Story Case

One night, on his way home from his office, Herbert Lacey was held up at a lonely corner by two men with masks and guns. In his pocket they found a check for $750, payable to him, which he had taken from a debtor in payment of a bill. With threats of shooting, the robbers compelled Lacey to write his name on the back of the check, so that it could be transferred by them. A few days later, the check came to the Fulton Exchange Bank and was presented for payment. It was dishonored, because all the funds of the maker had been withdrawn from the bank. There were a number of indorsements on the check, and as it had been several times transferred by delivery merely, its course could not be traced. The Fulton Exchange Bank, in preference to having recourse against its own customer from whom it had received the check, brought suit against Lacey, who was known to the bank to be solvent. Lacey contended that he was not liable on the indorsement, because in view of the circumstances, it was not his voluntary act. The bank answered that it had no information as to the character of the indorsement, but had paid full value for the check, relying upon its apparent validity. Is the bank entitled to recover?

Ruling Court Case. Thompson Vs. Niggley, Volume 53 Kansas Reports, Page 664. Volume 26 Lawyers' Reports Annotated, Page 803

Michael Niggley was the proprietor of a billiard room. He habitually sold liquor contrary to law. One evening, while closing up, a revolver, which he had in his hand, was accidentally discharged, and the bullet struck Sumner, seriously injuring him. Later, friends of Sumner went to Niggley and suggested that he should pay Sumner damages. Niggley said that he felt under no duty to do so because it was purely accidental. It was then intimated that unless a settlement was made he would be prosecuted for selling whiskey in violation of law. They sent for Niggley's wife, who left a sick child to come, and told her what they proposed to do.

Finally, Niggley consented. He signed a note for $1,250. Sumner transferred the note to Thompson, who knew the circumstances under which the note was given. Thompson now sues. Niggley contends that the note was procured under duress, and, therefore, he was not liable upon it. Mr. Justice Allen delivered the opinion of the court: "Notwithstanding the fact that Niggley was selling whiskey in violation of law, and not withstanding the fact that Sumner might have sued Niggley for damages, yet Sumner and his friends acted unreasonably in settling private claims. They brought pressure to bear upon Niggley which overcame the will of an ordinary person in procuring this note. Such conduct amounts to duress, and the note procured under these circumstances is void in the hands of persons who know of the circumstances." Judgment was given for Niggley.

Ruling Law. Story Case Answer

Defenses to the enforcement of a negotiable instrument are of two kinds: (1) Personal defenses; and (2) real defenses. Personal defenses are those which are available only as between the immediate parties to the instrument. Duress, under most circumstances, is considered as a personal defense. By duress is meant that the person is compelled to sign the instrument contrary to his own will. Thus, as against one who compells him to so sign the instrument, and as against one who knows of the circumstances of the signing, the person sought to be charged upon the bill may set up the fact that he was compelled to sign the instrument under duress. But if the instrument is sold to some person, who was not aware of the circumstances, this defense is not available to the person sought to be charged on the instrument.

The most common form of duress is the use of force, or threats of force which would lead the ordinary man to fear of harm. The Story Case presents an instance of duress beyond question, and the indorsement executed by Lacey would not entitle any one to recover, to whom knowledge of the duress used could be imputed. But the number of transfers in this case, some of them by delivery only and not by indorsement, has covered up the connection between the parties. The present plaintiff, the Fulton Exchange Bank, is not connected with the unlawful act in any way, but stands as a purchaser for value, in good faith, before the maturity of the check, without knowledge of the defect. Lacey did in fact, sign his name as an indorser, and duress is not a defense against an innocent purchaser. The bank can, therefore, recover the amount of the check from Lacey.