Merchants' Protective Ass'n v. Jacobsen

AILSHIE, J. This is an appeal from a judgment sustaining a demurrer to plaintiff’s complaint and dismissing plaintiff’s alleged cause of action. The material allegations of the complaint are as follows: Appellant is a corporation organized under the laws of the state of Utah, carrying on a general business of publishing credit ratings of firms and corporations and furnishing commercial information and adjusting and collecting delinquent and disputed accounts and claims for an agreed commission or rate of compensation. On about the 3d of June, .1903, respondent delivered to appellant for collection a certain claim against Simonds Bros, of Ft. Wayne, Ind., for the sum of about $1,160, together with $108.70 accrued interest, and employed and instructed the appellant to collect the same on certain agreed rates of commission or compensation. Appellant began negotiations for the collection of the claim, and in order to defray the expenses demanded of the respondent — 639 — the sum of $30, which respondent paid. Appellant thereupon continued negotiations and employed a firm of lawyers in Ft. Wayne to assist in the prosecution of the claim. These transactions and negotiations continued until the 10th of July, 1905, when, in view of further costs and expenditures and the probability of having to prosecute an action against the debtor, a modified or new contract was entered into. This new or modified contract consisted of an assignment by the respondent to the plaintiff of an undivided one-half interest in the claim, under an agreement that the plaintiff should bear all further expenses of the proceedings and furnish any bonds that might be necessary, and that after the claim was finally adjusted or collected the appellant would return to respondent the sum of $30, which had already been paid by respondent to appellant toward defraying costs and expenses. The appellant proceeded with its negotiations but without success, and thereafter and on or about the 7th of June, 1907, and while the plaintiff was still attempting to collect and adjust the claim, the respondent, without notice to appellant, entered into an agreement with the debtor, Simonds Bros., whereby the claim was paid directly to respondent, and Simonds Bros, were released and discharged from further liability. The appellant thereupon made demand on respondent for one-half the sum collected, less the sum of $30, which had been advanced for costs, and upon refusal by respondent to pay commenced this action. Bespondent demurred to the complaint, and the demurrer was sustained, on the ground that the contract was in violation of the common-law doctrine of champerty and maintenance, which rule of law, it is maintained, is in force in this state. The first question to be determined on this appeal is, whether the common-law rule of champerty prevails in this state. Champerty, which seems to be a species of the ancient law of maintenance, consisted in supporting or maintaining a suit for someone else in consideration of a bargain or agreement to have a part of the thing in dispute or some profit out of the results of the litigation or an agreement to divide the receipts derived from the suit or action. Maintenance of — 640 — causes of action was denounced by the Roman law in the strongest terms. (Institutes, Book 4, Title 16; 4 Blackstone’s Commentaries, 135.) It was adopted in England as a part of the feudal system, and but for the feudal system would doubtless have found no place in English common law. It was subsequently enacted by parliament into written law by statute Westminster I, c. 25; 3 Edw. I; 28 Edw. I, c. 11; 32 Henry VIII, c. 9. When first adopted in England, it had special reference to suits and actions involving title and right of possession to real property. (Lytle v. State, 17 Ark. 608.) At that time England was infested (I think “infest” correctly expresses it) with great feudal lords and barons, and class distinction prevailed everywhere. (Vol. 2, Hume’s History of England, p. 320.) It is said by law-writers that this law was invoked for the purpose of preventing great men of the times using their power and influence in supporting questionable titles against the weak and oppressed of various degrees and distinctions, and thus, perhaps, obtaining judg-' meats and decrees to which they were not entitled. A somewhat careful examination of the early authorities, however, and the results accomplished thereunder tends at least to leave the' impression on one’s mind that this doctrine may have been invoked as much for the protection of the feudal lords against each other as for their weaker and less influential subjects. (See Hovey v. Hobson, 51 Me. 62; Wright v. Meek, 3 G. Greene (Iowa), 472.) Feudal tenure never prevailed in this country, nor has class distinction had any place with us. The poor man who has a just and righteous cause of action may be without means to prosecute his action, and therefore be under the necessity of selling or hypothecating a part of his claim in order to obtain the means with which to prosecute it. The mere fact that he does so cannot affect the result of his action or work any injustice either on his adversary or the public. One man is no more powerful in the eyes of the law than another. For a learned and interesting discussion of the origin of this doctrine, see Lytle v. State, 17 Ark. 608. However this may be, it seems quite clear to us that no such condition has ever prevailed in this country as would — 641 — require or necessitate the application of such a doctrine in the law of this country. There is a great diversity of opinion among the courts as to whether the common-law doctrine of champerty ever became a part of the body of the common law of this country. In Indiana (Hart v. State, 120 Ind. 83, 21 N. E. 654, 24 N. E. 151), Kansas (Aultman v. Waddle, 40 Kan. 195, 19 Pac. 730), Kentucky (Lucas v. Allen, 80 Ky. 681), Maine (Hovey v. Hobson, 51 Me. 62), Massachusetts (Ackert v. Parker, 131 Mass. 436), Missouri (Duke v. Harper, 66 Mo. 51, 37 Am. Rep. 314), Oregon (Brown v. Bigne, 21 Or. 260, 28 Am. St. 752, 28 Pac. 11, 14 L. R. A. 745), Rhode Island (Orr v. Tanner, 12 R. I. 94), Utah (Croco v. O. S. L. R. Co., 18 Utah, 311, 54 Pac. 985, 44 L. R. A. 