Case Name: Blixt and another, Respondents, vs. Janowiak and wife, imp., Appellants
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1922-05-09
Citations: 177 Wis. 175
Docket Number: 
Parties: Blixt and another, Respondents, vs. Janowiak and wife, imp., Appellants.
Judges: 
Reporter: Wisconsin Reports
Volume: 177
Pages: 175–189

Head Matter:
Blixt and another, Respondents, vs. Janowiak and wife, imp., Appellants.
April 12
May 9, 1922.
Champertous contracts: Effect on action: Rescission: Fraud: Cancellation: Accotmting: Interest and taxes paid: Offsets.
1. At common law, a contract savoring of champerty or maintenance cannot form the basis of a cause of action between the parties thereto.
2. The rule that the claim or counterclaim of a party to an action must be dismissed where it appears that such party has a champertous agreement with his attorney or some third person has been so long recognized in this state that it will not be overruled, though it is contrary to the great weight of authority.
3. Where it appeared at the trial that plaintiffs had a champertous agreement with their attorneys, made in another state where such agreement did not- bar recovery against defendants, and that their local attorneys had no knowledge thereof, it was not an abuse of the discretion of the trial court to permit the rescission by the parties of the champertous agreement and the substitution therefor of a proper agreement without dismissing the action, the only effect of such dismissal being to cause the delay incident to commencing a new action.
4. In an equitable accounting as to rents and profits during the use and possession of the premises, the defendants, although guilty of positive and gross fraud, will be allowed taxes and interest charges. Crownhaet and Owen, JJ., dissent.
Appeal from a judgment of the circuit court for Oconto county: W. B. Quinlan, Circuit Judge.
Modified and affirmed.
Prior to February, 1914, one Joseph Skinkis had owned and lived on a farm of 140 acres in Oconto county, Wisconsin. On said date he with his wife, the plaintiff Aggie, now Blixt, conveyed the said farm and sold certain personal property thereon to a Mr. and Mrs. Pirek in exchange for certain real estate in Chicago, where the Pireks lived. In May, 1914, Joseph Skinkis and his wife commenced an action in the circuit court for Oconto county against the Pireks to rescind such transfer of real and personal property on the ground of fraud. On June 26, 1915, a judgment was rendered in said action restoring title to the farm to' the plaintiffs and for the value of the personal property. On June 29, 1918, by an instrument purporting to be a quitclaim deed, a conveyance of the real estate in question, together with a sale of the personal property, appears to have been made by the plaintiffs to one Stanley Grochocki, and such instrument recorded on July 5, 1915. Neither plaintiff Joseph Skinkis nor his wife tried to take possession of said farm after their conveyance in February, 1914.
On October 14, 1915, said Grochocki conveyed by warranty deed to the defendant John Janowiak, reciting a consideration of $9,500, made up, it was claimed, of the assumption of then outstanding mortgages of about $4,000 and the then payment of the balance in cash and by check. Stanley Grochocki remained in possession after the quitclaim to him in June, 1915, until his alleged sale to defendant Jan-owiak in October, 1915, and then continued in possession as an alleged tenant of Janowiak, being succeeded by George and Helen Gill, who were in possession at the time of the trial.
In March, 1920, a contract was drawn and executed by Joseph Skinkis and his former wife, the plaintiff Aggie Blixt (they having been divorced in 1918 and she having again married), reciting the former ownership of and the proceedings with reference to the said real estate, and then provided that said Joseph consented to the commencement of a further action to be instituted to again recover possession and title to said farm, he quitclaiming to his former wife all his interest in the land, with a provision that she would pay to him five per cent, of the value in excess of $3,000 of the land if so recovered.
On March 15, 1920, an agreement was made with Aggie Blixt and her now husband, Alfred Blixt, for the employment of an attorney in Chicago, Illinois, for the prosecution of such lawsuit. It was further agreed that she would pay the sum of $100 toward defraying the necessary costs and expenses of instituting and prosecuting such lawsuit, and in case the employment of local counsel in Wisconsin were necessary she would contribute fifty per cent, of the fees of such local counsel; and further provided that in case of a recovery through said lawsuit of such farm, an undivided one-half interest therein should be conveyed to the Chicago attorney as additional compensation for his services.
