27 F. 830 | U.S. Cir. Ct. | 1886
This suit is brought by George C. Hickox, a citizen of California, against Simon G. Elliott, Joseph Holladay, William H.
Briefly, the case stated in the bill, and admitted by the answers or made by the proof, is this:
On September 12,1868, Elliott entered into a partnership with Ben Holladay and C. Temple Emmet, for the purpose of constructing and operating railways in Oregon, which partnership was engaged in the consU-uction of the road of the Oregon Central Railway Company until November 5, 1869, when Holladay and Emmet commenced a suit in the circuit court for the county of Multnomah to dissolve said partnership, which suit was afterwards transferred to Marion county, where, on September 28, 1877, a decree was made dissolving said partnership and declaring Elliott indebted thereto in the sum of $470, from which decree Elliott took an appeal to the supreme court of the state, ^herein, on August 15, 1879, a decree was given dissolving said partnership, and that Elliott recover from Holladay $21,919.46, and from Emmet $8,596.08, together with nine-tenths of the costs in both the appellate and lower court, amounting, as taxed, to $2,710.76 ; and there is now due on said decree from said Holladay, principal and costs, the sum of $24,630.22, with interest from August 15, 1879, to January 25,1881, at the rate of 10 per centum per annum, and thereafter at the rate of 8 per centum until date; in all, the sum of $38,806.29.
On February 10, 1874, Elliott, being without means or credit, applied to Martin White, then and now a citizen of California, for a loan of $12,000, to enable him to assert and maintain his rights in said suit, and offered to secure the payment of the same by an assignment of all his right, title, and interest in the property involved therein, to the plaintiff, in trust for said White. Thereupon, a contract was duly made and signed by said Elliott and White, which in effect recites jihat a controversy exists between Elliott and Holladay and others,.concerning Elliott’s “right”, in the property, franchise, and rights of the Oregon Central Railroad Company, and that, “for the purpose of asserting and maintaining hiá rights in said contro
In pursuance of this agreement, Elliott, on February 13, 1874, executed and delivered to the plaintiff the following sale and assignment :
“In consideration of the sum of $12,000 in gold coin of the United States to me paid, and other valuable considerations, I. S. G. Elliott, of the commonwealth of Massachusetts, have granted, bargained, sold, and assigned, and by these presents do grant, bargain, sell, and assign, unto George C. Ilickox, of the city and county of San Francisco, state of California, all my right, title, interest, and claim, both in law and equity, in and upon the stock, property, and assets of the Oregon Central Railroad Company of Salem, Or., and the Oregon & California Railroad Company, of Portland, Or., the firm of A. J. Cook & Co., and the Arm of Ben Holladay & Co.”
White claims and testifies that between the date of said agreement and March 25,1879, he advanced to Elliott thereunder, or to others for him, the sum of $22,201.15. It is not questioned but that he advanced this sum, as stated in the account thereof attached to his deposition herein. But Elliott contends that White failed to advance him money as the agreement required, whereby the arrangement fell through and the assignment became inoperative; and that all sums paid out by White, as set forth in his account, after July 24,1S74, were so paid without his authority or consent, for which he is not Hablo. This contention is based on the assumption that White nn
Elliott admits that prior to July 2,1874, and scarcely five months from the date of the contract, White had advanced him $8,592.50, the larger portion of which appears to have been applied to the former’s private use, and not to the expense of the litigation with Holíaday & Co. But the evidence shows that by July 14, 1874, there was advanced to Elliott by White $11,718.50, and that on August 18th thereafter the latter paid Domnett a note of $363, which he had accepted for the former, in the February preceding, making the sum thus advanced $12,082.25, or $82.25 in excess of the sum stipulated.
On April 29, 1874, when over $7,000 had been advanced to Elliott, he drew on White from Portland in favor of himself for $500, and the defendant Effinger, who was his attorney, for $1,500. On May 6th these drafts were protested for non-payment, and three days afterwards White wrote Elliott, rebuking him sharply for drawing on-him for such sums or at all, after he had been advised not to draw on him for a dollar. The letter was put in evidence by Elliott. In the course of it White says if you need some small amounts “for incidental uses in the suit,” write and let me know, and I will send my check therefor. “I have already let you have enough to meet all coming [current] expenses, had it been applied to that purpose; in fact, I have advanced it twice as fast as I expected to, when I began.” I would be glad to furnish the $1,500 for Mr. Effinger. “I have no doubt he needs the money, but under the circumstances I cannot see any way to let him have it at present.” With this letter White sent Elliott his check for $250 “to defray incidental expenses.”
On July 24, 1874, Elliott being in San Francisco, and in need as usual, drew on White in favor of Johnson & Co. for the sums of $325 and $1,575, and the defendant Effinger for the sum of $600, which sums White declined to pay, as he told Elliott he would before the drafts were drawn.
