Casserleigh v. Wood

THAYER, Circuit Judge,

after stating the case as above, delivered the opinion of the court.

The general question which arises on this appeal is whether the contract that was entered into by James O. Wood, one of the appellees, under date of July 21, 1887, is a contract of such a nature that it can be specifically enforced by a court of equity; and the determination of this question depends upon the further inquiry whether the contract was founded upon a valuable consideration, as well as upon the inquiry whether it is voidable either on account of its champertous character or because its enforcement would be opposed to public policy. In the lower court the bill was dismissed, as it seems, upon the ground that, as this court had held on July 5, 1892, in the case of Billings v. Smelting Co., 10 U. S. App. 1, 2 C. C. A. 252 , 51 Fed. 338 , that the evidence which Casserleigh had in his possession, namely, “evidence necessary to establish the citizenship of * * * William J. Wood,” was in fact immaterial to the successful prosecution of the suit by the Wood heirs to recover their interest in the Emma mine, the promise of James O. Wood to give a two-thirds part of his interest in the mine for the production and use of that evidence was a promise without consideration, and therefore voidable at the election of the promisor. We are of opinion, however, that if James O. Wood, at the time the contract was entered into, supposed that the evidence to establish the citizenship of his father, which was in Casserleigh’s possession, was material and necessary to the successful prosecution of his claim to an interest in the Emma mine, then the contract which he signed was founded upon a valuable consideration, although it was subsequently decided by this court that such testimony was not essential to the establishment of his claim. A promise to pay á given sum for property, or for information which the promisor supposed that he needed, at the time of the making of the promise, surely does not become voidable because of a subsequent discovery that the property or the information was not needed. Whether a contract rests upon a valuable consideration or otherwise must be determined by conditions as they exist when it is made; and, if the promisor supposes that the thing which he seeks to obtain and promises to pay for will be beneficial to him, he cannot avoid his promise on the strength of a subsequent discovery that it was really nonessential, or of no value.

The important question in the case is whether the contract in question is voidable for either of the other reasons mentioned above; that is to say, because it is champertous, or because it is opposed to public policy. That the contract is champertous when tested by the *312 rules of the common law admits of no controversy. According to the usual definition of champerty, it is that species of “máintenance” which consists of a bargain with a plaintiff or a defendant for a part of the thing recovered in a suit at law or in chancery, be it land or something else, which suit the champertor undertakes to carry on or prosecute at his own expense; and at common law champerty was a public offense. Bouv. Daw Diet. 305; Chit. Cont. 676; 4 Bl. Comm. 134, 135; Duke v. Harper, 2 Mo. App. 1 . Now, by the contract under consideration, it was agreed that Casserleigh should receive two-thirds of whatever might be. recovered by Wood by means of legal proceedings on account of his interest in the Emma mine; also that Casserleigh was “to be at all cost in the matter,” which plainly means that he should pay all costs if an action was brought, and that he would save Wood harmless therefrom. It is obvious, therefore, that at common law the contract in question was voidable for illegality.

The case, however, cannot be determined solely from the standpoint of thé common law, since the contract was a Colorado contract, and in that state the old English statutes relative to maintenance and champerty never were in force, or, if once in forcé, are so no longer, because the common law on the subject has been superseded by a statute (Mill’s Ann. St. Colo. § 1299), which is as follows:

“If any person shall officiously intermeddle in any suit at law or in chancery that in no wise belongs to or concerns such person, by maintaining or assisting either party, with money or otherwise, to prosecute or defend such suit with a view to promote litigation, every such person so offending shall be deemed to have committed the crime of maintenance, and upon conviction thereof shall be fined and punished as in cases of common barratry: provided, that it shall not be deemed maintenance for a man to maintain a suit of his kinsman or servant or poor neighbor out of charity.”

The courts of -Colorado have held that this statute supplants the common law on the subject of maintenance in that state. Kutcher v. Love, 19 Colo. 542, 546 , 36 Pac. 152 . At common law, maintenance is declared to be an “officious intermeddling in a suit that no way belongs to one, by maintaining or assisting either party with money or otherwise.” Chit. Cont. 676; 4 Bl. Comm. 134. The definition of the same offense by the Colorado statute is somewhat different, in that it requires such officious intermeddling by assisting a litigant with money or otherwise to be done “with a view to promote litigation”; and in a recent case which was brought by this appellant against another of the Wood heirs (Casserleigh v. Wood, 14 Colo. App. 265 , 59 Pac. 1024 ), where a contract precisely like the one now involved was under consideration, it was held that the gist of the offense, under the Colorado statute, consists of the intent or purpose with which the act of intermeddling is done. It was further held that the statutory offense is committed when a man, with a view of fomenting litigation, encourages another to bring a suit or to make a defense which otherwise he would not have brought or made; and that a contract to assist another in the prosecution of a suit, although the intermeddler engages to bear the costs of the action, and to furnish a part of the evidence which is *313 deemed essential to maintain it, does not violate the statute unless the contract was entered into in bad faith by the intermeddler, either for the purpose of oppressing others, or with intent to gamble in litigation, or for the purpose of inducing suits which otherwise would not have been commenced. Casserleigh v. Wood, 14 Colo. App. 265, 272, 273 , 59 Pac. 1024 . This decision has very recently been affirmed by the supreme court of Colorado in an opinion not yet reported. Wood v. Casserleigh, 71 Pac. 360 . This construction, of the statute is binding, as a matter of course, upon the federal courts, it being an authoritative interpretation of a local law. But we are of opinion that when it becomes necessary to apply the statute, as thus construed by the local courts, to a particular contract, and determine upon a consideration of all of its provisions whether it is violative of the statute,- a federal court is entitled to express an independent judgment. In the case last supposed the question to be determined is one of general law, rather than of statutory construction, and the decision of the federal court thereon ought to be something more than a mere echo of a previous decision of the same question by a court of co-ordinate jurisdiction, although such a decision is entitled to the highest respect, and should be regarded as-persuasive authority.

