Summary
recognizing that Florida law does not generally follow the Second Restatement of Contracts on this issue
Summary of this case from Sewalk v. Valak Direct Mktg. Sys.Opinion
No. 89-1675.
April 4, 1991.
Appeal from the Circuit Court, Brevard County, John Dean Moxley, Jr., J.
William E. Weller, of Rose Weller, Cocoa Beach, for appellants/cross-appellees.
William R. Northcutt, of Northcutt Heim, P.A., Indian Harbour Beach, for appellees/cross-appellants.
Dennis and Voncile Franklin appeal from a final judgment of foreclosure of a mortgage on their marital residence. The Franklins executed a second mortgage on the property they owned as tenants by the entirety on March 13, 1984, in favor of Wallack. Wallack cross-claimed for foreclosure after the first mortgagee brought foreclosure proceedings against the property. The Franklins argue that the trial court erred in ruling that they failed as a matter of law to establish the defense of duress and extortion. We affirm.
The record establishes that Mrs. Franklin worked for Wallack as his legal secretary and bookkeeper in 1983 and 1984. On March 12, 1984, Wallack discovered shortages in his firm accounts. He confronted Mrs. Franklin, who admitted she had taken $4,000.00. Neither had a clear idea as to how much money she had actually taken over the time she worked for Wallack.
Wallack set up a meeting in his office with Mr. and Mrs. Franklin on the following day. Although the testimony about what was said at that meeting was in conflict, the trial court found that Wallack indicated he would not inform the authorities about Mrs. Franklin's theft, if both Mr. and Mrs. Franklin would execute a note for $20,000.00 and a mortgage on their residence. The trial court also found that Mr. Franklin was not responsible for his wife's theft and that he did not know about it. The trial court ruled, however, that even if Wallack did threaten the criminal prosecution of Mrs. Franklin, it would not constitute duress or extortion as to either Mr. or Mrs. Franklin because Wallack was legally justified in seeking such prosecution.
The Franklins contend that it is duress to "threaten" an innocent person with prosecution of his spouse for an admitted crime unless he joins in the pledge of property owned jointly by the innocent as well as guilty spouse to secure the victim's loss. They primarily rely on Burton v. McMillan, 52 Fla. 469, 42 So. 849 (1907) and Sheldon v. Wilfore, 136 Fla. 312, 186 So. 508 (1939). Both cases are distinguishable on the facts.
In both Burton and Sheldon the wife was pledging her separate property to secure losses occasioned by her husband's defalcation. In Sheldon the court explained:
The record shows that Joyce L. Wilfore acquired the property involved in the suit at bar prior to the time that her husband had accepted employment with the Morris Plan Company, and that the money with which she bought the property was from a relative residing at Detroit, Michigan, and that very little, if any, of her husband's money went into the property involved in this suit.
136 Fla. at 312, 186 So. at 509.
That is not the case at bar. Here the property was acquired as tenancy by the entireties during the wife's employment by the victim and while she was embezzling $64,904 (according to the Franklins) or $96,748.98 (according to the victim). It was during this period that the property was being purchased and improved.
Also common to both Burton and Sheldon was the fact that the wife was "sick with a nervous disease." Both cases seem to hold that the instruments were invalid less because of the threat than because of the lack of capacity to execute the instrument caused by the wife's mental state. This lack of capacity was not alleged in the case at bar. The record in this case established that the husband was neither ill nor nervous. He was persuaded to co-sign the note and pledge the joint property because his wife assured him that she had taken the money and asked him to sign and that by his signing she would avoid prosecution.
Loew v. Friedman, 80 So.2d 672 (Fla. 1955), also cited by the Franklins, does deal with joint property. However, it appears in Loew that the threat was unjustified. Loew was unhappy because he lost money invested with Friedman in a corporation which failed. His threat was to prosecute Friedman unless he returned Loew's investment. This may well have been malicious. The lack of facts in Loew makes comparison inconclusive.
This case is more analogous to Tyler v. Hill Bros., 127 Fla. 419, 173 So. 147 (1937), in which the court held (in the absence of an allegation of mental or emotional weakness) that the threat to prosecute another would not excuse an innocent signer when the threat was not malicious.
