Opinion
June, 1907.
Rose Putzel (Benjamin G. Paskus and Arthur W. Weil, of counsel), for appellant.
Feltenstein Rosenstein (Moses Feltenstein, of counsel), for respondent.
The defendant, "The 14th Street Store," is a domestic corporation carrying on an extensive business, divided into many different departments and employing agents and buyers. The plaintiff, a merchant, brought this action on account of goods sold and delivered to defendant company for the agreed price of $1,555.91 and interest. It was conceded on the trial that the goods were delivered to the defendant company at its store in this city, retained and used by it; that no part of the purchase price has been paid, and that the plaintiff made out a prima facie case under the pleadings. The plaintiff moved for judgment on the pleadings and stipulations in the case. The defendant company asked permission to introduce evidence in support of the affirmative defense set up in the answer. The court directed a verdict for the plaintiff for $1,576.92, excluding the testimony proffered by defendant, holding that, even though the facts alleged in the answer were true, the same did not constitute a sufficient defense as matter of law. The affirmative defense pleaded in the answer sets forth that: "The plaintiff without the knowledge or consent of the defendant and pursuant to an unlawful, fraudulent and criminal design and for the purpose of influencing the conduct of J.W. McGuiness, a purchasing agent in the employ of the defendant, in connection with his said employment, offered to pay to the said McGuiness a sum equal to 5 per cent. of the purchase price of the goods to be ordered from the plaintiff; that, pursuant to such unlawful, fraudulent and criminal design and arrangement, the plaintiff obtained an order for the goods, wares and merchandise described in the complaint herein; that thereafter the said goods, wares and merchandise were delivered at the premises of the defendant; that, pursuant to the said unlawful, fraudulent and criminal scheme, the plaintiff then did pay to the said J.W. McGuiness the sum of seventy-five dollars, such payment being made with the intent to influence his action in the matter of placing said order, and there being no consideration whatever for the advance to the said J.W. McGuiness by the plaintiff of said money; that the said order and delivery of goods, agreement and arrangement to pay and the said payment were part of an entire transaction which was contrary to public policy, illegal, void and contrary to statute." The defendant company admits reception of the goods purchased, claiming however that, without its knowledge and consent, pursuant to an unlawful and criminal design and for the purpose of influencing the conduct of defendant's purchasing agent, and against the act in such case made and provided, plaintiff offered and did pay to such agent seventy-five dollars for obtaining the order for the goods afterward sent to and retained and used by defendant company.
"Whoever gives, offers or premises to an agent, employee or servant, any gift or gratuity whatever, without the knowledge and consent of the principal, employer or master of such agent, employee or servant, with intent to influence his action in relation to his principal's, employer's or master's business; or an agent, employee or servant who without the knowledge and consent of his principal, employer or master, requests or accepts a gift or gratuity or a promise to make a gift or to do an act beneficial to himself, under an agreement or with an understanding that he shall act in any particular manner to his principal's, employer's or master's business; or an agent, employee or servant, who, being authorized to procure materials, supplies or other articles either by purchase or contract for his principal, employer or master, or to employ service or labor for his principal, employer or master, receives directly or indirectly, for himself or for another, a commission, discount or bonus from the person who makes such sale or contract, or furnishes such materials, supplies or other articles, or from a person who renders such service or labor; and any person who gives or offers such an agent, employee or servant such commission, discount or bonus shall be guilty of a misdemeanor and shall be punished by a fine of not less than ten dollars nor more than five hundred dollars, or by such fine and imprisonment for not more than one year." Penal Code, § 384r.
