258 Mass. 585 | Mass. | 1927
In this action of tort the defendants are charged with having deprived the plaintiffs of their property and business by means of an unlawful combination or conspiracy. The plaintiffs are George F. Willett and Edmund H. Sears, late copartners under the firm name of Willett, Sears and Company. The defendants are the persons alleged to be copartners in the firm of Kidder, Peabody and Company, the persons alleged to be copartners in the firm of F. S. Moseley and Company, and Robert F. Herrick. The Chase National Bank of New York City was named in the writ as one of the defendants but it was not served with process and was not a party to the trial. Daniel G. Wing was also named as one of the defendants. At the close of the plaintiff=•’ evidence a verdict in Wing’s favor was directed by the '
After the original declaration was passed on by this court (Willett v. Herrick, 242 Mass. 471), several amendments were allowed. The case was tried in the Superior Court. The trial occupied one hundred and eighty-five court days, beginning November 8, 1923. On December 18, 1924, the
One of the amendments allowed in the Superior Court, after the decision in the Supreme Judicial Court on the defendants’ demurrer to the declaration, so far as material to this discussion sets out that the defendants, having obtained control of the shares of the American Felt Company (hereinafter called the Felt Company) and the shares of the Daniel Green Felt Shoe Company (hereinafter referred to as the Green Company) by the fraudulent means alleged, in order to coerce the plaintiffs to surrender their right to redeem the same and to surrender additional shares of the Green Company, concealed the existence of the conspiracy from the plaintiffs, and by concealment and false representations procured a release of all claims and demands, and by the wrongful means alleged advised the plaintiffs and their assignees that a compromise settlement should be made with the plaintiffs’ creditors; that the plaintiffs, being ignorant of the defendants’ selfish motives, and of the conspiracy, were coerced by the defendants to assent to an offer of $125,000 made by the defendants, for the transfer of the shares of the Felt and Green companies, and the shares of the Green Company held by Kidder, Peabody and Company under an agreement; that the plaintiffs, misled by the defendants, conveyed to J. Sidney Stone, Frank G. Allen and Charles J. Prescott as alleged “trustees” the aforesaid shares and the right to redeem the shares of the Green Company and the Felt Company mentioned in an agreement of “July 29, 1918”; that the trustees transferred the shares to the defendants, and the right of redemption, and received the sum of $125,000.
It is further alleged that, on the date of the conveyance of the shares by the trustees, the plaintiffs executed a general release of the defendants, a copy of which is annexed; that the plaintiffs were induced to sign the instrument of release by the defendants’ concealment of the existence of the conspiracy and by fraudulent misrepresentations, in violation of fiduciary duties set forth; that “for the purpose of causing
This general release recited that Willett and Sears individually and as copartners, “in consideration of One Dollar ($1.00) and other valuable considerations, . . . remise, release, and forever discharge Kidder, Peabody & Co. and F. S. Moseley & Co., and their associates ... of and from all and all manner of actions or causes of action, suits, debts, dues, accounts, covenants, contracts, agreements, judgments, claims and demands whatsoever, direct or indirect, in law or in equity, which against the said Kidder, Peabody & Co. and F. S. Moseley & Co., and their associates, we, or either of us, . . . ever had, now have, or . . . can, shall, or may have, arising out of, or which may arise out of, any transactions had between us, or either of us, and the said Kidder, Peabody & Co. and F. S. Moseley & Co., and their associates, or any of them, or by reason of any cause, or matter, or thing whatsoever from the beginning of the world to the date of these presents.” This instrument was under seal and was signed by George F. Willett and Edmund H. Sears. It was dated March 24, 1919.
