moving the bankrupt to execute them, it had been guilty of a violation of a criminal statute.

A similar question arose under the statutes of New York, which are very much like the Arkansas statute, and upon facts but slightly different from those established in the case at bar. Burnham v. Cape Vincent Seed Co., 142 N. Y. 169, 172, 36 N. E. 889. There the warehouseman had permitted the consignee, after he had accepted a draft to which the bill of lading was attached, to remove the goods without surrender of the bill of lading. Thereupon the bank, the holder of the draft and bill of lading, demanded the goods, and the warehouseman, being unable to deliver them, paid the draft, taking an assignment thereof and a surrender of the bill of lading. In an action against the seed company, who had wrongfully obtained possession of the goods, the plea was interposed that the warehouseman had parted with the goods in violation of section 633 of the Penal Code of that state, which is almost identical with section 531, Kirby's Dig.; but the plea was overruled, the court saying:

"The defense based on plaintiff's alleged violation of section 633 of the Penal Code has no foundation in fact or in law. The section referred to is designed to protect bona fide holders of negotiable warehouse receipts, by inflicting a severe penalty on warehousemen who wrongfully deliver to third parties articles covered by the receipt. In the case at bar the plaintiff held the cargo of peas as security from the Ontario bank, and if, before the bank's debt was paid, he had wrongfully delivered it to the defendant, he would have been criminally liable under section 633 of the Penal Code, and the bank could have proceeded against him in a civil action for damages. The facts in this case show that the section quoted has no application. The plaintiff, before this action was commenced, had paid the claim of the Ontario bank and was subrogated to all its rights as against the defendant; his cause of action was on the draft, although inartificially pleaded; the defendant, by the verdict of the jury, is found to have received the cargo which was covered by the warehouse receipt held by the bank, and there is no reason in morals or in law why it should not pay the draft accepted in payment of property it has reduced to possession."

These statutes of Arkansas, although never construed by the Supreme Court of the state on the particular point now involved, have received construction as to its intent in two well-considered cases. Martin v. Railway Co., 55 Ark. 510, 524, 19 S. W. 314; Nebraska Meal Mills v. Railway Co., 64 Ark. 169, 173, 41 S. W. 810, 38 L. R. A. 358, 62 Am. St. Rep. 183.

In the first-cited case the court said:

"The act was passed to protect bona fide holders of the receipts of warehousemen and bills of lading of carriers. The main object of the act is to fix the liability of warehousemen, common carriers, and other persons named in the act, to the holders of their receipts or bills of lading. To do this it prohibits them from issuing the same, except for property in their actual possession, and from selling or incumbering, shipping or transferring, or permitting to be shipped, transferred, or removed beyond their control, the property for which a receipt or bill of lading has been given without the written assent of the person or persons holding such receipt or bill of lading. Their liability for a violation of the act is limited to the persons aggrieved, who are the persons interested in the property described in the receipt or bill of lading. It does not undertake to define the duties and liabilities of the warehousemen, carriers, and other persons named therein, to third persons, and does not change their rights, relations, duties, or liabilities to such persons, but leaves them as they were before its enactment."

In the last-cited case, the railway company had delivered some goods to the consignee without surrender of the bill of lading which the seller had retained and intended not to be delivered until the purchase money for which a draft had been drawn on the consignees, and which was attached to the bill of lading, had been paid. As the bill of lading was directed to the consignee and not to shipper's order, the railroad company delivered the goods to him without surrender of the bill of lading. Thereupon the consignor, the holder of the bill of lading, sued the carrier for the value of the goods, the consignee, being insolvent, insisting that the surrender of the goods in violation of this statute made it liable, but the court refused to sustain this contention, and held that:

"The purpose of the statute was to protect persons not parties to the bill of lading originally, but who for a valuable consideration acquired an interest in the property represented by it through the transfer of the bill of lading to them."

2. Does this statute prevent a recovery by the carrier of the value of property delivered in violation thereof and by the receiver converted to his own use? While there is some conflict among the decisions of the state courts as to the effect of an act not malum in se but only malum prohibitum, the decisions of the national courts are practically unanimous that there is an important distinction. United States v. Bradley, 10 Pet. 343, 360, 9 L. Ed. 448; Spring Company v. Knowlton, 103 U. S. 49, 26 L. Ed. 347; Ewell v. Daggs, 108 U. S. 143, 150, 2 Sup. Ct. 408, 27 L. Ed. 682; Dunlop v. Mercer, 156 Fed. 545, 555, 86 C. C. A. 435.

In Ewell v. Daggs the court said:

"A distinction is made between acts which are mala in se, which are generally regarded as absolutely void in the sense that no right or claim can be derived from them, and acts which are mala prohibitum, which are void or voidable according to the nature of the thing prohibited."