Thereafter, Elliott testifies that he considered the arrangement with White at an end, and the assignment inoperative.
The ouly item in White’s account of the $12,000 advanced to Ellictt,
On July 1st the defendants Elliott and Effinger were in San Francisco, the latter having in his possession this mortgage for Mr. Toomoy, who was anxious to realize on it. White, having knowledge of these facts, and being about to go to Nevada, to be absent some time, on the next day deposited with Mr. E. P. Clement, the attorney for Elliott, $3,400, that being the remainder of the «$12,000 yet unadvanced; and informed Elliott of the fact, and told him to take Effinger to Clement the next day, and have the mortgage paid, and receive the balance of the money. But Elliott tried to effect an arrangement by which the mortgage could be satisfied, and the debt otherwise secured, so that he could draw the full amount deposited with Clement; and, being unable to do this, he drew from Clement, on July 3d, $650, and the 13th and 14th, $200, leaving only $2,550 for the payment of the mortgage, whereon $2,645 was then due; which sum White, on August 31st, thereafter paid to Effinger on Elliott’s account.
From this it appears that although White had not advanced the full sum of $12,000 on April 21), 1874, still Elliott had no right, under the contract, to draw on him for such sums as he did, or at all, because he had already received a much larger sum under the contract than he had any right to expect or demand, within the time which had elapsed since it was made. But really this is not an open question between these parties. From defendant Elliott’s Exhibit 18, it appear.s that on September 25, 1874, White commenced a suit in the Twelfth district court, of San Francisco, to enjoin him from disposing of the property covered by the assignment to the plaintiff, in which he sot out the agreement and assignment of February 10 and 13, 1874-, and alleged that the advances then made thereunder amounted to $13,«337.25. In an answer and cross-complaint, filed November 4, 1874, Elliott admitted the execution and existence of the agreement and assignment, hut denied that White had advanced thereunder $13,337.25, but only $8,592.50; and alleges that he agreed to loan him $25,000, “as ho might wish to use or draw the same;” and claimed «$100,000 damages for the alleged failure to do so; and prayed that the agreement and assignment might be declared null and void; and on April 9,1875, the court found that prior to the commencement of that action White had “lent and advanced”
By this finding and judgment the parties thereto are bound. The fact that White advanced Elliott $12,000, under the agreement, before September 25, 1874; that he never agreed to furnish him any more; and that the agreement and assignment were valid and binding instruments,—is res judicata, and no longer open to question. Davis v. Brown, 94 U. S. 428; Cromwell v. County of Sac, Id. 353; Russell v. Place, Id. 608; Beloit v. Morgan, 7 Wall. 619; Outram v. Morewood, 3 East, 346; Sharon v. Hill, 26 Fed. Rep. 344; Oregonian Ry. Co. v. Oregon Ry. & Nav. Co., 27 Fed. Rep. 277.
The payments and advances made by White in and about the litigation with Holladay & Co., in excess of the sum of $12,000, are not necessarily secured by this assignment. Whatever Elliott obtained from him for that purpose is so secured. The advance or payment must have been made with the consent, express or implied, of Elliott; and the nature and necessity of the advance has much to do with the question of an implied consent. It is true, White had a direct interest in the subject of the litigation which may have justified him in incurring expense in protecting the same, and would have authorized him, under the circumstances, to apply to the court to be allowed to intervene and conduct the cause, as the real or principal party in interest. But even then his advances or expenses would not necessarily be secured by this assignment. There must have been an express or implied assent to the expenditure by Elliott.
On this view of the matter, I think the following items in White’s account ought to be included in the sum for which the assignment is a security: September 16 and October 31, 1874, payments to Mr. Effinger, the leading counsel in the litigation with Holladay & Go., $500 and $1,500. Elliott had already drawn on White for these sums, and $100 more, for this very purpose; and although the latter did not then advance the money, he paid it to Effinger soon after, with Elliott’s knowledge and apparent approbation. At least, no objection was made to the payment at the time. It was a matter of vital importance to the maintenance of Elliott’s rights in the matters then in controversy; and, in the absence of any act or word to the contrary, his assent to an act so well calculated to benefit himself ought to be presumed. September 3 and October 1 and 12,.1875, payments to Moreland, referee, $20, $20, and $600, the amount due from Elliott for fees and charges. These payments were absolutely necessary to get the report of the referee before the court. No objection appears to have .been made at the time, and Elliott’s assent
Averaging the periods during which these four sums were advanced, and adding interest thereon from that time to this, at the rate of 10 per centum per annum, gives the whole amount for which the assignment is security as follows: Interest on $12,082.25, from April 15, 1879, $14,699.85; interest on $2,000, from October 1, 1874, $2,422.22; interest on $640, from September 15,1875, $778.60; interest on $257.60, from March 15, 1879, $323.51; total principal, $14,979.85; total interest, $18,224.17; whole amount of claim, $33,-204.02. Of the remaining $7,221.30 of the gross amount ($22,-201.15) advanced and paid by White in and about this litigation, nearly $5,000 went to L. L. Bullock.
