Wurtz v. Fleischman

• Decision Date: 27 June 1980
• Docket Number: No. 78-110,78-110
• Citation: 293 N.W.2d 155,97 Wis.2d 100
• Court: Wisconsin Supreme Court
• Parties: , 12 A.L.R.4th 1254 Paul WURTZ, Plaintiff-Respondent-Petitioner, v. L. William FLEISCHMAN, Defendant-Appellant.

Page 155

293 N.W.2d 155

97 Wis.2d 100, 12 A.L.R.4th 1254

Paul WURTZ, Plaintiff-Respondent-Petitioner, v. L. William FLEISCHMAN, Defendant-Appellant.

No. 78-110.

Supreme Court of Wisconsin.

Argued June 3, 1980.

Decided June 27, 1980.

Thomas G. Godfrey, Elkhorn, argued, for plaintiff-respondent-petitioner; Godfrey, Pfeil & Neshek, S.C., Elkhorn, on brief.

Lowell E. Sweet, Elkhorn, argued, for defendant-appellant; Sweet & Leece, Elkhorn, on brief.

HEFFERNAN, Justice.

The sole issue on this appeal is whether the court of appeals, in reversing the trial court, exceeded its authority as an appellate court by making factual determinations in lieu of, and in addition to, the findings made by the trial court. We conclude that the court of appeals exceeded its appellate authority; and we reverse its decision, published at 89 Wis.2d 291, 278 N.W.2d 266 (1979), and remand the cause to the trial court for further proceedings consistent with this opinion.

Paul Wurtz commenced this action on October 26, 1976, seeking damages from L. William Fleischman for his refusal to convey nine and one-half units of Lakeside Habitat Developments valued at $47,500. Fleischman had signed a subscription agreement to transfer the units to Wurtz as an integral part of a large real estate transaction, but had subsequently refused to honor the agreement.

At trial, Wurtz alleged that Fleischman was guilty of fraud for inducing him to close the larger real estate deal by signing the subscription agreement without any intention of honoring it. Fleischman conceded Wurtz's allegations, but defended his conduct, because Wurtz, by applying economic duress, coerced his acquiescence to the agreement. Because the evidence adduced at trial is described in detail by the court of appeals, 89 Wis.2d at 297-300, it is summarized below only insofar as it is pertinent to our review.

Between 1971 and 1975 Wurtz was the president and sole stockholder of Hotel Luzern, Inc. Fleischman, an experienced real estate broker, was the president of Lakeside Habitat Corporation and a general partner in the limited partnership of Lakeside Habitat Developments. Lakeside Habitat Corporation was also a general partner in the limited partnership.

On December 13, 1971, Wurtz entered into a real estate listing with Fleischman, giving Fleischman the exclusive right to lease or sell certain property owned by Hotel Luzern, Inc. Fleischman failed to find any lessees or purchasers during the term of either the original listing agreement or of a similar subsequent agreement.

Fleischman eventually became interested in buying the property himself; and on September 8, 1973, Hotel Luzern, Inc. and Lakeside Habitat Corporation arranged an "Offer To Exchange Property." The exchange agreement required Wurtz to notify Fleischman what property he wanted in exchange for the hotel property valued at $300,000. Fleischman was to purchase the property selected by Wurtz and trade it for the hotel property at the closing.

The record indicates that, in order to extend the closing date, three addendums were made to the original offer to exchange property. The second and third addendums indicated that Lakeside Habitat Corporation was responsible for the delay and provided that Hotel Luzern, Inc. was entitled to a specified sum in consideration for agreeing to postpone the closing. The addendums all provided that time was of the essence in respect to the closing date. The last addendum specified March 31, 1974 as the date of closing.

Although many of the necessary arrangements were made, the closing did not take place on March 31, 1974, the date specified in the last addendum. The only explanation contained in the record for the postponement was that Fleischman was having difficulty procuring the necessary financing. The parties did not enter into a written agreement to extend the 1974 closing date or to waive the "time is of the essence" provision.

