Barnette v. Wells Fargo Nevada National Bank of San Francisco/Opinion of the Court

The appellant brought suit in the superior court of San Francisco county, Cal., for the surrender and cancellation of a deed of land and to recover money received by the appellee Noyes, a receiver acting under the appointment of an Alaska court, and deposited by him with the appellee bank, as rents derived from the land conveyed and as proceeds of the sale of part of it. The conveyance was made by appellant to receivers, predecessors in office of the appellee Noyes, appointed by the District Court for the District of Alaska. Relief was sought on the ground that the conveyance had been procured by duress. The cause was removed to the United States District Court for Northern California, and trial in that court resulted in a decree for the plaintiff. On appeal to the Circuit Court of Appeals the decree was reversed on the ground that the suit was barred by laches. 298 F. 689. The case comes to this court on appeal. Judicial Code, § 241 (Comp. St. § 1218), before Act of February 13, 1925 (43 Stat. 936).

The jurisdiction of the District Court was not challenged in the Circuit Court of Appeals; nor is it challenged here. The petition for removal from the state court to the District Court and the motion to remand, made and denied in the latter, are not shown in the record. They were omitted from the transcript made up on appeal to the Circuit Court of Appeals, because the parties had so stipulated under rule 75 of the Equity Rules then in force (226 U.S. Appendix, p. 23) relating to the reduction and preparation of transcripts on appeals in suits in equity. It therefore does not affirmatively appear on what ground the removal to the District Court was sought, allowed and sustained. But an examination of the bill, which is set forth in the record, shows that the purpose of the suit was to recover land and funds then in charge of the receiver of a court in Alaska which was created by laws of Congress, and derived its powers and authority from those laws. Such a suit was removable under section 28 of the Judicial Code (Comp. St. § 1010), as supplemented by the amendment of section 33 by the Act of August 23, 1916, c. 399, 39 Stat. 532 (Comp. St. s 1015). Matarazzo v. Hustis (D. C.) 256 F. 882, 887-889; see Texas & Pacific Ry. Co. v. Cox, 12 S.C.t. 905, 145 U.S. 593, 603, 36 L. Ed. 829; Board of Commissioners v. Peirce (C. C.) 90 F. 764. The alleged right to recover grew out of transactions between the plaintiff and the receivers within the territory of Alaska with reference to land located in Alaska, in all of which the receivers were acting in virtue of authority conferred on them as officers of the Alaska court. Rouse v. Hornsby, 16 S.C.t. 610, 161 U.S. 588, 590, 40 L. Ed. 817. As all this is apparent from the face of the bill, and as the removal is not challenged here, we think the presumption should be indulged that the removal was rightly taken, and that the District Court had jurisdiction.

We recognize that property in charge of a receiver is in the custody of the court by which he was appointed and under which he is acting, and that as a general rule other courts cannot entertain a suit against the receiver to recover such property, except by leave of the court of his appointment. Lion Bonding Co. v. Karatz, 43 S.C.t. 480, 262 U.S. 77, 88, 89, 67 L. Ed. 871. But the record shows that shortly after this suit was begun, the court in Alaska expressly authorized the receiver to appear in the suit and to make defense and present a counterclaim in it. This was the full equivalent of granting leave to bring the suit. That the order was made shortly after, instead of before the suit was begun, is not material. Jerome v. McCarter, 94 U.S. 734, 737, 24 L. Ed. 136; Board of Commissioners v. Peirce, supra, 765, 766. The plaintiff contended and the District Court held that, even if there had been no such leave, the suit could be maintained under the legislative permission given in section 66 of the Judicial Code (Comp. St. § 1048); but we need not consider that question.

On January 5, 1911, the District Court for Alaska appointed receivers for the Washington-Alaska Bank, a Nevada banking corporation engaged in business in Fairbanks, Alaska. The husband of the appellant had been the president, director and manager of the bank from its incorporation. In February, 1911, the appellant, then residing in Los Angeles, Cal., went with her husband to Fairbanks to assist in the liquidation of the bank's business, its assets and affairs being then in the hands of the receivers. Six weeks later, after consultation with their attorney, appellant and her husband tendered to one of the depositors of the bank as trustee for the unpaid depositors, a deed conveying real estate of the husband and real estate which was the separate property of the appellant, located in Alaska. Acceptance of the deed was refused on the ground that by it criminal prosecution of the husband and enforcement of his civil liability might be prejudiced or waived. Later a similar deed was tendered to the receivers and rejected by them for the same reasons. Appellant and her husband then filed a verified petition in the court in which the receivership was pending, praying that the receivers be directed to accept the trust deed and expressing the desire to prevent the commencement of legal proceedings against them by the receivers and to pay all the depositors of the bank in full. The court made an order authorizing the receivers, as such, to accept the deed and administer the trusts created by it, in connection with their duties as receivers.

The deed was executed by appellant and her husband on March 18, 1911, and was separately acknowledged by appellant, the certificate of acknowledgment stating that she executed it voluntarily and that 'she did not wish to retract it.' The receivers took possession of the property in Alaska; they and later their successor, the appellee, Noyes, received the rents from it and the proceeds of sale of some of the land, and the fund now in dispute was derived from the administration of the trust.

Within a week after executing the conveyance appellant departed from Alaska with her husband and returned to her residence at Los Angeles. More than three years later, on November 16, 1914, she instituted suit in the Alaska court against the receivers, to set aside the conveyance of her separate property on the ground that it had been procured by duress. The case was not brought to trial and after more than three years, on August 1, 1918, she consented to a nonsuit, having in the meantime, on July 24, 1918, commenced the present suit.