Mr. Bullock was in the employ of Elliott, in the litigation with Holladay & Co., as what may be called an “outside man,” when White made the arrangement with Elliott to advance him money. Thereafter he was paid a monthly stipend much of the time, down to the spring of 1879.* I think the payments made to him after July, 1874, and particularly after the suit commenced by White against Elliott, in September of that year, may be safely regarded as having been made for services rendered White, if any one, although they may have been of benefit to Elliott as well. At least, there is nothing in the nature of the services, or the necessity for them, so far as appears, which justifies the conclusion that Elliott assented to the payments being made on his account.
On the hearing of the demurrer to this bill it was claimed for the defendant Elliott that the suit was barred by the lapse of time, and that the contract on which the money was advanced was void for champerty. The same defenses are now set up in his answer, and insisted on in the argument. But I see no reason to question the soundness of the conclusions then reached on these points. As was then said:
“It is immaterial whether an action could now he maintained by White against Elliott to recover this money or not. This is not such an action, but a suit brought by a person, claiming to be the assignee of a decree, to subject the property of the debtor therein to its payment and satisfaction. And it can be maintained, although the right of action against Elliott to recover the money in question is barred by lapse of time. The statute bars the remedy against Elliott in six years, but does not destroy the debt, and it still exists, for the purpose of enforcing any lien or pledge given to secure its payment.*838 Quantock v. England, 5 Burr. 2628; Sparks v. Pico, 1 McAllister, 497; Myer v. Beal, 5 Or. 130; Goodwin v. Morris, 9 Or. 322; 2 Pars. Cont. 379; Rapalje & L. Law Dict. ‘Limitations.’ ” 22 Fed. Rep. 17.
' This contract is claimed to be champertous, and therefore void, mainly on the option clause therein, whereby White was given the choice, within 60 days after Elliott had recovered possession of the railway property in question, and some millions of bonds of the company, and notified White thereof, of taking, in lieu of his money with interest, one-half thereof, less $1,100,000 of the bonds reserved for the private use of Elliott and his attorney. This clause was put into the contract at the suggestion of Elliott, to give the transaction and the subject thereof an air of importance and vastness to which it was not entitled. As was determined by the supreme court of the state in its judgment in Holladay v. Elliott, these bonds were issued by a corporation (the Oregon Central) that was a sham and a fraud from its inception, and were utterly worthless. But Elliott did not recover any railway property or bonds in the suit, and of course did not give notice to White to exercise his option. The contingency never happened on which this clause in the contract was to take effect. Nothing was ever claimed or done under it, and, practically, it is no part of the agreement. And, oeven admitting that the validity of the contract for the loan and repayment of the money is to be tried by the law of this state, I do not believe that the courts thereof will ever hold a contract champertous or void for maintenance, whereby a party not an attorney in the case, or at all, lends a man, in straitened circumstances, money to enable him to maintain his rights in the courts, against powerful and wealthy adversaries, on the promise to repay the same, with legal interest, secured by a mortgage on his interest in the subject of the litigation. _ If so, one man could not safely loan another money to defend an action brought to dispossess him of his farm or homestead.
In the brief of counsel for Elliott it is stated that the supreme court of the state, since the decision in this case on the demurrer to the bill, has held, in the unreported case of-v. Sears, “that champerty does exist in all its force in this state.” It is also understood that the case is still pending on a rehearing. But I cannot, in a matter of this importance, act on any such informal and indefinite information concerning the judgment of that court. If not published in authentic form, a certified copy of the opinion should have been obtained from the clerk. However, I am still satisfied with the conclusion reached on the demurrer to the bill. It was then said, (10 Sawy. 430; 22 Fed. Rep. 23:) “This contract was made in California, and in contemplation of law was to be fulfilled or performed there.” It is not only the lex'loci contractus, but also the lex loci solutionis. “It has been held in that state since 1863 that there is no law there against any form of maintenance. Mathewson v. Fitch, 22 Cal. 93; Hoffman v. Vallejo, 45 Cal. 566. And the contract being
And on the point, now urged again, that security was taken for the performance of the contract on property in Oregon, which makes it a contract to bo performed here, and therefore its validity is to be tested by the laws of this state, it was said: “The authorities are uniformly otherwise.” Story, Const. Law, § 287; De Wolf v. Johnson, 10 Wheat. 367. In the latter case Mr. Justice Johnson, speaking for tho court, says:
“Taking foreign security does not necessarily draw after it the consequence that tho contract is to be fulfilled when the security is taken. The legal fulfillment of a contract oí loan, on the part of the borrower, is repayment of the money; and the security given is but tho means of securing what lie has contracted for, which, in the eye of the law, is to pay where he borrows, unless another place of payment be expressly designated by tho contract. ”
In support of his argument, counsel for Elliott now cites Whart. Const. Law, §§ 402, 509-511, and Parsons v. Trask, 7 Gray, 473. The first citation from Wharton is only to the effect that the mode of payment is determined by the law of the place of payment, and that tho latter is inferred from the facts. In tho other three sections the question is discussed as to what determines the validity of a contract to pay interest, in which the learned writer truly says: “This question has been frequently litigated in the United States, and with results which, on their face, are irreconcilable.” “But neither of them bear on the question whether the validity of this contract, as to champerty, is to be determined by the law of California or Oregon. But, at section 403, Wharton, after stating that so l'ar as performance is concerned, where the law of the place of solemnization of a contract conflicts with that of the place of performance, the latter controls; and that the validity of a mortgage depends on the law of the place where the thing exists, because there alone payment can he enforced,—says, at note 4: “But this is otherwise when a foreign mortgage is taken as collateral security merely, in which ease the place of performance is the place of the payment of the principal bond;” citing the case of De Wolf v. Johnson, supra. In Parsons v. Trask it was merely decided that a contract made in a foreign country, by which an adult person bound herself to serve a citizen of the United States for five years, for $ 10, and board, lodging, and clothes, without specifying the nature or extent of the service, or tho place of performance, even if valid where made, gave no right to the service in Massachusetts, because contrary to the laws and policy of that commonwealth.