285), Vermont (Hamilton v. Cray, 67 Vt. 233, 48 Am. St. 810, 31 Atl. 315), Wisconsin (Miles v. Mutual Reserve Fund L. Assn., 108 Wis. 421, 84 N. W. 159), District of Columbia (Matthews v. Hevner, 2 App. Cas. (D. C.) 349; Peck v. Heurich, 167 U. S. 627, 17 Sup. Ct. 927, 42 L. ed. 302), Illinois (Thompson v. Reynolds, 73 Ill. 11), Minnesota (Gammons v. Johnson, 69 Minn. 488, 72 N. W. 563), Montana (Quirk v. Muller, 14 Mont. 467, 43 Am. St. 647, 36 Pac. 1077, 25 L. R. A. 87), the doctrine seems to have been adopted in a more or less modified form,- while it has been wholly repudiated in Arkansas (Lytle v. State, 17 Ark. 608), California (Howard v. Throckmorton, 48 Cal. 482), Connecticut (Richardson v. Rowland, 40 Conn. 565), Delaware (Bayard v. MacLane, 3 Harr. (Del.) 139), Iowa (Wright v. Meek, 3 G. Greene (Iowa), 472), Maryland (Schaferman v. O’Brien, 28 Md. 565, 92 Am. Dec. 708), Michigan (Wildey v. Crane, 63 Mich. 720, 30 N. W. 327), New Jersey (Schomp v. Schenck, 40 N. J. L. 195, 29 Am. Rep. 219), Nebraska (Omaha R. & R. Co. v. Brady, 39 Neb. 49, 57 N. W. 767), Texas (Wheeler v. Riviere (Tex. Civ.), 49 S. W. 697), Tennessee (Sherley v. Riggs, 11 Humph. (Tenn.) 53), and West Virginia (Lewis v. Broun, 36 W. Va. 1, 14 S. E. 444). California, the state from which we took the great body of our original statutes, repudiated this doctrine as early as 1863, and in Mathewson v. Fitch, 22 Cal. 86, the supreme — 642 — court, directing its attention especially to the doctrines of maintenance, held such “laws inapplicable to this country” and that the only laws on the subject applicable to the state of California were such as had been specifically enacted into the statutes of the state. Thereafter and in 1872, the legislature of that state enacted sec. 161 of the Penal Code, which is the identical language of our sec. 6524, Rev. Codes. Our statute was evidently copied from the California statute, and reads as follows: ‘ ‘ Every attorney who, either directly or indirectly, buys or is interested in buying any evidence of debt or thing in action, with intent to bring suit thereon, is guilty of a misdemeanor. ’ ’ Our attention has not been called to any California case which has changed or modified the rule announced in Mathewson v. Fitch since the adoption of the foregoing penal statute in 1872. It is clear, however, that it was the intent of our legislature to prohibit attorneys purchasing any evidence of debt or thing in action with the intent of bringing suit thereon. On the other hand, our statute (sec. 4900, corresponding with sec. 1021, Cal.) leaves the measure and mode of compensation of attorneys to the agreement, “express or implied,” between the attorney and client. In the light of the foregoing statute and the decisions of the courts of California prior to our adoption of these statutes, it seems to us that it was not contemplated by the lawmakers that the common-law doctrine of champerty and maintenance should prevail in this territory, and that the lawmakers believed that the only rule governing these matters would be such as might be prescribed by the legislature, and hence the two statutes above named — that is, secs. 4900 and 6524. (See Wildey v. Crane, 63 Mich. 720, 30 N. W. 327.) “Without invoking that doctrine, the courts of this country have found ample authority to protect, the community and litigants as well against unconscionable and oppressive contracts and such transactions and agreements as are contrary to good morals and sound public policy. Where a contract, if given full force and effect by the court, would have the effect of stirring up strife and provoking unfounded and unjust litigation, the courts will, as they always have, inter — 643 — pose their authority to protect the community, and the litigants as well, by refusing relief on any such contracts. This principle is well enunciated by the supreme court of Oregon in Brown v. Bigne, 21 Or. 260, 28 Am. St. 752, 28 Pac. 11, 14 L. R. A. 745. Viewed in the light of what has been said above, we fail to find anything in the contract in this case that renders it obnoxious to any statute of this state or contrary to good morals or sound public policy. It does not appear that any of the officers or agents of appellant were attorneys or that this purchase was made by an attorney or for the purpose or with the intent of commencing an action thereon. It is true that an action was contemplated in the event the debt should not be paid without action. That was legitimate and proper. The assignment of a half interest in the claim was apparently made for the purpose of compensating the appellant for its labor and outlay in making the collection. This claim and account owned by the respondent was property and a property right, and under the laws of this state a man may sell any property or property right which he possesses, and what he may lawfully sell another person may lawfully buy, unless specifically forbidden and prohibited so doing by statute. This case is quite different in its facts from the Utah ease of Nelson v. Evans, 21 Utah, 202, 60 Pac. 557, cited and relied on by counsel for respondent. In that case a firm of attorneys employed in a case entered into a contract with one Nelson, whereby they agreed to give him “one-third of one-half of any amounts which may be collected, either on compromise or otherwise, in the case of Alfred H. Nelson, etc., v. The Southern Pacific Co., in consideration of said Thomas Nelson furnishing witnesses necessary to prosecute said case.’’ The court held that this contract was “champertous and against public policy.” The same view was taken by the Utah court in In re Evans, 22 Utah, 366, 83 Am. St. 794, 62 Pac. 913, 53 L. R. A. 952. We doubt very much if any court would disagree with the Utah court in holding such a contract contrary to good morals and sound public policy, and — 644 — this would be true whether or not the doctrine of champerty and maintenance prevails in the jurisdiction. The demurrer in this case should have been overruled, and the defendant should have been required to answer. The judgment will therefore be reversed and the cause is remanded, with direction to take further proceeding in accordance with the views herein expressed. Costs awarded to appellant. Sullivan, J., concurs.