On March 25, 1920, this action was commenced against the parties in possession of said farm: Stanley Grochocki, to whom the same had been conveyed by Joseph Skinkis and Aggie, his then wife; John Janowiak, to whom said Gro-chocki had conveyed; and one John A. Rybczinski, who, it was contended by plaintiffs, had been the confidential agent and trusted advisor of Mr. and Mrs. Skinkis during the various proceedings, and through whose effort, it was alleged, plaintiffs had been induced to execute the quitclaim deed to Grochocki in June, 1915. The Pireks were also inter-pleaded as defendants, and asserted by counterclaim their right to certain relief. Their claim, however, was denied by the court, and, no appeal being taken, the questions involved are not here considered.
During the trial the existence of the contract between the Chicago attorney and the plaintiffs was called to the attention of the court.
The contesting defendants then moved that the action be dismissed on the ground of the champertous nature of said contract. It clearly appeared that the attorneys in Wisconsin representing plaintiffs were in nowise parties to said contract and did not know of the same until it was brought to their attention on the trial.
After such motion was made the said attorney from Chicago and the plaintiffs agreed in writing to rescind and abrogate the contract of March 15, 1920, so alleged to be cham-pertous, and there was refunded to the plaintiffs the money they had advanced pursuant to the same. A new agreement was then made between the attorney and the plaintiffs, as against which no objection is made. Upon such facts the trial court denied defendants’ motion to dismiss and permitted the action'to proceed.
The court gave judgment in favor of the plaintiffs, the substance of the findings being that gross fraud had been perpetrated by the defendants Rybczinski, Janowiak, and Grochocki, whereby the plaintiffs Joseph Skinkis and Aggie Skinkis, his then wife, had been induced to convey the property recovered by them by the judgment in 1915 to the defendant Grochocki; that no consideration had been paid by defendant Janowiak to Grochocki for the conveyance by the latter to the former, and that such transaction was also a fraud upon the plaintiffs; that during the time plaintiffs had been out of possession there had been paid as'rent to the defendant John Janowiak by those in possession the sum of $1,550. The plaintiffs having alleged in their complaint that the defendants Rybczinski and Janozviak, during their possession of the farm, had the rents, issues, and profits-therefrom, and that the fair cash rental value has been $500 per annum, and asking for the sum of $2,500 for the rent of said farm, the court gave them judgment for the said $1,550.
It was further found that during the same period there had been paid by defendant Janowiak $484.71 for taxes lawfully assessed against said premises and the further sum of $550 for accrued interest on mortgages then outstanding, the validity of which mortgages has not been questioned by plaintiffs. The trial court refused to allow him said two items aggregating $1,034.71 out of said sum of $1,550.
From the judgment entered in accordance with such findings the defendants Janowiak have appealed.
For the appellants there was a brief by John B. Chase of Qconto and William J. Dillon of Chicago, attorneys, and Minahan, Minahan, Minahan & Duquaine of Green Bay, of counsel, and oral argument by Mr. Hugh Minahan and Mr. Chase.
For the respondents there was a brief by Classon & Whit-comb of Oconto and C. C. H. Zillman of Chicago, and oral argument by Mr. Zillman and Mr. Allan V. Classon.

Opinion:
Eschweiler, J.
The appellant, defendant Janowiak, challenges the findings of the court below on its determination that fraud was perpetrated by him and defendant Ryb-czinski, and for which fraud the court reinstated plaintiffs Aggie Blixt and Joseph Skinkis in the title to and possession of the farm.
We have not set out the details of the evidence in the record because it presents such a clear and convincing picture of gross fraud talcing advantage of gross credulity that no useful purpose would be served by spreading them upon our record. It is enough to say that the evidence amply supports the conclusions of the trial court in that regard and they are confirmed.
It is contended by appellants that, under the established doctrine of this court, the contract between the- Chicago attorney and the plaintiffs for the prosecution and carrying on of this lawsuit being champertous and called to the trial court's attention, it was his absolute duty to dismiss this lawsuit on the ground of public policy. ,
On the other hand it is contended by plaintiffs that if such be the heretofore recognized rule of this jurisdiction it is not in accord with the doctrine on the same subject elsewhere and should be now repudiated, or, in case that be not done, still it was a proper exercise of judicial discretion to permit the parties to such champertous agreement to rescind the same and proceed from that point on with the same litigation upon a new and legitimate contract for its conduct.
