Is Rescission of a Contract Available When Consent Was Caused by Menace?

It sometimes seems like California has a statute for everything. In the recent appellate decision in the Tran v. Nguyen case, the parties disputed whether there is a civil cause of action for extortion.

The trial court agreed with defendant Que Phung Thi Nguyen’s contention that plaintiff Bruce Tran’s extortioncause of action could only move forward if it arose out of a threat to initiate a false criminal or civil prosecution—and thus no such cause of action could be based on the facts in the case. The court of appeal disagreed.

Civil Code sections 1566, 1567, and 1570 establish a right to rescission in cases in which a person’s consent to atransaction was obtained by menace, threats of confinement, of unlawful violence to the person or his or her property, or of injury to a person’s character. This is effectively the civil version of extortion.

Here, Nguyen allegedly threatened to expose the existence of plaintiff’s child birthed by another woman during his marriage; and the appellate court concluded such a threat falls within the statutory prohibition.

The judgment entered against plaintiff Bruce Tran was reversed, and the case remanded to the trial court with directions to allow Plaintiff leave to amend his cause of action for

recovery of the funds he paid to Nguyen as a result of her threats to reveal their affair— and the existence of their child—to his wife.

Tran’s first amended complaint (FAC) against Nguyen stated causes of action for intentional infliction of emotional distress, and civil extortion.

The complaint alleged Tran and his wife were married in 2003 and have two children.

Between 2010 and 2011, the Trans separated. During their separation, Tran began a romantic relationship withNguyen; a few weeks into the relationship, Nguyen informed Tran she was pregnant with his child.

According to the FAC, Nguyen later “began to blackmail” Tran by demanding that he pay her thousands ofdollars, or she would disclose their relationship and the child’s existence to his wife.

Tran claimed he was afraid he might lose his family. He therefore paid Nguyen approximately $500,000 and purchased a BMW vehicle for her.

In 2017, Tran learned Nguyen had created a Facebook account in the name of the child, and she used it to post pictures featuring Tran, herself, and the child.

In 2018, when he concluded Nguyen’s financial demands would never cease, Tran refused to pay her more orbuy her the home she demanded.

Nguyen then added more than 500 photos to the child’s Facebook account. In the account, Nguyen referred toTran as her husband. She restored the account settings to public in late December 2018.

In January 2019, Nguyen sent an email directly to Tran’s wife, informing her of Tran’s relationship with Nguyen and providing a link to the child’s Facebook page.

The FAC alleges Nguyen is liable for civil extortion because she obtained property or other consideration fromhim, with his consent, induced by a wrongful use of force or fear and that the fear was induced by a threat toexpose, or impute to, [him] disgrace or to expose a secret affecting him.

Tran also alleged Nguyen was liable for intentional infliction of emotional distress in the form of repeatedly extorting him by threatening to disclose to Mrs. Tran the previous relations he had with Defendant Nguyen and the secret existence of the Child.”

He alleged Nguyen’s conduct was outrageous because, among other reasons, it is civil extortion.

Nguyen demurred, arguing California law does not recognize a cause of action for civil extortion under these circumstances.

She claimed the intentional infliction of emotional distress cause of action fails because (1) Tran has not adequately alleged outrageous conduct, and (2) it violates Civil Code section 43.5, California’s “anti-heart-balm” statute.

Following the court’s order sustaining Nguyen’s demurrer without leave to amend to both causes of action alleged on behalf of Tran, the court entered a judgment against Tran.

Tran argued the court erred in concluding a cause of action for civil extortion can be stated only in cases involving the wrongful threat of criminal or civil prosecution. He relied on a variety of authorities, both common law and statutory, to support his argument.

This approach confuses the issue because a statutory right and a common law right that is developed independently of that statute, exist separate and apart from each other.

Nonetheless, when it separated these two potential sources of a cause of action, the appellate court concluded the statutory right to rescind consent based on “menace,” which is grounded in Civil Code sections 1566, 1567 and 1570, is analogous to the crime of

extortion—and is applicable in the circumstances alleged here.

Extortion is the obtaining of property or other consideration from another, with his or her consent induced by a wrongful use of force or fear.

