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sm. X-6062 (OPINION OF THE SUPREME COURT OF MINNESOTA). No, 176 HEtiWIN COUNTY, | Olaen, C. The First State Bank of Hugo, Minnesota, I Respondent, Endorsed 26640 Filed June 8, 1928, -ve~ Grace Kaercher Davis, Clerk, The Federal Reserve Bank of Minneapolis > Appellant. SYLLABUS 1. To sustain an action for damages on the ground of coercion there must "be some wrongful or unlawful act, acts or con-duct, on the part of the defendant, s u f f i c i e n t to constrain the p l a i n t i f f , against his w i l l , to do or refrain from doing something which he has a legal right to do or refuse to do, and resulting in damage to him. • 2. A Federal reserve "bank i s required to receive on deposit for collection at par, from member hanks of the Federal reserve system, checks payable on presentation drawn upon any member bank in i t s d i s t r i c t . It i s authorized but not required to so receive checks upon non-member banks within i t s d i s t r i c t . Federal reserve banks are not authorized to pay exchange on checks collected by them* 4 8 4 X-6062 3. I 48 State "banks, not members of the federal reserve sys- tem, are not a f f e c t e d by the provisions of the Federal fie&erve Act against charging exchange* and may continue to demand exchange on remittances made by them. 4. • Where a non-member bank declines to remit at par, the Federal Reserve bank may present checks for payment at the counter of such bank and employ proper agencies for so doing, subject to the limitations that i t may not delay presentation so as to accumulate checks in a body in a large amount for presentation at one time for the purpose of coercing or injuring the bank, or employ other unreasonable and oppressive means or threats i n the c o l l e c tion thereof. The publication of a l i s t , known as a par l i s t , s t a t ing that defendant reserve bank w i l l receive for credit and c o l l e c t i o n checks upon a l l banks in Minnesota, held not wrongful or oppressive, although not a l l banks i n the s t a t e had consented to remit at par. 5. -Held, that there is1 no evidence to sustain a find- ing of coercion in the present case. ' Reversed. » S E i s i e s Defendant appeals from an order denying i t s alternative motion for judgment or a new t r i a l . The action was brought to recover damages from the defendant for the alleged coercion of p l a i n t i f f thereby compelling X-6062 • ; « " • and forcing p l a i n t i f f against i t s w i l l to agree to and remit to 1 , ' ••* defendant for a l l checks sent to p l a i n t i f f by mail, drama upon p l a i n t i f f bank, without making any exchange charge. The defendant i s a Federal Reeervfe bank located at Minneapolis, in .this s t a t e , P l a i n t i f f ife a small St&t6 bank with a capital of $10,000.00, located in the v i l l a g e of Hugo about 25 miles from Minneapolis, and the only bank in that v i l l a g e . It i s not a member of the Federal reserve system, "out i s located in defendant*s d i s t r i c t . P l a i n t i f f recovered a verdict. Defendant contends that there Was no evidence presented justifying the submission of the • / question of coercion to the jury; that there was no evidence of any wrongful or unlawful conduct on i t s part; and no evidence that p l a i n t i f f acted uiider coercion or duress in the matter, henco defendant was entitled to a verdict and judgment in i t s favor. 1. The term "coercion" i s somewhat d i f f i c u l t to de- fine with s u f f i c i e n t exactness to apply to a l l cases, Raid to be compulsion, force or duress. It is ?i I t i s said to exist* where one, by the unlawful act of another, i s induced to do or perform some act under circumstances which deprive him of the « exercise of his free w i l l . 11 C. J. 946, 947. This definition i s adopted in State ex rel Young v. Ladeon, 104 Minn. 252, 116 H. WJ 486. 136 H. 1 . In State ex rel Smith v. Daniels, 118 Minn. 155, 584, coercion i s stated to tie either physical force, v ' '• used to compel a person to act against his w i l l , or implied -3- legal force, where one i s so under subjection of another that he i s constrained, to do what h i s free w i l l would refuse, and that coercion i s usually accomplished by indirect means, such as threats or intimidation. Coercion, as a misdemeanor, i s de- fined "by Sec. 10431, G. S. 1923, which provides that every person who, with intent to compel another to do or abstain from doing an act which such other person has a legal right to do, or abstain from doing, shall wrongfully and unlawfully attempt to intimidate such person by threats or force, shall he guilty of a misdemeanor. 