Edison Stone Corp. v. 42nd Street Development Corp.

• Decision Date: 28 February 1989
• Parties: EDISON STONE CORPORATION, Plaintiff-Appellant, v. 42ND STREET DEVELOPMENT CORPORATION, Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 249

538 N.Y.S.2d 249

145 A.D.2d 249

EDISON STONE CORPORATION, Plaintiff-Appellant, v. 42ND STREET DEVELOPMENT CORPORATION, Defendant-Respondent.

Supreme Court, Appellate Division,

First Department.

Feb. 28, 1989.

Steven R. Miller, Flushing, of counsel (David F. Segal with him on the brief; Jaffe & Segal, New York City, attorneys), for plaintiff-appellant.

Kevin J. Harrington, of counsel (Rivkin, Radler, Dunne & Bayh, attorneys), New York City, for defendant-respondent.

Before SULLIVAN, J.P., and KASSAL, ROSENBERGER and WALLACH, JJ.

SULLIVAN, Justice.

Plaintiff Edison Stone Corporation appeals from the denial of its motion for summary judgment in lieu of complaint on a promissory note on which, after default, an $80,276.04 unpaid balance of principal is due. Since no triable issues are presented and no defense to the payment of the note exists, we reverse and grant summary judgment in the amount sought.

The facts are not in dispute. On or about January 13, 1982, the Aeroflex Museum, as landlord, and Edison, as tenant, entered into a lease of the entire parcel of real property located at 551-555 West 42nd Street, in New York City, for a term ending March 31, 1992, for use as a public parking lot. The lease contemplated that Edison would make certain improvements in addition to those it had already made at the time the lease was signed.

Some fifteen months earlier, on October 1, 1980, Aeroflex had executed a written contract to sell the premises to 42nd Street Development Corp., which, in turn, had assigned its interest to 11-42 Project Joint Venture (Joint Venture). Thus, as stated at paragraph 2(D) of the lease:

The interest of ... Development ... as contract vendee of the fee of the demised premises was assigned to ... Joint Venture, a joint venture between ... Development ... and Esal Commodities (U.S.A.) Ltd. Landlord has entered into this lease agreement with tenant at the request of * * * Joint Venture, and * * * Joint Venture has consented to Landlord's entry into this lease agreement and has agreed to be bound by the terms hereof in the event that it acquires fee title to the demised premises.

Joint Venture's consent to the lease and its agreement to be bound by the terms thereof were expressed in a signed document appended to the lease. As recited therein, the consideration for Joint Venture's consent was the payment to it of $32,918.00. ¹ Furthermore, more than 75% of each monthly installment of rent required to be paid by Edison under the lease was to be turned over to Joint Venture. Thus, while the lease required monthly payments of $5,314.75, all but $1,200.00, or $4,174.75, was to be "paid over to" Joint Venture. The lease also permitted the landlord to terminate the lease under certain circumstances. If it exercised the right, the landlord would be required to pay Edison a sum based on its actual improvement costs and calculated pursuant to a formula contained in the lease, but which was not to exceed Edison's anticipated improvement costs of $38,000.00.

Subsequently, Development and Edison agreed, in a June 11, 1982 letter prepared by Development and signed by each of the parties, that if Development acquired title within one year thereof Edison would surrender possession of the premises in consideration of Development's payment to it of $156,000.00, of which $36,000 was to be paid on vacatur and the balance under a $120,000 promissory note.

Within one year of the agreement Development acquired title to the premises. Honoring its commitment under the June 11, 1982 letter agreement, Edison surrendered possession and received from Development a check for $36,000 together with a note, dated August 12, 1982, in the sum of $120,000. Nineteen installments in varying amounts were thereafter paid to Edison from October 28, 1982 through October 18, 1985, reducing the principal balance of the note to $80,276.04. When Development failed to pay any additional sums, Edison commenced this action to enforce payment.

In his affidavit in opposition to the motion for summary judgment, Frederic S. Papert, Development's president, alleged that in 1981 ² he negotiated an arrangement with Edison allowing it "temporarily" to use the leased premises as a parking lot; that he rejected Edison's requests for a lease; that Edison occupied the premises from June 1981 on the basis of a "month-to-month tenancy"; that while he was on the West Coast during the early months of 1982, Edison "conspired and collaborated with Esal Commodities (U.S.A.) Inc.," Development's "business partner," and secured a ten-year lease for the premises, which Development never signed; and that the terms of the lease "effectively rendered the [leased premises] undevelopable" because Edison's possession discouraged the substantial expenditure needed to complete the working drawings, which were a pre-requisite to the issuance of building permits.

Papert further alleged that Development entered into a new partnership with a real estate developer, and that this new partnership refused to commit any funds to the development of the site unless the leased premises were "unencumbered." Allegedly under pressure from the new partnership to deliver a vacant site, Development negotiated with Edison for the surrender of its lease, to which Edison consented by entering into the June 11, 1982 letter agreement.

