 113, 120 N. E. 370, 372): "It has been held in many cases that, where the matters called for in the contract that render it illegal, do not involve moral turpitude, but are merely mala prohibita, either party, while it remains executory, may disaffirm it on account of its illegality and recover back money or property that he has advanced under it. If the contract has been executed the court will not relieve either party from the consequences of his own violation of law. But so long as it is entirely unexecuted in that part which the law forbids, there is a locus penitentiæ. The doctrine is stated very fully in White v. Franklin Bank, 22 Pick. 181. This rule is followed in Love v. Harvey, 114 Mass. 80; Atlas Bank v. Nahant Bank, 3 Met. 581, and Morgan v. Beaumont, 121 Mass. 7.

"It is established in a long line of English cases. Hastelow v. Jackson, 8 B. & C. 221; Bone v. Ekless, 5 H. & N. 925; Taylor v. Bowers, 1 Q. B. D. 291; Hampden v. Walsh, 1 Q. B. D. 189; Strachan v. Universal Stock Exchange, Ltd. (1895), 2 Q. B. 329; Hermann v. Charlesworth (1905), 2 K. B. 123, 135. It is also adopted generally

in America. Spring Co. v. Knowlton, 103 U. S. 49, 26 L. Ed. 347; Block v. Darling, 140 U. S. 234, 239, 35 L. Ed. 476, 11 S. Ct. 832; Pullman's Car Co. v. Central Transportation Co., 171 U. S. 138, 43 L. Ed. 108, 18 S. Ct. 808; Kiewert v. Rindskopf, 46 Wis. 481, 1 N. W. 163, 32 Am. Rep. 731; Urwan v. Northwestern Ins. Co., 125 Wis. 349, 103 N. W. 1102; Skinner v. Henderson, 10 Mo. 205. Most of these cases relate to the recovery of money or property that has been advanced under the illegal contract which is subsequently repudiated. In the present case labor and materials for the improvement of real estate were furnished by the plaintiff." . . .

"When labor and materials have been furnished upon real estate under a contract which contains an illegal element under a prohibitory statute, and when the contract remains entirely executory in that part which is illegal, and is disaffirmed because of its illegality, the disaffirming party has the same right to have compensation for the benefit conferred upon the real estate that he would have to recover for money or property received by the other party before the disaffirmance of such a contract."

where a creditor by pressure induced his debtor to enter into transactions fraudulent as to other creditors."1 In some cases also the guilt of the parties is differentiated for other reasons. Probably no more exact principle can be laid down than this, that if a plaintiff though culpable has not been guilty of moral turpitude, and the loss he will suffer by being denied relief is wholly out of proportion to the requirements either of public policy or of appropriate individual punishment, he may be allowed to recover back, the consideration with which he has parted.72 The nature or terms of a statute or rule of law will also sometimes indicate that it is intended for the protection of one class of individuals against another, and where this is the case a party belonging to the class whose protection was intended may recover what he has paid.73 Money lost at gaming is by statute frequently recoverable under this principle.74

71 See Atkinson v. Denby, 6 H. & N. 778, 7 H. & N. 934, citing earlier decisions.

72 Thus in White v. Franklin Bank, 22 Pick. 181, the plaintiff had made a deposit in the defendant bank on terms which violated the Banking Law. Though the court admitted that the defendant was blameworthy, it regarded the bank as more seriously guilty, and allowed the plaintiff to recover his money. See also Reynall v. Sprye, 1 De G. M. & G. 660; McDuffee v. Hayden-Coeur d'Alene, Irr. Co., 25 Ida. 370, 138 Pac. 503; Lowell v. Boston & L. R. R. Corp., 23 Pick. 24, 34 Am. Dec. 33.

In Davis v. Smoot (N. C.), 97 S. E. 488, the plaintiff in an accident case contracted to give his physician an illegal contingent fee for acting as an expert witness. Later the physician while his patient was somewhat under the influence of morphine obtained payment of the agreed fee. The plaintiff was allowed to recover it.

73 Thomas v. City of Richmond, 12 Wall. 349, 20 L. Ed. 453; Parkersburg v. Brown, 106 U. S. 487, 503, 27 L. Ed. 238, 1 S. Ct. 442; Logan County Bank v. Townsend, 139 U. S. 67, 35

L. Ed. 107, 11 S. Ct. 496; Scotten v. State, 51 Ind. 52; Deming v. State, 23 Ind. 416; Smart v. White, 73 Me. 332, 40 Am. Rep. 356; White v. Franklin Bank, 22 Pick. 181; Morville v. Amer. Tract. Soc., 123 Mass. 129, 137, 138, 25 Am. Rep. 40; Bateman v. Robinson, 12 Neb. 508, 11 N. W. 736; Becker v. Wilcox, 81 Neb. 476, 116 N. W. 160, 16 L. R. A. (N. S.) 571; Manchester R. Co. v. Concord R. Co., 66 N. H. 100, 131, 20 Atl. 383; Schermerhorn v. Talman, 14 N. Y. 93, 123; Tracy v. Talmage, 14 N. Y. 162, 181, 199, 67 Am. Dec. 132; Oneida Bank v. Ontario Bank, 21 N. Y. 490; Irwin v. Curie, 171 N. Y. 409, 64 N. E. 161, 58 L. R. A. 830; Duval v. Wellman, 124 N. Y. 156, 26 N. E. 343; Webb v. Fulchire, 3 Ired. L. 485, 40 Am. Dec. 419; Reinhard v. City, 49 Ohio St. 257, 31 N. E. 35; Insurance Co. v. Hull, 51 Ohio St. 270, 37 N. E. 1116, 46 Am. St. Rep. 571; Smith v. Blachley, 188 Pa. 550, 41 Atl. 619, 68 Am. St. Rep. 887, 198 Pa. 173, 47 Atl. 985, 53 L. R. A. 849; Deaton v. Lawson, 40 Wash. 486, 82 Pac. 879, 2 L. R. A. (N. S.) 392, 111 Am. St. Rep. 922.