1 . To sustain an action for damages on the ground of coercion, there must be some wrongful or unlawful act, acts or conduct, on the part of the defendant s u f f i c i e n t to constrain the p l a i n t i f f , against his w i l l , to do or refrain from doing something which he has a legal right to do or refuse to do, and resulting in damage to him. The acts or conduct com- plained of need not be unlawful in the technical sense of that term. I t i s s u f f i c i e n t i f same i s wrongful in the sense that i t i s so oppressive under given circumstances as to constrain one to do What his free w i l l would refuse. 2. Federal reserve banks are required to receive on deposit at par from member banks and reserve banks checks and drafts upon any of i t s member banks. They are authorized to so receive checks, payable on presentation, up On any bank within their respective d i s t r i c t s , whether such bank i s a member bank or not. Ho exchange charge can be madp against the re- X-6062 serve tanks "by member banks, and the reserve banks are not to pay exchange. 1 488 The result i s a system of par clearance of checks and items among member banks and between such banks and the re•< serve banks. 3. These provisions as to exchange are held not to apply to non-member state banks, and such banks are not compelled to forego any rights they may have under state laws and may continue to charge exchange. Where checks on a non-member bank were presented to a reserve bank for deposit and collection, the reServe bank could not accept or clear such checks unless either the non-member bank agreed to remit therefor at par, without charging exchange, or the reserve bank, at i t s own expense, employed other agencies to collect same by presentation for payment at the banking house of the non-member bank. In this situation the Federal Reserve Board and reserve banks sought to have a system of par clearance agreed to and adopted by the non-member state banks so as to include a l l banks and banking institutions in the United States. Letters and circulars were sent out by the Board and the reserve banks explaining the system and urging nonmember banks to agree to remit to reserve batiks without exchange charge. Many state banks agreed; others refused. Par l i s t s were prepared and sent out by the Board through the reserve banks, showing towns and c i t i e s where a l l banks remitted at par, and, where not a l l so remitted, the names of banks not so doing were given. Whore a l l batiks in a state so remitted, the name of the state was given. —5— / X-6C62 4. . L 48i Negotiations were carried, on by defendant, by cor- respondence , with p l a i n t i f f in the matter. On July 31, 1919, defendant sent p l a i n t i f f a circular letter* s t a t i n g that i t was making a f i n a l appeal and that, i f no reply was received, i t would be assumed that p l a i n t i f f preferred t o have checks » - drawn on i t and received by defendant presented at p l a i n t i f f ' s counter for payment in cash. On March 30, 1920, defendant wrote to p l a i n t i f f stating that, as i t had received no reply to a l e t ter of March 10th, i t assumed that p l a i n t i f f would remit at car, and that on April 15th i t would commence sending regular remittances with the understanding that p l a i n t i f f would remit in payment without exchange charges. A par l i s t was issued by the Beserve Board under date of April 1, 1920, s t a t i n g that the reserve bank would receive for c ol l e c t i on and credit items on a l l banks in Minnesota. Upon receipt of defendant's l e t t e r of March 30th, p l a i n t i f f wrote on the bottom thereof the statement that i t did not wish to be on the par l i s t and woy.ld continue to charge exchange, and return such l e t t e r and statement to defendant# The exact date when this was received by defendant does not appear. On April 12th, the defendant wrote to p l a i n t i f f acknowl- edging receipt and expressing regrets. In t h i s l e t t e r defendant called attention to the fact that the reserve bank was prohibited 1 V from paying.exchange, and stated that where a nonmember bank refused to remit at par the reserve bank would be forced to sdek some other method and through some agency present checks and drafts at the bank's counter for payment in cash. -6~ The l e t t e r X-6062 i. 490 f u H h e t S t a t e d that i