| Tenn. | Dec 15, 1922
delivered the opinion of the Court.
The action presented in this record is one by the . complainant to recover, for services performed by him for the deceased, Ramsey, in his lifetime, and for his administrator after his death, the sum stipulated in the contract under which services were performed. That there was a contract for the performance of the services, that the services were performed as stipulated, and that the value thereof was fixed at the amount stated in the bill, are not matters of dispute. Liability is contested on behalf of the creditors by the administrator ad litem alone upon the ground that the services contemplated and contracted for were those of lobbying to influence an appropriation by Congress to pay a claim in favor of the decedent against the United States government, and that the contract is inimical to sound public policy, and therefore without consideration and void and unenforceable.
The chancellor considered the contract illegal and dismissed both the bill and the cross-bill. Both parties appealed and assigned errors here.
The terms of the contract are not in dispute, and can be best understood by their recital in connection with the situation of the parties and circumstances under which they contracted:
The complainant, Stansell, was a partner in the firm of Roach, Stansell, Lowrance Bros. & Co., who in 1917 entered into contracts with the United States government for doing a large amount of work on leyees along the Mississippi river. Ramsey had subcontracted some of the work,of this firm and some work under another contractor named Blanks. These contracts, with the government to do this levee work were entered into and undertaken about the time of the declaration of war in 1917. The contractors were delayed in the execution of their work by reason of the government taking over the equipment, labor, etc., and devoting them to more urgent war preparations, such as were being conducted at the powder plants at Nashville, Sheffield, and other places. It was not until after the Armistice that these contractors could carry out their operations. It was then manifest that the carrying out of
It is not contended that there was in fact anything in the contract expressly providing for any improper service in connection with these claims, but the contention is that such must necessarily be implied from the fact that the compensation contracted for was contingent upon success. We have a case, therefore, where one who himself has a just and meritorious claim against the government which he can only be remunerated for by act of the Congress, who engages and contracts with others who have similar claims, based upon the same situations, to represent them along with his representations of himself in an effort to
“Courts will not declare contracts void on grounds of public policy except in cases free from doubt; a prejudice to the public interest must clearly appear before a court is justified in pronouncing a contract void on that account.”
Ón the other hand, in proper cases, the courts will not hesitate, from motives of preserving to men of full age and competent understanding the right and liberty of contracting as they choose, to declare void contracts which contravene sound public policy, even though, as in this case, the rulé is invoked by those who but for the legality of the contract would have no occasion to invoke it.
Fortunately we may not go far astray in the performance of this delicate duty by reason of illustrious precedent where other similar situations have been presented to distinguished courts of this country.
This contract is to be decided, not by what unlawful means may have been used to bring about a just and honest result, but whether by its terms it necessarily implies the use of unlawful means in its accomplishment. This court said in Hotel v. Ewing, 124 Tenn., 550, 138 S. W., 957, 38 L. R. A. (N. S.), 842, Ann. Cas. 1913A, 121:
“It is laid down, . . . that if a contract can by its terms be performed lawfully, it will be treated as legal, even if performed in an illegal manner; while a contract entered into with intent to violate the law is illegal, even if the parties may'in performing it depart from the contract, and keep within the law. 1 Page on Contracts, section 506, page 707.”
As applied to a situation like the one here presented, the rule is well, stated in 2 Ruling Case Law, p. 1041:
In 6 R. C. L. p. 731, the author has correctly deduced the rule to be: “It is unquestionably true that an agreement based on services to be rendered by an agent or attorney, the tendency of which would be to unduly influence on corrupt legislation, is against public policy, and cannot be enforced. It is not the law that all contracts dependent upon future legislative action are against public policy, nor is it true that all contracts to secure legislative action are unenforceable. It is correct to say that the law guards the processes of legislation against improper influences with jealous care, and will not lend its aid to the enforcement of any contract which expressly or impliedly contemplates the employment of corrupt or otherwise improper methods to influence the official conduct of legislators, or others charged with public duty. But it would be a perversion of this salutary rule to say that it forbids all efforts of interested persons or classes to secure the adoption of desired legislative measures. The courts do not condemn the attempts to secure legislation for legitimate purposes and in a legitimate manner.”