That a contract savoring of champerty or 'maintenance at common law cannot form the basis for a cause of action between the parties to such a particular contract is well recognized by a universal line of authorities and needs no further consideration. The rule is declared in such cases as Miles v. Mutual R. F. L. Asso. 108 Wis. 421, 433, 84 N. W. 159; Ellis v. Frawley, 165 Wis. 381, 161 N. W. 364.
But this court stands practically alone in holding that, where it appears in the trial of a civil action that either party thereto has a contract sávoring of champerty or maintenance with his attorney or some third person, such party's complaint or counterclaim, as the case may be, shall be dismissed, irrespective of the merits and solely because public policy forbids a court to continue hearing a cause where there is such an apparent stain upon the record. See note to Prosky v. Clark (32 Nev. 441, 109 Pac. 793) in 35 L. R. A. n. s. 512, 515; 5 Ruling Case Law, 284; 11 Corp. Jur. 270.
Elsewhere the recognized rule seems to be that the taint of champerty or maintenance only affects the litigation between parties tp such contract itself. It is the rule -in Illinois, where this particúlar contract was made (Elser v. Gross Point, 223 Ill. 230, 240, 79 N. E. 27), and elsewhere. Euneau v. Rieger, 105 Mo. 659, 682, 16 S. W. 854; Reichert v. Sheip, 204 Ala. 86, 85 South. 267; Cress v. Ivens, 163 Iowa, 659, 145 N. W. 325; Harness v. B. & O. R. Co.. 86 W. Va. 284, 103 S. E. 866; Irons v. Croft H. & N. Co. 86 W. Va. 685, 104 S. E. 111; Young v. Young, 196 Mich. 316, 162 N. W. 993; also note in 35 L. R. A. n. s. 512; 11 Corp. Jur. 270; 5 Ruling Case Law, 284.
Appellants contend that. the present action should have been dismissed upon the declared doctrine in this state. It is founded upon what was said by this court in Barker v. Barker, 14 Wis. 131, that public policy here and at common law requires that the court should, on its own motion, dismiss an action where champerty or maintenance was either in the contract sued upon or in a collateral agreement concerning the carrying on of the litigation made by one or the other parties litigant. In the Barker Case the contract sued upon was in violation of the .rule concerning maintenance and therefore did not present the situation that we have here. The cases there cited and relied upon other than frpm Tennessee were where suit had been brought directly upon such objectionable contracts.
From subsequent decisions in the Tennessee court it appears that the earlier decisions were based upon a particular statute subsequently repealed rather than upon what was assumed to be the common-law rule, and the Tennessee court now holds that the duty to dismiss is limited to suits in which the illegal contracts are directly sued upon. Staub v. Sewanee C., C. & L. Co. 140 Tenn. 505, 205 S. W. 320.
In Kelly v. Kelly, 86 Wis. 170, 56 N. W. 637, a situation was presented similar to the one here before us, and it was stated that though the ruling in the Barker Case was contrary to the great weight of authority, nevertheless it had become a substantive part of the law of this state and would not be then changed, and that the plaintiff, as party to the champertous contract for its prosecution, not being there to consent to the abrogation of such contract, the suit brought against a third person and prosecuted under such champertous agreement was dismissed.
The doctrine was again reaffirmed in Miles v. Mutual R. F. L. Asso. 108 Wis. 421, 432, 84 N. W. 159, and again in Decker v. Becker, 143 Wis. 542, 128 N. W. 67.
The general doctrine was also declared in Emerson v. McDonnell, 129 Wis. 67, 107 N. W. 1037, where the cham-pertous contract was directly concerned and involved the purchase by an attorney of his client's interest in certain lands. The last expression of this court is in Ellis v. Frawley, 165 Wis. 381, 385, 161 N. W. 364, where action was brought to recover by one attorney from another the former's claim for an interest arising by virtue of champertous contracts with clients.
In Stearns v. Felker, 28 Wis. 594, it was held in a suit ' between attorney and client concerning a claim for services that although there was. a champertous agreement between them under which such services were rendered and that such champertous agreement could not be enforced, yet that nevertheless the attorney might recover for the-value of his services.
