Summary
holding that a party's acceptance of a settlement agreement because she could not afford to wait for the outcome of an appeal does not constitute coercion
Summary of this case from Schempp v. GC Acquisition, LLCOpinion
No. 88-2135
Submitted January 16, 1990 —
Decided March 14, 1990.
Domestic relations — Contracts — Avoiding contract on basis of duress — Party must prove coercion by other party to the contract.
O.Jur 3d Duress
To avoid a contract on the basis of duress, a party must prove coercion by the other party to the contract. It is not enough to show that one assented merely because of difficult circumstances that are not the fault of the other party.
APPEAL and CROSS-APPEAL from the Court of Appeals for Summit County, No. 13547.
Nancy and William Blodgett were married in Connecticut on November 22, 1975. William signed an antenuptial agreement the day before their marriage; Nancy did not sign the agreement until December 31, 1975. Shortly after they married, the Blodgetts moved to Ohio.
On November 10, 1975, William entered into an agreement to purchase the assets of Roberts Cartage, Inc., later known as Roberts Express, Inc. William ran the company, and Nancy assisted in its operations by performing at various times duties such as clerical work, delivering freight, dispatching drivers, and sales. The company prospered and was sold to Roadway Services, Inc. in 1984 for $6,000,000 in cash, $3,000,000 in incentives if certain profit goals were reached by 1989, and $3,000,000 for a non-competition provision between William Blodgett and Roadway Services.
Nancy and William separated in February 1986, and in April 1986 she filed a complaint for divorce. The trial court granted the divorce in January 1988. With regard to property division, the trial court found the $6,000,000 proceeds from the sale of Roberts Express to be a marital asset. The non-competition and incentive payments were found to be non-marital assets and solely the property of William. Nancy's share of the marital assets, including the sale of Roberts Express, was set at $3,100,000. Because of tax consequences, the trial court ordered that Nancy be paid $2,765,000 if she signed a satisfaction of judgment within forty-five days of the trial court's judgment entry, filed on January 29, 1988.
During the divorce proceedings, Nancy had been advanced $50,000 in May 1987 and $20,000 in November 1987 from an escrow account holding the couple's assets. In addition, the trial court had ordered William to pay $3,000 per month temporary alimony beginning April 1, 1986. The temporary alimony payments ceased with the filing of the trial court's judgment entry. Nancy remained in the family home, which was awarded to her by the trial court.
Both parties appealed the distribution of assets. Nancy contended that the incentive and non-competition payments should have been treated as marital assets. William appealed the trial court's refusal to enforce the antenuptial agreement. While her appeal was pending, Nancy requested the court of appeals to order that $2,765,000 be released to her from escrow and the same amount to William, or that the court release an amount that would place them in an equal financial posture during the appeal. This motion was overruled.
On May 11, 1988, during the pendency of the appeal, Nancy signed and executed the satisfaction of judgment. In return, $2,765,000 was released from escrow and William executed a deed to the family home.
The next day, William filed a motion to dismiss Nancy's appeal based on her execution of the satisfaction of judgment, which he claimed had terminated her right to appeal. The court of appeals took the motion under advisement, indicating it would rule on the motion prior to its decision on the merits.
The court of appeals rendered its decision on the merits on October 19, 1988, holding that the incentive payment of $3,000,000 included in the purchase of Roberts Express was a marital asset and directing the trial court to divide it equitably. The court of appeals refused to enforce the antenuptial agreement because Nancy did not sign it until after she married William and because she signed under coercion. On October 27, 1988, the court of appeals journalized its decision overruling William's motion of May 12, 1988 to dismiss Nancy's appeal on the basis of Nancy's execution of the satisfaction of judgment. The court upheld Nancy's contention that she signed involuntarily as a result of "economic distress," but offered no rationale for its ruling.
Both parties appealed the judgment of the court of appeals. The cause is now before this court pursuant to the allowance of a motion and cross-motion to certify the record.
Vorys, Sater, Seymour Pease, John C. Elam, David W. Hardymon, Robert C. Paxton II Associates and Robert C. Paxton II, for appellee and cross-appellant.
Buckingham, Doolittle Burroughs, L. Andrew Reed, Jr., Hamilton Desaussure, Jr. and William M. Oldham, for appellant and cross-appellee.
William Blodgett contends that the court of appeals erred in refusing to dismiss Nancy Blodgett's appeal on the basis of her execution of the satisfaction of judgment. For the reasons that follow, we agree with this contention and hold that when Nancy executed the satisfaction of judgment she waived her right to continue her appeal.
It is a well-established principle of law that a satisfaction of judgment renders an appeal from that judgment moot. "`Where the court rendering judgment has jurisdiction of the subject-matter of the action and of the parties, and fraud has not intervened, and the judgment is voluntarily paid and satisfied, such payment puts an end to the controversy, and takes away from the defendant the right to appeal or prosecute error or even to move for vacation of judgment.'" Rauch v. Noble (1959), 169 Ohio St. 314, 316, 8 O.O. 2d 315, 316, 159 N.E.2d 451, 453, quoting Lynch v. Lakewood City School Dist. Bd. of Edn. (1927), 116 Ohio St. 361, 156 N.E. 188, paragraph three of the syllabus. See, also, Seifert v. Burroughs (1988), 38 Ohio St.3d 108, 526 N.E.2d 813.
