GORRELL v. HOME LIFE INS. CO. OF NEW YORK, 63 F. 371

WOODS, Circuit Judge (after stating the case). It is insisted that the court below erred in three particulars: First, “in sustaining demurrers to defendant’s special pleas;” second, “in refusing to permit petitioner to prove, on the trial of the cause, conversations and correspondence between plaintiff in error and C. A.

Townsend, the president of the Home Life Insurance Company, in relation to the note in controversy;” third, “in directing the jury to find for the defendant in error.” Waiving any question of these specifications meeting the requirements of our tenth and twenty-fourth rules, that “an assignment of error shall set out separately and particularly each error asserted and intended to be urged,” and that when the error alleged is to the admission or rejection of evidence the assignment “shall quote the full substance of the evidence admitted or rejected,” we are of opinion that the rulings of the circuit court were correct.

Of the special pleas referred to in the first assignment of error, the fourth is distinctly different from the others, but has not been supported by argument or citation of authority, and will not be considered. “The major proposition of the first three special pleas,” says the brief in support of them, “is that a. person cannot obtain advantage in a court of law of a contract made or

an act done in violation of law. Ex turpi causa, etc.

Each of the pleas sets forth a separate ground to sustain the proposition that the cause of action sought to be enforced in this suit grows out of a transaction forbidden by law.” A plea, which, without denying the receipt and full enjoyment of the consideration, is designed to defeat an obligation to repay money loaned because the corporation which made the loan had exceeded its powers, or contravened some express or implied provision of statute, should be strictly construed, and, unless the illegality is shown by averments so unequivocal and complete as to exclude any reasonable intendment to the contrary, the contract should be upheld.

By the theory upon which these pleas were drawn, neither the second nor third of them excludes the possibility or a fair presumption that the note in suit was lawfully made. The theory of the second pléa is that it was a violation of the law of New York for an insurance company not organized as a banking corporation to discount bills, notes, or other evidences of debt, and so it is alleged that this cause of action arose out of tlie fact of the defendant in error having discounted the note in suit. But it is not alleged that the note was given for money loaned, nor what was the consideration.

If the consideration was (he price of property sold, or an indebtedness of the plaintiff in error which had accrued in connection with an agency for the company or otherwise, or the accumulated amount of credits allowed him by the company for the one-third of annual premiums on policies of the company which he held, the taking or discounting of the note by the company was not a banking transaction.

The third plea shows that the note was made in consideration of a loan, and concedes the power of the company to loan to holders of its policies “a sum not exceeding one-third of the annual premium of the policies held by such policy holders respectively,” but alleges that the money loaned on this note exceeded by more than a hundred times the amount of the annual premium of any (one) policy of the company held by the 'plaintiff in error.

There is in the plea no averment that the loan for which the note was given was or was not intended to be for the one-third amount of premiums accumulated upon policies of the company which were held by the maker of the note, and were jdedged as security for the debt. He may, for a.ll that is averred, have held policies upon his own life sufficient for the purpose, or may have held them upon rhe lives of others, in whom he had insurable interests. But there is' a more radical objection to all three of the pleas.

The theory of them all is that the insurance company was forbidden to do a hanking business either in Yew York or in Illinois, and that in discounting the note in suit it violated the law of both states. It is not; claimed that the law of Illinois on the subject is express, but that by imjdication all corporations not organized under the general banking law of 1888 (chapter l(»a, Hurd’s Rev. St.) are forbidden to cany on k banking business in that state.

In support of the general proposition that courts will not give effect to contracts forbidden expressly or by implication, a number of cases are cited, but they do not go to the extent necessary to sustain the pleas. Of the cases in Yew York, for instance, the latest cited is Trust Co. v. Helmer, 77 N. Y. 64.

The answers in that case contained averments to the effect that the plaintiff kept a regular-office for discount and deposit, and carried on a regular banking business, so that upon the facl.s alleged, as (.he court said, the question for determination was whether the plaintiff possessed authority under its charter to discount notes the same as any other banking institution, credit the proceeds, and pay out the same upon the; checks of one of the parties, and not whether the plaintiff could lawfully buy and receive ju-omissory notes, and advance money on the same;.

The distinction was declared to he, as manifestly it was, a plain one. In New Hope, etc., Bridge Co. v. Poughkeepsie Silk Co., 23 Wend. 648, a foreign corporation, in violation of an express prohibition, kept in Yew York an office for receiving deposits and discounting notes, and a contract of loan which was found to have grown out; of the prohibited act was held to be illegal and void.

