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further proceeding with the litigation, which involved the same subject-matter as the compromise.
In Winslow v. Noble (1881) 101 Ill. 194, one who sought to enjoin an action of forcible detainer to recover possession of a tract of land occupied by him was held not to be in court with "clean hands" so long as he retained a certain sum of money which the defendant had paid in purchasing the property from and at the instance of the complainant, which property had been encumbered with a defectively executed mortgage which was about to be foreclosed at the time of the purchase, and to prevent which the complainant induced the defendant to buy the property. The defect in the mortgage deed was the ground on which the complainant prayed that the injunction be issued.
In McCabe v. New York C. & H. R. R. Co. (1909) 114 N. Y. Supp. 303, failure to return the amount paid by a railroad company as consideration for future damage to land of the plaintiff by the presence of the defendant's railroad was held to bar an action against the railroad company because of such damage.
In Farr v. Childs (1918) Mich. -, 169 N. W. 868, it was held that a person who received a transfer of property with the knowledge that it was made in fraud of the rights of the holder of a previous contract was not entitled to the aid of equity to maintain possession against the person thus defrauded.
In International Land Co. v. Marshall (1908) 22 Okla. 693, 19 L.R.A. (N.S.) 1056, 98 Pac. 951, failure of a person seeking a reconveyance of real estate conveyed by him to the defendant under a parol agreement to return the property on the payment of the money secured thereby, to refund money received therefor in a transaction which was believed to be only a mortgaging of the property, whereas it was an absolute conveyance thereof, was held to preclude him from obtaining relief.
e. Lack of mutuality in contract. If a contract is oppressive and lacks mutuality, a court of equity will not
aid in the enforcement of such a contract in behalf of the party who is responsible for its inequality.
In Pope Mfg. Co. v. Gormully (1892) 144 U. S. 224, 36 L. ed. 414, 12 Sup. Ct. Rep. 632, the suit was for specific performance of a contract, the terms of which are stated in the opinion as follows: "The defendant, in consideration of receiving a license to use certain patents belonging to the plaintiff during the life of such patents, agrees never to import, manufacture, or sell any machines or devices covered by certain other patents, unless permitted in writing so to do, nor to dispute or contest the validity of such patents or plaintiff's title thereto, and further to aid and morally assist the plaintiff in maintaining public respect for and preventing infringements upon the same; and further agrees that if, after the termination of his license, he shall continue to make, sell, or use any machine or part thereof containing such patented inventions, the plaintiff shall have the right to treat him as an infringer, and to sue out an injunction against him without notice. There are other covenants in this contract which show that the plaintiff intended to reserve to itself a large supervision and control of the defendant's business," etc. After referring to the decision in Cathcart v. Robinson (1831) 5 Pet. (U. S.) 264, 276, 8 L. ed. 120, 124, wherein the principle of the maxim is stated and applied, the court said: "These principles apply with great force to the contract under consideration in this case. Not only are the stipulations in paragraphs 9 and 11 unusual and oppressive, but there is much reason for saying that they were not understood by the defendant as importing any obligation on his part beyond the termination of his license. Indeed, the operation of these covenants upon his legitimate business was such that it is hardly possible he could have understood their legal purport. The testimony upon this point. was fully reviewed by the court below in its opinion, and the conclusion reached that the contract 'was an artfully contrived snare to bind the defendant in a manner which he did not
comprehend at the time he became a party to it.' We have not found it necessary to go into the details of this testimony. While we are not satisfied that his assent to this contract was obtained by any fraud or misrepresentation, or that the defendant should not be bound by it to the extent to which it is valid at law, we are clearly of the opinion that it is of such a character that the plainhiff has no right to call upon a court of equity to give it the relief it has sought to obtain in this suit."
Where the evidence disclosed that the complainant in a suit to enforce the specific performance of a contract for the sale of certain real estate was a person of no financial responsibility, a "straw man," acting for an undisclosed principal whose purpose was to profit from the transaction if it should be profitable and to evade responsibility should the transaction prove otherwise, it was held that the complainant was not in court with "clean hands," and was not entitled to the relief prayed. Houtz V. Hellman (1910) 228 Mo. 655, 128 S. W. 1001.