t had. been said, that i t was defendant's practice to hold hack items u n t i l they amounted to a considerable sum and thei>, for the purpose of embarrassing the hank, -present them on one day. I t assured p l a i n t i f f that this was not the. case and that i t had no desire to cause any unnecessary inconvenience; that i t might be p o s s i b l e , i f i t received items amounting to l e s s than $100 on one day, that i t would hold such items for a day or two to save unnecessary expense. The defendant then, on or about April 17th, adopted the method of turning over checks in i t s hands on the p l a i n t i f f bank to the American Railway Express Company for collection. That company, as part of i t s business, c o l l e c t s and transmits money for compensation. A few days l a t e r , on or about April 28th, i t changed agencies and employed the postmaster at Hugo to c o l l e c t and transmit such collections by mail. These two agencies presented checks on p l a i n t i f f bank, coming into defendant's hands, daily at p l a i n t i f f ' s counter from April 17th to 30th i n c l u s i v e , and received payment therefor in cash. The evidence tends to show that defendant was w i l l i n g to receive drafts on p l a i n t i f f ' s correspondent bank instead of cash, i f p l a i n t i f f had so requested. P l a i n t i f f ' s correspondent bank, at the time, was the First National Bank of S t . Paul, located adjacent to Minneapolis and somewhat nearer to p l a i n t i f f ' s place of business than Minneapolis. The amount of checks so presented varied from day to day and ran in amounts from $100 to $1,200. On April 30th p l a i n t i f f wrote to defendant that i t might d i s continue sending checks to be cashed over the counter; that p l a i n t i f f had decided to remit at par by d r a f t , and that defend -7- X-6062 ant might send, the checks "by mail in the usual way. Thereafter p l a i n t i f f continued tq remit tip defendant at par, by draft on i t s correspondent, f o r checks and items sent to i t "by defendant "by mail from day to day u n t i l October 1, 1924t 6n Septem- ber 25, 1924, p l a i n t i f f informed defendant, by l e t t e r , that on October 1 s t i t intended to again charge exchange. Thereupon de- dendant ceased to accept for c o l l e c t i o n checks on p l a i n t i f f bank and, om the par l i s t issued under date of October 1 s t , p l a i n t i f f was l i s t e d as withdrawn from the l i s t . During the ten days that defendant had i t s checks presented for payment in cash a t p l a i n t i f f ' s banking house, no d i f f i c u l t y arose. The presentation was courteous and orderly; so far as appears p l a i n t i f f suffered no injury or embarrassment; r e l a t i o n s were apparently f r i e n d l y . There i s evidence,that the reserve banks were conducting what i s called a campaign to induce nonmember banks to agree to remit at par; that placing Minnesota banks on the par l i s t resulted in bringing to defendant bank a large number of checks drawn on nonmember banks and on this p l a i n t i f f ; that the gatherf ing of such checks in defendant's *hands and presentation thereof at p l a i n t i f f ' s counter for payment required p l a i n t i f f to keep a larger cash reserve on hand than otherwise necessary and resulted & in the l o s s of i n t e r e s t which i t could have earned by keeping more of i t s reserve in i t s correspondent bank. I t i s urged a l s o that p l a i n t i f f feared and had cause to f e a t that on some days so large an aggregate amount of checks might come to the reserve bank and be presented for payment in cash that the p l a i n t i f f would be -8- X-6062 unable to pay them and. be forced to suspend. As evidence of *5:92 that, i t i s shown that during the four and a half years that p l a i n t i f f remitted to defendant at par there were two days on which checks aggregating s l i g h t l y over $8,000 each day were mailed to i t by defendant for payment by draft on p l a i n t i f f ' s correspondent; and on a number of other days checks aggregating over $3,000 were so received. The answer to that i s the un- contradicted evidence of defendant's o f f i c e r that i t would readi l y have accepted drafts on p l a i n t i f f ' s correspondent bank i n stead of cash at any time i f inconvenient for p l a i n t i f f to pay in cash. I t i s farther to be noted that p l a i n t i f f ' s place of business i s not over twenty miles distant from i t s correspondent bank in St. Paul, where