Cheshire Oil Co., Inc. v. Springfield Realty Corp.

• Decision Date: 07 April 1978
• Docket Number: No. 7928,7928
• Parties: CHESHIRE OIL COMPANY, INC. v. SPRINGFIELD REALTY CORPORATION and Bernard S. Young.
• Court: New Hampshire Supreme Court

Page 835

385 A.2d 835

118 N.H. 232

CHESHIRE OIL COMPANY, INC. v. SPRINGFIELD REALTY CORPORATION and Bernard S. Young.

No. 7928.

Supreme Court of New Hampshire.

April 7, 1978.

Goodnow, Arwe, Ayer, Prigge & Gardner, Keene (Eric R. Gardner, Keene, orally), for plaintiff.

Brighton, Fernald, Taft & Hampsey Professional Ass'n and John R. Falby, Jr., Peterborough, for defendants.

DOUGLAS, Justice.

This is an action in debt to recover damages resulting from the alleged default in the performance of the terms of a promissory note given by the defendants, Springfield Realty Corporation and Bernard S. Young, to Cheshire Oil Co., Inc. Trial was held before a Master (Charles T. Gallagher, Esq.) resulting in a recommendation that the court enter judgment upon a verdict for the plaintiff. The master's recommendation was approved by the court and a decree entered accordingly on May 2, 1977. The defendants moved to set aside the master's report and decree as against the law, the evidence, and the weight of the evidence. The defendants seasonably excepted to denial of their motion and to certain rulings of the court admitting and excluding evidence and granting and denying certain requests for findings of fact and conclusions of law. All questions of law raised by the foregoing exceptions were reserved and transferred by King, J.

In 1971, Springfield Realty Corporation and Bernard Young, the corporation's owner and executive officer, developed plans for construction of a shopping plaza in Peterborough, New Hampshire. Young acquired an option on ten acres of land owned by the Harris Construction Company that was located at the intersection of routes 101 and 202 in Peterborough. He then filed for approval of the shopping plaza with the Peterborough Zoning and Planning Boards.

Young later discovered that the boundaries of the Harris property were only vaguely defined. He approached Cheshire Oil Company, which owned the real estate adjacent to the Harris land, in an attempt to firm up the boundaries. The parties agreed that a boundary line would be established at Young's expense. Cheshire Oil's land that was east of the boundary line would be conveyed to Springfield Realty to be incorporated into the shopping center site. The parties further agreed that the consideration paid for Cheshire's land would be a nominal $200 and that Springfield Realty would lease a site in the shopping plaza to Cheshire to build a gasoline service station. If Cheshire could not obtain the necessary permits for the construction and operation of the gasoline island, however, the purchase price of the land without the lease would be $5,000. This understanding between Young and Cheshire Oil was never formalized into a written contract.

In August 1972, Springfield Realty obtained zoning and planning board approval to begin construction of the shopping plaza. Springfield than proceeded to acquire the Harris property. Contrary to the terms of the option, the deed contained a restriction against the sale of petroleum products on the property. Springfield nevertheless accepted the deed. When Cheshire learned of the restriction, it met with Young to further discuss their deal. Young offered to permit Cheshire to establish a service island in another shopping plaza owned by Young in Ludlow, Vermont, if Cheshire could not get into the Peterborough plaza. Cheshire agreed to this proposal and made application to the Ludlow Planning Board for approval of a gasoline station in the Ludlow shopping center. The first hearing on this application took place on September 27, 1972. On October 12, 1972, the Ludlow Planning Board rejected Cheshire's application.

The closing on the purchase of the Cheshire Oil land was scheduled for October 18, 1972. On that day, or perhaps a day earlier, Cheshire first notified Young that it was raising the price for its land to $25,000 if a permit could not be obtained and a lease entered into for a gasoline station in either the Peterborough or Ludlow locations. The defendants acquiesced and executed the note and agreement in suit, which provided that the purchase price of the land was to be $200 if Cheshire was able to obtain the permits necessary to lease the gasoline island at either or both of the shopping centers, but that if Cheshire was not successful in obtaining the necessary permits and the lease arrangement failed, the purchase price for the land would be $25,000.

On October 20, 1972, the plaintiff applied to the Ludlow Board of Adjustment for an appeal from the denial of its application for a gasoline station permit; this appeal was denied. The plaintiff never made application to the Peterborough zoning or planning authorities for approval of a gasoline station at the Peterborough plaza, nor did the defendant ever take any legal action to remove the restriction against the sale of petroleum products contained in the Harris deed.

Two issues are presented by this appeal. The first is whether the master erred in rejecting the defendants' claim that they were coerced by economic factors to sign the agreement and the note, and that this coercion amounted to "economic duress" sufficient to invalidate the agreement and note.