Fear, such as will constitute extortion, may be induced by a threat of any of the following: 1. To do an unlawfulinjury to the person or property of the individual threatened or of a third person; 2. To accuse the individualthreatened of a crime, 3. To expose, or to impute to him a deformity, disgrace, or crime, 4. To expose a secret affecting him, her, or them, 5. To report his, her, or their immigration status or suspected immigration status.

The concept of coerced consent is at the heart of extortion.

To constitute extortion the victim must consent, albeit it is a coerced and unwilling consent, to surrender of his property.

When extortion is based on the fear of a criminal accusation or a threatened exposure of a deformity, disgrace or secret, there is no requirement that the victim be innocent of the crime or free of the deformity, disgrace or secret; the misconduct is founded in the use of fear to obtain the victim’s money or property without the victim’s free consent.

Threats to do the acts that constitute extortion under Penal Code section 519 are extortionate whether or not the victim committed the crime or indiscretion upon which the threat is based and whether or not the person making the threat could have reported the victim to the authorities or arrested the victim.

Even it a defendant had the right to arrest the victim, he was not at liberty to threaten to arrest her for the purpose of extorting money or property from her.

The crime of extortion focuses on coerced consent as a means of obtaining the victim’s agreement to the transfer of property.

Likewise, Civil Code section 1566 provides a civil remedy when a person’s consent to a transaction is obtained through wrongful means: A consent which is not free is nevertheless not absolutely void, but may be rescinded by the parties, in the manner prescribed by the Chapter on Rescission.

Civil Code section 1567 expands the analysis: An apparent consent is not real or free

when obtained through: 1. Duress; 2. Menace; 3. Fraud; 4. Undue influence; or 5. Mistake.

Civil Code section 1569 defines "duress” as the confinement of a party or family member;

Civil Code section 1570 defines “[m]enace” as the threat of duress, of unlawful and violent injury a person or property, or of injury to the character of a person.

These statutes provide a remedy of rescission in cases where a party’s consent to a transaction was obtained through threats of injury to a person’s character.

Thus, the appellate concluded that a cause of action for rescission based on menace is the civil statutory counterpart to a criminal extortion claim.

Although the categories of threats that could qualify as “menace”—i.e., threats of confinement, of physical violence or of harm to character—are relatively narrow, this case

satisfies the statutory requirement because the threat of exposure alleged (that Tran had fathered a child with Nguyen while married to his wife), constituted threatened harm to his character.

Nguyen also argued Tran’s attempt to recover the payments he made to her violates “the policy behind the anti-heart-balm statue.” That statute, Civil Code section

43.5 (section 43.5), precludes causes of action based on acts of sexual seduction; specifically, slienation ofaffection, criminal conversation (the tort of seducing a wife), seduction of a person over the age of legal consent, or breach of promise of marriage.

Tran’s claim for recovery of the payments he made to Nguyen is none of those. His claim for rescission isbased on Nguyen’s wrongful use of menace as a means of coercing him into paying her money he would nototherwise have agreed to pay. That is a different theory of recovery than any of the claims prohibited bysection 43.5.

Such a cause of action for rescission, which entitles a party to seek rescission of the consent underlying atransaction, sounds in contract rather than tort. Thus, it does not support recovery of emotional distressdamages.

Rescission is a contractual remedy which allows for the recovery of consequential damages, but not damagesfor emotional distress.

This limitation on the scope of recovery is consistent with the rule that the victim of a crime, including the crime of extortion, would be entitled to an award of restitution based solely on “economic loss.

The judgment was reversed, and the case is remanded to the trial court with instructions to allow Tran leave to amend his cause of action for civil extortion based on Civil Code sections 1566, 1567, and 1570.

LESSONS:

1.         Extortion is the obtaining of property or other consideration from another, with his or her consent induced by a wrongful use of force or fear.

2.   To constitute extortion the victim must consent, albeit it is a coerced and unwilling consent, to surrender of his property.

3.         When extortion is based on the fear of a criminal accusation or a threatened exposure of a deformity, disgrace or secret, there is no requirement that the victim be innocent of the crime or free of the deformity, disgrace or secret; the misconduct is founded in the use of fear to obtain the victim’s money or property without the victim’s free consent.

4.         Threats to do the acts that constitute extortion under Penal Code section 519 are extortionate whether or not the victim committed the crime or indiscretion upon which the threat is based and whether or not the person making the threat could have reported the victim to the authorities or arrested the victim.