CRESS v. IVENS et al. (Supreme Court of Iowa. Feb. 12, 1914.) 1. CHAMPERTY AND MAINTENANCE (8 4*) CHAMPERTOUS CONTRACT-WHO MAY RAISE OBJECTION. In an action by the assignee of a cause of action, defendant cannot raise the issue that the contract of assignment between the assignor and the assignee was champertous, since that would raise an issue in which defendant had no real interest. [Ed. Note.-For other cases, see Champerty and Maintenance, Cent. Dig. §§ 4, 9, 11-19; Dec. Dig. 4.*] 2. ASSIGNMENTS (§ 119*) OPERATION AND EFFECT. Where the consideration for an assignment of causes of action was a promise by the assignee to account for the proceeds of the litigation and to pay his assignors 50 per cent., the effect was to make the assignee a trustee for his assignors, and as such he was entitled to maintain suit under Code, § 3459. [Ed. Note. For other cases, see Assignments, Cent. Dig. § 199; Dec. Dig. § 119.*] 3. ASSIGNMENTS (§ 100*)-EQUITIES AND DEFENSES BETWEEN ORIGINAL PARTIES. Where causes of action were assigned, and the assignee agreed to sue in his own name and account to the assignors for the proceeds of the litigation, paying them 50 per cent. thereof, every defense available against the assignors was also available against the assignee. [Ed. Note.-For other cases, see Assignments, Cent. Dig. 88 177, 180; Dec. Dig. § 100.*] 4. ASSIGNMENTS (§ 137*)-SETTLEMENT WITH ASSIGNOR-FRAUD. In an action by the assignee of several different causes of action, where the defense was that a full settlement had been made with each of the assignors, evidence held insufficient to show fraud in procuring any of the settle ments. [Ed. Note. For other cases, see Assignments, Cent. Dig. § 234; Dec. Dig. § 137.*] 5. COMPROMISE AND SETTLEMENT (§ 8*)-RAT IFICATION. Though there was fraud in procuring certain settlements, they would not for that reason be void, but voidable only, and the parties thereto, having retained the fruits of the settlements, would be held to have ratified them, since they could not repudiate without restoring the consideration received. [Ed. Note.-For other cases, see Compromise and Settlement, Cent. Dig. §§ 17-31, 33; Dec. Dig. § 8.*] Appeal from District Court, Woodbury County; John F. Oliver, Judge. Action at law to recover the amount of certain commissions received by the defendants in alleged fraud of plaintiff's assignors. Certain affirmative defenses were pleaded by the defendants. Two of these are presented on this appeal. There was a judgment for the plaintiff for the full amount claimed. The defendants appeal. Reversed and remanded. Milchrist & Scott, of Sioux City, and Johnston Bros., of Ida Grove, for appellants. Pitkin & Smith, of Sioux City, and Chas. D. Goldsmith, of Sac City, for appellee. EVANS, J. The plaintiff, as assignee of five assignors, brought this action upon the five separate causes of action of his assignors, respectively. The original transaction involved is the same as that involved in Cress v. Ivens et al., 155 Iowa, 17, 134 N. W. 869. The claim on the part of the plaintiff is that the defendants, acting together, induced ten others to join them in the purchase of a large tract of land, consisting of 14,883 acres, in Minnesota, near the city of Duluth, at a stated price of $5.25 per acre. The proposed purchase was made. Each of such ten per sons took a one-fifteenth interest in the enterprise and the defendants the remaining five-fifteenths. The purchase was made from the Boston & Duluth Farm Land Company. The purchase was made by executory contract; one-sixth of the purchase price being paid down and the remainder to be paid in five equal annual installments. At the time of such purchase, each of the defendants had a contract with the seller for a commission of 50 cents an acre, making a total of $1 an acre for both commissions. This commission was also payable in installments out of the corresponding installments of the purchase price. It is contended for plaintiff that the defendants falsely represented to their ten associates that they were to receive no commission, and that their associates stood on an equality with them in the purchase. The former action was brought by five of such associates. That suit was brought in equity and was in the nature of an accounting as for money received by the defendants from or on behalf of their joint associates; each associate claiming a one-fifteenth share thereof. The parties to that suit recovered the full amount claimed, and the judgment in their favor was affirmed here. In the present suit the rights of the remaining five associates are involved. The present action is brought on the law side but was tried to the court without a jury. The petition is indefinite in its allegations. It does not indicate whether it claims relief as for damages or as for money had and received. The distinction is perhaps not very material. And yet some stress is laid upon it in appellee's argument as bearing upon the question whether the causes of action now sued upon were covered or included by the settlements pleaded by the defendants and hereinafter referred to. Generally speaking, the theory of the plaintiff is that the false representations of the defendants caused each of their associates to pay more than they otherwise would have paid, and that the defendants received such excess in the form of commissions and are accountable therefor to their associates. There was no misrepresentation in any other sense as to the price of the land. The evidence is undisputed that the price quoted was the minimum price upon the tract. The evidence on behalf of the plaintiff shows that the sell- | 513, 17 N. W. 31, 21 N. W. 9, and s. c., 69 ing company had a large acreage of land oth- Iowa, 296, 22 N. W. 906, 28 N. W. 612, and in er than the land in question; that it clas- Small v. Railway Co., 55 Iowa, 582, 8 N. W. sified its lands and fixed uniform prices 437, the contrary view was adopted by this upon lands of the same class; and that court. Such contrary view is that a chamthese were not and could not be deviated pertous contract between an assignee plainfrom without destroying the market for other tiff and his assignor is not available to the unsold lands. The commission of $1 per acre defendant as a defense to the main action. was also the regular and usual commission To the same effect are Foley v. Grand Rappaid. The alleged false representations, ids Railway Co., 157 Mich. 67, 121 N. W. therefore, are confined to the question of 257; Bick v. Overfelt, 88 Mo. App. 139; commissions received, and the measure of Prosky v. Clark, 32 Nev. 441, 109 Pac. 793, recovery of each associate, if any, is the ex- 35 L. R. A. (N. S.) 512; Woods v. Walsh, cess amount paid by each associate by rea- 7 N: D. 376, 75 N. W. 767; Taylor v. Gilson of the inclusion of such commission in man, 58 N. H. 417; Connecticut Fire Insurthe purchase price. Such is the theory on ance Co. v. Way, 62 N. H. 622; Hart v. which the case was tried, and it bears upon State, 120 Ind. 83, 21 N. E. 654, 24 N. E. the nature and extent of the settlements 151; Davis v. Settle, 43 W. Va. 17, 26 S. E. hereinafter to be considered. Some of plain- 557; Elser v. Village of Grasspoint, 223 Ill. tiff's present assignors were named as parties 230, 79 N. E. 27, 114 Am. St. Rep. 326. in the original suit. In pursuance of settlements had by them with the defendants, they withdrew therefrom. After the trial of the former suit, the plaintiff herein, who was also a plaintiff in the former suit, obtained from his assignors written assignments of their respective causes of action arising out of the same transaction; these assignments being obtained in the summer of 1910, shortly prior to the beginning of this action on August 26, 1910. The following excerpts from some of the cited cases is a sufficient indication of their holding: "Even if the rule is still in force as to agreements with laymen, we think the better rule is that the contract is only void between the parties, and does not affect the obligation of the defendant to the plaintiff.” Foley v. Grand Rapids & I. Ry. Co., supra. "The trial court evidently was of the opinion that the contract of assignment of the notes was champertous and for that reason could not be enforced by the assignee, who had the notes under the champertous agreement. Conceding that the contract of assignment was champertous, the respondent was not a party to that contract, and for that reason was in no position to avail himself of its illegality. This is now the settled rule in Missouri and is supported by a decided weight of authority elsewhere." Bick v. Overfelt, supra. [1] 1. The interest of the plaintiff resting solely upon the assignments referred to, the first affirmative defense urged by the defendants is that each of the contracts, under which the assignments were made, was tainted with champerty and maintenance. It is claimed under the evidence that the plaintiff, being a layman and without any interest in the litigation, solicited such assignments and agreed to run the risk and bear the expense of the litigation for a consideration of 50 per cent. of the recovery. It is urged, therefore, that the assignments should all be deemed null and void, and that the plaintiff's petition should on that ground be dis-perty. Such however is not the case. missed. For the appellee, it is contended that the question of champerty, as between the plaintiff and his assignors, cannot be made an issue in this case. "In a suit by Prosky v. Hafer, to enforce the contract, the latter might set up the defense that the contract was void for cham There is no controversy between the plaintiffs, and whether the suit is conducted in the name of Hafer alone or in his name and that of his grantee or assignee is of no consequence to this defendant." Prosky v. | Clark, supra. "The contract by which the plaintiff acquired title to the note was in no way oppressive or injurious to the defendant, and there is no reason for his defeating the suit on a ground on which he could not defeat it, if it had been brought in the name of the payee without an indorsement of the note." Taylor v. Gilman, supra. The trial court did not pass upon the question of fact. Because of our conclusions about to be expressed, we find it unnecessary to pass upon it. There are some features of the contracts in question that are not fragrant. For the purposes of the argument, we may assume them to be champertous. It is the contention of appellants that when the taint of champerty is made to appear, and that plaintiff's title to the cause of action rests thereon, it becomes the duty of the court "This is not a suit by Osgood against the to refuse all relief and to dismiss the peti- company to recover compensation rendered tion on that ground. There is some author-under a champertous contract. The defendity for this contention. Miles v. Insurance ant cannot set up as a defense that the subCo., 108 Wis. 421, 84 N. W. 159. The weight of authority, however, is with the contrary view. In Vimont v. Railway Co., 64 Iowa, ject-matter of the suit has been made the subject of a champertous contract between the plaintiff and a stranger, unless he shows that the contract is in some way injurious to him." Connecticut River Mutual Fire Insurance Co. v. Way, supra. There is a very practical reason why the rule contended for by appellants at this point should not obtain. The question whether champerty exists is usually a question of fact and may be made such in any case. It is not usually made to appear upon the face of an assignment. It does not so appear in the case at bar. If it were permissible, therefore, for the defendant in any case to raise the issue of champerty against an assignee plaintiff, it would necessarily be permissible for him to do so in every such case. He could thus deflect the course of a trial to settle an issue in which he had no real interest and which could not affect his ultimate liability. To open such a door would be to add greatly to the burden and confusion of litigation. It is more appropriate, therefore, that such issue should be raised and tried between the appropriate parties at a more appropriate time. Our statutes and our previous decisions are liberal in their recognition of the right of an assignee of a cause of action to sue thereon, regardless of whether he hold the same as absolute owner or as agent or trustee for the owner. It is enough that he hold the uncontested legal title to the cause of action. Knadler v. Sharp, 36 Iowa, 232; Roberts v. Corbin, 26 Iowa, 315, 96 Am. Dec. 146; Burrows v. Stryker, 47 Iowa, 477; Goodnow v. Litchfield, 63 Iowa, 275, 19 N. W. 226; Gere v. Council Bluffs Ins. Co., 67 Iowa, 272, 23 N. W. 137, 25 N. W. 159; Vimont v. Railway Co., supra; Abell v. Hurd, 85 Iowa, 559, 52 N. W. 488. [2, 3] The consideration for the assignments involved in the case at bar was in each case a promise to account for the proceeds of the litigation and to pay assignors 50 per cent. thereof. The legal effect of such an assignment upon such a consideration is to make the plaintiff a trustee for his assignor. As such he is entitled to maintain the suit under the provisions of Code, § 3459. It goes without saying that every defense available to the defendants as against the beneficiary is available to them, also as against the trustee plaintiff. They therefore suffer no prejudice by the assignment. The assignments in this case have the merit that they enable five causes of action arising out of the same general transaction to be tried in one suit. This operates presumptively to the benefit of all the litigants. Similar motives frequently obtain in the assignment of causes of action, and they are not contrary to public policy. 2. As a separate affirmative defense to each cause of action set forth in the petition, the defendants pleaded a full settlement and discharge had in the year 1908 with each of plaintiff's assignors. By way of reply the ther that each of such settlements was procured through the fraud of the defendants, and that they were therefore void and now constitute no defense to plaintiff's causes of action. The real controversy, as presented to us, centers upon these settlements. Five assignors are involved: Rowe, Hammond, Collins, Patterson, and Larson. As to the first-named four of these, it is undisputed that settlements were had in August, 1908. Each settlement was made after the commencement of the previous suit heretofore referred to. The assignors were named as parties to such suit, some as plaintiffs and some as defendants. The charge of fraud in the settlement is predicated upon the fact that the defendants either denied or failed to confess that they had received the commissions in question. There was no formal repudiation of the settlements either before or after the assignments to plaintiff. The fruits of the settlements have always been retained by the assignors, and no tender of return has ever been made by them or by the plaintiff. The settlement in each case was separate and independent from every other settlemnt. We shall therefore have to deal with them singly in considering the merits of the issue as to each one. He [4, 5] 3. We turn our first attention to the cause of action of Mrs. Rowe and to the alleged settlement thereof. The following is her entire testimony: Emeline Rowe: "Acquainted with Dr. Andre and Ivens. Known them about 27 years. I entered into the contract, jointly with other parties, known as No. 832. Dr. Andre approached me in relation to this purchase. He said he thought it would be a good investment. said we was to pay $5.25 an acre. I took a one-fifteenth interest. I don't remember of anything being said by either Ivens or Andre about their receiving a commission. Q. If you had known that there was any such commission to have been paid them, would you have gone into the transaction? A. Yes, I think I would. Q. You would have bought the land just the same, you think? A. Yes, sir. It is my signature attached to Exhibit 3. [Exhibit 3 offered in evidence.] I think I signed Exhibit 3 on or about the date it bears." Cross-examination: "I signed Exhibits C and D at or about the time that they purport to have been signed. Q. Now, Mrs. Rowe, before you signed these papers marked Exhibits C and D on August 25, 1908, you had signed a power of attorney to Mr. Cress relative to a suit brought against Dr. Andre and Theodore Ivens, is that correct? A. Well, it was for the about the timber lands and to look after any fraud, as he told me, and that there was timber being taken off the lands, and it was to look after the interest of that. Q. Well, you had signed a paper at Mr. Cress' request? A. To that effect; yes, sir. Q. And the paper, Exhibit * by you August 25, 1908, was executed and de- | might be between you, including any claim livered by you for the purpose of revoking that might grow out of these commissions? and canceling that arrangement, was it? A. Yes, sir. I delivered these papers, Exhibits C and D, to Dr. Andre. After I had executed and delivered these papers, Exhibits C and D, August 25, 1908, to Dr. Andre, I signed Exhibit 3, which was delivered to Mr. Cress. Q. Now, I wish you would state, Mrs. Rowe, so that the reporter may take it down, just why and under what circumstances you signed this paper. A. Well, he was there two or three times, and I refused. Q. That is, Mr. Cress came to you two or three times and asked you to sign the paper? A. Yes, sir. Q. Now, did you tell Mr. Cress why you didn't want to sign another paper in connection with that matter? A. I told him I wanted nothing more to do with it. Q. Did you tell him that you had signed a paper of settlement and given it to Dr. Andre? A. Yes, sir; I think I did. Q. What did he say when he was informed that you had given the settlement paper to Dr. Andre? A. He asked to see the paper. Q. Did you show them to him? A. No, sir. It was at the house, and I replied that the papers were at the bank. Q. What did he say when he came the third time? When you did sign the paper? What did he represent this paper was? A. Well, he said it would obligate me in no way. Well, he said it would be better for me if I signed that. It might cause trouble if I didn't. Q. I wish you would make this matter clear in the record, Mrs. Rowe, just how and in what way he said this, that you had better sign the paper and it would cause trouble if you didn't. What did you understand him to mean? A. I couldn't say the exact words just what he said. Q. Well, I am not asking you for his exact words, but what did you understand his meaning was when he said you had better sign it or it would cause trouble? What did you understand him to mean? A. I don't hardly know. Q. Did you understand that he was threatening to make you trouble if you didn't