1. A., B., C., and D., having a dispute about their rights in a
railroad company, entered into a contract of settlement, by which
they divided the stock in certain proportions among them. A.
refused to carry out the contract. B. filed a bill to compel him to
stand to his agreement. A.,
Page 81 U. S. 315
after answering, filed a cross-bill, insisting that B. ought to
have made C. and D. parties to his original proceeding.
Held that the bill, not seeking any relief against B. and
C., it was not necessary that they should be parties.
2. Equity will not set aside a contract whose purpose is a
settlement of disputes simply because one party to it was in want
of money when he made it and because such want may have been an
inducing cause for his making it, the party having been an
intelligent person who acted deliberately and with knowledge of
what he was doing. Equity favors amicable compromise of
controversies where pecuniary interests are complicated and
conflicting.
In the year 1854, the Legislature of Virginia passed an act to
incorporate the
Washington & Alexandria Railroad
Company. Two persons, J. S. French and Walter Lenox, subscribed for
the whole stock, French taking three-fourths and Lenox one-fourth,
and French being made president of the company. The road was built.
French and Lenox, however, spent very little money of their own in
its construction, but raised large sums by borrowing. When,
therefore, the road was built, the company was seriously
embarrassed. Two deeds of trust had been executed in 1855, and in
1857 another deed was made to Lenox, as trustee, to secure bonds,
issued to raise money for the purposes of the road.
The civil war broke out when the road was in this condition.
French and Lenox went South, and the government took military
possession of the road.
During their absence, a proceeding was instituted in the
Alexandria County Court for the removal of Lenox as trustee in the
deed of trust to him and for the substitution of a new trustee in
his place. A new trustee, one Stewart, was appointed, and he
proceeded in alleged conformity to the deed of trust to sell the
railroad.
Under the sale thus made, a new company was organized, which
assumed the name of the Washington, Alexandria
&
Georgetown Railroad Company, and the government having
relinquished the road in 1865, this company took
Page 81 U. S. 316
possession of it at once, and not long afterwards entered into a
contract with the Adams Express Company, represented by one
Shoemaker, in relation to the conveyance of express freight, and
the furnishing by the company of means to work the road. This
contract did not prove satisfactory, and by consent of both parties
a lease for ten years was made to two persons, named Stevens and
Phelps, in May, 1866, and in the following June, another contract
for means of operation and for the conveyance of express freight
was made for ten years with the Adams Express Company.
Litigation soon arose upon this lease and upon these contracts.
One Davison, asserting himself to be a stockholder of the
Washington, Alexandria &
Georgetown Railroad Company,
filed his bill in the Alexandria County Court in November, 1866,
alleging that the lease was made without authority and in fraud of
the rights of the stockholders and praying that it might be set
aside and annulled. The Adams Express Company filed its bill about
the same time in the Circuit Court of the United States for the
District of Virginia, praying for the enforcement of its contract
with the company and with the lessees, and under that proceeding an
order was made by the circuit court for the appointment of
receivers of the road, who took possession.
The Washington & Alexandria Railroad Company, describing
itself as
that company, by J. S. French, its president,
had already in March, 1866 (the government having, with the
suppression of the rebellion, given up, as already said, its
possession, and French and Lenox having returned from the South),
filed its bill in the Alexandria County Court asserting its title
to the road, charging fraud in the whole proceeding for the
organization of the Washington, Alexandria &
Georgetown Railroad Company and praying that it might be
declared void, and that a decree might be made establishing its own
original title to the road as unimpaired by that proceeding. But
French, when he returned to Alexandria, was very needy and so much
in debt that he was quite without means to work this railroad if he
had had it, or even to get a decree establishing the old
company's
Page 81 U. S. 317
title to it. Lenox was little or no better off. And the debts of
the road were very heavy.
In this condition of their pecuniary concerns and in the general
state of opposed and opposing interests, in November, 1866, French
and Lenox had an interview in Washington at the house of Mr.
Merrick, who had been the counsel of Stevens and Phelps, with
Shoemaker (representing the Adams Express Company), Stevens and
Phelps, the lessees under the new, or as it was sometimes styled
the "spurious" road, and Dean Smith, who had been counsel of
Shoemaker, at which interview an inchoate agreement was made for
the organization of a new company and the payment of the debts of
the old one. This meeting, which was a long one, and where the
whole condition of things was largely gone into, was apparently
satisfactory to French. Shoemaker, Stevens and Phelps, and Smith
were the active managers of the Washington, Alexandria &
Georgetown Railroad at this time, and perhaps its formal
directors, but all seemed to be of the opinion that the sale by the
trustee Stewart and the new organization could not stand in
law.
This inchoate agreement remained unacted upon for some months,
its details being the subject of conversations among the parties.
It was subsequently reduced to writing, and at another meeting
signed by all the parties except French, who was absent. It was not
then dated; the date was left in blank.
