Courtright v. Burnes

• Decision Date: 01 November 1881
• Citation: 13 F. 317
• Parties: COURTRIGHT v. BURNES.
• Court: U.S. District Court — Western District of Missouri

13 F. 317

COURTRIGHT v. BURNES.

United States Circuit Court, W.D. Missouri, Western Division.

November, 1881

Besides a general denial the defendant answers as follows:

'For further answer to said petition, says that before and at the time of the making of the pretended note in said petition, described, said plaintiff, this defendant, F. H Winston and George C. Campbell had been and were partners in a contract for building a railroad to a point opposite the city of Atchison, Kansas, from a point on the Chicago &amp Southwestern Railroad, which road was known as the Atchison branch of the Chicago & Southwestern Railroad. Prior to the date of said pretended note said Winston had been in charge of the construction of said branch road for said partners under said contract, and had received, and then had in his possession, as part of the assets under such contract, 40 bonds of the city of Atchison, for the sum of $1,000 each, belonging to said parties, subject to the payment of the partnership debts, and a distribution among said parties after such payment in proportion to their respective interests therein. Shortly before said pretended note was made, said parties made, constituted, and appointed this defendant as trustee for said partners, to take charge of said partnership business in place of said Winston, and to wind up said business; that at the time of making said pretended noted said partnership had not been settled, nor is it yet settled, nor has the interest of said Winston in said partnership, or in said bonds, been ascertained; that at the time of making said pretended note Winston turned over to this defendant, as trustee of said partnership as aforesaid, said bonds and other assets in his hands belonging to said partnership, with the consent of said partners, and for the benefit of said partnership; that at the time said Winston turned over to defendants said bonds and assets, said Winston estimated that there would be due him as a partner as aforesaid, upon the first settlement of said partnership, a considerable sum of money arising from said bonds or their proceeds, and he estimated that sum at the amount of said pretended note; that there having been no settlement of said business, said Winston and this defendant considered said estimate as a mere conjecture, depending upon the debts sue said partnership, and the result of said settlement. Said Winston therefore requested this defendant, as the trustee of said partners, of whom plaintiff was one, to make said note with the understanding that the same was not to be sued on, but was to be deemed a mere memorandum of the amount that should be estimated as the share of said Winston on account of said bonds on a settlement amount said partners. Defendant executed said pretended note with such understanding between said Winston and himself as trustees of said partnership, and not as the separate note of this defendant. Said pretended note, so executed, was assigned by said Winston for the benefit of plaintiff to one G. W. De Camp, and by said De Camp to plaintiff, without any consideration from said De Camp to Winston, nor from said plaintiff to De Camp, and will full knowledge by said De Camp and plaintiff of said facts relating to said note, and that such were made long after the time at which said note was due, as appeared on its face, and upon the further consideration and agreement between said De Camp and plaintiff and Winston that this defendant should not be sued upon said note, and this defendant says that said note is based upon and grew out of transactions relating to business of said partners; that said partners are interested in the same, and are necessary parties to a suit relating to said note, and the amount due upon said note, if any, cannot be ascertained until a final settlement of said partnership can be had.

'For further answer to said petition said defendant says said plaintiff ought not to have or maintain his said action, because he says that said action was instituted and is being prosecuted under an agreement between plaintiff and George W. De Camp, his attorney, by which said De Camp agrees to prosecute such suit, and to bear all the expenses incident to the prosecution of the same, in consideration that said De Camp shall receive a portion of the amount to be recovered in such suit, to-wit, four-tenths of the amount so recovered, which said agreement is illegal, and against public policy and good morals. Defendant, therefore, asks to be discharged with his costs.'

This case was tried before the court by agreement of parties, a jury being waived.

Botsford & Williams and G. W. De Camp, for plaintiff.

Willard P. Hall, Silas Woodson, Benj. F. Stringfellow, and L. H. Waters, for defendant.

McCRARY D.J.

