New York Law Review

Tag: consideration

  • Matter of Kurcsics, 154 A.D.2d 598 (N.Y. App. Div. 1989): Enforceability of Immunity Agreements for Returning Children

    Matter of Kurcsics, 154 A.D.2d 598 (N.Y. App. Div. 1989)

    An agreement for immunity from prosecution, exacted in exchange for the return of children to their lawful custodian pursuant to a Family Court order, is unenforceable because it lacks consideration from the parent who is legally obligated to return the children.

    Summary

    This case concerns an attorney, Kurcsics, who violated a Family Court order by not returning his children to their mother. To avoid prosecution for custodial interference, Kurcsics negotiated an immunity agreement with the District Attorney in exchange for returning the children. The court held that the agreement was unenforceable. The court reasoned that Kurcsics provided no actual consideration because he was already legally obligated to return the children. Therefore, enforcing the agreement would violate public policy by allowing someone to avoid prosecution for fulfilling a pre-existing legal duty. The court affirmed the dismissal of Kurcsics’s Article 78 proceeding seeking to prohibit his prosecution.

    Facts

    Kurcsics, an attorney, had custody of his three children for visitation during the summer of 1988, with a mandated return date of July 31st to their mother. On July 16th, Kurcsics was observed in New Jersey with two of the children and a trailer packed with boxes. He failed to return the children by the court-ordered date. The mother contacted authorities, and an arrest warrant was issued for Kurcsics on August 3rd for felony custodial interference.

    Procedural History

    After the arrest warrant was issued, Kurcsics offered to return the children in exchange for immunity from prosecution and an agreement from his former spouse not to alter visitation rights. After negotiating the terms of an agreement with an Assistant District Attorney, Kurcsics returned the children and was arrested. He then initiated an Article 78 proceeding to prohibit prosecution based on the immunity agreement. The Appellate Division dismissed the petition, and the Court of Appeals granted leave to appeal.

    Issue(s)

    Whether an agreement providing immunity from prosecution is enforceable when it is made in exchange for an individual fulfilling a pre-existing legal obligation to return children to their lawful custodian pursuant to a court order.

    Holding

    No, because the agreement lacks valid consideration from the parent who is already legally obligated to return the children. Therefore, such an agreement is unenforceable.

    Court’s Reasoning

    The court emphasized that prosecutorial integrity is crucial to the criminal justice system but found that it was not compromised in this case. It distinguished true bargaining from the situation at hand, noting that Kurcsics initiated the negotiation and escalated his demands while unlawfully concealing the children. The court found that Kurcsics provided no consideration in exchange for the prosecutor’s concessions, agreeing only to do what he was already legally obligated to do: return the children safe and in good health.

    The court reasoned that enforcing such an agreement would be a “perversion, not a requirement, of public policy.” It cited United States v. Gorham, stating that allowing someone to avoid prosecution by fulfilling a pre-existing legal duty is against public policy. The court effectively held that agreeing to obey the law cannot serve as valid consideration for a contract, especially when that contract seeks to grant immunity from prosecution for violating that same law.

  • Martin Roofing, Inc. v. Martin, 452 N.E.2d 1308 (N.Y. 1983): Enforceability of Oral Promises to Pay Another’s Debt Under the Statute of Frauds

    Martin Roofing, Inc. v. Martin, 452 N.E.2d 1308 (N.Y. 1983)

    An oral promise to answer for the debt of another is unenforceable under the Statute of Frauds unless the promisor receives a direct, immediate, and pecuniary benefit, and undertakes a duty to pay irrespective of the original debtor’s liability.

    Summary

    Martin Roofing sought to recover payment for services from Martin, a former officer of Bon-Aire Construction. Martin allegedly promised to pay Bon-Aire’s debt to Martin Roofing. The court considered whether this oral promise was enforceable under the Statute of Frauds. The Court of Appeals held that the promise was unenforceable because Martin did not receive a direct benefit, and the corporation’s debt was not discharged. The court emphasized that the Statute of Frauds requires a writing or a new consideration beneficial to the promisor, establishing them as the primary debtor.

