the plaintiff entered a settlement agreement with the defendant which modified the terms of their earlier contract. Twenty months later, the plaintiff filed an action to void the settlement agreement on duress grounds.
The trial court denied the defendant's motion to dismiss plaintiff's claims. The Appellate Division reversed, and held that the plaintiff had failed to establish duress as a matter of law. According to the court, "defendant's threat . . . related to a relevant and legitimate dispute which stemmed from the contract itself. The fact that plaintiff  may have been financially constrained to accept less than the true value of their alleged damages does not constitute economic duress." 374 N.Y.S.2d at 355. See also Muller, 390 N.Y.S.2d at 817 (given contract's express termination provision, "there is no possibility that the plaintiff could present evidence which would establish that defendant's threatened cancellation was in excess of its contractual rights and, hence, was wrongful").
This case is distinguishable from Muller because DuFort alleges mental incapacity as well as economic duress. If DuFort was mentally incompetent at the time he spoke with Feury in March 1989, he could have perceived Feury's statements as threats rather than hard bargaining tactics. However, DuFort has not cited -- and the Court has not located -- any New York case holding that the existence of a wrongful threat is determined by the alleged incompetent's subjective perceptions. To the contrary, it appears that the existence of a wrongful threat must be evaluated under an objective standard. See Harrison, 790 F. Supp. at 455 (analyzing alleged duress under objective standard, even where plaintiff had alleged mental incompetence). As a result, DuFort cannot rely on his alleged mental incompetence to support his duress claims.
2. Mental Incompetence
DuFort contends that the release is voidable because at the time he signed that agreement, he was mentally incompetent to do so. In New York, capacity to contract is presumed. The party asserting incompetence must prove that status "at the time of the disputed transaction, . . . an extremely heavy [burden]." Harrison, 790 F. Supp. at 447 (citing Feiden v. Feiden, 151 A.D.2d 889, 542 N.Y.S.2d 860, 862 (3d Dept. 1989)). DuFort must also show that Aetna knew or should have know of his condition. Ortelere v. Teachers Retirement Board of the City of New York, 25 N.Y.2d 196, 303 N.Y.S.2d 362, 369-70, 250 N.E.2d 460 (1969).
The parties dispute whether DuFort was in fact incompetent to contract at the time he signed the release on March 16, 1989. It is undisputed, however, that Aetna did not know and had no reason to know about DuFort's alleged mental condition. In fact, at his deposition, DuFort conceded that he never told Feury or any other Aetna employee that he was depressed or otherwise mentally incapacitated. According to DuFort, he merely told Feury that he was "very, very sick" and not feeling well, statements that were consistent with his claim of total physical disability. Nothing in the record suggests that, by his conduct or statements, DuFort put Aetna on notice of a potential mental incapacity. As a result, the Court finds that Aetna did not know and should not have known of DuFort's alleged mental condition.
In Ortelere, however, the New York Court of Appeals recognized that, under certain limited circumstances, a contract may be voided even if one party had no reason to know of the other's mental incompetence. Quoting the Restatement 2d of Contracts, the Court stated that "when . . . the other party is without knowledge of the contractor's mental illness and the agreement is made on fair terms . . . the power of avoidance . . . terminates to the extent that the contract has been so performed in whole or in part or the circumstances have so changed that avoidance would be inequitable. In such a case a court may grant relief on such equitable terms as the situation requires." 303 N.Y.S.2d at 369-70. See, e.g., Pentinen v. New York State Employees' Retirement System, 60 A.D.2d 366, 401 N.Y.S.2d 587, 588 (3d Dept. 1978) (noting that in retirement system cases, courts have allowed rescission of contracts despite lack of knowledge regarding mental incompetency where "there was proof that the [defendant] would not be prejudiced or that avoidance would not be inequitable").
DuFort argues that this Court should exercise its equitable powers to set aside the 1989 release despite Aetna's lack of knowledge regarding his condition and despite the fact that the contract has been fully performed.
(Opposition at 9-10). However, given the factual dispute regarding DuFort's actual mental condition at the time the release was signed and DuFort's heavy burden on this issue, the Court cannot to do so at this time.
See, e.g., McNorton v. Bronx Psychiatric Center, 151 A.D.2d 448, 542 N.Y.S.2d 646, 649 (1st Dept. 1989) (hearing required where parties dispute mental capacity at time of contract signing). A hearing will therefore be held on April 22, 1993 at 10:00 a.m. regarding DuFort's mental condition on March 16, 1989. Fed. R. Civ. P. 43 (e). If appropriate, defendants may renew their motion for summary judgment following that hearing.
For the foregoing reasons, defendants' motion is granted in part and denied in part.
New York, New York
March 29, 1993
LOUIS J. FREEH, U.S.D.J.