Fisher v. Bishop — 13 N.Y. St. Rep. 466

Majority

p. 466

Henry E. Fisher, Resp’t, v. Enoch H. Bishop et al., App’lts.

(Court of Appeals,

Filed January 17, 1888.)

Headnote

1. Duress—Undue influence—Doctrine op equity.

When an antecedent fiduciary relation exists, a court of equity will presume confidence placed and influence exerted; where there is no such fiduciary relation the confidence and influence must be proved by satisfactory, extrinsic evidence; the rules of equity and the remedies which it bestows are exactly the same in each of these two cases. ' The rule is not limited to cases of attorney and client, guardian and ward, trustee or cestui que trust, or other similar relations, but it holds good wherever fiduciary relations exist, and there has been a confidence reposed which invests the person trusted with an advantage in treating with the person so confiding. Where this relation is shown to exist it imposes the burden of proof upon the person taking securities, or making contracts ensuing to his benefit, to show that the transaction is just and fair, and that he has derived no unfair advantage from his fiduciary relations.

•2. Same—Application op rule as between attorney and client.

One who had, by reason of his supposed ability and integrity, been employed by another as a confidential adviser to transact the business of ob taining security from an insolvent debtor, and who draws the transfer of Affirming 36 Hun, 112 .

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property for that purpose, occupies a position of trust towards his employer which, in good faith and common honesty, should preclude him from taking advantage of his situation and using the information thus acquired to the detriment and disadvantage of said employer.

8. Same—When a bond and mortgage will be set aside on account OF ERRORS.

In an action in equity to procure the surrender and cancellation of a bond and mortgage alleged to have been produced by duress and undue influence, the proof showed that the plaintiff was a farmer about seventy years of age and had become much involved as an indorser for his son, who had recently failed in business and absconded. On the day of his flight the son had executed to his father a transfer of property for the purpose of securing him as far as he was able for the liabilities which his father had incurred on his account. The plaintiff had become much embarrassed by these liabilities and distressed by the disgrace which he apprehended from his son’s misconduct. The defendant Wattles was a resident of the same town as plaintiff, where he had been a justice of the peace for many years and was largely employed as a legal adviser and conveyancer. He had been frequently employed in that capacity by the plaintiff, and was engaged by him in the transaction wherein the son attempted to secure the plaintiff, and drew the transfer made on that occasion. Three days after the son had absconded, the defendants obtained the bond and mortgage in suit, and the proof showed it was executed by the plaintiff through fear excited by the representations of Wattles that the transfer by the son to plaintiff were fraudulent against creditors, and that unless the plaintiff secured the defendants they could and would set aside such transfers as fraudulent. These threats were several times re-1 peated during the three days occupied by the negotiations, but plaintiff, resisted all effort to induce him to give the security until finally, on the; third day, his resistance was overcome and he consented to execute the' mortgage. He was under no obligation to give this security, as his liabilities for his son already exceeded the value of the property received by him as security. Held, that the circumstances of the case established the fact of undue influence within the meaning of the rule which avoids contracts and conveyances so obtained, and that the bond and mortgage should be canceled.

W. H. Johnson, for app’lts; William Youmans, for resp’t.

This is an action in equity to procure the surrender and cancellation of a bond and mortgage alleged to have been procured by duress and undue influence by the defendants upon the plaintiff to that end.

The proof showed that the plaintiff was a farmer, almost seventy years of age, residing in Sidney and had become much involved as an indorser for his son, who had recently failed in business and absconded. On the day of his flight the son had executed to his father a transfer of property for the purpose of securing him, as far as he was able, for the liabilities which his father had incurred on his account. The plaintiff had become much embarrassed by these liabilities as well as mortified and distressed by the shame and disgrace which he apprehended from his son’s misconduct. Tlie defendant Wattles was, also, a resident of Sidney where he had been a justice of the peace for

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many years and was largely employed by the people of the vicinity as a legal adviser and conveyancer. He had been frequently employed in that capacity by the plaintiff, and was engaged by him in the transaction wherein the sop. attempted to secure the plaintiff, and drew the transfer made on that occasion. Three days after the son had absconded, the defendants obtained the bond and mortgage .in suit, and the proof shows it was executed by the plaintiff through fear excited by the representations of Wattles that the transfers by the son to plaintiff were fraudulent against creditors, and that unless the plaintiff secured defendants, they could and would set aside such transfers as fraudulent. These threats were several times repeated during the two or three days occupied by the negotiations between defendants and plaintiff and during which the plaintiff resisted all efforts to induce him to give the security demanded. Finally on the third day his resistance was overcome and he consented to execute the mortgage. He was under no legal or moral obligation to give this security, as his liabilities for his son, already exceeded the [value of the property received by him as security.