It is not alleged in any of these pleas that the Home Life Insurance Company kept an office for discount and deposit, or in any sense carried on a regular banking business, but simply that it made a loan of money upon the note in suit. Conceding, as was said in Insurance Co. v.

Ely, 5 Conn. 560, that “the discount of money on a note” is an exercise of “the most important power of a bank,” it does not follow that a single loan of money upon the note of the borrower by an insurance company—it may be supposed to have been, as the £roof in this instance shows it was, to an agent of the company to enable him to prosecute the company’s business of insurance more successfully—must be deemed to have been made in violation of the statute.

At most the pleas show that in making the loan and taking the note in suit the company exceeded its powers, —did a thing which was ultra'vires, but not otherwise in violation of law. In Hew York, however, as elsewhere, the rule is established “that the contracts of corporations, made in excess of their rightful powers, but free from any other vice, are not illegal, in the sense of the maxim Ex turpi causa,’ etc.” It was so declared by one of the judges in Bissell v. Railroad Co., 22 N. Y. 258, and has since been there and generally the recognized i*ule. Arms Co. v. Barlow, 63 N. Y. 62; Woodruff v.

Railway Co., 93 N. Y. 609; Bank v. Jones, 95 N. Y. 115, 123; Raft Co. v. Roach, 97 N. Y. 378; Bank v. Porter, 125 Mass. 333; Woollen Co. v. Lamb, 143 Mass. 420, 9 N. E. 823; Farnham v. Canal Co., 61 Pa. St. 265, 271; Grant v. Coal Co., 80 Pa. St. 208, 218; Darst v. Gale, 83 Ill. 136; Alexander v. Tolleston Club, 110 Ill. 65, 73; Brown v. Mortgage Co., Id. 235; Gold-Mining Co. v. National Bank, 96 U. S. 640; Bank v. Matthews, 98 U. S. 621; Bank v. Whitney, 103 U. S. 99; Reynolds v. Bank, 112 U. S. 408, 5 Sup. Ct. 213; Fritts v. Palmer, 132 U. S. 282, 10 Sup. Ct. 93; Thompson v. Bank, 146 U. S. 240, 13 Sup.

Ct. 66; McBroom v. Investment Co., 153 U. S. 318, 14 Sup. Ct. 852; State Board of Agriculture v. Citizens’ Street Ry. Co., 47 Ind. 407; Driftwood Valley Turnpike Co. v. Board of Com’rs, 72 Ind. 226; Platter v. County of Elkhart, 103 Ind. 360, 381, 2 N. E. 544. Contracts of national banks made in violation of express prohibitions have been upheld by the supreme court of the United States in the cases cited upon the principle, as declared in Thompson v.

Bank, “that where the provisions of the national banking act prohibit certain acts by banks or their officers, without imposing any penalty or forfeiture applicable to particular transactions which have been executed, their validity can be questioned only by the United States, and not by private parties.” In Brown v. Mortgage Co., supra (decided in June, 1884), the supreme court of Illinois, speaking of a foreign company which was organized for the purpose of loaning money on mortgage security, said: “There' is nothing in the character of such a corporation contrary to public policy in this state (Stevens v.

Pratt, 101 Ill. 206), and to allow the plea of ultra' vires here would be to work a wrong.

It would be contrary to natural right and justice.” The loan involved in that suit was «probably made before the banking law of 1887-88 took effect, but if a new rule or policy had been introduced by force of that act, the fact would, doubtless have been mentioned by the supreme court of the state, or, to say the least, the unqualified statement quoted of the present law or policy on the subject, would not have been made. finder the second assignment; of error the only question can be of the admissibility of the oral -testimony which was offered and rejected.

There was no exclusion of correspondence between the parties. In so far as the oral testimony which was offered is identical with the contents of the letter of March 16, 3891, its exclusion was harmless, because the letter itself is in evidence, and oral proof to the same effect ivas needless; and, in so far as the proposed testimony goes beyond the letter, it was properly rejected. Union Stock Yards & Transit Co. v. Western Land & Cattle Co., 18 U. S. App.---, 7 C. C. A. 660, 59 Fed. 49.

Its admission would have been in plain violation of the familiar rule “which precludes the admission of parol evidence to contradict or substantially vary the legal import: of a written agreement.” In Renner v. Bank, 9 Wheat 581, 587, quot'd in Martin v. Cole, 304 U. S. 30, 38, it is said that “there is no rule of law better settl'd or more salutary in its application to contraéis.” The contract before us—the noie in suit—is complete in its terms.

