Reynolds v. Nichols & Co.

Weight, J.

As the injunction was made perpetual as to the collection of the entire sum secured by the trust deed, it is manifest that the bill was sustained upon the third or last ground, to-wit: the illegality of the consideration.

The deed was made to secure a loan in February, 1858. The consideration was, “Post notes of the Dubuque Harbor Co.;” made in Nov. 1857, issued by a corporation organized under the general incorporation laws of this State, transacting and having its sole place of business within this State; said notes being issued with the purpose and design of having them circulate as money.

The Constitution of 1846, art. 8, declares that no corporate body shall be created, with the privilege of making, issuing or putting in circulation any check, promissory note, certificate or other paper to circulate as money; and that the Genera] Assembly shall by law prohibit any person, association or corporation from exercising the privilege of banking or creating paper to circulate as money. Accordingly, by chap. 147 of the Code of 1851, it is provided, that if any person subscribe to or become a member of any such association or company, he shall be fined and imprisoned; that all notes and securities made or given to any such organization, or given to secure the payment of any money loaned or discounted by any such-company or its officers, are void; and that if any person or corporation shall issue any such bills to be loaned or circulated as money, or to be used as currency or circulating medium, they shall be fined not exceeding one thousand dollars. Our present constitution, which took effect September 3d, 1857, removes the prohibition contained in the former, and gives the legislature th© power to create a State Bank, and banks under a general banking law, with certain restrictions and limitations. In March, 1858, two laws upon these respective subjects were passed which took effect in July of the same year.

*402 It is suggested by appellants that the new constitution and the banking laws passed thereunder, repeal and remove the prohibitions and penalties contained in chap. 147 of the Code of 1851. We do not so understand it, as applied to the present subject and inquiry. Article 8, of the present constitution on the subject of corporations does not execute itself. The power is given to the legislature, subject to the vote of the people to create corporations with banking powers ; but this power may not be exercised. It is not a power that must be exercised, but may be. Instead of conferring the power, the legislature, within the limitations and restrictions therein contained, may prohibit the issuing of paper to circulate as money, and such prohibition would be just as fatal as under the old constitution. At the time of issuing these “post notes,” then, there was no law authorizing it, and if invalid and void under the constitution of 1846, they remained so notwithstanding the change in the organic lawn Whether they so continued after the taking effect of the banking laws in July, 1858, it is not necessary to express an opinion, as this was long subsequent to the transaction now before us. Nor need we say how far these banking laws operate to remove the penalties and prohibitions of chap. 147 of tho Code of 1851, (chap. 174, Rev. I860,) as applied to all other corporations or associations.

Under the Code of 1851, in the light of the provisions quoted, can this transaction be upheld ? It seems to us clearly not. Says Shaw, C. J., in White v. Bass, 3 Cush. 448 : “ It is well settled by the authorities, that any promise, contract or undertaking, the performance of which would tend to promote, advance or carry into effect any object or purpose which is unlawful, is in itself void, and will not maintain an action. The law which prohibits the end, will not lend its aid in promoting the means designed to carry into effect, and in this respect, the law gives no *403 countenance to the old distinction between malum in se and malum prohibitum. That which the law prohibits, either in terms or by affixing a penalty to it, is unlawful; and it will not promote in one form that which it declares wrong in another.” And it was held in Springfield Bank v. Merrick, 14 Mass. 322 , that a note payable in paper prohibited by statute from being issued by a bank, was void and would not support an action. So the rule is declared as general, that all contracts or agreements, which have for their object any thing which is repugnant to the general policy of the common law, or contrary to the provisions of any statute, are void and not to be enforced. 1 Comyns on Cont. 30. And to the same effect see Hunt v. Knickerbocker, 5 John. 326 ; Guenther v. Dewien, 11 Iowa 133 ; Marianthall et al. v. Shaffer, 6 Ib. 223 ; Davis v. Bronson, Ib. 410, 425; Sipe v. Finarty, Ib. 394; Craig v. Andrews, 7 Ib. 17; David v. Ransom, 1 G. Greene 383; Cole v. Parker, 7 Iowa 167 .

The statute expressly prohibited the issuing of this paper, and affixed a penalty for its violation. It was void, in its inception, void in the hands of any person. To allow a third person to recover, for it as a loan of money, would recognize that as right which the law has declared wrong. How more effectually could the courts of the State promote and advance an act "which is unlawful, (the putting these notes in circulation,) than to hold that third persons could enforce all contracts having for their consideration this illegal and spurious paper. It seems to us none.

This view renders an examination of the other points in the case unnecessary.

Affirmed.