New York Law Review

Tag: detrimental reliance

  • In re Estate of Hennel, 31 N.Y.3d 486 (2018): Promissory Estoppel and the Enforcement of Gratuitous Promises

    In re Estate of Hennel, 31 N.Y.3d 486 (2018)

    Promissory estoppel can be invoked to enforce a promise, even without formal consideration, if the promisee reasonably relied on the promise to their detriment, and injustice can only be avoided by enforcement.

    Summary

    The New York Court of Appeals addressed whether promissory estoppel could be used to compel an estate to satisfy a mortgage on property the deceased had promised to leave to the claimants. The deceased, Edmund Hennel, promised his stepson and stepson’s wife that he would leave them his house if they took care of him and his wife. They provided care for years, and he executed a will to that effect. However, a later will omitted this devise. The court held that the promise was enforceable under promissory estoppel because the couple reasonably relied on the promise to their detriment by providing extensive care, and injustice could only be avoided by enforcing the promise.

    Facts

    Edmund Hennel promised his stepson, Gregory Hennel, and his wife, Barbara Hennel, that he would leave them his home upon his death if they took care of him and his wife. The Hennels provided care for many years, and in 2006, Edmund executed a will that devised the property to them. In 2008, he executed a new will, which omitted the devise of the home. After Edmund died, the Hennels sought to enforce the promise and filed a claim against the estate to satisfy the mortgage on the property. The Surrogate’s Court initially found for the Hennels on both promissory estoppel and the interpretation of the will’s directive to pay “just debts.” The Appellate Division affirmed on the basis of promissory estoppel. The estate appealed.

    Procedural History

    The Surrogate’s Court granted the Hennels’ claim, ruling in their favor based on promissory estoppel and the interpretation of the will. The Appellate Division affirmed, focusing on promissory estoppel. The estate appealed to the New York Court of Appeals, which reversed the Appellate Division’s ruling.

    Issue(s)

    1. Whether the doctrine of promissory estoppel can be applied to enforce a promise to devise real property where the promisee provided care and support in reliance on the promise, but there was no consideration.

    Holding

    1. Yes, because the Hennels reasonably relied on the promise to their detriment, and injustice can only be avoided by enforcing the promise through promissory estoppel.

    Court’s Reasoning

    The Court of Appeals acknowledged the elements of promissory estoppel: a clear and unambiguous promise, reasonable and foreseeable reliance by the promisee, and injury sustained by the promisee because of that reliance. The court noted that the Hennels provided extensive care, and they had changed their positions in reliance on Edmund’s promise. The court found that enforcing the promise was necessary to prevent injustice. While generally, gratuitous promises are not enforceable, promissory estoppel provides an exception when there is detrimental reliance. The court directly applied the law to the facts, concluding that the Hennels’ care for Edmund and his wife, given the promise, created a situation where failing to enforce the promise would be unjust. The court emphasized that the promise was clear and the reliance was reasonable, and the injury was significant.

    Practical Implications

    This case clarifies the applicability of promissory estoppel in situations involving promises to transfer property or provide benefits where traditional contract elements, such as consideration, may be absent. Lawyers should consider promissory estoppel when advising clients who have relied on promises to their detriment, even if those promises might not be enforceable under traditional contract principles. This decision emphasizes that courts will look closely at the fairness of the situation, and the extent to which the promisee changed their position in reliance on the promise. This case can influence how attorneys advise clients involved in estate disputes, especially those involving claims based on promises of inheritance. It also influences how attorneys will craft arguments to both enforce and defend against these types of claims. The court’s focus on preventing injustice suggests that courts will be inclined to enforce promises when significant reliance has occurred, particularly when a party has provided care or performed services in reliance on the promise.

  • Messner Vetere Berger McNamee Schmetterer Euro RSCG Inc. v. Aegis Group Plc, 93 N.Y.2d 229 (1999): Part Performance Exception to Statute of Frauds Requires Detrimental Reliance

    93 N.Y.2d 229 (1999)

    To successfully invoke the part performance exception to the Statute of Frauds, a plaintiff must demonstrate actions unequivocally referable to the alleged oral agreement and detrimental reliance on that agreement; inaction, without detrimental reliance, is insufficient, and the part performance must be by the party seeking to enforce the contract.