In June, 1918, the Chase National Bank held two notes of Willett, Sears and Company for $200,000 each, due July 15, 1918, and October 15,1918, respectively, which were secured by twelve thousand shares of the Felt Company common stock standing in the plaintiffs’ names and pledged by them. The Girard National Bank of Philadelphia also held a note of the plaintiffs for $100,000, due in September of that year, and secured by two thousand shares of the Felt Company’s common stock pledged by the plaintiffs. The Green and Felt companies required a special loan of $3,000,000. Negotiations were carried on for obtaining this loan, meetings of bank officials were held and the plaintiffs were informed they would have to take care of the notes held by the Chase and
The writings confirming the undertaking of July 31 were dated July 29, 1918. The details appear in a written communication to Willett, Sears and Company, signed by Kidder, Peabody and Company, and F. S. Moseley and Company, and in substance are as follows: “We have this day, in behalf of ourselves and associates, bought from you 16,500 . . . shares of the American Felt Company common stock and 500 . . . shares common stock of the Daniel Green Felt Shoe Co. ... In consideration of the foregoing we agree to sell you or your assigns all of the aforesaid shares for the sum of $1,227,000 ... to be paid on or before July 25, 1920.” On the same date Willett, Sears and Company gave to Kidder, Peabody and Company and F. S. Moseley and Company a written memorandum which declared, “We have this day sold to you sixteen thousand five hundred . . . shares of American Felt Company common stock and five hundred . . . shares of Daniel Green Felt Shoe Company common stock for the sum of $500,000, the receipt of which is hereby acknowledged.” The purchase price was paid by checks of Kidder, Peabody and Company.
On July 31, 1918, the agreement for the $3,000,000 loan to the Felt and Green companies was perfected. The loan was to be made by four national banks and one trust company in Boston, the Chase National Bank of New York, Kidder, Peabody and Company and F. S. Moseley and Company, in the proportions set out in “Schedule B” annexed to the bankers’ circular. This circular stipulated that if the existing indebtedness of $2,500,000 of the companies due to various banks, and $500,000 due to the United States government, as well as outstanding paper placed by brokers, should not be satisfactorily provided for by February 15, 1919, such proceedings were to be taken as appeared wise to liquidate the two companies. On the same date Kidder, Peabody and Company received three thousand,
After these arrangements had been carried out, on November 29, 1918, one Sydeman brought a suit in equity against Willett, Sears and Company on a contract, claiming damages in the amount of $300,000, and seeking to reach and apply the Felt and Green stock in the name of Kidder, Peabody and Company, as well as stocks in other companies. Other actions and suits were brought against Willett, and Willett, Sears and Company. There was evidence that Willett requested Charles F. Choate, Jr., Frank G. Allen and J. Sidney Stone to assist in straightening out his affairs. In December, 1918, Willett and Sears gave Allen a written power of attorney.
In January, 1919, according to the testimony of Fessenden, a member of the firm of F. S. Moseley and Company, at an interview between himself, Allen and Stone, Allen suggested that the defendants purchase the Green stock deposited with Kidder, Peabody and Company and the option to buy the Felt and Green stocks for $125,000, in order that a settlement might be made with the plaintiffs’ creditors. On February 1, 1919, Stone wrote Willett, who was then at Pinehurst, North Carolina, informing him of the offer of $125,000 for the Felt and Green stocks, and requesting authority to act, stating, “the only alternative to making this sale is bankruptcy.” On March 13, 1919, Willett, Sears and Company assigned to Messrs. Allen, Prescott and Stone, all their interest in the Green Company’s stock, including their right to repurchase the stock of the Felt and Green companies. By this instrument, which was signed by both Willett and Sears, the assignees were given “full authority to dispose” of all the “shares of stock and option” for $125,000 in cash, and to dispose of the proceeds among the creditors of Willett, Sears and Company.
On the same day, the assignees wrote to Fessenden, offering to sell to him or to those whom he represented the shares
On March 24, 1919, Willett met Allen, Stone, and his counsel, Edward W. Hutchins. At this meeting the question of Willett’s signing the general release was discussed. The advice of Hutchins was asked concerning the possibility of any claim Willett might have against the defendants, and Willett was advised that such claim would be discharged if he signed the release. Sears testified that he acted on the advice of Hutchins and signed the papers, believing it the best thing to do, and because he had confidence in Choate, Allen, Stone and Hutchins. The sale was then completed: a check of Kidder, Peabody and Company for $125,000, payable to Allen, Stone and Prescott, the assignees of Willett, Sears and Company, was delivered to them, and the general release, duly signed, was delivered, and also an assignment from the assignees of the Green stock. In addition, Willett, Sears and Company gave a special release to Kidder, Peabody and Company, F. S. Moseley and Company, and then-associates, releasing them from all obligations with respect to the shares of the Green stock standing in the name of Kidder, Peabody and Company, and the assignees transferred to Kidder, Peabody and Company, F. S. Moseley and Company, and their associates, all title to the Felt and Green shares. Willett and Sears also discharged the defendants of all obligations as set forth in the “agreement, dated July 29, 1918,” concerning the shares of stock of the Felt and Green companies, and also discharged them of all
No return of the consideration for the general release has been made, and no notice of rescission has been given.
