O'Toole v. Lamson

41 App. D.C. 276, 1914 U.S. App. LEXIS 2174

• Court: Court of Appeals for the D.C. Circuit
• Decided: January 5, 1914
• Docket: No. 2568
• Status: Published

Opinion

Mr. Justice Kobb

delivered the opinion of the Court:

Duress may be defined as a condition of mind resulting from such improper pressure that the will is overcome and an involuntary act or contract induced, — a condition of mind produced by an unlawful intimidation, and which results in the doing of an act which is not required by law. “When one is under the influence of extreme terror, or of threats, or of apprehension short of duress, his act may be avoided, for in cases of this sort he has no free will, but stands in vinculis.” 1 Story, Fq. Jur. 239. “A condition which exists where one, by the unlawful act of another, is induced to make a contract, or perform or forego some act, under circumstances which deprive him of the exercise of free will.” 14 Cye. 1123. And the rule is well settled that either a husband or wife may avoid a contract if it was made to relieve the other from duress. Shep. Touch. 61; Robinson v. Gould, 11 Cush. 55. And this rule has been extended to the relation of parent and child. Thus in Harris v. Carmody, 131 Mass. 51, 41 Am. Rep. 188, it was held that a father may avoid a mortgage which he has been induced to sign by fears of the prosecution and imprisonment of his son. The court said: “No more powerful and constraining force can be' brought to bear upon a man to overcome his will and extort from him an obligation than threats of great injury to his child.” In Meech v. Lee, 82 Mich. 274, 46 N. W. 383, a mother had executed a mortgage under a belief, induced by the mortgagee, that she would thereby save her son from a threatened criminal prosecution. The mortgage was set aside, not only as being the result of duress, but as being voidable as against public policy. McCormick Harvesting Mach. Co. v. Hamilton, 73 Wis. 486, 41 N. W. 727, was a case where a mortgage was set aside that had been executed by a wife under duress and undue influence by means of fears that unless she did so the imprisonment of her son would result. The court, after reviewing the authorities, said: “The contract is then void by every principle of equity. It is the worst species of fraud, because it attacks the weakest point of human nature, and appeals to natural affection.” In Williamson, H. F. Co. v. Ackerman, 77 Kan. 502, 20 L.R.A.(N.S.) 484, 94 Pac. 807, the court held it to be a good defense to a mortgage executed by a father, that his son would be arrested and prosecuted, the court saying: “The suit was not one to determine the guilt or innocence of John [the son], nor was the matter of his actual guilt an essential feature of the defense of duress. The point for decision was whether the threats of arrest and prosecution of John put the father in fear, and thus overcame his will and rendered him incompetent to contract. * * * The conduct of John, whatever it may have been, was no excuse or justification for intimidating and coercing the father to pay John’s debt, or to give a mortgage on his home to secure the payment of such debt.” In Fisher v. Bishop, 108 N. Y. 25, 2 Am. St. Rep. 357, 15 N. E. 331, a father made certain transfers of his property for the benefit of creditors of his son, and through one occupying a fiduciary relation to the father. The transfers were set aside.' In its opinion the court said: “The ease shows that by these means the defendants have obtained security for a large amount from an old man who was under no legal or moral obligation to give it, and without any consideration to support it except the nominal one of a dollar, and that this was extorted at a time when he was laboring under much distress and anxiety of mind on account of the trouble that encompassed him.” Bayley v. Williams, 4 Giff. 638, was a case where a note and security had been given by a father to protect his son from criminal prosecution for forgery of his father’s name to promissory notes. The court said: “If the fair result of the evidence shows that the agreements were executed under influence felt by the plaintiff, and exercised by the defendants, if the fear of the criminal prosecution against the plaintiff’s son, or if the result of the discovery of the criminal act, for which the plaintiff was not liable, was used by the defendants against the plaintiff, to operate upon his fears so as to induce him to give a security which would relieve his son from a criminal prosecution, according to the law of this court a security obtained under such circumstances cannot stand. The inequality of the situation of the parties, the one exacting a security which the other is driven to give in order to save his son from exposure, disgrace, and ruin, taints the security obtained under the influence of such fears.” This case was sustained on appeal to the House of Lords (L. II. 1 IT. L. 200).

