Winget v. Rockwood
| Decision Date | 10 February 1934 |
| Docket Number | No. 9765.,9765. |
| Citation | 69 F.2d 326 |
| Parties | WINGET v. ROCKWOOD et al. |
| Court | U.S. Court of Appeals — Eighth Circuit |
R. H. Fryberger, of Minneapolis, Minn. (John N. Ohman, of Minneapolis, Minn., on the brief), for appellant.
C. J. Rockwood and Loring M. Staples, both of Minneapolis, Minn. (M. B. Mitchell, Claude G. Krause, and Cobb, Hoke, Benson, Krause & Faegre, all of Minneapolis, Minn., on the brief), for appellees.
Before GARDNER, WOODROUGH, and BOOTH, Circuit Judges.
The appellant, as plaintiff below, brought this suit in equity by which she sought to cancel and rescind her contract transferring to the defendant W. B. Foshay 1,250 shares of the common stock of the Winget Kickernick Company, which she alleges was secured from her without consideration, through fraud, duress, and undue influence.
The parties will be referred to as they appeared below.
It is alleged in the bill of complaint that the defendants E. C. Warner and W. B. Foshay, conspiring together, coerced plaintiff to enter into the contract by which she transferred title to this stock. Defendants interposed a motion to dismiss the bill of complaint on the grounds that: (1) It does not state facts sufficient to constitute a cause of action; (2) the action is barred by the statute of limitations, having been commenced more than six years after the cause of action accrued; (3) plaintiff's cause of action is barred by her laches. The court sustained this motion and entered decree dismissing the bill of complaint, and from this decree plaintiff has appealed.
The bill of complaint is quite long, covering, with the exhibits attached and made part of it, thirty-one pages of the printed record. It is verbose and sometimes indefinite in its allegations. The allegations of major importance may be summarized as follows:
The Winget Kickernick Company was a Minnesota corporation engaged in the manufacture and sale of wearing apparel. Plaintiff and her husband had built up its business, and for some years prior to December, 1924, it was controlled by them. In 1922, the company, being in need of funds, entered into a contract with the defendant E. C. Warner Company, which was owned and controlled by E. C. Warner, for its financing for a period of three years; and an agreement was entered into between the Winget Kickernick Company and the Warner Company, which provided that the Warner Company would assist the Winget Company by guaranteeing payment of its promissory notes not in excess of $50,000, and would give the Winget Company financial advice. The Winget Company was to pay not less than $5,000 a year for the guarantee and services to be rendered under this contract. It was not, however, intended that the contract should be carried out as written, but it was intended that loans should be made direct by Warner or the Warner Company to the Winget Company; the contract being a mere cover for usury.
Warner advanced funds from time to time approximating $90,000, for the use of which, in the form of interest or bonus, the Winget Company had paid up to December 31, 1924, $21,346.18. Up to that time Warner had encouraged the Winget Company to borrow these funds, and at no time intimated or warned it that further loans would be denied, or that immediate payment of the loan would be demanded. Plaintiff did not know that the loan was usurious until the month of November, 1932, and prior to that time believed that payment could legally be enforced. It had adopted no program for refinancing this indebtedness, but had entered upon a plan of extending and enlarging its business, had carried out an advertising program, and incurred obligations on open account at wholesale houses aggregating many thousand dollars. It was necessary, for the welfare of the business, to maintain its credit, and any action commenced against it would have impaired its credit, prompted demands for immediate payment of its accounts due wholesale houses, and seriously jeopardized its affairs, all of which conditions were known to the defendants Foshay, Warner, and their companies.
About the 1st of December, 1924, the Winget Company being then indebted to the Warner Company for money loaned in the amount of approximately $90,000, that company, without previous notice, demanded immediate payment, refusing further loans, and threatening immediate suit. The Winget Company had no reason to anticipate that the loan would be called and was not prepared to meet it. The defendants Foshay and Warner entered into a conspiracy to deprive plaintiff of her property through threats, intimidation, duress, and coercion, and it was prearranged between them that W. B. Foshay, acting as agent for said named defendants, would exact the transfer of plaintiff's stock as set out in the complaint.
