Court Opinion

ID: 9691293
Source: CourtListenerOpinion
Date Created: 2023-08-24 20:23:30.432484+00
Date Added: 2024-06-11T09:10:18.755904
License: Public Domain

*711Nuessle, Cli. J.
(On petition for rehearing.) The plaintiff and respondent has filed a petition for rehearing. He predicates his petition on three propositions. 1. “That the Court erred in finding and in concluding as a fact that the respondent purchased the note and the mortgage securing the payment thereof with intent to bring suit thereon in violation of Section 12-1719 EC 1943.” 2. “That the-Court erred in assuming without deciding that the appellant Smith could challenge the validity of plaintiff’s deed (obtained through foreclosure of the mortgage) on the ground that it was champertous even, though she was not a party to the transaction or contract of purchase of the assignment.” 3. “That the Court erred in holding (by necessary implication) that the appellant could collaterally attack the validity of respondent’s deed in this action which he had obtained through the foreclosure of the mortgage acquired by .purchase of an assignment.”
As to the first proposition, it is enough to say that the question as to whether there was a violation of Section -12-1719 EC 1943 was fully considered in the opinion filed and we discern no reason for departing from the holding there announced.
As to the second proposition advanced in the petition for rehearing, we are of the opinion that the petitioner has either misread or misconceived the holdings in the greater number of those authorities on which he relies to sustain his contention. His contention is that the appellant Smith could not challenge the validity of respondent’s deed because Smith was not a party to the transaction involving the purchase of the note and mortgage and the defense of champerty can be invoked only by a party to the champertous agreement in a proceeding where such contract is sought to be enforced.
After a further extensive research and a meticulous reexamination of the authorities dealing with this question, we are confirmed in the opinion -that a majority of the authorities approve and sustain the rule that while a third person may not take advantage of champerty as against the original owner of a chose in action, that defense is available to a third person in an action brought by a champertous assignee thereof. This rule is, in our *712judgment, a rule of reason and logic, since the assignee, to establish his right to bring the action, must predicate that right upon the champertous contract.
In Galbraith v. Payne, 12 ND 164, 96 NW 258, an action to quiet title, this court said: “Section 7002 (Section 12-1714 RC 1943) makes it a misdemeanor for any person to convey any pretended title to lands, unless he or those under whom he claims have been in possession or have taken the rents and profits for one year before his conveyance. The deed upon which- the plaintiff relies to establish his title- was executed in violation of this section. It was, therefore, void, as contrary to the express provisions of the statute, and contrary to the policy of the law of this state as expressed in said section. See section 3920, Rev. Codes (Section 9-0801 RC 1943).”- And the court held that the plaintiff could not recover as against the defendant who was in adverse possession when the conveyance to plaintiff was executed. This holding has been approved and followed in a great many cases in this court. Among the latest of these cases are Robertson v. Brown, 75 ND 109, 25 NW2d 781; and Sailer v. Mercer County, 75 ND 123, 26 NW2d 137. Clearly, insofar as the effect of a violation of Section 12-1714 is concerned, it is identical with the effect of a violation of Section 12-1719 with which we are here dealing. See also Hudson v. Sheafe, 41 SD 475, 171 NW 320. And this is at least the implication of our holding in Woods v. Walsh, 7 ND 376, 75 NW 767; and in Starke v. Wannemacher, 32 ND 617, 156 NW 494, 4 ALR 167. See also in this connection Colville v. Small, 22 Ont L Rep 426, 19 American and English Annotated Cases 515, and authorities cited in note; Prosky v. Clark, 32 Nev 441, 109 Pac 793, 35 LRA NS 512, and authorities cited in note; 10 Am Jur 572; 14 CJS 382.
