Court Opinion

ID: 7887467
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:43:52.77706+00
Date Added: 2024-06-11T16:31:47.703508
License: Public Domain

The opinion of the court was delivered by
JoHNSTON, J.:
The plaintiffs in error present two questions —one, that the findings of the court fail to support its judg*200ment; and the other, that the contract between the creditors of the Pomona creamery company and F. A. Waddle is ch’am-pertous.
The only criticism made upon the findings is where the court states that the second charter filed was intended as an amended one, and not to be the charter of a new corporation. Two charters were filed by the company — one when it was organized, in January, 1884, and one in June, 1885. In the first charter there was a provision that the individual property of the stockholders should not be liable for corporate debts, and that the indebtedness of the corporation should not at any time exceed one-third of the capital stock of the company. The judgments which form the basis of this proceeding were rendered after the second charter was filed; and it is contended by the stockholders that they could not be held individually liable under the charter first filed, and that the making and filing of the second charter was the formation of a new company in which they held no stock, and hence they were not liable for the judgments sought to be enforced. The court, however, finds from the evidence that the second charter was merely intended as an amendment of the first, and in the absence of the evidence, which was not brought here, this finding is conclusive in this court. Even the preamble to the amended charter clearly indicates that it was made to cure irregularities or defects in the first. There was no change of name nor of purpose, and the company continued to carry on its business with the same property, using the same books and records, under the directions of the same officers, as before. The stockholders were notified in the manner prescribed by the by-laws of the meeting at which the attempted amendment of the charter was made, and most of the plaintiffs in error continued to do business with the corporation as such after that time. The fact that the law did not then permit the amendment of charters will not relieve the stockholders from liability, since the court has found that the action taken was intended as an amendment aud as a continuation of the corporation first organized in which they held stock; nor can *201they be relieved from liability by virtue of the exceptions included in the first charter. That charter contained all the essential provisions, and more also. It set forth the name of the corporation, the purpose for which it was formed, the place where its business should be transacted, the number of its directors and the names of those first appointed, and the amount of capital stock and the shares into which it was divided. Included in the document were by-laws which had no place there, and among them a provision that the stockholders shall not be individually liable for the debts of the corporation. This provision is in direct conflict with the constitution and statutes of the state, and is nugatory. But the placing of this void provision in the charter does not necessarily invalidate the organization. Further than that, these stockholders are not in a position to impeach the irregularity of the organization of the corporation, or to deny their liability as stockholders therein. Having organized themselves as a corporation, transacted business and held themselves 1- -HaSiity of stockholders. out to the world as such corporation, they cannot , ' when proceeded against by creditors set up as a defense that the preliminary steps in the organization were irregular. (Thompson’s Liability of Stockholders, § 407.)
The defense of champerty is raised on an agreement contemporaneously made with the assignments of the judgments. The finding of fact respecting the matter is that it was agreed between the plaintiff, who is an attorney at law, and the judgment creditors “ that he should proceed to collect said judgments in his own name, and when collected to pay to said several judgment creditors fifty per cent, of the amount collected on each judgment; they, the judgment creditors, then advancing to plaintiff $30 as indemnity against costs.” There is a great diversity of opinion as to what constitutes champerty. A few of the courts hold to the ancient doctrine of champerty with ' considerable strictness; many of them have greatly relaxed the common-law rules, making them conform more closely to the ' present condition of society; while some have repudiated the doctrine entirely. In this state the doctrine has been recog*202nized, and it has been held that the defense of champerty may be maintained. (A. T. & S. F. Rld. Co. v. Johnson, 29 Kas. 218.) In that case the only consideration for the prosecution of the suit was a share of the judgment to be recovered, and the attorneys were to commence and carry it to an end at their own oost and expenses. The mere agreement for a contingent fee does not fall within any of the rules of champerty, nor is it generally regarded to be unlawful for an attorney to carry on a suit for another for a percentage or share of the thing to be recovered, unless he assumes the risks of the litigation by relieving or indemnifying his client from all costs and expenses of the same. Sir William Blackstone says that champerty is “a bargain with a plaintiff or defendant eampum partiré to divide the land or other matter sued for between them, if they prevail at law; whereupon the champertor is to carry on the party’s suit at his own expense.” (4 Bl. Com. 135.) The same view is taken by Mr. Chitty, who makes the carrying on of the suit by the ehampertee at his own expense an essential element. (Chitty on Contracts, 745.) This interpretation, which we adopt, is now generally accepted, and is sustained by the weight of authority. (Park Comm’rs v. Coleman, 108 Ill. 591; Walsh v. Shumway, 65 id. 471; Duke v. Harper, 66 Mo. 51; Moody v. Harper, 38 Miss. 601; Weakly v. Hall, 13 Ohio, 167; Key v. Vattier, 1 id. 142; Moses v. Bagley, 55 Ga. 283; Allard v. Lamirande, 29 Wis. 502; Martin v. Clarke, 8 R. I. 389; Wright v. Tebbitts, 91 U. S. 252; Knadler v. Sharp, 36 Iowa, 232; Courtright v. Burnes, 13 Fed. Rep. 317, and note; Phillips v. South Park Comm’rs, 10 N. E. Rep. 230; Jewell v. Neidy, 61 Iowa, 299.) In the present case there is no showing that the attorney was to enforce the collection of the judgments at his own cost or expense. As the finding stands it indicates that the judgment creditors were not to be relieved from the costs, as it is stated that they advanced to the attorney $30 as indemnity against costs. It does not appear that the costs of the proceeding to enforce the collection of the judgments exceeded the sum advanced, and as the plaintiffs in error presented the defense of champerty it devnl Wi *Aam. to show *2032. not cRam- ’ pertous. the cbampertous elements of the agreement. From the record in the case we are bound to assume that the assignors of the judgments were to bear the cost of the proceedings for their enforcement; and it follows that the agreement made was not champertous.
We may further remark that the validity of the judgments is not questioned; and certainly it is not unlawful to assign or enforce them. The agreement did not bring on useless litigation, or make unnecessary costs. The claims qf the creditors had already been placed in judgments, and the costs of litigating the claims had accrued. The effect of assigning all the judgments to one person and enforcing the same in a single proceeding tended to reduce the costs, and was not detrimental to the interests of the plaintiffs in error.
We find no error in the record, and will therefore affirm the judgment.
All the Justices concurring.