. We think the circumstances of the case established the ¡fact of undue influence within the meaning of the rule which avoids contracts and conveyances so obtained. It is said in Pomeroy’s Equity Jurisprudence (section 951), j“ Where an antecedent fiduciary relation exists, a court of ■ equity will presume confidence placed and influence exerted; ¡where there is no such fiduciary relation, the confidence and influence must be proved by satisfactory extrinsic evidence; the rules of equity and the remedies which it bestows are exactly the same in each of these two cases. The doctrine of equity concerning undue influence is very broad, and is based upon principles of the highest morality. It reaches every case and grants relief where influence is acquired and abused, or where confidence is reposed and betrayed.”

It is said by Lord Cranworth, in Smith v. Kay (7 H. L., 771): “There is no branch of the jurisdiction of the court of chancery, which it is more ready to exercise, than that which protects infants and persons in a situation of dependence, as it were, upon others, from being imposed upon by those upon whom they are so dependent. The familiar cases of the influence of a parent over his child, of a guardian over his ward, of an attorney over his client, are best instances,” but, as said by Lord Eldon, in Gibson v. Jeyes (6 Ves., 266), it is “the great rule applying to trustees, attorneys or anyone else.” It will be seen that the rule is not limited to cases of attorney and client, guardian and ward, trustee or cestui que trust, or other similar relations, but it holds good wherever fiduciary rela

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tians exist, and there has been a confidence reposed which invests the person trusted with an advantage in treating with the person so confiding. Freelove v. Cole, 41 Barb., 318 ; affirmed, 41 N. Y., 619 ; Ford v. Harrington, 16 id., 285. When this relation is shown to exist, it imposes the burden of proof upon the person taking securities, or making contracts enuring to his benefit, to show that the transaction is just and fair, and that he has derived no unfair advantage from his fiduciary relation. Mason v. Ring, 2 Abb. Pr. (N. S.), 322. Cases holding that contracts obtained under circumstances which amount to legal constraint only, or threats of doing that which the party threatening had a legal right to do, are not controlling or even important in considering the case made by the proof in this action. One who had, by reason of his supposed ability and integrity, been employed by another as a confidential adviser to transact the business of obtaining security from an insolvent debtor, and who draws the transfer of property for that purpose, occupies a position of trust towards his employer which, in good faith and common honesty, should preclude him from taking advantage of his situation and using the information thus acquired to the detriment or disadvantage of such employer.

There was no evidence in the case which tended to show that the transfers from the son were in fact tainted with fraud or subject to any suspicion, but the assertion that they were subject to be. set aside for that reason, coming from the person in whom the plaintiff had confided, and whom he had reason to suppose competent to determine that question, must have weighed with great force upon the mind of an old man ignorant of legal proceedings and already involved in debts and liabilities almost beyond his capacity to meet. The plaintiff might well have been quite unconscious of any fraud in the transaction, and yet have lent a ready belief to the proposition, so often asserted by his confidential adviser, that the transfers were fraudulent, and could, and would be set aside. The extent to which the plaintiff confided in the defendant Wattles is clearly shown by the fact that he had frequently employed him in business transactions, and that the conveyances which he then threatened to annul and overthrow were drawn by him and taken under his advice and co-operation.. It was a gross breach of good faith for a person thus trusted and who had, by conducting the business, vouched for its validity and lawfulness, to turn around for the purpose of gaining a personal advantage, and assert that he had been engaged _ in an illegal transaction which he could,- at his own option, annul and destroy.

The case shows that by these means the defendants have

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obtained security for a large amount from an old man who was under no legal or moral obligation to give it, and without any consideration to support it except the nominal one of a dollar, and that this was extorted at a time when he was laboring under much distress and anxiety of mind, on account of the trouble that encompassed him.

The parties in this case did not meet on equal terms, and the defendants took an unfair advantage of the position in which they had been placed and of the confidence reposed in them by the plaintiff, to procure from him a valuable security to which they had no legal right.

We think the case is clearly within the rules above laid down, and that the defendants should be required .to cancel the obligation obtained. The disposition made by the general term of the appellant’s claim that the mortgage should be sustained, because the plaintiff did not offer to return the consideration of one dollar, before suit brought, was correct. Allerton v. Allerton, 50 N. Y., 670 .

The judgment should be affirmed.

All concur.