In this jurisdiction, the payment of money or the making of a contract might be under such circumstances of business necessity or compulsion as will render the same involuntary and entitle the party so coerced to recover the money paid or excuse him from performing the contract. Morrill v. Bank, 90 N.H. 358, 9 A.2d 519 (1939); Malloy v. Bemis Bros. Bag Co., 283 F.2d 32 (1st Cir. 1960); see Annot., 79 A.L.R. 655, 657 (1932); 25 Am.Jur.2d Duress and Undue Influence, § 6, at 361 (1966). "(T)he doctrine of duress has gradually expanded . . . to cover interference with one's business interests. Such interference which is considered a species of duress despite its departure from the original common law rules, is generally referred to as the modern doctrine of economic duress or business compulsion." 79 Annot., A.L.R.3d 598, 603 (1977).

In addition to the basic definitional requirement that the coercion be directed toward business interests, the courts have developed further requisites for a finding of business compulsion. First, one side must have involuntarily accepted the terms of another. "(I)t must appear that the consent was actually induced by the pressure applied and would not have been given otherwise." Morrill v. Bank, supra, 90 N.H., at 365, 9 A.2d at 525; accord, 13 S. Williston, Contracts, § 1618A, at 737 (3d ed. 1970). "This pressure does not . . . have to be such as to overcome the will of a brave or courageous man, or even that of a man of ordinary firmness, but is sufficient if it in fact overcomes the will of the person against whom it is applied." Morrill v. Bank, supra at 365, 9 A.2d at 525; see Annot., 79 A.L.R.3d, supra at 604-605.

Second, the coercive circumstances must have been the result of the acts of the opposite party. A contract signed because a party is bargaining under adverse conditions or in pressing want of pecuniary means is not unenforceable on account of duress if the other party is not responsible for those circumstances and did not create those necessities. Morrill v. Bank,supra at 364, 9 A.2d at 524; Urban Plumbing & Heating Co. v. United States,187 Ct.Cl. 15, 408 F.2d 382, 389 (1969); see Healey v. Richman, 109 N.H. 439, 440, 254 A.2d 844, 844-45 (1969) (per curiam).

Third, the pressure must have been wrongful. In Morrill v. Bank, this court stated that "there must be some threat to do something harmful which the threatening party has no legal right to do." 90 N.H. at 365, 9 A.2d at 525. This statement was consistent with the view of other courts that a finding of business compulsion could not be predicated upon a demand which is lawful, or upon doing or threatening to do that which a party has a legal right to do. Kohen v. H. S. Crocker Co., 260 F.2d 790 (5th Cir. 1958); Newland v. Child, 73 Idaho 530, 254 P.2d 1066 (1953); Doernbecher v. Mutual Life Ins. Co., 16 Wash.2d 64, 132 P.2d 751 (1943). Many of the courts observing this general statement in principle have nonetheless indicated that an act otherwise lawful could become the basis for a claim of duress if done in bad faith. See e. g., Morrill v. Bank, supra, 90 N.H., at 364, 9 A.2d at 524-25; Doernbecher v. Mutual Life Ins. Co., supra, 16 Wash.2d, at 72-3, 132 P.2d at 755; Annot., 79 A.L.R.3d, supra at 606. More recently a number of courts have stated that "(t)he act or threat upon which a claim of coercion is predicated must only be wrongful in a moral sense, not necessarily a legal one." Gerber v. First Nat. Bank, 30 Ill.App.3d 776, 779, 332 N.E.2d 615, 618 (1975). See e. g., Fowler v. Mumford, 48 Del. 282, 102 A.2d 535 (1954). We think that an act or threat may form the basis for a claim of coercion although the act or threat is not criminal or tortious or in violation of a contractual duty. See generally Dalzell, Duress by Economic Pressure II, 20 N.C.L.Rev. 341, 361-67 (1942).

Circumstances must have permitted no other alternative but to accept the terms of another if there is to be a finding of business compulsion. Urban Plumbing & Heating Co. v. U. S., supra at 389; W. R. Grimshaw Co. v. Nevil C. Withrow Co., 248 F.2d 896 (8th Cir. 1957). Thus if the aggrieved party had a legal remedy adequate to redress or compensate for the injury threatened, the threat will not amount to duress. Glass & Co. v. Haygood, 133 Ala. 489, 31 So. 973 (1902); Oleet v. Pennsylvania Exch. Bank, 285 App.Div. 411, 137 N.Y.S.2d 779 (1955); 13 S. Williston, supra § 1621.

The elements to a finding of duress are questions of law; whether the facts exist to establish those elements in a particular case is an issue for the trial court, and its findings will not be disturbed unless unreasonable. See Bielinski v....