sign it? A. Well, I supposed that was whatQ. That was your understanding was it? A. Yes, sir. Q. Of his meaning? A. Yes, sir. Q. Was that the reason that you signed this last paper that you gave to Mr. Cress? A. It was. Q. I ask you now, Mrs. Rowe, whether it is your present understanding that you have settled all your matters and had settled all your matters and claims with Dr. Andre and Mr. Ivens at the time of the execution of this paper, these papers, on May 25, 1909? A. Yes, sir; I understood that- Q. You understood that that was a complete settlement between you? A. Yes, sir. Q. Do you so understand that now? A. Yes, sir. Q. Is it your present desire that the settlement stand? A. Yes, sir. Q. You have no disposition now or desire to back out or set aside that settlement? A. No, sir. Q. And you understood at that time that this settlement included everything? A. Yes, sir. Q. That A. Yes, sir." To the court's ruling striking the foregoing from the record, the defendants at the time duly excepted. Redirect: "After signing the paper which I gave to Mr. Cress, I have had very little conversation with either Dr. Andre, Mr. Ivens, or either of the Johnston brothers, or Mr. Scott, in relation to the transaction. The first conversation was in June, after having signed the paper. I remember of having a conversation with them concerning this paper. I told them I had signed the paper. I don't know that I told them what it contained. My talk was with Dr. Andre and A. C. Johnston. The conversation took place at my home in Schaller. They came to my home to interview me with relation to the paper I had given to Dr. Andre. They spoke about the paper I had given to Mr. Cress. They wanted to know if I understood what it was. I told them I felt like it had been misrepresented to me because I didn't think as I understood Mr. Cress; that it didn't relate to anything to the other one where I was released from all obligations; that after I had signed the paper I understood that it did. I understood so before they told me. I came to that conclusion by thinking and studying the matter over. I think the Cress contract relates to the same matter as the Andre contract. When I signed the paper for Mr. Cress, I had been told that Dr. Andre and Ivens had received a commission for the sale of the land, but I didn't believe they had when I signed the contract with Mr. Cress. I signed the paper because he said I had better. When I signed the paper for Dr. Andre, I understood that I was going to get out of being brought into court. At the time I signed the papers with Dr. Andre, he bought my other shares that I had, my shares in the land. At the time that I made the assignment to Mr. Cress, he told me that I had my share of the commission coming that Dr. Andre and Ivens had received. I don't remember that I told him that if I had that I ought to have it. In my settlement with Andre he paid me for the shares; that is, for my interest that was left when the land was divided up. I still own some of the land. I couldn't tell you the amount. They paid me as much as $100. It was not before I had signed this paper for Mr. Cress." It will be noted that a part of the foregoing testimony was stricken by the trial court. In view of the testimony of the defendants on the same subject, the ruling is not very material. It was doubtless stricken upon the theory that the present attitude of the witness was not binding upon the plaintiff. We may as well say at this point that as the beneficiary of the cause of action, and as the holder of the fruits of the settlement, her testimony at this point was clearly admissible and ought to have received the consideration of the trial court. Passing that question, See, also, Lake v. Dredge, 138 however, this evidence shows no misrepresen- | covery of property alleged to have been tation whatever on the part of the defendants fraudulently procured. Bishop on Contract, in the original transaction. Nor does it § 679; Beach on Modern Law of Contracts, show any in the settlement. It further ap- 792; Perley v. Balch, 23 Pick. (Mass.) 283, 34 pears from her testimony that the settlement Am. Dec. 56; Sheldon Axle Co. v. Scofield, was supported by a substantially full con- 85 Mich. 177, 48 N. W. 511; Masson v. Bovet, sideration in that defendants purchased from 1 Denio (N. Y.) 69, 43 Am. Dec. 651; Balue v. her all her interest in the Minnesota land. Taylor, 136 Ind. 368, 36 N. E. 269. Such a This settlement was satisfactory to her at the contract is voidable only. The injured party time and ever after down to the day of her may confirm it and sue for damages if he testimony. She retained the fruits of the set- chooses, or he may disaffirm it, in