This case is almost identical to Norris v. Stewart, 350 So.2d 31 (Fla. 1st DCA 1977), cert. denied, 362 So.2d 1055 (Fla. 1978). Stewart had advanced $15,000 to Norris which Norris immediately converted. On learning this, Stewart, in the presence of Mrs. Norris, threatened to prosecute Norris. In order to prevent her husband from "going to jail," Mrs. Norris co-signed a $15,000 note. She defended, not claiming mental or emotional weakness, but on the "general law in Florida" to the effect that a wife may avoid a conveyance obtained by express or implied threat of imprisonment of her husband. She cited Burton, Sheldon and Loew. The court rejected her defense, stating:
Duress . . . requires a showing the act of the party compelling obedience of another is unlawful or wrongful. [Citations omitted.] There was no showing by Mrs. Norris that Stewart's intimations were illegal.Norris at 31-32.
In our case there are no allegations that Dennis Franklin was either emotionally or mentally ill, or that the property was his separate property. This case does not come under the Burton or Sheldon cases. This is a case in which an innocent third party — in order to prevent legitimate prosecution of a loved one — pledges property (in this case joint property) to secure repayment of the damages suffered by the victim. This is a Tyler/Norris case. There is no public policy reason to refuse to enforce this obligation.
AFFIRMED.
DAUKSCH, J., concurs.
W. SHARP, J., dissents with opinion.
I respectfully dissent. The subjective determination of whether or not Dennis or Voncile actually executed the $20,000 note and mortgage under duress was never made in this case by the trial judge. He ruled that duress, as a matter of law, could not be established in Florida because Voncile was guilty of embezzlement. Even though Wallack extracted the note and mortgage from the Franklins by promising not to prosecute, Voncile was prosecuted, convicted, served time in prison and is under a restitution order to reimburse Wallack in full for his losses (which at this point have not been fully repaid). I disagree with the trial judge's ruling. I would reverse and remand for the trial judge to make a finding of duress, at least as to Dennis.
The trial judge followed the rule, which has long been applied in Florida (although not consistently), that duress cannot be established by proving a threat to do an act which the threatening party has the legal right to do. See 20 Fla.Jur.2d Duress Undue Influence (1980); Fuller v. Roberts, 35 Fla. 110, 17 So. 359 (1895); City of Miami v. Kory, 394 So.2d 494 (Fla. 3d DCA), rev. denied, 407 So.2d 1104 (Fla. 1981); Scutti v. State Road Department, 220 So.2d 628 (Fla. 4th DCA 1969); Corporacion Peruana de Aeropuertos y. Aviacion v. Boy, 180 So.2d 503 (Fla. 2d DCA 1965).
Duress is a mixed bag in this state. It requires a fact finding by the court or jury that a person was so severely pressured or influenced that the person's free will was practically destroyed, and he or she was forced to do an act or enter into a contract, not of that person's own volition. See Cooper v. Cooper, 69 So.2d 881 (Fla. 1954); Herald v. Hardin, 95 Fla. 889, 116 So. 863 (1928). This is essentially a subjective test. Illness, mental frailty and other circumstances may help establish duress in the subjective sense, but they are not essential.
At common law, threatening criminal prosecution was one of the classic category of cases in which duress could be found. See 17 C.J.S. Contracts § 168 at 948 (1963). The "old case law" held that in order to constitute duress (as a matter of law) the threat to prosecute had to be itself unjustified or illegal. But, the more "modern" view is that whether the prosecution would be justified or legal, the effect on the victim is key.
Annotation, Innocence of the Person Threatened as Affecting the Rights or Remedies in Respect of Contracts Made, or Money Paid, to Prevent or Suppress a Criminal Prosecution, 17 A.L.R. 325, 335 (1922).
Id. at 328; 17 C.J.S. Contracts § 175 (1963); 25 Am.Jur.2d Duress and Undue Influence § 22 (1966).
