Able counsel weakens claim of fraud and duress.

Nieginski and Shpak operated a butcher shop in the Brighton Beach area of Brooklyn, New York. The business was operated in the name of a corporation, "# 1 Meat and Poultry, Inc.," of which Nieginski and Shpak were the sole shareholders. An attorney, Berfond, represented the corporation during its entire existence.

The corporation operated the butcher shop under a lease with the owner of the building. The lease contained a provision which granted the corporation aright of first refusal to purchase the building for $550,000.

In January, 1999, the time came for the corporation to exercise its right to acquire the property for the agreed upon price. Instead of the corporation purchasing the building, its sole shareholders, Nieginski and Shpak agreed for Nieginski to buy the building and at the same time lease the store to Shpak, or his designee. Nieginski and Shpak entered into a written agreement under which the corporation assigned its right to purchase the building to Nieginski. The agreement also required Nieginski to deposit the down payment of $55,000 with the attorney for the owner. to be held in escrow, and to execute a lease for the store with Shpak or his designee. At the same time, a contract to purchase the building, was made with the building's owner and the $55,000 down payment deposit supplied by Nieginski was turned over to the owner' s attorney. The purchase contract provided that the time for the closing was "of the essence", and that failure to close on time would cause the down payment to be forfeited.

On the scheduled closing date, Shpak and his designee (his wife, Kaganosvskaya), demanded a cash payment of $115,000 from Nieginski which they claimed was orally agreed upon by Nieginski when the assignment deal was originally negotiated. Al- though Nieginski protested, claiming that the only consideration for the assignment was set forth in the written agreement, and no promise of any kind was made as to $115,000, he signed a promissory note in favor of Shpak's wife as designee for a lower amount of $107,000, to be paid in installments. This was acceptable to Shpak and his wife.

When the first installment of payment was due, Nieginski refused to pay and commenced a lawsuit to set aside the promissory note on the grounds that Shpak, his wife and the attorney for the corporation committed fraud and duress against Nieginski and that further, there was a lack of consideration for the note.

Shpak, his wife and attorney Berfond, moved to dismiss Nieginski's complaint on the grounds that the written note speaks for itself and must be enforced. Kaganovskaya also counterclaimed, asserting that the entire $107,000 was due and payable and that she should be awarded attorney's fees of $26,000 as well.

The case was considered by Justice Gloria M. Dabiri of the Supreme Court, Kings County. The judge reviewed the positions of the parties in her decision. She stated that Nieginski claimed that when the closing transaction to acquire the building was taking place, the demand for the $115,000 was made by Shpak and his wife and attorney Berfond. Nieginski claimed that he ultimately signed the note for $107,000 only because Shpak and attorney Berfond threatened to abort the closing. Nieginski said that Shpak and Berfond took the owner and his attorney aside and threatened to cancel the closing by claiming that they had an interest in the property and that title could not be transferred to Nieginski unless he signed the promissory note. Nieginski feared that the $55,000 down payment deposit would be forfeited, that the mortgage commitment to finance the purchase of the building would lapse and that the option to purchase the building would be lost if he did not sign the note.

Justice Dabiri set forth the position of Shpak and Berfond. They claimed that in addition to the written contract made by Nieginski with Shpak, Nieginski orally agreed to make a cash payment of$115,000 to Shpak or to his designee. They claimed that Shpak and his wife, as designee, finally agreed at the closing to accept the $107,000 note in lieu of the $115,000 cash payment.

The judge ruled that the promissory note must be enforced. She stated that the not provided that Nieginski would pay Kaganovskaya $107,000 in installments, and the note could not be changed or terminated except in writing. The note also stated that upon default the entire principal balance could be called due and that Nieginski would pay all costs and attorney's fees.

The Court stated that the general rule is that the signer of written agreement is conclusively bound by its terms unless there is a showing of fraud or duress on the part of a party to the contract.

In this case, Neiginski claimed that he was fraudulently induced to sign the note, that he did so under duress, and that further, the note was void for lack of consideration. In the case of fraud, Nieginski must show that he relied upon a false representation of Shpak or Berfond and thereby suffered injury. However, Nieginski failed to make a sufficient demonstration that Shpak or Berfond made any misrepresentation upon which Nieginski relied. The allegation that they would force the cancellation of the closing was not a misrepresentation. Rather, it was no more than a prediction of something which is expected to occur in the future. Such allegation cannot sustain a claim for fraud. In addition, Nieginski could not have relied upon any misrepresentation because he was always represented by his own able counsel who reviewed the note before it was signed.

With respect to Nieginski's claim that he signed the note under duress, Judge Dabiri concluded that duress exists only when a party enters into an agreement by means of a wrongful threat which precludes the exercise of free will. Only then would the contract be set aside. In this case, she held, all that happened was that a party to a contract threatened to exercise a legal right. Such conduct does not constitute duress. Duress cannot be sustained by a contracting party who has simply been bested in negotiations by the "hard bargaining" of the other contracting party. Duress is even more difficult to sustain when the party asserting it has had access to competent and knowledgeable counsel.

Nieginski's claim that the note should be rescinded for lack of consideration also had no merit. The judge concluded that the note itself recited that it was given "for value received," and further, Shpak alleged that Nieginski orally agreed to pay the $115,000 as partial consideration for the assignment of the right of first refusal, and that the oral agreement was reduced to the written note for $107,000.

Justice Dabire awarded Kaganovskaya the full amount of the note of $107,000. However, even though the note specified that she was entitled to attorney's fees, the judge ruled that such fees can be awarded only if they are reasonable. She therefore set the matter of legal fees down for a hearing as to their reasonableness.

(Edward L. Schiff is a real estate partner at the Manhattan law firm of Hartman & Craven, LLP.)