But the question hero is, whore was this contract—this agreement to loan and repay this money—to be performed ? If it was to ho performed hero, then the law of this state as to champerty may apply; otherwise not. The contract was executed in California, and the money loaned there, and the only reasonable inference from the facts is that the repayment was to he made there also. Both par
Another point is'now first made, by counsel for Elliott, on section 161 of the Penal Code of California, which makes it a misdemeanor for an attorney to directly or indirectly buy any evidence of debt or thing in action, with intent to bring suit thereon. It may be admitted that a contract of sale or assignment, the making of which involves the commission of a misdemeanor, is impliedly prohibited and void. The agreement by which the money was loaned, and repayment promised, does not come within this section. The transaction, so far, was not a purchase of anything, but a loan. Nor does the section effect the sale or assignment to Hickox; because whatever passed by the same was obtained, not with intent to bring suit thereon,—to stir up strife,—but to defend one already pending. Nor were Hickox or White attorneys at the time of the transaction. The former never was an attorney. White was admitted to the bar in California in 1859, and in 1864 quit the practice on account of his health, and has been engaged in mines and mining ever since. Admitting, then, that White indirectly acquired whatever Hickox took in trust for him by the assignment, I do not think, on the facts, he was an attorney, within the meaning of the statute.
From the evidence it appears that the defendant Effinger was retained by Elliott in the case of Holladay v. Elliott in the fall of 1872. Thereafter, on December 1st, Elliott' agreed to pay him $400 a month to act as his attorney until the termination of the controversy. By November 4, 1874, he had received from Elliott $1,450, and from White, on the latter’s account, $2,000,—in ail, $3,450. The suit.dragged along for reasons not always within the control of Elliott, and still less of his attorney, and was not finally decided until 1879, when Effinger filed a notice of lien on the judgment, in pursuance of the statute, (Code Civil Proe. § 1012, sub. 4,) for the sum of $31,800, the amount of his compensation, reckoned at $400 per month, from December 1, 1872, to the date of the decree, less the sum of $3,450, received thereon, as above stated.
I do not think, under the circumstances, that this contract ought to be considered in force after 1874. Shortly before White advanced him the $2,000, Mr. Effinger, seeing the difficulties and delays in which Elliott was involved, wrote the former, offering to take $3,000 in addition to what he had already received, in full of his services to date, and such other and further compensation at the end of the litigation as might be considered reasonable, under the circumstances.
Effinger testifies that when judgment was obtained in the supreme court he purposed to apportion it between White, Elliott, and himself; but the latter immediately repudiated his claim and White’s also; whereupon, as a protection for both himself and White, he fell hack on his contract, and filed the notice of lien accordingly. And the controversy between these tw'o is now, apparently, a friendly one, and may he adjusted by them irrespective of the action of this court. An unconditional fee of $5,000, promptly paid or secured, would, in my judgment, be a reasonable compensation for Mr. Effinger’s services. But if the compensation was wholly contingent on success,— dependent on making the money out of the litigation,—$10,000 would not be an unreasonable fee. After 1874, Effinger’s compensation was practically contingent, not only on getting a decree, but in realizing on it. This delay and risk must be considered in fixing the amount of this contingent compensation. In addition to the $3,450 he received prior to 1875, I will allow him the sum of $5,000, with legal interest from August 15, 1879, the date of the judgment., which amounts to $7,871.85.
