Eulrich v. Snap-On Tools Corp.

853 P.2d 1350, 121 Or. App. 25, 1993 Ore. App. LEXIS 957
CourtCourt of Appeals of Oregon
DecidedJune 9, 1993
Docket88-0708; CA A64027
StatusPublished
Cited by17 cases

This text of 853 P.2d 1350 (Eulrich v. Snap-On Tools Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals of Oregon primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Eulrich v. Snap-On Tools Corp., 853 P.2d 1350, 121 Or. App. 25, 1993 Ore. App. LEXIS 957 (Or. Ct. App. 1993).

Opinions

[28]*28RIGGS, J.

Defendants1 appeal from a judgment entered on a verdict for plaintiff2 in this case involving a Snap-On Tools dealership and its termination. Plaintiff cross-appeals.

Plaintiffs claims of damages for fraud, breach of good faith and fair dealing and breach of contract arise out of a 1986 dealership agreement under which plaintiff sold Snap-On tools. We state the facts and draw inferences in a manner most favorable to plaintiff.3

Defendant Snap-On is a company that manufactures and sells hand tools to a nationwide network of dealers who in turn sell them to professional mechanics. Each dealer is assigned a marketing territory. There was evidence that the marketing system was designed to provide a maximum number of potential dealers and profit for Snap-On while often providing inadequate revenue to support the dealers. As a consequence, dealers quickly fail and are replaced by new recruits who build from the business developed by the failed dealers.

Before he became a Snap-On dealer, plaintiff was an auto body mechanic; he had never operated a business. He initially invested approximately $22,000 in inventory and accounts, which came from his savings. In addition, he promised to pay a balance of $22,500 from sales of inventory. Defendants fraudulently induced plaintiff to enter into the dealership agreement by misrepresenting to him the earning potential of the dealership. Defendants misrepresented the adequacy of the sales territory to support the dealership, and badgered him into making marginal sales and over-extending [29]*29credit to his customers, for which plaintiff was personally liable. From the start, plaintiffs dealership was not profitable. Plaintiffs supervisors, defendants Kash and Park, continually berated plaintiff into believing that his business failure was his own fault rather than the fault of Snap-On’s marketing system, and insisted that anyone could succeed as a dealer merely by following Snap-On’s sales program. Kash and Park demoralized plaintiff by denigrating his business ability in front of his wife and a large group of dealers.

In early 1987, plaintiff unsuccessfully attempted to get a more profitable territory, because his territory was not supporting him. He was told to work the territory harder. By spring, 1987, plaintiff was financially ruined. He told Kash and Park that he was out of money and that he wanted to exercise his rights under the dealership agreement and terminate his dealership. Beginning in April, 1987, he made numerous attempts to get Kash and Park to “check in” his truck, which he understood would involve taking an inventory of tools and would allow him to receive a refund for the tools and the equity in his van. Because the dealership business had depleted his personal finances, plaintiff needed the money from the tools and the equity in the van to pay his household bills. Kash and Park repeatedly put off the check-in until June 1. By that time, as they knew, plaintiff was in serious financial difficulty and could not pay his living expenses. They also knew that plaintiffs wife was extremely ill with toxemia related to her first pregnancy and required hospitalization. Plaintiff and his wife had no medical insurance and her medical bills made their financial situation even more precarious.

When plaintiff took his van to Portland to check it in, he arrived at 8 or 9 a.m. He and Kash worked for five or six hours to unload and inventory the van. During that time, Kash did not make conversation with him, and his attitude was “not kind at all.” After the inventory was completed, plaintiff was told to haul the boxes into the building. By this time, plaintiff was physically tired and emotionally drained. Kash and Park had plaintiff come into Park’s office to “do paperwork.” They had not explained to plaintiff before then that he would have to sign numerous documents to terminate the dealership. Although they had known for nearly two [30]*30months that he wanted to terminate, they had not sent the documents to him in advance to look over before he checked in the van. In the office, Kash and Park continued to berate plaintiff about being a failure, and Park “hollered” at plaintiff about “how sloppy a business practice” he operated and that “a good dealer wouldn’t do business the way” plaintiff did. They handed plaintiff “quite a few” documents to sign. Plaintiff testified that Kash and Park would hand him a piece of paper and tell him to sign it and that he did not have a chance to read through all of the papers. He did not take time to read the papers because he was uncomfortable in the hostile environment. Kash told plaintiff that he had to sign the papers before he could get any money. When he asked when he would get a check, Park told him that there would be no checks until the inventory was done and all the papers were signed. By this time, plaintiff just wanted to sign the papers and leave.

Included in the papers that plaintiff signed was a “Termination Agreement. ’ ’ It consists of five numbered paragraphs on one page and includes an agreement by Snap-On to repurchase plaintiffs tool inventory at current dealer cost. The fifth paragraph is a release of claims. Plaintiff did not know at that time that he had legal claims against defendants.

Defendants assert that all of plaintiffs claims are barred by the release, which provides:

“Except as provided above, each party to this Agreement waives any and all claims it may have against the other arising out of the Dealership terminated by this Agreement and acknowledges that fair consideration has been given. This paragraph is intended to apply and extend to any agents, representatives, officers or employees of either party to this Agreement.”

Plaintiff seeks rescission of the release, claiming mistake, undue influence, lack of consideration, adhesion and economic duress. He acknowledges that, if the release is not rescinded, all of his claims for damages are barred. The trial court allowed the rescission, and the jury awarded plaintiff general and punitive damages on all claims in the amount of $8,912,000.

Defendants’ first two assignments of error challenge the trial court’s denial of their motion for directed verdict on [31]*31all claims, based on the release, and its entry of judgment for plaintiff on his rescission claim. We review the rescission claim de novo. Gardner v. Meiling, 280 Or 665, 671, 572 P2d 1012 (1977). We conclude that plaintiff is entitled to rescind the release and that, therefore, the trial court did not err in denying defendants’ motion for directed verdict.

A party seeking to rescind an agreement must prove the claim for rescission by clear and convincing evidence. See Erwin and Erwin, 100 Or App 64, 67, 784 P2d 1109 (1990). Plaintiff asserts that the release should be rescinded because it was executed under economic duress. The gravamen of a claim of economic duress is that, as a result of some wrongful act by one party, the other party is deprived of free will in entering into the agreement. See Capps v. Georgia-Pacific, 253 Or 248, 453 P2d 935 (1969). Plaintiff must prove (1) wrongful acts or threats, (2) financial distress caused by those wrongful acts or threats, and (3) the absence of any reasonable alternative to the terms presented by defendants. Oregon Bank v. Nautilus Crane & Equip. Corp., 68 Or App 131, 142, 683 P2d 95 (1984).

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Eulrich v. Snap-On Tools Corp.
853 P.2d 1350 (Court of Appeals of Oregon, 1993)

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Bluebook (online)
853 P.2d 1350, 121 Or. App. 25, 1993 Ore. App. LEXIS 957, Counsel Stack Legal Research, https://law.counselstack.com/opinion/eulrich-v-snap-on-tools-corp-orctapp-1993.