Johnson v. Van Wyck

Mr. Justice Shepard delivered the opinion of the Court ' 1. The first question to be considered is : Do the recitals of the deed, contracts and trusts, which make up plaintiff’s claim of title, show forth the existence of champerty? “ Champerty is the unlawful maintenance of a suit in consideration of an agreement to have a part of the thing in dispute.” 1 Hawk. P. C. 545; Co. Litt. 368. It has also been defined to be “ a bargain to divide the land or thing in dispute on condition of his carrying it on at his own expense.” Stanley v. Jones, 7 Bing. 369. These definitions have been very generally approved. Roberts v. Cooper, 20 How. 467 ; Brown v. Beauchamp, 5 T. B. Mon. 415. The offences of maintenance and champerty and the docrine of the invalidity of contracts on account thereof, did not have their origin solely in the statutes of Edward I and III, which provided special penalties therefor. Lord Ellen-borough is authority for saying that maintenance was always considered malum in se. Wallis v. Duke of Portland, 3 Ves. Jr. 494. See also Brown v. Beauchamp, 5 T. B. Mon. 415, citing — 316 — 2 Inst. 208-212. And it has generally been held that these statutes were declaratory only of the common law. Pechell v. Watson, 8 M. & W. 691 ; 4 Bl. Com. 135 ; Thurston v. Percival, 1 Pick. 415 ; Backus v. Byron, 4 Mich. 535 ; Arden v. Patterson, 5 Johns. Ch. 44 ; Boardman v. Thompson, 25 Iowa, 487 ; Thompson v. Reynolds, 73 Ill. 11 ; Gilbert v. Holmes, 64 Ill. 548 ; Barker v. Barker, 14 Wis. 142 ; Weakley v. Hall, 13 Ohio, 167 ; 2 Story Eq. Jur., Sec. 1048. The same may be said of the statute of 32 Hen. VIII, prohibiting conveyances and agreements with respect to lands between parties neither of whom have had possession for a limited period, and providing severe penalties therefor, in a further effort to correct the evils of maintenance and champerty. Lord Chancellor Eldon declared this to be the object and effect of that act in his advisory opinion to the House of Lords in the famous case of Lord Cholmondeley v. Clinton, 4 Bligh. 1, in the course of which he quoted with approval this passage from a case reported in 1 Plowd. 88 ; “ This statute was made in affirmance of the common law and not in alteration of it, and all that the statute has done is, it has added a greater penalty to that which was contrary to the common law.” We are of the opinion that the contracts and combinations exposed in the recitals of the instruments under consideration are not only clearly within the provisions of those old statutes, but also as clearly against the policy of the older common law, to which they only added sanction with increasing penalties. The original contractor with the heirs, Lorin Blodget, whose contract is retained and carefully guarded throughout the whole chain of instruments, not only undertook to secure a one-half interest in the things to be recovered by suit, but also covenanted to institute the necessary suits and to maintain them diligently entirely at his own cost and expense. He then brought-in others to assist in his scheme, and later on organized a trust or syndicate or lottery (whichever it — 317 — may appropriately be called), the sole asset of which consists of his prospective share of the results of the proposed litigation, capitalized in the sum of $240,000, and represented by certificates of the face value of $1,000 each, which are to be issued and disposed of to raise funds for the prosecution. The original contract necessarily implied the institution of the suits in the names of the contracting heirs at law of Samuel Blodget. But to facilitate the institution and conduct of suits and the management of the business generally, and, no doubt, to guard the interests of each and everyone of the shareholders, as well as to provide a speedy, inexpensive and thorough mode of conversion and distribution of all recoveries, the conveyance to the common trustee was devised. Thus a permanent executive officer was created, to whom all titles were passed, and in whose name all proceedings are to be taken ; a permanent and responsible treasurer — the Union Trust Company — was provided for, to hold and disburse the moneys received. The corporation idea was completely developed. Lorin Blodget and the contracting heirs may die or part with their remaining interests, certificate holders may die or assign, but the trust will go on unchanged and unending until the last claim of the estate of Samuel Blodget shall be reduced, converted into cash, and distributed. 