Summary
involving fidelity bond covering employees who misappropriated illegal liquor
Summary of this case from Covenant Health Rehab of Picayune v. BrownOpinion
No. 43403.
March 8, 1965.
1. Intoxicating liquors — public policy of State.
Public policy of State is that intoxicating liquors or transactions involving intoxicating liquors are illegal. Secs. 2612, 2613, 2618, Code 1942.
2. Fidelity bond — employees misappropriation of intoxicating liquors — contract unenforceable.
Fidelity bond indemnifying employer for dishonest acts of employees would not be enforced where misappropriated property consisted of intoxicating liquors, and employer, in order to recover on bond, was required to introduce evidence of his own illegal liquor activities notwithstanding that prohibition laws were not enforced in some areas within State which collected a "black market" tax on liquor sold within State. Secs. 2612, 2613, 2618, Code 1942.
3. Intoxicating liquors — public policy of State cannot be waived.
Public policy of State that intoxicating liquors or transactions involving intoxicating liquors were illegal could not be waived by fidelity bond surety who agreed not to defend any bond claim on ground that employer was in an illegal liquor business. Secs. 2612, 2613, 2618, Code 1942.
4. Contracts — public policy of State cannot be waived by private contract.
Headnotes as approved by Gillespie, J.
APPEAL from the Circuit Court of Warren County; BEN GUIDER, J.
Prewitt Bullard, Vicksburg, for appellant.
I. Collateral contracts, in which no illegal design enters, are not affected by an illegal transaction with which they may be remotely connected. American Equitable Assurance Co. v. McWhirter, 160 Miss. 216, 133 So. 664; Conithan v. Royal Insurance Co., 91 Miss. 386, 45 So. 361; Erb v. Fidelity Insurance Co., 99 Iowa 733, 69 N.W. 261; Edwards House v. Davis, 124 Miss. 485, 86 So. 849; Mechanics Insurance Co. v. C.A. Hoover Distilling Co., 182 Fed. 590, 31 L.R.A. (N.S.) 873; Sec. 2618, Code 1942; Anno. 18 A.L.R. 1084; 6 R.C.L. 696.
II. Contracts not opposed to law or public policy but which may aid incidentally in evasion of the law or public policy are enforceable. American Equitable Assurance Co. v. McWhirter, supra; Armstrong v. American Exchange National Bank, 133 U.S. 433, 33 L.Ed. 747, 10 S.Ct. 450; Armstrong v. Toler, 11 Wheat. 258, 6 L.Ed. 468; Brooks v. Martin, 2 Wall. 70, 17 L.Ed. 732; Conithan v. Royal Insurance Co., supra; Ford v. Harrington, 16 N.Y. 285; Hanover National Bank v. First National Bank, 109 Fed. 421; Ingraham v. National Salt Co., 130 Fed. 676; Illinois Trust Savings Bank v. Pacific R. Co., 117 Cal. 332, 49 P. 197; Jefferson v. Burhans, 58 U.S. App. 586, 85 Fed. 949; J.R. Watkins Co. v. Rachal (La.), 31 So.2d 871; Judson v. Buckley, 130 F.2d 174, cert. den. 63 S.Ct. 161; Kansas City Hydraulic Press Brick Co. v. National Surety Co. (Kansas), 167 Fed. 496; Loughran v. Loughran, 292 U.S. 216, 78 L.Ed. 1219, 54 S.Ct. 684; Mechanics Insurance Co. v. C.A. Hoover Distilling Co., supra; Marion Trust Co. v. Crescent Loan Investment Co., 27 Ind. App. 451, 61 N.E. 688, 87 Am. St. Rep. 257; Mitchell v. Campbell, 111 Miss. 806, 72 So. 231; Norton v. Blinn, 39 Ohio St. 145; Place v. Hayward, 117 N.Y. 487, 23 N.E. 25; Planters Bank v. Union Bank, 16 Wall. 483, 21 L.Ed. 473; State v. Capital City Bank (N.M.), 257 P. 993, 53 A.L.R. 1356; Taylor v. North Star Gold Mining Co., 79 Cal. 285, 21 P. 753; Tracy v. Talmadge, 14 N.Y. 162, 67 Am. Dec. 132; Waterbury v. McKinnon, 146 Fed. 737; Wright v. Hughes, 119 Ind. 324, 12 Am. St. Rep. 412, 21 N.E. 907; 17 Am.Jur.2d., Contracts, Sec. 590 p. 219; Anno. 18 A.L.R. 1084; 13 C.J. 502; 6 Williston, Contracts (rev. ed.), Sec. 1789.