The only provision in the contract in question here relied upon as showing an intention to unduly influence legislation is that which makes the compensation of complainant contingent upon success. This contention is based upon the asserted proposition that — “The courts
Upon this principle it is insisted that any contract the probable tendency of which would be to sully the probity or mislead the judgment of those to whom the high trust of legislation is confided must be pronounced void, and that such tendency must necessarily be inferred from an agreement to pay and to receive contingent compensation.
We entirely agree with the soundness of the proposition that a contract which necessarily implies the exercise of an improper or undue influence upon legislation should be declared void and unenforceable out of consideration of a sound public policy, but we are unable to concur in the conclusion that such a situation is inferable from the mere provisions for contingent compensation. The terms of a contract may be broad enough and used in connection with circumstances and in such a way as to imply secret or dishonest services, and such a law falls within the condemnation of public policy.
“But as the law does not presume that a person intends to violate its provisions, the general principle controlling the construction of a contract to influence legislation when the contract itself does not in terms stipulate for improper means seems to be that it will be upheld, unless the use of. such means appears by necessary implication. The test
Numerous cases might be cited where the courts haye upheld contracts for service in which compensation was contingent upon success. Reference to a few will suffice to show that the mere fact of contingency does not of itself vitiate the contract. A leading case which has been recognized and followed in numerous decisions by the supreme court of the United States is Wylie v. Coxe, 15 How., 415" court="SCOTUS" date_filed="1854-02-16" href="https://app.midpage.ai/document/wylie-v-coxe-86841?utm_source=webapp" opinion_id="86841">15 How., 415, 14 L. Ed., 753. In that case one Baldwin was employed to prosecute a claim for one Cox, growing out of loss of property and personal outrages through the officers of the Mexican Republic, a treaty of peace between the United States and Mexico having made provision for' the settlement of such claims, and Congress having passed an act authorizing a board of commissioners to examine and decide such claims. Under Baldwin’s contract he was to receive a contingent fee of five per cent, out of the money awarded, whether money or scrip. If nothing was received he was entitled to- nothing for his services. There was no suggestion in the opinion of the court that this contingent fee in any way affected the complainant’s right to recover. There' was, of course, no intimation that any improper conduct had been resorted to, and in sustaining the complainant’s claim the court said:
“We think the contract is, proved, also the services rendered under it, by the complainant, and that he is entitled to the compensation claimed.”
It is said by counsel for the defendant that the case just referred to is one of the recognized cases of pure profes
“The well-known difficulties ánd delays in obtaining payment of just claims which are not within the ordinary course of procedure of the auditing' officers of the government, justifies a liberal compensation in successful cases, where none is to be received in case of failure. Any other rule would work much hardship in cases of creditors of small means residing far from the seat of government who can give neither money nor personal attention to securing their rights.
In Nutt v. Knut, 200 U. S., 13, 26 Sup. Ct., 216, 50 L. Ed., 348" court="SCOTUS" date_filed="1906-01-02" href="https://app.midpage.ai/document/nutt-v-knut-96374?utm_source=webapp" opinion_id="96374">50 L. Ed., 348, the agreement provided that the claimant was to take exclusive charge and control of a certain claim which the defendant had against the government of the United States, the claim being for the use of property which the defendant and his estate was deprived of by the acts of officers and soldiers of the United States, complainant’s obligation being to prosecute “before any of the courts of the United States, and upon appeal to the supreme court of the United States, or before any of the departments of government, or before the Congress of the United States, or before any officer or commission or convention specially authorized to take cognizance of the claim, or through any
“Much was said in argument as to the nature of the services rendered by the [complainant], the charge being that his services were of the kind called lobby services for which, • consistently with public policy and public morals, no recovery could be had in any court. . . . We have seen that the State court of original jurisdiction was of opinion the suit was for lobbying services, and on that ground denied all relief. But the supreme court of Mississippi, held that the record did not establish such a case, and we accept that view of the evidence in the cause.”