Turning to the contract now under consideration, it is to be observed that the compensation which Casserleigh was to receive for producing the evidence in his possession was wholly contingent on-the success of the litigation which he was about to institute. He was not to be paid in any event for the evidence of citizenship which he had secured, or for his other services, but his compensation depended entirely on his bringing the litigation to a successful termination. It furthermore appears from thé averments of the bill that the evidence to establish the citizenship of William J. Wood, deceased, and his identity as one of the locators of the Emma mine, did not consist exclusively of documentary evidence, which could not well be falsified. On the contrary, some facts which were deemed of vital importance when the contract was made were to be established by the mouths of witnesses whom Casserleigh had discovered, or claimed to have discovered. Moreover, the agreement contemplated that he would produce these witnesses, and that he should, in effect, have full direction and control of the litigation through the attorneys whom he individually employed, since it is alleged that Wood resided in another state when the contract was signed, and contemplated remaining there during the progress of the suit. Another fact, already mentioned, should also be kept in mind, namely, that Casserleigh made himself responsible for all the costs in the action that might be incurred, and this irrespective of the result of the litigation. In view of these considerations it is difficult to resist the conviction that Casserleigh’s purpose in entering into the contract was not to aid a poor and helpless litigant in-the prosecution of a claim which he believed to be meritorious, but that his real object was to take advantage of a flaw in another’s title for his own benefit; or, in other words, to gamble in litigation. The contract shows that he was to receive by far the greater part *314 of the money or property which might be recovered if an action was brought and successfully prosecuted, and that he intended to profit more largely by the suit than the person whom he ostensibly befriended. We think, therefore, that it might well be held that the contract in question is voidable under the Colorado statute of maintenance, within the construction which has been placed on the statute by the local courts, because it appears from the provisions of the contract and the allegations of the bill that Casserleigh, by promising to produce evidence which was deemed absolutely essential to a recovery, and by engaging to bear the costs of litigation, induced the bringing of a suit concerning a subject-matter in which he had no interest whatever; and that he did so for his own benefit, hoping to derive a large profit from money invested in maintaining a law suit. Most any one would permit an action to be brought in his name under the favorable conditions on which the appellant proposed to bring a suit against the owners of the Emma mine, and it may well be that the action would not have been brought but for his active efforts in that behalf and promise of assistance.

But even if the contract in question is not voidable under the aforesaid statute and for the reasons heretofore stated, the question nevertheless arises whether such a contract is not so far opposed to public policy that the courts—particularly a court of chancery—should decline to enforce it. In the case of Peck v. Heurich, 167 U. S. 624, 630 , 17 Sup. Ct. 927, 42 L. Ed. 302 , Mr. Justice Gray, speaking for the court, said, in substance, that, even where the English statutes of champerty have become obsolete, or have never been adopted, an agreement by an attorney to prosecute a suit at his own expense to recover an interest in land in which he has no personal interest, present or contingent, in consideration of receiving a part of what is recovered, is regarded as voidable on grounds of public policy according to the rules of the common law as generally recognized in those states where they have not been modified by statute. Many other courts have also held that, while a lawyer may agree to take a contingent fee, to be paid out of what is recovered in an action, yet it is contrary to a sound public policy to uphold contracts where a lawyer, in addition to agreeing to take a contingent fee, payable in kind out of what is recovered, also stipulates to bear all of the costs of the action, thereby inducing others to bring doubtful and speculative suits, without risk to themselves, which otherwise, might not have been brought. Railway Co. v. Brady, 39 Neb. 27, 50 , 57 N. W. 767 ; Boardman v. Thompson, 25 Iowa, 487, 499 ; Jewel v. Neidy, 61 Iowa, 299, 300 , 16 N. W. 141 ; Lafferty v. Jelley, 22 Ind. 471 ; Aultman v. Waddle, 40 Kan. 195, 202 , 19 Pac. 730 ; Dockery v. McLellan, 93 Wis. 381 , 67 N. W. 733 . See, also, Belding v. Smythe, 138 Mass. 530, 532 ; Duke v. Harper, 66 Mo. 51 , 37 Am. Rep. 314 ; Brown v. Bigne, 21 Or. 260 , 28 Pac. 11 , 14 L. R. A. 745, 28. Am. St. Rep. 752. If contracts of that kind, when made, either by a lawyer or a layman, are upheld and enforced, the tendency would undoubtedly be to occasion much unnecessary, vexatious, and oppressive litigation, as persons can generally be found who are ready and willing to take advantage of any defect or flaw, no matter how slight, in another’s *315 title, and to prosecute an action to upset it, at their own expense, especially if the property involved is of great value, and the reward, in case of success, promises to be large. Men can be found who are prone to speculate in litigation as in other subjects. While such contracts may at times result in the enforcement of rights that would otherwise be lost, yet we are persuaded that, as a general rule, they tend to disturb the peace of society and occasion suits that otherwise would not have been brought, and which ought not to have been brought. We are of opinion, therefore, that, even if it be conceded that there is no statute in the state of Colorado expressly interdicting the practice of that species of maintenance which is termed “champerty,” yet, in virtue of the general rules of the common law, which are in force there as they are everywhere, the contract now under consideration is voidable, and the enforcement thereof ought to be denied on the ground of public policy. We are also of opinion that, even if an action at law could be maintained for a breach of the contract, yet it is so far meretricious and tainted with illegality that a court of equity ought not to enforce it specifically. t

The decree appealed from being for the right party, it is accordingly affirmed.