OPINION
STATEMENT OF THE CASE
Defendant-Appellant Scott County, Indiana (Scott County) appeals from the negative judgment in favor of Plaintiffs-Appel-lees James and Malinda Vaughn (The Vaughns). Defendant below, the State of Indiana, joins this appeal as an appellee. 1
We affirm.
ISSUES
Scott County raises two issues for our review which we re-state as:
1. Whether the State’s use of a loan receipt agreement as a settlement tool is contrary to Article XI, Section 12 of the Indiana Constitution, which prohibits the *1031 State from loaning state funds to private individuals.
2. Whether the State’s use of a loan receipt agreement in this case is contrary to public policy as it was used as a settlement tool to the detriment of a political subdivision of the State.
FACTS AND PROCEDURAL HISTORY
The accident underlying this appeal occurred on October 14, 1992, when Malinda Vaughn was traveling on County Road 150 South in Scott County. Tonya Vaughn, Malinda’s daughter, was a passenger in the vehicle. Third party plaintiff below Ike and Cathy Routts’ daughter, Jennifer Routt, was also a passenger in Malinda’s vehicle. As Malinda approached the intersection of County Road 150 South and State Road 3, Malinda’s vehicle entered the intersection and was struck by a northbound vehicle traveling on State Road 3. The Vaughns assert that Malinda was not able to see the intersection itself or the stop sign located at the intersection until she had crested the hill and was parallel to the stop sign. Upon impact, Jennifer Routt and Tonya Vaughn were thrown out of the rear window of Malinda’s 1991 Chevrolet Blazer. Malinda Vaughn and Jennifer Routt were severely injured, and Tonya Vaughn was killed as a result of the accident.
On March 7, 1994, the Vaughns filed suit against the State of Indiana and Scott County alleging negligence against both defendants for failure to exercise reasonable care in the design, construction, and maintenance of the intersection. The State and Scott County filed separate answers to the Vaughns’ complaint in April of 1994. The Routts were joined into the lawsuit as a necessary party in May of 1994, and the Routts subsequently filed their third party complaint for damages against the State and the County. In December of 1994, the County filed its motion for summary judgment against both plaintiffs arguing that it owed no duty to either plaintiff. Following a hearing, the trial court granted the County’s motion.
In September of 1995, the decision of the trial court was reversed by this court in a memorandum decision. In our unpublished memorandum decision, we held that the State and the County had a simultaneous duty with respect to the safety of the intersection and the alleged inadequacy of the signage. Hence, we held that genuine issues of material fact existed with regard to whether breach of the duties proximately caused the injuries alleged. Vaughn/Routt v. State of Indiana/Scott County, No. 72A01-9506-CV-194 (Robertson, J., Sept. 27,1995).
Following negotiations, the Routts and the Vaughns entered into loan receipt agreements with the State. Specifically, on October 20, 1995, the Routts entered into a loan receipt agreement whereby the State advanced the sum of $200,000.00 to the Routts, and on April 10, 1996, the Vaughns entered into a loan receipt agreement whereby the State advanced the sum of $400,00.00 to the Vaughns. Both agreements contained a provision providing for the repayment of the loan if the plaintiffs should collect money damages from any other entity, including Scott County.
On November 6, 1997, the County filed a motion to set aside the loan receipt agreements arguing that they were unconstitutional. The State intervened, and responses were filed. Following a hearing, the trial court denied the County’s motion to set aside. The County petitioned to certify the issue for interlocutory appeal, which petition was granted by the trial court. We subsequently accepted jurisdiction on June 9,1998. This appeal ensued.
DISCUSSION AND DECISION I. Loan Receipt Agreements Ind. Const. Art. XI, § 12
The County contends that the trial court erred in denying its motion to set aside the loan receipt agreements, because they were entered into in violation of Article XI, Section 12 of the Indiana Constitution.
A. Loan Receipt Agreements Defined
We first found reference to the “loan receipt” instrument in
Klukas v. Yount,
wherein this court in 1951 stated that “[a] loan receipt is an instrumentality which permits the insurer to pay an insured speedily and yet press in court to recoup its losses from the wrongdoer without the insurer appearing
*1032
by name, thereby avoiding some of the consequences of subrogation.”