The defendant Joseph Holladay states in his answer that he has “no knowledge, information, remembrance, or belief” as to the alleged! contract and assignment, or the payment of any money thereunder by White, “wherefore he denies” the same. On the hearing- lie-claimed the benefit of this denial as being evidence against the existence of such writings and the making of such payments. This allegation is a motley of code and equity pleading, but not proper under either. The Code does allow a defendant to controvert an allegation in the complaint by denying “any knowledge or information, thereof sufficient to form a belief,” but not on that account to deny the allegation itself. In equity a defendant who has no knowledge,, information, or belief concerning the matter of an allegation should say so; and this is sufficient to put the plaintiff on the proof thereof. But such an answer is not evidence that requires at least one witness, and corroborating circumstances to overcome. It is a mere negation, and proves nothing; and the addition, “wherefore he denies the-same,” amounts to nothing except to stultify the defendant; for how can a party truthfully deny an allegation of which he has just affirmed he has not even a belief. Clark v. Van Riemsdyk, 9 Cranch, 160; Brooks v. Byam, 1 Story, 301; Dutilh v. Coursault, 5 Cranch., C. C. 351.
At the close of the argument, counsel for Holladay also filed a mo,tion to suppress the copies of the agreement and assignment, marked
There is but one Exhibit A and B attached to the commission, and that is doubtless the one to which both witnesses refer, and which was probably furnished by Hickox. They are true copies of. the agreement and assignment mentioned in the bill, and set out in the pleadings, in the case of White v. Elliott, and aré doubtless what they purport to be,—true eojoies of the original writings in the possession of Hickox. Attached to each exhibit is the certificate of Edward Chattin, a notary public and commissioner for Oregon, to the effect that he had compared it with the original in the possession of Hickox, and that it was a true copy thereof.
Had the officer who took these depositions done so in due form of law, it would appear therefrom that the,witness produced the original writings before him, and identified them; but, not desiring to give up the possession, he allowed the commissioner to take copies of them, which the latter attached to the commission, with his certificate that they were true copies, of the original writings produced by the witness, and referred to in his testimony. Dundee, etc., Co. v. Cooper, 26 Fed. Rep. 665. Discarding the certificate of Chattin, who was a mere volunteer, and without authority in the premises, it does appear, at least inferentially, that the witness Hickox, in whose custody the original writings then were, produced them before the commissioner, and furnished him with what he testified were true copies of the same; and that the commissioner, either on the strength of that statement or his own examination, and it may be on both, indorsed said copies as the Exhibits A and B referred to in the testimony of White and Hickox, and attached them as such to the commission, with the depositions. That all this is technically insufficient, for lack of an express eertieate by the commissioner that he had compared the alleged copies with the originals, and found them correct, may be admitted. But the objection is one that cannot be made at the hearing. It should have been made by a motion to suppress before the cause was set for hearing, when, if allowed, the mistake might have been corrected by retaking the depositions. When , cause is set for hearing all technical objections to the reading of
The answer of Holladay also contains an allegation in bar of this suit, to the effect that on November 7, 1883, and prior to the commencement thereof, the circuit court of the state for the county of Multnomah, in a suit then ponding therein between Ben Holladay and Joseph Holladay, appointed a receiver of all the property mentioned in the bill herein, who is now in possession of the same as such receiver, which suit is still pending in said court. In support of this defense counsel submit the proposition that while property is in the hands of a receiver appointed by a court, no other court can acquire or take jurisdiction of a suit concerning such properly, and cites a number of authorities in support thereof. But the proposition is altogether too broad, and is unsupported by the authorities cited. The receiver has no right in the property, but only the possession thereof. So long as that is not disturbed or questioned, parties may litigate in the same court, or elsewhere, questions concerning the ultimate right and title to the property. And therefore, notwithstanding the suit of Holladay v. Holladay, and the possession of the receiver therein, this court may take jurisdiction of a suit to set aside or postpone an alleged fraudulent conveyance of any of this property by Ben Holladay which hinders or delays the plaintiff in the enforcement of his judgment against said Holladay. In Buck v. Colbath, 3 Wall. 334, this question is examined by Mr. Justice Miller, and the conclusion reached that the rule, among courts of concurrent jurisdiction, that the one which first obtains jurisdiction of a case has the exclusive right to decide every question arising therein, is subject to limitations. See, also, Andrews v. Smith, 19 Blatchf. 100; S. C. 5 Fed. Rep. 833.
