The statute of frauds is a legal doctrine that requires that certain types of contracts be reduced to a writing in order to be enforceable. While the statute of frauds varies from one jurisdiction to another, in general it requires that the following types of contracts must be in writing and signed by the party against whom the contract is asserted in order to be enforceable: contracts which cannot be performed in one year, contracts involving real property, contracts involving a promise by the executor of a will to pay debts of an estate out-of-pocket, contracts for the sale of goods above a certain minimum value, and contracts wherein a party guarantees the debt of obligation of another party.
A statute of frauds defense is an affirmative defense and will be waived if not asserted in a timely fashion. In some cases a contract that would otherwise be void for meeting one of the above criteria will be held enforceable. If a party takes action in reliance on the contract, part performance can take the contract out of the statute of frauds and render it enforceable. If a party relies to his detriment on a promise that would ordinarily be void under the statute of frauds, a showing of promissory estoppel can render the contract enforceable.
The following are some cases and articles that include issues related to the statute of frauds.
In Big G Corp. v. Henry, in the original trial court action which gave rise to the appeal, the plaintiff had made the argument that the admission of certain testimony offered by the defendant violated both the parol evidence rule and the Statute of Frauds. Defendants had premised their waiver claim on a promissory estoppel argument. The court decided to admit the evidence and issued a special instruction to the jury to determine whether or not the parties had made an oral agreement such that the plaintiff would receive the title to the property in satisfaction of the debts of the defendant. The jury returned a verdict and decided that the side deal had in fact taken place and gave the verdict in favor of the defendant.
Boone v. Coe was a case in which a party tried to sue the other for damages because that party would not complete a real estate transaction. The contract fell within the statute of frauds and the court held that the plaintiff had not rendered part performance and had not relied on the promise to his detriment. The contract was therefore invalid.
In Borchardt v. Kulick the defendant contended that the oral contract fell under the scope of authority of the statute of frauds and that the trial court below was incorrect in failing to grant her a directed verdict. However, the defendant had not made any objection to the introduction of evidence of an oral contract at commencement of the trial and in fact there had been no mention of the statute of frauds. The defendant also had not made any motion to dismiss or for a directed verdict until after the plaintiff had rested its case.
In Chomicky v. Buttolph, the court was faced with the decision of whether an admission to the existence of an oral contract for the sale of certain real property can remove the contract from the Statute of Frauds. The court held that it could not. The party can admit making the oral promise and still be able to raise the defense that the contract is void under the statute of frauds. The court held that only part performance could remove it and mere preparation for purchase was not sufficient.
Another employment contract that involved an issue related to the statute of frauds was Crabtree v. Elizabeth Arden Sales Corporation. In that case the plaintiff was hired for a two year period but the agreement was never placed into a single writing. There were however several documents which, if taken together, would have met all of the requirements of a contract. The issue was whether or not the agreement had to be embodied in a single document or could be pieced together from several.
The court held that he court held that the writings combined contained all of the essential terms of the contract - the parties to it, the position that P was to assume, and the salary that he was to receive - except a term relating to the duration of P’s employment. The contract was held to be enforceable.
In Davis v. Meyer, the court articulated the rule that an oral sales contract that is not placed in writing and where none of the price has been paid is invalid unless the buyer accepts and receives part of the object being sold. It is not sufficient for the seller merely to deliver the object. There must be receipt and voluntary and unconditional acceptance by the buyer. If there is a contract for the sale of goods, and the object hasn’t been paid for, and the object hasn’t been received by the buyer, the contract is void.
DF Activities Corp. v. Brown was a case that related to the requirement that contracts for the sale of goods above a certain value be placed in writing. In that case the parties made an oral agreement to purchase a chair for $60,000. The seller denied making the promise. The court held that if the defendant denies making the oral promise, the plaintiff cannot pursue the case on the hope that evidence of the oral contract will arise during discovery.
In Easton v. Wycoff, the court held that the doctrine of estoppel which relates to a misrepresentation made regarding a past or present fact might be invoked in that case to preclude the respondent from asserting his lack of title to the property if the elements of estoppel were shown. For this case however the court noted that it could view the respondent as the owner in fact of the property and therefore had to deal with the more complex issue of whether the appellant was legally entitled to enforce or sue upon the contract.
In Johnson v. Lewis, the court held that an easement is a liberty, privilege, or advantage which a party may have in the real property of another without profit and it must be under a deed or via prescription. The court held that although the grant of an easement is ordinarily subject to the statute of frauds and must be in writing, a parol grant that has been executed will be upheld just as a parol contract for the sale of lands would be. The court did not agree that the plaintiffs' complaint sufficiently defined such a right of way as would eventually ripen into a vested right.
Ludke Elec. Co. v. Vicksburg Towing Co. involved a suit filed by the Ludke Electric Company in the County Court of Warren County against the Vicksburg Towing Company. The plaintiff sought $1,421.35 alleged to be due it because of an order placed by the Vicksburg Towing Company for certain parts of a pneumatic propulsion control. The court heard the issue joined on the statute of frauds and entered judgment for the defendant towing company.
A case that involved the statute of frauds in the context of an employment contract was McIntosh v. Murphy. In that case the defendant made an oral promise to hire the plaintiff for a year to work in his car dealership in Hawaii. The plaintiff sued when he was fired two months later. In that case the court held that an oral promise is enforceable if the promissor should reasonably expect it to induce either action or forbearance by the other party. If the party to whom the promise was made took steps in relying on that promise, the promise was removed from the statute of frauds.
In Miller v. Lawlor, the court stated that the question in cases involving the statute of frauds is not which party will suffer the greater detriment if the other party wins. The rule for promissory estoppel is that it arises when an innocent promisee relies to his disadvantage on a promise that was intended or reasonably calculated to induce action by him.
When such cases arise, equity is first concerned with the innocent promisee if the promissor were to be allowed protection under the statute of frauds. The court held that in this case the record showed that the plaintiffs bought the Vander Wal home on the strength of the defendant's promise as to how he would build. If the defendant were to build as he threatened later, a real value would be subtracted from plaintiff's premises. The court held that in light of this the plaintiff won.
Mossman v. Hawaiian Trust Co. involved a case in which in a suit seeking specific performance brought by a husband and wife alleging a gift or real property by decedent to them, the defendant executor pleaded the Statute of Frauds. The issue for the court to resolve in that case was whether there was any written memorandum in writing. The defendant elicited testimony from the husband that the alleged donor wrote a letter to his wife which could not be found but which may have been a memorandum sufficient to satisfy the Statute of Frauds.
In Piedmont Life Ins. Co. v. Bell, the defendant filed his answer together with both general and special demurrers. The substance of the demurrers was that the petition did not state a cause of action upon which relief could be granted. The defendant contended that the contract as alleged was required to be in writing under the statute of frauds and was therefore void. The defendant also alleged that the action was barred by the statute of limitations or that regarding any breaches occurring four years or more before the plaintiff filed his complaint, any claims filed with respect to those breaches would also be barred by the statute of limitations.
One case that demonstrated the meaning of “within one year” in terms of contracts that exceed one year being held unenforceable was Professional Bull Riders, Inc. v. AutoZone, Inc. In that case one party promised to sponsor another for two years, but the agreement also contained a clause that allowed the party to withdraw from the contract at any time. The court held that since the party could withdraw at any time the contract could be performed within one year and it was therefore enforceable.
In Radke v. Brenon, the court specified precisely what must be included in a writing in order for it to not fall under the statute of frauds. The court held that a writing for the sale of land must contain at least an express statement of consideration, a description of the land to be conveyed, which must be signed by the party to be bound, and the identities of the parties to the contract. In that case the court held that all of these elements were clearly present in the letter written by the defendant and the court ruled in favor of the plaintiff that the contract was valid.
Sullivan v. Porter was an example of the statute of frauds at work in a real estate transaction. In this case the plaintiff had moved onto the land and made improvements on it after the defendant assured him that he would prepare the paperwork to complete the transaction. The court held that this contract was valid. The defendant’s actions induced part performance by the plaintiff and the plaintiff won.
In Winternitz v. Summit Hills Joint Venture, the issue was whether a contract affecting third parties who were not parties to the contract would be enforceable. In that case the court held that contracts that affect third parties are not within the statute of frauds and can be enforced insofar as it affects such parties.
Showing posts with label promissory estoppel. Show all posts
Showing posts with label promissory estoppel. Show all posts
Wednesday, November 12, 2008
Saturday, November 1, 2008
Promissory Estoppel
Promissory estoppel is an important doctrine in contract law in which a non contractual promise lacking consideration rendered enforceable to avoid an injustice. Promissory estoppel arises when injustice can be avoided only by means of the enforcement of a promise that would otherwise be unenforceable for lack of consideration. It is usually applied in cases in which a party has relied on another party’s promise, and that party’s nonbinding promise will be enforced because to do otherwise would be unfair. Promissory estoppel is commonly used in the context of charitable donations. In some jurisdictions the charity must have reliance on the promise but in others reliance is not necessary.
The concept of quasi contract is somewhat similar in that such contracts have the same effect of enforcing a promise in order to avoid an unjust result, however in such cases there had been no promise in the first place.
One case in which the court applied the doctrine to render a contract otherwise lacking in consideration enforceable was McIntosh v. Murphy. That case involved a verbal agreement to hire the plaintiff at the defendant’s auto dealership in Hawaii for one year. After moving all the way to Hawaii he was fired two month later. The court found in favor of the plaintiff because he had relied on the promise of the defendant and had rendered part performance.
In Miller v. Lawlor, the court concluded that it was not necessary to determine the relative applicability of the doctrines of part performance versus estoppel because it was not necessary to distinguish them. The court in that case noted that other courts had recognized that promissory estoppel had become recognized as another form of consideration or consideration substitute. The court ultimately held that the language in the contract was sufficient to support a finding that the contract was enforceable via application of the doctrine of promissory estoppel.
In Peoples Nat. Bank of Little Rock v. Linebarger Const. Co., the court applied the doctrine of promissory estoppel in determining the amount the plaintiff bank would recover from Linebarger. In that case there had been special circumstances that had indicated a particular purpose in using the money, and the court stated that if not for those circumstances the court might have awarded the plaintiff the entire amount of the representation. In that case the money was used for the payroll and the bank was not free to let Cart use it for other purposes.