    Facts

    Martin Roofing contracted with Bon-Aire Construction to repair roofs. After partial payment, Martin Roofing became concerned about outstanding balances. An employee of Bon-Aire Construction told Martin Roofing that Martin (the defendant) would ensure payment. Martin, then a director/stockholder of Bon-Aire Industries (parent company), allegedly promised Martin Roofing he would guarantee payment to ensure the work was completed, which was necessary for Bon-Aire to receive funds from the Urban Development Corporation. Martin Roofing continued working, but Bon-Aire Construction failed to pay the remaining $11,000. Martin Roofing later received payment for other jobs completed for Bon-Aire.

    Procedural History

    Martin Roofing sued Bon-Aire Construction, securing a default judgment. Unable to recover from Bon-Aire Construction, Martin Roofing sued Martin based on his alleged oral promise. The trial court found for Martin Roofing. The Appellate Division reversed, dismissing the complaint, holding the oral promise unenforceable under the Statute of Frauds. Martin Roofing appealed to the New York Court of Appeals.

    Issue(s)

    Whether Martin’s oral promise to pay the debt of Bon-Aire Construction is enforceable under the Statute of Frauds, specifically considering if the promise was supported by new consideration moving to Martin and beneficial to him, making him a primary debtor.

    Holding

    No, because Martin’s promise lacked sufficient consideration that was directly and immediately beneficial to him, and the evidence showed the parties intended Bon-Aire Construction to remain primarily liable for the debt.

    Court’s Reasoning

    The Court of Appeals affirmed the Appellate Division’s decision, holding the oral promise unenforceable. The court reasoned that the Statute of Frauds requires a written agreement for a promise to answer for the debt of another, unless an exception applies. The court stated that a beneficial consideration must move to the promisor, and the promisor must become the primary debtor. The court found that the benefit to Martin as a minority shareholder in the parent company was too indirect. The court stated that under New York law, “when the original debt subsists and was antecedently contracted, an oral promise to pay it is enforceable only when there is consideration for the promise which is beneficial to the promisor and the promisor comes under a duty to pay irrespective of the liability of the original debtor.” The court emphasized that the benefit must be “immediate, personal, pecuniary and direct.” The fact that Martin Roofing sued Bon-Aire Construction first, and only amended the complaint against Martin five years later, suggested that Martin was intended to be a surety, not the primary obligor. The court also noted that Martin’s use of the word “guarantee” indicated a surety relationship. The court rejected the “main purpose rule,” stating that even if it applied, the evidence did not demonstrate consideration beneficial to Martin. The court concluded, “Plaintiff’s evidence failed to establish a prima facie case to take defendant’s promise out of the Statute of Frauds.”

  • Feigenbaum v. Singer, 42 N.Y.2d 362 (1977): Consideration Found in Detriment to Promisee Even Without Benefit to Promisor

    Feigenbaum v. Singer, 42 N.Y.2d 362 (1977)

    Consideration for a promise exists when the promisee incurs a specific, bargained-for legal detriment, even if the promisor receives no direct benefit.

    Summary

    This case clarifies that consideration in contract law doesn’t always require a direct benefit to the promisor; a detriment incurred by the promisee is sufficient. Feigenbaum promised to indemnify his co-shareholders in Mobile Modular Industries. When the corporation defaulted and the other shareholders paid, Feigenbaum refused to contribute, arguing he received no benefit as he hadn’t personally guaranteed the loan. The Court of Appeals held that the other shareholders’ promises to indemnify each other, a detriment to them, constituted sufficient consideration to enforce Feigenbaum’s promise, regardless of whether he directly benefited.

    Facts

    Mobile Modular Industries, Inc. needed capital and sought a loan from First National City Bank of Binghamton.

    The bank required personal guarantees from all shareholders.

    Most shareholders, including the plaintiffs (Singer, et al.), provided guarantees.

    Feigenbaum, the defendant, did not give a personal guarantee to the bank.

    All shareholders, including Feigenbaum, entered into a cross-indemnity agreement, promising to cover pro rata losses if any shareholder was liable to the bank.

    The agreement stated the guarantees were an inducement for the line of credit.