An employer who seeks to enjoin an employee from selling his services to another is not entitled to the relief sought if the contract of employment on which the suit is based lacks mutuality. Kenyon v. Weissberg (1917) 240 Fed. 536 (contract with actor); American League Baseball Club v. Chase (1914) 86 Misc. 441, 149 N. Y. Supp. 6 (contract with baseball player).
Thus, in Kenyon v. Weissberg (Fed.) supra, it appeared that a contract of employment bound the employee to performance thereof for a definite period of time, without giving to him the corresponding right to compel its performance on the part of the employer during the stipulated period. It further provided that the employee. might be discharged from his employment at any time his services should be determined by the employer to be unsatisfactory, without making any provision as to what should constitute satisfactory service. By the terms of the contract the employer also acquired the right to assign the contract
to another, regardless of the latter's financial responsibility. The court refused to decree the specific performance of this contract at the instance of the employer, on the ground that it lacked mutuality, and the complainant was not in court with "clean hands."
f. Inducing breach of contract. A court of equity will not lend its aid to one who, in connection with the matter in controversy, has, with notice
of the existence of a contract of employment, so dealt with a party thereto as, in effect, to induce him to break the contract. See T. B. Harms & Francis, Day, & Hunter v. Stern (1915) 145 C. C. A. 2, 229 Fed. 42, reversing (1915) 222 Fed. 581.
Therefore, courts of equity, in applying the principle embodied in this maxim in suits involving contracts of employment, have refused to enjoin the persons whose services were concerned from serving any other employers, where the persons seeking the relief were guilty of unconscionable conduct in knowingly inducing the defendants to break contracts of employment previously entered into by them with third persons, and this is true notwithstanding the former agreements did not embrace the elements of a valid contract, and were therefore unenforceable in a court of law.
Thus, in Weegham v. Killifer (1914) L.R.A.1915A, 820, 131 C. C. A. 558, 215 Fed. 289, affirming (1914) 215 Fed. 168, it appeared that the defendant, a professional baseball player, signed a contract with the Philadelphia National League Baseball Club to play for that organization during the baseball season of 1913. This contract gave to the club the right to terminate the contract on ten days' written notice, and contained a clause reserving, for a consideration, the defendant's services for the following baseball season, provided an agreement could be reached by the parties as to the terms of the contract for the ensuing year. After the close of the baseball season of 1913 the defendant was notified by the Philadelphia Club that it desired his services for the season of 1914, and would pay him an increased
salary. Nevertheless the defendant entered into a contract with the Chicago Federal League Baseball Club to play for that organization during the baseball season of 1914. The Federal League Club had notice of the reserve clause in the contract of the defendant with the National League Club for the season of 1913. The defendant subsequently signed a contract to play for the Philadelphia National League Club during the season of 1914, and this suit was brought to restrain him from playing with any other baseball club than the plaintiff's organization, the Chicago Federal League Baseball Club. The court held that by the reserve clause in the contract of 1913, the National League Club was invested with an equitable right to have the defendant endeavor in good faith to arrange with it for his services for the 1914 season before he should attempt to contract for his services with another club; and that the act of the plaintiff in contracting for the defendant's services for that season with notice of the existence of the reserve clause in the latter's contract referred to was
fraud on the National League Club, and that therefore the plaintiff's suit could not be sustained, under the maxim, "He who comes into a court of equity must come with clean hands." However, in T. B. Harms & Francis, Day, & Hunter v. Stern (Fed.) supra, it was held that the owner of the copyright of a musical composition was entitled to an injunction restraining its infringement, notwithstanding he had purchased the copyright from the composer with notice of the fact that the latter had previously entered into an agreement with the defendants, whereby the composer "sold, assigned, and transferred" to the defendants the "right to print, publish and sell" all compositions which he "might write" during a definite period, within which period the copyrighted production was composed. In a previous suit the prior agreement had been declared invalid as lacking mutuality, and the decree therein was held by the court in the instant case to be conclusive in the litigation before it. The court held
that if the prior contract had not been void, the relief prayed by the plaintiff could not have been granted because of the equitable principle of "unclean hands."
In Ely v.
King-Richardson Co. (1914) 265 Ill. 148, L.R.A.1915B, 1052, 106 N. E. 619, wherein it appeared that the employees of a corporation organized a rival concern, and induced employees of the older company to break their contracts of employment with that concern and enter the employ of the new company, it was held that the acts complained of were so unconnected with the subject-matter of the suit, which was to recover compensation for the services of the organizers of the new company, earned while they were employees of the older concern, that they could not preclude a recovery by the complainants under the principle of the maxim, "He who comes into equity must come with clean hands."
