This section contains the nature of the case and procedural background.

Prior to April 1962, P sold his milk to a cheese factory under a contract entitling him to what in the business is called the Grade B price, which was established by the federal government and was approximately 60 percent of the Grade A price, which was established by the state. P was a dairyman, and it was financially impossible for a dairyman in the Santa Clara Valley to remain in business without a Grade A contract. D, the president of the Santa Clara Creamery, called on P and offered him a Grade A contract for the sale of his milk if plaintiff would pay him a rebate or 'kickback' of four and one-half cents a gallon. Such a scheme was against the law. P accepted the offer. P agreed to sell the Santa Clara Creamery 51,600 pounds of Grade A milk per month, and the creamery agreed to purchase said milk at the Grade A price for the Santa Clara marketing area. D would then bill P for monthly 'feeding charges' in an amount equal to the agreed rebate of four and one-half cents per gallon of milk delivered. No feeding services were performed. A year later, D informed P that he needed money to pay off a debt or he would lose the creamery; that if he did not loan him $6,500, D would terminate his contract. P gave $6,500 in exchange for a promissory note dated April 16, 1963, signed by D and his wife. P thereafter paid Collins a rebate of only three cents per gallon of milk delivered. P made no payments after October 1963. On May 22, 1964, D terminated the contract. P ultimately disposed of his dairy. P sued D to recover the rebate monies of $4,177.72 and the loan of $6,500. The court found that P was not in pari delicto. P got the judgment, and D appealed.

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