Wurtz v. Fleischman
| Decision Date | 13 March 1979 |
| Docket Number | No. 78-110,78-110 |
| Citation | 278 N.W.2d 266,89 Wis.2d 291 |
| Parties | Paul WURTZ, Plaintiff-Respondent, v. L. William FLEISCHMAN, Defendant-Appellant. |
| Court | Wisconsin Court of Appeals |
John R. Zwieg, (argued and on brief) of Godfrey, Neshek, Worth, Howarth & Leibsle, Elkhorn, for plaintiff-respondent.
Lowell E. Sweet, Elkhorn, for defendant-appellant.
Before MOSER, P. J., and BROWN and BODE, JJ.
This is an appeal from a judgment of the circuit court entered in favor of the plaintiff-respondent (Wurtz). The judgment ordered that the defendant-appellant (Fleischman) transfer the deeds to certain property pursuant to a contract entered into on March 24, 1975.
Paul Wurtz was the owner of the Hotel Luzern which was located on the shores of Lake Geneva. He wanted to sell the hotel and hired L. William Fleischman, a real estate broker, to procure a purchaser. The hotel was listed for over a year at $350,000 without any serious prospective offers to purchase. Eventually, Fleischman became interested in the property and conceived an idea of turning the hotel into a Hilton Inn. Fleischman asked Wurtz if he was interested in the proposed project, but Wurtz declined. Wurtz wanted cash of $300,000 and wanted to sell the property outright. Fleischman, on behalf of Lakeside Habitat, Inc., of which he had a participation interest, then began to negotiate with Wurtz for the purchase of the property.
After seeing his lawyer, Wurtz decided that he did not want cash in return for the hotel. Rather, he wanted to exchange the hotel property for real estate with a value equal to $300,000. By trading real property, Wurtz had been advised that he would receive a tax advantage. Fleischman agreed to exchange real estate rather than to give Wurtz cash, and the agreement was reduced to writing with the closing date to take place on October 10, 1973. Time was of the essence. Wurtz was to notify Fleischman of what property he wanted in exchange for the hotel property. Fleischman was to purchase the property and then trade the property for the hotel at the closing.
The date for closing was extended by written agreement of the parties to March 31, 1974. Again, time was of the essence. The reason for the extension was that Wurtz had originally asked Fleischman to obtain a McDonald's restaurant in Albuquerque, New Mexico as the exchange for the hotel. Fleischman had done so. The McDonald's restaurant was, however, valued at $246,400. Since the agreement had been for Fleischman to exchange $300,000 worth of real estate for the hotel, Fleischman had to find approximately $60,000 in additional property in order for Wurtz to have a tax deferred exchange. With this understanding, the closing was postponed so that Wurtz could select the necessary additional property. Eventually, Wurtz selected a warehouse in Delavan as the additional property to be bought by Fleischman on Wurtz' behalf.
The closing did not take place on March 31, 1974 as had been previously arranged. It was again postponed. This time, however, there was neither a written agreement to postpone the closing nor a written waiver of the "time is of the essence" clause. The reason for the postponement is unclear from the record, but there is evidence that Fleischman was having trouble procuring the necessary financing to complete the transaction.
Although there was no written waiver of the "time is of the essence" clause, there is evidence that both parties continued to feel bound by the original agreement. It was agreed between Wurtz and Fleischman, for instance, that as compensation for agreeing to the postponement, Wurtz was to receive from Fleischman the equivalent of the income he would have received from the McDonald's restaurant and the Delavan warehouse each month had the closing taken place. This consent to monthly compensation is documented in a closing statement signed by Wurtz on February 1, 1975, almost one year past the date the transaction was supposed to have been closed by prior written agreement. Other documentary evidence includes the records from the closing conference which show that Wurtz did receive credit in the form of rental payments for the period of time between the date of the second postponement and the actual closing. Further, the record discloses that Wurtz and Fleischman were in almost daily contact throughout the second postponement period. It is evident that even though the "time is of the essence" clause was not specifically waived by Wurtz, the closing was still contemplated upon the terms and conditions outlined in the original offer to purchase agreement.
