In the event two or more employees are found guilty of being involved in a wrongdoing, one individual might decide to sue one or more of the other wrongdoers for redress or damages.
In a case involving Person A lending some money to a friend, Person B. Person B later refused to repay a loan contending that the repayment of the money is not judicially enforceable because the loan was funded by the proceeds of illegal gambling, which resulted in Person A suing Person B seeking a court order mandating that Person B repay the loan to Person A.
The Court of Appeal, affirming a ruling by the Appellate Division, held:
'The doctrine of waiver does not preclude consideration of [Person B's] challenge here to the enforceability of the loan on the ground that it was funded by illegal gambling proceeds. Nevertheless, that defense was properly rejected on the merits. Given our strong public policy favoring freedom of contract, agreements are generally enforceable by their terms (159 MP Corp. v Redbridge Bedford, LLC, 33 NY3d 353, 359-361 ). There is an affirmed finding, supported by the record, that the parties entered into a bona fideloan agreement and the facts do not support voiding the agreement on public policy grounds.
"Neither the terms of the agreement nor [Person A's] performance — i.e., loaning money to a friend — was intrinsically corrupt or illegal. Although the loan was funded by the parties' illegal gambling operation (for which both were criminally prosecuted), the record does not support a characterization of their conduct as "malum in se, or evil in itself" (Lloyd Capital Corp. v Pat Henchar, Inc., 80 NY2d 124, 128 ) and the source of funds used for a loan is not typically a factor in determining its validity.
"[Person B] argues the agreement should be deemed unenforceable because the courts should not assist a party in profiting from ill-gotten gains. But, here, where both parties were involved in the underlying illegality, neither enforcement nor invalidation of the contract would avoid that result. Indeed, if the loan is not enforced, [Person B] receives a windfall despite his participation in the criminal acquisition of the funds. We have been reluctant to reward "a defaulting party [who] seeks to raise illegality as a sword for personal gain rather than a shield for the public good'" (id., quoting Charlebois v Weller Assoc., 72 NY2d 587, 595 ; cf. McConnell v Commonwealth Pictures Corp., 7 NY2d 465 ). Although we do not condone [Person A's] illegal bookmaking business, for which he was prosecuted and fined, the circumstances presented here do not warrant a departure from this tenet."
The decision is posted on the Internet at: