Mountain Elec. Co. v. Swartz

• Decision Date: 06 July 1964
• Docket Number: No. 9396,9396
• Citation: 87 Idaho 403,393 P.2d 724
• Parties: MOUNTAIN ELECTRIC COMPANY, a corporation, Plaintiff-Appellant, v. Gilbert SWARTZ and Louise L. Swartz, husband and wife, Defendants-Respondents.
• Court: Idaho Supreme Court

Page 724

393 P.2d 724

87 Idaho 403

MOUNTAIN ELECTRIC COMPANY, a corporation, Plaintiff-Appellant, v. Gilbert SWARTZ and Louise L. Swartz, husband and wife, Defendants-Respondents.

No. 9396.

Supreme Court of Idaho.

July 6, 1964.

Racine, Huntley & Olson, Pocatello, for appellant.

McDevitt & McDevitt, Pocatello, for respondents.

SMITH, Justice.

Appellant brought this action seeking to foreclose its second mortgage encumbering real property of respondents, given to secure payment of their promissory note. Repondents denied the indebtedness, and counterclaimed for all sums paid to appellant, claiming that appellant 'unjustly and wrongfully received' the same through 'coercion and threats and undue influence' of respondents.

Trial by a jury, by assent of appellant and respondents, resulted in a verdict and judgment of $3,880.06 in favor of respondents on their counterclaim. Appellant has appealed from an order denying its motion for directed verdict, from the resulting adverse judgment, and from an order denying its motion for a new trial.

Appellant corporation engages in the business of selling and repairing household appliances in Pocatello. Respondent Gilbert Swartz, herein sometimes referred to as Swartz, had been employed by appellant for some 15 years prior to the bringing of this action. He was a good worker, enjoyed an excellent reputation in the vicinity of Pocatello based on the high caliber of his services, and was instrumental in developing the repair phases of appellant's business. He had free access at all times to appellant's establishment and was allowed the use of a company truck. He could purchase parts, for appliances being repaired, from local merchants, and was generally permitted to pursue his work without interference from the management.

Appellant's repairmen, including respondent, were required to keep daily time cards which listed customers served, parts used, and time spent in repairs. Appellant customarily billed the customer for the work performed, but occasionally a customer would pay a repairman who, upon submitting the work order to appellant's bookkeeper, would pay the money received to the bookkeeper. Unless a repairman, personally taking a work order, reported it to the office, appellant would have no record of such work. Unless a repairman paid over the cash received from a customer for work performed, appellant would be ignorant of the payment unless the customer subsequently brought the matter to appellant's attention. A Mr. Burnett, appellant's expert witness and a certified public accountant, testified that the accuracy of appellant's bookkeeping system depended upon the honesty of its employees.

In this respect, appellant's witness, a Mrs. Durrell, testified that Swartz had repaired her washing machine on different occasions, for which she made payment to him by check. In the spring of 1960, Swartz installed a new water pump in the machine, for which service Mrs. Durrell paid him $25. Later, Mrs. Durrell mentioned this transaction and the cost to appellant's bookkeeper. Swartz had told the bookkeeper that this particular job had been cancelled and insisted that such was the case even after the cancelled check had been turned over to appellant's manager. A few weeks later, however, Swartz turned in the money for this particular job.

Appellant's manager, a Mr. Jackson, testified that Swartz had obtained items from other merchants, charging them to appellant, but which he, Swartz, had used personally, including tires and oil. He also testified that he missed two appliances from appellant's stock of merchandise which he could not trace to any particular employee because of the nature of the bookkeeping system; also, that it was impossible to determine how much Swartz had failed to turn in to the company for repair work.

Because of those asserted losses Mr. Jackson employed the services of the Ridgway Company, a California agency which specialized in this type of investigation. Its representative, Jackson and Swartz met together the evening of November 25, 1960, in a hotel room in Pocatello. Jackson testified that Swartz readily confessed to embezzling $20 a week in money and merchandise during a period of 630 weeks of his employment by appellant, amounting to $12,600; Swartz also wrote and signed three almost identical letters, to that effect, addressed to Jackson, each in the nature of a confession. The full context of one such letter is set forth below. ¹

Swartz, on the other hand, testified that Jackson and the Ridgway representative accused him of having misappropriated company funds; that if he did not confess to those shortages, his relatives and other people would be informed of what he had done. The substance of Swartz's testimony is to the effect that he was coerced into writing the confessions; that although he denied to Jackson and the representative that he had taken any company money, he signed the confessions because 'I was so upset by those guys a-dinging at me that I didn't know what I was doing.'