The object of the suit in the state court between the two Holladays is not stated in the answer. But, in the nature of things, it cannot involve the matters in controversy here, and particularly the question of whether the plaintiff is entitled, as a creditor of Ben Holladay, to have these conveyances to Joseph Holladay set aside or postponed in favor of the judgment against the former. If this court should find that these conveyances were made with intent to hinder and delay the plaintiff in the collection of his demand, under such circumstance as makes the grantee therein a participant in the fraud, it would be its duty to decree that they be set aside or postponed in favor of the plaintiff’s judgment. So far there would bo no interference with the process of the state court or the possession of its receiver. Whether this court will stop there,'and remit the plaintiff to his execution out of the same state court on his judgment therein, or provide for the sale of so much of the property by a master as may be sufficient to satisfy the same, together with the costs incurred in this court, will depend on circumstances. The latter course cannot
But so long as the plaintiff’s right to enforce the judgment, and for the amount found due him, depends on a decree of this court, it is proper, and very convenient, that any disposition of the property in question to satisfy the same should be made on its process. And provision may be made in the decree that the sale shall be delayed until the receiver is discharged, or that the plaintiff) may apply, on the footing of the decree, for an order of sale as soon as such discharge takes place.
The defendant Joseph Holladay also makes the further points against the plaintiffj’s right to relief: (1) The bill does not allege, and it is not shown, that there was any debt due from Ben Holladay to the plaintiff or his assignor prior to the date of the conveyances sought to be set aside, or any of them; (2) it does not appear that any execution has ever been issued on the decree against Holladay; and (8) there is no evidence that Holladay is insolvent and unable to satisfy the decree, except from the property in question.
The bill alleges that on November 5, 1869, and long prior to the date of any of the conveyances to Joseph Holladay, that a suit was commenced by Ben Holladay against Elliott, to dissolve the partnership of Holladay & Co., and for the settlement of its accounts, in which a final judgment was given in the supreme court dissolving said partnership as of the date of the commencement thereof, and that Elliott recover from said Holladay the sum of $21,919.46, and costs; and the answer of the defendant Holladay admits the allegation, word for word. The allegation might have been more specific, and stated that the sum recovered represented the indebtedness of Ben Holladay to his'copartner Elliott at the commencement of the suit. But such is the necessary implication of the allegation as it stands. The indebtedness must have existed on November 5, 1869, from which time the ■court determined the partnership was dissolved, and the liability of its members to one another ascertained. And the proof to that effect is full and specific. By the decree of the supreme court it is found that the amount for which it is given was a debt, with the interest thereon, due Elliott from Holladay before the commencement of the suit.
Admitting that a mere judgment for money is not evidence of an earlier indebtedness, (Bump, Fraud. Conv. 557,) still it may appear from the findings of the court, or other proceedings in the case anterior to the judgment, how long the indebtedness existed prior thereto.
In Hinde v. Longworth, 11 Wheat. 211, which was a controversy between a party claiming under a voluntary deed of March, 1799, and one claiming under a money judgment of August, the same year, against the grantor therein, the court held that while the mere judgment did hot show that the plaintiff therein was a creditor prior to the execution of the deed, without which he could not impugn the
The alleged fraudulent conveyances are about 20 in number, and appear to have been made from November, 1875, to April, 1879, while both the allegation and the proof are satisfactory that the indebtedness existed at and prior to November 5, 1869.
The issue of an execution, and the return of nulla bona thereon, is considered sufficient evidence of the insolvency of the judgment debtor, and that the judgment creditor is remediless at law. But it is not the only evidence of that fact, nor, in my judgment, always the best. The authorities are in apparent conflict on this question. Wait, Fraud. Conv. § 68; Bump, Fraud. Conv. 518-527. But where the diversity is not the result of local legislation, I think the apparent conflict arises from confounding creditors’ bills to subject personal property to the satisfaction of a judgment with an ordinary bill in equity to set aside or postpone a conveyance of real property on which the plaintiff’s judgment is, as against liis debtor, a lien without an execution. In the latter case the right to maintain the suit is based on the unsatisfied judgment, the fraudulent conveyance, and the insolvency of the debtor; which latter fact may be proved by any competent evidence, as well as a return of nulla bona on an execution.
In Hodges v. S. H. Mining Co., 9 Or. 200, it was held, in a suit against a stockholder of a corporation on a corporation debt, that the insolvency of the corporation might bo shown as any other fact, without an execution or even a judgment against it.
Terry v. Tubman, 92 U. S. 156, was an action against a stockholder of a bank to recover the amount of certain unredeemed bills of the corporation. The court held that the insolvency of the bank might be shown otherwise than by a judgment and an unsatisfied execution.
Case v. Beauregard, 101 U. S. 688, was a creditors’ bill against the members of an insolvent firm. The court said that a judgment and a fruitless execution are not the only evidence that a creditor has exhausted his legal remedy. “They are not the only possible means of proof. The necessity of resort to a court of equity may be made otherwise to appear.”
In McCalmont v. Lawrence, 1 Blatchf. 232, Mr. Justice Nelson held that “chancery has jurisdiction, on a bill filed by a judgment creditor for relief against a conveyance of lands by his debtor, made with intent to defeat the judgment lien, or to hinder or delay satisfaction of the judgment, whether execution has been issued thereon or not.” See Bump, Fraud. Conv. 523.