    Summary

    Messner Vetere sued Aegis Group, claiming Aegis had orally agreed to assume obligations under a lease. Aegis argued the Statute of Frauds barred the claim. Messner Vetere argued part performance was an exception. The Second Circuit certified questions to the New York Court of Appeals about whether “inaction” and the defendant’s actions alone sufficed for part performance. The Court of Appeals held that the plaintiff’s inaction, absent detrimental reliance, was insufficient, and that part performance must be by the party seeking to enforce the oral agreement. The court emphasized that part performance requires actions unequivocally referable to the oral agreement coupled with detrimental reliance to prevent unjust enrichment.

    Facts

    HBM Creamer Inc. entered a 20-year lease in 1979. Aegis purchased Creamer’s stock in 1986. In 1987, Creamer moved its operations and merged into Della Femina McNamee Inc. (DFM). Aegis and other entities occupied the leased space. In 1988, Aegis sold 20% of DFM to Messner Vetere, then sold additional shares in 1989 and 1992. Messner Vetere alleged Aegis orally agreed to assume lease obligations and hold Creamer harmless. Aegis made lease payments until 1995, then terminated involvement. Messner Vetere then sued Aegis.

    Procedural History

    Messner Vetere sued Aegis in Federal District Court for breach of contract and a declaratory judgment. The District Court dismissed the complaint, finding Aegis’s conduct wasn’t unequivocally referable to the oral agreement. The Second Circuit certified two questions to the New York Court of Appeals: (1) whether “inaction” based on the oral promise constitutes part performance, and (2) whether the defendant’s actions alone constitute part performance.

    Issue(s)

    1. Whether the part performance doctrine is adequately invoked at the pleading stage by a claim that the plaintiff ‘took no action’ with respect to a pre-existing written agreement, relying on an oral promise allegedly made by the defendant to the plaintiff that the defendant would act in place of the plaintiff and fulfill all of the plaintiff’s obligations under that agreement.

    2. Whether the plaintiff’s allegation of part performance by the defendant alone states a claim under the part performance doctrine.

    Holding

    1. No, because the plaintiff’s inaction, as pleaded, is insufficient to defeat a Statute of Frauds defense without detrimental reliance.

    2. No, because the acts of part performance must have been those of the party insisting on the contract, not those of the party insisting on the Statute of Frauds.

    Court’s Reasoning

    The Court of Appeals emphasized that an oral agreement to convey an interest in real property is unenforceable under the Statute of Frauds unless the party seeking to enforce the agreement can demonstrate part performance unequivocally referable to the agreement. While inaction could theoretically constitute part performance, it must be pleaded as a term of the oral agreement, be unequivocally referable to the agreement, and be coupled with detrimental reliance. Here, the plaintiff’s “inaction” was not the result of satisfying the alleged oral agreement, and the plaintiff did not allege detrimental reliance. Any payment of rent by Aegis benefitted, rather than harmed, Messner Vetere.

    The court also stated that the part performance must be by the party seeking to enforce the contract, not the party asserting the Statute of Frauds. The court quoted Walter v. Hoffman, stating that “[u]nless there has been part performance by the suitor, there has ordinarily been no change of position by him, and, therefore, no injustice to him if the contract is not performed. To that extent, therefore, the acts of part performance relied on must be the acts of the suitor” (267 N.Y. 365, 370). The court noted, “Because the doctrine of part performance is based upon the equitable principle that it would be a fraud to allow one party, insisting on the Statute, to escape performance after permitting the other party, acting in reliance, to substantially perform, the acts of part performance must have been those of the party insisting on the contract, not those of the party insisting on the Statute of Frauds”.

  • De Petris v. Union Settlement Assn., 86 N.Y.2d 406 (1995): Enforceability of Employee Manuals in At-Will Employment

    De Petris v. Union Settlement Assn., 86 N.Y.2d 406 (1995)

    An employee manual does not limit an employer’s right to discharge an at-will employee unless the employer made the employee aware of an express written policy limiting its right of discharge, and the employee detrimentally relied on that policy.