The petitioner, in support of his contention, .relies among other cases upon Burnes v. Scott, 117 US 582, 29 Law Ed 991, 6 Sup Ct Rep 865; and Woods v. Walsh, supra. But in Woods v. Walsh, Judge Wallin writing the opinion, said “The statute in this state has singled out -certain agreements which were champertous at common law, and declared that the same are misde*713meanors. See Revised Codes, (1895) sections 7008-7013. (Section 7008 is now found in the 1943 Codes as Section 12-1719.) The case at bar. reveals no features which bring it within either of the sections we have cited.” In Woods v. Walsh the action was brought by the original owner of the'cause of action. The agreement between plaintiff and his attorney to prosecute the action was champertous. The court held that in such case the defense of champerty was not available to a third person who was not a party to the champertous agreement. And in the opinion on petition for rehearing the court further said “The authorities which have controlled this court in deciding this case, and which are cited in the opinion, go to the extent of holding that a champertous agreement made between the plaintiff and another person, which agreement is independent of the contract sued upon, can never operate to defeat an action which is based upon a valid claim which is not tainted with the stigma of champerty.” That is, in this Woods case the champertous agreement was' between Woods and his attorney, and this being so, Walsh, the maker of the notes could not raise the issue of champerty in an action brought by Woods against him to recover thereon.- The court among other authorities cites Hilton v. Woods, LR 4, Equity, 432; and Keiper v. Miller, 68 Fed 627, construing Burnes v. Scott, supra. Hilton v. Woods was a case identical with the case in Woods v. Walsh, and so also was Burnes v. Scott. In Keiper v. Miller, the suit was brought by an assignee to whom the cause of action had been assigned. The court held that the agreement to assign constituted champerty and the action should be dismissed. Dallas, Circuit Judge, writing the opinion, considered and construed Burnes v. Scott and Hilton v. Woods, and in effect said that these cases were consistent with and in fact supported the holding in the Keiper case.
The case of Prosky v. Clark, 32 Nev 441, 109 Pac 793, 35 LRA NS 512 also is cited and relied upon by-the petitioner. This was an appeal from an order granting a motion for nonsuit. The action was brought by the appellants, Prosky and Clark, as plaintiffs. The court said: “The motion for nonsuit was granted upon the sole ground of an alleged champertous con*714tract entered into between the appellants prior to the commencement of tbe action under the provisions of which the said appellant Winfield Scott Prosky was granted a one-half interest of the property rights of the said appellant George Hafer in the property in controversy.
“In the view we take of this case, it is unnecessary to determine the question whether the agreement entered into between appellants Prosky and Hafer was in fact champertous, nor (or) to determine the extent to which the doctrine of champerty prevails in this state.” The court then went on, and after citing numerous cases, in the greater number of which the facts were similar to those in Burnes v. Scott and Woods v. Walsh, said: “conceding, for the purposes of this case, that the contract between Hafer and Prosky was void for champerty, only the alleged right of action of Prosky would be affected. All the right of action was held either by Hafer alone, or by Hafer and Prosky jointly. In either event, a motion for a nonsuit could not be supported upon the theory that the conveyance or assignment from Hafer to Prosky was void for champerty.” So it seems to us that Prosky v. Clark is an authority of little, if any, value in support of the petitioner’s contention.
Now as to the third contention. To restate the facts: In the instant case the petitioner procured an assignment of the mortgage on the premises here'involved. The appellant Smith had acquired a tax deed to these premises and was in possession thereof under color of this deed. The assignment challenged was purchased contrary to the provisions of Section 17-1719 and was champertous. The petitioner brought a hybrid action to foreclose the mortgage and to quiet the title as against the appellant’s tax deed. She demurred. The court sustained the demurrer and dismissed the case as against her. Thereafter the petitioner had judgment of foreclosure. The premises were sold under that judgment and petitioner, purchasing at the sale, acquired the deed under which he now claims.' His contention is that in the foreclosure action, based upon the mortgage thus assigned, the court, having ordered judgment of foreclosure, necessarily must have found him to be the owner of the mort*715gage and accordingly that his purchase of the assignment was ■ valid. He further contends that Smith, having then had an! opportunity to challenge the validity of the purchase of the assignment and having failed to do so, is now barred from interposing that challenge; that the attack now made by Smith is collateral and cannot be sustained. There is no substance to> this contention. No appeal was taken from the action of the court in dismissing the case against Smith. Thereafter she was no longer a party. As to her, the court had no jurisdiction. The purchase of the assignment was champertous and therefore void, but no issue as to its validity was raised in the foreclosure proceedings. The representatives of the mortgagor, the other defendants having defaulted, were the only ones who might have raised it, but they did not do so. They stipulated that the judgment of foreclosure might be entered so long as they were not charged thereby for a deficiency or for costs. In its findings the court recited that the action had been dismissed as to Smith, but made no finding and stated no conclusion as to the validity of the purchase of the assignment. The court evidently had no knowledge of its invalidity, and did not pass upon that question. Therefore the judgment entered in the foreclosure action is no more binding upon Smith than it is upon any other person not a party to the proceeding. Accordingly, since the contract of purchase was void, and Smith was not concluded by the judgment, as to her it is subject to collateral attack. See Rasmusson v. Schmalenberger, 60 ND 527, 235 NW 496; Christenson v. Grandy, 46 ND 418, 180 NW 18; Freeman on Judgments, 5th Ed, p 601 et seq.
Petition denied.
Burke, Morris and Christianson, JJ., and Gronna, Dist. J., concur.