The rule having been so long recognized in this state and the express challenge made in the Kelly Case to have this court change its ruling and that having been refused, we are not prepared to nor do we feel called upon to now overturn the former declarations of this court in that regard.
Such position now taken, however, does not require a reversal of the trial court's ruling permitting the lawsuit to continue. Plaintiff's right of action as against the defendants was not of itself contrary to public policy nor one that a court could refuse to recognize. A dismissal of the present action for the reason contended by appellants would of course be no' bar to the immediate commencement of another action by plaintiffs against the same defendants upon a contract or arrangement for the prosecution of the same which would not be in violation of the law as to champerty or maintenance. So a dismissal of the present action would amount to no more than a delay in the final judgment between the plaintiffs and defendants upon the merits. We think it was well within the discretion of the court, therefore, to permit the present lawsuit to continue after being purged of the champertous agreement with counsel, rather than to dismiss the same and thereby require the commencement of a new action. We think such procedure is clearly recognized by what is said in the Kelly Case, supra.
We are unable, however, to sustain the ruling of the court on the other question involved in this appeal as to the refusal to deduct from the amount with which the defendants are charged as having been received by them in the shape of rents during the possession of the premises the sums paid for the unquestioned valid assessment of taxes and the interest paid on the unquestioned valid incum-brances on the property.
Were the fraud for which the conveyance from the plaintiffs was set aside that which is designated by the courts as a constructive as distinguished from one in which the elements of positive bad faith and intentional wrongdoing appear, there would not be much doubt that under the recognized doctrine of this state such relief should be granted. Cook v. Berlin W. M. Co. 56 Wis. 643, 649, 650, 14 N. W. 808; Kickbusch v. Corwith, 108 Wis. 634, 651, 85 N. W. 148.
Here, however, is presented a situation where the defendants are properly found guilty of positive and gross fraud. They are wilful wrongdoers, and it is argued forcibly here and was so held by the trial court, that, being such wrongdoers, they are entitled to nothing that savors of relief as to the situation in which their own wrongdoing placed them.
There is sharp conflict in the authorities on this particular question presented, but we are disposed to follow those which hold, as did this court in the case of Hawley v. Tesch, 88 Wis. 213, 242, 59 N. W. 670, that on an accounting for rents and profits as against one held as trustee through active fraud (p. 231), nevertheless he shall be allowed his disbursements for taxes paid and other expenses from which the complainants received a benefit.
The question is fully discussed and the authorities on both sides considered in the case of Loos v. Wilkinson, 113 N. Y. 485, 487, 21 N. E. 392, and it is there held in effect that the setting aside of the fraudulent conveyance is separate and distinct from the demand for an accounting of the rents and profits during possession, which is in the nature of an equitable proceeding and must be disposed of on equitable principles, and that from rents received shall be deducted payments for taxes, interest, and other items necessarily expended in preserving the property. Such holding does not appear to have been changed in New York since and has been several times expressly recognized. Smith v. Wise, 132 N. Y. 172, 30 N. E. 229; Hamilton Nat. Bank v. Halstead, 134 N. Y. 520, 524, 31 N. E. 900.
The same holding was had as to an allowance for taxes paid in Lamb v. McIntire, 183 Mass. 367, 370, 67 N. E. 320. The same rule is recognized as valid in Morley Bros. v. Stringer, 133 Mich. 690, 694, 95 N. W. 978. To the shme effect, Hutchinson v. Park, 72 Ark. 509, 82 S. W. 843; Sheridan v. McCormick, 39 N. Dak. 641, 168 N. W. 59, 8 A. L. R. 523, note p. 527. See, also, 12 Ruling Case Law, 643; 27 Corp. Jur. 664, 676.
There is a substantial distinction between payments for such items as the lawful owner would have had to pay if in possession himself and amounts paid or claimed by the fraudulent grantee as a part of the original fraudulent transaction such as were presented and discussed in McGovern v. Milwaukee M. Co. 141 Wis. 309, 124 N. W. 269; Baldwin v. Frisbie, 163 Wis. 26, 157 N. W. 526.
We deem it more consonant with the idea of an equitable accounting, such as this necessarily is as to the rents and profits during the use and possession of the premises, to allow the taxes and interest charges.
By the Court. — Judgment modified by deducting the sum of $1,034.71 from the $1,550 allowed as damages, and as so modified is affirmed.