In the case of Salsbury v. Northwestern Bell Telephone Co. the court justified the application of the doctrine of promissory estoppel as a matter of public policy. In that case the court held that for charitable contributions no showing of consideration or detrimental reliance was necessary. The court in this case followed the rule as stated in the Restatement (2d) of Contracts § 90. In that case Northwestern Bell had promised to give Charles City College $15,000 and the court compelled it to pay even though there had been no detrimental reliance.
The concept of quasi contract is somewhat similar in that such contracts have the same effect of enforcing a promise in order to avoid an unjust result, however in such cases there had been no promise in the first place.
One case in which the court applied the doctrine to render a contract otherwise lacking in consideration enforceable was McIntosh v. Murphy. That case involved a verbal agreement to hire the plaintiff at the defendant’s auto dealership in Hawaii for one year. After moving all the way to Hawaii he was fired two month later. The court found in favor of the plaintiff because he had relied on the promise of the defendant and had rendered part performance.
In Miller v. Lawlor, the court concluded that it was not necessary to determine the relative applicability of the doctrines of part performance versus estoppel because it was not necessary to distinguish them. The court in that case noted that other courts had recognized that promissory estoppel had become recognized as another form of consideration or consideration substitute. The court ultimately held that the language in the contract was sufficient to support a finding that the contract was enforceable via application of the doctrine of promissory estoppel.
In Peoples Nat. Bank of Little Rock v. Linebarger Const. Co., the court applied the doctrine of promissory estoppel in determining the amount the plaintiff bank would recover from Linebarger. In that case there had been special circumstances that had indicated a particular purpose in using the money, and the court stated that if not for those circumstances the court might have awarded the plaintiff the entire amount of the representation. In that case the money was used for the payroll and the bank was not free to let Cart use it for other purposes.
In the case of Salsbury v. Northwestern Bell Telephone Co. the court justified the application of the doctrine of promissory estoppel as a matter of public policy. In that case the court held that for charitable contributions no showing of consideration or detrimental reliance was necessary. The court in this case followed the rule as stated in the Restatement (2d) of Contracts § 90. In that case Northwestern Bell had promised to give Charles City College $15,000 and the court compelled it to pay even though there had been no detrimental reliance.
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Friday, October 31, 2008
Miller v. Lawlor
Miller v. Lawlor, 245 Iowa 1144, 66 N.W.2d 267 (Iowa 1954).
Plaintiffs are husband and wife. We shall, for convenience, refer to J. R. Miller as 'plaintiff' since Mrs. Miller does not seem to have taken active part in the transaction or trial. They bought their present home in Cherokee, Iowa, from one Vander Wal in the spring of 1952. It is on a sightly eminence with what is described as a 'terrific' nine mile view to the south and west across vacant property owned by defendant and to hills and woods beyond.
The part of defendant's premises immediately adjoining plaintiffs' on the south is a rectangular area referred to as the 'panhandle,' 101 1/2 feet north and south and 175 feet deep. The properties of both parties face east on South Eleventh Street.
Defendant owns a much larger additional tract extending south from the panhandle 257 feet, and west from the street 533 feet. The panhandle slopes downward gently from northeast to southwest. At about its south line the ground drops quite abruptly to the south in a 30 degree incline for 100 to 150 feet, then levels off for a distance and finally descends to the bottom of a ravine.
Plaintiff claims that before he purchased from Vander Wal, and in contemplation of such purchase, he obtained oral assurance from defendant that the latter would not build so as to obstruct the view from the house and he bought in reliance thereon. 'I said to Dr. Lawlor that I supposed he had heard I had been dickering on the Vander Wal house. He said 'I hope you purchase the house. We would like to have you as neighbors.' I told him that under no circumstances would I make a bid upon that house if his building plans were in any way to spoil the view to the south and southwest of this home. I told him Mr. Vander Wal had told me that he had an agreement with Dr. Lawlor (defendant) as to the location of his (defendant's) house and that I was over there to hear from him as to whether or not he confirmed that agreement I told him that Vander Wal had told me that Dr. Lawlor had agreed that he was building a hillside type of house down at the crest of the hill, and that it would not obstruct any view to the southwest; that the house would be low enough so that we could see over it.'
'Dr. Lawlor said, 'that's about right,' and he left the room and came back with two sheets of paper with some drawings upon it. He explained the diagrams to me that his house would be nine feet high would stand approximately seventy feet west of the east lot line. 'There is a rock pile down on the crest of the hill;' that that rock pile would be approximately the northwest corner of his house.'
Plaintiff testifies defendant said Vander Wal and he sighted from the living area of the proposed Vander Wal house 'as to what this would obscure, and that about all it would obscure is the farm buildings down in the valley.' I then said to him, 'If I purchase this house will you agree that you will not build your house north or west of that location?' and he said 'Certainly.'
Plaintiff further testifies defendant said 'according to his building plans, the north side of his house would be eighty feet south of his north lot line, and that the house would extend from the east lot line approximately seventy feet.' Plaintiff later verified the distances. He says 'The rock pile was slightly over eighty feet, measured from the fence, which I later learned was about three to four feet south of the true lot line, and approximately seventy-five feet west of the east lot line.'
Plaintiff also says he relied on defendant's statement and purchased the premises and would not have purchased without that assurance.
Defendant, while admitting there was a conversation at the time and place referred to, denies he made a statement that he would not build 'closer than eighty feet from his lot line' or 'further west than a point seventy feet from my east lot line.' 'The first time I ever heard these dimensions and measurements was when I was served (May 7, 1953) with the petition in the first lawsuit.' (This refers to a suit commenced by plaintiffs but dismissed several days before commencement of the present suit.)
Defendant's wife testifies she was present at the conversation. She is equally limited in her denial: 'During that conversation no mention was ever made of a measurement of 80 feet from the north lot line. No mention at all was made by either party of a measurement of distance of seventy feet west from my husband's east lot line.'
Neither denies any other part of plaintiff J. R. Miller's testimony. Neither denies the testimony with reference to what defendant was said to have told Vander Wal, nor the reference by him in conversation with both plaintiff and Vander Wal, to the rock pile as the northwest corner of his proposed home and the proposed height of nine feet of the house at that point. Nor is there any denial that plaintiff in effect secured from defendant a definite agreement with full realization plaintiffs were contemplating purchase of the Vander Wal premises on the strength of such agreement.
Mr. Vander Wal acquired the present Miller premises in August or September, 1951. He almost immediately thereafter commenced building the house now owned and occupied by plaintiffs. He describes it as 'designed for this particular lot so that the housewife would have access to the view no matter what part of the house she was in, with the exception of the bedroom and bathroom. The house was tailored to the lot. A type of construction known as contemporary. It was also designed so that the sun rays in winter time when the sun was low would reflect on this window wall to make use of the solar heating system. There is about twenty-eight feet of window wall on the south side of the house. There is no frames or anything.'
He testifies to a conversation with defendant in the early part of September, 1951, 'the first day of construction work. We were just staking out this particular lot and setting up chalk lines where the digging of footings was to be at that time.' The witness on that occasion first learned defendant owned the land to the south. They examined the Vander Wal plans and the witness says defendant also spoke of his own plans to build 'a hillside home of tri-level nature. He pointed out a rock pile' that 'would be the approximate west end of the home.' They viewed the site where defendant's home might be and concluded it would not obstruct the view from the upper premises.
It was stipulated at the close of Vander Wal's testimony that one Ferguson, his building superintendent or construction supervisor, would if present confirm his testimony as to a conversation between Ferguson and defendant in which the latter said his plans 'were of hillside nature' and in which the rock pile was referred to 'as the beginning of the north portion of his house and also that it would not be extended further west than the rock pile.'
There is a definite claim by Vander Wal that he obtained assurance at that time from defendant on the strength of which he (Vander Wal) went ahead with the construction. He also testifies to later conversations with defendant along the same line. At their first conference, he says, they discussed 'sharing the sewer and water,' and they later entered into a written 'Sewer and Water Agreement,' signed and acknowledged before plaintiff's brother and law partner as notary public. That was a month or more before plaintiffs became interested in buying the premises.
We do not go into greater detail of the transactions between Vander Wal and defendant as plaintiffs do not seem to have relied on any agreement between those two. The matter is material however as introductory to and explanatory of what plaintiff testifies he said to defendant about it at their conference already mentioned, when the oral agreement between plaintiff and defendant is claimed to have been made. It also tends to corroborate plaintiff's testimony that definite assurance was later given him by defendant.
Plaintiffs pray that defendant be enjoined from erecting any structure on his premises closer than 80 feet from his (defendant's) north lot line or extending more than 70 feet west of his east lot line or at a height greater than nine feet above natural ground level at a point 80 feet south of said north lot line and 70 feet west of said east line.
Throughout the trial defendant carefully protected his record by appropriate and careful objections to evidence, urging the statute of frauds and other objections. He also guarded against any possible waiver by careless cross-examination or by introduction of unnecessary evidence. We have no technical problem on that score. We have the clear question as to the sufficiency of the pertinent evidence to show a contract within the exception to the statute of frauds or to establish an equitable estoppel against the ban of the statute. Testimony for that purpose was admissible.
The trial court granted injunction practically as prayed, same to 'run with and be binding upon defendant's real estate for the benefit of plaintiffs' real estate and binding upon defendant, his heirs, assigns and any subsequent owners of defendant's real estate,' but to terminate 'whenever plaintiffs, or their successors permanently terminate the use of the view.'
The decree allowed defendant a 10% tolerance or leeway on specified distances and height, and protected his right to take advantage of a written waived tendered by plaintiffs which in effect waived objection to the erection of any 'garage or residential structure:' (1) Upon the east 40 feet of defendant's premises, regardless of the height thereof; or (2) The extreme north wall of which is 60 feet or more south of defendant's north line and which does not extend more than 100 feet west of defendant's east line and the height elevation of which is six inches lower than the present floor level of plaintiffs' home; or (3) The extreme north wall of which is 60 feet or more south of defendant's north line and regardless of how far west it extends from defendant's east line, providing the portion that is more than 100 feet west of said east line does not exceed a height elevation of six feet below the present floor level of plaintiffs' home.
Defendant has appealed.
I. The trial court's decision is based upon seemingly alternative theories. After a rather thorough discussion of the theory of a contract within the exception to the Statute of Frauds because of claimed 'part performance' the court says: 'In any event, whether or not plaintiff has brought himself within the recognized exception to the statute of frauds, the doctrine of equitable estoppel entitles him to complete relief.' We deem the difference between the two doctrines more apparent than real.
