Meyer v. Guardian Trust Co.

• Citation: 296 F. 789
• Decision Date: 29 February 1924
• Docket Number: 6318.
• Parties: MEYER v. GUARDIAN TRUST CO.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

296 F. 789

MEYER v. GUARDIAN TRUST CO.

No. 6318.

United States Court of Appeals, Eighth Circuit.

February 29, 1924

C. A Sorensen, of Lincoln, Neb. (F. L. Bollen, of Lincoln, Neb on the brief), for plaintiff in error.

E. J Burkett, of Lincoln, Neb. (Burkett, Wilson, Brown & Wilson of Lincoln, Neb., and Hindry, Friedman & Brewster, of Denver, Colo., on the brief), for defendant in error.

Before KENYON, Circuit Judge, and TRIEBER and MUNGER, District Judges.

KENYON Circuit Judge.

Defendant in error brought action in the District Court of the United States for the District of Nebraska, Lincoln Division, upon six promissory notes, aggregating the sum of $10,000, given by H. H. Meyer, Jr., and plaintiff in error, to Wm. C. Merrill, Jr., and by him assigned to defendant in error. Said notes, while given in Nebraska, were payable at Denver, Colo. The defense thereto was that they were given in place of other notes upon which the name of plaintiff in error was forged, and that they were secured by duress. The court made certain orders with reference to proof, which we think, in view of our finding here, was inconsequential and needs no discussion. The parties followed the order fixed by the court as to the introduction of evidence, and after certain evidence was introduced, and offers of the evidence, which the court refused to admit, the jury was directed to return a verdict for the defendant in error for the full amount. Afterwards, to wit, December 30, 1922, the court sustained a motion of plaintiff in error for a new trial on the first cause of action, being the cause evidencing the note originally purchased by defendant in error prior to the time of the purchase of the remaining notes. Many questions are suggested by the assignments of error. A few present the actual points in controversy.

The first assignment of error relates to the question of the court's jurisdiction. The petition of defendant in error alleged that William C. Merrill, Jr., payee, as assignor of the notes sued upon, was at the time of the commencing of the suit a resident and citizen of the state of Colorado. Plaintiff in error in his answer made a general denial of the allegations of the petition, admitted residence of defendant in error in the state of Colorado, but made no admission as to the residence of Merrill, Jr. Plaintiff in error claims that the citizenship of said Merrill, Jr., was put in issue by the pleading, and that, no testimony being offered to show that said Merrill, Jr., payee of the notes, and defendant in error's assignor, was a citizen of Colorado, the court was without jurisdiction. When the case was called for trial the following took place:

'The Court: It is admitted by the pleadings here that the notes sued on were signed by the defendant. It is not denied but what the plaintiff bought the notes sued on, but sets up in reply estoppel, and matter in defense is denied.

'Senator Burkett: Yes, your honor, everything is admitted, the jurisdiction, the amount, diverse citizenship, the execution of the notes, defendant pleading no consideration, and obtaining of them by fraud and duress.'

Counsel for plaintiff in error were present in the courtroom participating in the proceedings. The statement made by counsel for defendant in error that diverse citizenship was admitted was acquiesced in by the silence, if not otherwise, of counsel for plaintiff in error. While jurisdiction could not be conferred by consent, the statement of counsel to the court and the acquiescence on the part of plaintiff in error's counsel was an admission of the essential fact, namely, diverse citizenship. We think this settles that proposition, and there is no need to discuss the question of whether or not the general denial put in issue the citizenship of Merrill, Jr., payee and assignor. We pass, therefore, to the real questions of the case.

Assignments of error 2, 3, and 4, relative to the action of the court in charging the jury to return a verdict for the plaintiff, and in not submitting to the jury for determination the issues between the parties, raise the fundamental and controlling controversies of the case. Errors pointed out in other assignments are quite generally dependent upon the conclusion as to the merits of assignments 2, 3, and 4. For instance, the alleged error in not permitting plaintiff in error to show circumstances surrounding the taking of the notes as bearing on the question of duress was immaterial, if in fact the defendant in error was a holder in due course without notice of duress. We shall therefore discuss the three fundamental propositions which are involved in the case, and which are raised by the assignments of error.

First. Was there sufficient evidence, either admitted or offered, to submit to a jury the question of duress in securing said notes?

