Arden v. Patterson

| New York Court of Chancery | Jan 4, 1821

The Chancellor.

The question in this case is, whether the assignment by the plaintiffs, S. and R., to the defendant, De Hart, in trust for the defendant, Patterson, in the summer of 1815, of their demand and right of action against Arden, for thirteen pipes of wine, can be permitted to stand ?

The facts on which this question turned, are the following :

G. De Peyster, who had deposited thirteen pipes of Madeira wine with the plaintiff A., as collateral security for the payment of certain promissory notes made by him and held by A., amounting to 4,000 dollars, having, afterwards, become insolvent, on the 16th February, 1811, assigned to the plaintiffs, S. and R., in trust for certain of his creditors, mentioned in a prior assignment, which is not produced, all his property, including a demand which he had against the plaintiff, Arden, for the value of the thirteen pipes of wine. De Peyster testified, that he then owed the defendant P. 196 dollars, on a balance of accounts; and he thinks that P. was one of the creditors for whose benefit that assignment was made. The assignees immediately brought a suit in trover against Arden for the wine; and on the trial they were nonsuited, for want of.proof in support of their title, as such assignees, to the wine, and they were subjected to the payment of 351 dollars and 31 cents, for the costs and expenses of the suit. The demand was then given up as hopeless. The defendant P., who was an attorney at law, and previously instructed by De Peyster in the merits of the con-: tvoversy relative to the wine, applied to the plaintiffs, S. and 12., to purchase their right of action against Arden. His application to purchase that demand was in the summer of 1815; and he offered to refund their costs and expenses, as the consideration for the purchase; they closed with his proposal, and took his note for the 351 dollars and 31 cents, and at his request made a formal assignment to the defendant, De Hart, (who was his brother-in-law, residing in New-Jersey,) as his nominal trustee. The defendant P. then brought a new suit in trover, in the names of S. and 22., against Arden, for the wine, and as their attorney, but for his own benefit, and at his own risk. In this new suit, the defendant P. proceeded, and recovered by verdict, 5,987 dollars and 25 cents, which he now claims as lawful owner. The note that P. gave to the plaintiffs, S. and 12., was sued, and the money collected, and it now remains in the hands of their attorney. This money the plaintiffs offer to return, and to pay the defendant P. the costs of the suit. Subsequent to this recovery, the plaintiffs, S. and 22., being advised that the assignment was fraudulently and corruptly procured by the defendant P., assumed to act as owners of the judgment so recovered, and entered into a compromise and settlement with Arden for 2,500 dollars, which they took as assignees for the creditors of De Peyster, and acknowledged satisfaction of tfye judgment. The entry of that satisfaction was, afterwttrds, vacated by the Supreme Court, upon motion of the defendant P.; and the question now fairly occurs, is it proper for this Court, upon these facts, to set aside the assignment to P., and leave the plaintiffs, as trustees, to take the benefit of the judgment, or of their settlement with Arden ?

This was a purchase by an attorney, for a very small and inadequate consideration, of a matter in litigation, and for the very purpose of a renewed litigation. It was a purchase by a person known to the other contracting party to be an attorney, and he knowing that the other contracting parties held the claim merely in trust for the benefit of creditors. The purchase was avowedly made as a matter of speculation, and at a time when this attorney knew, from previous disclosures made to him in his character of attorney, all the facts on which the foundation of the claim so purchased rested, and which created a belief in his mind that the value of the wine could be recovered. Such a purchase, by such an officer, and under such circumstances, cannot be sustained. It is champerty, for the unlawful maintenance of a. suit, and the contract was therefore unlawful, as well by common law, as by the statute. The statute declares, (I MR. L. 172.) that “ no officer, or other person, shall take upon him any business that is or may be in suit in any Court for to have part of the thing in plea or demand$ and no person, upon any such agreement, shall give up his right to another, and every such conveyance and agreement shall be void.” And again; “ All persons who move pleas and suits, or cause them to be moved, either by their own procurement or by others, and sue them at their own proper costs, for to have part of the thing in controversy or demand, or part of the gain, shall be adjudged champertors.” And u all gifts and conveyances made for maintenance, shall be •void.” The purchase of a lawsuit by an attorney, in a case like this, is champerty in its most odious form; and it ought equally to be condemned on principles of public policy. It would lead to fraud, oppression, and corruption. As a sworn minister of the Courts of justice, the attorney ought not to be permitted to avail himself of the knowledge he acquires in his professional character, to speculate in lawsuits. The precedent would tend to corrupt the profession, and produce lasting mischief to the community. The knowledge which led to this speculation was acquired by the defendant, P., as the attorney of De Peyster, for De Peyster disclosed to him all the facts relative to his dealings with Arden, and which led to the deposit of the wine.

