Gates v. Shutts

• Decision Date: 08 October 1859
• Citation: 7 Mich. 127
• Court: Michigan Supreme Court
• Parties: Myron Gates and another v. Martinus Shutts

7 Mich. 127

Myron Gates and another v. Martinus Shutts

Supreme Court of Michigan

October 8, 1859

Heard June 8, 1859; June 9, 1859 [Syllabus Material]

Appeal from Wayne circuit in chancery.

The bill was filed by Myron Gates and his wife, March 29th, 1856 to set aside a note of $ 325, given February 20th, 1856, to defendant by complainant Myron, and a mortgage, made by both complainants, to secure said note. These securities the bill alleges, were given for no consideration whatever, and were obtained by fraud, duress and compulsion. The allegations in the bill, and the proof taken, are sufficiently stated in the opinion to illustrate the questions of law involved.

On the hearing in the court below, on pleadings and proofs, the bill was dismissed with costs, and complainants appealed.

Decree affirmed with costs.

G. V N. Lothrop, and Moore & Blackmar, for complainants:

1. Courts of equity have ever been watchful to protect parties in entire immunity, from imposition, oppression, duress and undue influence of any kind, in the making of contracts. A review of some cases will serve to show not only the principle, but the extent of the protection thus afforded.

Thus, equity guards against the exercise of undue influence by those in confidential relations, and will set aside contracts, in such cases, where they are improvident and without professional advice: 14 Ves. 287; 1 Ves. Sen., 276; Ibid., 19; 3 Madd. 191; 2 Atk. 254; 7 Beav. 551; 8 Beav. 439; 8 How. 183.

So where there is great pecuniary distress, which has been taken advantage of. And in these cases, gross inadequacy of price may be regarded as evidence of fraud and imposition: 1 Ves. 218; 10 Ves. 219; 14 Ves. 215; 3 Madd. 417; 1 Cox 333; 3 Bro. Ch., 157; 2 Sch. & Lef., 35, 214; 3 Bro. P. C., 560.

And grossly improvident contracts of heirs and young persons, just come into fortunes, have, in a great many instances, been set aside as fraudulent: 2 Vern. 27; Ibid., 319.

Fraud vitiates all contracts; fraud is infinite in its forms, and the cases in which equity has set aside contracts tainted with it are almost infinite.

The fraud may be by misrepresentation or a wrongful suppression: Suggestio falsi vel suppressio veri: 1 Story Eq., §§ 201, 203; 1 P. Wms., 240; 6 Ves. 173; 5 Blackf. 522.

So where a person uses some lawful proceeding or right oppressively: 1 Atk. 409; 16 Pet. 269; 6 Johns. Ch., 201; 2 Fost. 310.

And where the contract is made under the influence of great fear or alarm, or of threats, or under circumstances which constitute a moral duress, though falling short of legal duress, equity will avoid it. So, if the occasion is sudden, the party has no time for suitable deliberation, is importunately pressed and menaced, is strongly advised by persons in whom he confides, and an unconscientious advantage has been taken, equity relieves: 1 Story's Eq., §§ 239, 251; 1 Pars. Con., 319, 320; 16 Ves. 157.

2. But the counsel for Shutts contend that, conceding the note and first mortgage to have been made under the influence of great alarm and distress, produced by the threats of Shutts, yet that it was confirmed and rendered valid by the execution of the second mortgage.

Let us see what this amounts to.

The trap of the conspirators was sprung late Saturday afternoon. On Monday morning following, the note and mortgage were signed by Gates. On Wednesday following, the second mortgage was made. The element of time alone, we think, disposes of this whole position.

The note, given with the mortgage, all parties supposed to be binding; and until Gates got into a position where he could repudiate the whole transaction, he could not, with any show of propriety, refuse to correct what was a mere mistake.

No act will work a confirmation of a fraudulent contract, unless the sufferer does it after the original influence is entirely removed; after he fully understands his rights, and comprehends the full effects of his action: 1 Ves. 215; 1 Vern. 237; 2 Vern. 121; 2 Ves. 281; 2 Bro. Ch., 400; 3 Bro. Ch., 633; 2 Sch. & Lef., 479; 2 Bro. P. C., 183; 1 Wilson 320, 4 Dessaus. 706; 5 Blackf. 509.

Backus & Harbaugh, on same side:

The liability of Gates as to the wheat was only that of warehouseman, bound to reasonable care. The burden of proof was, therefore, on Shutts, to establish such want of care as would charge him with the loss of the wheat.