i t carried i t s reserve, and funds a v a i l able from that source within an, hour, i f needed. The case of American Bank & Trust Co. v. Federal Reserve Bank of Atlanta, 262 U. S. 643, 67 L. ed. 1153, i s of interest. In that case a number of s t a t e banks in Georgia brought s u i t to enjoin the reserve bank from publishing their names in the par l i s t and to enjoin i t from c o l l e c t i n g checks on them by presenting such checks by i t s agents for payment at the counter of these banks in cash, or c o l l e c t i n g such checks otherwise than in the usual way, which was alleged to be by mailing them to the bank upon vhich drawn and accepting remittance therefor by d r a f t , l e s s exchange. We i n f e r there was the usual prayer for other and further r e l i e f . The Federal d i s t r i c t court dismissed the case for i n s u f f i c i e n c y of the complaint and -9- . X-6062. the decision was affirmed by the Circuit Court of Appeals. Tm case then came before the United States Supreme Court, reported i n 256 U. S. 350, 65 L. ed. 983. I t was there held that the complaint stated a cause of action in that i t alleged that defendant intended to accumulate checks in large amounts and present them at one time in a body for the purpose of injuring and coercing the p l a i n t i f f and breaking down i t s business, and the decree of dismissal was reversed. The case was then tried i n the d i s t r i c t court and i s reported in 280 Federal 940. The t r i a l court granted an injunction restraining the defendant from including the names of p l a i n t i f f s i n the par l i s t and denied any other r e l i e f . I t was held that the reserve bank, i n the exercise of i t s clearing house functions, was authorized to , accept any and a l l checks payable on presentation, when deposited With i t for c o l l e c t i o n ; that checks so accepted must be c o l l e c t e d by i t at par; that i t was not permitted to accept l e s s than f u l l face value; that i t was authorized to adopt any reasonable measure for these purposes; that, i f the drawee bank refused to remit without exchange charge, the reserve bank had power to employ any proper agency to c o l l e c t the checks from the drawee bank and to pay the necessary cost of %ch s e r v i c e ; that the d a i l y c o l l e c t i o n of such checks did not constitute any accumulation thereof and was lawful; that i t was proper for sy.ch bank to publish a par clearance l i s t , but not to place thereon the name of a norimember bank without i t s consent. The court further found that there was no e v i - dence to sustain any charge that the reserve bank had acted i l - -10- l e g a l l y or exercised any of i t s rights so as to* oppress or in-L • . t&. jure the p l a i n t i f f s . ' This decision was affirmed by the Circuit Court of Appeals, 284 Federal 424. I t came again before the United States Supreme Court, 262 U. S. 643, 67 L. ed. 1155, and was affirmed. In that decision i t i s stated that the decree l e f t the reserve tank free to publish in i t s par l i s t that i t would c o l l e c t at par checks on a l l banks in any town, that i s , . i t might name the town or c i t y as one wherein i t c o l l e c t e d checks at par, although there were bamcs in that town or c i t y which would not permit at par, so long as i t did not publish the names of such banks. Here, in our present case, the par l i s t com- plained of did not even name the town in which p l a i n t i f f bank • r i s located, but named merely the s t a t e of Minnesota as a d i s t r i c t i n which defendant would c o l l e c t checks at par. The court further s t a t e s that Federal reserve banks are authorized to c o l l e c t for; member banks and a f f i l i a t e d nonmember banks checks on any banks,within their respective d i s t r i c t s , i f the checks are payable on presentation and can in f a c t be c o l l e c t e d c o n s i s t ently with the l e g a l rights of the drawee "without paying an exchange charge; that, within these l i m i t s , reserve banks have ordinarily the 'same right to present checks to the drawee bank for payment over the counter as any other bank, s t a t e or national would have. The l i m i t a t i o n s referred to are that the reserve bank may not accumulate checks for presentation or make other unreasonable or oppressive demands or threats in connection with the c o l l e c t i o n for the purpose of injuring the drawee bank or compelling i t to agree to remit without exchange. The