The original declaration made no mention of the general release; by a subsequent amendment it became a part of the declaration. Its validity and effect were issues in dispute at the trial, the plaintiffs contending that the release was obtained by fraud and duress, the defendants asserting that it was a bar to the plaintiffs’ action.
On March 24,1919, when the general release was executed, and the documents already referred to were delivered, the sale of the shares in the Felt and Green companies and the assignment of the right to repurchase were completed. At this time $125,000 was paid by the defendants. These matters were all a part of the same transaction. The settlement, therefore, was founded on a consideration. Furthermore, the release was under seal. Kaplan v. Suher, 254 Mass. 180. Chertok v. Morang, 228 Mass. 598. The plaintiffs’ debt of $500,000 to the Chase and Girard banks had been paid by the defendants and the plaintiffs were discharged of all liability to the Felt Company.
Although the defendants were discharged of liability under the agreement of July 31, 1918, by the special release, the general release was not limited to a particular demand; it was comprehensive in its language. Its terms were plain and distinct. It disposed of all causes of action, and of all claims and demands arising out of any transactions between the plaintiffs and defendants. Deland v. Amesbury Woollen & Cotton Manuf. Co. 7 Pick. 244. Rich v. Lord, 18 Pick. 322.
The plaintiffs contend that they were induced to sign the release because of the defendants’ misrepresentations, and that for this reason it can be avoided. We have been unable to find in the voluminous record any misrepresentations made by the defendants concerning the contents or meaning of the document executed on March 24, 1919. There was no evidence of fraud entering into the making of this agreement. None of the defendants were then present. Sears
Important misrepresentations relied on by the plaintiff were alleged to have been made by Fessenden in the summer and fall of 1918, and in January, 1919, and were in effect that the Felt and Green companies were hopelessly involved; that he (Fessenden) was much disturbed and troubled about them. The alleged misrepresentations of Winsor, a member of the firm of Kidder, Peabody and Company, were made in November, 1918, during a conversation with Willett in which reference was made to Willett’s lack of business ability, and that the properties had no value. Assuming that a jury could find that the misrepresentations as testified to by Willett were made by Fessenden and Winsor, there was nothing to show that they were made for the purpose of inducing the plaintiffs to execute a general release, or to influence their action in connection therewith. The subject matter of a release was not discussed; it was not referred to or suggested. To enable a party to rescind a contract because of fraud or misrepresentations, the fraud or misrepresentations relied on must have operated to cause him to make the contract, or have been intended to influence his action in
On March 13 the plaintiffs assigned to Allen, Prescott and Stone, all right, title and interest in the Felt and Green properties, giving to their assignees full authority to sell “ to whomsoever they see fit for . . . $125,000.” Nothing up to this time had been said with reference to the release by the plaintiffs. The written offer of the assignees, of the same date, to sell the Felt and Green option and the Green stock for $125,000 contains these words: “. . . a full release by American Felt Company of all claims and demands against Willett, Sears & Co. and George F. Willett or Edmund H. Sears, individually.” This apparently was the first time the question of a release was considered. Herrick testified that he had not thought of a release by Willett, Sears and Company to the defendants, until he saw the letter of the assignees of March 13, calling for a release from the Felt Company. The jury, of course, could believe or disbelieve this testimony. If they believed it, it showed that the release was not procured by any misrepresentations or fraud or by the wrongful use of power in combination. If they disbelieved it, there was no evidence to show that the alleged misrepresentations were made to induce the plaintiffs to sign the release. Nor was there any evidence from which it could be reasonably inferred that such a purpose was in the mind of Fessenden or of Winsor. Hunnewell v. Duxbury, 154 Mass. 286.