Under the Restatements of Contracts, First and Second, it makes no difference if the person making the threat thinks the other is guilty of a crime. As the older Restatement of Contracts observed, if a person is in fact guilty, the coercive force of a threat of criminal prosecution likely will be much greater than if the person were innocent. The rationale for this rule is that the courts will not permit resort to the criminal law to collect private debts. Duress includes threats to prosecute a person's family member as well as himself.
Restatement (Second) of Contracts § 176(1), comment c (1979); Willig v. Rapaport, 81 A.D.2d 862, 438 N.Y.S.2d 872 (N.Y.A.D.2d Dept. 1981); Motor Equipment Co. v. McLaughlin, 156 Kan. 258, 133 P.2d 149 (1943); 25 Am.Jur.2d Duress § 22.
Restatement of Contracts § 493, comment d (1932).
25 Am.Jur.2d Duress Undue Influence § 4 (1966).
Id. at § 22.
However, Florida case law appears to follow the older line of cases, that duress cannot be established by proof that a guilty person was threatened with criminal prosecution, where the threat has a connection with the demand for which compensation is sought. See Commercial Credit Co. v. Davis, 103 Fla. 519, 137 So. 688 (1931); Smith v. Commercial Bank of Jasper, 77 Fla. 163, 81 So. 154 (1919). Berber v. Berber, 466 So.2d 1149 (Fla. 4th DCA 1985) and Paris v. Paris, 412 So.2d 952 (Fla. 1st DCA 1982) cast some doubt on how strictly this rule is followed. But both of those cases involve threats by one spouse to another to obtain a favorable marital settlement. The acts threatened were technically legal, and were steps the threatening spouse had the right to do, but there was no connection between the threats and the action sought to be forced by them.
Id. at § 16.
In any event, there is a split of authority in Florida regarding the application of the "legal" threat doctrine, when the threat is made to an innocent spouse or family member, to bring criminal prosecution against that person's spouse or relative. Tyler v. Hill Brothers, Inc., 127 Fla. 419, 173 So. 147 (1937) and Norris v. Stewart, 350 So.2d 31 (Fla. 1st DCA 1977), cert. denied, 362 So.2d 1055 (Fla. 1978) appear to follow the older rule.
11 Fla.Jur.2d Contracts § 41 (1979).
However, in Burton v. McMillan, 52 Fla. 469, 42 So. 849 (1907), the court ruled that the "legal" threat to bring criminal prosecution against a spouse of an innocent person, made to that person to obtain a deed or mortgage, can constitute duress. The court said:
[T]he maxim 'In pari delicto,' should not be applied to a case where a married woman sues to set aside a deed of her separate property made by her under express or implied threats of the prosecution of her husband, and to save him from prosecution whether the threatened prosecution was lawful or unlawful, when she was sick and nervous, and when she does not appear to have had abundant opportunity for consideration and consultation with disinterested advisors.
52 Fla. at 484, 42 So. at 854. Burton was followed in Loew v. Freidman, 80 So.2d 672 (Fla. 1955) and Sheldon v. Wilfore, 136 Fla. 312, 186 So. 508 (1939).
Although Burton and Sheldon involved wives claiming duress and relief for their separate properties, I do not think the rule is so fact-specific as to be limited to sick, nervous wives and their separate properties. Loew involved a healthy wife and relief for her mortgage on tenancy by the entireties property.
In this case jointly owned property was involved, on which Dennis was in the process of remodeling a residence at the time the mortgage was given. There was no proof or inference that any of Wallack's stolen funds went into the construction of the residence or property. If anything, the inference was otherwise. Wallack handled the Franklins' closing on the property, which was financed by a sizeable first mortgage (in excess of $50,000). Dennis was personally and actively involved in remodeling the house, and he had no knowledge of Voncile's theft.
I conclude that Florida follows the "modern" or Restatement view of duress when the threatened person is innocent, and the threat is to prosecute that person's spouse. I would hold that the trial court erred in this case by holding, as a matter of law, as to Dennis, that duress could not be proven because Voncile was guilty. The trial court should have gone forward and made the factual determination of whether Dennis was actually coerced and forced by Wallack's threats to execute the note and mortgage on his property.
See 25 Am.Jur.2d Duress Undue Influence § 22 (1966).