This Court win signment void cessarily lead-corruption^31111 An agreement torney and his clients, amount-mg to champea m ^“court^of equity.

A great deal was said, and powerfully enforced, upon the argument, in respect to the usury of Arden. Be that as it may, that is not the point before us, nor does it relate to this question of the purchase of the lrove% suit. The conduct of Arden, in his efforts to defeat the first suit in trover, likewise occupied much of the attention of the counsel, as did also the efforts of the defendant P., to procure the testimony of De Peyster. But I place all those considerations out of view, as having no necessary connexion with the plain and simple question, whether the purchase of the lawsuit by P. was lawful, or ought to be permitted by this Court to be available.

I have no doubt of the settled jurisdiction of this Court over the case, so iar as to set aside an assignment void m law, and necessarily leading to fraud and corruption. This is the peculiar province of this Court, and such a salutary jurisdiction is in constant exercise. In Strachan v. Brander, (1 Eden, 303.) the Lord Keeper ordered a bond, taken by an attorney, to be delivered up as unconscionable, savouring of champerty, and dangerous to public justice. And in Wood v. Downes, (18 Vesey, 120.) it was declared, that an agreement between an attorney and his client could not stand in a Court of equity, upon the doctrine of champerty, and as the purchase of a title in litigation, even if the defendant had not been an attorney. There are, also, numerous cases in vvhich, upon principles of policy, the Court will not suffer * a contract between an attorney and the client to stand, There would be no bounds, as Lord Thurlow observed, to . the overruling influence of the power of an attorney, if it were not so. The object of ihe rule is, to remove the temptation to imposition and abuse, for clients must apply to attorneys for assistance; and, though Sú and R. were not strictly clients of the defendant P. at the time of the purchase, yet he came to them as an attorney, and with a knowledge of the merits of the controversy, which he had acquired as an attorney; and there is no evidence, and not even an averment in the answer, that he disclosed to 5. and R. the solid grounds of his hope. The knowledge and skill which be had thus acquired ought to have been employed, if employed at all, strictly in his professional character, for the benefit of those trustees, and not for his own emolument. The purchase, under the circumstances, falls within the principle of the obnoxious dealings between attorney and client.

But it has been observed, that the defendant P. had an interest in the suit, as one of the creditors of De Peyster, to the amount of his debt of 196 dollars. The evidence is not quite decisive that he was one of the creditors named in the first assignment to S', and R., and for whose use the assignment of the wine was also made. De Peyster says, that when he stopped payment, he owed P. that sum, and that he gave P., as collateral security for the payment of it, a note of one Baylis, for upwards of 80 dollars, and twelve and a half shares in the Washington Hall stock; and he says further, that the defendant P. was not mentioned in the list of his creditors, which he exhibited to the Recorder in July, 1811, when he was discharged under the insolvent act; because the defendant P. “ preferred to abide by the collateral security which De Peyster had given him, as before mentioned.” This does not look as if he was one of the creditors named in his general assignment in January, 1811; and De Peyster does not speak with certainty, whether his name was inserted. He only says, “ he thinks” his name was inserted. If the defendant P. had been one of the original cestuy que trusts, why have we not some evidence given by him of his claim between January, 1811, and July, 1815, for a rateable share of the proceeds of the first assignment, which, he says in his answer, consisted of a schedule of debts and effects, and which assignment he himself drew ? What has become of the debts and effects so assigned in trust to S. and R., and has there been no distribution of them among the creditors who were indisputably named? If the defendant P. was one of those creditors, it is to be inferred from the testimony of De Peyster, that he had waived his right under that assignment as early as July, 1811, when his name was intentionally omitted (and with his consent, for he conducted the proceedings as attorney) in the sworn list of De Peyster’s creditors. He relied solely on his distinct and separate collateral security, or rather took that security as a satisfaction of his debt; otherwise, his name could not have been honestly omitted in the full and perfect list of creditors required by the insolvent act.

where an at-chases from ^0ieies"b/ect matter of controversy, for bis own benefit, though he may have had ofbis own^itis cllmnVa'iy.

