French v. Shoemaker (81 U.S. 314)/Opinion of the Court

Complicated as the transactions are out of which the present controversy has arisen, it will be impossible to explain the grounds of our decision in a manner which will be satisfactory to the parties, without giving in the first place a pretty full statement of the facts.

On the twenty-seventh of February, 1854, the legislature of Virginia passed an act incorporating a company to construct a railroad between Alexandria and Washington, by the name of the Alexandria and Washington Railroad Company, and the record shows that three-fourths of the stock of the company was taken by James S. French, and the other fourth by Walter Lenox, and that they continued to own the whole stock of the company and the entire railroad until they conveyed the same to the complainant. They proceeded to build the road, and in procuring means for that purpose they contracted large money obligations, and to secure those obligations they executed the three deeds of trust mentioned in the bill of complaint; that on the breaking out of the rebellion they went within the lines of the insurgents, and our government took possession of the railroad and used it for military purposes; that during their absence within the insurgent lines Joseph Davison presented a petition to the County Court of the State representing that he was the agent and attorney of all the holders of the bonds in the deed of trust to Walter Lenox, and that the trustee therein named was incapacitated from acting as such, and praying that a certain other person named might be appointed in his place; that the County Court removed the trustee named in the trust deed and appointed the person mentioned in the petition as substituted trustee, and that the substituted trustee subsequently, on the 10th of April, 1862, sold the railroad and everything belonging to it to the persons named in the record, and that the purchasers and others associated organized, or pretended to organize, a new company, called the Washington, Alexandria, and Georgetown Railroad Company. When the government relinquished the road, some time in the year 1865, this new company took possession of the same, and on the first of February entered into a contract with the Adams Express Company in relation to the conveyance of express freight and the furnishing by the latter of means to operate the road. On the twenty-eighth of March, 1866, French and Lenox, having returned, caused a suit to be instituted in the County Court in the name of the Washington and Alexandria Railroad Company against the new company organized or pretended to be organized under the sale, to recover the railroad and property belonging to it, upon the ground that the whole proceedings by which the sale was made and the new company was formed were fraudulent and null and void. Dissatisfaction arose as to the contract with Adams Express Company, and on the fifth of May, 1866, by consent of both parties a lease for ten years was made by the new or spurious company to Oscar A. Stevens and W. J. Phelps, and on the eighteenth of June following another contract for means of operation and in respect to the conveyance of express matter was made for ten years with the same express company. Litigations ensued with respect to those contracts, some of which were pending when the contracts which are the foundation of the present litigation were executed, and others were commenced at a later period. Serious embarrassments surrounded the parties who had caused the suit to be instituted to set aside the pretended sale of the road during their absence within the insurgent lines, and it was at this stage of the controversy, in November, 1866, that it was arranged that the parties interested should meet for consultation, as shown by the proofs, and as admitted by the respondents. James S. French, S. M. Shoemaker, Walter Lenox, Oscar A. Stevens, J. Dean Smith, and R. T. Merrick were present at the interview. Satisfactory proof is exhibited that they came to an amicable arrangement, subject to the condition that the pending suit in the County Court to set aside the pretended sale of the railroad should be determined in favor of the old company. They separated at the close of the consultation without reducing the agreement to writing, but it was drawn up in form, leaving the date blank, not long after, and was signed by all the parties except the complainant and respondent, who were not present. By the proofs, however, it appears that the complainant signed it shortly after and the respondent, on the sixth of December, 1867, also signed it, though he earnestly objected to signing it when it was first presented to him for that purpose not long after it was signed by the other parties. He not only signed the agreement, but at the same time executed a conveyance of all his interest in the railroad to the complainant to secure the repayment of five thousand dollars advanced to him by the grantee, and covenanted that it should be held by the grantee for the purpose and objects declared in the contract executed at the same time.

1. By that contract French and Lenox agreed to convey all their right, title, and interest in the railroad to a corporation to be formed as specified, if such a company was formed, or to devote all their interest to the common benefit of the parties thereto, in the proportions specified, if the old company should be revived.

2. Stevens and Phelps agreed, if the parties decided to reorganize the old company or to form a new one as there suggested, to assign all their interest as lessees of the spurious company to such new company, or to hold the same for the exclusive benefit of the parties to the contracts in the proportions therein specified.