Papert argued that Development "had no choice but to sign the note," which was not legally binding "since it was signed only under the duress which was the direct and intended result of [Edison's] fraudulent conduct." Significantly, Papert concedes that "[t]he reason we stopped making payment on the note is, to put it plainly, that we ran out of money" and that "[o]ur present financial straits preclude us from making payment at the moment."

In making nineteen payments on the note over a three-year period, without objection, until it "ran out of money", Development has, as a matter of law, ratified the note and waived any right it might have had to repudiate its obligations thereunder. (Bethlehem Steel Corp. v. Solow, 63 A.D.2d 611, 405 N.Y.S.2d 80; app. dismd., 45 N.Y.2d 837; Marine Midland Bank v. Stukey, 75 A.D.2d 713, 427 N.Y.S.2d 123; affd, 55 N.Y.2d 633, 446 N.Y.S.2d 265, 430 N.E.2d 1318; Port Chester Elec. Constr. Corp. v. Hastings Terraces, Inc., 284 App.Div. 966, 134 N.Y.S.2d 656.) As this court stated in Bethlehem Steel, "One who would repudiate a contract procured by duress, must act promptly, or he will be deemed to have elected to affirm it." (63 A.D.2d at 612, 405 N.Y.S.2d 80.)

In Marine Midland Bank v. Stukey, supra, the makers of a promissory note, executed on October 10, 1975, raised a defense of duress. They admittedly had paid interest on the note without protest from October 10, 1975 until October 1, 1978. The court held that the "claimed defense of duress has been waived" [citations omitted]. (75 A.D.2d 713, 427 N.Y.S.2d 123.) Similarly, in Port Chester Elec. Constr. Corp. v. Hastings Terraces, Inc., supra, the court rejected a defense of duress, where the notes were made and executed on May 11, 1951, but the claim of duress was not asserted until February 16, 1953, almost two years thereafter. The duress, if any, would have terminated in November 1951. As already noted, Development's economic duress defense was not raised at any time during the three-year period from October 1982 through October 1985.

Moreover, even if it were not otherwise waived, the defense of economic duress is not sustainable in the circumstance presented, since Edison did not wrongfully threaten to remain in possession unless Development executed and delivered the note. Edison made out a prima facie case on the note by proof of due execution and Development's failure to make payment in the manner provided for therein. (Seaman-Andwall Corp. v. Wright Mach. Corp., 31 A.D.2d 136, 295 N.Y.S.2d 752, affd., 29 N.Y.2d 617, 324 N.Y.S.2d 410, 273 N.E.2d 138.) To defeat the motion, Development was obliged to raise a bona fide and substantial triable issue of fact. (Leumi Fin. Corp. v. Richter, 24 A.D.2d 855, 264 N.Y.S.2d 707, affd, 17 N.Y.2d 166, 269 N.Y.S.2d 409, 216 N.E.2d 579; Mackey v. Dominick & Dominick, 47 A.D.2d 722, 365 N.Y.S.2d 18, affd, 38 N.Y.2d 957, 384 N.Y.S.2d 151, 348 N.E.2d 608). "The party opposing the [summary judgment] motion * * * must produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which the opposing claim rests * * *." (Gilbert Frank Corp. v. Federal Ins. Co., 70 N.Y.2d 966, 967, 525 N.Y.S.2d 793, 520 N.E.2d 512.) Bald, conclusory allegations, even if believable, are not enough. (Id.; Ehrlich v. American Moninger Greenhouse Mfg. Corp., 26 N.Y.2d 255, 309 N.Y.S.2d 341, 257 N.E.2d 890.) It was incumbent on Development to "establish evidence of all elements of economic duress to defeat the motion for summary judgment * * *." (Finserv Computer Corp. v. Bibliographic Retrieval Servs., 125 A.D.2d 765, 766, 509 N.Y.S.2d 187.)

"A contract may be voided on the ground of economic duress where the complaining party was compelled to agree to its terms by means of a wrongful threat which precluded the exercise of its free will." (Muller Constr. Co. v. New York Tel. Co., 40 N.Y.2d 955, 956, 390 N.Y.S.2d 817, 359 N.E.2d 328.) It is equally well settled that "[t]he threatened exercise of a legal right cannot constitute duress [citation omitted]." (Marine Midland Bank v. Stukey, supra, 75 A.D.2d 713, 427 N.Y.S.2d 123.) Thus, the rule has evolved that "[t]he existence of economic duress is demonstrated by proof that one party to a contract has threatened to breach the agreement by withholding performance unless the other party agrees to some further demand [citation omitted]." (805 Third Ave. Co. v. M.W. Realty Assoc., 58 N.Y.2d 447, 451, 461 N.Y.S.2d 778, 448 N.E.2d 445.)

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