We quote the pertinent part of the statutes from Iowa Code Statute of Frauds. Except when otherwise specially provided, no evidence of the following enumerated contracts is competent, unless it be in writing and signed by the party charged or by his authorized agent.
'3. Those for the creation or transfer of any interest in lands.’
Section 622.33: 'Exception: The provisions of subsection 3 of section 622.32 do not apply where the purchase money has been received by the vendor, or when the vendee, with the actual or implied consent of the vendor, has taken and held possession of premises under and by virtue of the contract, or when there is any other circumstance which, by the law heretofore in force, would have taken the case out of the statute of frauds.'
It will be observed our statute, unlike its English forerunner, does not forbid oral contracts or render them invalid. It relates merely to the manner of proof. See Berryhill v. Jones and McMinimee v. McMinimee.
A consideration of the language of these sections as applied to the Record here explains what defendant in argument calls the trial court's lack of faith in the doctrine of part performance. It is particularly difficult to speak in terms of the 'creation or transfer of any interest in lands,' 'purchase money,' 'vendor,' 'vendee,' and 'possession of the premises' under the facts shown. Plaintiffs and defendant were not in the ordinary sense vendees and vendor. There was no 'purchase money' to be received by defendant nor any taking of 'possession of the premises' by plaintiffs. As defendant in argument says 'It is a very strained interpretation' to consider defendant here as a vendor.
Of course the claimed agreement was designed to create an interest in land within the purview of the statute. It contemplated the creation of a restrictive or negative easement over defendant's premises in favor of the adjoining premises. That would surely be an 'interest.' Oral evidence of it was inadmissible unless under the statutory exception or unless defendant was estopped to claim the benefit of the statute. Plaintiffs do not claim the contrary.
The acts described in Code section 622.33 as creating the exception, i.e., payment of 'purchase money' and taking 'possession of the premises', are usually spoken of as 'part performance;' but speaking literally and technically there was here no 'part performance.' As said Fairall v. Arnold, 'The term 'part performance' is a misnomer and inaccurate, in that many matters designated as such are not in fact the performance or part performance of the contract, itself, but are those done pursuant to or in reliance upon the contract.'
The apparent difficulty might perhaps be met as the analogous situation has always been met by the law of contracts, in cases where the promisor derives no benefit but the promisee suffers a detriment. Consideration has always been held to exist in such cases. See citations in West's Iowa Digest, Contracts, Key No. 52. But 'consideration' is a broader term than 'part performance' and here the statute specifies particular acts of part performance not technically descriptive of those shown in the instant case.
The New York Court of Appeals suggests the doctrine of promissory estoppel has been used in certain cases as the equivalent of consideration. See Allegheny College v. National Chautauqua County Bank.
We conclude a determination here is unnecessary as to the relative applicability of the doctrine of part performance of contract or the doctrine of estoppel. They need not be distinguished. "Promissory estoppel' is now a recognized species of consideration. See Porter v. Commissioner of Internal Revenue. And in Fairall v. Arnold, this court quoted with apparent approval from the commentator in 101 A.L.R. 935: "The true basis of the doctrine of part performance, according to the overwhelming weight of authority, lies in the principles of equitable estoppel and fraud". The statement is undoubtedly sound.
The trial court, recognizing the close relationship between part performance (as a form of consideration) and promissory estoppel, pointed out that Code section 622.33 not only names specific acts of part performance as creating an exception but also specifies 'Any other circumstance which, by the law heretofore in force, would have taken the case out of the statute of frauds.' We deem that language sufficient to include what is now called 'promissory estoppel.' See Vogel v. Shaw and Wolfe v. Wallingford Bank & Trust Co.
II. The doctrine of equitable estoppel is applicable whenever the representation or promise relied on has been made to induce action or is reasonably calculated to induce action. The Restatement of the Law of Contracts, § 90, says: 'A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by the enforcement of the promise.' See Fried v. Fisher and Halligan v. Frey.
See also Restatement of the Law of Property, § 524: 'An oral promise that certain land will be used in a particular way, though otherwise unenforceable, is enforceable to the extent necessary to protect expenditures made in reasonable reliance thereon.' 'Comment: a Rationale,' immediately following is quite pertinent here but too long to quote.
The authorities make it clear the binding force of the promise does not depend on any personal gain or advantage to the promisor. See Fried v. Fisher where it is said: 'so from the earliest times there was recognized, the principle that an estoppel might similarly arise from the making of a promise, even though without consideration, if it was intended that the promise be relied upon and in fact it was relied upon, and a refusal to enforce it would be virtually to sanction the perpetration of fraud or result in other injustice.' As stated by an early Michigan opinion: 'The rule does not rest upon the assumption that he (the party estopped) has obtained any personal gain or advantage, but on the fact that he has induced others to act in such a manner that they will be seriously prejudiced if he is allowed to fail in carrying out what he has encouraged them to expect.' See Faxton v. Faxton.
III. We do not understand defendant questions the naked proposition that equitable estoppel may be effective to take a transaction out of the statute, or more accurately stated, that the statute may not bar oral proof of the promise as a basis for equitable estoppel. He argues however that 'plaintiff has failed to prove the following essential elements of estoppel: (1) A clear and definite oral agreement; (2) That plaintiff acted to his detriment solely in reliance on said agreement; (3) That plaintiff was without knowledge of the real facts; (4) False representation or concealment of material facts; (5) That a weighing of all the equities entitles plaintiff to the equitable relief of estoppel.' It is apparent (3) and (4) are not applicable to promissory estoppel where plaintiff relies on a promise rather than a misrepresentation of fact. There were here no unknown facts to be misrepresented or concealed.
We find quite definite (practically undenied) evidence of 'a clear and definite oral agreement,' relied on by plaintiff to his detriment. The testimony has necessarily been set out in condensed form. Defendant especially urges the indefiniteness of some of the language concerning distances, e. g.: 'approximately,' 'something better than 80 feet,' 'slightly over,' etc. He concedes the definiteness of plaintiff's own testimony in that respect but asserts it was 'squarely rebutted both by defendant and defendant's wife.'
But, as already pointed out, defendant and his wife merely denied the mention of distances in figures. They did not deny reference to the 'rock pile' as the northwest corner of their proposed house nor the measurements by which the location of the 'rock pile' was, we think, sufficiently proven. A familiar maxim of law says 'that is certain which can be made certain.' It applies here. The subsequent ascertainment in distances of the location of the rock pile is not disputed.
Neither defendant nor his wife denied plaintiff said to defendant: 'That under no circumstances would I make a bid upon that house if his building plans were in any way to spoil the view to the south and southwest.' It was no casual conversation. Defendant must have understood plaintiff was seeking an assurance upon which he could rely and without which he would not act.
There is no evidential denial of plaintiff's testimony that he went to defendant before buying and expressly stated the purpose was to learn if Vander Wal's report to him was correct and in effect to exact an agreement: 'If I purchase this house will you agree that you will not build your house north or west of that location?' (clearly referring to the rock pile).
It must be conceded the lawyer-like way--and plaintiff is a lawyer--would have been for him to have asked for a written contract. But the statutory exception does not exclude lawyers from its benefits when and if they are unwise enough to rely on it. And plaintiff had a right to accept his friend's oral promise in lieu of a written contract.
IV. Defendant's fifth 'essential element of estoppel' refers to a 'weighing of all the equities.' If by that is meant a mathematical comparison of potential disadvantages to the respective parties depending on whether the promise is or is not enforced, the proposition is unsound.
The question is not which party will suffer the greater detriment if the contention of the other prevails. That is not the rule of promissory estoppel--estoppel that arises when an innocent promisee relies, to his disadvantage, upon a promise intended or reasonably calculated to induce action by him.
In such case equity is first concerned with the plight of the innocent promisee if the promisor be permitted to seek asylum within the protection of the statute of frauds.
The Record here fairly shows plaintiffs bought the Vander Wal home on the strength of defendant's commitment as to how he would build. Were he to build as threatened, a real value would be subtracted from plaintiff's premises. The evidence makes it reasonably certain the magnificent view constituted a large part of the inducement for anyone to select such a site for a house. It was clearly the deciding factor without which plaintiffs would not have bought. It was not necessarily the sole reliance. It is sufficient that without it plaintiffs would not have acted.
Vander Wal attempted to measure any threatened damage to plaintiffs' home at 'from fifty to seventy-five per cent of its present value.' But we agree with him 'the damage cannot be evaluated in dollars and cents.' That fact merely fortifies the jurisdiction of equity to restrain this threatened wrong. An injury is said to be irreparable where there exists no certain pecuniary standard for measuring the damage. We think the Record shows that here, in the language of the Restatement, 'injustice can be avoided only by enforcement' of the promise upon which plaintiffs relied.
V. While the threatened injustice to the promisee is equity's first consideration, it is proper to consider the possible harshness to defendant by enforcement of his promise.
Much was urged on his behalf during the trial on the necessity, by reason of his profession especially, of easy approach to his garage from the street. That point is probably eliminated by plaintiffs' waiver recognized by the decree which preserves defendant's right under it.
Defendant was preparing to build (in addition to a garage in the northeast part of the panhandle) a house nearly 100 feet long, to be placed diagonally from northwest to southeast on the panhandle (presumably to conform to the slope of the ground from northeast to southwest) set back 27 feet from the street and far enough north to leave room for a terrace between it and the south edge where the ground begins to drop abruptly to the south. This terrace is shown on the architect's plat as 42 feet wide at the house and fanning out wider as it extends some 30 feet to the southern edge of the panhandle.
It is obvious defendant must, under the decree here, abandon that particular plan. But it is not shown impossible to design a home in some other way or of some other type that will be appropriate to and preserve equally well the advantages inherent in the location--possibly such a type as he originally had in mind.
VI. Defendant argues there was between plaintiff and himself a fiduciary or confidential relationship of attorney and client, and that the resulting presumption of fraud has not been rebutted. We find no pleading raising that defensive issue. And we find no suggestion in the Record to warn the trial court and opposing counsel that such a contention would be made.
The rule is well established that fraud, when relief on as either a cause of action or as a defense, must ordinarily be pleaded.
Of course there are exceptions to the rule but we know of none in point here. The fact that plaintiff or his law firm had acted for defendant in other matters, unrelated here, came into the Record incidentally. It was not pleaded. The case was not tried on the issue of fraud by violation of confidential relationship or otherwise. There is no indication it was intended by defendant as furnishing the basis for a claim of fraud or undue influence. We cannot find it was ever urged to the trial court and we cannot and should not consider it on appeal.