Under the principle of the maxim that he who comes into equity must come with clean hands, a court of equity will not aid a party to a suit for the specific performance or the cancelation of an executory contract, or to set aside an executed contract, on the ground of fraud, if the party seeking the aid of the court has been a party to the fraud. Reynolds v. Boland (1902) 202 Pa. 642, 52 Atl. 19; Swanson v. Sims (1917) Utah, 170 Pac. 777.
Thus, in the case first cited, the court quoted with approval from Pomeroy's Equity Jurisprudence, as follows: "If a contract has been entered into through fraud, or to accomplish any fraudulent purpose, a court of equity will not, at the suit of one of the fraudulent parties, a particeps doli, while the agreement is still executory, either compel its execution or decree its cancelation; nor, after it has been executed, set it aside, and thus restore the plaintiff to the interests which he has fraudulently transferred. Equity will leave such parties in exactly the same position in which they have placed themselves, refusing all affirmative aid to either of the
fraudulent participants. The only The only equitable remedies which they can obtain are purely defensive." For applications of this rule, see infra, V.
1. Rule stated.
A court of equity, in the application of the principle of this maxim, will not aid any of the parties to a contract tainted with illegality in a controversy arising out of or directly connected with the illegal agreement, but will leave them in the position in which they have placed themselves by their unlawful conduct. Collins v. Blantern (1767) 2 Wills. 350, 95 Eng. Reprint, 852; Creath v. Sims (1847) 5 How. (U. S.) 192, 12 L. ed. 111; Sample v. Barnes (1852) 14 How. (U. S.) 70, 73, 14 L. ed. 330, 332; Beck v. Flournoy Live-Stock & Real-Estate Co. (1894) 12 C. C. A. 497, 27 U. S. App. 618, 65 Fed. 30; Shattuck v. Watson (1890) 53 Ark. 151, 7 L.R.A. 551, 13 S. W. 516; Roe v. Kiser (1896) 62 Ark. 92, 54 Am. St. Rep. 288, 34 S. W. 534; Atwood v. Fisk (1869) 101 Mass. 363, 100 Am. Dec. 124. See also Houtz v. Hellman (1910) 228 Mo. 655, 128 S. W. 1006. See also LANGLEY V. DEVLIN (reported herewith) ante, 32.
Thus, in Shattuck v. Watson (1890) 53 Ark. 147, 7 L.R.A. 551, 13 S. W. 516, the court said: "It is a practicable principle that guides equity courts in their administration of justice that he who invokes their aid must come with clean hands,-that he who hath committed iniquity shall not have equity.
Mr. Story, treating the subject as to the rights of parties to such an agreement, states the law as it is generally approved: "The general rule is, that where an illegal contract has been made, neither courts of law nor of equity will interpose to grant any relief to the parties, but will leave them where it finds them, if they have been equally cognizant of the illegality.' 1 Story, Contr. § 486; 2 Parsons, Contr. 746; 2 Addison, Contr. pp. 715-724; 1 Pom. Eq. Jur. § 402."
In Atwood v. Fisk (1869) 101 Mass. 363, 100 Am. Dec. 124, quoting from the opinion in the English case of Col
lins v. Blantern (Eng.) supra, the court said: "Whoever is a party to an unlawful contract, if he hath once paid the money stipulated to be paid in pursuance thereof, he shall not have the help of a court to fetch it back again; you shall not have a right of action when you come into a court of justice in this unclean manner to recover it back. Procul, o procul este, profani!' In this respect the rule in equity is the same as at law. Equity follows the rule of the law, and will not interfere for the benefit of one such party against a particeps criminis. The suppression of illegal contracts is far more likely in general to be accomplished by leaving the parties without remedy against each other."