That the contract did provide for contingent compensation in this case there was no question nor doubt, but, as we have seen, it was held that this was not sufficient to denounce the contract as one calling for lobby service.
In the case of Valdes v. Larrinaga, 233 U. S., 708, 34 Sup. Ct., 750, 58 L. Ed., 1163" court="SCOTUS" date_filed="1914-05-25" href="https://app.midpage.ai/document/valdes-v-larrinaga-98194?utm_source=webapp" opinion_id="98194">58 L. Ed., 1163, Yaldes was a riparian owner, and desired a water franchise from the Porto Rican government, and he entered into a contract with Larrinaga by which the latter was employed to help him “in getting it through,” and in all the rest in connection with said franchise, such as plans, projects, and everything concerning technical plans thereof, upon a contingent interest of
“We shall not speculate nicely as to exactly what the law was in Porto Rico at the time the contract was made, but shall give the complainant the benefit of the defenses upon which he relies, such as Hazelton v. Sheckells, 202 U.S., 71" court="SCOTUS" date_filed="1906-04-23" href="https://app.midpage.ai/document/hazelton-v-sheckells-96460?utm_source=webapp" opinion_id="96460">202 U. S., 71. But we discover nothing in the language of the letters that necessarily imports, or even persuasively suggests, any improper intent or dangerous tendency. Lar-rinaga had ceased to be assistant secretary, and while in that position had refused to take part in the plan. His answer, which must control if there is any difference, as the parties went ahead on it, . . . binds him to help in the steps to be gone through, and in the technical part. If his help in the steps to be gone through was not to be, like the rest of his work, in the technical part alone, still there is nothing to indicate that it is of a kind that it could not be stipulated for. In view of the subject-matter, á grant, it would seem to a riparian owner, of the right to use water power for public service, the things done, such as joining in an application to the military governor for a franchise on the footing of a joint interest, or helping to present it to the secretary of war when it came up to him, or preparing plans and specifications to be presented to the executive council of Porto Rico when the first franchise granted by the secretary of war had been lost by not complying with its terms, have no sinister smack. We see nothing to control the decision of the district judge that the contract was not against the policy of the law.”
“We discover nothing . . .. that necessarily imports, or even persuasively suggests any improper intent or dangerous tendency.”
We- are directed by counsel for the defendant to the case of Marshall v. B. & O. R. R. Co., 16 How., 314" court="SCOTUS" date_filed="1854-05-18" href="https://app.midpage.ai/document/marshall-v-baltimore--ohio-railroad-86875?utm_source=webapp" opinion_id="86875">16 How., 314, 14 L. Ed., 953, as authority for the proposition that all contracts for a contingent compensation for obtaining legislation are void by the policy of the law. If we may take segregated excerpts from the opinion of the court in that case, a basis for the defendant’s argument will be found but, when considered as a whole, the case does not justify the conclusion relied upon. We find from an examination of that case a complainant who was suing for compensation for services who was a professional lobbyist. His contract called for secrecy in his employment, as well as in his compensation. The correspondence leading up to his employment shows that he contemplated the use of personal influence regardless of the merits of the legislation he was proposing to obtain. The legislation was of a character the propriety of which was very much disputed, and one with respect to which much legislative lobbying had previously been engaged in. Questionable methods had been employed to defeat the legislation, and this gentleman proposed to fight the devil with fire.- It was with respect to contracts of this sort that the court held competent as evidence the communications of the gentleman setting forth the methods which he proposed to use, and .in which the court said:
The contract in that case involved all of the elements denounced by the language just quoted. There was not only a contingent fee, but there was an agreement for secrecy, personal and sinister influences, and withholding upon the part of the agent of the capacity in which he urged this legislation and of the fact that he was at all interested in it. The opinion of the court in that case concedes that persons whose interests may be affected by act of the legislature have an undoubted right to urge their claims and arguments, either in person or by counsel by the legislature itself, as well as in courts, and it was said:
“But where persons act as counsel, agent, or in any representative capacity, it is due to those before whom they plead . . . that they should honestly appear in their true characters, so that their arguments and representations, openly and candidly made, may receive their just weight and consideration. A hired advocate or agent, assuming to act in a different character, is practicing deceit on the legislature. Advice or information flowing from the unbiased judgment of disinterested .persons, will nat