The controversy, in this case, occurred sometime after the March 31, 1974 agreed closing date but before the actual March 24, 1975 closing date. Fleischman contends that the evening before the actual closing, Wurtz told him in a telephone conversation that the closing was off unless Wurtz was paid an additional $50,000. Fleischman states that he felt economically compelled to assent to the arrangement in order to avoid cancellation of the closing. It is his view that he had to assent to the extra $50,000 or face certain financial ruin. While he had no cash available, he offered Wurtz the only asset he had his nine and one-half units of Lakeside Habitat developments worth $47,500. Wurtz accepted Fleischman's offer and the closing took place. Fleischman later refused to issue the units to Wurtz after the closing. Wurtz brought suit and the trial court awarded Wurtz the units. From this judgment, Fleischman appeals.
Wurtz claimed at trial and he claims on appeal that the $50,000 demand was first made two or three months before the actual closing date and not the night before as is alleged by Fleischman. Wurtz professes that since time was of the essence and the clause was not expressly waived at the time of the second postponement, he was under no obligation to go through with the closing. Wurtz asserts, therefore, that he was legally justified in seeking a modification of the contract calling for an increased consideration. He argues that there was no economic duress and maintains that he is entitled to specific performance as ordered by the trial court.
In discussing the doctrine of economic or business compulsion, we note that Wisconsin has adopted the doctrine as a viable defense to a contract. In Minneapolis, St. Paul & Sault Ste. Marie Railway Co. v. Railroad Commission, 183 Wis. 47, 197 N.W. 352 (1924), the court stated:
The old rule that there could be duress only where there was a threat of loss of life, limb, or liberty has been so changed that duress may sometimes be implied when a payment is made or an act performed to prevent great property loss or heavy penalties when there seems no adequate remedy except to submit to an unjust or illegal demand and then seek redress in the courts. 183 Wis. at 56, 197 N.W. at 355.
As late as 1960, the supreme court reaffirmed the adoption of the modern view which recognizes the existence of the doctrine. 1 While the court has adopted the doctrine of business or economic compulsion, the criteria to be used in determining whether a cause of action or defense exists for economic duress has not been specifically set forth by any court in this state. However, analysis of the criteria to be examined in economic duress has been the subject of a number of law review articles. 2 As the writer of an Iowa Law Review Note states, the courts which have adopted the modern view of economic duress have used many different formulas to determine whether or not a contract is voidable for economic or business compulsion. These formulas include the relative bargaining positions of the parties, the adequacy of alternative legal remedies, the gravity of the threatened evil, the wrongfulness or illegality of the threats, the fairness of the resulting bargain, and the ratification by the allegedly coerced party. 3
Some of these criteria sound in quasi-contract and others sound in tort. There has been much discussion by academicians about the proper analytical framework into which economic duress falls. One thing is clear when one party wrongfully threatens another with severe economic loss if he does not enter a proposed contract, and the threatened party acquiesces solely because of the wrongful threat, the injury to the threatened party may be redressed under the doctrine of economic duress. It is the application of a more consistent duress theory which we seek, and as a result of our research we hereby adopt the analytical formula as suggested in the Iowa Law Review Note. This formula involves the tort criteria of duty, breach, causation and damages.
Before we may analyze the elements of economic duress, we must determine the burden of proof Fleischman must meet in order to establish a defense. In cases involving intentional torts, the supreme court has adopted and applied a middle burden of proof. See, Kuehn v. Kuehn, 11 Wis.2d 15, 26-30, 104 N.W.2d 138, 145-47 (1960). Therefore, Fleischman must prove to a reasonable degree of certainty, by evidence that is clear, satisfactory and convincing, that the portion of the contract requiring that he deed his interest in the Lakeside Habitat development was a product of economic duress. See, Kuehn v. Kuehn, supra ; Wis J I Civil, Part 1, 205. Damages, however, need only be proven by the greater weight of the credible evidence. Lang v. Oudenhoven, 213 Wis. 666, 669, 252 N.W. 167, 168 (1934); Wis J I Civil, Part 1, 1705.
The duty in economic duress cases is the duty to exercise superior economic power reasonably in a bargain situation. 4 Relative bargaining position should be determined from the entire context of the bargaining relation if it is to be meaningful in the duress analysis. 5 A party has a superior bargaining position if he is the sole effect or source of something needed by the other party to avoid a severe...
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