court km s t a t e s that the advantages offer red by the reserve "banks have created a steady flow in increased volume of checks on country banks to the reserve "banks, and that c o l l e c t i n g such checks over the counter w i l l subject the country banks to certain l o s s e s of exchange and i n t e r e s t , but that country banks are not e n t i t l e d to protection against legitimate competition and such l o s s e s are of the kind to which business concerns are commonly subjected when improved f a c i l i t i e s are introduced by others', or a more e f f i c i e n t competitor enters the f i e l d . I t i s urged that the reserve bcinks had adopted a plan to coerce and compel country banks to remit at par and that defendant, in what i t did, was engaged i n carrying out such unlawful purpose, and that p l a i n t i f f was thereby coerced and compelled to a c t against i t s free w i l l . A wrongful purpose or intent alone cannot constitute coercion. There must be threats or oppressive a c t s or conduct s u f f i c i e n t to overcome the w i l l and constrain the one coerced to go against h i s free will. There were here no threats, wrongful publication of par l i s t s , accumulation of checks, or other oppressive conduct. Brookings State Bank v. Federal Reserve Bank of San Francisco, 277 Fed. 430, 281 Fed. 222, was a case where the reserve bank treated checks as dishonored where p l a i n t i f f refused to remit at par by mail, and so informed i t s c l i e n t s . This was held wrongful and defendant enjoined from sending l e t t e r s to i t s c l i e n t s advising them that they must look to p l a i n t i f f bank f o r protection for i t s f a i l u r e to p r o t e s t the —12— X-6062 6 - h 496 checks. •* • Farmers & Merchants Bank of Catlettsburg v . Federal Reserve Bank of Cleveland, 285 Fed. 810, i s c i t e d . A merg reading of the statement of f a c t s i n that case shows that the c o l l e c t i o n of checks there was accompanied "by such disturbance, threats, armed messenger, interference with the "bank's customers and "business, public display of checks and claims against the bank, espionage and such words and acts of oppression as to c l e a r l y render the defendant's conduct wrongful and unlawful. The holdings of the Federal d i s t r i c t court that defendant should be enjoined from continuing to so c o l l e c t checks drawn on p l a i n t i f f bank and from advertising that i t would c o l l e c t such checks free of charge, mast be held to be limited to the f a c t s in the case. That case was decided by the d i s t r i c t court before the f i n a l decision by the Supreme Court in the Atlanta Bank case. The case of Farmers & Merchants Bank of Monroei v . Federal Reserve Bank of Richmond, 262 U. S. 649, 67 L. ed. 1157, was decided a t the same time*and the opinion written by the same j u s t i c e as in the Atlanta Bank case. i f y the holdings in that case. I t does not change or mod- The question there decided was the c o n s t i t u t i o n a l i t y of a s t a t e s t a t u t e authorizing s t a t e banks to pay their checks, when presented by a Federal reserve bank or i t s agents, in exchange drawn on the reserve deposits of the drawee bank. This permitted the s t a t e banks to deduct'Exchange, The law was held c o n s t i t u t i o n a l . While the Federal Reserve Act -13- X-6062 L. i s construed, as applied to that s i t u a t i o n , i t i s so construed in harmony with the Atlanta Bank case. Primarily the b e n e f i t from having checks cleared a t par goes to the makers of such checks, the customers of the bank upon which they are drawn. I f such a customer can send h i s check to another c i t y or place i n payment of his debts or purchases and have the check cleared at par, he saves money and inconvenience, saves purchasing a draft and paying the exchange thereon. He can- not compel h i s debtor or obligee at the other end to accept h i s check subject to exchange charges. His bank i s , to that extent, favoring him and i n c i d e n t a l l y attracting customers to i t s e l f . 5. This case has been f u l l y and f a i r l y tried. Our conclusion l a that there i s no evidence j u s t i f y i n g the jury in finding that there was coercion. Defendant, therefore, was en- t i t l e d to a. directed verdict and to judgment notwithstanding the v e r d i c t . The order appealed from i s reversed with d i r e c t i o n to have judgment entered for defendant. -14-
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