    Mobile Modular defaulted, and the bank recovered from six shareholders who then sought contribution from Feigenbaum per the indemnity agreement.

    Feigenbaum refused to pay.

    Procedural History

    Plaintiffs sued Feigenbaum to enforce the indemnity agreement.

    Special Term granted summary judgment for plaintiffs, estopping Feigenbaum from denying he was a guarantor.

    The Appellate Division affirmed, finding Feigenbaum benefited when the bank loaned funds to the corporation.

    The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether a promise to indemnify co-shareholders against disproportionate loss is enforceable when the promisor (Feigenbaum) received no direct benefit because he did not personally guarantee the underlying debt to the bank.

    Holding

    Yes, because consideration may consist of a detriment to the promisee (the shareholders who provided guarantees), even if the promisor (Feigenbaum) receives no direct benefit. The plaintiffs’ promise to indemnify each other constituted sufficient consideration.

    Court’s Reasoning

    The court rejected the argument that consideration requires a benefit flowing to the promisor.

    It traced the historical development of consideration from actions of debt (quid pro quo) to assumpsit (detriment to promisee).

    The court explained that modern contract law recognizes consideration as either a benefit to the promisor or a detriment to the promisee.

    The court cited Rector of St. Mark’s Church v Teed, 120 NY 583, 586, stating, ” ‘[a] valuable consideration may consist of some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.’ “

    Plaintiffs’ promises to indemnify each other, regardless of their value to Feigenbaum, represented a detriment since they assumed the added duty of sharing the corporation’s default costs. “Since this detriment was precisely what defendant had bargained for under the terms of that agreement, he cannot now avoid his own promise by claiming that it was not supported by legally sufficient consideration.”

    The court also noted the promises to the bank were identified in the cross-indemnity agreement as part of the consideration.

    Finally, the court addressed the sequence of events. Even if Feigenbaum’s promise came after the guarantees, General Obligations Law § 5-1105 allows enforcement if the past consideration (the guarantees) is expressed in the writing.

  • Ehrlich v. American Moninger Greenhouse Mfg. Corp., 26 N.Y.2d 255 (1970): Sufficiency of Evidence to Rebut Lack of Consideration Claim

    Ehrlich v. American Moninger Greenhouse Mfg. Corp., 26 N.Y.2d 255 (1970)

    A party opposing summary judgment on the basis of lack of consideration must present specific evidentiary facts, not just conclusory assertions, to demonstrate a genuine issue for trial, especially when documentary evidence supports the existence of consideration.

    Summary

    Ehrlich sued American Moninger Greenhouse and Daniel Ehrlich (guarantor) to recover on a demand note. The defendants argued the note lacked consideration, claiming the initial transfer of funds was an investment, not a loan, camouflaged for tax reasons. The Court of Appeals affirmed summary judgment for Ehrlich, holding that while the parol evidence rule and CPLR 4519 (Dead Man’s Statute) did not bar the defendants’ evidence, they failed to provide sufficient evidentiary facts to rebut the overwhelming documentary evidence suggesting a loan. Bald, conclusory assertions were insufficient to defeat summary judgment.

    Facts

    1. Plaintiff gave Daniel Ehrlich, an officer of American Moninger Greenhouse and her deceased husband’s brother, a $40,000 check payable to the corporation.
    2. After her husband’s death, Plaintiff requested repayment.
    3. Instead of repayment, the corporation issued a demand note for $40,000, guaranteed by Daniel Ehrlich, stating “value received.”
    4. The corporation made interest and principal payments on the note, but later defaulted.
    5. Plaintiff sued to recover the remaining balance of $30,000.

    Procedural History

    1. The Special Term initially denied Plaintiff’s motion for summary judgment.
    2. The Appellate Division reversed, granting summary judgment to Plaintiff.
    3. The Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    1. Whether the defendants presented sufficient evidence to raise a triable issue of fact regarding the lack of consideration for the demand note, thereby precluding summary judgment.
    2. Whether the defendant Ehrlich could assert counterclaims against the plaintiff based on claims he had against the plaintiff’s deceased husband.