The District Court below held that appellant's conveyance had been procured by duress. This conclusion was based on findings that during the period of appellant's sojourn in Alaska in 1911 threats or 'suggestions' were made to her (which it appears were made by two women depositors of the bank and by others who are unidentified) that her children would be kidnapped and her husband and herself subjected to personal violence; that under the circumstances these threats aroused in her a reasonable fear for the safety of her children, her husband and herself, and induced the execution of the deed to the receivers.

We turn aside from the objections pressed upon us that the evidence was insufficient to establish duress and that in neither pleading nor proof is it suggested that the receivers or the great majority of the creditors of the bank were parties to or aware of the alleged duress. See Fairbanks v. Snow, 13 N. E. 596, 145 Mass. 153, 1 Am. St. Rep. 446. Nor need we consider any of the numerous defenses interposed, except the acquiescence of appellant in her deed, and her delay in asserting her rights, which, in the circumstances, are decisive of the case.

Appellant's cause of action is necessarily founded upon the assertion of the rightful and effective exercise of the power to disaffirm her conveyance, which arose as soon as she was relieved from the compulsion of the alleged duress. Acts induced by duress such as is here relied on, which operates only on the mind and falls short of actual physical compulsion, are not void in law, but are voidable only, at the election of him whose act was induced by it. Andrews v. Connolly (C. C.) 145 F. 43, 46; Miller v. Davis, 122 P. 793, 52 Colo. 485, 494; Eberstein v. Willetts, 24 N. E. 967, 134 Ill. 101; Fairbanks v. Snow, supra; Miller v. Lumber Co., 57 N. W. 101, 98 Mich. 163, 39 Am. St. Rep. 524; Oregon & P. R. R. Co. v. Forrest, 28 N. E. 137, 128 N. Y. 83. If there was duress here, appellant, as soon as she was relieved from its operation, was in a position either to disaffirm her conveyance or to allow it to stand undisturbed as the free and formal disposition of her rights. If her choice was to disaffirm, it might have been evidenced by suit timely brought or by any other action disclosing her purpose to those who would be affected.

In that situation she was subject to the requirement of equity that an election to disaffirm and to recall the legal consequences of an act which has operated to alter legal rights by transferring them to others, must be exercised promptly. Andrews v. Connolly and other cases cited, supra, show how this requirement is applied in cases of duress. The principle has a like application where the right is founded on fraud. Upton, Assignee, v. Tribilcock, 91 U.S. 45, 54, 55, 23 L. Ed. 203; Wheeler v. McNeil, 101 F. 685, 41 C. C. A. 604; Blank v. Aronson, 187 F. 241, 109 C. C. A. 327.

What promptness of action a court may reasonably exact in these circumstances must depend in large measure upon the effect of lapse of time without such disaffirmance, upon those whose rights are sought to be divested. The appellant formed the intention of taking proceedings to set aside her conveyance immediately on her return to Los Angeles, in April, 1911. This intention remained undisclosed for more than three years until she brought suit in the district court of Alaska in November, 1914. There is no evidence that the threats of violence were renewed after she left Alaska, or that they operated to prevent the prompt exercise of her election when she had returned to her home in Los Angeles. Her husband was brought to trial upon criminal charges growing out of his administration of the affairs of the bank, and criminal proceedings were concluded in December, 1912, or in 1913. During the period from April, 1911, until November, 1914, appellant, who was represented in Alaska by counsel and by an attorney in fact, was aware that the receivers, and later the appellee Noyes, none of whom was shown to have had any knowledge of the alleged duress, were engaged in the administration of the trust created by appellant's conveyance, under an order of the court obtained on her petition. During that period, she made no effort to advise the court or the receivers of the alleged duress or of her intention to disaffirm her deed.

By the provisions of the deed, the grantees were given unrestricted power of sale of the property after November, 1914, but it was expressly provided that sales might be made in the meantime by the united action of the grantors and grentees, and the proceeds paid to the grantees under the trust provisions of the deed. Appellant joined with her husband and the appellee receiver in a sale of one of the plots of her separate property, the conveyance being executed in her behalf by her attorney in fact and the proceeds being paid to the appellee in November, 1911. This unexplained delay of more than three years in exercising appellant's asserted right to disaffirm her conveyance, while the appellee and his predecessors were left in ignorance of her intention to assert it, and her affirmative action as well, in recognizing the validity of her deed and the authority of the appellee under it, establish conclusively her election to allow her conveyance to stand as the unrevoked and effective agency for the disposition of her rights.

The case is not one which requires us to consider the effect of mere delay in bringing suit to enforce a claim of which appellees had notice, with the consequent opportunity to protect themselves, in some measure, from the prejudice which would otherwise result from mere lapse of time, as in Simmons Creek Coal Co. v. Doran, 12 S.C.t. 239, 142 U.S. 417, 35 L. Ed. 1063, and Southern Pacific Co. v. Bogart, 39 S.C.t. 533, 250 U.S. 483, 63 L. Ed. 1099, relied upon by appellant. Nor have we to do with a situation where complainant's silence did not mislead or prejudice the defendants, as in Northern Pacific Railway Co. v. Boyd, 33 S.C.t. 554, 228 U.S. 482, 57 L. Ed. 931, also relied upon. Here the very existence of the appellant's right depends upon the timely exercise of her election to disaffirm the deed. Delay in its exercise was necessarily prejudicial to her grantees; for they were entitled to and did rely and act upon the authority of her deed, and their defense under the circumstances was necessarily impeded and embarrassed by the lapse of time during the period in which they were left in ignorance of appellant's claim.

The judgment of the Circuit Court of Appeals is affirmed.

Mr. Justice BRANDEIS, with whom Mr. Justice SANFORD concurs, dissenting.