On February 8, Choate, Stone, Allen and Prescott joined in a letter to Willett, telling him that unless the suggestion
The plaintiffs also contend that the general release was voidable because of fraudulent nondisclosure of material facts. The basis of this contention is that the defendants stood in a fiduciary relation to the plaintiffs. By the transaction of July 31,1918, sixteen thousand five hundred shares in the Felt Company and five hundred shares in the Green Company were sold by the plaintiffs to the defendants. It was an outright sale. The plaintiffs had merely an option to repurchase the property for $1,227,000 on or before July 25, 1920. The defendants were not their trustees. They had to be in readiness to transfer the property to the plaintiffs, on payment of the price; but they stood in no confidential relation to them by reason of this sale and option to repurchase. Even if it be assumed that the defendants concealed from the plaintiffs the existence of an unlawful combination and the actual condition of the business and affairs of the various corporations, as purchasers of the shares under the agreement of July 31, with an option to repurchase, they were not the plaintiffs’ agents, and therefore were under no duty of disclosure. Thacher v. Weston, 197 Mass. 143. Eastman Marble Co. v. Vermont Marble Co. 236 Mass. 138, 152. Loring v. Lamson & Hubbard Corp. 249 Mass. 272. Edwards v. West, 7 Ch. D. 858. See also, Wehrle v. Mercantile National Bank of Salem, 221 Mass. 585.
The written agreement for the sale of the Felt and Green shares, with the option to repurchase, shows on its face that it was an outright sale. Parol evidence however was introduced, which the plaintiffs say controls the written contract and indicates that the transaction was not a sale, but was a pledge. The contention of the plaintiffs is that the de
The plaintiffs refer to a conversation with Fessenden in June, 1918, as showing that the negotiation of the $3,000,000 loan was committed to F. S. Moseley and Company, and because of this, F. S. Moseley and Company became their agents, occupying a position of trust and confidence. F. S. Moseley and Company were note brokers. They had sold to their customers a large amount of the commercial paper of the Felt Company. All that was said at the interview in question was perfectly consistent with a desire to protect these customers and save them from loss. In fact, Sears admitted that he understood at this time that Fessenden had placed a considerable amount of the Felt Company paper, and was under an obligation to do what he could to protect his own customers; that he “was quite interested in that view of the proposition.” We do not find anything in this conversation to warrant the finding that Fessenden relinquished his right to act independently and for the best interests of his firm and its customers, or that he submitted himself to the plaintiffs and agreed to act solely for their interests. The burden was upon the plaintiffs to show that Fessenden was their agent. This relation could not be established by evidence tending equally to show that Fessenden was acting for his firm and in the interests of his own customers. Smith v. First National Bank in Westfield, 99 Mass. 605, 612. Sprow v. Boston & Albany Railroad, 163 Mass. 330, 341. Glidden v. Chamberlin, 167 Mass. 486, 498. Hanna v. Shaw, 244 Mass. 57, 60.
The plaintiffs rely upon Reed v. A. E. Little Co. 256 Mass. 442. That case is not in conflict: the demurrer in that case admitted that while the defendants’ agent was fraudulently pretending to act in the interest of the plaintiff, he was really acting for the defendants. In addition to this, in the case at bar, the plaintiffs were not seeking a loan. It was the corporations which required capital for their business, and if an agency existed, it would be an agency for them, and not for the plaintiffs. See Storey v. Bickford, 237 Mass. 284. If a wrong were done a corporation by conspiracy or other
Sears testified that the firm of Willett, Sears and Company was much embarrassed by the Sydeman suit; that the attachment was made in November and the four months would expire March 29, 1919; that rather than let the attachment mature he would file a petition in bankruptcy or make an assignment; that he reached, this conclusion soon after the suit was brought. On this evidence it would seem that the direct cause of the sale to the assignees and the further sale to the defendants and the execution of the release was the Sydeman suit, and with this suit the defendants had nothing to do, they were in no way connected with it. The plaintiffs, acting upon independent advice, transferred their title in the properties to their assignees; the defendants insisted on a full release of all claims and demands if the sale were to take place. This settlement was the free act of the plaintiffs and their assignees. Furthermore, it cannot be said that the defendants divested the plaintiffs of their property on March 24, 1919, by any act of theirs, when on March 13, 1919, the plaintiffs, by their voluntary act, without solicitation on the defendants’ part, divested themselves of this property and gave all their rights, title and interest to Allen, Stone and
One of the averments in the declaration is to the effect that the defendants, in order “to strongly exert an influence over and pressure upon the plaintiffs to transfer” the title to the shares, “concealed from . . . Choate, Allen, Stone and Prescott the conspiracy that had been entered into, and the . . . means” therein employed. The plaintiffs did not prove this. None of these men were witnesses at the trial and there is nothing to show that they did not possess full information of all the decisive facts. Even if it be assumed that there was a duty on the defendants to disclose the facts, we cannot assume that these men, in dealing with the defendants, were ignorant of the material facts.