The answer alleges that this suit is being prosecuted by one of the attorneys for plaintiff upon a champertous contract by which he is to pay the expenses of the litigation and receive as his compensation 40 per cent. of the sum realized, and the defendant moves to dismiss the suit for that reason. The proof sustains the allegation of champerty, the testimony of the defendant himself being quite conclusive upon that point. This makes it necessary for the court to decide the important question whether the plaintiff can be defeated in his action upon the note by the proof that he has made a champertous contract with his attorney. In other words, can the defendant, the maker of a promissory note, avoid payment thereof or prevent a recovery thereon upon the ground that the holder of the note has made a void and unlawful agreement with an attorney for the prosecution of a suit upon it.

The authorities upon this question are in conflict. Some courts have ruled that if the fact that a suit is being prosecuted upon a champertous contract comes to the knowledge of the court in any proper manner it should refuse longer to entertain the proceeding. Barker v. Barker, 14 Wis. 142; Webb v. Armstrong, 5 Humph. 379; Morrison v. Deaderick, 10 Hump. 342; Greenman v. Cohee, 61 Ind. 201.

Other courts have held that the fact that there is an illegal and champertous contract for the prosecution of a cause of action is no ground of defense thereto, and can only be set up by the client against the attorney when the champertous agreement itself is sought to be enforced. Hilton v. Woods, L.R. 4 Eq.Cas. 432; Elborough v. Ayres, L.R. 10 Eq.Cas. 367; Whitney v. Kirtland, 27 N.J.Eq. 333; Robinson v. Beall, 26 Ga. 17; Allison v. Railroad Co. 42 Iowa, 274; Small v. Railroad Co. 8 N.W.Rep. 437.

This latter view is in my judgment supported by the better reason. It is not necessary for the full protection of the client to go so far as to dismiss the suit, for he is in no manner bound by the champertous agreement; nor are there any reasons found on public policy that should require such dismissal. If all champertous agreements shall be held void, and the courts firmly refuse to enforce them, they will thereby be discouraged and discountenanced to the same extent and in the same manner as are all other unlawful, fraudulent, or void contracts. If, on the other hand, the defendant in an action upon a valid and binding contract may avoid liability or prevent a recovery by proving a champertous agreement for the prosecution of the suit between the plaintiff and his attorney, an effect would thus be given to the champertous agreement reaching very far beyond that which attaches to any other illegal contract. The defendant in such case is no party to the champerty; he is not interested in it, nor in anywise injured by it. If the contract upon which he is sued is a bona fide contract, upon which a sum of money is due from him to the plaintiff, and he has no defense upon that contract, I can see no good reason for holding that he may be released by showing that the plaintiff has made a void and unlawful agreement with his attorney concerning the fee and expenses of the suit.

The tendency in the courts of this country is stronger in the direction of relaxing the common-law doctrine concerning champerty and maintenance, so as to permit greater liberty of contracting between attorney and client than was formerly allowed, and this for the reason that the peculiar condition of society which gave rise to the doctrine has in a great measure passed away. In some of the states the common-law rule is altogether repudiated, and it is held that no such contract is now invalid unless it contravenes some existing statute of the state. Sedgwick v. Stanton, 14 N.Y. 289; Voorhees v. Darr, 51 Barb. 580; Richardson v. Rowland, 40 Conn. 572; Mathewson v. Fitch, 22 Cal. 86; Hoffman v. Vallejo, 45 Cal. 564; Lytle v. State, 17 Ark. 609.

The common-law doctrine, however, prevails in Missouri, according to the decision of the supreme court of the state in Duke v. Harper, 66 Mo. 55. While following that ruling, I am disposed, in view of the general tendency of American courts, to relax somewhat the rigor of the English rule, to apply it only to the champertous contract itself, and not to allow debtors to make use of it to avoid the payment of their honest obligations.

It follows that the defense of champerty in this case cannot be maintained, and that the motion to dismiss must be overruled.

This bring us to the consideration of the case upon its merits. The first defense, as set forth in the answer, is, in substance, that the note sued on was not intended to bind the defendant to pay the sum therein named 30 days after date, as appears from the face, but was intended as a mere memorandum to show that Winston, the payee, claimed an interest amounting to $7,333 in certain bonds turned over by him to defendant, and for which defendant was to account to him in the settlement of certain...