Litten v. Jonathan Logan, Inc.

Dissenting Opinion by

Montgomery, J.:

I cannot find in this record any reason to permit plaintiffs to recover on an oral agreement allegedly entered into by the parties in November, 1960, in the face of a complete written contract executed on January 9, 1961, with the advice of counsel.

The argument of duress advanced by plaintiffs as a reason to modify the written contract so as to permit recovery on the alleged antecedent oral agreement is *289 not tenable. The duress asserted by plaintiffs is economic duress. It may be assumed that the defendant made overtures to plaintiffs to purchase their business in June of 1960, when they were solvent but had had business reverses suggesting a compromise with creditors and that they refused to sell at that time. This fact does not support their argument that in January, 1961, when they signed the written contract, they were under any economic duress emanating from the defendant.

Unquestionably, by January 9, 1961, plaintiffs had got themselves into a situation where their solvency was questionable. Their liabilities at that time were over $270,000 and they were threatened with bankruptcy ’ey their creditors. It was at this time and in this situation that the defendant agreed (1) to pay the liquidating value of the companies to plaintiffs, which was to be determined on the basis of directions set forth in the agreement and (2), to employ plaintiffs for a year, subject to termination by either party on one week’s notice. In return, defendant was to receive 40 shares of the common stock and 700 of the preferred stock of Princess Fair Blouse and 20 shares of the common stock of Roliman, Inc., certified to be all of the outstanding stock of those two corporations and held in the name of Bernard Litten.

The defendant performed its part of the contract by paying off the creditors and employing the plaintiffs. Although the plaintiffs were subsequently discharged before the expiration of one year, the written contract provided for their dismissal upon giving one week’s notice, which was given.

The majority, in allowing recovery on the theory of economical duress, says, “If plaintiffs had refused to sign, bankruptcy would have been the result. Defendant and only defendant had the choice of preventing *290 bankruptcy for the corporation and personal financial disaster for plaintiffs. The only recourse for plaintiffs on January 9, 1961, was to sign the written contract. This is the kind of duress contemplated by the decisions of the New York courts.”

I find the New York decisions to the contrary. Allstate Medical Laboratories, Inc. v. Blaivas, 26 A.D. 2d 536 , 271 N.Y.S. 2d 371 (1966), aff’d, 20 N.Y. 2d 654 , 282 N.Y.S. 2d 268 (1967) ; Glicman v. Barker Painting Company, 227 A.D. 585 , 238 N.Y.S. 419 (1930). Restatement of Contracts, §492, also supports my view. Plaintiffs’ pending bankruptcy was not caused by any wrongful act of the defendant and the agreement was signed by persons well versed in business practices and upon the advice of counsel, which nullifies any contention of duress. Carrier v. William Penn Broadcasting Company, 426 Pa. 427 , 233 A. 2d 519 (1967); Smith v. Lenchner, 204 Pa. Superior Ct. 500 , 205 A. 2d 626 (1964). Furthermore, need of financial assistance is not considered sufficient to avoid a contract on the theory of economic distress. Joseph F. Egan, Inc. v. City of New York, 18 A.D. 2d 357 , 239 N.Y.S. 2d 420 (1963); Lawlor v. National Screen Service Corporation, 211 F. 2d 934 (1954), reversed on other grounds, 349 U.S. 322 , 75 S. Ct. 865 , 99 L. Ed. 1122 (1955); Colonial Trust Company v. Hoffstot, 219 Pa. 497 , 69 A. 52 (1908). In 17 Am. Jur. 2d, Contracts, §153, the rule is stated: “But an agreement signed because a party is in straitened circumstances and greatly embarrassed and in pressing want of pecuniary means, where the other party to it is not responsible for those circumstances and had not created those necessities or embarrassments, is a voluntary act, and he is bound by its terms;”

The New York cases cited by the majority as authority are distinguishable from the present case. In *291 Pearlman v. State, 18 Misc. 2d 494 , 191 N.Y.S. 2d 422 (1959), the State compelled the inclusion of extra work in the contract after plaintiff had submitted his bid. Thus under the duress emanating from the State the plaintiff was compelled to comply with the demand and sign the contract or forfeit |2,500 which it had deposited with its bid and for which there was no right of recovery. The Court in that case said, page 499, “When Pearlman signed the contract document he did not do so freely and at arm’s length, as the Attorney General contends, but under duress, choosing the lesser of two evils. He had no other immediate relief.

In Wou v. Galbreath-Ruffin Realty Co., Inc., 22 Misc. 2d 463 , 195 N.Y.S. 2d 886 (1959), the duress was asserted by one of the parties. The plaintiff at trial after agreeing to vacate the leased premises for a consideration by a certain date refused to do so unless paid additional compensation. This would have resulted in a great hardship to the other party, which had made plans at great expense to have the building demolished as, of the date their tenant had agreed to vacate. To avoid this loss the tenant was promised more money to accomplish his removal. On the theory of duress he was denied this additional consideration.

The present case involves no such situation. These parties negotiated from September, 1960, until January 9, 1961, for the purchase of plaintiffs’ business. During this period plaintiffs refused the various offers made by the appellant, while during the same period their business was deteriorating. During this period they had numerous oral understandings but it was not until January 9, 1961, when the business had reached the bankruptcy point, that they crystallized their understandings and entered into the final written agreement. All during this period they dealt at arm’s length as experienced businessmen and with the advice of *292 counsel; and therefore, on the age-old theory that all preliminary negotiations are considered as being finalized as stated in their writing, that contract may not be altered by oral testimony in the absence of fraud, accident or mistake. I find none of those elements present in this case and would hold the parties to the terms of the written agreement.

Furthermore, if any wrong was done by defendant, such was not charged until seventeen months following the execution of the contract and after plaintiffs had accepted all of the benefits the contract afforded. Their long delay indicates an acceptance of the contract as written. Joseph F. Egan, Inc. v. City of New York, supra; Port Chester Electrical Construction Corp. v. Hastings Terraces, Inc., 284 A.D. 966, 134 N.Y.S. 2d 656 (1954).

If however, the alleged oral agreement giving Bernard Litten an option to purchase stock in defendant’s corporation at a fixed price were considered as a separate undertaking, it fails to satisfy the New York Statute of Frauds. Corporate stock is covered by that statute, which requires contracts for the sale of goods of the value of $500 to be in writing. Corporate stocks are held to be goods under this statute. N.Y. Sess. Law 1911, c. 571, §85, as amended (now New York Uniform Commercial Code, §§2-201 and 8-319). Agar v. Orda, 144 Misc. 149, 152, 258, N.Y.S. 274, 276, aff’d, 239 A.D. 827 , 264 N.Y.S. 939 , aff’d, 264 N.Y. 248 , 190 N.E. 479 ; and furthermore, there is no separate consideration shown to support such a claim.

For the foregoing reasons, I would reverse the judgments entered in favor of plaintiffs and enter a judgment n.o.v. for the defendant.

Therefore, I respectfully dissent.

Jacobs, J., joins in this dissenting opinion.