Dent, Ward, Martin Terry, Vicksburg, for appellee.
I. One simple question is presented to the Court by this appeal: Is it against the public policy of the State of Mississippi for appellant to maintain an action against appellee on its bond for alleged misappropriation of intoxicating liquor, the possession of which is a violation of the laws of the State? American Equitable Assurance Co. v. McWhirter, 160 Miss. 216, 133 So. 664; Capps v. Postal Telegraph-Cable Co., 197 Miss. 118, 19 So.2d 491; Carrigan v. Lycoming Fire Insurance Co., 53 Vt. 418, 38 Am. Rep. 687; Chicago Bonding Insurance Co. v. Oliner (Md.), 115 A. 592, 18 A.L.R. 1081; Coca-Cola Bottling Co. v. Savage, 228 Miss. 612, 89 So.2d 634; Conithan v. Royal Insurance Co., 91 Miss. 386, 45 So. 361; Edwards House v. Davis, 124 Miss. 485, 86 So. 849; Grapico Bottling Co. v. Ennis, 140 Miss. 502, 106 So. 97; Jones v. McFarland, 178 Miss. 282, 173 So. 296; J.R. Watkins Co. v. Rachal (La.), 31 So.2d 871; Judson v. Buckley, 130 F.2d 174; Kellogg v. German-American Insurance Co., 133 Mo. App. 391, 113 S.W. 663; Kisner v. Jackson, 159 Miss. 424, 132 So. 90; Mechanics Insurance Co. v. C.A. Hoover Distilling Co., 182 Fed. 590, 31 L.R.A. (N.S.) 873; Mitchell v. Campbell, 111 Miss. 806, 72 So. 231; Morrissey v. Bologna, 240 Miss. 284, 123 So.2d 537; Northwest Amusement Co. v. Aetna Casualty Surety Co. (Oregon), 107 P.2d 110, 132 A.L.R. 118; Powelson v. National Airlines, 220 Miss. 595, 71 So.2d 467; State v. Capital City Bank (N.M.), 259 P. 993, 53 A.L.R. 1356; Whelchel v. Stennett, 192 Miss. 241, 5 So.2d 418; Wood v. First National Fire Insurance Co., 21 Ga. App. 333, 94 S.E. 622; Secs. 2613, 2618, Code 1942; 29 Am. Jur., Insurance, Sec. 234 p. 619; 44 C.J.S., Insurance, 1007; 45 C.J.S., Intoxicating Liquors, 746.
S.M. Smith, doing business as Tic-Toc Beverages, plaintiff below and appellant here (hereinafter called Smith), sued Maryland Casualty Company, defendant below and appellee here (hereinafter called Casualty Company), in circuit court on a fidelity bond. The court sustained a plea in bar and dismissed the suit. Hence this appeal.
Casualty Company issued to Smith a commercial blanket bond indemnifying Smith against loss of money or other property sustained through any fraudulent or dishonest act or acts committed by any of Smith's employees, to an amount not exceeding $10,000. The declaration charged that two of Smith's employees dishonestly misappropriated merchandise in excess of $10,000 while the bond was in force.