    Holding

    1. No, because the defendants’ allegations consisted of bald, conclusory assertions and failed to overcome the overwhelming documentary evidence indicating the transaction was a loan.
    2. No, because counterclaims against a plaintiff are restricted to the capacity in which the plaintiff sues, and allowing the counterclaim would afford the defendant a preference over other creditors of the estate.

    Court’s Reasoning

    The Court reasoned that while CPLR 4519 (the Dead Man’s Statute) and the parol evidence rule, in this instance, did not automatically bar the defendants’ evidence, the defendants still failed to meet their burden in opposing summary judgment. The Court emphasized that more than merely raising an issue of consideration was required; the defendants needed to state their version of the facts in evidentiary form. The court stated, “‘Bald conclusory assertions, even if believable, are not enough.’” The documentary evidence, including the note, checkbook entry, and corporate financial statements, all pointed to a loan. The defendants’ explanation that the transaction was disguised as a loan for “tax reasons” was deemed insufficient because they failed to disclose the specific nature of these tax reasons or how the disguise would have benefited any party. Regarding the counterclaims, the Court invoked the rule restricting counterclaims to the capacity in which the plaintiff sues. Permitting the counterclaim would grant the defendant an unfair advantage over other creditors of the estate. However, the court noted that the defendant could institute a separate action against the estate to pursue their claims. The court referenced Latham v. Father Divine, 299 N.Y. 22, 27 regarding the potential for impressing a constructive trust.

  • Rodgers v. Rodgers, 229 N.Y. 255 (1920): Enforceability of Contracts Promoting Marital Reconciliation

    Rodgers v. Rodgers, 229 N.Y. 255 (1920)

    An agreement between a husband, his father, and the wife to resume marital relations in exchange for monthly payments to the wife, which are to continue regardless of separation or divorce, is not facially against public policy and may be enforceable.

    Summary

    The New York Court of Appeals addressed the enforceability of a contract where a wife agreed to discontinue her divorce action and resume marital relations with her husband in exchange for monthly payments from her husband and his father. The court held that such an agreement is not facially against public policy and is supported by valid consideration, as the wife surrendered her right to pursue the divorce and live separately. The court emphasized the importance of encouraging reconciliation when parties are separated for cause.

    Facts

    The plaintiff, Mrs. Rodgers, had filed a divorce action against her husband, James. To reconcile, Mrs. Rodgers, James, and James’ father, John C. Rodgers, entered into an agreement. This agreement stipulated that Mrs. Rodgers would discontinue her divorce action and resume marital relations. In return, she would receive $300 per month from James and his father, John C. Rodgers. These payments would continue regardless of whether the couple lived together, separated, or divorced, and would be unaffected by the death of either James or John C. Rodgers. Mrs. Rodgers discontinued her divorce action and lived with James until his death. John C. Rodgers made some payments but failed to pay the full amount owed.

    Procedural History

    Mrs. Rodgers sued John C. Rodgers to recover the unpaid payments. After John C. Rodgers’ death, the action was continued against his executors. The defendants demurred, arguing the complaint failed to state a cause of action and there was a defect of parties defendant. The lower courts sustained the demurrer, dismissing the complaint. The Court of Appeals then reviewed the decision.

    Issue(s)

    1. Whether an agreement for a wife to resume marital relations with her husband in exchange for financial payments, which continue even if the couple separates again, is void as against public policy.
    2. Whether the husband’s estate is a necessary party to the action.

    Holding

    1. No, because the agreement, on its face, is not against public policy as it encourages reconciliation, and the wife provided valuable consideration by giving up her right to a divorce and separate living.
    2. No, because the agreement imposed a joint obligation on the husband and his father, and the plaintiff was not required to pursue the husband’s estate first.