It contains an absolute promise to pay on demand a stated sum, and the consent, of the maker is expressed that renewal commissions accruing- to his account may be retained by the company and applied in liquidation of the obligation. The rule that, where an oral agreement has' been but. partially reduced to writing the whole agreement is open to proof is not applicable. The proof proposed here was of an agreement: inconsistent with the writing, which in itself is complete and unambiguous. The written promise to pay is absolute.

By the proposed proof that, promise would have been nullified, and the noté converted into an agreement that the sum named should be paid out; of accruing commissions, and not otherwise. The ease- is dearly distinguishable from Burke v. Dulaney, 153 U. S. 228, 14 Sup. Cf. 816, where evidence was admitted to show a. parol agreement, that a note should not become operaiive as a note until the maker could examine the property for which it was given.

That attack was upon (In' delivery, and not, as in this cast', upon the meaning of tin* terms of a note, of the delivery of which no question has boon made either in the pleadings or proofs. The remaining- question is whether the court erred in directing a verdict, and that depends upon the force of the correspondence between the parties which was admitted in evidence. In support, of the contention of the plaintiff in this respect four propositions are advanced, and authorities cited to establish them: -

(1) That all the writings between the parties must be construed together. Bish. Cont. § 165: Crop v. Norton, 2 Atk. 74, 75; Colbourn v. Dawson. 4 Eng. Law & Eq. 378; Stacy v. Randall. 37 Ill. 467; Fort v. Richey, 128 Ill. 502, 21 N. E. 498; Hanford Oil Co. v. First Nat Bank, 126 Ill. 584, 21 N. E. 483. l'2) That a promissory note payable' from a designated source or fund is contingent upon the (exist('nee and quantity of the source or fund. Schmittler v. Simon, 114 N. Y. 176, 21 N. E. 162; Bradley v. Marshall, 54 Ill. 173; Bailey v. Cromwell, 4 Ill. 71; Josselyn v. Lacier, 10 Mod. 294; Worden v. Dodge, 4 Denio, 159; Cook v. Satterlee, 6 Cow. 108.

(3) That where parties thereto have’ placed a construction upon their contract the courts will adopt their construction. 2 Kent, Comm. 557; Insurance Co. v. Dutcher, 95 U. S. 269; District of Columbia v. Gallaher, 124 U. S. 505, 8 Sup. Ct. 585; Reissner v. Oxley, 80 Ind. 580; Willcuts v. Insurance Co., 81 Ind. 300.

(4) That where a complete oral agreement has been but partially reduced to writing the whole agreement may be proved by parol evidence. Bish. Cont. § 164; Board v. Shipley, 77 Ind. 553, 556; Tomlinson v. Briles, 101 Ind. 538, 1 N. E. 63; Wood v. Williams, 142 Ill. 269, 276, 31 N. E. 681; Ballston Spa Bank v. Marine Bank, 16 Wis. 120: Magill v. Stoddard, 70 Wis. 75, 35 N. W. 346; Chapin v. Dobson, 78 N. Y. 74; Juillard v. Chaffee, 92 N. Y. 529; Schmittler v. Simon, supra; Bradshaw v. Combs, 102 Ill. 428; Lafitte v. Shawcross, 12 Fed. 519.

The last proposition is pertinent only to evidence which was not admitted, and which we have already considered. Conceding the general soundness and relevancy of the other propositions, we find nothing in the letters which passed between these parties which can properly be said to modify the meaning of tin terms used in the note.

The contention is that the clause in the note which authorized the company to retain all renewal commissions, and apply them to the liquidation of the obligation, should be given the meaning of the clause in the letter of March 16, 1891, where, referring to the unsigned note, which was inclosed in the letter, it is said, “Which, as you will see, we have made payable from your renewal commissions maturing from,” etc.

That, however, was intended, manifestly, not to put upon the note a construction which would make of it a contract distinctly different from the one evidenced by its terms, but simply to call attention to the provision as it is found in the note for the retention and application of renewal premiums to the discharge of the demand.

That this was the intention would be the fair inference if the expression of the letter were unqualified, and it is put beyond doubt by the use of the phrase “as you will see,” Avhich means “as you will see by reading the note.” With that letter in his hand the plaintiff in error was bound to scrutinize the note, and had no right to execute it on the assumption or supposition that it did not mean Avhat it said.

If he was misled by the leftei* and by statements of the president of the company, so as to be entitled to relief on the ground of mistake, and had sought a correction of the note in order to bring it into conformity with the supposed intention of the parties, a court of equity, on proper application and proof, could have given him relief; but as presented here, in a suit at law, there is in the evidence, and there was offered in ei'idence, nothing to affect the validity and force of the note as it reads, and the court did right in directing a verdict. The judgment is affirmed, with costs.