The stipulations of this agreement in substance were:
1st. That French and Lenox would convey all their interest in
the Washington & Alexandria Railroad Company to a corporation
to be formed as specified, or to devote all of that interest to the
common benefit of the parties, in the proportion specified, should
the Washington & Alexandria Railroad be revived and the
corporation by that name again come into existence.
2d. That when the parties should have agreed to reorganize and
should actually reorganize that company, or should organize another
company on the basis of the title of French and Lenox, Stevens and
Phelps would assign to the company
Page 81 U. S. 318
all their interest as lessees of the Washington, Alexandria
&
Georgetown Railroad Company, or hold the same for
the exclusive use of the parties to the agreement, according to
their respective interests.
3d. That Shoemaker, for himself and the Adams Express Company,
would aid the corporation to be formed or reorganized by money and
credits -- that is, to pay, settle or compromise all liabilities of
the Washington & Alexandria Railroad Company, the liabilities
of the lessees of the Washington, Alexandria &
Georgetown Railroad Company for stock and materials for
the road, and all the
bona fide liabilities incurred by
them in behalf of the road; Shoemaker to be substituted in all
rights of creditors paid by him; all compromises to be for the
benefit of all the parties or the new organization; no advances to
discharge liens to be refunded until the final end of litigation; a
majority in interest to have the right to substitute other
securities for any thus acquired by him; and the net receipts of
the company to be formed or reorganized to be devoted to reimburse
the advances made by him, except 20 percent of the receipts, to be
divided among the parties to the agreement in proportion to their
interests.
4th. That the agreement should be carried into effect on the
rendering of the decree of the Alexandria County Circuit Court in
the case of The Washington & Alexandria Railroad Company v. The
Washington, Alexandria &
Georgetown Railroad Company,
and the new company to be formed or reorganized with a capital
stock of 3,000 shares, to be divided among the parties thus: French
and Lenox, 1250; Stephens and Phelps, 850; Shoemaker, 500; Dean
Smith, 200; G. W. Brent, 200.
5th. The lessees to be continued under the new corporation as
general superintendent and manager, receiving $250 per month each
until otherwise ordered by the board of directors, as to
salary.
When the agreement thus reduced to writing was presented to
French early in the year 1867 by Mr. G. W. Brent, who was the
professional adviser of French and
Page 81 U. S. 319
Lenox, French refused to sign it for certain reasons which were
the subject of conversation between him and Brent, one of the
reasons being that a certain $5,000 which were to be advanced to
him were not provided for in the agreement. Finally, however, on
the 6th of December, 1867, French signed the contract. On the same
day, a separate contract was made between French and Shoemaker, by
which the latter advanced the former $5,000 on the transfer to the
latter of French's right and interest in the road. By this separate
deed from French to Shoemaker, French conveyed, on account of
$5,000 paid him by Shoemaker, all his right and interest in the
railroad, for the purpose of securing the payment of the $5,000,
and for the purposes set forth in the agreement of same date, 6
December, 1867.
After the courts in Virginia had finally decided, as they did on
28th August, 1868, the case of The Washington & Alexandria
Railroad Company v. Washington, Alexandria &
Georgetown Railroad Company in favor of the plaintiff
therein, reinstating the said company and annulling the charter of
the new company, Lenox (September 22, 1868) called a meeting of the
parties who had signed the agreement of 6 December, 1867; the
purpose of the meeting being to carry into effect the provisions of
that agreement. French was present at the meeting. The meeting
directed, among other things, that Mr. Brent should prepare and
publish a call to form the new company in accordance with the
provisions of the Virginia code. The proceedings were printed and
French received a copy. Acting under the instructions given to him,
Brent did prepare a form of call and caused to be called a meeting
at the Mansion House Hotel, in Alexandria, Va., for the 29th
October, 1868.
The meeting was duly held. Lenox was present, and voted on the
stock assigned him by the agreement of 6 December, 1867. Shoemaker
was elected president of the company. One day previously -- that is
to say on the 28th day of October, 1868 -- French filed a bill of
complaint in the Circuit Court of Alexandria County, Virginia,
against Shoemaker, the Adams Express Company, and Lenox,
setting
Page 81 U. S. 320
forth that Lenox had made a fraudulent combination with
Shoemaker to injure and annoy the said Washington & Alexandria
Railroad Company, and had called a meeting of stockholders at the
Mansion House, in Alexandria, for the 29th October, and he prayed
an injunction against them to forbid their holding the meeting
under said notice, from electing a board of directors &c.
In the meantime -- that is to say on the 30th day of September,
1868 -- a writ of possession had been issued from the Circuit Court
of Alexandria County, Virginia, in the suit of The Washington &
Alexandria Railroad Company v. Washington, Alexandria &
Georgetown Railroad Company, commanding the sheriff to put
the former, the plaintiff, into possession of the railroad and its
appurtenances. This writ of possession was taken out by French as
president of the company.
