Hannigan v. Italo Petroleum Corp. of America

• Decision Date: 22 March 1935
• Citation: 178 A. 589,36 Del. 442
• Court: Delaware Superior Court
• Parties: MARTIN G. HANNIGAN v. ITALO PETROLEUM CORPORATION OF AMERICA, a corporation of the State of Delaware

178 A. 589

36 Del. 442

MARTIN G. HANNIGAN v. ITALO PETROLEUM CORPORATION OF AMERICA, a corporation of the State of Delaware

Superior Court of Delaware, New Castle County

March 22, 1935

Superior Court for New Castle County, Action of Assumpsit on two promissory notes executed by the defendant, No. 105 January Term, 1935.

Case heard on demurrer to the fifth plea of the defendant to the plaintiff's declaration.

The plaintiff's declaration contained two counts. In the first count he declared on a promissory note made by the defendant company for $ 9,476.13, with interest at the rate of 6%, dated January 20, 1929, and payable on demand to Fred Shingle, Syndicate Manager, or order. He, also, alleged in that count that the payee therein had, on January 20, 1929 endorsed the note in question "without recourse," and on September 19, 1934, by assignment in writing, had "assigned, transferred and conveyed" it to the plaintiff.

The second count of the declaration was similar to the first except that the note declared on, though also payable on demand to Fred Shingle, Syndicate Manager, with interest at the rate of 6% per annum, was for $ 35,222.25, dated April 20, 1929. This count, also, alleged the endorsement of the note in question on the day of its date "without recourse" by the payee, and the assignment and transfer of it by him on September 19, 1934, to the plaintiff.

The fifth plea of the defendant company to the plaintiff's declaration alleged, in substance, that the said Fred Shingle, Syndicate Manager, and plaintiff's assignor held the promissory notes, declared on by the plaintiff, in a representative capacity, and had no individual interest or title in them, and that the plaintiff in this action was not the holder of said notes in due course; that the persons having an interest in the proceeds of the said notes, before the bringing of this action, assigned all of their rights, titles and interests in them to one Harry Byers, at his special request and solicitation; that prior to that assignment, the said Byers had no interest, legal or otherwise, in said notes; that in consideration of the said assignment, Byers agreed with the persons originally entitled to the proceeds of said notes to institute suits on them, to pay the expenses of such suits, and if the proposed litigation should result in a judgment against the defendant, and the payment of any money in satisfaction thereof, Byers was to pay 25% of the amount recovered to the persons originally entitled to the proceeds of said notes, and was to retain 75% of any moneys so collected for his own use; that out of that 75% Byers agreed to pay any attorneys' fees incurred in the prosecution of said suit; that at the time of the making of the said agreement with Byers, the pro rata interest or share of each of the persons entitled to the proceeds of the said notes was, also, agreed upon; that the assignment in question to Byers on the conditions herein above set forth was against the form, intent and meaning of the statute in such cases made and provided, but that pursuant to the said corrupt and unlawful agreement, the said Byers caused this action to be brought.

The plaintiff filed a general demurrer to this plea.

The demurrer is sustained.

C. Stewart Lynch (of Biggs, Biggs and Lynch) for plaintiff.

Ivan Culbertson (of the office of Hugh M. Morris) for defendant.

HARRINGTON RICHARDS and REINHARDT, J. J., sitting.

OPINION

HARRINGTON, J.

This case is before us on a demurrer to the fifth plea to the plaintiff's declaration. That plea, in substance, alleges:

1. That Shingle, who was described as Syndicate Manager, the original payee in the notes sued on, merely held them in a representative capacity and had no real interest in, or title to such notes.

2. That before this action was brought, the parties interested in their proceeds had assigned all of their titles and interests in the notes to one Byers, who had no other rights or interests in them.

3. That, in consideration of that assignment, Byers agreed to bring suit on the notes, to pay the expenses of the suit, and, if he recovered on them, to pay 25% of the amount so recovered to his assignors, the persons originally entitled to their proceeds; the remaining 75% was to be retained by him, and out of which he was to pay the necessary counsel fees incident to the suit.

4. That the assignment to Byers on such terms was contrary to the intent of the statute in that behalf, but that, pursuant to that unlawful agreement, Byers had, nevertheless, caused this action to be brought (necessarily meaning by Hannigan, the plaintiff).

All of these facts are admitted by the demurrer. Shipman's Com. Law. Pl. 264.

