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Court Decides Case Involving Promissory Estoppel

NY Slip Op 05266

The petitioner brought this case to enforce an oral agreement that would be void because of the statute of frauds. The petitioner’s grounds for this action are unconscionability of the statute of frauds. The court agrees that when promissory estoppel is satisfied it would be unconscionable and egregious to rely on the statute of frauds. Nonetheless, the court concludes that the petitioner can’t rely on this doctrine because the application of the statute of frauds would inflict injury on the petitioner and would be unfair. The court felt that while it would be unfair, it was not unconscionable.

The decedent owned an apartment building. His grandsons contend that before 2006, the had helped their grandfather with maintenance and snow removal on the property. Later, the grandfather asked the petitioners about taking over management duties of the property.

The property had a mortgage. Five years prior the decedent had obtained a $100,000 loan secured by the mortgage. The decedent used that money as gifts to family members. The family members pooled their money and created a golf course business. Four shareholders (not the grandsons), backed out of the deal. The two grandsons became the sole owners. The petitioners said that they didn’t want to take ownership of the property because it was subject to a mortgage.

The decedent said in response that he would have his estate satisfy the balance of the mortgage. The document the oral agreement they met with an estate lawyer. The lawyer transferred the property to the petitioners for $1.00. The decedent also executed a will.

From that time on, the petitioner assumed all of the responsibilities related to the property. Several years later the decedent made a new will but didn’t mention the property in the document.

The decedent died, and his wife was named an executor of the estate. The petitioners commenced this proceeding pursuant to SCPA 1809, claiming breach of contract, breach of warranty, promissory estoppel and unjust enrichment. Both parties later moved for summary judgment.

Petitioner submitted testimony from the lawyer that created the first will. His understanding was that the petitioners were to receive the property free of the mortgage.

In a cross-motion, the respondent submitted records that the mortgage balance had indeed been reduced (they had been paying it down).

The surrogate court granted the petitioners summary judgment and held that in this case, promissory estoppel clearly applied (Matter of Hennell 40 Misc 3d 547, 558). On appeal, the case was affirmed.

The respondent appealed and this court reverses.

The law requires that every agreement is in writing. This would bar the petitioner’s reliance on the statute of frauds, therefore they were obliged to bring it under an exception.

The petitioners attempted to rely on promissory estoppel. The respondent agreed that if the petitioners can establish the elements of promissory estoppel that there would otherwise be an injury. The court adopts this reasoning.

The Second Restatement of Contracts endorses the principle that a promise inducing reasonable reliance is enforceable (Restatement of Contracts 139 [1].

The court also concluded that the related doctrine of equitable estoppel and part performance may preclude the application of the statute of frauds (Am Bartenders School v 105 Madison Co 59 NY2d 716, 718 [1983], Wooley v Stewart 222 NY 347, 350-351 [1918].

The court stated that the doctrine is grounded in the principle of fairness.

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