3. On behalf of himself and Adams Express Company the complainant agreed to aid the organization to be formed or revived, by money and credit, to pay, settle, or compromise all liabilities of the old company, and the liabilities of the lessees of the spurious company, for procuring stock and materials for working the road, and all other bona fide liabilities incurred by them on behalf of the road, the claimant being substituted to all the rights and remedies of any such creditors for the benefit of the parties to the agreement or the organization by them formed or revived, subject to certain conditions therein specified, excepting twenty per cent. of the receipts, which it was agreed should be divided among the parties to the instrument according to their respective interests.

4. They also agreed that the arrangement should be carried into effect on the rendition of the decree of the County Court in the pending case before mentioned, and that the company should then be formed and organized with a capital stock of three thousand shares, to be divided and distributed as follows: French and Lenox to have twelve hundred and fifty shares, Stevens and Phelps to have eight hundred and fifty shares, S. M. Shoemaker to have five hundred shares, J. Dean Smith to have two hundred shares, and George W. Brent also to have two hundred shares.

5. It was also agreed that the lessees should be continued as general manager and superintendent, at two hundred and fifty dollars each as salary until otherwise ordered by the directors.

Five thousand dollars were paid by the complainant, or agreed to be paid, at the date of the agreement, and in consideration thereof the respondent executed the instrument called the assignment, in which he acknowledges the payment of that sum of money, and proceeds to say, 'I do hereby assign, convey, transfer, and set over unto the said S. M. Shoemaker or his assigns, all my right, title, interest, claim, and demand in and to the property, stock, road, roadbed, franchise, and charter of the corporation known as' the old company, or 'any interest I may possess in and to the same, and do further agree to make such other and further conveyances or assurance as may be hereafter required by the grantee or his assigns for the following purposes,' to wit: (1.) To secure the payment of five thousand dollars due to the grantee as an advance on the same. (2.) For the purposes and objects set forth in the agreement bearing even date herewith, between the parties therein named, and which is particularly described in the pleadings.

Various defences were set up in the answer, but those chiefly to be noticed are the two following: (1.) That the signature of the respondent to the contract was obtained by fraud and oppression, that it is void as against public policy, and because it was fraudulently obtained. (2.) That the assignment, though intended only as a mortgage to secure the five thousand dollars advanced to him by the complainant, was fraudulently prepared with the design of deceiving the respondent into an assignment of his interest and estate in the road, and that he was compelled to sign it by threats, oppression, and persistent and deceptive influences and importunities.

Proofs were taken and the parties were fully heard upon the bill, answer, and replication, and upon the cross-bill, answer, and replication, and upon the proofs, and the Circuit Court being of the opinion that the equity of the case was with the complainant, granted an injunction perpetually restraining the respondent from any and every proceeding not in accordance with the contracts. Appeal was regularly taken to this court, and the principal error assigned here is that the Circuit Court erred in setting up and enforcing the contracts for the conveyance by the respondent of his right, title, and interest in the railroad to the complainant.

Complaint is also made that the decree of the Circuit Court is equivalent to a decree for specific peformance, but it is clear that it cannot be viewed in that light, as the contracts were executed and the conveyance made and delivered nearly a year before the bill of complaint was filed, nor is that the theory of the defence as set up in the answer or in the cross-bill. On the contrary, they both admit the execution of the agreement and the assignment to secure the sum advanced, but the respondent appears to rely chiefly for his defence upon the circumstances of hardship, imposition, and oppression alleged in the answer as affording a just ground to deny the prayer for relief contained in the bill filed by the complainant. He admits that the conveyance was made to secure the sum of five thousand dollars, but he alleges that he tendered the amount to the complainant on condition that the complainant would reconvey the property to him to be held as it was prior to the assignment, and that the complainant refused to receive the money on those terms.