There is another equally well settled rule of law so far as the national courts are concerned. When a statute imposes specific penalties for its violation, where the act is not malum in se, and the purpose of the statute can be accomplished without declaring contracts in violation thereof illegal, the inference is that it was not the intention of the lawmakers to render such contracts illegal and unenforceable. Harris v. Runnels, 12 How. 79, 13 L. Ed. 901; Farmers', etc., Nat. Bank v. Dearing, 91 U. S. 29, 23 L. Ed. 196; National Bank v. Matthews, 98 U. S. 621, 629, 25 L. Ed. 188; Barnet v. National Bank, 98 U. S. 555, 25 L. Ed. 212; Louisiana v. Wood, 102 U. S. 294, 298, 26 L. Ed. 153; Fritts v. Palmer, 132 U. S. 282, 289, 293, 10 Sup. Ct. 93, 33 L. Ed. 317; Central Transportation Co. v. Pullman Co., 139 U. S. 24, 60, 11 Sup. Ct. 478, 35 L. Ed. 55; Logan County Bank v. Townsend, 139 U. S. 67, 11 Sup. Ct. 496, 35 L. Ed. 107; Merchants' Cotton Press Co. v. Insurance Co., 151 U. S. 368, 388, 14 Sup. Ct. 367, 38 L. Ed. 195; Pullman Co. v. Central Transportation Co., 171 U. S. 138, 18 Sup. Ct. 808, 43 L. Ed. 108; Connoly v. Union Sewer Pipe Co., 184 U. S. 540, 545, 22 Sup. Ct. 431, 46 L. Ed. 679; Yates v. Jones National Bank, 206 U. S. 158, 179, 27 Sup. Ct. 638, 51 L. Ed. 1002;

Hanover National Bank v. First National Bank, 109 Fed. 421, 426, 48 C. C. A. 482, 487; Dunlop v. Mercer, supra; Boatman's Bank v. Fritzlen (C. C.) 175 Fed. 183.

The rule to be deduced from these authorities is that, when such a plea of illegality is set up, the court must examine the entire statute in order to discover whether or not the Legislature intended to prevent courts of justice from enforcing contracts based on the act prohibited, and unless it does so appear only the penalties imposed by that statute can be enforced. A reference to a few of the leading cases on that subject will show how well settled this rule is in the courts of the United States.

In Harris v. Runnels the plea in bar to an action on a note was that "the consideration was the purchase of a slave imported into the state of Mississippi, which the statute prohibited." The only penalty provided in the statute was a fine on the seller and purchaser, and it was held that, the context of the statute showing no other penalty was intended, the plea was bad.

The national banking act prohibits these banks from making loans secured by real estate. In National Bank v. Matthews it was sought to foreclose a mortgage taken by a national bank in violation of the statute, and this statutory prohibition was pleaded as a defense. The Supreme Court of Missouri sustained the plea. On error the Supreme Court of the United States reversed that decision and held that from an examination of the entire statute it did not appear that Congress intended to declare a contract made in violation of the statute void, and the bank was entitled to a foreclosure of the mortgage. In Barnet v. National Bank a like construction was given to that part of the national banking act prohibiting usurious contracts, and this has been uniformly followed by all courts ever since.

In Fritts v. Palmer a conveyance of land made to a foreign corporation prohibited under a penalty from doing business in the state of Colorado was sought to be set aside by the vendor; but the court held the deed passed a valid title to the corporation, basing its decision upon the ground that, as the statute imposed a penalty and did not declare that contracts and deeds in violation thereof were void, it indicated that the Legislature did not intend to make them so.

In Marsh v. Fulton County, 10 Wall. 676, 684, 19 L. Ed. 1040, it was said:

"The obligation to do justice rests upon all persons, natural and artificial, and, if a county obtains the property or money of others without authority, the law, independent of any statute, will compel a restitution or compensation."

In Central Transportation Co. v. Pullman Company, the court said: "A contract ultra vires being unlawful and void, not because it is in itself immoral, but because the corporation, by the law of its creation, is incapable of making it, the courts, while refusing to maintain any action upon the unlawful contract, have always striven to do justice between the parties, so far as could be done consistently with adherence to law, by permitting property or money, parted with on the faith of the unlawful contract, to be recovered back or compensation to be made for it. In such case, however, the action is not maintained upon the unlawful contract, nor according to its terms; but on an implied contract of the defendant to return, or, failing to

do that, to make compensation for, property or money which it has no right to retain. To maintain such an action is not to affirm, but to disaffirm, the unlawful contract."

In Connoly v. Union Sewer Pipe Co. this question is again fully discussed, and the broad rule laid down:

"Assuming, as defendants contend, that the alleged combination was illegal if tested by the principles of the common law, still it would not follow that they could, at common law, refuse to pay for pipe bought by them under special contracts with the plaintiff. The illegality of such combination did not prevent the plaintiff corporation from selling pipe that it obtained from its constituent companies or either of them. It could pass a title by a sale to any one desiring to buy, and the buyer could not justify a refusal to pay for what he bought and received by proving that the seller had previously, in the prosecution of its business, entered into an illegal combination with others in reference generally to the sale of Akron pipe."

