Holland v. Sheehan

• Decision Date: 09 July 1909
• Docket Number: 16,146 - (171)
• Citation: 122 N.W. 1,108 Minn. 362
• Parties: HENRY HOLLAND v. T. D. SHEEHAN and Others
• Court: Minnesota Supreme Court

122 N.W. 1

108 Minn. 362

HENRY HOLLAND v. T. D. SHEEHAN and Others

Nos. 16,146 - (171)

Supreme Court of Minnesota

July 9, 1909

Action in the district court for Ramsey county against T. D. Sheehan and two railway companies for an accounting on a partnership contract between the plaintiff and defendant Sheehan. A demurrer to the complaint by defendant Sheehan was overruled Hallam, J., and he was allowed to answer. The case was tried before Olin B. Lewis, J., who found the partnership contract to be void and that plaintiff was entitled to no relief. From an order denying plaintiff's motion for a new trial, he appealed. Affirmed.

SYLLABUS

Maintenance -- Contract against Public Policy.

A contract between a layman and a lawyer, by which the former undertakes and agrees, in consideration of a division of the fees received by the latter, to hunt up and bring to the attorney persons having causes of action against railroad companies for personal injuries, is contrary to public policy and void.

Parties in Pari Delicto.

In such contracts the parties are in pari delicto.

Edward G. Rogers and George Nordlin, for appellant.

Thos C. Daggett, for respondent Sheehan.

OPINION

BROWN, J.

On the thirtieth of November, 1906, plaintiff and defendant entered into the following contract in writing, namely:

"This agreement, made and entered into this 30th day of November, 1906, by and between T. D. Sheehan and Henry Holland,

"Witnesseth: It is hereby agreed by and between each of the parties above named, respectively, that in reference to all claims and cases handled by suit or settlement by the said T. D. Sheehan or Henry Holland, from the date of this instrument, that the proceeds of all litigation, either by settlement or suit, shall be divided equally, one-half, between the said parties to this said agreement.

"It is also further agreed all expenses, including said Holland's expenses on the road, and all expenses that may be incurred by office, and legitimate expenses necessary for carrying on the said business, shall be shared equally by and between the said parties, and that the expenses shall first be deducted from all the settlements made in the carrying on of said business.

"T. D. Sheehan.

"Henry Holland."

The agreement, as illuminated by the evidence, discloses the following facts: Plaintiff is a layman, following, so far as involved in this case, the occupation of discovering persons who had received personal injury at the hands of railroad companies and others, and inducing them to intrust their claims for compensation to him and his associate, Sheehan, for suit, adjustment, and settlement, upon the basis of a division of the amounts received from the railroad or person liable. Sheehan is an attorney and counselor at law, practicing in the city of St. Paul, and the terms of the contract required of him the prosecution of all claims brought in by plaintiff upon the agreement that each should share equally in the profits resulting from litigated or settled cases. When clients were brought in, Sheehan made an independent contract with them, specifying the terms of his employment and the proportion of the recovery to be alotted to him for his services, usually from one-fourth to one-half. Plaintiff, by the agreement, was to assist in the preparation of the cases for trial, in looking up evidence and other necessary details, though, not being an admitted attorney, he was not required or expected to take part in the court proceedings. A large number of persons with grievances against railroad companies were discovered by plaintiff, and, acting under the agreement, he conducted them to the office of defendant, who thereafter managed their cases with success, collecting and receiving large sums of money as compensation for their injuries, dividing with plaintiff the compensation received for his services. Finally, however, defendant repudiated the contract and declined further to be bound by it, and plaintiff brought this action for an accounting respecting moneys received by defendant prior to the repudiation. The trial court found the facts substantially as here outlined, held that the contract was illegal and void, and directed judgment for defendant. Plaintiff appealed from an order denying a new trial.

The only question presented is whether the court below rightly held the contract void and unenforceable. The findings of the trial court are all sustained by the evidence.

Illegality vitiates contracts of every description, and the courts decline to enforce them. Illegality, within the rule, includes agreements in violation of some prohibitive statute, in violation of the express rules of the common law, or contrary to public policy. The second and third are so closely related as to be in particular instances indistinguishable; for the common law, and public policy, other than that evidenced by statutory enactments, are often inseparably blended together. Parsons v. Trask, 66 Am. Dec. 502, 506, note.

Formerly a distinction was made in determining the question whether contracts were illegal between acts mala prohibita and those mala in se; but the old rule no longer obtains. Either, under all modern authorities, nullifies the contract. Gibbs v. Consolidated Gas Co., 130 U.S. 396, 9 S.Ct. 553, 32 L.Ed. 979; Swanger v. Mayberry, 59 Cal. 91. Contracts mala in se include all those of an immoral nature, iniquities in themselves, and those opposed to sound public policy; and, where both parties are in pari delicto, neither as a general rule will be accorded relief by a court of justice. The exceptions to the rule are well defined. 9 Cyc. 551, and cases. The term "public policy," as applied to this subject, is comprehensive, and covers a wide range, whether evidenced by the trend of legislation, judicial decisions, or the principles of the common law. It embraces all acts or contracts which tend "clearly to injure the public health, the public morals, the public confidence in the purity of the administration of the law, or to undermine that sense of security for individual rights, whether of personal liberty or of private property, which any citizen ought to feel." Goodyear v. Brown, 155 Pa. St. 514, 518, 26 A. 665, 20 L.R.A. 838, 35 Am. St. 903.

The contract in the case at bar is one between an attorney and a layman, and without stopping to consider whether expressly prohibited by statute, either as to the attorney or the layman, we take up the question whether it is void as against public policy. That it is we entertain no serious doubt. That conduct by a layman in stirring up litigation, searching out persons who have received some injury to their person or property, and including them to intrust their cause to the solicitor, or an attorney of his selection, on a contingent fee basis, tends to disturb confidence in the administration of justice and to undermine that sense of security for individual rights which every citizen has the right to feel, and is as obnoxious to sound public sentiment as when champerty was a crime at common law, is too obvious to require extended discussion.

As remarked by Judge Mitchell in Gammons v. Johnson, 76 Minn. 76, 81, 78 N.W. 1035: "The general purpose of the law against champerty and maintenance and barratry was to prevent officious intermeddlers from stirring up strife and contention by vexatious or speculative litigation, which would disturb the peace of society, lead to corrupt practices, and prevent the remedial process of the law. All contracts or practices which necessarily and manifestly tend to produce these results ought still to be held void on grounds of public policy." It becomes all the more odious when participated in by a lawyer and a layman; the latter agreeing to "find the cases" and the former to conduct them through the courts. In such cases both are equally guilty, and neither should be permitted,...