Court Opinion

ID: 5797621
Source: CourtListenerOpinion
Date Created: 2022-01-12 18:21:29.741944+00
Date Added: 2024-06-11T08:42:28.582647
License: Public Domain

Simons, J. (dissenting).
Defendant may defeat plaintiffs’ suit
for damages predicated upon the increased interest charges by establishing either that the delay was not Holiday’s fault or that the increased interest rate was due to the mistake of LS & G in renegotiating the contract.
Paradoxically, to have any semblance of a claim against Instlcorp, Holiday must prove that the blame for the delay rests exclusively with someone other than plaintiffs’ predecessor, LS & G, and that Instlcorp was obliged under paragraph 11 to extend its original commitment. Furthermore, recovery over of any payment by Holiday will be made upon a finding that Holiday is responsible for the loss caused by delay in construction. Thus, Holiday must claim that it has paid damages resulting from its own delay in construction (it has not cross-claimed against anyone else) and that Instlcorp must indemnify it for that loss.
It is difficult to visualize how any indemnity theory may be stated to establish that Instlcorp will have been unjustly enriched by Holiday’s payment to plaintiffs under those circumstances. It is the general rule that "a person who, in whole or part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity from the other, unless the payor is barred by the wrongful nature of his conduct” (Restatement, Restitution, §76; Brown v Rosenbaum, 287 NY 510). Payment to plaintiffs will follow proof of Holi*264day’s fault and will not result in any beneficial effect to Instlcorp because plaintiffs have no cause of action which they can assert against Instlcorp.
The majority opinion finds a cause of action in favor of plaintiffs predicated upon breach of contract or overreaching. The breach of contract claim is meritless, for LS & G voluntarily renegotiated the commitment agreement. Unless that new agreement is voidable for overreaching, it is a binding obligation.
The general theory of economic duress or business compulsion is stated in Austin Instrument v Loral Corp. (29 NY2d 124, 130-131). A contract is voidable for economic duress when the party making the claim was forced to agree to the contract because of wrongful threats precluding the exercise of its free will. LS & G might have such a claim by proving that Instlcorp threatened to breach its agreement for permanent financing unless LS & G agreed to an increase in the interest rate, that no other source of credit at the same rate was available to LS & G and that it had no adequate remedy for Instlcorp’s threatened breach. Neither LS & G nor plaintiffs however have made such a claim. The renegotiated commitment cannot be avoided for duress unless a prompt disclaimer of the contract has been asserted (Austin Instrument v Loral Corp., supra, p 133; Oregon Pacific R.R. Co. v Forrest, 128 NY 83, 92-93; Port Chester Elec. Constr. Corp. v Hastings Terraces, 284 App Div 966, 967). Plaintiffs may not interpose it successfully at this late date and if the cause of action does not exist for plaintiffs, then Holiday may not assert it (cf. Barry v Niagara Frontier Tr. System, 35 NY2d 629, 633).
To state the case another way, Instlcorp had no legal relationship with Holiday and breached no duty owed to it. The majority’s holding imposes a duty on Instlcorp to extend the commitment to LS & G. It holds that a lender is liable to a defaulting contractor for the contractor’s construction delay which occasions the renegotiation of a financing commitment with a higher interest rate although the lender is not liable to its borrower for charging higher interest.
While we may not go behind the pleading on this motion to dismiss for insufficiency, it requires no great flight of imagination to understand what happened here. LS & G had a problem which frequently confronts real estate developers — the expiration of its commitment for permanent financing. It made a pragmatic decision to renegotiate the commitment *265with Instlcorp rather than to insist that it was entitled to an extension or look elsewhere for financing. Whether its decision was correct is a matter of defense in the action between plaintiffs and Holiday. But Holiday should not be permitted to escape the consequences of its fault or that of LS & G and place the loss on Instlcorp which did what any intelligent lender would do in a rising money market, that is, renegotiate an expired commitment at a rate closer to the current interest market.
The order should be affirmed.
Cardamone, Mahoney and Goldman, JJ., concur with Moule, J. P.; Simons, J., dissents and votes to affirm the order, in an opinion.
Order reversed with costs and motion denied.