But admitting that ihe.defendant, P., had still an interest in the assignment to S. and R,, that interest did nbt change the nature of the purchase of the suit. Had he assisted in the prosecution for the benefit of his rateable proportion of r, the dividend of the proceeds, he would not have been liable ... .... to the charge of maintenance, and such assistance is all that is intended in the books. It is an assistance given towards carrying on a suit, for the common benefit of those in interest. Here the defendant sued in the character of purchaser of the whole subject matter in controversy, and for his own exclusive benefit. He took it as purchaser for a trifling consideration, and on a speculation of great gain, and with a belief (for so he admits in his answer,) of recovery; and nothing was said or alluded to respecting his scintilla of interest in the assignment to S. and R.: nor was the assignment to him made in satisfaction of a precedent debt, due bona fide to him. It was a purchase by him as a stranger ; and it is altogether inadmissible for the defendant P. now to set up his interest as a pretext for the purchase. That colour or pretence has no foundation in fact, for it was no inducement to the purchase, and the case falls most clearly within all the mischiefs and all the meaning of champerty.

. A decision of on motion and sui^aresjudiconclude atíothor Court from inquiring into the case,

If the purchase by the defendant was void, yet it is said that it is good as between the parties to it, and is only void as against him who has right. That objection does not apply * to this case; for the plaintiffs, S, and R., have no right of their own, and do not pretend to any. The whole case admits that they possessed the right of action, as assignees for certain creditors of He Peyster, and the suit now brought by them is entirely en autre droit, and was to enure to the benefit of these creditors. If the assignment of the right of action to P. was void, then the judgment recovered by him in their names belongs to them, and is subject to their disposition as trustees. And as far as this suit is brought for the benefit of the plaintiff Arden, and to prevent him from being charged by a person not entitled to the judgment, the objection has no application.

But the question touching the validity of the assignment to P., is said to have been already decided by the Supreme Court, on the motion of the defendant P., to have the satisfac^on °f the judgment acknowledged by S. and R., and entered upon record, vacated. I do not consider the decision of that* . „ . motion, upon affidavits, to amount to a res judicata, which ought to conclude the present inquiry. It could not have been so intended by that Court. We have not the reasons upon which the Court decided, and the decision may have been upon grounds very different from the question of the validity of the assignment. But this objection utterly fails upon the principle adopted by the judges of the Supreme Court, and sanctioned by the Court of Errors, in Simson v. Hart, (14 Johns. Rep. 63.) in which case it was declared, that decisions upon motion and summary application, which do not admit of great discussion, or of being subject to a writ of error, are not final and conclusive so as to amount to a res judicata, and a bar to a renewed consideration of the case, in another Court of concurrent jurisdiction.

As to the compromise and settlement of the judgment, made between S. and R. and Arden, it does not appear to have any bearing upon the question before me. Whether that settlement was proper and fair, or collusive and a breach of trust, is not to be discussed in this suit. We have not the proper parties in interest before us. It is a question entirely between S. and R. end those creditors for whose benefit they took the assignment of the wine and the claim upon Arden; if they should hereafter bring that subject into discussion, it will then be in time to consider of the validity of that settlement. And I cannot but be of opinion, that the bringing of all these extraneous acts into view, such as the settlement with Arden, and the usury of Arden, and the efforts of Arden to defeat the recovery in trover, by keeping back the witness, and the efforts of the defendant P., tú coerce the attendance of that witness by extraordinary means, was entirely useless, as to the great point in the case, touching the validity of the purchase by P. j and that if these circumstances were to have any effect, it would be a pernicious one, by distracting the attention, or by exciting prejudices unfavourable to a just and dispassionate consideration of the point.

Decree-,

I shall accordingly declare, that the assignment by the plaintiffs, S'. and R. to the defendant De Hart, for the use of the defendant P,, of their demand and right of action against the plaintiff A., was an unlawful sale and purchase by the defendant, and ought not to be sustained, or the judgment recovered thereon permitted to be enforced, for the benefit of the defendants, or either of them; and that upon payment to the defendant P., or to his solicitor, or depositing with the assistant register for his use, the 351 dollars 31 cents so recovered of the defendant, as the consideration of the assignment, together with the taxable costs of the suit at law, brought by the defendant P., in the name of the plaintiffs S. and R., a perpetual injunction issue, prohibiting the defendant P., his agents, Sic. or any per ton for his use, from proceeding at law to enforce the judgment so recovered against the plaintiff Arden, by execution, scire facias, action of debt, or otherwise, and that no costs of this suit be charged by e¡¡-|ier pavty as against the other.

Decree accordingly.