2. It may now be considered to what extent, if any, the Statutes of Edward I and III, and of 32 Hen. VIII, and the policy of the common law against champerty and maintenance may prevail in this jurisdiction. It may be admitted that all of these statutes became obsolete in Maryland before the cession of the District of Columbia; they certainly had become so later, as was held in Schaferman v. O’Brien, 28 Md. 565, decided in 1868. That case has been followed by us in one where the naked question was presented, whether a deed made by one out of possession, both actual and constructive, is void by reason of the prohibition of the statute of 32 Henry VIII. Matthews v. Hevner, 3 — 318 — App. D. C. 349. But Mr. Justice Morris, who delivered the opinion, of the court, was careful to limit the decision to the question as presented, and in doing so he took occasion to say : “ We do not desire to be understood, however, as holding that champerty and maintenance are no longer reprehensible or criminal under our laws; or, as was intimated in Schaferman v. O’Brien, that there may not be cases where the purpose of the parties to stir up litigation is so plain that their acts should be regarded as void.” In Stanton v. Haskin, 1 MacArthur, 558, decided in 1874, the General Term of the Supreme Court of the District refused specific performance of a contract between attorney and client for a one-third interest in land to be (and which was) recovered in litigation maintained in accordance therewith. The court also expressed the opinion that, “with some modifications, the common law with regard to champerty, which is supposed to be founded on the statute of 28 Edw. I, is generally recognized.” This seems to be the only case in which the question has ever been discussed or alluded to in the courts of this District. It must be admitted, though not to the extent claimed on behalf of appellant, that the conditions prevailing in our country and in our times are so different from those existing in the days when the doctrine of champerty had its origin and was rigidly enforced, that the chief reasons for the existence of the rule have passed away entirely, whilst others have lost or largely spent their force. Modifications and exceptions to the rule were early recognized in England, and have grown and increased there, and, generally in greater degree, in this country. Acts of assistance and upholding of litigation were gradually recognized as justifiable when prompted solely by charity to the poor and unfortunate who might else be unable to right a wrong; by the ties and obligations of consanguinity, affinity, or common interest; by the relations of landlord and tenant, master and servant, neighbor and neighbor, and attorney and client. The — 319 — recognized relations of attorney and client have resulted in the complete recognition of the legality of contingent fees. Wylie v. Coxe, 15 How. 415 ; Wright v. Tibbetts, 91 U. S. 252 ; Stanton v. Embrey, 93 U. S. 548 ; Taylor v. Bemiss, 110 U. S. 42. We have heard of no case, however, where such contracts have been enforced when they contained a covenant by the attorney to prosecute the cause at his own cost. In the foregoing cases no such covenant appeared, and in no one of them was proof made that they were obtained unfairly or an undue advantage taken of the relation of attorney and client. Notwithstanding the changed conditions that have begotten certain changes in public policy, we (as intimated above) cannot admit that all the reasons which formerly operated against the recognition and toleration of champertous contracts have ceased to exist. Unnecessary and speculative litigation, the promotion of inexcusable strife, the vexation of landholders and the laying of embargoes on the free alienation of their holdings, are as pernicious now as they ever were and as needful of redress. Contracts which tend to promote these evils are as much opposed to sound public policy as they ever were, and therefore ought not to be enforced. The distinction between contracts in aid of litigation which ought to be enforced and those which ought not, is well drawn in the case of Brown v. Bigne, 21 Ore. 260. This was a suit on a contract made between Bigne, who was engaged in a necessary and meritorious suit and had no means with which to further prosecute it, and Brown, who furnished the necessary funds upon Bigne’s agreement to give him one-half the proceeds. The court found that the contract was fairly and freely made, and had been performed by Brown in good faith, and upheld it as untainted by champerty, but at the same time said: “ When such contracts are made for the purpose of stirring up strife and litigation, harassing others, inducing suits to be begun which otherwise would not be, or for speculation, they come within the analogy and principles of that