By disposing of defendant's contention in this way we are not to be understood as implying we find anything in the Record to support it had the defense been pleaded. The contrary is true. Any relation of attorney and client in other matters and at some former time (not specified) is not shown to have been such as to have any possible effect in this transaction. Defendant has been plaintiffs' family doctor. 'If he had told me that day I had to have my appendix out I wouldn't have doubted it.' Plaintiff urges that as an explanation of his failure to ask for a written contract. These relationships make more regrettable this controversy between friends but have no legal significance under this Record.
We have tried to give careful consideration to all defendant's contentions. We conclude the trial court reached the correct result and must be affirmed. It is so ordered.
Affirmed.
All Justices concur.
Plaintiffs are husband and wife. We shall, for convenience, refer to J. R. Miller as 'plaintiff' since Mrs. Miller does not seem to have taken active part in the transaction or trial. They bought their present home in Cherokee, Iowa, from one Vander Wal in the spring of 1952. It is on a sightly eminence with what is described as a 'terrific' nine mile view to the south and west across vacant property owned by defendant and to hills and woods beyond.
The part of defendant's premises immediately adjoining plaintiffs' on the south is a rectangular area referred to as the 'panhandle,' 101 1/2 feet north and south and 175 feet deep. The properties of both parties face east on South Eleventh Street.
Defendant owns a much larger additional tract extending south from the panhandle 257 feet, and west from the street 533 feet. The panhandle slopes downward gently from northeast to southwest. At about its south line the ground drops quite abruptly to the south in a 30 degree incline for 100 to 150 feet, then levels off for a distance and finally descends to the bottom of a ravine.
Plaintiff claims that before he purchased from Vander Wal, and in contemplation of such purchase, he obtained oral assurance from defendant that the latter would not build so as to obstruct the view from the house and he bought in reliance thereon. 'I said to Dr. Lawlor that I supposed he had heard I had been dickering on the Vander Wal house. He said 'I hope you purchase the house. We would like to have you as neighbors.' I told him that under no circumstances would I make a bid upon that house if his building plans were in any way to spoil the view to the south and southwest of this home. I told him Mr. Vander Wal had told me that he had an agreement with Dr. Lawlor (defendant) as to the location of his (defendant's) house and that I was over there to hear from him as to whether or not he confirmed that agreement I told him that Vander Wal had told me that Dr. Lawlor had agreed that he was building a hillside type of house down at the crest of the hill, and that it would not obstruct any view to the southwest; that the house would be low enough so that we could see over it.'
'Dr. Lawlor said, 'that's about right,' and he left the room and came back with two sheets of paper with some drawings upon it. He explained the diagrams to me that his house would be nine feet high would stand approximately seventy feet west of the east lot line. 'There is a rock pile down on the crest of the hill;' that that rock pile would be approximately the northwest corner of his house.'
Plaintiff testifies defendant said Vander Wal and he sighted from the living area of the proposed Vander Wal house 'as to what this would obscure, and that about all it would obscure is the farm buildings down in the valley.' I then said to him, 'If I purchase this house will you agree that you will not build your house north or west of that location?' and he said 'Certainly.'
Plaintiff further testifies defendant said 'according to his building plans, the north side of his house would be eighty feet south of his north lot line, and that the house would extend from the east lot line approximately seventy feet.' Plaintiff later verified the distances. He says 'The rock pile was slightly over eighty feet, measured from the fence, which I later learned was about three to four feet south of the true lot line, and approximately seventy-five feet west of the east lot line.'
Plaintiff also says he relied on defendant's statement and purchased the premises and would not have purchased without that assurance.
Defendant, while admitting there was a conversation at the time and place referred to, denies he made a statement that he would not build 'closer than eighty feet from his lot line' or 'further west than a point seventy feet from my east lot line.' 'The first time I ever heard these dimensions and measurements was when I was served (May 7, 1953) with the petition in the first lawsuit.' (This refers to a suit commenced by plaintiffs but dismissed several days before commencement of the present suit.)
Defendant's wife testifies she was present at the conversation. She is equally limited in her denial: 'During that conversation no mention was ever made of a measurement of 80 feet from the north lot line. No mention at all was made by either party of a measurement of distance of seventy feet west from my husband's east lot line.'
Neither denies any other part of plaintiff J. R. Miller's testimony. Neither denies the testimony with reference to what defendant was said to have told Vander Wal, nor the reference by him in conversation with both plaintiff and Vander Wal, to the rock pile as the northwest corner of his proposed home and the proposed height of nine feet of the house at that point. Nor is there any denial that plaintiff in effect secured from defendant a definite agreement with full realization plaintiffs were contemplating purchase of the Vander Wal premises on the strength of such agreement.
Mr. Vander Wal acquired the present Miller premises in August or September, 1951. He almost immediately thereafter commenced building the house now owned and occupied by plaintiffs. He describes it as 'designed for this particular lot so that the housewife would have access to the view no matter what part of the house she was in, with the exception of the bedroom and bathroom. The house was tailored to the lot. A type of construction known as contemporary. It was also designed so that the sun rays in winter time when the sun was low would reflect on this window wall to make use of the solar heating system. There is about twenty-eight feet of window wall on the south side of the house. There is no frames or anything.'
He testifies to a conversation with defendant in the early part of September, 1951, 'the first day of construction work. We were just staking out this particular lot and setting up chalk lines where the digging of footings was to be at that time.' The witness on that occasion first learned defendant owned the land to the south. They examined the Vander Wal plans and the witness says defendant also spoke of his own plans to build 'a hillside home of tri-level nature. He pointed out a rock pile' that 'would be the approximate west end of the home.' They viewed the site where defendant's home might be and concluded it would not obstruct the view from the upper premises.
It was stipulated at the close of Vander Wal's testimony that one Ferguson, his building superintendent or construction supervisor, would if present confirm his testimony as to a conversation between Ferguson and defendant in which the latter said his plans 'were of hillside nature' and in which the rock pile was referred to 'as the beginning of the north portion of his house and also that it would not be extended further west than the rock pile.'
There is a definite claim by Vander Wal that he obtained assurance at that time from defendant on the strength of which he (Vander Wal) went ahead with the construction. He also testifies to later conversations with defendant along the same line. At their first conference, he says, they discussed 'sharing the sewer and water,' and they later entered into a written 'Sewer and Water Agreement,' signed and acknowledged before plaintiff's brother and law partner as notary public. That was a month or more before plaintiffs became interested in buying the premises.
We do not go into greater detail of the transactions between Vander Wal and defendant as plaintiffs do not seem to have relied on any agreement between those two. The matter is material however as introductory to and explanatory of what plaintiff testifies he said to defendant about it at their conference already mentioned, when the oral agreement between plaintiff and defendant is claimed to have been made. It also tends to corroborate plaintiff's testimony that definite assurance was later given him by defendant.
Plaintiffs pray that defendant be enjoined from erecting any structure on his premises closer than 80 feet from his (defendant's) north lot line or extending more than 70 feet west of his east lot line or at a height greater than nine feet above natural ground level at a point 80 feet south of said north lot line and 70 feet west of said east line.
Throughout the trial defendant carefully protected his record by appropriate and careful objections to evidence, urging the statute of frauds and other objections. He also guarded against any possible waiver by careless cross-examination or by introduction of unnecessary evidence. We have no technical problem on that score. We have the clear question as to the sufficiency of the pertinent evidence to show a contract within the exception to the statute of frauds or to establish an equitable estoppel against the ban of the statute. Testimony for that purpose was admissible.
The trial court granted injunction practically as prayed, same to 'run with and be binding upon defendant's real estate for the benefit of plaintiffs' real estate and binding upon defendant, his heirs, assigns and any subsequent owners of defendant's real estate,' but to terminate 'whenever plaintiffs, or their successors permanently terminate the use of the view.'
The decree allowed defendant a 10% tolerance or leeway on specified distances and height, and protected his right to take advantage of a written waived tendered by plaintiffs which in effect waived objection to the erection of any 'garage or residential structure:' (1) Upon the east 40 feet of defendant's premises, regardless of the height thereof; or (2) The extreme north wall of which is 60 feet or more south of defendant's north line and which does not extend more than 100 feet west of defendant's east line and the height elevation of which is six inches lower than the present floor level of plaintiffs' home; or (3) The extreme north wall of which is 60 feet or more south of defendant's north line and regardless of how far west it extends from defendant's east line, providing the portion that is more than 100 feet west of said east line does not exceed a height elevation of six feet below the present floor level of plaintiffs' home.
Defendant has appealed.
I. The trial court's decision is based upon seemingly alternative theories. After a rather thorough discussion of the theory of a contract within the exception to the Statute of Frauds because of claimed 'part performance' the court says: 'In any event, whether or not plaintiff has brought himself within the recognized exception to the statute of frauds, the doctrine of equitable estoppel entitles him to complete relief.' We deem the difference between the two doctrines more apparent than real.
We quote the pertinent part of the statutes from Iowa Code Statute of Frauds. Except when otherwise specially provided, no evidence of the following enumerated contracts is competent, unless it be in writing and signed by the party charged or by his authorized agent.
'3. Those for the creation or transfer of any interest in lands.’
Section 622.33: 'Exception: The provisions of subsection 3 of section 622.32 do not apply where the purchase money has been received by the vendor, or when the vendee, with the actual or implied consent of the vendor, has taken and held possession of premises under and by virtue of the contract, or when there is any other circumstance which, by the law heretofore in force, would have taken the case out of the statute of frauds.'
It will be observed our statute, unlike its English forerunner, does not forbid oral contracts or render them invalid. It relates merely to the manner of proof. See Berryhill v. Jones and McMinimee v. McMinimee.
A consideration of the language of these sections as applied to the Record here explains what defendant in argument calls the trial court's lack of faith in the doctrine of part performance. It is particularly difficult to speak in terms of the 'creation or transfer of any interest in lands,' 'purchase money,' 'vendor,' 'vendee,' and 'possession of the premises' under the facts shown. Plaintiffs and defendant were not in the ordinary sense vendees and vendor. There was no 'purchase money' to be received by defendant nor any taking of 'possession of the premises' by plaintiffs. As defendant in argument says 'It is a very strained interpretation' to consider defendant here as a vendor.