Second. Was the defendant in error a holder in due course of the notes sued on, and without notice of the infirmities in or defenses to the notes, and was this a question for the jury?

Third. Was plaintiff in error estopped by certain letters written by him to defendant in error before the purchase of the notes to raise the question of notice of the alleged duress?

These in their order.

I. It is quite apparent from the record that in the admitted and offered testimony there was evidence from which a jury could find that defendant in error assigned said notes because of threats that his son would be prosecuted and sent to the penitentiary for alleged forgery as to the first notes given. Whether Angus, the party making such threats, was or was not the agent of the defendant in error, is immaterial on this branch of the case. If the mind and will to contract of defendant in error was destroyed by the threats, and if while in such condition he signed the notes, then there was duress. Whether or not such was the fact was a question to be determined by a jury.

What constitutes duress is a matter of law. Whether such duress exists as to a particular transaction is a matter of fact. The query is: Was the will power of the person signing overcome by the threats? This court held, in International Harvester Co. v. Voboril, 187 F. 973, 110 C.C.A. 311, that:

'Duress may be caused by threats of a criminal prosecution of a husband, wife, child, or other near relative of the person whose action is thereby controlled, though no crime has in fact been committed or prosecution begun. If the contracting party has been so put in fear as to be deprived of the free will power essential to contractual capacity, the transaction thereby induced may be avoided.'

In that case the party signing the notes was coerced by threats that her husband would be arrested and jailed unless she signed and guaranteed the notes, and that was held sufficient to constitute duress. The court held that testimony of the condition of the defendant and the state she was put in by the threats should have been admitted, and that the court erred in not admitting the same.

In Henry et al. v. State Bank of Laurens, 131 Iowa, 97, 107 N.W. 1034, it was held that a threat to prosecute the maker's brother for embezzlement and to send him to the penitentiary was sufficient to show duress; the party alleging that she signed the instrument in suit because of such statements and would not otherwise have done so.

The Nebraska rule as to this is laid down in Nebraska Mut. Bond Ass'n v. Klee, 70 Neb. 383, 387, 97 N.W. 476, 478, as follows:

'To constitute duress sufficient to avoid a contract in this state, the means adopted need only be of a character necessary to overcome the will and desire of the injured party, whether that person be below or above the average person in firmness and courage, and whether the means employed come clearly within the common-law definition of duress or otherwise.'

In the early case of U.S. v. Huckabee, 16 Wall. 431, 21 L.Ed. 457, the rule as to duress is stated thus:

'Duress, it must be admitted, is a good defense to a deed, or any other written obligation, if it be proved that the instrument was procured by such means; nor is it necessary to show, in order to establish such a defense, that actual violence was used, because consent is the very essence of a contract, and if there be compulsion there is no binding consent, and it is well settled that moral compulsion, such as that produced by threats to take life or to inflict great bodily harm, as well as that produced by imprisonment, is sufficient in legal contemplation to destroy free agency, without which there can be no contract, because in that state of the case there is no consent. Unlawful duress is a good defense to a contract, if it includes such degree of constraint or danger, either actually inflicted or threatened and impending, as is sufficient in severity or apprehension to overcome the mind and will of a person of ordinary firmness.'

See, also, Barnett Oil & Gas Co. v. New Martinsville Oil Co. (D.C.) 254 F. 481; Galusha et ux. v. Sherman et al., 105 Wis. 263, 81 N.W. 495, 47 L.R.A. 417; Schultz v. Catlin, 78 Wis. 611, 47 N.W. 946; Hullhorst v. Scharner, 15 Neb. 57, 17 N.W. 259; Morrill et al. v. Nightingale et al., 93 Cal. 452, 28 P. 1068, 27 Am.St.Rep. 207; Morrison v. Faulkner, 80 Tex. 128, 15 S.W. 797; Thompson et al. v. Niggley et al., 53 Kan. 664, 35 P. 290, 26 L.R.A. 803; also 2 Greenleaf on Evidence (14th Ed.) note to section 301; Joyce, Defenses to Commercial Paper, Sec. 105.

There was sufficient evidence introduced or offered to make the question of whether the notes were given under duress one for the jury. Therefore it was error to preclude evidence as to this, provided: (a) That defendant in error was not a holder in due course without notice of duress; (b) that plaintiff in error was not estopped as...