doctrine, and — 320 — should not be enforced.” There is a clear analogy between 'contracts of this nature and those for the purchase of a naked right to bring an action at law or in equity, which have generally, if not universally, been held void as against public policy. In the case of De Hoghton v. Money, L. R. 2 Ch. App. 164, it was held “that such a transaction, if not in strictness amounting to maintenance, savors too much of it for this court to give its aid to enforce the agreement.” Traer v. Clews, 115 U. S. 528. In this case the court drew the distinction clearly between the assignment of the mere right to file a bill in equity for a fraud that had been committed, which it was declared would be void “ as contrary to public policy and savoring of maintenance,” and the conveyance of the property itself, “where the fact that the grantee may be compelled to bring a suit to enforce his right to the property, does not render his conveyance void.” We would not pursue the discussion further on this line but for the earnest contention of the appellant that in the absence of an express statute these contracts, or the cause of action based thereon, if really involved, cannot be affected or refused enforcement on the grounds of public policy alone. The grounds of this contention are without merit. As we have seen above, champerty was regarded as an offense at common law before the statutes were adopted, and as a thing malum in se. From the earliest times the courts have declared contracts void because opposed to public policy. Why should these be exceptions to the rule? “All contracts or agreements which have for their object anything which is repugnant to justice, or against the general policy of the common law, or contrary to the provisions of any statute, are void, and whenever a contract or agreement is entered into with a view to contravene any of these general principles, there is no form of words, however artfully introduced or omitted, which can prevent courts of law and equity from investigating the truth of the transaction; for ex turpi contractu actio non oritur is a rule both in law and in — 321 — equity.” 1 Comyn. Cont. 30. See Boardman v. Thompson, 25 Iowa, 487 ; Kennett v. Chambers, 14 How. 38. This last case was a suit to enforce a contract for the sale of lands in Texas between Chambers, the owner, who was an officer in the service of the Republic of Texas, and complainants, who were citizens of Ohio. The moneys advanced on the contract were to be used in aid of the war for Texan independence. The contract was made and the money paid in Ohio before the independence of Texas was recognized by the ■Government of the United States. The bill was filed in the United States Circuit Court for the District of Texas some years after the admission of that State into the Union, which -dismissed it, and that decree was affirmed on appeal therefrom? The decision was not made to rest upon any statute or treaty of the United States. As said by Chief Justice Taney: “ The decision stands on broader and firmer grounds, and this agreement cannot be sustained either at law or in equity. The question is not whether the parties to this contract violated the neutrality laws of the United States or subjected themselves to a criminal prosecution; but whether such a contract, made at that time within the United States, for the purposes stated in the contract and the bill of complaint, was a legal and valid contract, and such as to entitle either party to the aid of the courts of justice of the United States to enforce its execution.” See also Oscanyan v. Arms Co., 103 U. S. 261 ; Irwin v. Williar, 110 U. S. 499. If this suit were for the express purpose of testing the validity of these contracts and obligations, there could be no doubt of the result. In England the rule denying the enforcement of such contracts has been uniformly adhered to. In Powell v. Knowler, 2 Atk. 224, decided in 1741, enforcement was denied a contract which the court said was “ evidently artfully drawn to keep it out of the statute of champerty.” In Wood v. Downes, 18 Ves., Jr., 120, a contract with an attorney was set aside on a bill for that purpose. In his opinion therein, Lord Eldon quoted with express — 322 — approval a declaration of Lord Northington in Strachan v. Brander, 1 Eden, 303, to this effect: “ The transaction [by which a fund had been raised to carry on litigation], though not strictly champerty, was so near that it could not be permitted to prevail; it savors of champerty, and is therefore dangerous to public justice.” See also Stevens v. Bagwell, 15 Ves., Jr., 139 ; De Hoghton v. Money, L. R. 2 Ch. App. 164 ; Ram v. Chunder, L. R. 2 App. Cas. 