Nicholson v. Ellis

Worthington, J., delivered the opinion of the Court. Tbis case comes before us upon appeal from, tbe Circuit Court of Baltimore City, and presents tbe rulings of that Court upon exceptions to tbe ratification of a mortgagee’s sale made under and by virtue of a consent decree obtained in • that Court on July 8th, 1908, Tbe lower Court sustained, tbe exceptions, annulled tbe sale, and declared tbe decree void, on tbe ground that tbe consideration for-the mortgage and mortgage notes was illegal. Tbe consideration in tbis case is held to be illegal because ■ tbe agreement containing tbe promise to pay the money secured by tbe mortgage contains, in addition to a transfer of ' certain property rights and secret formulas, to tbe promisor, also a covenant on tbe part of tbe promisee to refrain from doing certain things wbicb are deemed to be illegal as in restraint of trade; and tbe argument is that therefore tbe whole consideration is tainted and insufficient to support a promise. It seems to be well settled that any stipulation to perform an immoral act would taint tbe entire contract, and render it void in toto.

Anson on Contracts, p. 251; Erie Ry. Co. v. Union Locomotive Co., 6 Vroom, 240 ; Emerson v. Townsend, 73 Md. 224 . So also where tbe entire consideration for a promise is illegal, merely, though not immoral, the contract is ³³¹ void. Wildey v. Collier, 1 Md. 213.

So also it has been held that where a part of the consideration is good and part illegal merely, though not contrary to good morals, if the bad part of the consideration is not severable from the good, the whole promise fails. Bishop v. Palmer, 146 Mass. 469 . On the other hand, the Supreme Court of New Jersey, in a well-considered opinion by Beasley, Chief Justice, maintained that a stipulation which was not immoral would not vitiate or avoid the entire agreement, although such stipulation was so blended with the residue of the consideration, consisting of valuable rights and interests, as not to be severable from it. Fishall v. Gray, 60 N. J. L. 5.

The learned Judge in that case said: “There is nothing immoral or criminal in a stipulation not to engage in a certain business. A man may bind himself to such an abstention without incurring any legal penalty. The only effect is that such an agreement cannot be enforced, either at law or in. equity.” Further on in the same opinion he said: “If it be true that by reason of-the promise of the plaintiff to abstain from this business being blended with the residue of the consideration, that consisted of valuable interests transferred to the company, will prevent a recovery of the price agreed to be paid for such property, and will enable the company to retain it without giving -the equivalent, agreed on, a result certainly obtains that would be both wholly unconscionable and impolitic.” In a later New Jersey case (1901), the Court of Errors and Appeals of that State said: “The contract between the parties was based on sufficient reciprocal consideration, apart from the plaintiff’s restrictive agreement. Both parties must be presumed to have known the law as to contracts in restraint of trade, and therefore the restrictive covenant, if invalid, ought not to be held to avoid the valid covenants Contracts in restraint of trade are loosely spoken of as