The insolvency of Ben Holladay is confessed. The bill alleges that he has no property in Oregon in his own name, and has not had since the date of said decree, out of which the same could be
This disposes of the case, except as to the question of fact, did Ben Holladay make the conveyances and transfers in question with intention to hinder and delay his. creditors, and. did Joseph Holladay receive them with notice of such design, or good reason to believe the same ? It is impossible for any unprejudiced mind to give any other than an affirmative answer to this question. It is not necessary to go into the evidence in detail. Suffice it to say that it appears from the defendant’s own testimony, and the admitted facts of the case, that in January, 1873, Ben Holladay, being indebted to h'is brother Joseph'in the sum of $100,000, gave him his note therefor; and on November 1, 1876, gave him another note for $163,345, in payment of the former note, and interest thereon at 12 per centum per annum, together with a third note for $4,500, given some time before. These notes have remained in the possession of Joseph Holladay, and no credits have been allowed or indorsed on them, although three valuable parcels of this real property, of not less than $50,000 in value, and 1,050 shares of the Oregon Transfer Company’s stock, worth not less than $.50,000 more, were conveyed and transferred te him between the giving of the first and last note. The real property was lots 1, 7, and 8, in block 47, in Portland, on which the Holladay residence is situated, the place called the Seaside House, and other considerable tracts of land in Clatsop county; and lots 6, 7, and. 8, in block 23, in Couch’s addition, together with sundry lettered blocks in said addition that were afterwards determined to belong te the Oregon & California Bailway Company. .
Afterwards, between November 25, 1876, and. April, 1879, sundry
The defendant contends that he did not receive this last stock from Ben Holladay, hut that he bought it from the Bank of California for $34,000, to whom the former had pledged it as collateral security for a loan of probably not less than $25,000. But the fact is admitted that the payment was made out of moneys derived from the property and business transferred to him by Ms brother, and mainly out of the earnings of the transfer company. The plaintiff alleges that this property, when conveyed to the defendant, was worth §225,-000, and was worth at the commencement of this suit $500,000. In Ms answer the defendant says the property was not worth over $100,-000 when he received it, and that it is now not worth over $400,000. My conclusion is that the allegation in the hill on this point is substantially correct.
Nothing passed between the brothers at the time those conveyances were made as to their purpose or object. Joseph never asked for any of them, and Ben never told him why he made them. And the only conversation th'at ever passed between them on the subject, according to the former’s testimony, is that, as his brother was about to leave the state in the fall of 1877, ho wont to Ms house, when the former said to Mm, without solicitation or explanation: “All this property belongs to you, and no power on earth can take it away from you.” And lie insists that he received it silently, but in “good faith,” in payment of the debt then due him. The various properties remained in the hands and under the management of the persons in charge before the transfers were made, and the rents and profits of the mill and hotel, so far as they could be spared from the payment of debts, charges, and taxes, were largely transmitted to Ben Holladay; at Washington.
The defendant admits that he consented that the manager of the mill, Air. George Weidler, might send 1ns brother five or six thousand dollars a year to keep him from starving while in Washington prosecuting his Indian spoliation claim; and says that ho has since learned that Weidler let him have not less than $75,000 during this time,
In the spring of 1879 the defendant was in Washington, and, being in need of money, applied to his brother for $1,000, which was refused for want of means. Thereupon he wrote Ben Holladay a letter, which is in evidence. After stating the request and refusal, he writes in substance: “You have just made $15,000 on the sale of O. & 0. bonds, and yet refuse me $1,000, when you know I have not a dollar on earth, but have let you have every dollar I had on earth fifteen years ago.” When the decree was given in the supreme court in favor of Elliott in 1879, the personal property at the Seaside House, and in the Holladay residence, was immediately transferred to the defendant by the agent of Ben Holladay, to prevent its seizure on execution. When the bills of sale were presented to him he appeared to apprehend the purpose of the transaction, and said it was no use,—the judgment would hold the property; but, on being assured by the agent, on the authority of a prominent lawyer, that nothing but an .execution would prevent the transfer of personal property, he acquiesced and took the bills.
And lastly, in his answer in Holladay v. Holladay, which appears from the evidence to be a suit to have these conveyances, which are absolute in form, declared to be mortgages, the defendant swore that these conveyances were delivered to him “secretly and fraudulently” by Ben Holladay, “with the fraudulent intent” on his part “to cover up and conceal from his creditors” said property, and “in the fraudulent hope and expectation” that the defendant “would support him therefrom, and would fraudulently join and assist him in purchasing from his creditors their said claims and debts for a small percentage of their face value, and force them to compromise the same, and would thereafter reeonvey the-remainder of the property to him;” and for fear the creditors of Ben Holladay might have the defendant examined on oath concerning said conveyances, “said understanding and expectations were not put in the form of words or in writing,” but Ben Holladay “verbally said to the defendant, in November, 1877, and divers other times, that said lands and personal property belonged to and were the property of this defendant.” This is a full and frank confession of the fraudulent intent of the grantor in these conveyances, and the knowledge and acquiescence, if not the active participation, of the defendant therein.