Additional testimony of Mr. Jackson on cross examination indicates that, excepting for the $25 check which Swartz received for repairing Mrs. Durrell's washing machine,--a job he insisted had been cancelled,--appellant had not, at the time of trial, compiled any direct evidence, other than the confessions, indicating that Swartz had misappropriated any of appellant's property. Jackson further admitted that at no time had he ever confronted Swartz 'man to man' and directly accused him of misappropriation of funds, the reason being that 'We considered Mr. Swartz a very valuable employee; he had a wonderful reputation as a service man, so we decided to overlook some of these * * * trivial matters; because we wanted to maintain our reputation in the community as a desirable place to do business * * *.'

On November 26, 1960, the Ridgway representative and Jackson met with appellant's counsel, Mr. Racine, and showed him the confessions which Swartz had written and signed the previous evening. The representative left Pocatello later that day. Appellant subsequently paid the Ridgway Company $1,500 for its services.

On November 28, 1960, Jackson and Swartz met with Mr. Racine who thereupon stated that he was appellant's counsel in the matter. In regard to that meeting, Mr. Racine testified that Swartz at no time denied taking the money; and that 'he simply wanted to do what was right and get it over with, and * * * if possible to stay in the employment of Mountain Electric.' Racine also advised Swartz to seek legal advice if he had any questions concerning the matter. Swartz also testified he regarded Mr. Racine's advice as 'honest and trustworthy.' At the same meeting, Jackson agreed to settle appellant's claim with Swartz for $6,000, a portion thereof to be paid in cash.

On January 13, 1961, respondents, Swartz and his wife, met with Mr. Racine at his law offices, and executed their promissory note for $3,000 in favor of appellant, secured by a chattel mortgage encumbering their real property (a second mortgage); and they paid the remaining $3,000 of the account in cash. In return for this note and mortgage, Racine gave respondents a release signed by Mr. Jackson, as president of appellant, the intent of which was to 'release and discharge the said Gilbert Swartz and Louise L. Swartz from all claims, demands, or liability of evert kind and character arising out of or by reason of the employment of Gilbert Swartz by Mountain Electric Company * * *,' providing that they paid the full amount of the promissory note. In regard to the execution of the note and mortgage, Mr. Racine testified that Mrs. Swartz felt that her husband could not have misappropriated any funds and that what they were doing 'could not be right.' Racine again told respondents to seek advice if there was any question in their minds concerning the transaction.

In regard to the January 13, 1961, meeting with Mr. Racine, Mrs. Swartz testified that she and her husband had not obtained legal advice prior to that meeting but instead, relied on Mr. Racine's advice; that her reason for signing the note and mortgage was because 'any wife would have did it, under the circumstances. If you couldn't raise the money, if you didn't have the money that was the only thing that was left * * * to do.'

Two days after this meeting, i. e., on January 15, 1961, Swartz met with an attorney, a Mr. Phillips, in Pocatello. Mr. Swartz did not disclose the results of that meeting. Beginning on the same day, January 15, 1961, respondents began making monthly payments of $75.00 each on the promissory note, which they continued to make until March 6, 1962, at which time they had made 14 payments. Whether respondents made any attempt to secure legal advice during that period of time is not disclosed in the record. Respondent Swartz continued in the employ of appellant until August 5, 1961, when he terminated the job of his own volition. During that period of approximately seven months, his earnings totalled $4,124.58.

Respondents stopped making payments on their promissory note after March 6, 1962, upon advice of counsel. Appellant filed suit on August 11, 1962. Respondents, in answering the complaint and counterclaiming for sums they had paid appellant, for the first time alleged that the note and mortgage executed almost 21 months earlier, on January 13, 1961, were executed under circumstances amounting to fraud and duress. The jury, in returning a verdict for respondents in the sum of $3,880.06 on their counterclaim in effect found respondents to be entitled to their payments made to appellant in cash and on the promissory note, and the judgment for such sum in effect returned respondents to the relative position they were in prior to execution of the note and mortgage.

Appellant assigns as error the trial court's refusal to give appellant's requested jury instruction No. 7, designed to instruct the jury...