Wednesday, July 5, 2017

PROMISSORY ESTOPPEL AND THE STATUTE OF FRAUDS


Matter of Hennel 2017 NY Slip Op 05266 Decided on June 29, 2017 Court of Appeals Fahey, J. :

"Petitioners concede that the statute of frauds would generally bar reliance on their oral bargain with decedent. As the Appellate Division acknowledged, wills are ambulatory in nature, and decedent was free to revoke or alter his 2006 will until his death (see Matter of American Comm. for Weizmann Inst. of Science v Dunn, 10 NY3d 82, 92 [2008]). Petitioners do not allege that decedent promised never to revoke or alter his 2006 will. In any event, Estates, Powers and Trusts Law § 13-2.1 (a) (2) requires every agreement or promise to make a "testamentary provision of any kind" to be in writing. General Obligations Law § 5-701 (a) (1) further requires any agreement or promise that "[b]y its terms is not to be performed within one year from the making thereof or the performance of which is not to be completed before the end of a lifetime" to be in writing. The Appellate Division therefore correctly held that "petitioners were obliged to bring this case within an exception to the statute of frauds" (Hennel, 133 AD3d at 1122).

Petitioners attempted to do so by relying on the doctrine of promissory estoppel. Although respondent agrees that the statute of frauds will not apply if petitioners can establish the elements of promissory estoppel and that they would otherwise suffer unconscionable injury, [*5]this Court has not yet expressly recognized this principle. We adopt it now, for several reasons.

The Restatement (Second) of Contracts endorses the principle that a promise inducing reasonable reliance "is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise" (Restatement [Second] of Contracts § 139 [1]; see also 10 Richard A. Lord, Williston on Contracts §§ 27:14-27:15, at 185-206 [4th ed 2011]; 4 Corbin on Contracts § 12:8, at 38-44 [1997]). This Court has previously cited section 139 of the Restatement with approval (see Farash v Sykes Datatronics, 59 NY2d 500, 504-505 [1983]).

This Court has also recognized that the related doctrines of equitable estoppel and part performance may preclude application of the statute of frauds under certain circumstances (see e.g. American Bartenders School v 105 Madison Co., 59 NY2d 716, 718 [1983], affg 91 AD2d 901 [1st Dept 1983]; Anostario v Vicinanzo, 59 NY2d 662, 663-664 [1983]; Woolley v Stewart, 222 NY 347, 350-351 [1918]; cf. Messner Vetere Berger McNamee Schmetterer Euro RSCG v Aegis Group, 93 NY2d 229, 234 n 1 [1999])[FN2]. Furthermore, the Appellate Division departments have unanimously recognized that promissory estoppel may preclude enforcement of the statute of frauds if application of the statute would result in unconscionability (see e.g. Carvel Corp. v Nicolini, 144 AD2d 611, 612-613 [2d Dept 1988]; Bernard v Langan Porsche Audi, 143 AD2d 495, 496 [3d Dept 1988]; American Bartenders School, 91 AD2d at 902; Buddman Distribs. v Labatt Importers, 91 AD2d 838, 839 [4th Dept 1982]; Swerdloff v Mobil Oil Corp., 74 AD2d 258, 261-264 [2d Dept 1980], lv denied 50 NY2d 803, 913 [1980]).

Finally, this equitable doctrine is grounded in sound principles of fairness. As this Court has stated in a different context,

"The Statute of Frauds was designed to guard against the peril of perjury; to prevent the enforcement of unfounded fraudulent claims. But, as Professor Williston observed: 'The Statute of Frauds was not enacted to afford persons a means of evading just obligations; nor was it intended to supply a cloak of immunity to hedging litigants lacking integrity; nor was it adopted to enable defendants to interpose the Statute as a bar to a contract fairly, and admittedly, made'" (Morris Cohon & Co. v Russell, 23 NY2d 569, 574 [1969], quoting 4 Williston on Contracts § 567A, at 19-20 [3d ed 1961]).

In other words, equity "will not permit the statute of frauds to be used as an instrument of fraud" (Wood v Rabe, 96 NY 414, 425 [1884]).

We hold that where the elements of promissory estoppel are established, and the injury to the party who acted in reliance on the oral promise is so great that enforcement of the [*6]statute of frauds would be unconscionable, the promisor should be estopped from reliance on the statute of frauds.[FN3]"

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