27 N.Y.2d 339 (1971)

An oral agreement modifying a contract for the sale of goods requires consideration to be valid under New York law at the time, and a debt owed to a deceased party remains an enforceable asset of the estate unless validly discharged or modified.

Summary

The case concerns a dispute over whether a debt owed by the testator’s son to the testator’s construction company was an asset of the estate. The son had received building materials from the company and later surrendered the deed to his house as payment, receiving a receipt. The deed was returned, and the son made monthly payments until the testator’s death. The court held that the debt remained an enforceable asset because a subsequent oral agreement modifying the debt (allowing monthly payments) lacked consideration and was not a valid written modification under the Statute of Frauds. The court also addressed the daughter’s claim for interest on her legacy, granting her 3% interest as provided by statute.

Facts

James H. Crea died, leaving a will that bequeathed $20,000 to his daughter, Catherine, and equipment to his son, James T. Crea, both co-executors. In 1954-55, James T. Crea used materials from Crea Construction Company (owned by his parents) to build a house. In 1955, James T. Crea gave his parents the deed to the property, and they gave him a receipt stating it was payment in full for the debt. The parents never sold the house and returned the deed to James T. Crea. James T. Crea then orally agreed to pay monthly installments. These payments were treated as interest on the company’s books. As executor, James T. Crea initially included the debt as an asset for estate tax purposes but later omitted it from his accounting.

Procedural History

The Surrogate’s Court ruled the debt was not an asset of the estate, citing the Statute of Frauds. The Appellate Division affirmed, finding a completed sale of goods took the transaction out of the Statute of Frauds but that the subsequent oral agreement terminated liability upon the testator’s death. The daughter appealed to the Court of Appeals.

Issue(s)

1. Whether the son’s debt to the father’s construction company was an enforceable obligation that should have been included as an asset of the estate.

2. Whether the daughter was entitled to interest on her cash legacy.

Holding

1. Yes, because the subsequent oral agreement modifying the debt lacked consideration and was not a valid written modification under the statute of frauds.

2. Yes, because section 218 of the Surrogate’s Court Act specifically provided for the imposition of 3% interest where the legacy is not paid seven months from the issuance of letters testamentary.

Court’s Reasoning

The court reasoned that the initial receipt did not extinguish the debt because the documents were returned and the son orally agreed to make payments. The court found that the oral agreement for monthly payments was an invalid modification of the contract because it lacked consideration as required by former section 33(2) of the Personal Property Law (now General Obligations Law § 5-1103), which stated that an agreement to discharge or modify an obligation must be in writing and signed. The court emphasized,