Case Name: GREAT AMERICAN INDEMNITY CO. v. BERRYESSA et al.
Court: Utah Supreme Court
Jurisdiction: Utah
Decision Date: 1952-09-23
Citations: 122 Utah 243
Docket Number: No. 7680
Parties: GREAT AMERICAN INDEMNITY CO. v. BERRYESSA et al.
Judges: McDONOUGH and CROCKETT, JJ., concur.
Reporter: Utah Reports
Volume: 122
Pages: 243–253

Head Matter:
GREAT AMERICAN INDEMNITY CO. v. BERRYESSA et al.
No. 7680.
Decided September 23, 1952.
(248 P. 2d 367.)
See 11 C. J. S., Bills and Notes, sec. 716. Validity of contract for repayment of embezzled money. 12 Am. Jur., Negligence, secs. 192 et seq.; 32 A. L. R. 422.
Thatcher & Young, LeRoy B. Young, Ogden, for appellant.
Howell, Stine & Olmstead, Ogden, for respondent.

Opinion:
WADE, Justice.
The Great American Indemnity Company, .appellant herein, brought this suit against Frank Berryessa and W. S. Berryessa, the obligors on a joint promissory note. Frank Berryessa was not served with summons and did not participate in the trial. W. S. Berryessa pleaded as defenses duress and lack of consideration and also counterclaimed for the return of $1,500 paid by him and the cancellation of a personal check given by him and not cashed at time of suit. This appeal is from a jury verdict and judgment thereon in favor of respondent W. S. Berryessa.
Viewing the evidence in the light most favorable to respondent, as we must, the jury having found in his favor, it discloses that Frank Berryessa, a son of W. S. Berryessa, misappropriated some funds of his employer, the Eccles Hotel Company, which operates the Ben Lomond Hotel in Ogden, Utah. When the father first learned of this, it was thought that the sum involved was approximately $2,000 and he agreed to repay this amount if the bonding company would not be notified and no publicity given to the matter, and gave the hotel his promissory note for $2,186 to cover the shortage. Before this note became due, it was discovered that the shortage would probably be over $6,000 and therefore the manager of the hotel called W. S. Berryessa in for a conference. W. S. Berryessa knew he couldn't pay this larger sum and it was decided that the bonding company, the appellant herein, should be advised of the shortages. The hotel didn't try to collect the note for $2,186 after the bonding company was notified apparently expecting that company to reimburse the hotel for the entire shortage discovered. After the bonding company was notified, its agent had several conferences with the Berryessas and the hotel management in which there was ascertained that the total shortage amounted to $6,865.28 and Frank Berryessa signed a statement that he had misappropriated that amount. Frank Berryessa had stated that he had given a brother-in-law some of the money he had embezzled and it was suggested that he sign a note along with the Berryessas. The brother-in-law did not sign the note and at a further meeting of the Berryessas with the agent W. S. Berryessa indicated that he did not think his son Frank would be able to make the payments of $250 quarterly suggested and that he was sure that he personally would not be able to do so and therefore did not want to sign the note. Mr. Berryessa then testified, although this was denied by the agent, that the agent thereupon swore, pounded his fists on his desk, and told him, "You can't come here and tell me what you will do." and then told them that if W. S. Berryessa would pay $2,000 in cash and sign a note with Frank Berryessa for $4,865.20, payable at the rate of $50 a month, that Frank would not be prosecuted but that if he did not sign Frank would have to be prosecuted. Thereupon, W. S. Berryessa agreed to do this and a couple of days later signed the note sued upon herein and about a month later, having secured a loan by mortgaging his home, gave the agent a cashier's check in the amount of $1,502 and a personal check in the amount of $500 as payment for the $2,000 cash agreed upon. Mr. Berryessa asked the agent not to cash the $500 check for about a month until he could get some more funds to pay it. This is the check which was never presented for payment by the appellant.
At the conclusion of the trial, appellant moved for a directed verdict in its favor and for a dismissal of the counterclaim because there was insufficient evidence of duress or lack of consideration. The court refused to grant its motion and this refusal is relied upon by appellant for reversal in this case.