The statute, it should be noted, provides for two offenses: First, the giving, offering and promising to an agent any gift or gratuity whatever, without the knowledge or consent of the employer, with intent to influence his action in relation to his employer's business. Second, the giving or offering of a commission, discount or bonus to any agent who is authorized to procure materials, supplies or other articles, either by purchase or contract for his employer. Assuming that the section of the Penal Code referred to has been violated in these respects, and that the plaintiff and McGuiness, defendant's purchasing agent, offended against the law and are guilty of a misdemeanor, can it be reasonably and fairly argued or held that such corrupt action on their part ab initio vitiated and invalidated the agreement for the sale and delivery of the goods? This is a penal statute and it must be strictly construed. The act does not directly or inferentially declare a contract made, induced by reason of the corrupt giving and acceptance of a gratuity, as illegal or void, merely declaring such improper action to be a misdemeanor. The purpose of a penal statute prohibiting vicious acts and fixing penalties for offending against its provisions is to punish offenders, as a deterrent to others to live within the law, and not to destroy property or interfere with the enforcement of executed contracts. The contract for the sale and delivery of the goods in this case was valid in itself, the merchandise ordered was delivered, retained, appropriated and used by the defendant company. On discovery of the criminal act of the plaintiff and its agent, the defendant did not return the goods or offer to restore the plaintiff to his primary condition. The agency of McGuiness is admitted, and his right and authority to buy goods for the defendant company is not questioned. Thus the situation is presented of an agent, clothed with authority to buy and to contract for the purchase of property, making an agreement for goods at an agreed price, and which goods as ordered were accepted and appropriated. In other words, we are not met with the theory of whether an executory agreement is to be enforced, but with a condition, a valid promise and complete executed performance by the plaintiff. It has been repeatedly held that, where a contract has been fully executed and defendant reaped the benefit thereof, the fact that a penal statute has been violated in the approach to the contract will not prevent the court from enforcing the contract and payment thereunder. In Cody v. Dempsey, 86 A.D. 340, WOODWARD, J., writing, says: "It is true that where the statute prohibits the doing of a particular thing, the courts will not aid in enforcing contracts made in violation of the law, but where a contract, not unlawful in itself has been executed, and the parties have enjoyed the benefits of the contract, the mere fact that one of the parties has violated a penal statute in the approach to the contract will not prevent the court from enforcing payment. A vested right of action is property in the same sense in which tangible things are property, and it is equally protected against arbitrary interference." Guy v. Siebold, 97 N.Y. 472; Sinnott v. German-American Bank, 164 id. 391; Haynes v. Abramson, 97 N.Y.S. 371; Hough v. Baldwin, 99 id. 545; Smith v. Sichel, 49 Misc. 643. If McGuiness, defendant's employee, was attempting to recover from the plaintiff for his five per cent. commission on the purchase, or if the latter was endeavoring to compel the former to perform the terms of the agreement, there would be no doubt that a defense such as is pleaded might be successfully sustained. Here, defendant company obtained property belonging to the plaintiff and refuses to pay for the same, with no plea of damage or pecuniary injury or loss whatever, suffered by or through the act of the plaintiff. It must be borne in mind that this action is not brought to enforce a contract condemned by statute, nor upon an executory agreement, but upon a transaction fulfilled agreeably to understanding, with nothing left incomplete or unfinished by the plaintiff. Long before the enactment of section 384r of the Penal Code, the question of gratuities by tradesmen to influence servants of masters was considered by the courts, and it was held that "The giving of gratuities by a tradesman or artisan to the servants of his customers through whose agency their orders are received, although highly improper, does not of itself constitute a defense to the tradesman's action against the employer for services rendered, without evidence that the interests of the employer were prejudiced thereby. An injury cannot be inferred from the mere fact that such presents were made to and accepted by the servant." Brewster v. Hatch, 18 Abb. N.C. 205. In Vought v. Eastern Building Loan Association, 172 N.Y. 508, it was held that a defense of ultra vires was not available where the contract has been, in good faith, fully performed by the plaintiff and the defendant has had the benefit of such performance and of the contract. Judge MARTIN in his opinion at page 517 states: "It is now well settled that a corporation cannot avail itself of the defense of ultra vires when the contract has been, in good faith, fully performed by the other party, and the corporation has had the benefit of the performance and of the contract. As has been said, corporations, like natural persons, have power and capacity to do wrong. They may, in their contracts and dealings, break over the restraints imposed upon them by their charters; and when they do so their exemption from liability cannot be claimed on the mere ground that they have no attributes nor facilities which would render it possible for them thus to act. * * * It may be that while a contract remains unexecuted on both sides, a corporation is not estopped to say in its defense that it had not the power to make the contract sought to be enforced, yet when it becomes executed by the other party, it is estopped from asserting its own wrong and cannot be excused from payment upon the plea that the contract was beyond its power." The alleged misdemeanants, if found guilty, may be punished under the section of the Penal Code, and the law fully vindicated; but the court will not lend its aid to the defendant company to exempt and relieve it from the payment for the goods appropriated by it to its use under an executed contract. The learned trial justice committed no error in declining to admit proof under defendant's answer.
GILDERSLEEVE and SEABURY, JJ., concur.
Judgment affirmed, with costs to respondent.