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Philo Smith Co., Inc. v. Uslife Corp.

United States Court of Appeals, Second Circuit
Apr 19, 1977
554 F.2d 34 (2d Cir. 1977)

Summary

concluding that the plaintiffs' claimed "injury in the form of their relinquishment of their opportunity to seek other purchasers . . . hardly seems the sort of irremediable change in position normally associated with the doctrine of promissory estoppel"

Summary of this case from Bloomfield Inv. Res. Corp. v. Daniloff

Opinion

No. 760, Docket 76-7551.

Argued March 24, 1977.

Decided April 19, 1977.

Brendan P. Bovaird, New York City (Russel H. Beatie, Jr., Dewey, Ballantine, Bushby, Palmer Wood, New York City, of counsel), for plaintiffs-appellants.

Joel M. Miller, New York City (Edward W. Keane, Susan J. McCone, Ullman, Van Ginkel, Miller Wrubel, P. C., Sullivan Cromwell, New York City, of counsel), for defendant-appellee.

Appeal from the United States District Court for the Southern District of New York.

Before ANDERSON and MESKILL, Circuit Judges, and MARKEY, Chief Judge, U.S. Court of Customs and Patent Appeals.

Sitting by designation.


This is a diversity action brought to recover a finder's fee, allegedly earned as a result of the acquisition, by USLIFE Corporation, of the All American Life Financial Corporation. At one time, there was a written finder's fee agreement in effect between the parties, but it had expired by the time an agreement was reached between USLIFE and All American. Under the applicable New York Statute of Frauds, N.Y. Gen. Oblig. Law § 5-701(10), the absence of an effective written note or memorandum of agreement is generally fatal to an action for a finder's fee, whether based on a theory of express contract, implied in fact contract or quasi contract. Plaintiffs argued, however, that the defendant should be estopped to assert the Statute of Frauds. See Imperator Realty Co. v. Tull, 228 N.Y. 447, 127 N.E. 263 (1920). The basis for this argument was the plaintiffs' alleged detrimental reliance upon the defendant's promises to extend the written agreement. The case went to trial before a jury on this theory. At the close of plaintiffs' case, the defendant's motion for a directed verdict was granted, and the complaint was dismissed. In a written opinion, reported at 420 F.Supp. 1266 (S.D.N.Y. 1976), the district court held that plaintiffs had failed to make out a prima facie case because they had failed to prove, inter alia, that their acts of reliance resulted in substantial injury.

The district court also held that plaintiffs had failed to prove (1) that their acts of reliance were "unequivocally referable" to the defendant's alleged promises, or (2) that the defendant's alleged promises were made with intent to defraud. Plaintiffs have raised substantial questions concerning the legal and factual bases for those holdings. We express no view on the merits of those questions. It is unnecessary to do so in light of our decision regarding the plaintiffs' failure to demonstrate substantial injury. We affirm on that issue only.

The strongly held public policy reflected in New York's Statute of Frauds would be severely undermined if a party could be estopped from asserting it every time a court found that some unfairness would otherwise result. For this reason, the doctrine of promissory estoppel is properly reserved for that limited class of cases where "the circumstances are such as to render it unconscionable to deny" the promise upon which the plaintiff has relied. 3 Williston on Contracts § 533A, at 801 (3d ed. 1960) (emphasis added). The relatively limited scope of the doctrine is nowhere more evident than in its requirement of substantial injury. As the New York Court of Appeals said in Woolley v. Stewart:

A party to [an oral] agreement [within the statute] may legally and rightfully refuse to recognize or perform it. The breach of a void agreement is not a fraud or a wrong in law. . . . He may, however, withdraw himself from the policy and defense of the statute, or waive its protection, by inducing or permitting without remonstrance another party to the agreement to do acts, pursuant to and in reliance upon the agreement, to such an extent and so substantial in quality as to irremediably alter his situation and make the interposition of the statute against performance a fraud. In such a case a court of equity acts upon the principle that not to give effect to those acts would be to allow the party permitting them to use the statute as an instrument defending deception and injustice.