Hereupon Shoemaker filed in the Circuit Court of the United
States for Virginia, against French, the bill on which the decree
now appealed from was made. The bill had been prepared and was
sworn to by Shoemaker on the 27th of October, 1868. A subpoena,
ordered against French on the same day, and a rule to show cause
why an injunction should not be issued, were served on French, all
on the same 27th October, the day before he, French, applied for an
injunction to prevent the meeting at the Mansion House to organize
the new company.
The bill set forth most of the facts above stated, that the
complainant had offered to convey to French his interest in the
stock and property of the Washington & Alexandria Railroad
Company, on his paying the $5,000 advanced, which he had refused to
do. It then prayed that the said French might be restrained from
doing any act whatever as president of the Washington &
Alexandria Railroad Company; from interfering with the road and
property of the said company, or with the complainant and the
parties to the agreement, in carrying out the provisions thereof
and in organizing a new company, or from taking any legal
proceedings for that purpose, and prayed further that French's
interest
Page 81 U. S. 321
might be sold by a commissioner of the court for the payment of
the said sum of $5,000.
The answer of French set up as its main defense needy
circumstances and imposition. It was thus:
"The parties -- Shoemaker, Stevens, Phelps, Smith -- whom the
defendant met at Mr. Merrick's were all strangers to him. Some of
them he had never seen before; others of them he had seen and knew
by sight. His interview with them was solely on the recommendation
of his counsel, G. W. Brent. Such was the embarrassment under which
the defendant was suffering resulting from the fraudulent
deprivation of his property and the consequent want of himself and
family, that he was scarcely in a condition to investigate the
nature of the proposition, and such was the confidence which he had
in his attorney, the said G. W. Brent, under whose counsel he
acted, that it was impossible for him to suspect the propriety or
the advantages of the proposition thus made to him. Before,
however, these propositions were reduced to writing, the defendant
was suddenly called by telegraph to his home in Southwestern
Virginia on account of the illness of a member of his family. This
was in the month of November, 1866. The defendant heard nothing
more of these negotiations until his return, in the month of
January, 1867, when the contract referred to in complainant's bill,
signed by the complainant, the said Stevens, Smith, Brent, and
Lenox, was handed to the defendant by the said Brent and the
defendant was pressed by him to sign the same. The defendant
declined to sign it upon the grounds that it was not in accordance
with the verbal agreement; that it contained no stipulation for the
advance of the sum which was agreed to be advanced to the
defendant, and the advance of which was the great inducement to his
making the said agreement; and that the contract, in many
particulars, was essentially different from the agreement discussed
at the meeting. The defendant was then threatened by the said
Stevens, and those acting in concert with him and the complainant
that they would keep the defendant out of possession of the road
for years; that they would set up the contract in a court of
equity, and making the impression upon the mind of the defendant
that, by protracted litigation, they would render his property in
said road unavailing to him. Thus assailed, importuned, and
threatened, the defendant,
Page 81 U. S. 322
after having for nearly one year resisted their influences,
being greatly pressed by his necessities, was at length forced to
sign the said contract upon the condition that the complainants
would advance to the defendant the sum of $5,000 and the further
condition that the contract should be immediately carried into
effect."
"The defendant avers that the contract was void in law and
equity, because against public policy, having been fraudulently
made by the said complainant, Stevens, Smith, and Phelps, in
violation of the fiduciary relations they sustained to the said
Washington, Alexandria &
Georgetown Railroad Company;
that the contract to purchase the interest of the said defendant
and the said Lenox, and to furnish, supply, and advance the means
to carry on the litigation of the suit then pending was illegal,
and of the nature of champerty; and that for these reasons, if
there were none other, the complainant is not entitled to the
relief prayed for in his said bill, and especially is not entitled
to the injunction prayed for therein; the contract being obnoxious
to the maxim that
'ex turpi contractu non oritur
actio.'"
"That upon the face of the contract there was no consideration
sufficient to support said contract, and that it was drawn with the
fraudulent purpose and design of deceiving and defrauding the
defendant, and he avers that the assignment aforesaid, which he
executed only as a mortgage to secure the $5,000 advanced to him by
the complainant, was fraudulently prepared by the complainant, the
said Smith and the said Stevens, with the design of deceiving the
defendant into an assignment of his interest and estate in the said
road, for purposes other than that which he intended."
"The defendant averred that the complainant, Phelps, Stevens,
Smith, and Brent, have conspired together for the purpose of
oppressing and defrauding him; that to this end they have imposed
upon his confidence, taken advantage of his necessities, seized
upon his property, appropriated the earnings of the road,
three-fourths of the stock of which is owned by him, for the
purpose of preventing the company, of which he is president, from
obtaining possession of the road."
