Payson Building & Loan Soc. v. Taylor

Payson Building Loan Society, a corporation, plaintiff below and appellant here, filed an action in the district court of the Fourth judicial district of the state of Utah, Utah county, to foreclose a mortgage upon the home of Lee R. Taylor and Ada D. Taylor, his wife. The home was the property of Ada D. Taylor. The mortgage and note sued upon were dated December 11, 1930, and were payable to the State Bank of Payson. At the time this action was brought, the State Bank of Payson was in charge of J.A. Malia, state bank commissioner, and was in process of liquidation. The defendants Ada D. Taylor and Lee R. Taylor, filed separate answers. The answers admit the execution of the note and mortgage, and then allege that they were renewals of a previous note and mortgage executed on the 11th day of December, 1925. It is further affirmatively alleged by the answers that there was no consideration for the note or mortgage, and that the instruments were executed under duress.

The substance of the allegations constituting the duress is: That on or about the 4th day of December, 1925, G.M. Whitmore was vice president of the State Bank of Payson and T.F. Tolhurst was president of said bank; that these men told the defendants that Lee R. Taylor, who had been cashier of the bank, had committed a crime against the laws of the state of Utah; that Lee R. Taylor had made false statements and reports to the state bank commissioner, and that, unless the defendants signed a note in the sum of $2,500 and secured the same by a mortgage on their home in Payson, Lee R. Taylor would have a criminal complaint filed against him; that Ray Monsen had become cashier of the State Bank of Payson and secretary and treasurer of the Payson Building Loan Society and continued in those capacities until the State Bank of Payson closed in December, 1931; that Otto B. Erlandson was president of both the State Bank of Payson and the Payson Building Loan Society; that these men assigned the note and mortgage in question to the Payson Building Loan Society when they knew about the circumstances constituting the duress which brought about the execution of the note and mortgage originally given and renewed.

Demurrers to the answers of defendants Taylor and motions to strike certain allegations from the answers were filed. The demurrers were overruled, and the motions to strike denied. The default of the defendant J.A. Malia, bank commissioner, was entered. No appeal has been taken on behalf of the bank commissioner. The case was tried to the court, sitting with a jury, upon the issues made between the plaintiff and the defendants Lee R. Taylor and Ada D. Taylor. The court submitted certain interrogatories to the jury for answer. All the interrogatories were answered by the jury unfavorably to the plaintiff. The court adopted the findings made by the jury as the basis for his findings and the entry of judgment in so far as they were found by the jury. Judgment was entered in favor of the defendants Lee R. Taylor and Ada D. Taylor and against the plaintiff, whereby it was adjudged and decreed that the note and mortgage sued upon were obtained by fraud and duress and without consideration. The court ordered the note and mortgage annulled and canceled. The Payson Building Loan Society appeals.

There was no error in the ruling of the trial court in denying the motion to strike. As to the demurrer, it is urged that there are no allegations in the complaint showing that the State Bank of Payson was authorized to make the assignment of the note and mortgage or that the Payson Building Loan 1 Society knew anything about the alleged duress. We think the allegations sufficient to ward off the attack of the general demurrer. The record reveals a community of interest and identity of purpose existing between the Payson State Bank, the Strawberry Investment Company, and the Payson Building Loan Society. While not all of the officers of each of the corporations are disclosed, those that are disclosed were identical, and especially as to management were the same persons. The Payson Bank contained the office for all of them. The vaults were the depositaries of all funds, records, securities, and paraphernalia of all of them, and the bank officers transacted all of the business. There were three corporate entities, but essentially one business. The Strawberry Investment Company was the waste basket; the Payson Building Loan Society was the transfer and overflow for the convenient placement of funds and securities.

While the answers are separate, the allegations contained therein are of the same substantive import. The allegations are that the defendants were threatened by the bank officers by stating that Lee R. Taylor had committed a crime by making false reports to the state banking department and that, unless the note and mortgage of December 11, 1925, were signed, he would be arrested and prosecuted on a criminal charge. The same substantive statements were either made or referred to as being understood between the Taylor and the cashier of the bank at the time the renewal note and mortgage were executed.

It is argued that because of the payments of interest defendants are estopped to deny the validity of the note and mortgage. Eash v. Pence, 121 Okla. 7, 246 P. 1091. There are no pleadings relating to estoppel, and as to Ada D. Taylor the evidence is undisputed that she knew nothing 2 about the payment of interest by her husbnd and that she paid none herself. She is the owner of the mortgaged property.

It is alleged that the defendants were overcome with great fear by reason of the threats (statements of Tolhurst and Whitmore), and their judgment and power of will were coerced and subdued into believing that Lee R. Taylor would be arrested and imprisoned because of such statements, and that to avoid such prosecution and imprisonment and for no other purpose or consideration did they execute the note and mortgage. A careful examination of the whole record, including a study of the testimony of all the witnesses, impresses us that the evidence fully supports the allegations of the complaint, and the findings of the court and jury are in accord therewith.

The statements made to the defendants that Lee R. Taylor would be arrested and imprisoned with the consequent disgrace and humiliation that would result from such threatened arrest and imprisonment was sufficient to put the husband and wife in fear and to cause them to act contrary to their 3 respective wills and inclinations. Such being the allegations and the proof, a case of duress is made out sufficient to avoid the validity of the executed instruments.Graves v. O'Brien, 111 Kan. 320, 207 P. 198, 202; Thompson v. Niggley, 53 Kan. 664, 35 P. 290, 26 L.R.A. 803. The former case quotes the following from the syllabus of the latter:

"Written securities, extorted by means of threats of prosecution for criminal offenses of which the party threatened was guilty in fact, but which were in no manner connected with the demand for which compensation was sought may be avoided by the parties executing them, not only in the hands of the original payee, but of his assignees having notice of the circumstances under which such securities were taken."

The question of consideration in the instant case is so connected with the statements or duress or menace or fraud, whichever word may more accurately characterize the words and acts of the officers of the institutions who were the apparent beneficiaries of the executed documents, as to be either determined or become immaterial once the duress has been found. No fixed standard may be arbitrarily set up that will determine what facts will in every case establish duress, fraud, or menace sufficient to avoid an instrument. What might be sufficient in one case might fail in another. All the assignments of error except those relating to the demurrer and motion to strike are intimately related to the question of sufficiency of the evidence and instructions of the court, or that there is not sufficient evidence as to certain specific matters that are all subsidiary to the main issue. Practically every issue, controlling and subsidiary, was submitted by special interrogatories to the jury. The court adopted the findings of the jury.

The trial court and the jury, having seen and heard all the witnesses, may have believed some and disbelieved others. It is evident that generally they believed the evidence supporting defendants' side of the cause. There is evidence to support the answers made to the interrogatories submitted to the jury, and we think the jury was not misled by the interrogatories. The evidence supports the findings and the findings the judgment of the court.

In the final analysis of the matter, the controlling factor in a case of this character is the determination as to whether or not the defendants were induced to execute the instruments by reason of the statements relating to a threatened prosecution of Lee R. Taylor. The matter of notice to the plaintiff as to the circumstances under which the note and mortgage were obtained was definitely determined by the court and jury. There was sufficient evidence to support that finding.

Finding no reversible error, the judgment should be affirmed. Such is the order. Respondent to recover costs.

ELIAS HANSEN, C.J., and FOLLAND and EPHRAIM HANSON, JJ., concur.