What has been said applies to all the details of the plaintiffs’ case, including the alleged mismanagement of the properties and the acts of Kidder, Peabody and Company in holding, for the benefit of the loan syndicate, the additional shares of the preferred and common stock of the Green Company, already referred to. There is no evidence that there was any breach of duty in voting this stock. Lawrence v. Curtis, 191 Mass. 240. The additional shares of the Green stock were deposited with Kidder, Peabody and Company as one of the conditions of the loan of $3,000,000. Although Kidder, Peabody and Company and F. S. Moseley and Company participated in this loan, six different banks joined with them in the undertaking, and agreed to advance the money; these shares were deposited solely for the pur
Nothing appears in the acts of Herrick to show that he was a trustee of the plaintiffs. In fact, according to Willett, at a conference between him, his counsel and Herrick, in September, 1918, Herrick repudiated a suggestion that he was a trustee for the plaintiffs, and Willett apparently did not object to this. See Young v. Walker, 224 Mass. 491.
It is said by the plaintiffs that the general release is inoperative because obtained by duress. In this Commonwealth a contract made through fear or by such acts of coercion or undue influence as the plaintiffs rely on is not void; it is merely voidable. It may be ratified by the one who is wronged. Fairbanks v. Snow, 145 Mass. 153. To set aside an agreement because of duress, the will of the party subjected to it must be overcome, and the means made use of must be such as to overcome the mind of an ordinary person. Morse v. Woodworth, 155 Mass. 233. The duress must be connected with and underlie the contract. See Barbour v. Poncelor, 203 Ala. 386. If the plaintiffs were free either to rely on their legal rights or to accept the settlement, and they voluntarily decided to accept the terms proposed and deliver the release, there was no coercion in its execution. Forbes v. Appleton, 5 Cush. 115. Grimes v. Briggs, 110 Mass.
Reliance is placed on certain acts of Herrick which, it is contended, tend to make out a case of undue influence. The Sydeman suit was brought in November, 1918. On January 18, 1919, actions were brought against Willett and Sears by certain note holders. On January 22, 1919, an action at law and a suit in equity, referred to as the Fisher suits, were brought by one Fisher against the plaintiffs, to recover on notes of a corporation indorsed by Willett, Sears and Company. Herrick was interested in these notes. The makers of them were certain subsidiary corporations. Willett, Sears and Company, by a letter addressed to the committee representing the banks who were to make the loans, agreed to “use our utmost endeavors to place” in their hands sufficient stock in these subsidiary corporations, “to control the action of the stockholders of those corporations.” Neither Herrick nor the defendants were trustees of the plaintiffs and did not stand in a fiduciary relation to them, or to the makers of the notes. The purchase of the notes by Herrick was not in violation of any duty he owed the plaintiffs. He was the owner; the plaintiffs were his debtors. Even if the suits on these notes had any harmful effect on the plaintiffs, Herrick had a right to do what he did; and the enforcement of a legal right by legal means is not evidence of duress. Forbes v. Appleton, supra. Grimes v. Briggs, supra. Chandler v. Sanger, 114 Mass. 364. O’Callaghan v. Cronan, 121 Mass. 114. Lajoie v. Milliken, 242 Mass. 508. On the facts disclosed in this case, the motives of a creditor in bringing an action to collect a debt are immaterial. Bragg v. Raymond, 11 Cush. 274. Randall v. Hazelton, 12 Allen, 412, 418. Emmons v. Scudder, 115 Mass. 367, 372. DeWolfe v. Roberts, 229 Mass. 410, 412.