74 See supra, § 1679.

§ 1790. Where one party is a fiduciary.

If the illegal transaction was entered into by a trustee or guardian so that any penal consequences visited upon the transaction will fall, not upon the guilty fiduciary, but upon his beneficiary, relief would be afforded either by the enforcement of the agreement because of the innocence of the beneficial plaintiff,75 or if in the particular case this seemed against public policy as amounting to allowance of ratification of an illegal transaction, the innocent beneficiary or the fiduciary in his behalf would at least be allowed to rescind and recover any consideration paid.76 Creditors, however, have no such large rights. The transfer of money or property under an unlawful act "does not necessarily give creditors a right to pursue the property after the contract has been fully executed. Such a contract may or may not be fraudulent as against creditors. If it is, they may set it aside. If it is not, they cannot."77 And a trustee in bankruptcy cannot for the benefit of the estate enforce an illegal contract, as a wager, under which the bankrupt, and, therefore, his trustee, would be entitled to money or property had the contract been legal.78

§ 1791. Where one party was induced by fraud to enter into the illegal contract.

Where one party to a bargain has been fraudulently induced to enter into the transaction, it is frequently said he is not in pari delicto, and the case has sometimes been classed with duress or coercion, but a distinction is to be observed. If the fraud consisted in deceiving the plaintiff as to the unlawful character of the transaction, doubtless the analogy with duress is sound.79 And even though the fraud consisted in depriving the plaintiff of the use of his faculties or judgment, the same principle might apply. But if the only fraud consisted in rep

75 See supra, § 1631.

80

76 Lee v. Boyd, 86 Ala. 283, 5 So. 489.

77 Traders' Nat. Bank v. Steere, 165 Mass. 389, 43 N. E. 187, quoted with approval and followed in Johns v. Reed, 77 Neb. 492, 109 N. W. 738.

78 Shoolbred v. Roberts, 11899] 2 Q. B. 560 [1900] 2 Q. B. 497.

79 Fears v. United &c. Bank, 172 Ky. 255, 189 S. W. 226.

80 In Block v. McMurry, 56 Miss. 217, 31 Am. Rep. 357, the defendant fraudulently induced the plaintiff to become intoxicated and then induced

resentations inducing the plaintiff to believe that the proposed illegal transaction would be more profitable than it actually turned out to be, it seems hard to discover any reason which should induce a court to favor him.81 It has been indeed decided by the Supreme Court of the United States 82 that a fraudulent illegal transaction might be rescinded on the broad ground that "a person does not become an outlaw and lose all rights by doing an illegal act. The right not to be led by fraud to change one's situation is anterior to and independent of the contract. The fraud is a tort. Its usual consequence is that as between the parties one who is defrauded has a right, if possible, to be restored to his former position. That right is not taken away because the consequence of its exercise will be the undoing of a forbidden deed." While the decision of the case may be supported on the ground of the slight guilt of the plaintiff, it is believed that the broad statement just quoted cannot be accepted as a statement of general principle. Certainly where the illegality is of a serious character its consequences may well be expressed by saying that as to that transaction the parties engaged in it become outlaws. For instance, if a purchase of stolen silver known by both parties to be such was induced by fraudulent misrepresentations of circumstances affecting its value, it is submitted that not only could the bargain not be enforced if executory, but it could not be rescinded if executed, nor would an action of tort for deceit lie in favor of the defrauded party. The broad principle ex dolo malo non oritur actio is not confined in its terms nor in its reason to an action on the contract.83

him to make a sale of his horse on Sunday. The seller was allowed to recover. See also Bell v. Campbell, 123 Mo. 1, 25 S. W. 359, 45 Am. St. Rep. 505.

81 See decisions under Sunday laws, supra, § 1710, ad fin.

82 National Bank & Loan Co. v. Petrie, 189 U. S. 423, 23 S. Ct. 512, 47 L. Ed. 879. In this case the plaintiff bought bonds of the National Bank & Loan Co., the defendant below. The court assumed that the transaction was forbidden by law. The plaintiff

alleged that the sale was induced by fraud and sought in the action to rescind the sale and recover the money paid for the bonds, tender of which was made and kept good. The court held the action maintainable.

83 In Tracy v. Talmage, 14 N. Y. 162, 181, 67 Am. Dec. 132, Selden, J., said: "The cases in which the courts will give relief to one of the parties on the ground that he is not in pari delicto form an independent class entirely distinct from those cases which rest upon a disaffirmance of the con