    Court’s Reasoning

    The court reasoned that the agreement was not facially against public policy because it aimed to reconcile a husband and wife separated for cause. The wife’s consideration was valid because she relinquished her right to pursue a divorce and live separately. The court noted, “The performance of marital duty should not be made the subject of bargain and sale, but it does not appear that reconcilement was plaintiff’s duty in this case. Rather it was her right to refuse to condone an offense against the marriage relation and to insist on a divorce with separate support and maintenance.” The court emphasized that discouraging such agreements would undermine the law’s preference for marital reconciliation. The Court distinguished this case from situations where a wife, separated without good cause, is hired to return, stating, “The husband was not hiring a discontented wife, separated from him without good cause, to return to him. She was to be paid to give up her right to live apart from him.” The court also held that the agreement imposed a joint obligation on the husband and his father. Therefore, Mrs. Rodgers could sue John C. Rodgers’ estate directly without needing to join the husband’s estate as a party. The agreement explicitly stated that payments were to continue regardless of the death of either the husband or the husband’s father, binding their respective legal representatives. The court concluded that the complaint sufficiently alleged non-payment by both obligees. The judgments were reversed, and the demurrer was overruled.

  • Meltzer v. Doll, 91 N.Y. 365 (1883): Enforceability of Accommodation Notes and Consideration

    Meltzer v. Doll, 91 N.Y. 365 (1883)

    An accommodation note is enforceable if supported by valid consideration, such as an agreement to forbear from prosecuting a debt against a third party.

    Summary

    This case addresses the enforceability of a promissory note where the defense of lack of consideration is raised. Meltzer Bros. sued Nicholas Doll’s estate to collect on a note. The estate argued the note was merely for accommodation and lacked consideration. The plaintiffs contended that the note was given in exchange for their agreement to suspend legal action against a third party, Merkle. The New York Court of Appeals affirmed the judgment for the plaintiffs, holding that forbearance from pursuing a claim against a third party constitutes valid consideration for a note, and the jury’s finding in favor of the plaintiffs on conflicting evidence was supported.

    Facts

    Meltzer Bros. held a note against George Merkle. Merkle was undergoing involuntary bankruptcy proceedings. Meltzer Bros. claimed that Nicholas Doll gave them a promissory note in exchange for their agreement to temporarily halt prosecution of their claim against Merkle. After both John and Gottfried Meltzer died, Gottfried’s executor continued the suit against Nicholas Doll’s estate, seeking to enforce the note.

    Procedural History

    The case was initially brought in a lower court, where a jury found in favor of the plaintiffs (Meltzer’s estate). The defendant (Doll’s estate) appealed, arguing that the note lacked consideration and that the court erred in admitting certain evidence. The New York Court of Appeals affirmed the lower court’s judgment, finding no reversible error.

    Issue(s)

    Whether an agreement to forbear from prosecuting a claim against a third party constitutes valid consideration for a promissory note.

    Holding

    Yes, because forbearance from pursuing a legal claim, even against a third party, is recognized as sufficient consideration to support a promise, including the promise embodied in a promissory note.

    Court’s Reasoning

    The court reasoned that valid consideration existed if the note was given in exchange for Meltzer Bros.’ agreement to forbear prosecution of their claim against Merkle. The court emphasized that it was the jury’s role to weigh the conflicting evidence and determine whether the note was an accommodation note or was supported by consideration. The court noted that evidence was presented showing Doll potentially had an interest in Merkle’s financial well-being, thus providing a motive for Doll to provide the note to induce Meltzer Bros. not to pursue action against Merkle. The court further stated that, “It was competent for the plaintiff to show an intent or motive on the part of the witness in testifying as he did on the trial which might affect his credibility before the jury.” The court also addressed the admissibility of the bill of sale and chattel mortgage, finding they were relevant to demonstrate Doll’s potential interest in Merkle’s financial stability. The court also addressed the defendant’s argument that the plaintiffs proving a debt in bankruptcy before the three months expired negated any consideration; the court found this argument without merit because the deposition in bankruptcy stated that the debt was owed to one member of the firm individually, not to the firm as a whole, and it could be presumed that the individual had lawfully obtained ownership of the debt. Furthermore, “the ex-parte proof in bankruptcy is not such an adjudication as to the existence of a fact as to legally preclude the person making it from afterward explaining or contradicting the statement therein contained, especially as against one who was not in a legal sense a party to that proceeding.” Because there was no estoppel, the court affirmed the judgment for the plaintiffs.