It also appeared that, before the Fisher suits were brought, Willett, in a letter to Charles F. Choate, dated January 14, 1919, discussed with him the matter of a settlement with the plaintiffs’ creditors, and gave to Choate and Allen full power to make such settlement as seemed best to them. Willett then knew the financial condition of his firm. These
The so called Roxbury Carpet Company claim is also relied on as evidence of coercion. The Roxbury Carpet Company was purchased in 1917; about $800,000 was due on the purchase price. The plaintiffs contended it was purchased by the Felt Company; the defendants contended that the Felt Company could not legally make such a purchase and that the stock of the Roxbury Carpet Company was in reality purchased by Willett, Sears and Company with the funds of the Felt Company. Much evidence was introduced on this question. In our opinion it is unnecessary to decide who was in fact the purchaser. There was sufficient evidence to show that the defendants might well have believed in good faith that they had a well founded claim against the plaintiffs, and the attempted enforcement of a demand under these circumstances did not amount to duress. Lajoie v. Milliken, supra. Forbes v. Appleton, supra. Hockley v. Headley, 45 Mich. 569.
The plaintiffs contend that certain properties (subsidiary corporations in which the plaintiffs and the Felt and Green companies were interested) were mismanaged by the defendants. There was evidence that the operation of these companies “depended upon keeping them in a position to borrow from banks.” It also appeared that, at a meeting of the bankers, in discussing the terms of the $3,000,000 loan to the Felt and Green companies, it was stated that it was hopeless to try to finance these smaller companies. It was thought best that they be liquidated and Willett, according to his letter of February, 1920, understood this. The evidence shows that the liquidation of these companies was conducted by the bank creditors rather than the de
We find nothing in the dealings as to the Rich Building to support the plaintiffs’ contention.
The plaintiffs’ case is not one to recover for fraud or concealments, nor to set aside a written agreement on the ground of fraud. Their action at law is based on the conspiracy, on the unlawful exercise of combined power and influence. It was decided in Willett v. Herrick, supra, that this wrongful combination was the essence of the charge. The action was not altered in this connection by the subsequent amendment to the declaration in reference to the general release. The declaration as amended sets out the wrongs done by this conspiracy which became effective by reason of the use of power in combination. According to these averments the
The facts do not show that the plaintiffs were coerced and forced to sign the release. Duress as well as fraud is not to be presumed; it must be proved. Antecedent fraud, duress, concealment or misrepresentation as an instrument of an illegal conspiracy or distinct from and not connected with the conspiracy, may be remitted. The parties had the right to adjust their controversies and release each other of all obligations. To invalidate a release of this kind, fraud or other illegal acts must operate to produce its execution and contribute to it as a cause. See Dawe v. Morris, 149
We have not thought it necessary to go further into the details of the various transactions. All the evidence has been thoroughly examined and every argument advanced on behalf of the plaintiffs has been carefully considered. The plaintiffs’ affairs were much involved; their solution required ability and judgment. Willett understood the financial and operating burden the firm was carrying. There was no evidence that the discretion of the defendants was abused or made use of to bring about the final settlement. We have not considered the effect of the plaintiffs’ failure to return the consideration received when the release was signed, and their failure to rescind the release. Nor have we thought it necessary to discuss the question of the plaintiffs’ ratification of the release.
It may have been thought, by reason of the original transaction of July 31, 1918, that the plaintiffs were the victims of a hard bargain; being in financial distress, that advantage was taken of their inability to continue their business; that a capacious price was asked for the right to repurchase the shares, and for the loan by the bankers; that the plaintiffs had to yield or retire. It may have been believed also that the undertaking was profitable to the defendants. On the other hand, the defendants were taking a risk; they were investing their own funds. We are concerned only with the legal rights of the parties, and cannot deal with the ethics of the situation. The defendants were fully exonerated of these prior acts and the injury, if any, flowing from them. However great the plaintiffs’ loss may have been, or however hard the terms, they intelligently signed a document releasing the defendants from all actions and demands, when they were free to accept its terms or rely on their rights at law. Such a document cannot be set aside unless the plaintiffs’ legal rights were invaded. It was a valid and legal instrument and a bar to the plaintiffs’ action. There was no connection
Exceptions sustained.
Judgment for the defendants.