Zimmermann v. Benz , 162 Minn. 47 ( 1925 )

While it must be confessed that the effort to charge duress is somewhat feeble, yet in my opinion there are averments which make the complaint good as against the demurrer. There is a very plain allegation, quoted by Mr. Justice Holt, of a threat by defendants so to conduct the company's business and so to utilize its earnings as to deprive plaintiffs of dividends and render their stock worthless. Under the other circumstances of plaintiff, referred to in the opinion (which were very different from those of the defendants in American Nat. Bank of Lake Crystal,161 Minn. 504, 202 N.W. 20, these allegations, in my judgment, should be taken as sufficient to present an issue as to whether the will of plaintiffs was actually overcome and supplanted by that of defendants in a manner constiting duress. In the event of the attempted carrying out of such a threat by persons so minded and competent for the task, as we must assume for the present these defendants were, the supposed "adequate redress in court" referred to by the majority is illusory, for it is a very difficult thing for minority stockholders to compel the declaration of dividends by directors under the control of a recalcitrant majority. Not only is it difficult, it is wearisome and expensive. The idea that the alleged threats detailed in the complaint may not, in a case such as this, constitute duress is, in my judgment, wholly inconsistent with the modern and now well-accepted relaxation of the law of duress. For to me, it is very plain that in these days when many an inexperienced widow derives most if not all of her income from stocks left by her husband, a threat of the kind now under consideration might be, as against such a one, the most potent kind of duress.

There is another assumption in the majority opinion with which my experience does not permit me to agree. It is to the effect that the management of a corporation, in the control of the majority stock interest, will not do anything to reduce the value of the stock for the purpose of acquiring the holdings of the minority. Common experience is to the contrary. An artificial and forced depreciation of stock value is the conventional method resorted to by an oppressive majority to freeze out an undesirable minority. In such a situation, the withholding of dividends that ought to be paid is ordinarily the first move in the game, and it can go a long way before litigation, at the instance of the minority, can interpose any serious obstacle.

There are other weapons such as excessive salaries and contracts expensive to the corporation but profitable to its management which are available. We all know, or ought to know, that if the minority stockholders, or any of them, are inexperienced and ignorant, or timid and needy, they become easy targets for operations of the kind charged against these defendants. They are clearly within the "class of cases where, although there may be a legal remedy, his situation or the situation of his property is such that the legal remedy would not be adequate to protect him from irreparable prejudice — where the circumstances and the necessity to protect himself or his property otherwise than by resort to the legal remedy may operate as a stress or coercion upon him to comply with the illegal demand." DeGraff v. County of Ramsey, 46 Minn. 319, 48 N.W. 1135.

There can never be justification for the use of threats, such as those here charged against defendants, in the circumstances wherein it is claimed they have used them. They may have constituted duress of a very potent kind. For that reason I am of the opinion that the order appealed from should be reversed.