Of course the claimed agreement was designed to create an interest in land within the purview of the statute. It contemplated the creation of a restrictive or negative easement over defendant's premises in favor of the adjoining premises. That would surely be an 'interest.' Oral evidence of it was inadmissible unless under the statutory exception or unless defendant was estopped to claim the benefit of the statute. Plaintiffs do not claim the contrary.
The acts described in Code section 622.33 as creating the exception, i.e., payment of 'purchase money' and taking 'possession of the premises', are usually spoken of as 'part performance;' but speaking literally and technically there was here no 'part performance.' As said Fairall v. Arnold, 'The term 'part performance' is a misnomer and inaccurate, in that many matters designated as such are not in fact the performance or part performance of the contract, itself, but are those done pursuant to or in reliance upon the contract.'
The apparent difficulty might perhaps be met as the analogous situation has always been met by the law of contracts, in cases where the promisor derives no benefit but the promisee suffers a detriment. Consideration has always been held to exist in such cases. See citations in West's Iowa Digest, Contracts, Key No. 52. But 'consideration' is a broader term than 'part performance' and here the statute specifies particular acts of part performance not technically descriptive of those shown in the instant case.
The New York Court of Appeals suggests the doctrine of promissory estoppel has been used in certain cases as the equivalent of consideration. See Allegheny College v. National Chautauqua County Bank.
We conclude a determination here is unnecessary as to the relative applicability of the doctrine of part performance of contract or the doctrine of estoppel. They need not be distinguished. "Promissory estoppel' is now a recognized species of consideration. See Porter v. Commissioner of Internal Revenue. And in Fairall v. Arnold, this court quoted with apparent approval from the commentator in 101 A.L.R. 935: "The true basis of the doctrine of part performance, according to the overwhelming weight of authority, lies in the principles of equitable estoppel and fraud". The statement is undoubtedly sound.
The trial court, recognizing the close relationship between part performance (as a form of consideration) and promissory estoppel, pointed out that Code section 622.33 not only names specific acts of part performance as creating an exception but also specifies 'Any other circumstance which, by the law heretofore in force, would have taken the case out of the statute of frauds.' We deem that language sufficient to include what is now called 'promissory estoppel.' See Vogel v. Shaw and Wolfe v. Wallingford Bank & Trust Co.
II. The doctrine of equitable estoppel is applicable whenever the representation or promise relied on has been made to induce action or is reasonably calculated to induce action. The Restatement of the Law of Contracts, § 90, says: 'A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by the enforcement of the promise.' See Fried v. Fisher and Halligan v. Frey.
See also Restatement of the Law of Property, § 524: 'An oral promise that certain land will be used in a particular way, though otherwise unenforceable, is enforceable to the extent necessary to protect expenditures made in reasonable reliance thereon.' 'Comment: a Rationale,' immediately following is quite pertinent here but too long to quote.
The authorities make it clear the binding force of the promise does not depend on any personal gain or advantage to the promisor. See Fried v. Fisher where it is said: 'so from the earliest times there was recognized, the principle that an estoppel might similarly arise from the making of a promise, even though without consideration, if it was intended that the promise be relied upon and in fact it was relied upon, and a refusal to enforce it would be virtually to sanction the perpetration of fraud or result in other injustice.' As stated by an early Michigan opinion: 'The rule does not rest upon the assumption that he (the party estopped) has obtained any personal gain or advantage, but on the fact that he has induced others to act in such a manner that they will be seriously prejudiced if he is allowed to fail in carrying out what he has encouraged them to expect.' See Faxton v. Faxton.
III. We do not understand defendant questions the naked proposition that equitable estoppel may be effective to take a transaction out of the statute, or more accurately stated, that the statute may not bar oral proof of the promise as a basis for equitable estoppel. He argues however that 'plaintiff has failed to prove the following essential elements of estoppel: (1) A clear and definite oral agreement; (2) That plaintiff acted to his detriment solely in reliance on said agreement; (3) That plaintiff was without knowledge of the real facts; (4) False representation or concealment of material facts; (5) That a weighing of all the equities entitles plaintiff to the equitable relief of estoppel.' It is apparent (3) and (4) are not applicable to promissory estoppel where plaintiff relies on a promise rather than a misrepresentation of fact. There were here no unknown facts to be misrepresented or concealed.
We find quite definite (practically undenied) evidence of 'a clear and definite oral agreement,' relied on by plaintiff to his detriment. The testimony has necessarily been set out in condensed form. Defendant especially urges the indefiniteness of some of the language concerning distances, e. g.: 'approximately,' 'something better than 80 feet,' 'slightly over,' etc. He concedes the definiteness of plaintiff's own testimony in that respect but asserts it was 'squarely rebutted both by defendant and defendant's wife.'
But, as already pointed out, defendant and his wife merely denied the mention of distances in figures. They did not deny reference to the 'rock pile' as the northwest corner of their proposed house nor the measurements by which the location of the 'rock pile' was, we think, sufficiently proven. A familiar maxim of law says 'that is certain which can be made certain.' It applies here. The subsequent ascertainment in distances of the location of the rock pile is not disputed.
Neither defendant nor his wife denied plaintiff said to defendant: 'That under no circumstances would I make a bid upon that house if his building plans were in any way to spoil the view to the south and southwest.' It was no casual conversation. Defendant must have understood plaintiff was seeking an assurance upon which he could rely and without which he would not act.
There is no evidential denial of plaintiff's testimony that he went to defendant before buying and expressly stated the purpose was to learn if Vander Wal's report to him was correct and in effect to exact an agreement: 'If I purchase this house will you agree that you will not build your house north or west of that location?' (clearly referring to the rock pile).
It must be conceded the lawyer-like way--and plaintiff is a lawyer--would have been for him to have asked for a written contract. But the statutory exception does not exclude lawyers from its benefits when and if they are unwise enough to rely on it. And plaintiff had a right to accept his friend's oral promise in lieu of a written contract.
IV. Defendant's fifth 'essential element of estoppel' refers to a 'weighing of all the equities.' If by that is meant a mathematical comparison of potential disadvantages to the respective parties depending on whether the promise is or is not enforced, the proposition is unsound.
The question is not which party will suffer the greater detriment if the contention of the other prevails. That is not the rule of promissory estoppel--estoppel that arises when an innocent promisee relies, to his disadvantage, upon a promise intended or reasonably calculated to induce action by him.
In such case equity is first concerned with the plight of the innocent promisee if the promisor be permitted to seek asylum within the protection of the statute of frauds.
The Record here fairly shows plaintiffs bought the Vander Wal home on the strength of defendant's commitment as to how he would build. Were he to build as threatened, a real value would be subtracted from plaintiff's premises. The evidence makes it reasonably certain the magnificent view constituted a large part of the inducement for anyone to select such a site for a house. It was clearly the deciding factor without which plaintiffs would not have bought. It was not necessarily the sole reliance. It is sufficient that without it plaintiffs would not have acted.
Vander Wal attempted to measure any threatened damage to plaintiffs' home at 'from fifty to seventy-five per cent of its present value.' But we agree with him 'the damage cannot be evaluated in dollars and cents.' That fact merely fortifies the jurisdiction of equity to restrain this threatened wrong. An injury is said to be irreparable where there exists no certain pecuniary standard for measuring the damage. We think the Record shows that here, in the language of the Restatement, 'injustice can be avoided only by enforcement' of the promise upon which plaintiffs relied.
V. While the threatened injustice to the promisee is equity's first consideration, it is proper to consider the possible harshness to defendant by enforcement of his promise.
Much was urged on his behalf during the trial on the necessity, by reason of his profession especially, of easy approach to his garage from the street. That point is probably eliminated by plaintiffs' waiver recognized by the decree which preserves defendant's right under it.
Defendant was preparing to build (in addition to a garage in the northeast part of the panhandle) a house nearly 100 feet long, to be placed diagonally from northwest to southeast on the panhandle (presumably to conform to the slope of the ground from northeast to southwest) set back 27 feet from the street and far enough north to leave room for a terrace between it and the south edge where the ground begins to drop abruptly to the south. This terrace is shown on the architect's plat as 42 feet wide at the house and fanning out wider as it extends some 30 feet to the southern edge of the panhandle.
It is obvious defendant must, under the decree here, abandon that particular plan. But it is not shown impossible to design a home in some other way or of some other type that will be appropriate to and preserve equally well the advantages inherent in the location--possibly such a type as he originally had in mind.
VI. Defendant argues there was between plaintiff and himself a fiduciary or confidential relationship of attorney and client, and that the resulting presumption of fraud has not been rebutted. We find no pleading raising that defensive issue. And we find no suggestion in the Record to warn the trial court and opposing counsel that such a contention would be made.
The rule is well established that fraud, when relief on as either a cause of action or as a defense, must ordinarily be pleaded.
Of course there are exceptions to the rule but we know of none in point here. The fact that plaintiff or his law firm had acted for defendant in other matters, unrelated here, came into the Record incidentally. It was not pleaded. The case was not tried on the issue of fraud by violation of confidential relationship or otherwise. There is no indication it was intended by defendant as furnishing the basis for a claim of fraud or undue influence. We cannot find it was ever urged to the trial court and we cannot and should not consider it on appeal.
By disposing of defendant's contention in this way we are not to be understood as implying we find anything in the Record to support it had the defense been pleaded. The contrary is true. Any relation of attorney and client in other matters and at some former time (not specified) is not shown to have been such as to have any possible effect in this transaction. Defendant has been plaintiffs' family doctor. 'If he had told me that day I had to have my appendix out I wouldn't have doubted it.' Plaintiff urges that as an explanation of his failure to ask for a written contract. These relationships make more regrettable this controversy between friends but have no legal significance under this Record.
We have tried to give careful consideration to all defendant's contentions. We conclude the trial court reached the correct result and must be affirmed. It is so ordered.
Affirmed.
All Justices concur.
Peoples Nat. Bank of Little Rock v. Linebarger Const. Co.
Peoples Nat. Bank of Little Rock v. Linebarger Const. Co., 240 S.W.2d 12, 219 Ark. 11 (Ark. 1951).
McFADDIN, Justice.
The trial court refused to allow appellant any recovery for money which it had advanced to Floyd Cart in reliance on appellees' representations to appellant.