2. Application of rule.
In Creath v. Sims (1847) 5 How. (U. S.) 192, 12 L. ed. 111, an injunction was sought to stay proceedings on a judgment at law recovered against the complainant on a promissory note, the consideration for which was certain slaves. While the slaves were delivered in Tennessee, the contract for them was, as a matter of fact, made in Mississippi, "and was designed to be and was in reality, a fraud upon the Constitution and laws of Mississippi, forbidding the introduction of slaves, as merchandise, within that state." The court said: "Whosoever would seek admission into a court of equity must come with clean hands. The complainant alleges that the obligation to which he had voluntarily become a party was intentionally made in fraud of the law, and for this reason he prays to be relieved from its fulfilment. This prayer, too, is preferred to a court of conscience, to a court which touches nothing that is impure. The condign and appropriate answer to such a prayer from such a tribunal is this: that, however unworthy may have been the conduct of your opponent, you are confessedly in pari delicto; you cannot be admitted here to plead your own demerits; precisely, therefore, in the position in which you have placed yourself, in that position we must leave you."
In Trible v. Nichols (1890) 53 Ark. 271, 22 Am. St. Rep. 190, 13 S. W. 796, the court refused to enforce a right to subrogation on the ground that it was dependent on a usurious contract.
In Roe v. Kiser (1896) 62 Ark. 92, 54 Am. St. Rep. 288, 34 S. W. 534, a party seeking relief against a mortgage was held to be in court with "unclean hands" because of his participation in a usurious transaction out of which the mortgage arose.
In Downey v. Charles S. Gove Co. (1909) 201 Mass. 251, 131 Am. St. Rep. 398, 87 N. E. 597, the court refused equitable relief against a mortgage given to secure notes for the price of liquor, the purchase of which was solicited in violation of law.
In Pendleton v. Gondolf (1915) 85 N. J. Eq. 308, 96 Atl. 47, it appeared that the complainant agreed to furnish the money for a "wire-tapping" scheme, whereby information to be used in gambling was to be obtained illegally. It was held that he was not entitled to the aid of equity to set aside a fraudulent conveyance by his confederate.
In Unckles v. Colgate (1896) 148 N. Y. 529, 43 N. E. 59, affirming (1893) 72 Hun. 119, 25 N. Y. Supp. 672, one who, as a holder of its certificates of trust, was a party to an illegal combination or trust, was held to be in court with "unclean hands" in seeking to compel an accounting of the affairs of the trust by the trustees thereof.
In American League Baseball Club v. Chase (1914) 86 Misc. 441, 149 N. Y. Supp. 6, it was held that the players' contract system of "organized baseball" constituted an unlawful monopoly, so that equity would not enforce the negative covenant in a contract with a player.
In Kahn v. Walton (1889) 46 Ohio St. 195, 20 N. E. 203, a person who had entered into an illegal stock speculation contract was held not to be entitled to an injunction against the payment of checks given for losses. So, in Smith v. Kammerer (1892) 152 Pa. 98, 25 Atl. 165, a party to a similar contract was held not to be entitled to 4 A.L.R.-6
enjoin the collection of notes given by him as security.
In Hays's Estate (1893) 159 Pa. 381, 28 Atl. 158, an agreement between the plaintiff and another lien creditor to suppress competitive bidding at a ju dicial sale of the property of a dece dent was held to preclude him from relief on a rule against legatees of the estate, to show cause why the plaintiff should not be subrogated to the lien of their legacies.
In Kennedy v. Lonabaugh (1911) 19 Wyo. 352, 117 Pac. 1079, Ann. Cas. 1913E, 133, it appeared that a partnership was formed for the purpose of procuring public lands by fraudulent entry thereon. It was held that an between accounting the partners
would be denied.
Where the consideration for a contract is the promise of a party thereto not to prosecute another for criminal conduct, a court of equity, in applying the principle of the maxim, will refuse its aid to either of the parties to the agreement suing to enforce it, or for relief from its burdens, but will leave them as it finds them. Shattuck v. Watson (1890) 53 Ark. 147, 7 L.R.A. 551, 13 S. W. 516 (promise not to prosecute for forgery); Atwood v. Fisk (1869) 101 Mass. 363, 100 Am. Dec. 124 (promise not to prosecute for embezzlement). Thus, in the case first cited, a court of equity refused to cancel a mortgage which was executed in pursuance of an agreement entered into between the mortgagor and mortgagee that, on consideration of the execution of such a mortgage, the mortgagee would refrain from prosecuting the son of the mortgagor for forging a prior mortgage and notes on his father's property, on the ground that the agreement not to prosecute the son was illegal and the complainant was not in court with "clean hands."
Illegality affecting a marriage contract has been held to be sufficient, in the application of the principle of "unclean hands," to justify a court of equity in refusing to lend its aid to either of the parties thereto in a suit arising out of the contract. There