After a careful consideration of all the facts, in my judgment, the best construction that can be put on these transactions is this: The conveyances and transfers were made by Ben Holladay to Joseph Holladay, not in payment or satisfaction of his debt, but to secure it.
Section 51 of chapter 6, (Laws Or. 523,) which is substantially chapter 5 of 13 Eliz., provides, among other things, that every conveyance of any estate in lands, or goods or things in action, “made with intent to hinder, delay, or defraud creditors, or other persons, of their lawful * * * debts or demands, * * * as against the persons so hindered, delayed, or defrauded, shall be void.” It is not necessary that the grantee in a deed made to hinder or delay creditors should have actual knowledge of the debtor’s intent to make it void. A knowledge of facts sufficient to excite the suspicions of a prudent man, and put him on inquiry, amounts to notice,' and is equivalent, in contemplation of law, to actual knowledge, and makes the grantee a party to the wrong. Clements v. Moore, 6 Wall. 312; Bartles v. Gibson, 17 Fed. Rep. 293; Bump, Fraud. Conv. 200. And the grantee in such a conveyance cannot avoid the effect of these criminative circumstances by insisting that he acted in good faith,—res ipsa loquitor: for good faith, in such case, cannot co-exist with notice of the vmmgful intent of the grantor.
The conveyances of real property being void as to the plaintiff, he is entitled to have them so declared and set aside, so far as may be necessary to collect thereout the judgment against Ben Holla day; and it is so ordered. The plaintiff is also entitled to costs against the defendants Elliott and Joseph Ilolladay; but whether they shall bo taxed against them in solido or severally, and, if the latter, for what amounts, and whether the decree shall leave the plaintiff to enforce his decree by execution from the state court, or by the process and under the direction of this court, will be determined at the settlement of the decree, on which counsel may be heard.
NOTE.
1. Champerty. Champerty is an aggravated species of maintenance. McIntyre v. Thompson, 10 Fed. Rep. 532.
A mere agreement for a contingent fee is not ohampertous. To constitute champerty there must be ail agreement on the part of the champertor to carry on the party’s suit at his own expense, as well as for a share of the thing or money to bo received. Jewel v. Neidy, (Iowa,) 16 N. W. Rep. 141.
Agreement to prosecute a claim for a stipulated amount of the proceeds, with full power to compromise as shall bo thought best, is not a champorlous agreement. Jeffries v. Mutual Life Ins. Co. of N. Y., 4 Sup. Ct. Rep. 8.
In Vimont v. Chicago & N. W. Ry. Co., (Iowa,) 21 N. W. Rep. 9, J., who was injured by the negligence of defendant railroad company, assigned his claim for damages to Y., and V. executed the following- agreement: ‘‘In consideration of the assignment to me by J. of his claim for damages against the Chicago & Northwestern Eailway Company, resulting to him by reason of an injury received by him on or about the thirty-first day of August, 1881, on said railway, I hereby agree to dispose of the entire amount
A contract between an attorney and his client that the attorney shall prosecute a claim at his own cost, for a share of the recovery, is champertous and illegal. Martin v. Clarke, 8 R. I. 389.
Where an attorney was employed to bring an action, the client agreeing to give or allow and pay him the first $50 collected by him therein, held not champertous. Scott v. Harmon, 109 Mass. 237.
An agreement by which a defendant in attachment assigns to his attorney the property attached, in consideration of his services in the suit, and in prosecuting a contemplated action of damages on account of the attachment, stipulating for his own diligence in the attachment suit, and giving the attorney the entire management and control, is not void for champerty or maintenance. Ware’s Adm’r v. Russell, 70 Ala. 174.
In Stanton v. Haskin, 1 McArthur, 558, R. & S., attorneys at law, agreed to conduct a suit in chancery for the recovery of lauds claimed by H. and wife, who agreed to give them one-third of whatever land or money might bereceived. A decree was obtained in favor ofH. and wife for the lands, and also for the rents and profits. In a suit to enforce the agreement for an undivided third of the land so recovered, the court held that the contract was champertous and therefore void.
The Hew York Code contemplates a case in which the action might never have been brought but for the inducement of a loan or advance offered by the attorney, and where the latter, by officious interference, procures the suit to lie brought, and obtained a retainer in it. Fowler v. Callan, (N. Y.) 7 N. E. Rep. 169.
For a full discussion of the general subject of champerty, see Courtright v. Burnes, 13 Fed. Rep. 317, and note by Judge Seymour D. Thompson, 323-329.
2. Fraudulent Conveyance—Knowledge of Grantee. For ail exhaustive discussion of the question of fraudulent conves'ance, and therein of the knowledge of the grantee, see Platt v. Schreyer, 25 Fed. Rep. 83, and note, 87-94.