The appellee, Linebarger Construction Company (hereinafter called 'Linebarger'), was a partnership composed of W. E. and Richard W. Linebarger, and was the principal contractor for building the Rivercliff Apartments in Little Rock. Linebarger subcontracted to Floyd Cart the furnishing of labor--but not materials--for the plastering work in the said buildings. The subcontract was based on unit prices; and, through error of Linebarger, the original total of Cart's subcontract was placed at $62,551.70 for which he made surety performance bond to Linebarger. The correct total afterwards proved to be only $50,884.30. 1
The Linebarger-Cart contract was dated February 18, 1948, and stated that Cart was to be paid on monthly estimates. But his laborers demanded payment each week; and Cart was unable to finance these payments from one month to the next. Accordingly, he asked Linebarger to pay him each week. This request was refused, but Linebarger suggested that Cart might get some bank to finance him from one monthly payment to the next. Linebarger learned from Cart that he carried an account with the appellant, Peoples National Bank (hereinafter called 'Peoples' or 'Bank'); and Linebarger then called the Peoples Bank and outlined the situation to Mr. Hadfield, one of its officials. Hadfield gave the following undenied version of the conversation: 'Mr. Linebarger called me by telephone. He told me that he had let a subcontract for the plastering on the Rivercliff Apartments to Mr. Floyd D. Cart and that Mr. Cart would need money for his payroll from month to month and that he could only pay him once a month on his estimate and wanted to know if my bank would be interested in financing this payroll. I asked him how much money it would involve and I believe he told me the contract ran into some sixty thousand dollars total, but he would only want payroll money from month to month. He says, 'You will be taking no chances, however, on that; I will have an assignment drawn in my office of the contract in favor of your bank; I will give you a letter each month telling you how much money he will have coming to him from the next estimate so you will know how much money to lend him.''
Linebarger prepared and had Cart execute an assignment from Cart to the Bank, and Linebarger executed the acceptance of the assignment, and gave Cart the completed instrument, 2 along with a signed letter from Linebarger to the Bank, dated May 21st, and reading:
'Confirming Mr. Linebarger's conversation with you, we enclose herewith Assignment of monies to be paid to Floyd D. Cart, Plaster Contractor, on his contract with us for work to be done on the Rivercliff Apartments. This Assignment has been duly completed by this company and it is our understanding that Mr. Cart will call at the bank in the morning to complete, the transaction.
'By June 10 an amount near $6,000.00 will be due Mr. Cart on his contract.'
Armed with these papers prepared by Linebarger, Cart then approached the Bank for the first time on the matter; and Mr. Hadfield agreed to make the loans, as suggested, and wrote Linebarger:
'You will find enclosed a signed and accepted copy of the assignment of monies coming to Floyd D. Cart from your company, and we have this day advanced Mr. Cart $3,000.00 on the strength of same.
'Mr. Cart advises us that he will need another pay roll next Saturday. In that event we would appreciate you giving us another letter as to the approximate amount that will be coming to him on June 10 or the next pay day.'
The $3,000.00 loan was properly repaid on June 10th by check of Linebarger, made jointly to Cart and Peoples Bank. After the first loan, the Bank made a series of loans to Cart, in reliance on the aforementioned assignment and Linebarger's letter of estimate to the Bank prior to each such loan. Each transaction was handled and concluded as follows:
(a)--On May 28th Linebarger advised the Bank that on June 10th there would be due Cart $7,000.00 on his contract; the Bank made loans to Cart for $4,500.00; and on June 10th Linebarger issued its check to Cart and the Bank for said amount, and Cart delivered the check to the Bank in payment of the loan.
(b)--On June 12th Linebarger advised the Bank that on June 15th there would be due Cart $2,500.00 on his contract; the Bank made a loan to Cart for that amount; and on June 15th Linebarger issued its check to Cart and the Bank for said amount, and Cart delivered the check to the Bank in payment of the loan.
(c)--On June 18th Linebarger advised the Bank that on July 15th there would be due Cart $13,000.00 on his contract; the Bank made loans to Cart totaling that amount; and on July 15th Linebarger issued its check to Cart and the Bank for said amount, and Cart delivered the check to the Bank in payment of the loan.
(d)--On July 16th Linebarger advised the Bank that on August 15th there would be due Cart $13,000.00 on his contract; the Bank made loans to Cart totaling that amount; and on August 15th Linebarger issued its check to Cart and the Bank for said amount, and Cart delivered the check to the Bank in payment of the loan.
We come now to the transaction that caused this litigation. On August 12th Linebarger advised the Bank that on September 15th there would be due Cart $16,000.00 on his contract; the Bank made a loan to Cart for that amount; but on September 15th Linebarger refused to issue any check, claiming--as was a fact--that Cart had defaulted in his contract, and that the difference in the total figure of the contract (that is, the difference between $62,551.70 and $50,884.30) had also come to light. 3 It developed that Cart 'had too many irons in the fire'; he was operating various businesses, and had lost money in them to such an extent that he became a voluntary bankrupt. The Bank proved, by evidence, that of the $16,000.00 loaned to Cart on the strength of Linebarger's letter of August 12th, the sum of $11,996.07 was actually used to pay Cart's payrolls on his subcontract with Linebarger.
I. Promissory Estoppel. The Bank, in claiming that it is entitled to judgment against Linebarger, relies on the rule of estoppel, and particularly that of promissory estoppel. The broad general principle of estoppel 4 is: 'he, who, by his language or conduct, leads another to do what he would not otherwise have done, shall not subject such person to loss or injury by disappointing the expectations upon which he acted. Such a change of position is sternly forbidden.'
We have many cases recognizing and applying the rule of estoppel. Most of the old cases held that the representation must relate to a past or present situation, rather than to something in the future. But the Arkansas Supreme Court, in an early case--Shields v. Smith, held that if one, by his statements as to his intended abandonment of existing rights, designedly induces another to change his condition in reliance upon such statements, then the person so stating will afterwards be estopped in his efforts to enforce his rights contrary to his declared intention to abandon them. 5
Later, in Conley v. Johnson, a party stated his intentions and allowed another to rely thereon, and estoppel was successfully invoked. Mr. Justice Wood quoted in the opinion from Union Mutual Ins. Co. v. Mowry: 'The doctrine of estoppel is applied with respect to representations of a party, to prevent their operating as a fraud upon one who has been led to rely upon them as to matters of fact, or to his intended abandonment of existing rights'.
And, against, he quoted from Bishop on Contracts: 'It is a palpable fraud for one man to entice another with promises to change his course of action, and to his injury part with his effects or his services.'
Again, In Davis v. Shelby, we held that when a party, by his statement of his intended abandonment of his purchase, induced another to buy the land from the vendor, then such party would be estopped to enforce his rights contrary to his declared intention of abandonment. In each of the foregoing cases the estoppel was based on the representation of a future matter, as distinguished from the representation of a past or present event. 6
The trend of modern cases is to extend the rule of estoppel to promissory statements, if the evidence clearly shows that the statements were made to induce action and that the promissor was culpable in some regard. Pomeroy's Equity Jurisprudence, 5th ed., Sec. 808b, states the holdings in this language: 'There are numerous cases in which an estoppel has been predicated on promises or assurances as to future conduct. Thus an estoppel may arise from the making of a promise, even though without consideration, if it was intended that the promise be relied upon and in fact it was relied upon, and a refusal to enforce it would be virtually to sanction the perpetration of fraud or result in other injustice. The name 'promissory estoppel', has been adopted as indicating that the basis of the doctrine is not so much one of contract, with a substitute for consideration, as an application of the general principle of estoppel to certain situations.'
The following are only a few of the many recent cases recognizing the development of the law of promissory estoppel, which development is an attempt by the courts to keep remedies abreast of increased moral consciousness of honesty and fair representations in all business dealings: Brewer v. Universal Credit Co., Lacy v. Wozencraft, Thom v. Thom, May v. City of Kearney, In re Jamison's Estate, Goodman v. Dicker, Klein v. Farmer, Swift v. Petersen, and Waugh v. Lennard.
In applying the rule of promissory estoppel to the case at bar, we only need to list a few of the salient acts, representations, and omissions by Linebarger:
(a)--Linebarger initiated a course of dealings with the Bank so that Linebarger's subcontractor, Cart, might meet his weekly payroll and thereby benefit Linebarger.
(b)--Linebarger stated to the Bank: 'You will be taking no chances, however, on that; I will have an assignment drawn in my office of the contract in favor of your bank; I will give you a letter each month telling you how much money he will have coming to him from the next estimate so you will know how much money to lend him.'
(c)--Over a period of months Linebarger gave letters of estimate to the Bank as to the amount Linebarger would owe Cart on future dates, and each one of these letters proved accurate; and Linebarger issued its check, in accordance therewith, up to the transaction involved in this litigation. In short, by its dealings and conduct, Linebarger led the Bank to believe that checks would be issued in accordance with Linebarger's letters. 7
(d)--Then, on August 12th, at a time when Linebarger knew that Cart's total contract was not $62,551.70 but only $50,884.30, and when Linebarger knew that Cart was not properly performing the subcontract and was neglecting the work, Linebarger wrote the Bank that on September 15th Linebarger would owe Cart $16,000.00.
Under the rule of promissory estoppel, and in view of all the course of dealings, we hold (a) that Linebarger's letter of August 12th was a representation by Linebarger that on September 15th it would issue its check to the Bank and Cart for any amount--up to $16,000.00--that the Bank might advance to Cart to meet his payroll; (b) that the Bank was justified in relying on Linebarger's representations and in advancing Cart money, of which $11,996.07 actually went to meet the payroll of Cart in the Linebarger construction; and (c) that Linebarger is now estopped from denying the promissory representations contained in the letter of August 12th. 8
II. The Amount the Bank is Entitled to Recover. With the rule of promissory estoppel thus applied, we come to the amount that the Bank is entitled to recover from Linebarger; and we find this amount to be $11,996.07 and interest. If special circumstances had not indicated a particular purpose for use of the money, then the estoppel might well have extended to the full amount stated in the representation; but the dealings between Linebarger and the Bank, as already shown, designated the particular purpose for which the Bank was to advance the money to Cart--i.e., the meeting of payrolls. In relying on Linebarger's representations, the Bank was not free to let Cart have the money for general purposes but only for the special purpose of paying his laborers. Since only $11,996.07 went to meet Cart's payrolls on the Linebarger job, the Bank, in asking a court of equity to give it relief on the basis of promissory estoppel, is likewise estopped to claim any amount greater than what actually went into the Linebarger job--this in view of the particular course of dealings in this case. A reasonable construction of relationships is that Linebarger represented to the Bank that on designated dates Linebarger would supply estimates of the amounts Cart would be entitled to receive for work actually performed on the building, the benefits of which were received by Linebarger. Since a preponderance of the evidence shows that Linebarger profited to the extent of $11,996.07 of the estimates so made, and upon which estimate the bank relied, Linebarger will be estopped to deny the values accruing at appellant's cost.