Loan receipt agreements or “partial settlement agreements,” as they are sometimes referred to, were described by Judge Robertson in Burkett v. Crulo Trucking Co, Inc. as follows:
A loan receipt agreement, in its simplest form, provides that one with potential liability to a claimant will advance funds in the form of a non-interest loan to the claimant in order that the claim may be prosecuted against another who is also potentially liable for the claim. In return for the funds advanced, the claimant agrees that he will not sue or will not seek to enforce a judgment against the lender and will repay the loan according to some formula based upon the claimant’s recovery against the other party. Such an agreement, then, serves to limit the liability of one against whom a claim might be pressed and, at the same time, gives the claimant an immediate ‘bird in hand’ instead of forcing him to await but possible recovery following protracted litigation.
The loan receipt agreement entered into between the State and the Vaughns provides in pertinent part as follows:
The State of Indiana will advance to Malinda Vaughn the sum of FOUR HUNDRED THOUSAND DOLLARS ($400,000.00), as a loan, without interest, repayable to the extent Malinda Vaughn ... collects money in damages from any other person, firm, organization or other entity, including Scott County, for the injuries sustained by her and/or her daughter as a direct and proximate result of the aforementioned collision.
Malinda Vaughn ... agrees to repay the full extent of the loan ($400,000.00) by forwarding to the State SEVENTY PERCENT (70%) of the entire amount collected from any other party, person, organization or entity, including, but not limited to, Scott County, LESS 30% attorney fees.
In no event shall the amount repaid to the State by Malinda Vaughn ... exceed FOUR HUNDRED THOUSAND DOLLARS ($400,000.00).
Malinda Vaughn ... will dismiss with prejudice her claims against the State of Indiana only, expressly reserving her right to proceed against Scott County ...
(R. 567-568).
B. Constitutionality under Art. XI, § 12
Specifically, the County argues that the State has loaned public funds to private individuals in contravention of Article XI, Section 12 of the Indiana Constitution. A-ticle XI, Section 12 of the Indiana Constitution states as follows:
The State shall not be a stockholder in any bank; nor shall the credit of the State ever be given, or loaned, in aid of any person, association or corporation; nor shall the State become a stockholder in any corporation or association.
Questions arising under the Indiana Constitution are to be resolved by “examining the language of the text in the context of the history surrounding its drafting and ratification, the purpose and structure of our constitution, and case law interpreting the specific provisions.”
Boehm v. Town of St. John,
Northern Indiana Bank and Trust Co. v. State Bd. of Finance of Indiana,
involved an action for declaratory judgment regarding whether a statute permitting state and municipal corporations to deposit funds in deposit-type savings associations violated Article XI, § 12 of the Indiana Constitution. Ultimately, the supreme court held that the State had not become a stockholder in violation of Article XI, § 12 by reason of its deposit of public funds in savings associations which were not depositories under the Depository Act of 1937.
In 1834, the Indiana Legislature chartered the State Bank, authorized the State to buy fifty percent of the Bank’s stock, and gave the Bank the power to issue currency. The State Bank generally monopolized the entire banking industry, and there was bitter opposition to its continued existence. Members of the opposition advocated a “free bank” system, in which the State played no active role. Debate on this issue occupies several hundred pages in the Report on the Debates and Proceedings of the Convention for the Revision of the Constitution (hereinafter “Constitutional Debates of 1850”). Several resolutions were offered and ultimately the Convention accepted the following language: “The State shall not be a stockholder in any bank, after the expiration of the present bank charter ...” This clause of Article XI, § 12 was sought to prevent the State from re-chartering the State Bank after its original charter expired in 1857.
Northern Indiana Bank,
The second major impetus to the drafting of Article XI, § 12 was the pre-1850 internal improvement system. In 1836, the Indiana Legislature passed the Internal Improvement Act, which provided for the construction of turnpikes, railroads and additional infrastructure within the State. The Act established a Board and granted control of the purse strings to the Board. Ultimately, the entire system failed arid many of the projects were left unfinished. During this period, the State Bank lent substantial sums of money to private industry, but also began to buy stock in these corporations. The State was speculating on the potential money to be made with the State’s improved internal infrastructure. Because the internal improvement plan failed, the State was nearly bankrupt by 1839.