222 N.Y. 347, 350-51, 118 N.E. 847, 848 (1918) (emphasis added; citations omitted). The proof in this case fell well short of that mark. Judge Tenney found that the only substantial injury suffered by the plaintiffs was the loss of a fee from the defendant. However, as Judge Tenney held, and as the quotation from Woolley indicates, this is not the kind of injury contemplated by New York law, for it is solely a result of the non-performance of a void agreement. Plaintiffs claim substantial injury in the form of their relinquishment of their opportunity to seek other purchasers for All American. This hardly seems the sort of irremediable change in position normally associated with the doctrine of promissory estoppel. See, e. g., Alaska Airlines, Inc. v. Stephenson, 217 F.2d 295, 15 Alaska 272 (9th Cir. 1954). Indeed, it is difficult to imagine a case in which the mere failure to seek an uncertain prospective benefit could ever generate a sufficient level of unconscionability to warrant the application of the doctrine. We are not prepared to say that it never could, but on the facts of this case we agree with Judge Tenney that it has not.

Affirmed.


Summaries of

Philo Smith Co., Inc. v. Uslife Corp.

United States Court of Appeals, Second Circuit
Apr 19, 1977
554 F.2d 34 (2d Cir. 1977)

concluding that the plaintiffs' claimed "injury in the form of their relinquishment of their opportunity to seek other purchasers . . . hardly seems the sort of irremediable change in position normally associated with the doctrine of promissory estoppel"

Summary of this case from Bloomfield Inv. Res. Corp. v. Daniloff

affirming district court's dismissal of promissory estoppel claim barred by the Statute of Frauds because plaintiff's injury, the loss of a finder fee commission, was "solely a result of the non-performance of a void agreement" and "not the kind of injury contemplated by New York law" that falls within the unconscionability exception

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affirming district court's dismissal of promissory estoppel claim barred by the Statute of Frauds because plaintiff's injury, the loss of a finder fee commission, was "solely a result of the non-performance of a void agreement" and "not the kind of injury contemplated by New York law" as falling within the unconscionability exception

Summary of this case from CMC Transaction Servs., LLC v. Idex Corp.

affirming district court's dismissal of promissory estoppel claim barred by the Statute of Frauds because plaintiff's injury — the loss of a finder's fee commission — was "solely a result of the non-performance of a void agreement" and "not the kind of injury contemplated by New York law" as falling within the unconscionability exception

Summary of this case from Komlossy v. Faruqi & Faruqi, LLP

affirming district court's dismissal of complaint in which Plaintiff's only substantial injury was the loss of a fee

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applying New York law

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noting that " relatively limited scope of the doctrine [of partial performance] is nowhere more evident than in its requirement of substantial injury," and holding that the plaintiff's alleged "substantial injury" did not "generate a sufficient level of unconscionability to ... warrant application of the doctrine [of partial performance]"

Summary of this case from Mtivity, Inc. v. Office Depot, Inc.

cautioning against applying the promissory estoppel doctrine liberally and ruling "[t]o invoke the power that equity possesses to trump the Statute of Frauds plaintiff must demonstrate 'unconscionable' injury, i.e., injury beyond that which flows naturally (expectation damages) from the non-performance of the unenforceable agreement."

Summary of this case from Optionality Consulting PTE. v. Nekos

analyzing promissory estoppel in the context of the Statute of Frauds

Summary of this case from Joshi v. Trs. of Columbia Univ. in the City of N.Y.

noting that in order to overcome the Statute of Frauds, a plaintiff must allege injury resulting from its reliance that is of "such an extent and so substantial in quality as to irremediably alter his situation and make the interposition of the statute against performance a fraud"

Summary of this case from Tri-County Motors, Inc. v. American Suzuki Motor

requiring unconscionable injury lest "[t]he strongly held public policy reflected in New York's Statute of Frauds . . . be severely undermined"

Summary of this case from Pearce v. Manhattan Ensemble Theater, Inc.

requiring that the claimed detriment be irreversible and that use of the statute of frauds defense would itself constitute a fraud

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discussing the prerequisites to showing promissory estoppel to defeat the defense of the statute of frauds

Summary of this case from Shearson Lehman CMO, Inc. v. TCF Banking and Savings, F.A.

In USLIFE, a written finder's fee agreement was in effect between the parties, but had expired by the time defendants reached an agreement with a third party found by the plaintiffs.

Summary of this case from Rosenthal v. Kingsley

discussing use of doctrine to override New York General Obligations Law § 5-701

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Case details for

Philo Smith Co., Inc. v. Uslife Corp.

Case Details

Full title:PHILO SMITH CO., INC. AND JAMES E. RUTHERFORD, PLAINTIFFS-APPELLANTS, v…

Court:United States Court of Appeals, Second Circuit

Date published: Apr 19, 1977

Citations

554 F.2d 34 (2d Cir. 1977)

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