186. This last case was an action for damages and costs incurred in a law suit vexatiously carried on against plaintiff through a contract between defendant and another, and came-before the House of Lords on appeal from India. It was held that the laws against maintenance and champerty did not prevail in India, wherefore fair agreements to furnish funds to carry on litigation in consideration of a share of the property are not per se void. But it was said in connection therewith (page 209): “ It seems clear that contracts of this nature ought, under certain circumstances, to be held invalid as being against public policy.” Stanton v. Haskin, 1 MacA. 559, and some other American cases have been heretofore cited and others will be referred to later. Without undertaking to define limits or specify all exceptions that may be recognized, we hold that a purely champertous contract, or one which savors so strongly of champerty and public mischief as the one under consideration, is against sound public policy, and ought not to be enforced in the District of Columbia. Contracts for the prosecution of harassing litigation, which would not otherwise be instituted, and upon speculation in a spirit of gambling, shares in which may be thrown upon the market to be disposed of to chance buyers, like tickets in a lottery, ought to receive the condemnation of the courts of this District when brought to their attention in a proper manner. To encourage the formation of syndicates or trusts for the purpose of maintaining litigation like this — for this is but one of a series that may be instituted at any time for the recovery of lots — 323 — throughout the boundaries of the old “ Jamaica ” tract of 494 acres — could have none but a most mischievous effect. Once legalize them or give them the slightest approval, and in these times of feverish speculation and marked propensity for gambling enterprises which promise great returns for small investments, we may, not unreasonably, expect to see similar joint stock associations formed for the express purpose of maintaining law suits throughout the land, thereby vexing the people, crippling their enterprises, interfering with the growth and development of country and cities, and producing other and great mischiefs. 3. It does not follow, however, that every champertous contract incidentally connected with the title or thing in controversy can be brought within the grasp of the court therein. There may be other distinct ahd controlling considerations. It is now generally held that where a party has a right or a title he cannot be debarred from its prosecution by reason of an incidental contract concerning the same which may be unlawful or against public policy, because this would be equivalent to a forfeiture of title. The practical effect would be to divest the title of the true owner and vest it in his disseizor. Brinley v. Whiting, 5 Pick. 348 ; Robison v. Beall, 26 Ga. 17 ; Allison v. C. & N. W. RR. Co., 42 Iowa, 274 ; McMullen v. Guest, 6 Tex. 275 ; Hilton v. Wood, L. R. 4 Eq. 432. It is true that a contrary rule prevails in some States (Barker v. Barker, 14 Wis. 142 ; Allard v. Lamirande, 29 Wis. 502 ; Cardwell v. Sprigg’s Heirs, 7 Dana (Ky.), 36 ; Harmon v. Brewster, 7 Bush. 355); but the question may be regarded as firmly settled, as far as we are concerned, by the Supreme Court of the United States. Boone v. Chiles, 10 Pet. 177 ; Burnes v. Scott, 117 U. S. 582. The difficulty in this case is that it does not present that aspect entirely. The suit is not by and in the names of the heirs of Samuel Blodget. If this were the case we would be constrained to hold that collateral contracts, though tainted with champerty, could not be brought to the attention of — 324 — the court by plea or otherwise, so as to bar the right of action. It becomes necessary now to notice the contention of appellant, that, granting the existence of champerty, the deed to Johnson is good as a conveyance by the heirs of the legal title, notwithstanding all other provisions thereof may be rejected. The proposition is that, “ where there are several stipulations in a particular agreement, and one is illegal, it does not defeat the others when they are divisible, and the consideration as a whole is not illegal.” Without pausing to affirm or deny the soundness of this proposition, quoted from Wharton on Contracts, we deny its application to the papers offered in evidence in this case. The stipulations and provisions of these contracts are not divisible; they are and were clearly meant to be inseparable. The “ consideration as a whole ” is illegal. It is the maintenance of this and other contemplated suits for the ' benefit of all, but at the expense and through the efforts exclusively of Loriu Blodget and his assignees. The recited additional consideration of “ ten dollars ” is purely nominal, and cannot be regarded as a consideration to support the contract or deed, separated from the real and main one. It was not intended to confer a shadow of title upon the grantee save for the purposes of the trust. These are the moving considerations, and it is in their conditions that the illegality lies. They cover in their recitals each and every instrument or contract in the series. They cannot be rejected without destroying the whole scheme, and every purpose of the conveyance, and vesting in Johnson a title -which it cannot he pretended was within the contemplation of any one who executed it or is interested in its operation. The deed must therefore be taken as a whole and in connection with each instrument referred to and made a part of it. The heirs of Samuel Blodget have mingled and bound up their claim, if a just one, with the interests of Lorin Blodget and the certificate holders in the champertous trust organized by him. These rights and interests are inseparable in the action as — 325 — brought. The trustees’ recovery inures to the benefit of all alike. If we hold them barred of their right to recover in this action the heirs of Samuel Blodget have themselves alone to blame. It may be added, too, that dismissing this action will not bar any action they may see proper to maintain when they shall have withdrawn from the illegal contract with Lorin Blodget and his associates. If they suffer it will be the consequence of mingling a just and legal claim with a bad one so that they cannot be separated. This would bo in strict accord with the doctrine of Trist v. Child, 21 Wall. 441, where a suit was brought upon a claim for legal services mingled with “ lobby ” service in prosecuting a claim before Congress. In denying recovery Mr. Justice S wayne said : “We have said that for professional services' in this connection a just compensation may be recovered. But where they are blinded and confused with those which are forbidden the whole is a unit and indivisible. That which is bad destroys that which is good, and they perish together.” This suit cannot be maintained without we give our approval to the unlawful contracts which enter into and form a part of the plaintiff’s claim of title. These are not collateral matters sought to be forced on our attention by plea or motion or affidavit; they inhere in the title itself, and must be given effect if plaintiff be permitted to recover thereon. Whilst the point is not without grave and serious difficulty in the absence of direct and binding authority, we nevertheless think that upon principle it should be resolved against the appellant, and this conclusion has support in decisions of courts of high authority made in cases which are analogous. Hilton v. Wood, L. R. 4 Eq. 432 ; Elborough v. Ayres, L. R. 10 Eq. 367 ; Harrington v. Long, 2 Mylne & K. 590 ; Bayly v. Tyrrell, 2 Ball & Beaty, 358 ; Ld. Cholmondeley v. Clinton, 4 Bligh. 1 ; Saylor v. Stuart, 2 Heis. (Tenn.) 510. In Hilton v. Wood, the plaintiff enjoined defendant from — 326 — mining coal in land belonging to him, and asked for an account for that which had been before taken out. Plaintiff had been in ignorance of his rights in the premises until informed by a solicitor named Wright. He made a contract with Wright by which the latter guaranteed plaintiff against all costs, and in consideration was to share the proceeds of the recovery. The champertous contract was brought to the attention of the court by affidavit. The vice-chancellor held that the champertous contract could not be introduced for the purpose of depriving plaintiff of his action, but said: “ I have carefully examined all the authorities which were referred to in support of this argument, and they clearly establish that whenever the right of the plaintiff, in respect of which he sues, is derived under a title founded in champerty and maintenance, his suit will on that account necessarily fail. But no authority was cited, nor have I met with any which goes to the length of deciding that where a plaintiff has an original and good title to property he becomes disqualified to sue for it by having-entered into an improper bargain with his solicitor as to the mode of remunerating him for his professional services in the suit or otherwise. It is clear that the bargain between plaintiff and Mr. Wright amounted to maintenance, and if the latter had been the plaintiff, suing by virtue of a title claimed under that contract, it would have been my duty to dismiss his bill.” As it