Fraud is certainly charged in the answer, but the charge is wholly unsupported by any satisfactory proof, and the charge is virtually abandoned by the cross-bill, in which it is alleged that the respondent, notwithstanding the oppression and injustice which compelled him to execute the agreement, was willing and anxious, and for a long time continued to demand, that the same should be carried out according to its spirit and intent. What he there alleges as matter of complaint is that it was his necessities which compelled him to make the sacrifice and to surrender his stock on the hard terms of the agreement, and yet he affirms that he would have been satisfied if the other parties to the agreement had fairly and honestly performed their part of the same, but he alleges that they have utterly failed so to do, though often reminded of the delinquency and repeatedly urged to commence their peformance. Many instances of such alleged failures are specified, but it is a sufficient answer to them all to say that they are separately denied in the answer to the cross-bill, and that the party making the charges has failed to introduce any sufficient proof to warrant a finding in his favor in respect to any one of the accusations. Nearly eight months elapsed after the contracts were signed before the County Court rendered their decree annulling the charter of the spurious company and restoring the railroad to its rightful owners. They entered the final decree on the twenty-eighth of August, 1868, and on the twenty-second of September following Walter Lenox called a meeting of the parties to the agreement, and the record shows that the respondent was duly notified and that he attended the meeting. He not only attended the meeting but he knew that the persons composing the meeting intended to effect an organization under the agreements described in the pleadings, as they directed one of their number to prepare and publish a call for another meeting to carry that purpose into effect in accordance with the code of the State and as contemplated by the terms of those agreements. Acting under those instructions the person designated for the purpose prepared the form of a call for such a meeting to be held on the twenty-ninth of October then next, and caused the same to be published; and the record also shows that the meeting was regularly held pursuant to the call for the same, and that the company was duly organized at that meeting by the choice of the complainant as president of the company. Prior to that meeting, however, to wit, on the thirtieth of the preceding month, the respondent, claiming to act as president of the road, obtained a writ of possession under the decree annulling the pretended sale of the road, and it appears that he was put in possession of the road by the sheriff, to whom he delivered the writ for that purpose. Instead of co-operating with the other parties to perfect the organization the respondent applied to the County Court for an injunction to restrain the other parties from holding the meeting called for that purpose, but the subpoena was issued in this case on the same day and the complainant obtained a rule requiring the respondent to show cause why an injunction should not issue restraining him from doing any act as president of the road, and from interfering in any way to prevent the execution of the agreement, and it appears that the subpoena and the order to show cause were served on him the day before he obtained his injunction forbidding the contemplated meeting.

Sufficient has already been remarked to show that the defence of fraud is not proved, but inasmuch as that defence is set up in several forms in the answer it may be necessary to say that the antecedent remarks upon the subject apply to that defence in every form in which it is presented. Reference has also been made to the defence that the respondent was compelled to sign the contracts by threats, oppression, and by persistent and deceptive influences and importunities, but it becomes necessary to state that defence more in detail and to give it a more careful consideration.

He alleges that he was induced to sign the two instruments by threats that if he refused he should be kept out of the possession of the road for years, and that in consequence of his pecuniary embarrassments and through fear that the parties would render his property unavailing to him in case he continued to resist their importunities, he finally executed the agreement; that being pressed for the want of pecuniary means and overcome by threats, importunities, and deceptive influences, he was ultimately forced to sign the agreement upon the condition that the complainant would advance him five thousand dollars, and that the contract should be immediately carried into effect.

Even if admitted to be true the answer does not show that the instruments were executed under duress, as the respondent admits that the sum of five thousand dollars was to be advanced as a part of the consideration for the transfer, and that he finally consented to the arrangement on the condition that the contract should be immediately executed. Much discussion to show that a contract or written obligation procured by means of duress is inoperative and void both at law and in equity is hardly required, as the proposition is not denied by either party. Actual violence, even at common law, is not necessary to establish duress, because consent is the very essence of a contract, and if there be compulsion, there is no actual consent, and 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 everywhere regarded as sufficient in law to destroy free agency, without which there can be no contract, because in that state of the case there is no consent. In its more extended sense duress means that degree of constraint or danger, either actually inflicted, or threatened and impending, which is sufficient in severity or in apprehension, to overcome the mind and will of a person of ordinary firmness. Decided cases may be found which deny that contracts procured by menace of a mere battery to the person, or of trespass to lands, or of loss of goods, can be avoided on that account, and the reason assigned for that restriction to the general rule is that such threats are held not to be of a nature to overcome the mind and will of a firm and prudent man, because it is said that if such an injury is inflicted sufficient and adequate redress may be obtained in an action at law, but the modern decisions in this country adopt a more liberal rule, and hold that contracts procured by threats of battery to the person or of destruction of property may be avoided on the ground of duress, because in such a case there is nothing but the form of a contract without the substance. Grant all this and still the concession cannot benefit the respondent, as the proofs exhibited in the record are not sufficient to support the charges as made in the answer. Substantially the same charges are made by the respondent in his cross-bill, and every one of them is denied by the complainant under oath in his answer to that bill.