Complainant is entitled to relief on the ground of surprise, mixed with mistake of law: Story's Eq. Juris., § 151. Though, as a general principle, a mistake of law is not a ground of relief in equity, yet where a mistake of law is mingled with imposition, misrepresentation, undue influence, misplaced confidence, and surprise, relief will be granted: 1 Story Eq. Juris., §§ 131, 154; 3 Barb. 55; 11 Ohio 480, 223; 18 Ohio 548; 6 Mass. 506; 1 Ves. 43; 16 Ves. 157; 10 Barb. 438; 3 Ves. 447.

Both mortgages were without consideration, legal or moral; which, coupled with the fact of mistake of law and the undue influence used, create such a confirmation of mistake and oppression as entitle complainant to relief. He was under the influence of such a combination of terror, threats and apprehension, to give these securities, that he had no free will; and the well established rule of equity is that where a party is not a free agent the court will protect him: 1 Ves. 215; 2 Ves. 497; 6 Johns. Ch., 201; Talbot Cas., 111; 10 Pet. 270; 1 Atk. 409; 9 How. 81.

Holbrook & Bishop, for defendant:

1. The court will not interfere in a compromise where the party knows all the facts, and elects to compromise rather than litigate: 1 Story Eq. Juris., §§ 130, 131; 1 P. Wms., 723; 1 Bibb. 168; 15 Vt. 379; 2 Paige 478; 8 Ohio 372; Saxton, 101, 112; 3 Edw. Ch., 36; 10 Leigh 436, 445.

2. The giving of the second note and mortgage was a full confirmation of the original agreement to settle, and the court will not interfere: 1 Story Eq. Juris., §§ 345, 306; 1 Bibb. 168; 3 P. Wms., 290; 12 Ves. 373; 3 Yerg. 369; 1 Pars. Cont., 361, 363; and notes x, y, z.

3. The threat of legal proceedings was justifiable: 2 Dev. Eq., 292; 1 Ired. Eq., 207; 8 Ohio 372.

Manning, J. Martin, Ch. J. and Christiancy, J. concurred. Campbell, J. did not sit in this case.

OPINION

Manning J.:

The bill states Gates had a mill burnt in 1848, and that Shutts had a quantity of wheat in the mill at the time of the fire; that a few days before the note and mortgage, mentioned in the bill, were executed and delivered, certain persons, among whom was Shutts, designing to take advantage of Gates, and deprive him of his property, conspired in falsely charging him with having himself procured or caused his mill to be burnt; that they pretended they could bring witnesses to swear to it; and that Shutts, and those with whom he acted (who had like pretended claims) threatened Gates that, unless he immediately paid or secured Shutts for the wheat he had lost, they would publish said charge to the world, and brand him with the alleged crime, and thereby destroy his character, and expose him to great infamy, if not punishment; that Gates was thrown into extreme fear and alarm by such false charges and threats, and fearing false testimony, and that, although innocent, he might be disgraced, and be subjected to great pecuniary loss, if not to criminal prosecution, was thereby induced to give the note and mortgage in question.

There is no proof of a conspiracy or combination to charge Gates with burning the mill, or causing it to be burnt. And the gravamen of the bill, aside from the conspiracy, consists in the publication of the charge, and the disgrace and infamy, if not public prosecution, that Gates feared from the publication. The proof fails here, as well as to the conspiracy.

There is no evidence that Shutts, or any one else, unless Shutt's claim was settled, threatened to publish to the world that Gates burnt the mill, or procured it to be done.

From the evidence, it appears that a short time before the settlement between the parties took place, and the note and mortgage were given, Shutts received information, through one Miller, that led him to suppose Gates had something to do in burning the mill, and that he sent one Congdon to see a man by the name of Crafts in regard to it; and that after Congdon's return he went to see Gates. This was on Saturday, towards night. He and Gates went into a room by themselves, and he then told Gates he must have pay for his wheat; that he, Gates burnt the mill; and that he (defendant) "had a sure thing on it." Gates asked time to get counsel. Shutts gave him until Monday morning, but advised him not to get counsel, for his case was a bad one.

On the evening of the next day, which was Sunday, Gates went to consult with one Hedden, a brother-in-law, who then was, or had been, a justice of the peace. Hedden advised him, whether guilty or not of burning the mill, to keep away from Shutts, and told him both the civil and criminal suits were barred by the statute of limitations.

As Gates did not come to Shutts's house on Monday morning, as early as he was expected, Shutts went to Plymouth. Gates came soon after Shutts had gone, and followed on after him. They met at Plymouth, and in the presence of Scattergood agreed on the amount to be paid for the wheat, and the first note and mortgage were given. After their execution and delivery, Gates was informed that Crafts was the person by whom the charge made against him could be proved. On the same day Gates started to see Crafts, leaving word with his family that he should be back in one or two days.

An error having been discovered in the mortgage, Scattergood went in the evening to Gates's house, to see him and have it corrected, but did not find him at home, for he had...