Nancy maintains, however, that even though she signed the satisfaction of judgment and took its benefits, the satisfaction of judgment should not be held to have terminated her appeal because she signed the satisfaction of judgment involuntarily. She asserts that because she was unable to obtain a loan from the investment banking firm named as escrow agent on the basis of the trial court's judgment entry or to persuade the court of appeals to disburse funds from the escrow account during the appeal, she found herself in extreme financial distress. Therefore, she argues that the executed satisfaction of judgment should have no effect on her right to continue to prosecute her appeal.
In Tallmadge v. Robinson (1952), 158 Ohio St. 333, 49 O.O. 206, 109 N.E.2d 496, this court declared that threats may be held to constitute duress "* * * if such threats overcome the will of such person, remove his capacity to act for himself and cause him to perform an act he is not legally bound to perform * * *." Id. at paragraph one of the syllabus. Nancy contends that she accepted the satisfaction of judgment because she faced the potential of penury and that prospect overcame her free will. We note that Nancy was never required to prove that her financial condition was as desperate as she claimed. No fact-finding is necessary, however, because even if Nancy believed herself to have been forced by circumstances to accept the benefits of the satisfaction of judgment, she was not a victim of "economic duress" as the ruling case law has defined it.
The law of duress as a reason to avoid a contract has evolved to encompass "economic duress" as well as physical compulsion. 1 Restatement of the Law 2d, Contracts (1981), Section 176, Comment a. See, also, United States v. Bethlehem Steel Corp. (1942), 315 U.S. 289; Hartsville Oil Mill v. United States (1925), 271 U.S. 43 (recognizing economic duress as a legal theory). A person who claims to have been a victim of economic duress must show that he or she was subjected to "* * * a wrongful or unlawful act or threat, * * *" and that it "* * * deprive[d] the victim of his unfettered will." 13 Williston on Contracts (3 Ed. 1970) 704, Section 1617. Further, "* * * [m]erely taking advantage of another's financial difficulty is not duress. Rather, the person alleging financial difficulty must allege that it was contributed to or caused by the one accused of coercion." Id. at 708. The Restatement of the Law 2d, Contracts, supra, also requires that the one who coerces the victim be the other party to the agreement: "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." (Emphasis added.) Id. at 475, Section 175(1).
The United States Court of Claims summarized what a party must prove to establish duress: "[`]An examination of the cases * * * makes it clear that three elements are common to all situations where duress has been found to exist. These are: (1) that one side involuntarily accepted the terms of another; (2) that circumstances permitted no other alternative; and (3) that said circumstances were the result of coercive acts of the opposite party. * * * The assertion of duress must be proven to have been the result of the defendant's conduct and not by the plaintiff's necessities. * * *[']" (Emphasis added.) Urban Plumbing Heating Co. v. United States (U.S. Ct. of Claims 1969), 408 F.2d 382, 389-390, quoting Fruhauf Southwest Garment Co. v. United States (U.S. Ct. of Claims 1953), 111 F. Supp. 945, 951.
Because of the nature of the appellate process, Nancy could not receive the trial court award until her appeal was decided, unless she chose to terminate the appeal herself by executing the satisfaction of judgment. She may well have believed that this circumstance coerced her acquiescence to the satisfaction of judgment, but the workings of the judicial system are irrelevant in this context. To avoid the satisfaction of judgment, it must be shown that the one whose actions forced Nancy to accept the judgment was William, the other party to the agreement.
To avoid a contract on the basis of duress, a party must prove coercion by the other party to the contract. It is not enough to show that one assented merely because of difficult circumstances that are not the fault of the other party. The record here is devoid of evidence of legal duress by William. Nancy does not assert that William threatened to keep the trial court award from her. William had a right to dispute on appeal her entitlement to the $2,765,000 awarded her by the trial court and to oppose her motion for temporary alimony filed in the court of appeals. Clearly, Nancy has failed to establish duress.
We decline to accept the proposition that if an appellant executes a satisfaction of judgment merely because she cannot afford to wait for the outcome of an appeal, that satisfaction of judgment may be subsequently avoided. Almost every settlement agreement contains some modicum of coercion or duress. An appeal or prospect of a trial always involves a degree of risk to both parties. The law encourages settlement of disputes. By executing the satisfaction of judgment, Nancy could be sure she collected $2,765,000. If she did not execute the document, the judgment awarded her by the trial court remained subject to the risk that William would convince the court of appeals to enforce the antenuptial agreement. It is noteworthy that Nancy made her choice with the benefit of the advice of counsel.
The court of appeals should have granted William's May 12, 1988 motion to dismiss because Nancy's execution of the satisfaction of judgment terminated her appeal. Therefore, we reverse the judgment of the court of appeals and reinstate the judgment of the trial court.
Judgment reversed.
MOYER, C.J., SWEENEY, HOLMES, DOUGLAS, BRYANT and RESNICK, JJ., concur.
PEGGY BRYANT, J., of the Tenth Appellate District, sitting for H. BROWN, J.