Reed v. Janes

Bleckley, Chief Justice. 1. There is a well-grounded distinction between direct champerty and collateral champerty. Collateral champerty is exterior to suit, and though affording a motive for carrying on the litigation, is not directly involved in it as matter for decision or adjudication in the pending controversy. Hilton v. Woods, L. R., 4 [389] Eq. Cas. 432. According to the great weight of authority, collateral champerty is not available as a defence to the action, whether the proceeding be at law or in equity, unless there be some statutory provision controlling the question. Courtright v. Burnes, 13 Fed. Rep. 317, and notes thereto by Judge Thompson ; 3 Am. & Eng. Encyc. L. 86; Greenhood Pub. Pol. 418, 419 ; Robison v. Beall, 26 Ga. 17; Boone v. Chiles, 10 Pet. 218. The plea in this case does not allege any vicious agreement or contract to which Colbert, from whom the title to the execution, mortgage and note was derived, was a party. He was the assignor, and Mrs. Reed the assignee. The ultimate contract oí assignment, therefore, was between them, and that is the contract — not the one between Jones and Reed — which gave origin to the title of Mrs. Reed involved in her bill. True she did not furnish the consideration for the assignment, — that was furnished by Jones ; but under the code, §2747, it matters not from whom the consideration of a contract moves. Moreover, as between Jones and Colbert, there is no suggestion in the plea that there was any champerty. Colbert retained no interest in the property assigned or its proceeds, and was to have no fruit of any litigation that might ensue. The title in its passage from Colbert to Mrs. Reed being wholly without taint, she acquired all the rights that he had, the code, §3597, declaring that “Any plaintiff or transferee may bona fide, and for a valuable consideration, transfer any judgment or execution to a third person, and in all cases the transferee of any judgment or execution shall have the same rights, and be liable to the same equities, and subject to the same defences, as the original plaintiff in judgment was.” This transfer, as between Colbert and Mrs. Reed, and as between Colbert and Jones, was to all appearance bona fide. Nothing is suggested in the plea to the contrary, nor is [390] it suggested that it was not for value as the assignment itself imports on its face. The assignor, as we have said, retained no interest in the property transferred, and stipulated for no share in the proceeds of any litigation that might ensue. Mrs. Reed may be considered as holding the title as trustee for Jones and Reed ; not for Jones alone nor for Reed alone, but for both. Had the assignment been made directly to one or both of them, it would have been no more nor less tainted by their so-called champertous agreement than it was after being made to Mrs. Reed for their joint benefit. Inasmuch as all choses in action arising upon contract are now assignable under the code, §2244, there would seem to be no longer a public policy against the purchase of such claims, although at the time of the purchase it might be in contemplation to briug suit for the purpose of realizing the fruits of the purchase. Now that all choses in action not originating in tort may be bought up so as to pass title both legal and equitable to the assignee, there would seem to be no consistency in denying to the assignee a right to bring and maintain an action in each and every case where an action might be necessary to reach and realize the debt or obligation which is the subject of assignment. One may buy an insolvent claim as freely as a solvent one, a litigated claim as freely as an unlitigated claim. Why not? There is a -plain distinction between purchasing a mere lawsuit and purchasing a judgment, execution, promissory note or other evidence of debt to the ownership of which a right of action may be incident. Even an action of tort may be maintained by the purchaser of personal property not in the possession of the seller at the time of the sale. Hall v. Robinson, 2 Comst. 293 ; Robinson v. Weeks, 6 How. Pr. 161. See further, as to distinction between selling property and a mere right of action, Hodgson v. Western [391] R. Co., 7 How. Pr. 492. The code, §2695, allows the sale of real property whilst held by an adverse claimant, and thus changes the prior law as to maintenance in that class of cases. As there was no champerty in the contract by which the assignor of the execution, mortgage and note parted with title to the assignee, and as the plea alleges no champerty in that contract, but only in the collateral contract between Jones and Reed, the real purchasers of the property assigned, the court erred in not striking the plea and in overruling the plaintiff’s demurrer to the same. 2. Though not necessary to a decision of the case, we will add that were the suit founded on the contract between Jones and Reed, we should hesitate to hold that even that contract was tainted with champerty. If so tainted, it could not be enforced. Code, §2750. But it'seems to us that two persons may lawfully agree to purchase jointly an execution, etc. against a third person, upon any terms satisfactory to themselves as to which of them shall pay; the purchase money and as to bearing the burden of expense in conducting any litigation necessary to engage in for the purpose of realizing the fruits of the purchase. Here Jones advanced all the purchase money, but that did not render him sole owner of the beneficial interest in the purchase. Reed was to be a joint and equal owner with him, and though the contract between them may have burdened Reed with the whole of the expense incurred, or to be incurred, in conducting the litigation, such burden was but a method selected by the parties to arrive at his share of the cost of the net proceeds of the execution, etc., in which they were to have ultimately a joint and equal interest. In what respect does such a transaction differ from a partnership for a single venture in which one of the parties contributes capital and the other personal services ? Here, Jones was to make, and did make, the purchase from Colbert, paying him the entire [392] consideration therefor, but in so doing he acted not for himself alone, but for Reed also, and as soon as the assignment by Colbert took place, it passed the title to Mrs. Reed quite as much for the benefit of Reed as for that of Jones. The expenditures made by Reed, or to be made by him thereafter, would inure as much to his own interest as to that of Jones, and the authorities all agree in holding that where the expenses of a suit are incurred and defrayed by reason of an interest in the ownership of property to which the suit is incident, there is neither maintenance nor champerty. 3 Am. & Eng. Enc. of Law, 76. In any and every view that we can take of the subject, we are unable to discover any legal foundation for the plea of champerty in the present ease, whether tested by the allegations of the plea itself or the evidence adduced to support the same. Judgment reversed.