was, however, costs were denied plaintiff, because as under the contract they were payable by Wright, recovery thereof would inure to his benefit. Elborough v. Ayres is not itself in point, but in the opinion, James, V. C., relates a case tried before V. C. Wigram, of Evans v. Protheroe (not reported), in which the plaintiff, suing upon a title acquired through champerty, had been turned out of court. In Harrington v. Long, one Milligan had obtained a decree on a bill filed as a creditor of Long, the deceased testator. A supplemental bill was filed by Harrington and the original plaintiff, Milligan, against Sarah — 327 — Long, executrix, alleging that she had proved the will of testator since said decree, and asking to set aside a certain deed made to her by the testator five days before his death when in a state of mental incapacity, as fraudulent and void as to creditors. The bill alleged that Milligan, after proving his debt before the master, under the decree, had assigned the same to Harrington, with whom' he joined as coplaintiff in this supplemental proceeding. The Master of the Rolls (Sir John Leach) held that the mere assignment of the debt was aot maintenance ; but upon inspection of the contract between the parties and discovery that the assignee had given the assignor an indemnity against all costs, for the purpose of prosecuting the suit, he dismissed the bill for the champerty. This decree was affirmed by the Lord Chancellor; Bayly v. Tyrrell is a case of this kind : Joseph Tyrrell was the owner of an interest in land, the possession of which was vithheld from him by his brother William for a claim charged thereon in his favor in partition proceedings, but under i;o claim of adverse title. In 1790 Joseph executed a lease ;of the premises to Bayly, who was an attorney. In 1791he filed a bill against William praying a decree for possessicn, and, becoming embarrassed, he agreed with Bayly for d material abatement in the rent in consideration of the htter’s advance of £50 to bring the case to a hearing. Josejh died pending the suit, and his heir at law refused to continue it. Bayly then filed his bill to recover possession, and (or an account for rent from the commencement of his lease Because the transaction was against public policy the bill vas dismissed without prejudice to his right to sue at law for he non-performance of the agreement. Tie case of Lord Cholmondeley v. Clinton was very much argied and finally concluded in the House of Lords. The two plaintiffs, Lord Cholmondeley and Mrs. Damer, joined in the bill, though their claims were adverse to each other, foi one claimed the whole as heir at law of Horatio, Earl of — 328 — Oxford, while the other claimed the whole as devisee of the same. The bill contained this recital: “Some questions had. arisen between the plaintiffs respecting the will and codicil of Horatio, Earl of Oxford, so far as regards the equity of redemption of the said mortgages, hereditaments, etc., and in order to put an end to such questions, they had agreed to share the same between them.” Lord Eldon said: “This agreement was one that a court could not overlook ever, if the parties so wished.” In his opinion to the Lords, Lord Redesdale denounced the agreement, and referring to the inconsistency of the claims of the plaintiffs, said: “ To aroid that inconsistency they state this agreement, which is contrary to law, and which you are bound to destroy.” 4 King. 123-4. Saylor v. Stuart is a case directly in point, though it is evidently based upon a statute of Tennessee relatiig to maintenance and champerty, which is not recited in the report of the case. It would not seem, however, to ¿fleet the principle. The action to recover land was brouglt in both the names of the grantor and grantee in a champertous deed. The court said that had the grantor brought the suit alone or had there been a separate count for recovery h his name alone, the champertous deed to his grantor, being void therefor, could not have been relied on to defeat his recovery. “ But seeking in a single count to recover in the joint nanes of the grantor and grantee, the champertous contract nade by one of the parties affects both, and is fatal to the wiole suit.” We are not unmindful of the injury which may be suffired by the heirs of Samuel Blodget through our judgmerb, if indeed they have a good title to their lands, which maj be affected only by adverse possession. But the injury is the result of their own deliberate conduct. Public policy loiks beyond and far higher than the mere interests or incmvenience of parties. It follows that the judgment must be affirmed; and it is so ordered, with costs to the appellee.