Therefore, the decree of the Chancery Court is reversed and the cause is remanded, with directions to enter a decree in favor of the Bank, and against Linebarger, for the said sum of $11,996.07, with interest from September 15th, 1948 until paid, and together will all costs.
GEORGE ROSE SMITH, J., not participating.
---------------
1 The Linebarger-Cart contract contained these provisions: 'It is further understood and agreed that the quantities set forth above are of close approximations only, and that the unit prices govern, with the quantities being adjusted to those actually developed in the job, and that the final gross consideration is to be the sum of the actual quantities at the unit prices set forth herein. It is further agreed and understood that such partial or monthly payments shall only be made for 90% of the work performed, the remaining 10% being retained until the completion of the work and final payment under general contract conditions and then added to, and made a part of, the final or completion payment.'
Another case in this Court growing out of the Linebarger-Cart contract is that of Western Casualty Co. v. Linebarger.
2 It reads in its entirety:
'Assignment
'Know All Men By These Presents:
'That, for and in consideration of the sum of One Dollar ($1.00) to the undersigned in hand paid by Peoples National Bank of Little Rock, Arkansas, the receipt of which is hereby acknowledged, and as security for the full repayment of loans made and to be made the undersigned by the said Peoples National Bank of Little Rock, evidenced by notes executed by the undersigned to the said bank, any renewals or extensions thereof, the said undersigned Floyd D. Cart, Plaster Contractor, does hereby transfer, assign, and deliver to the said Peoples National Bank all sums due and to become due Floyd D. Cart, Plaster Contractor under that contract executed on February 18, 1948 by and between the undersigned and Linebarger Construction Company for labor on lath and plaster work on the Rivercliff Apartments, it being understood that the within assignment covers all of the funds to be disbursed subsequent to the date of this instrument by Linebarger Construction Company, Little Rock, Arkansas.
'In Witness Whereof this instrument has been executed in Little Rock, Arkansas, this 21st day of May, 1948.
'Floyd D. Cart, Plaster Contractor
'By: /s/ Floyd D. Cart
'Notice of the above assignment is hereby acknowledged this 21st day of May, 1948.
'Linebarger Construction Company
'By: /s/ R. W. Linebarger
Partner'
3 Linebarger discovered this mistake sometime earlier but never mentioned it to the Bank.
4 The quotation is from Dickerson v. Colgrove. Keylon v. Arnold, and also Rogers v. Hill, other cases are listed stating some of the principles of estoppel.
5 Shields v. Smith was cited in American Surety Co. v. Ballman as one of the cases holding that a promise as to future conduct could form the basis of estoppel.
6 In West's Arkansas Digest, Estoppel, k85, two cases are listed as apparently holding that estoppel does not apply to representations concerning future events. These cases are Rhodes v. Cissel and Renner v. Progressive Life Ins. Co. But a study of these cases shows that neither case directly concerned the matter of promissory estoppel. In Rhodes v. Cissel, the opinion says of Cissel: 'He was not misled or influenced by Rhodes to take any course of conduct, and Rhodes is not estopped.' In Renner v. Progressive Life Ins. Co., the Court said: 'It is not estoppel, however, but fraud upon which appellant relies.'
7 On the witness stand, Mr. Linebarger was asked and gave answer: 'Q. The point I am getting at, Mr. Linebarger, to be perfectly frank, is, you had a letter out here addressed to Peoples National Bank, dated August 12, 1948, in which you told the bank that between September first and fifteenth he would have approximately sixteen thousand dollars coming to him under his contract with your company. Now I just want you to state to the Court frankly, in your own way, whether you felt you discharged the obligation you had toward the bank in view of that letter you wrote them, or failed to discharge it by putting them on notice not to lend him and more money after that, when you knew he wasn't doing the work. A. Mr. Fulk, in my mind I had no obligation to the bank, and still I don't believe I have any obligation to the bank.'
The rule of promissory estoppel is at variance with Mr. Linebarger's answer. He did owe an obligation to the bank: the obligation of fulfilling his representations.
8 Citizens National Bank at Brownwood v. Ross Construction Co., the Supreme Court of Texas held the rule of promissory estoppel inapplicable in a situation in which a bank had advanced $13,000.00 to a subcontractor in reliance on the general contractor's acceptance of an assignment by the subcontractor. But in the Texas case there was not present the controlling facts found here, i.e., (a) initiation of the credit by the general contractor; (b) regularly sending of letters containing estimates of amounts to be due at future dates; (c) course of dealings on which general contractor allowed bank to rely; and (d) knowledge of the general contractor as to mistake of total amount to be paid subcontractor.
McFADDIN, Justice.
The trial court refused to allow appellant any recovery for money which it had advanced to Floyd Cart in reliance on appellees' representations to appellant.
The appellee, Linebarger Construction Company (hereinafter called 'Linebarger'), was a partnership composed of W. E. and Richard W. Linebarger, and was the principal contractor for building the Rivercliff Apartments in Little Rock. Linebarger subcontracted to Floyd Cart the furnishing of labor--but not materials--for the plastering work in the said buildings. The subcontract was based on unit prices; and, through error of Linebarger, the original total of Cart's subcontract was placed at $62,551.70 for which he made surety performance bond to Linebarger. The correct total afterwards proved to be only $50,884.30. 1
The Linebarger-Cart contract was dated February 18, 1948, and stated that Cart was to be paid on monthly estimates. But his laborers demanded payment each week; and Cart was unable to finance these payments from one month to the next. Accordingly, he asked Linebarger to pay him each week. This request was refused, but Linebarger suggested that Cart might get some bank to finance him from one monthly payment to the next. Linebarger learned from Cart that he carried an account with the appellant, Peoples National Bank (hereinafter called 'Peoples' or 'Bank'); and Linebarger then called the Peoples Bank and outlined the situation to Mr. Hadfield, one of its officials. Hadfield gave the following undenied version of the conversation: 'Mr. Linebarger called me by telephone. He told me that he had let a subcontract for the plastering on the Rivercliff Apartments to Mr. Floyd D. Cart and that Mr. Cart would need money for his payroll from month to month and that he could only pay him once a month on his estimate and wanted to know if my bank would be interested in financing this payroll. I asked him how much money it would involve and I believe he told me the contract ran into some sixty thousand dollars total, but he would only want payroll money from month to month. He says, 'You will be taking no chances, however, on that; I will have an assignment drawn in my office of the contract in favor of your bank; I will give you a letter each month telling you how much money he will have coming to him from the next estimate so you will know how much money to lend him.''
Linebarger prepared and had Cart execute an assignment from Cart to the Bank, and Linebarger executed the acceptance of the assignment, and gave Cart the completed instrument, 2 along with a signed letter from Linebarger to the Bank, dated May 21st, and reading:
'Confirming Mr. Linebarger's conversation with you, we enclose herewith Assignment of monies to be paid to Floyd D. Cart, Plaster Contractor, on his contract with us for work to be done on the Rivercliff Apartments. This Assignment has been duly completed by this company and it is our understanding that Mr. Cart will call at the bank in the morning to complete, the transaction.
'By June 10 an amount near $6,000.00 will be due Mr. Cart on his contract.'
Armed with these papers prepared by Linebarger, Cart then approached the Bank for the first time on the matter; and Mr. Hadfield agreed to make the loans, as suggested, and wrote Linebarger:
'You will find enclosed a signed and accepted copy of the assignment of monies coming to Floyd D. Cart from your company, and we have this day advanced Mr. Cart $3,000.00 on the strength of same.
'Mr. Cart advises us that he will need another pay roll next Saturday. In that event we would appreciate you giving us another letter as to the approximate amount that will be coming to him on June 10 or the next pay day.'
The $3,000.00 loan was properly repaid on June 10th by check of Linebarger, made jointly to Cart and Peoples Bank. After the first loan, the Bank made a series of loans to Cart, in reliance on the aforementioned assignment and Linebarger's letter of estimate to the Bank prior to each such loan. Each transaction was handled and concluded as follows:
(a)--On May 28th Linebarger advised the Bank that on June 10th there would be due Cart $7,000.00 on his contract; the Bank made loans to Cart for $4,500.00; and on June 10th Linebarger issued its check to Cart and the Bank for said amount, and Cart delivered the check to the Bank in payment of the loan.
(b)--On June 12th Linebarger advised the Bank that on June 15th there would be due Cart $2,500.00 on his contract; the Bank made a loan to Cart for that amount; and on June 15th Linebarger issued its check to Cart and the Bank for said amount, and Cart delivered the check to the Bank in payment of the loan.
(c)--On June 18th Linebarger advised the Bank that on July 15th there would be due Cart $13,000.00 on his contract; the Bank made loans to Cart totaling that amount; and on July 15th Linebarger issued its check to Cart and the Bank for said amount, and Cart delivered the check to the Bank in payment of the loan.
(d)--On July 16th Linebarger advised the Bank that on August 15th there would be due Cart $13,000.00 on his contract; the Bank made loans to Cart totaling that amount; and on August 15th Linebarger issued its check to Cart and the Bank for said amount, and Cart delivered the check to the Bank in payment of the loan.
We come now to the transaction that caused this litigation. On August 12th Linebarger advised the Bank that on September 15th there would be due Cart $16,000.00 on his contract; the Bank made a loan to Cart for that amount; but on September 15th Linebarger refused to issue any check, claiming--as was a fact--that Cart had defaulted in his contract, and that the difference in the total figure of the contract (that is, the difference between $62,551.70 and $50,884.30) had also come to light. 3 It developed that Cart 'had too many irons in the fire'; he was operating various businesses, and had lost money in them to such an extent that he became a voluntary bankrupt. The Bank proved, by evidence, that of the $16,000.00 loaned to Cart on the strength of Linebarger's letter of August 12th, the sum of $11,996.07 was actually used to pay Cart's payrolls on his subcontract with Linebarger.