Following the demands for immediate payment and threats of suit, plaintiff, the Winget Company, and the defendant Foshay entered into negotiations for the refinancing of the loan. The Foshay Company became the Winget Company's fiscal agent to sell its Gold Notes up to $90,000, for which it was to receive a 10 per cent. commission. Foshay, fully informed of the indebtedness to the Warner Company and the threatened loss to plaintiff and her husband as the owners of the stock of that company, after entering into a contract on behalf of the Foshay Company to refinance the Winget Company by sale of its notes, told plaintiff that the Foshay Company, of which he was president, would not sell the notes unless she transferred to him 1,250 shares of her stock, which would give him control of the Winget Company; and he also told her that if she refused, Warner would ruin the company and her stock would become worthless. She complied with his request and transferred the stock to Foshay. He retained one-half of it, and transferred the balance to Warner, but not on the books of the company; the transfer being concealed from plaintiff so that she did not learn thereof until November, 1929. The scheme which induced her to part with this stock was a conspiracy between Foshay and Warner, acting in behalf of themselves and their companies, to obtain control of the Winget Company.
By the terms of the written contract by which the Winget Company employed the W. B. Foshay Company as its financial agent, it was provided that the Foshay Company agree to use its best efforts to sell the notes. The contract was executed on behalf of the W. B. Foshay Company by W. B. Foshay, its president, and by its secretary. In inducing plaintiff to execute the contract for transfer of her stock to Foshay, it is alleged in the complaint that Foshay, in furtherance of a conspiracy between himself and defendant Warner, "well knowing the lack of knowledge of plaintiff in business matters of such character, then and there threatened and stated to plaintiff that unless plaintiff's stock were transferred as he demanded, his company would not undertake to and would not sell the notes, and that in the event of the failure to so refinance the Winget Company `it was through'; that `it was sunk'; that `it could never finance itself'; that it was financially ruined; that said E. C. Warner Company would immediately enforce payment of said indebtedness unless immediately paid; that neither plaintiff nor her agent knew of said conspiracy, nor were they acquainted with manner and means of financing corporations; that neither said corporation nor plaintiff knew of anywhere else to look to secure financing of said Winget Kickernick Company; that they were in a helpless condition to save plaintiff's investment in said stock and were in great financial and mental distress, all of which said W. B. Foshay and said W. B. Foshay Company, and said E. C. Warner then and there well knew"; that Foshay, taking advantage of plaintiff's helpless condition to accomplish the purpose of the conspiracy between himself and Warner, demanded the transfer of the Winget stock, threatening that otherwise his company would not sell nor attempt to sell said notes; that the demand was unconscionable, inequitable, and unjust; and that solely by reason of the threats, intimidation, duress, fraud, coercion, and the fear then and there entertained by plaintiff, and the belief that said threats and statements were true, she, without any consideration, caused the stock to be transferred. The stock so transferred was of the value of $135 per share.
The bill then alleges that the signing of this contract, and the transfer of the stock pursuant thereto, were not her free act and deed, but that she was deprived of her free will, and placed in position where she was coerced to comply with this unconscionable demand; that the coercion, duress, intimidation, and fraud continued uninterrupted up to the time of the commencement of the action; that Foshay and his company, with the knowledge of Warner and his company, caused Foshay and his associates to be elected to the board of directors of the Winget Company ousting plaintiff from control of the affairs of the company; that although one-half of this stock was at once secretly transferred by Foshay to Warner, it was not transferred on the books of the company until after the Foshay Company went into the hands of a receiver, and plaintiff knew nothing of this transfer to Warner; that at one time she made inquiry concerning the affairs of the Winget Company and of her stock, and was told by an attorney representing W. B. Foshay Company directly and the other defendants indirectly that "she had better keep out of this"; that Foshay falsely and fraudulently represented to her that the election of himself and those under his control as directors and the removal of plaintiff as president and director, was necessary to further preserve the financial standing of the Winget Company in order to protect the note holders, and that unless their position was maintained as stockholders and officers, the Winget Company would again be financially...
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