Russo v. Miller
559 A.2d 354 (1989)
Rule of Law:
A contract is voidable for undue influence if a party's assent is induced by unfair persuasion from a person who dominates them or with whom they share a relationship of trust. Undue influence exerted by a third party, such as an undisclosed agent, can be attributed to a party to the contract.
Facts:
- Sandra Russo, who has a long history of psychiatric illness including multiple hospitalizations for depression and suicide attempts, owned a 12-acre property.
- Shortly after being discharged from a psychiatric hospital in October 1985, Russo was visited by her neighbor, Mariis Goldschmidt, who was aware of Russo's problems and expressed a desperate need to purchase land.
- Russo agreed to sell Goldschmidt 2.5 acres for $5,000.
- Goldschmidt's husband worked with James Miller, a real estate investor who had offered finder's fees for property leads.
- Goldschmidt then persuaded Russo to sell her remaining land to the Millers (James and Daniel Miller, as Jaydan Associates), telling Russo the land was worth about $25,000 to $30,000.
- On November 7, 1985, the same day she met the Millers, Russo signed a contract to sell them her remaining land for $25,000 without consulting an attorney, broker, or appraiser.
- After the sale closed, the Millers paid the Goldschmidts a $500 finder's fee.
- Approximately six weeks later, the Millers purchased the 2.5-acre parcel back from the Goldschmidts for $20,000, and within eight months, sold two acres of that parcel for $84,000.
Procedural Posture:
- Sandra Russo (seller) sued James Miller, Daniel Miller, and Jaydan Associates (buyers) in Superior Court, seeking to rescind the real estate conveyance on grounds of undue influence.
- The buyers filed a separate forcible entry and detainer action in District Court to evict Russo from the property.
- The buyers' eviction action was removed to the Superior Court and consolidated with Russo's undue influence lawsuit for a single bench trial.
- The Superior Court found for Russo, setting aside the conveyance due to undue influence, and remanded the eviction action for entry of judgment in Russo's favor.
- The buyers appealed the Superior Court's judgment to this court.
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Issue:
Does undue influence, sufficient to void a real estate contract, exist when a seller with a known history of psychiatric illness is unfairly persuaded by third parties, who are undisclosed agents of the buyers, to sell her property for a significantly low price without independent legal advice?
Opinions:
Majority - Wathen, J.
Yes. A contract for the sale of land is voidable for undue influence where the seller, due to mental infirmity, was susceptible to unfair persuasion by third parties acting as undisclosed agents for the buyers, resulting in a sale at a grossly inadequate price without the benefit of independent advice. The court formally adopts the definition of undue influence from the Restatement (Second) of Contracts § 177, which defines it as 'unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relation between them is justified in assuming that that person will not act in a manner inconsistent with his welfare.' The court found that the Goldschmidts acted as undisclosed agents for the buyers, meaning their influence was attributable to the buyers. The court then analyzed the totality of the circumstances and found sufficient evidence of undue influence by considering: 1) the unfairness of the sale price; 2) the seller's lack of independent legal advice; and 3) the seller's heightened susceptibility due to her documented mental infirmity. While none of these factors are determinative alone, together they demonstrated that the sale was produced by means that 'seriously impaired the free and competent exercise of judgment.'
Analysis:
This case is significant for formally adopting the Restatement (Second) of Contracts § 177 definition of undue influence in Maine, extending the doctrine beyond its traditional application in will contests to commercial contracts. It clarifies that influence exerted by a third party can be imputed to a contracting party, particularly under an agency theory, even if the contracting party's direct involvement is minimal. The decision reinforces a holistic, totality-of-the-circumstances approach, emphasizing that a combination of factors—a susceptible party, lack of independent advice, and a grossly unfair outcome—can collectively prove undue influence even without a classic confidential relationship between the direct parties.
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