In this language we have a correct, accurate and full statement of the nature and character of action which enter into contracts constituting “lobbying,” denounced as vitiating and depriving the agent of the right to recover compensation. The contract therein held to be void is akin to the one involved in this case only in the provision for a contingent fee, which, as we have seen, is not of itself sufficient to denounce it. Contingency of compensation may well be a circumstance in the construction of the contract to determine whether any improper service is contemplated by the parties. In the case at bar the agent was not a hired lobbyist, but was himself a claimant who had personal interest in the claims for which he sought legislation. It could not have been contemplated by the parties that it was expected that there existed any possibility of his being able to deceive any committee or congressman by any representation of being disinterested in the matter. His claim and those of the other contractors whom he represented were honest and just claims. There was and could be no impropriety in his presenting the claims of himself and his associates to the senator and congressman
There are other cases than that of Marshall v. B. & O. R. R. Co., above referred to, in which contracts similar thereto have been denounced. An examination of them shows that in every instance there was embraced in the contract language indicating and expressed under circumstances and conditions from which it must be inferred that the parties intended to use some covert pretense, or exercise some personal influence independent of the merits of the
Under the authorities and reasons which we have expressed, and with respect to which much more might be said, we are unable to agree that this case presents a situation wherein the court ought'to declare nonenforcement of the contract on grounds of public policy, whereby creditors may escape payment of compensation for services which procured for them the very means which affords them an opportunity to question the validity of the contract. There is no such intendment in the contract as to justify the implication that the parties stipulated for performance of any illegal or improper services and there was nothing done from which we can infer any improper intention in the making of this contract. It results, therefore, that the complainant’s claim must be allowed and the cross-bill dismissed.
The complainant Stansell claims a preference over the other creditors for payment out of the funds appropriated by Congress, upon the theory of equitable lien. This claim is resisted upon two grounds: First, it is contended by the defendant that the enforcement of a lien would be in violation of the statutes of the United States, revised section 3477 (U. S. Comp. St., section 6383), which declares that all transfers of any part of any claim against the United States, or any interest therein, whether absolute or Conditional, shall be absolutely null and void, unless executed in the presence of at least two attesting witnesses after the allowance of such claim, the ascertainment of the am.ouu.t_ due, and the issuing of a warrant therefor. From an examination of the statute and a consideration of the nature of the claim, it is quite evident that this defense
Whatever may be said upon the question of whether Stansell can now assert a preference over the other creditors, it is certain that he never had any such a right in the claim or the fund which he could have asserted independently of the statute while the fund was in the hands of the government. • It was not such- a lien as attached to the fund itself. Whether a lien can now be set up in equity by virtue of the circumstances is another question. It is certain it had no existence prior to the effort made in this proceeding to assert it. It can stand no higher than the lien of the-vendor who had not contracted in his deed for a lien for the purchase money. Fain v. Inman, 6 Heisk., 16" court="Tenn." date_filed="1871-09-16" href="https://app.midpage.ai/document/yoe-v-dyer-7655783?utm_source=webapp" opinion_id="7655783">6 Heisk., 16, 19 Am. Rep., 577. A lien does not arise out of any inter
A more difficult question is whether the situation of the parties entitles the complainant to an equitable preference out of the funds. It may be conceded that but for the •services of complainant Congress would not have made the appropriation. We do not understand that an equitable lien can be based alone upon moral obligations, but It must find that basis in established equitable principles. While it is quite true, as stated by Chancellor Cooper in Brown & Reid v. Bigbee, 3 Chancery Reports, the inclination of the courts of this country, and of none more so than those of this State, has been to enlarge the doctrine of equitable liens and charges, with a view to the attainment of the ends of justice, without much respect for the technical restrictions of the common law. Nevertheless, we must find as a basis therefor some recognized principle. The only theory of equity advanced is that the services of Stansell produced the fund, and that under his contract he looked to the fund alone for compensation, and not to any obligation of his principal in person. We think neither of these propositions is maintainable. In the first place, Stansell did not produce the fund. It came by virtue of an appropriation by Congress. It may be quite true —and we think it is — that Stansell rendered valuable services but for which Congress would not have been'moved to act. Still it cannot be said that the fund was procured by an individual in such a sense as to give him any equi
“We all agreed we would pay Mr. Stansell ten per cent, of the amount which he succeeded in getting the government to pay, and in addition each pay his proportionate part of the expenses incurred by him.”