A cross-bill was also filed by French to set aside the
arrangement. It set up the same facts as the answer; admitting,
notwithstanding, that he, French, was for a long time
Page 81 U. S. 323
willing and anxious to carry out the arrangement, and asserting
that the other parties had wholly failed to perform their part of
it, though he, French, had frequently urged them to do so. It
further insisted that Stevens and Phelps were necessary parties to
the original bill. The answer to the cross-bill denied all its
important allegations of fact.
The case as made out by the proofs was much as that already
stated. There was no doubt that French was needy, and it seemed
probable that his want of money was the prevailing consideration
with him when he finally determined to sign the contract, but it
was not proved that he acted unadvisedly or otherwise than his best
interests in the complicated and embarrassed condition of the road
and his own embarrassed condition might reasonably seem to
suggest.
The questions were:
1. Whether Stevens and Phelps were necessary parties to the
original bill.
2. If not, whether the contract of December 6, 1867, was binding
on French? If it was, then of course his act in taking possession
of the road with the view of excluding the other parties to the
contract, and his application to the Circuit Court of Alexandria
County, Virginia, for an injunction to restrain the parties to the
agreement from holding a meeting to reorganize, was a breach of
faith which justified the complainant in invoking the authority of
the circuit court against him.
As to the first point the court below said:
"If the original bill sought any relief as against Stevens and
Phelps, or any aid from the court in carrying into effect the
settlement contract as to them, it would be necessary to make these
persons parties. But such is not the case. The bill seeks no relief
as against them. There does not appear to be any controversy
between them and the original complainant. And we cannot see that
the cross-complainant has a right to have any controversy he may
have with them settled in this suit. It is very certain that at the
time the settlement contract was made he had no cause of complaint
against them. Nothing, so far as they were concerned, appears to
have been concealed from him. The plain language of the agreement,
which he had before him nearly a whole
Page 81 U. S. 324
year, stated their relation, and gave all the notice of
circumstances connected with them which a court of equity will
require. If their subsequent conduct affords ground of complaint,
it must be in regard to the stock assigned to them; but this may
be, and should be, as we think, submitted to judicial scrutiny, in
a proceeding founded on the settlement contract, not hostile to it.
The objection that Stevens and Phelps are not made parties to the
original bill must therefore be overruled."
On the second point -- the merits -- the court was of opinion
that the equity of the case was with the complainant, and
accordingly decreed that French be enjoined from any use of the
title of the president of the Washington & Alexandria Railroad
Company, and from any action to interfere with any proceeding for
the reorganization of the said company under the contract of the
6th of December, 1867, and from any proceeding whatever not in
accordance with the said contract, without prejudice, however, to
his right to the stock assigned to him by the said contract, or to
assert any claim he might have against the company reorganized
under the contract, or against Shoemaker, or against the Adams
Express Company, not in contravention of the contract, or to pursue
by proper proceedings in law or equity any claim he might have in
respect to the distribution of stock made by the contract, founded
upon failure of consideration or other cause.
From this decree French brought the case here by appeal.
MR. JUSTICE CLIFFORD delivered the 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
Page 81 U. S. 325
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 &
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 & Alexandria
Railroad Company against
Page 81 U. S. 326
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
Page 81 U. S. 327
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 percent 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
Page 81 U. S. 328
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 defenses 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.
Page 81 U. S. 329
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 performance, 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
defense 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 defense 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
Page 81 U. S. 330
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 performance. 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 anyone 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
Page 81 U. S. 331
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 cooperating 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 defense of
fraud is not proved, but inasmuch as that defense 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 defense in every
form in which it is presented. Reference has also been made to the
defense 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 defense 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.
Page 81 U. S. 332
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. [
Footnote 1] 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. [
Footnote 2] 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
Page 81 U. S. 333
substance. [
Footnote 3]
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
defenses set up in the answer have a better foundation.
Want of consideration is also averred in the answer, but
Page 81 U. S. 334
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 defense 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
defense 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 defense 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
bona 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 someone or more of
Page 81 U. S. 335
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 defenses 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
defense a separate examination. [
Footnote 4]
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 fulfill his contracts according to the terms of
the instruments.
Decree affirmed.
[
Footnote 1]
Brown v.
Pierce, 7 Wall. 214.
[
Footnote 2]
Chitty on Contracts, 217; 2 Greenleaf on Evidence 283.
[
Footnote 3]
Foshay v. Ferguson, 5 Hill 158;
Central Bank v.
Copeland, 18 Md. 317;
Eadie v. Slimmon, 26 N.Y. 12; 1
Story's Equity Jurisprudence, 9th ed. 239.
[
Footnote 4]
Eyre v. Potter,
15 How. 42;
Fisher v. Boody, 1 Curtis 206;
Price v.
Berrington, 7 English Law & Equity, 254.
