Finstad v. Ransom-Sargent Water Users, Inc.
2014 ND 146
| N.D. | 2014Background
- John and Lori Finstad and Willis and Doris Olson granted the Ransom-Sargent Water Users (now Southeast Water Users District) options to purchase contiguous farmland in 1997 that included five-year lease‑back rights and a nonassignable right of first refusal for a succeeding five‑year period.
- In May 2001 the District exercised the options; the Olsons’ lease‑back rights were assigned to the Finstads. The District later terminated the Finstads’ lease‑back rights after two incidents of tilling the land that the District believed violated land‑use restrictions.
- To preserve eligibility for 2001 federal PFC (Freedom to Farm) payments, the District’s attorney prepared a nominal cash‑rent farm contract and a contemporaneous Agreement and Release in which the Finstads released all lease‑back and option rights and agreed not to enter the property.
- The Finstads, facing financial stress, signed both documents, obtained PFC payments, and later bid unsuccessfully to lease the land in 2003 (their higher bid was rejected).
- The Finstads sued alleging breach of the original option agreement and that the Agreement and Release was procured by fraud, duress or coercion; after a bench trial the district court rescinded the Agreement and Release based on economic duress and awarded damages for breach of the option‑lease.
- The Supreme Court reversed, holding North Dakota does not recognize the economic duress doctrine as a basis to rescind a contract and concluding the Agreement and Release was valid and enforceable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Agreement & Release was voidable for economic duress | Finstad: signed under economic duress and had no realistic alternative; release should be rescinded | District: no economic duress; agreement is valid and bars suit | Court: North Dakota does not recognize economic duress as a ground for rescission under existing statutes; rescission for economic duress was erroneous |
| Whether the Agreement & Release was unlawful or against public policy | Finstad: the documents were a sham to secure federal PFC payments and thus lacked lawful object | District: contracts not inherently illegal; even if intended to obtain payments, not per se unlawful | Court: contract provisions not inherently illegal under N.D.C.C. § 9‑08‑01 and thus lawful |
| Whether there was consideration for the Agreement & Release | Finstad: no valid consideration because the farm contract was a sham | District: consideration existed — right to collect 2001 government payments and forbearance from litigation | Court: consideration existed (right to PFC payments and foregoing contest of District action sufficed) |
| Whether equitable powers could justify refusing enforcement | Finstad: court could use equity to avoid enforcement despite statutory constraints | District: equitable relief cannot override unambiguous statutory law | Court: equitable powers cannot contravene clear statutory law; no basis to override the statute-based analysis |
Key Cases Cited
- Mellon v. Norwest Bank, 493 N.W.2d 700 (N.D. 1992) (discusses elements of economic duress)
- Bye v. Mack, 519 N.W.2d 302 (N.D. 1994) (addresses duress in contract context)
- Jamestown Farmers Elevator, Inc. v. General Mills, Inc., 552 F.2d 1285 (8th Cir. 1977) (Eighth Circuit predicted adoption of economic duress doctrine)
- Centric Corp. v. Morrison-Knudsen Co., 731 P.2d 411 (Okla. 1986) (interpreting a statute identical to N.D.C.C. § 9‑03‑05 to encompass economic duress)
- Bornsen v. Pragotrade, LLC, 804 N.W.2d 55 (N.D. 2011) (statutory text governs; courts should not create common‑law doctrines that conflict with code)
- Huber v. Farmers Union Serv. Ass’n, 787 N.W.2d 268 (N.D. 2010) (contract provision unlawful only if inherently illegal)
- Anderson v. Zimbelman, 842 N.W.2d 852 (N.D. 2014) (consideration is a question of law)