If the contract be construed so as to mean that the appropriation itself should be set apart for Stansell’s services, it would come dangerously near violating the statute prohibiting the transfer of claims against the United States. The lien cannot be based upon an express execu-tory agreement whereby an intention is indicated to make some particular property or fund security for a debt, for the reason there was no such express contract. Neither is it necessarily implied from the terms of the agreement. The rule of law seems to be that an agreement of that sort must be either expressed or necessarily implied without any reliance upon the person responsible or the owner of the claim of which the fund was the result. Walker v. Brown, 165 U.S., 654" court="SCOTUS" date_filed="1897-03-01" href="https://app.midpage.ai/document/walker-v-brown-94637?utm_source=webapp" opinion_id="94637">165 U. S., 654, 17 Sup. Ct., 453, 41 L. Ed., 865" court="SCOTUS" date_filed="1897-03-01" href="https://app.midpage.ai/document/walker-v-brown-94637?utm_source=webapp" opinion_id="94637">41 L. Ed., 865. An equitable lien does not necessarily involve a right which is
It is contended by StanselPs counsel that he stands in the same situation as an attorney at law. Conceding this to be true, his right to the lien does not follow. An attorney may be entitled to assert a lien upon a judgment which he has represented his client in obtaining, but a principal basis for allowing a lien to an attorney at law is that it is deemed both natural and wise that the lawyer be secured in the fruits of his professional labor, since the proper administration of justice is essential to the well-being of the public, which cannot be secured without an intelligent and prosperous bar. Brown & Reid v. Bigbee, supra. Usually where the services of an attorney have been recognized as an equitable lien, the services have been performed in connection with court proceedings, and judgment has been obtained in favor of his client. An attorney for a defendant, however great the value of his services, and however much property he may have enabled his client to save, has no lien on his client’s property by virtue of equitable principles.
On principle we are of the opinion that there exists no equitable reason for preference in favor of the complainant over the other creditors. We have been referred to no case in our jurisdiction deciding the question one way or the other. The view expressed finds authority in the case of Trist v. Child, 21 Wall., 441" court="SCOTUS" date_filed="1875-03-22" href="https://app.midpage.ai/document/trist-v-child-89027?utm_source=webapp" opinion_id="89027">21 Wall., 441, 22 L. Ed., 623. In that case Trist had a claim against the United States for his services touching the treaty of Guadaloupe Hidalgo. He
“That the claim set up in the bill to a specific part of the money appropriated is within this statute is too clear to admit of doubt. It would be a waste of time to discuss the subject.”
