Machinery Hauling, Inc. v. Steel of West Virginia

• Decision Date: 27 July 1989
• Docket Number: No. CC987,CC987
• Citation: 181 W.Va. 694,384 S.E.2d 139
• Court: West Virginia Supreme Court
• Parties: MACHINERY HAULING, INC. v. STEEL OF WEST VIRGINIA and Robert Bunting.

Page 139

384 S.E.2d 139

181 W.Va. 694

MACHINERY HAULING, INC. v. STEEL OF WEST VIRGINIA and Robert Bunting.

No. CC987.

Supreme Court of Appeals of West Virginia.

July 27, 1989.

Syllabus by the Court

The concept of "economic or business duress" may be generally stated as follows: Where the plaintiff is forced into a transaction as a result of unlawful threats or wrongful, oppressive, or unconscionable conduct on the part of the defendant which leaves the plaintiff no reasonable alternative but to acquiesce, the plaintiff may void the transaction and recover any economic loss.

Fred B. Westfall, Jr., Huddleston, Bolen, Beatty Porter & Copen, Huntington, for Steel of WV and Robert Bunting.

James A. Colburn, Baer, Robinson & Colburn, Huntington, for Machinery Hauling.

MILLER, Justice:

In this case, the Cabell County Circuit Court certifies questions concerning the effect of threats made by one party for the purpose of inducing contract concessions from the other. We consider today whether, and under what circumstances, such threats are actionable.

We restate the facts of the case as they appear in the complaint. Machinery Hauling, Inc., the plaintiff below, is a West Virginia corporation whose principal business is the transport of freight. In January, 1988, the defendant, Steel of West Virginia (Steel), contracted with the plaintiff to transport seventeen loads of steel product to Shelby Steel, Inc. (Shelby), a firm located in Louisville, Kentucky. When delivery was nearly completed, Steel informed the plaintiff that the product was not of merchantable quality and that Shelby had rejected it.

Steel orally directed the plaintiff to return the last three loads of the product to Steel's plant in Huntington, West Virginia. Shortly thereafter, Robert Bunting, an agent and employee of Steel, instructed the plaintiff to pay to Steel the sum of $31,000, the price of the undelivered loads, "or else [Steel] would cease to do business with the [p]laintiff." In its complaint, the plaintiff avers that Steel and Bunting "negligently attempted to extort money from the [p]laintiff" by their joint threat to sever business relations unless payment for the defective product was made. Loss of business that resulted from this threat was claimed to have been in excess of $1,000,000 per year.

The plaintiff filed suit in the Circuit Court of Cabell County against Steel and Bunting, seeking monetary damages for their "extortionate demands." The circuit court concluded that threats against business interests may in some circumstances be actionable, but that the threats made by the defendants were not.

We are initially confronted with the parties' disagreement over the legal theory that applies to this situation. The plaintiff argues that there is a cause of action under our criminal extortion statute, W.Va.Code, 61-2-13. ¹ Particular reliance is placed on Hurley v. Allied Chemical Corp., 164 W.Va. 268, 262 S.E.2d 757 (1980), where we formulated a general rule with regard to permitting a private cause of action for the violation of a statute. ² Reliance is also placed on W.Va.Code, 55-7-9, which provides: "Any person injured by the violation of a statute may recover from the offender such damages as he may sustain by reason of the violation...." ³ See Jenkins v. J.C. Penney Casualty Ins. Co., 167 W.Va. 597, 280 S.E.2d 252 (1981).

The defendants, on the other hand, argue that there is no general authority that recognizes the right to recover civil damages for extortion, citing Bass v. Morgan, Lewis & Bockius, 516 So.2d 1011 (Fla.App.1987), review denied, 525 So.2d 876 (Fla.1988), and several cases from other jurisdictions cited therein. However, in these cases, there was no actual economic loss. ⁴

We find few cases that analyze recovery in this type of situation from the perspective of an implied civil cause of action arising from a criminal extortion statute. ⁵ Furthermore, since there was no threat in the legal sense, the facts would not appear to come within the statutory language of a threatened injury to the "character, person or property of another person." W.Va.Code, 61-2-13. In Black's Law Dictionary 1327 (5th ed.1979), a "threat" is defined as "[a] declaration of an intention to injure another or his property by some unlawful act." Iden v. Adrian Buckhannon Bank, 661 F.Supp. 234 (N.D.W.Va.1987), modified, 841 F.2d 1122 (4th Cir.1988); Schott v. People, 174 Colo. 15, 482 P.2d 101 (1971); State v. Schweppe, 306 Minn. 395, 237 N.W.2d 609 (1975). As we discuss in more detail later, the plaintiff had no continuing contract with Steel. As a consequence, Steel was free to place its haulage business wherever it chose. Its statement to the plaintiff did not constitute an unlawful act.