It is appellant's contention that there was insufficient evidence of duress to present that question to the jury and that the court erred in giving its instructions numbered 1 and 6 because it gave the jury the idea that there were two separate and distinct defenses to the validity of the transaction. Respondent pleaded both duress and illegal consideration as defenses. The court in its Instruction No. 1 told the jury:
"You are instructed that the defendant, W. S. Berryessa, admits signing the note sued upon but raises two defenses to his liability thereon. The first defense is that his signature was obtained as a result of the duress upon him of the plaintiff's agent, J. G. Hagman, Jr., that if defendant, W. S. Berryessa, did not sign the note his son, Frank Berryessa, would be criminally prosecuted and sent to jail. The second defense is that even if it should be determined that such duress has not been proven, nevertheless the only consideration for his signing the note was the promise of plantiff's agent, J. G. Hag-man, Jr., that if he would sign Frank Berryessa would not be criminally prosecuted, and that such consideration is illegal and insufficient to support the note. You are instructed that either of these defenses, if established by preponderance of the evidence is a sufficient and adequate defense to plaintiff's action against the defendant, W. S. Berryessa."
In Instruction No. 6 the jury were told:
"You are instructed that the note sued upon by the plaintiff is invalid against the defendant, W. S. Berryessa, if not supported by a valuable consideration. A promissory note given for the suppression of a criminal prosecution is against public policy and cannot be enforced between the parties, and it is immaterial whether the individual as to whom the criminal prosecution is suppressed was guilty or innocent. Accordingly, if you believe from a preponderance of the evidence that the defendant, W. S. Berryessa, signed the note sued upon by the plaintiff in consideration of plaintiff's promise through its agent, J. G. Hagman, Jr., that Frank Berryessa would not be criminally prosecuted for his defalcations, the note is invalid as to the defendant, W. S. Berryessa, and you must so find.
"The burden of proof is on the defendant in this case to prove that the consideration for which the defendant signed the note was the suppression of a criminal prosecution against defendant's son."
It will be noted that these instructions correctly placed the burden of proving their defenses of duress or illegal consideration upon the Berryessas.
It is well settled that a note given to suppress a criminal prosecution is against public policy and is not enforceable between the parties. See 10 C. J. S., Bills and Notes, § 154, pages 630-631 and Simon Newman Co. v. Woods, 85 Cal. App. 360, 259 P. 460, on pages 462, 463, wherein the court said:
"It is conceded that a note or mortgage given on promise to refrain from the prosecution of a person for a felony, or under threats of arrest or prosecution, would be void as against public policy;
In this case respondent relied on two separate defenses, duress and illegal consideration, either one of which is sufficient to nullify this note. So if the jury found that the note was the result of duress or that respondent signed the note because appellant promised to refrain from criminal prosecution of his son, either one would be sufficient to invalidate the note and would constitute a defense thereto.
The uncashed check and the payment of $1,500 cash, present a different problem. Respondent had given the hotel a note for slightly over $2,000 to pay for the son's defalcations. At the time this note was given, there can be no question that no coercion was exercised against respondent and that his act was voluntary and at his own suggestion. There is nothing in the record to indicate that this note was given under duress or a promise to suppress prosecution. When appellant as surety paid the hotel the entire amount embezzled, it was entitled to be subrogated to the rights of the hotel and to an assignment of the note which respondent had given it. Respondent knew he had signed the note and was liable thereon. He, therefore, substituted for his promise to pay the hotel a promise to pay $2,000 to the Indemnity Company. In conformity to that promise, he paid $1,500 and gave his check for $500. This should be regarded as the extinguishment of a preexisting, valid debt, which the appellant had a right to collect. Under such circumstances, the court erred in submitting the issue of duress and illegal consideration to the jury on respondent's counterclaim.
The judgment against appellant on its complaint is affirmed. The judgment in favor of the respondent on his counterclaim is reversed. Each party to bear their own costs.
McDONOUGH and CROCKETT, JJ., concur.