In Merchants' Cotton Press Co. v. Insurance Company the validity of bills of lading was attacked upon the ground that rebates and drawbacks had been granted to the shipper; but Mr. Justice Jackson, speaking for the court, quotes with approval the following excerpt from the decision of the Supreme Court of Tennesssee in that case: "This fact of special rate and rebate is denied, and it is a matter of controversy and conflict of evidence. * * We are of opinion, however, and rest our decision upon the ground, that if it were assumed that the law was applicable, and the fact of agreement for rebate and special rate proven, it would not prevent liability on the part of the carrier for the freight received and covered by insurance in the hands of the carrier's agent. The law makes such agreements as to rebate, etc., void, but does not make the contract of affreightment otherwise void, and we think there is nothing in the law or the policy of it which requires a construction that would excuse a carrier from all liability when it made such a contract in connection with that for receipt and transportation of freight. Such a construction would encourage rather than discourage such unlawful agreements for rebates. The carrier might prefer them to liability for the freight. Such a contract for rebate would be void, and could not be enforced; but we think the shipper could nevertheless recover for loss of his freight through the carrier's and insurer's negligence. No different construction has yet been put upon the interstate commerce law so far as we are advised, and we decline to give it any other."

In Yates v. Jones National Bank it was held that:

"The civil liability of national bank directors, then, in respect to the making and publishing of the official reports of the condition of the bank, a duty solely enjoined by the statute, being governed by the national banking act, it is self-evident that the rule expressed by the statute is exclusive, because of the elementary principle that, where a statute creates a duty and prescribes a penalty for nonperformance, the rule prescribed by the statute is the exclusive test of liability."

The latest decisions of the Supreme Court on that subject are Citizens' Central National Bank v. Appleton, 216 U. S. 196, 30 Sup. Ct. 364, 54 L. Ed. ——, and Earling v. Eneigh (opinion filed May 31, 1910, and not yet officially reported) 30 Sup. Ct. 672, 54 L. Ed.

In the Appleton Case it was sought to recover money loaned by the Cooper Exchange Bank, of which Appleton became receiver, to a debtor of the Citizens' Bank, to be used for the purpose of paying that debt, and the money was so applied; the Citizens' Bank guaranteeing to the Cooper Exchange Bank the payment of the loan. The plea of illegality and ultra vires was set up in bar to this action; but the

180 F.-34

court held that, although the guaranty was ultra vires, and therefore illegal, as the bank had received the money, it was liable on the implied contract which made it its duty to account to the Cooper Exchange Bank for the money advanced by the latter in execution of the agreement made by the former with the borrower. The court, speaking bye Mr. Justice Harlan, said:

"Whatever may be said as to the validity of the written guaranty now alleged to be illegal, the judgment can be supported based wholly on the implied contract which made it the duty of the Central National Bank, under the facts disclosed, to account to the Cooper Exchange Bank for the money obtained from the latter in execution of the agreement made by the former with the borrower."

In the Earling Case the stock of a corporation engaged in the business of a creamery and making butter was turned over to the cashier of a national bank, but in trust for the bank, to whom the corporation was indebted. The business was carried on in the name of the original corporation, but for the benefit of the bank, and under its control. The corporation becoming insolvent, creditors of the creamery, while under management for the benefit of the bank, sued the receiver and the bank. The plea was that the national banking act prohibited it from doing other than a banking business, and for that reason there was no liability; but the court held that it was liable for these debts, saying:

"Although restitution of property obtained under a contract which was illegal cannot be adjudged by force of the illegal contract, yet, as the obligation to do justice rests upon all persons, natural and artificial, if defendant obtained the money or property of others without authority, the law, independent of express contract, will compel restitution or compensation."

In Pangborn v. Westlake, 36 Iowa, 546, 549, the rule is thus tersely stated:

"We are, therefore, brought to the true test, which is that while, as a general rule, a penalty implies a prohibition, yet the courts will always look to the language of the statute, the subject-matter, the wrong or evil which it seeks to remedy or prevent, and the purpose sought to be accomplished in its enactment; and, if from all these it is manifest that it was not intended to imply a prohibition or to render the prohibited act void, the courts will so hold and construe the statute accordingly."

Was it the intention of the General Assembly of the state of Arkansas, as expressed in the statute, to impose upon a carrier delivering goods to the consignee without surrender or cancellation of the bill of lading, in addition to the large fine imposed by the statute if convicted in a criminal proceeding, and a civil liability for all damages sustained by the owner of the bill of lading, the further penalty of being prohibited from collecting the value of the goods thus illegally delivered? At common law a bill of lading, as stated in Pollard v. Vinton, 105 U. S. 7, 26 L. Ed. 998:

"While a symbol of ownership designed to pass from hand to hand with or without indorsement, and is efficacious for its ordinary purposes in the hands of the holder, it is not a negotiable instrument or obligation in the sense that a bill of exchange or a promissory note is. Its transfer does not preclude, as in those cases, all inquiry into the transaction in which it originated, because it has come into hands of persons who have innocently