which tlement and was not willing to relinquish event fraud destroys the contract ab initio, them or to set the settlement aside. As al- and no reason can be assigned for permitting ready indicated, the plaintiff made no tender the party undertaking rescission to retain the or offer of any kind to support his repudia- property received and at the same time detion of the settlement. Plaintiff's pleadings mand the return of that (the consideration) and argument have proceeded upon the the- with which he had been wrongfully induced ory that if there was any fraudulent conceal- to part." ment on the part of the defendants at the N. W. 869. We think it very clear that there time of the settlement, or failure to confess can be no recovery in this branch of the case. their receipt of the commissions, this of itself 4. We pass next to the claim of Hammond. would render the settlement void in toto, re- Hammond testified in support of the claim. gardless of any election to repudiate, and re- He testified that false representations were gardless of their return or offer to return the made to him in the original transaction, and fruits of the settlement. perhaps inferentially at least that there was fraudulent concealment at the time of the settlement. The consideration of the settlement with him was that he exchanged his interest in the Minnesota land and certain mining stock with the defendants for an Iowa farm of 128 acres adjoining his own. The following excerpts from his testimony in rebuttal, in relation to the settlement, will be sufficient to indicate the general facts: James Hammond: "I have heard the testimony relating to the settlement between myself, Andre, and Ivens for the commissions. The testimony in reference to the written instrument which I signed with Dr. Andre, I signed the contract, but I could not tell you who wrote the contract itself. This contract was read to me by Dr. Andre. I didn't know at this time about any commissions being received by Dr. Andre and Mr. Ivens. I don't remember that they said anything to me about it, I didn't think they had any commissions. Q. Then, of course, you didn't think you had any rights to any commissions? A. I didn't give any thought to it at all. I thought I was signing everything over, and it didn't make any difference to me. It didn't make any difference, and I didn't make any further inquiry. Q. Why didn't it make any further difference? A. Because I was not interested. Q. You didn't know there was any commissions to be interested in? A. I did not. Q. If you had known they had received $1,500 commissions belonging to you, would you have entered into the contract for settlement you did? A. I don't know about that. Q. Why don't you know, Mr. Hammond? A. I never thought about it until now. In this settlement Dr. Andre traded me some land for my interests in the land in Minnesota. Dr. Andre gave me in exchange for my Minnesota land, my If there was fraud in the settlement, it was voidable, but voidable only. After the discovery of fraud, the election rested with plaintiff's assignor to repudiate. She was not bound to repudiate. She had an equal right to ratify. If she failed to repudiate with reasonable promptness, she would be deemed to ratify. Until she elected to repudiate, her right to the fruits of the settlement was absolute. She could not repudiate and yet retain the fruits of her settlement. The only exception to this rule is that where the party rescinding would be entitled to retain the money of property received, in any event, even though the contract be set aside. O'Brien v. Railway Co., 89 Iowa, 644, 57 N. W. 425; Howard v. McMillen, 101 Iowa, 453, 70 N. W. 623; Dillon v. Lee, 110 Iowa, 156, 81 N. W. 245. This was not a case of that kind. By the settlement in this case, Mrs. Rowe sold her interest in the Minnesota land to the defendants and received her pay therefor. This was a part of the contract of settlement. She became entitled to receive and to hold the consideration for the land by virtue of such contract of settlement. After her discovery of the alleged fraud, she still perferred to hold the defendants to the contract of settlement rather than to repudiate the same and to claim for the amount of the commissions. In Rose v. Eggers, 148 Iowa, 311, 127 N. W. 198, we said: "But where the party undertaking to rescind has received money or property under the terms of the agreement sought to be avoided, to which he has no claim other than by virtue of the contract, the rule is of universal application that an offer to return, unless the necessity therefor has been obviated by conduct of the other party constituting a waiver, is essential as a condition precedent to the |