Upon motion of Casualty Company, the court ordered Smith to furnish a bill of particulars, and in response Smith filed a statement that the misappropriated property consisted of intoxicating liquors. Casualty Company then answered and included a plea in bar based on Mississippi Code Annotated section 2613 (1956), making the possession of liquor in Mississippi a violation of the law, and on the ground that the maintenance of Smith's action would violate the public policy of the State of Mississippi, and further that under Mississippi Code Annotated section 2618 no property rights exist in liquor. Upon the hearing of this plea in bar, it was stipulated that the agent of Casualty Company, with authority so to do, wrote Smith prior to the alleged loss stating that the bond was written with the express understanding and representation that the Casualty Company waived any defense of any legal action under said bond on the basis that Smith was engaged in an illegal activity. The trial court sustained the plea in bar and dismissed the action.
(Hn 1) Smith contends that collateral contracts in which no illegal design enters are not affected by an illegal transaction with which the contract is only remotely connected. We are unable to agree that this bond was only remotely connected with an illegal activity. The bond gave protection to Smith's illegal liquor business and in order to recover Smith requires the aid of the evidence showing his illegal activities. We said in Capps v. Postal Telegraph Co., 197 Miss. 118, 19 So.2d 491 (1944), involving an action based on the negligent failure of the Telegraph Company to send a message involving a gambling contract, that "(I)f a plaintiff requires essential aid from an illegal transaction to establish his case, he has no case." The public policy of the State has been clearly defined regarding intoxicating liquors. It is unlawful to possess, sell, or give away liquor. Miss. Code Ann. § 2613 (1956). There shall be no property rights in intoxicating liquor. Id., § 2618. Debts based on transactions involving intoxicating liquors are void. Id., § 2112. See Morrissey v. Bologna, 240 Miss. 284, 123 So.2d 537 (1960).
(Hn 2) The bond, as applied to the business in which Smith was engaged, furnished aid and protection to his illegal business, and in order to recover Smith must base his cause of action on his own admitted illegal act. Under these circumstances the courts will not enforce the contract. See Powelson v. National Air Lines, 220 Miss. 595, 71 So.2d 467 (1954). This is in accord with the overwhelming weight of authority elsewhere. Annot., 18 A.L.R. 1086 (1922).
We have carefully considered the authorities relied upon by appellant and they do not justify a holding that the fidelity bond involved in this case was only incidentally, indirectly, or remotely connected with Smith's illegal liquor business. Edwards House v. Davis, 124 Miss. 485, 86 So. 849 (1920), involved a suit to recover the value of a suitcase and clothing contained therein. The contention was made that no property right existed in the suitcase because it was being used for the transportation of a bottle of illegal whiskey, and the Court held this contention was without merit. The Court construed Chapter 189, Laws of 1918 (now Mississippi Code Annotated section 2618 (1956), and held it did not denude the plaintiff of his property rights in the suitcase. It was not necessary for plaintiff in that case to depend on evidence of his illegal act in order to make out his case.
American Equitable Assurance Co. v. McWhirter, 160 Miss. 216, 133 So. 664 (1931), and Conithan v. Royal Insurance Co., 91 Miss. 386, 45 So. 361 (1907), were cases involving enforcement of insurance contracts covering furniture in houses of prostitution, and the Court enforced the contracts because they did not directly aid the illegal businesses and the connection between the contracts and the illegal businesses was too remote to invalidate the contracts. In those cases it was not necessary for the plaintiffs to rely on the illegal businesses to establish their cases, whereas in the case at bar, Smith's case, if he has one, is based on his own illegal act.
(Hns. 3, 4) We have carefully considered the commitment Casualty Company made not to defend any claim on the ground that Smith was in an illegal business. The policy of the State cannot be waived by private contract. Otherwise, the public policy of the State would be subject to the will of contracting parties.
In view of the commonly known fact that the prohibition laws are not enforced in some areas, and the fact that the State collects a "black market" tax on liquor sold in this State, the Court has given careful consideration to the reasons underlying the rule governing this case, but we find no basis for unsettling the law in this area.
Affirmed.
Lee, C.J., and Ethridge, Jones and Patterson, JJ., concur.