A brief analysis of the evidence in the present case bearing upon the question of duress will suffice. According to the admissions of the defendants Messrs. Anderson and Murray, and of Mr. Boyd, who accompanied them upon the occasion of their interview with Mrs. O’Toole which resulted in the giving of the first note by her, the situation had been carefully reviewed by the three men prior to the interview, and the conclusion reached that young O’Toole had not acted in good faith toward his partners; that he had deposited with the Eider-Lewis Company $1,500, when he should have deposited $3,000. The papers tending to prove this alleged delinquency on his'part were given Boyd, admittedly for the purpose of showing them to Mrs. O’Toole. That other papers were placed in Boyd’s hands for a like purpose appears from the testimony of these three men. Mr. Boyd says: “I may add that other correspondence was exhibited there (at the first interview) to which I have not referred particularly, and which indicated that Mr. O’Toole had collected moneys belonging to the Southern Automobile Sales Company, which he had not accounted for, and which had been in his possession a length of time sufficient to enable him to have accounted for it.” He further testifies that after Mrs. O’Toole had consented to “give a mortgage to indemnify the company against any loss that might happen by reason of any irregularities on the part of her son,” the amount of these alleged irregularities was ascertained “to be about $8,000, simply from the correspondence.” Again, in his cross-examination, he says: ■ “She was perfectly willing to indemnify the other members pf the concern against any irregularities her son might be guilty of,” Moreover, in the answer of Anderson and Murray to which we have alluded, they stated under oath that one purpose of their interview with Mrs. O’Toole was “through her to secure them on account of the aforesaid sum retained by him” (the son), and that they “stated to her that it would be imperatively necessary for them to take some action at once to protect themselves against loss."

The conclusion is irresistible, from the evidence before us, that these three men, when they sought this interview with this mother, intended to convey to her, and did in fact convey to her, the impression that her son, who was then hundreds of miles away, had been guilty of such serious “irregularities” as would place him in jeopardy, and that they were prepared to take steps against him unless his “irregularities” should be made good immediately. They of course knew that she was ignorant of the law, ignorant of the rights of one partner as against another, but, like all mothers, imbued with a love for her son and a consuming desire to protect him at any cost-The precise words or terms employed, therefore, are of little importance. The question is, What impression did they intend to convey and what impression was conveyed to her mind ? Under the evidence, can it be doubted for a moment that the result of the interview caused her to believe that, unless she came to the rescue, these men would proceed against her son and place him in jeopardy. She testifies, and her testimony is corroborated by her sister, that these men told her in terms that her son had “embezzled and forged,” and that unless they had the money before the sun went down “they would have her son arrested and brought home in chains.” It will be remembered that Murray, in his direct examination, stated that Mrs. O’Toole’s sister upon this occasion “seemed to be quite excited,” while Anderson testified that she “became hysterical.” It is very singular, if the interview was as peaceful, harmonious, and free from restraint as the defendants would have us believe, that the sister should have become excited and hysterical. But a still more significant inconsistency in the testimony is apparent. Mr. Boyd, at one point in his testimony, states that “it was not with the idea of getting money from Airs. O’Toole that they went to see her, but merely to consult her as to what could be done to protect the interests of the Southern Automobile Sales Company;” that the “only pressing emergency was about the $1,500.” In other words, that it was necessary to obtain $1,500 immediately to preserve the contract with the Rider-Lewis Company. And yet a note for $8,000 was obtained from Airs. O’Toole, and upon exactly the same representations that were made to obtain the $1,500. This, we think, shows very clearly the motive that really actuated the three men when they sought this interview with Airs. O’Toole. We think it too clear for argument that they intended to induce her through fear that Iict son would otherwise be proceeded against and placed in jeopardy, to sign a note for $3,000 without the slightest consideration.

Something was said during the hearing at bar to the effect that, even conceding that the signing of the first note was occasioned hv duress, the note and mortgage in suit were voluntarily executed. This contention is obviously untenable. Conditions had not changed on the next day, when the signature of Airs. O’Toole was obtained to these instruments. As Justice Story says: “If the party is still acting under the pressure of the'original transaction, or the original necessity, or if he is still under the influence of the original transaction, and of the delusive opinion that it is valid and binding upon him, then, and under such circumstances, courts of equity will hold him not barred from relief by any such confirmation.” 1 Story, Eq. Jur. 345. See also Meech v. Lee, 82 Mich. 275, 46 N. W. 383.

The question whether the defendant Faris is a holder in due course must now be determined. We have ruled that this note was obtained through duress, hence the burden was on Mr. Earis “to prove that he or some person under whom he claims .acquired the title as a holder in due course.” D. C. Code sec. 1363 [31 Stat. at L. 1402, chap. 854] ; Lytle v. Lansing, 147 U. S. 59, 62, 37 L. ed. 78, 79, 13 Sup. Ct. Rep. 254. In other-words, the burden was on Mr. Earis to prove that he took the note in good faith, for value, and without notice of any infirmity in the instrument. D. C. Code, sec. 1356.