Enough appears in the record to convince the court that the respondent was in straitened circumstances, that his business affairs had become complicated, that he was greatly embarrassed with litigations, and that he was in pressing want of pecuniary means, but the court is wholly unable to see that the complainant is responsible for those circumstances or that he did any unlawful act to deprive the respondent of his property, or to create those necessities or embarrassments, or to compel him to do what he acknowledges he did do, which was to yield to the pressure of the circumstances surrounding him, and as a choice of evils accepted the advance of five thousand dollars and the shares assigned him in the new organization as proposed, and voluntarily signed both the agreement and the assignment. Such an act as that of signing those instruments, under the circumstances disclosed in the record, must be regarded, both in equity and at law, as a voluntary act, as it was unattended by any act of violence, or threat of any kind, calculated in any degree to intimidate the party or to force the result, or to compel that consent which is the essence of every valid contract. Suppose he consented reluctantly, as he avers, still the fact is that he did consent when he might have refused to affix his signature to the instruments, as he had repeatedly done for the year preceding; and having consented to the arrangement and signed the instruments he is bound by their terms, and must abide the consequences of his own voluntary act, unless some of his other defences set up in the answer have a better foundation.

Want of consideration is also averred in the answer, but the terms of the instrument disprove the allegation, and the proofs introduced by the respondent as well as those introduced by the complainant show that the defence is unfounded.

Mistake and misapprehension on the part of the respondent are alleged, but the allegation is not sustained by any satisfactory proof, and the attending circumstances, taken in connection with the lapse of time from the original meeting to the time the respondent signed the instrument, convinces the court that the defence is without merit, which is all that need be remarked upon the subject.

Delay in execution of the contract is also alleged in the cross-bill, and that the complainant has failed to perform his part of the agreement, but those allegations are expressly denied in the answer to the cross-bill, and being unsustained by any satisfactory proofs the defence must be overruled.

Inequitable and unconscionable contracts, it is said, ought not to be sustained, but it is not possible to regard the arrangement in question as falling within that category, as by the terms of the agreement the complainant was to advance five thousand dollars to the respondent and to aid the organization by money and credit, to pay, settle, and compromise all liabilities of the old company and the liabilities of the lessees of the spurious company, for procuring stock and materials for working the road, and all other bon a fide liabilities incurred by them in behalf of the road. Authentic data to enable the court to compute the amount of those liabilities are not given in the record, but enough appears to satisfy the court that they must have been very large, and amply sufficient to constitute a valuable consideration for the contract.

Suggestion is also made that the contract was against public policy, as some of the parties were interested in the spurious company, but the court is of the opinion that the charge is without any foundation, as it is clearly proper that parties whose pecuniary interests are complicated and conflicting should compromise the controversy, nor is it possible to see now the respondent is injured even if some one or more of the parties failed to perform their duty to the spurious company which was annulled.

Suffice it to say, in respect to the alleged want of proper parties, that the court is of the opinion that the objection cannot be sustained, and being entirely satisfied with reasons given for overruling the objection in the Circuit Court it is not necessary to give the point any further examination.

Want of mutuality in the contract is also suggested, but it is clear that the suggestion is not well founded, as the covenants to make the advance, pay the debts and liabilities of the company, and to allot the stock as stipulated, could be enforced by suit in any court of competent jurisdiction.

Strong doubts are entertained whether any of those defences to the merits are open to the respondent, as the general rule is that where fraud is charged in the bill or set up in the answer, the party making the charge, if it is denied in a proper pleading, will be confined to that issue, but the court being disinclined to place the decision upon that ground has determined to give each defence a separate examination.

Parties who execute contracts must expect that they will be enforced when due application for that purpose is made to a court of justice, nor can they reasonably hope that courts of justice will reopen matters which they have voluntarily and understandingly closed. Even if the terms of adjustment were unfavorable to the respondent still he is bound by the arrangement, as he voluntarily signed both the agreement and the assignment. Had he refused his assent to the arrangement the case might have been different, but the proofs show that he signed instruments after he had ample time for inquiry, examination, and reflection, and having done so, neither a court of equity or a court of law can release him from the obligation to fulfil his contracts according to the terms of the instruments.

DECREE AFFIRMED.