Sometime after the March 31, 1974 closing date passed and before the actual closing date, Wurtz informed Fleischman that the offer to exchange property would be withdrawn unless Fleischman increased the value of the property he was willing to exchange by $50,000. Fleischman agreed to add the nine and one-half units of Lakeside Habitat Developments, worth $47,500, to the deal, and the closing took place on March 24, 1975. In conjunction with executing the various closing papers, Fleischman signed a subscription agreement to transfer the units to Wurtz. Fleischman testified that the only reason he signed the subscription agreement was to insure that the larger transaction would close and that he never intended to transfer the nine and one-half units.

Fleischman testified that Wurtz made the demand for additional compensation for the first time on March 23, 1975, the night before the deal was planned to close. Fleischman stated that he felt compelled to meet Wurtz's last-minute demand in order to avoid financial ruin. He detailed the large amount of time and financial resources he had expended in expectation of closing the deal and stated that most of it would have been a total loss if the deal were not closed. Fleischman further stated that, even though the "time is of the essence" clause had not been waived by Wurtz, the closing was still contemplated upon the terms of the original agreement. In support of this contention, he testified that the parties continued to negotiate after the March 31, 1974 closing date passed and that Wurtz accepted a credit at the actual closing equaling monthly rental payments earned during the postponement period from the property held by Fleischman for exchange.

Wurtz, on the other hand, disputed Fleischman's testimony and testified that the demand for the $50,000 was made two or three months before the March 24, 1975 closing date and was repeated on several occasions. Wurtz claimed that, because time was of the essence in the deal, he had no legal obligation to close the deal once the 1974 closing date passed and was therefore, free to modify the original agreement.

At the conclusion of the trial to the court, which consisted solely of testimony by the two parties and the introduction of several exhibits, the trial court held that Fleischman was guilty of fraud and that the defense of economic duress was without merit and awarded Wurtz judgment for the value of the nine and one-half units. The trial court made 26 specific findings of fact and four conclusions of law, all of which were drafted by Wurtz's counsel, ¹ and filed a memorandum decision.

In its decision, the trial court reasoned that Fleischman was an experienced businessman whose specialty was commercial real estate and "could have drawn papers to protect himself" during the postponement if he was so dependent on the deal being closed. The court also concluded that there was no duress, because Fleischman had an adequate legal alternative to signing the subscription agreement he could have refused to meet Wurtz's demand and could have brought a legal action instead of fraudulently inducing Wurtz to close the deal. The trial court specifically found that Fleischman neither made his promise to convey the units, nor signed the subscription agreement while under any duress from Wurtz.

The court of appeals reversed the trial court on the ground that, according to its view of the facts, Fleischman had established a valid defense of economic duress. The court of appeals said that, although this court has recognized the doctrine of economic or business duress as a valid defense to a contract, we have not, as yet, specifically articulated the criteria to be used in determining whether a cause of action or defense exists for economic duress. 89 Wis.2d at 300-01, 278 N.W.2d 266. To fill this perceived need, the court of appeals adopted the analytical formula proposed in a student law review note, Economic Duress after the Demise of Free Will Theory: A Proposed Tort Analysis, 53 Iowa L.Rev. 892 (1968), and applied it to the facts of the case. Using the tort criteria of duty, breach, causation, and damages, the court of appeals considered the parties' relative bargaining positions, the availability of alternative legal remedies, the gravity of the threatened harm, the wrongfulness of illegality of the threats, and the fairness of the resulting bargain. 89 Wis.2d at 301, 278 N.W.2d 266.

The court of appeals concluded that economic duress was an intentional tort and that Fleischman therefore had the burden of proving the defense "to a reasonable degree of certainty, by evidence that (was) clear, satisfactory and convincing . . . ." 89 Wis.2d at 302, 278 N.W.2d at 270. Without mentioning the trial court's findings, the court of appeals made a de novo analysis of the record and held that, under the criteria adopted from the law review note, Fleischman had established the defense of economic duress "by the greater weight of the credible evidence." ² 89 Wis.2d at 308, 278 N.W.2d at 270.

Neither party to this review challenges the criteria adopted by the court of appeals for determining duress. Nor is there any contention that the various factual determinations made by the court of appeals are without at least arguable support in the record. The question on review is limited to whether the court of appeals exceeded its authority by making factual determinations, based on conflicting evidence, in lieu of, and in...