It will be remembered that Mr. Anderson, who interested the note.broker, Mr. Lamson, in this note, testified that he was .“running' the office for Mr. Lamson at the time, — at least the company was;” that he, Anderson, made arrangements' with Lamson to negotiate the note. The relations of Mr. Lamsou and .Mr. Anderson, therefore, were such that any information possessed by Anderson concerning- the circumstances surrounding the execution of this note would naturally have been imparted to Lamson. Mr. Faris had already purchased several notes through Mr. Lamson, and it is apparent from their testimony that they were well acquainted. That they deemed it necessary to interview Mrs. O’Toole is clear. Mr. Earis states that Mrs. O’Toole during that interview said she had given the note “to assist the company in its business;” that he,-. Earis, “wanted to know in regard to this business transaction between her and this company, whether it was satisfactory to her, and if the note was all right. She said it was; and it was on this occasion that she told me that her son was away from home.” Lamson, according to his testimony, merely asked her if her signature was genuine “and if it (the note) was all right.” Mr. Faris admits that, if Mrs. O’Toole had informed him that she had given the note to protect her son, such a statement would instantly have excited his concern, and he “would not have had anything to do with it.” Attention already has been directed to a conflict between the testimony of Mr. Faris at tbe preliminary and final bearings as to his payment for the note. While Murray appears to have taken an active part in negotiating the note, he testified that he did not know who bought it, that is, whether Lamson or Faris. Anderson, however, was very certain that Lamson purchased it for $2,800, and Lamson in his testimony said ho purchased it for that sum, and sold it to Faris for $2,900. In his sworn answer Lamson stated that he negotiated this note to Faris for Anderson. According to Mr. Paris’s testimony he received no information that Mrs. O’Toole did not intend to pay the balance on this note until about a year after it was given; and yet in his sworn answer Mr. Lam-son states that, on or about the maturity of the note, counsel for Mrs. O’Toole informed him that it had been “procured from her by fraud or misrepresentation;” that Mrs. O’Toole, at about the same time, “informed respondent that she was willing to pay $500 on the aforesaid note, and directed him to go to George W. Faris, and inform him that she would not pay any other or further sum thereonMr. Faris apparently had many interviews after this time with Mr. Lamson, and also several with Mrs. O’Toole. The failure of Lamson to testify that he did not notify Faris of Mrs. O’Toole’s repudiation of the note is significant. The indorsement on the note, “Interest paid to March 11th, 1910,” in the handwriting of Mr. Faris, will he remembered. At the preliminary hearing Lam-son testified that he did not see Mr. Faris make this indorsement. At the final hearing he testified that the indorsement was made in his presence. Testifying concerning this indorsement Mr. Faris said that Lamson, upon its date, paid him “about $3,5 interest up to the 11th of March.” The indorsement, it will he noticed, does not state the amount of the payment. It will he further noticed that Faris did not testify that he had no knowledge as to the source of this payment. These various facts and circumstances necessarily have an important bearing upon the issue now being determined. Taken together, they create the impression or warrant the inference that there was concert of action between Anderson and Murray, on the one hand, and Lamson and Faris on the other; that is, that the four men were acting together in an endeavor to collect this note. Whether Lamson was anything more than a mere broker in the transaction we need not determine, for both he and Faris, for reasons of their own, interviewed Mrs. O’Toole. She says, and her testimony is corroborated by that of her daughter, and still more strongly by the surrounding circumstances, that she informed these men that she had given the note to protect her son. It is inconceivable that these business men, one of them an attorney, having had their suspicions aroused, would have avoided questions calculated to elicit information concerning the facts leading up to the execution of the note, had they really desired such information. We think it quite apparent, from their testimony, that they were more concerned as to whether Mrs. O’Toole intended to repudiate the note than they were as to the circumstances surrounding its execution. Searching the ■whole record, we conclude that Mr. Faris has not sustained the burden resting upon him; in other words, that he is not a holder in due course.

There was neither ratification nor laches on the part of complainant. The $1,500 payment was made before the return of young O’Toole and while the conditions inducing her to execute the note remained unchanged, that is, while she was still acting under the original duress. No other payment on this note was made by her, and, at or before its maturity, she repudiated it. Further action by her was not necessary until the attempt to enforce payment on the note was made.

We conclude, therefore, that complainant is entitled to the relief prayed. The decree will be reversed, with costs, and the cause remanded for further proceedings not inconsistent with this opinion. Reversed and remanded.