Claim to a lien was denied upon the equitable principle stated that a mere agreement to pay a debt out of such fund is not sufficient, but there must be an appropriation of the fund pro tanto either by giving an order or by transferring it otherwise in such manner that the latter is authorized to pay the amount directly to the claimant without the further intervention of the debtor. In the case of Nutt v. Knut, 200 U. S., 13, 26 Sup. Ct., 216, 50 L. Ed., 348" court="SCOTUS" date_filed="1906-01-02" href="https://app.midpage.ai/document/nutt-v-knut-96374?utm_source=webapp" opinion_id="96374">50 L. Ed., 348, there was an agreement between the claimant and his attorney by which the latter was to prosecute a claim against the United States for property used and of which he was deprived by United States officers, amounting to |1,000,000, in consideration of which the claimant was to
“It does not follow . . . that, for this error, the judgment must be reversed” as* “there is a provision in the contract of 1882 which can stand alone and which was not in violation of the statute, namely,' the onq evidencing the agreement on the part of Nutt’s executors to pay to the attorney for his services a sum equal to thirty-three and one-third per cent, of the amount allowed on the claim. . . . Such an agreement did not give the attorney any interest or share in the claim itself nor any interest in the particular money paid over to the claimant by the government. It only established an agreed basis for any settlement that might be made, after the allowance and payment of the claim, as to the attorney’s compensation. It simply created a legal obligation upon the part of the estate which, if not recognized after the collection of the money, could have been enforced by suit for the benefit of the attorney, without doing-violence to the statute or to the public policy established by its. provisions. The decree below may then be regarded as only giving effect to the agreement as to the basis upon which the attorney’s compensation was to be calculated. It did not assume to
The claim here falls within the class of the decisions of Trist v. Child and Nutt v. Knut, denying the lien, since there was no contract either express or implied by which the attorney was to have any part of the recovery itself. There are cases decided by the supreme court of the United States in which an equitable lien was allowed, but in those cases it appeared that the attorney had contracted for an interest in the fund independently of any personal obligation of the claimant to pay, or there existed reasons for equitable interference. Wylie v. Coxe, 15 Howe., 415, 14 L. Ed., 753" court="SCOTUS" date_filed="1854-02-16" href="https://app.midpage.ai/document/wylie-v-coxe-86841?utm_source=webapp" opinion_id="86841">14 L. Ed., 753. Under the contract in that case the attorney was to receive a commission of five per cent, on the sum awarded for his services. There was no discussion in that case of the doctrine of equitable liens. No controversy appears to have arisen as to preference between the attorney and other creditors out of the particular fund, and the court concluded by saying:
“It is admitted that the complainant, by his explanations and arguments, removes difficulties and objections which, unexplained, would in all probability prevent the allowance of the claim. We think the contract is proved, and also the services rendered under it, by the complainant, and that he is entitled to the compensation claimed.”
There was objection made that equity had no jurisdiction on the ground that adequate relief could be obtained at law. With respect to this objection, the court merely said:
“The evidence proves that the complainant was to receive a contingent fee of five per centum, out of the fund award
In Valdes v. Larrinaga, 233 U. S., 708, 34 Sup. Ct., 750, 58 L. Ed., 1163, the complainant had a contract for ten per cent, of the profits which were to be obtained out of a concession which he paid the defendant to procure, thus evidencing that the contract was not for any personal obligation of the claimant but an interest in the profits themselves. It was objected that this did not present a case for equitable relief, but the court said the contract “gave the appellee an equitable interest in the concession to the extent of securing his share of the profits, if any, and attached to these profits specifically if and when they came into being. ... It established a fiduciary relation between Valdes, who had legal control, and the plaintiff. The bill alleges an abuse of the relation by a secret transaction from which it is alleged that the profits accrued. It is a proper case for equitable relief.”
The cases referred to point out the distinction which we have applied in accordance with good reason and sound principles wherein in cases of this sort an equitable lien may be asserted, with the result that the complainant is entitled
The decree of the chancellor will be modified so as to allow the claim of the complainant in full without any preference in his favor over the other creditors of the estate. The costs in the case will be paid by the administrator and the cause remanded in order that it may be proceeded with consistently with this opinion.