There was considerable debate and sentiment among the delegates to the Constitutional Convention that the State be prevented from ever again engaging in such speculative behavior with public funds. Hence, the second and third clause of Article XI, § 12 were intended by the framers to prevent the State from loaning money to individuals or corporations and prevent it from becoming a “partner in speculation.”
Northern Indiana Bank and Trust,
The above cases deal primarily with the first and third clauses of Article XI, § 12, while the County here contends that the State has acted in contravention of the second clause of § 12. Specifically, the County argues that the loan receipt agreements are in violation of that portion of Article XI, § 12 which states, “... nor shall the credit of the State ever be given, or loaned, in aid of any person ...” This second clause of Article XI, § 12 was specifically discussed in
Johnson v. St. Vincent Hospital, Inc.,
Because the “intent of the framers of the Constitution is paramount in determining the meaning of a provision, this court will consider the purpose which induced its adoption in order that we may ascertain what the particular constitutional provision was designed to prevent.”
Boehm,
Using the liberal approach to constitutional construction and considering the fundamental principle of such construction is to give effect to the intent of those who framed the provision, we cannot say that the use of a loan receipt agreement in this case was an evil that the framers sought to prevent by ratifying Article 11, § 12 of the Indiana Constitution.
II. Loan Receipt Agreements Public Policy
Scott County urges this court to reconsider the continued use and validity of loan receipt agreements in Indiana. While acknowledging that loan receipt agreements have been deemed permissible in civil cases, Scott County argues that the agreements have been the subject of much debate and have been deemed void as against public policy in other jurisdictions. The County further argues that if this court is not willing to denounce the use of loan receipt agreements in general, we should at a minimum declare it against public policy in this specific case.
Scott County contends that the time is ripe for this court to find loan receipt agreements void as contrary to public policy. Specifically, the County argues that the agreements promote prolonged litigation between the remaining parties, adversely alter the trial process, mislead the trier of fact, and promote unethical collusion between the parties.
We recognize that loan receipt agreements have been treated with apprehension by the courts in the past. For example, in
Sullivan v. American Cas. Co. of Reading, Pa.,
[although ‘covenants not to sue, covenants not to execute, and loan receipt agreements are legal and are to be encouraged in the settlement of litigation ... controversy [still] arises regarding the use of *1035 such settlement agreements.... ’ [One of the fears] is the collusive effect loan receipt agreements have between the parties. Once the potentially liable party has entered into a loan receipt agreement and has advanced funds to the plaintiff, that party will have little, if any, incentive to participate vigorously in [the] truth-finding function of the trial process. In fact, in most situations, it may be to a settling defendant’s advantage to assist the plaintiff, because to the extent the plaintiff recovers from a non-settling defendant the settling defendant will be entitled to reimbursement for the money ‘loaned.’
(Citations omitted).
To be sure, loan receipt agreements cause considerable concern during the trial of a plaintiffs remaining unresolved claims against a non-settling defendant. However, many of the problems with loan receipt agreements have been judicially remedied, and the courts have continued to favor their use. For example, in
Manns v. State Dept. of Highways,
[t]he admission of prior partial-settlement evidence rarely provides probative and relevant evidence and generally injects extraneous, irrelevant, and confusing circumstances and issues which are likely to impair a jury in its fair and impartial ascertainment of truth. Stick negative evi-dentiary considerations, however, are significantly outweighed by the sound judicial policy favoring the use of partial settlement agreements as tools for prompt and amicable settlements, we conclude that the risks and hazards of their unfair use at trial should be minimized.
Indiana has expressly approved of the use of loan receipt agreements in
Northern Indiana Public Service Co. v. Otis,
CONCLUSION
Based on the foregoing, we conclude that loan receipt agreements continue to represent a valid settlement tool in Indiana and do not run counter to Article XI, Section 12 of the Indiana Constitution. We further hold that the use of such agreements are not against public policy.
Affirmed.
Notes
. Third party plaintiffs Ike and Cathy Routt, on behalf of their minor child Jennifer Routt, are not a party to this appeal.