I. Promissory Estoppel. The Bank, in claiming that it is entitled to judgment against Linebarger, relies on the rule of estoppel, and particularly that of promissory estoppel. The broad general principle of estoppel 4 is: 'he, who, by his language or conduct, leads another to do what he would not otherwise have done, shall not subject such person to loss or injury by disappointing the expectations upon which he acted. Such a change of position is sternly forbidden.'
We have many cases recognizing and applying the rule of estoppel. Most of the old cases held that the representation must relate to a past or present situation, rather than to something in the future. But the Arkansas Supreme Court, in an early case--Shields v. Smith, held that if one, by his statements as to his intended abandonment of existing rights, designedly induces another to change his condition in reliance upon such statements, then the person so stating will afterwards be estopped in his efforts to enforce his rights contrary to his declared intention to abandon them. 5
Later, in Conley v. Johnson, a party stated his intentions and allowed another to rely thereon, and estoppel was successfully invoked. Mr. Justice Wood quoted in the opinion from Union Mutual Ins. Co. v. Mowry: 'The doctrine of estoppel is applied with respect to representations of a party, to prevent their operating as a fraud upon one who has been led to rely upon them as to matters of fact, or to his intended abandonment of existing rights'.
And, against, he quoted from Bishop on Contracts: 'It is a palpable fraud for one man to entice another with promises to change his course of action, and to his injury part with his effects or his services.'
Again, In Davis v. Shelby, we held that when a party, by his statement of his intended abandonment of his purchase, induced another to buy the land from the vendor, then such party would be estopped to enforce his rights contrary to his declared intention of abandonment. In each of the foregoing cases the estoppel was based on the representation of a future matter, as distinguished from the representation of a past or present event. 6
The trend of modern cases is to extend the rule of estoppel to promissory statements, if the evidence clearly shows that the statements were made to induce action and that the promissor was culpable in some regard. Pomeroy's Equity Jurisprudence, 5th ed., Sec. 808b, states the holdings in this language: 'There are numerous cases in which an estoppel has been predicated on promises or assurances as to future conduct. Thus an estoppel may arise from the making of a promise, even though without consideration, if it was intended that the promise be relied upon and in fact it was relied upon, and a refusal to enforce it would be virtually to sanction the perpetration of fraud or result in other injustice. The name 'promissory estoppel', has been adopted as indicating that the basis of the doctrine is not so much one of contract, with a substitute for consideration, as an application of the general principle of estoppel to certain situations.'
The following are only a few of the many recent cases recognizing the development of the law of promissory estoppel, which development is an attempt by the courts to keep remedies abreast of increased moral consciousness of honesty and fair representations in all business dealings: Brewer v. Universal Credit Co., Lacy v. Wozencraft, Thom v. Thom, May v. City of Kearney, In re Jamison's Estate, Goodman v. Dicker, Klein v. Farmer, Swift v. Petersen, and Waugh v. Lennard.
In applying the rule of promissory estoppel to the case at bar, we only need to list a few of the salient acts, representations, and omissions by Linebarger:
(a)--Linebarger initiated a course of dealings with the Bank so that Linebarger's subcontractor, Cart, might meet his weekly payroll and thereby benefit Linebarger.
(b)--Linebarger stated to the Bank: 'You will be taking no chances, however, on that; I will have an assignment drawn in my office of the contract in favor of your bank; I will give you a letter each month telling you how much money he will have coming to him from the next estimate so you will know how much money to lend him.'
(c)--Over a period of months Linebarger gave letters of estimate to the Bank as to the amount Linebarger would owe Cart on future dates, and each one of these letters proved accurate; and Linebarger issued its check, in accordance therewith, up to the transaction involved in this litigation. In short, by its dealings and conduct, Linebarger led the Bank to believe that checks would be issued in accordance with Linebarger's letters. 7
(d)--Then, on August 12th, at a time when Linebarger knew that Cart's total contract was not $62,551.70 but only $50,884.30, and when Linebarger knew that Cart was not properly performing the subcontract and was neglecting the work, Linebarger wrote the Bank that on September 15th Linebarger would owe Cart $16,000.00.
Under the rule of promissory estoppel, and in view of all the course of dealings, we hold (a) that Linebarger's letter of August 12th was a representation by Linebarger that on September 15th it would issue its check to the Bank and Cart for any amount--up to $16,000.00--that the Bank might advance to Cart to meet his payroll; (b) that the Bank was justified in relying on Linebarger's representations and in advancing Cart money, of which $11,996.07 actually went to meet the payroll of Cart in the Linebarger construction; and (c) that Linebarger is now estopped from denying the promissory representations contained in the letter of August 12th. 8
II. The Amount the Bank is Entitled to Recover. With the rule of promissory estoppel thus applied, we come to the amount that the Bank is entitled to recover from Linebarger; and we find this amount to be $11,996.07 and interest. If special circumstances had not indicated a particular purpose for use of the money, then the estoppel might well have extended to the full amount stated in the representation; but the dealings between Linebarger and the Bank, as already shown, designated the particular purpose for which the Bank was to advance the money to Cart--i.e., the meeting of payrolls. In relying on Linebarger's representations, the Bank was not free to let Cart have the money for general purposes but only for the special purpose of paying his laborers. Since only $11,996.07 went to meet Cart's payrolls on the Linebarger job, the Bank, in asking a court of equity to give it relief on the basis of promissory estoppel, is likewise estopped to claim any amount greater than what actually went into the Linebarger job--this in view of the particular course of dealings in this case. A reasonable construction of relationships is that Linebarger represented to the Bank that on designated dates Linebarger would supply estimates of the amounts Cart would be entitled to receive for work actually performed on the building, the benefits of which were received by Linebarger. Since a preponderance of the evidence shows that Linebarger profited to the extent of $11,996.07 of the estimates so made, and upon which estimate the bank relied, Linebarger will be estopped to deny the values accruing at appellant's cost.
Therefore, the decree of the Chancery Court is reversed and the cause is remanded, with directions to enter a decree in favor of the Bank, and against Linebarger, for the said sum of $11,996.07, with interest from September 15th, 1948 until paid, and together will all costs.
GEORGE ROSE SMITH, J., not participating.
---------------
1 The Linebarger-Cart contract contained these provisions: 'It is further understood and agreed that the quantities set forth above are of close approximations only, and that the unit prices govern, with the quantities being adjusted to those actually developed in the job, and that the final gross consideration is to be the sum of the actual quantities at the unit prices set forth herein. It is further agreed and understood that such partial or monthly payments shall only be made for 90% of the work performed, the remaining 10% being retained until the completion of the work and final payment under general contract conditions and then added to, and made a part of, the final or completion payment.'
Another case in this Court growing out of the Linebarger-Cart contract is that of Western Casualty Co. v. Linebarger.
2 It reads in its entirety:
'Assignment
'Know All Men By These Presents:
'That, for and in consideration of the sum of One Dollar ($1.00) to the undersigned in hand paid by Peoples National Bank of Little Rock, Arkansas, the receipt of which is hereby acknowledged, and as security for the full repayment of loans made and to be made the undersigned by the said Peoples National Bank of Little Rock, evidenced by notes executed by the undersigned to the said bank, any renewals or extensions thereof, the said undersigned Floyd D. Cart, Plaster Contractor, does hereby transfer, assign, and deliver to the said Peoples National Bank all sums due and to become due Floyd D. Cart, Plaster Contractor under that contract executed on February 18, 1948 by and between the undersigned and Linebarger Construction Company for labor on lath and plaster work on the Rivercliff Apartments, it being understood that the within assignment covers all of the funds to be disbursed subsequent to the date of this instrument by Linebarger Construction Company, Little Rock, Arkansas.
'In Witness Whereof this instrument has been executed in Little Rock, Arkansas, this 21st day of May, 1948.
'Floyd D. Cart, Plaster Contractor
'By: /s/ Floyd D. Cart
'Notice of the above assignment is hereby acknowledged this 21st day of May, 1948.
'Linebarger Construction Company
'By: /s/ R. W. Linebarger
Partner'
3 Linebarger discovered this mistake sometime earlier but never mentioned it to the Bank.
4 The quotation is from Dickerson v. Colgrove. Keylon v. Arnold, and also Rogers v. Hill, other cases are listed stating some of the principles of estoppel.
5 Shields v. Smith was cited in American Surety Co. v. Ballman as one of the cases holding that a promise as to future conduct could form the basis of estoppel.
6 In West's Arkansas Digest, Estoppel, k85, two cases are listed as apparently holding that estoppel does not apply to representations concerning future events. These cases are Rhodes v. Cissel and Renner v. Progressive Life Ins. Co. But a study of these cases shows that neither case directly concerned the matter of promissory estoppel. In Rhodes v. Cissel, the opinion says of Cissel: 'He was not misled or influenced by Rhodes to take any course of conduct, and Rhodes is not estopped.' In Renner v. Progressive Life Ins. Co., the Court said: 'It is not estoppel, however, but fraud upon which appellant relies.'
7 On the witness stand, Mr. Linebarger was asked and gave answer: 'Q. The point I am getting at, Mr. Linebarger, to be perfectly frank, is, you had a letter out here addressed to Peoples National Bank, dated August 12, 1948, in which you told the bank that between September first and fifteenth he would have approximately sixteen thousand dollars coming to him under his contract with your company. Now I just want you to state to the Court frankly, in your own way, whether you felt you discharged the obligation you had toward the bank in view of that letter you wrote them, or failed to discharge it by putting them on notice not to lend him and more money after that, when you knew he wasn't doing the work. A. Mr. Fulk, in my mind I had no obligation to the bank, and still I don't believe I have any obligation to the bank.'
The rule of promissory estoppel is at variance with Mr. Linebarger's answer. He did owe an obligation to the bank: the obligation of fulfilling his representations.
8 Citizens National Bank at Brownwood v. Ross Construction Co., the Supreme Court of Texas held the rule of promissory estoppel inapplicable in a situation in which a bank had advanced $13,000.00 to a subcontractor in reliance on the general contractor's acceptance of an assignment by the subcontractor. But in the Texas case there was not present the controlling facts found here, i.e., (a) initiation of the credit by the general contractor; (b) regularly sending of letters containing estimates of amounts to be due at future dates; (c) course of dealings on which general contractor allowed bank to rely; and (d) knowledge of the general contractor as to mistake of total amount to be paid subcontractor.
Labels:
construction,
contracts,
finance,
law,
loans,
money,
past or present situation,
promissory estoppel