The declaration alleges the endorsement of the notes sued on, without recourse, by Shingle, Syndicate Manager, the payee named in them on the day of their date, and their subsequent assignment and transfer to Hannigan, the plaintiff, on September 19, 1934; and the question is whether the plea above referred to sets up a good defense to the plaintiff's action, because it appears from it that such action is based on a champertous agreement.

In England, in the early days of the common law, a champertous "bargain was an offense," because such bargains when made with men of wealth and power tended to affect the due course of justice. They, also, tended to encourage litigation and were, therefore, highly injurious to the peace of society. For these reasons they were void on grounds of public policy. Bayard v. McLane, 3 Del. 139, 3 Harr. 139, 208, 212. See, also, Gibson v. Gillespie, 4 W. W. Harr. (34 Del.) 331, 152 A. 589; The Clara A. McIntyre (D. C.), 94 F. 552; Thurston v. Percival, 1 Pick. (Mass.) 415; 4 Black. Com. 135.

In the year 1742 (15 Geo. II) our colonial legislature passed an Act which provided

"That if any person within this government * * * shall be guilty of maintenance, champerty, or embracery, every such person so offending shall be proceeded against as by the common law and the several statutes made against such offenses in * * * England is provided and directed." 1 Del. Laws 239.

Section 4778 of the Revised Code of 1915, the statute now in force, also, provides:

"Whoever shall be guilty of * * * maintenance, or champerty, shall be deemed guilty of a misdemeanor. * * *"

The making of a champertous agreement is, therefore, a criminal offense in this state, and has been since the year 1742. Bayard v. McLane, 3 Del. 139, 3 Harr. 139; Revised Code 1829, 138; Revised Code 1852, Chap. 130, § 2; Revised Code 1852, as amended in 1874, Chap. 130, § 2. Such being by statute the clearly defined policy of this state toward champertous agreements, our courts have held that agreements of that character are necessarily absolutely void, though not made so by the express terms of the statute. Bayard v. McLane (Ct. of Err. & App.), 3 Del. 139, 3 Harr. 139 Gibson v. Gillespie, et al., 4 W. W. Harr. (34 Del.) 331, 152 A. 589. In fact, the same general principle applied in these cases was, also, applied in Strout Co. v. Howell, 4 Boyce (27 Del.) 31, 85 A. 666, and in Cook v. Pierce, 7 Del. 499, 2 Houst. 499, and Gregory & Co. v. Bailey's Adm'r, 4 Del. 256, 4 Harr. 256, does not lay down any inconsistent rule.

In view of these cases in our own state, it is unnecessary for us to consider Guffey-Gillespie Oil Co. v. Wright (C. C. A.), 281 F. 787, and Adams Express Co. v. Darden (C. C. A.), 286 F. 61, and other cases cited by the plaintiff.

It is true that neither of the statutes above quoted define the precise meaning of the word "champerty."

The opinion of the Court in Bayard v. McLane, 3 Del 139, 3 Harr. 139, supra, however, contains an exhaustive discussion of the law on that subject, and, to a lesser degree, of the law of maintenance, which is closely connected with it. Without entering into a detailed discussion on the question, it is apparent from that case that even as early as 1742, and to an even greater degree by 1776, when we became a State, the ancient common law rules prohibiting the assignments of choses in action, which rules were, at least, auxiliary to and closely connected with the law of champerty, had been materially changed by judicial decision in England. It is, also, apparent that certainly as early as 1736 substantially the same changes had been made by statute by the Colonial Assembly in what is now this State (Act "for assigning bills and specialties," 1 Del. Laws, 17). That strictly speaking the ancient common law rules relating to champerty were never applied in this state is, therefore, apparent. Bayard v. McLane, 3 Del. 139, 3 Harr. 139, supra. The Court in that case did not mean, however, that there was then no law, whatever, in England against the making of champertous contracts to which we could refer to define the meaning of that term as used in our statute of 1742 and in the subsequent legislative acts based thereon. In fact, quoting from no less an authority than Sir Edward Coke, Judge Harrington, speaking for the Court, said that the Statute of Westminster I was the real "foundation of all the acts and book cases" on the law of champerty in England that followed it, and that the meaning of that term could be ascertained by referring to those acts. The legislative acts subsequent to Westminster I, referred to by the Court, were 3 Edw. I, 28 Edw. I, Chap. 11, and, particularly, 33 Edw. I, enacted in the year 1305. There are cases in both England and America that say that these statutes were substantially declaratory of the common law rules then applying to champerty in England and did little more than...