The more common analysis proceeds under a theory of business or economic loss. In the early common law, duress per minas, i.e., by threats, was available to void a contract where the threat involved imprisonment mayhem, or loss of life or limb. Restatement (Second) of Torts § 871, comment f (1979); 25 Am.Jur.2d Duress & Undue Influence § 11 (1966). Through the years, there has been a steady expansion of duress principle such that direct dire harm is no longer essential, the focus instead being on whether the threat overbears the exercise of free will. Professor Williston, in discussing the status of business compulsion, has identified two basic elements: (1) the party who asserts business compulsion "must show that he has been the victim of a wrongful or unlawful act or threat," and (2) "[s]uch act or threat must be one which deprives the victim of his unfettered will." 13 Williston on Contracts § 1617 at 704 (1970). ⁶

Recently, courts have tended to avoid the term "free will" as applied to the victim, but instead have utilized the concept that the victim had "no reasonable alternative." This is found in Section 175(1) of the Restatement (Second) of Contracts (1981): "If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim." A more difficult issue is determining what type of threat is sufficient to invoke the rule. Courts tend to use as a shorthand summary, words such as "wrongful," "oppressive," or "unconscionable" to describe conduct, but the complexity of the term "threat" is demonstrated in Section 176 of the Restatement. ⁷ The concept of "economic or business duress" may be generally stated as follows: Where the plaintiff is forced into a transaction as a result of unlawful threats or wrongful, oppressive, or unconscionable conduct on the part of the defendant which leaves the plaintiff no reasonable alternative but to acquiesce, the plaintiff may void the transaction and recover any economic loss. ⁸ See, e.g., Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Serv. Co., 584 P.2d 15 (Alaska 1978); Frank Culver Elec., Inc. v. Jorgenson, 136 Ariz. 76, 664 P.2d 226 (App.1983); Rich & Whillock, Inc. v. Ashton Dev., Inc., 157 Cal.App.3d 1154, 204 Cal.Rptr. 86 (1984); Charter Medical Management Co. v. Ware Manor, Inc., 159 Ga.App. 378, 283 S.E.2d 330 (1981); Herget Nat'l Bank of Pekin v. Theede, 181 Ill.App.3d 1053, 130 Ill.Dec. 780, 537 N.E.2d 1109 (1989); First Data Resources, Inc. v. Omaha Steaks Int'l, Inc., 209 Neb. 327, 307 N.W.2d 790 (1981); King Enterprises v. Manchester Water Works, 122 N.H. 1011, 453 A.2d 1276 (1982); Continental Bank of Pennsylvania v. Barclay Riding Academy, Inc., 93 N.J. 153, 459 A.2d 1163, cert. denied, 464 U.S. 994, 104 S.Ct. 488, 78 L.Ed.2d 684 (1983); 805 Third Ave. Co. v. M.W. Realty Associates, 58 N.Y.2d 447, 461 N.Y.S.2d 778, 448 N.E.2d 445 (1983); Oregon Bank v. Nautilus Crane & Equip. Corp., 68 Or.App. 131, 683 P.2d 95 (1984); Barker v. Walter Hogan Enterprises, Inc., 23 Wash.App. 450, 596 P.2d 1359 (1979). See generally, Annot., 30 A.L.R.4th 294 (1984) (duress in employer-employee releases); Annot., 12 A.L.R.4th 1262 (1982) (duress in sale of real property); Annot., 9 A.L.R.4th 942 (1981) (duress in refusal to pay debt); Annot., 79 A.L.R.3d 598 (1977) (duress in promissory notes).

Furthermore, while economic duress principles are more prevalent in contract cases, they are not limited solely to this area. ⁹ Some courts have proceeded to analyze economic duress cases in terms of a tort theory. Under this theory, the duty is deemed to be the reasonable use of the superior economic power of the defendant. The breach is using such power unlawfully or unreasonably. The proximate cause is shown by the fact that the victim had no reasonable recourse but to acquiesce in the unlawful conduct of the defendant and is damaged thereby. E.g., Pecos Constr. Co. v. Mortgage Inv. Co. of El Paso, 80 N.M. 680, 459 P.2d 842 (1969); Housing Auth. of City of Dallas v. Hubbell, 325 S.W.2d 880 (Tex.Civ.App.1959); Wurtz v. Fleischman, 89 Wis.2d 291, 278 N.W.2d 266 (1979), rev'd on other grounds, 97 Wis.2d 100, 293 N.W.2d 155 (1980). See also Note, Economic Duress After the Demise of Free Will Theory: A Proposed Tort Analysis, 53 Iowa L.Rev. 892 (1968). It is apparent that this tort theory is not substantially different from the economic duress theory under a contract analysis.

In several cases, we have utilized what amounts to a "business compulsion" analysis, although we characterized it only as "duress." Our earliest case is West Virginia Transp. Co. v. Sweetzer, 25 W.Va. 434 (1885), where the defendant purchased quantities of oil in northern West Virginia and attempted to transport the same to market. The sole outlet for the oil was the plaintiff's railroad. Even though the freight charges made by the plaintiff were in excess of that authorized by statute, the defendant paid the charges so as to ensure delivery of the oil. When the plaintiff sued to recover the unpaid freight charges, the defendant counterclaimed to recover the excess charges. We summarized the cases from other jurisdictions...