    Summary

    Dr. De Petris, an at-will employee of Union Settlement Association, was terminated. He claimed the termination violated procedures in the employee manual. The Court of Appeals held that the manual did not create enforceable rights because De Petris did not demonstrate detrimental reliance on the manual’s policies when accepting or continuing employment. The Court emphasized that the mere existence of a written policy, without detrimental reliance, does not limit an employer’s right to discharge an at-will employee.

    Facts

    Dr. De Petris was the administrative director of a counseling center managed by Union Settlement Association. Concerns arose regarding De Petris’s oversight of the Center’s finances. Despite warnings and proposed corrective measures, the financial situation did not improve. On April 20, 1992, Union Settlement terminated De Petris’s employment. De Petris argued that the termination violated the procedures outlined in the company’s personnel manual, which required written notice of performance problems and a period for improvement before termination.

    Procedural History

    De Petris filed an Article 78 proceeding seeking reinstatement and back pay, arguing that the termination was arbitrary and capricious because it failed to follow the procedures in the employee manual. The trial court dismissed the petition. The Appellate Division affirmed, concluding there was no indication the manual procedure was violated. The Court of Appeals affirmed the Appellate Division’s order, but on different grounds, focusing on the lack of detrimental reliance.

    Issue(s)

    1. Whether an employee manual, by itself, limits an employer’s right to terminate an at-will employee in the absence of detrimental reliance by the employee on the manual’s policies.
    2. Whether an Article 78 proceeding is the appropriate vehicle to circumvent the requirement of detrimental reliance in wrongful discharge claims based on employee manuals.

    Holding

    1. No, because the mere existence of a written policy, without proof that the employee detrimentally relied on that policy in accepting or continuing employment, does not limit an employer’s right to discharge an at-will employee.
    2. No, because the elements of a claim against a private corporation based on violation of an employee manual must remain the same whether the claim is portrayed as one for breach of contract or under Article 78.

    Court’s Reasoning

    The Court of Appeals reaffirmed the established New York rule that employment is presumed to be at-will unless a fixed duration is agreed upon. The Court cited Weiner v. McGraw-Hill, Inc., clarifying that an employee can only recover if the employer made the employee aware of a written policy limiting the right of discharge, and the employee detrimentally relied on that policy in accepting the employment. The Court emphasized that De Petris, already employed when the manual was issued, could not demonstrate detrimental reliance. “Whether provisions relating to just cause or provisions relating to termination procedures, the essential question — the employer’s limitation of its right to discharge an at-will employee — can be no different.” The Court distinguished cases involving educational institutions, where courts intervene more readily to ensure academic integrity. The Court concluded that allowing an Article 78 proceeding to circumvent the detrimental reliance requirement would undermine established employment law. The Court stated, “Consistent with the policy of ensuring that academic credentials truly reflect the knowledge and skills of the bearer, the courts have indicated that they will intervene if an institution exercises its discretion in an arbitrary or irrational fashion.”

  • Varrington Corp. v. City of New York, 85 N.Y.2d 28 (1995): Retroactive Application of Tax Law Changes

    Varrington Corp. v. City of New York, 85 N.Y.2d 28 (1995)

    A retroactive tax law change is valid unless it is so unfair or reaches so far into the past as to constitute a deprivation of property without due process; a taxpayer’s reliance on a temporary alteration of a long-standing tax policy is not cognizable detrimental reliance.

    Summary

    Varrington Corporation, a Netherlands Antilles company, challenged New York City’s retroactive application of a tax rule. Varrington, a limited partner in a New York partnership, initially paid corporate taxes based on its partnership interest. After a temporary City ruling suggested it wasn’t liable, Varrington received a refund. The City then reversed course, enacting a rule stating that limited partners were subject to the tax, and sought to recoup the refund. The New York Court of Appeals upheld the City’s action, finding the retroactive application permissible because it did not constitute a deprivation of property without due process and because Varrington’s reliance on the temporary changed position was not a cognizable form of detrimental reliance.

    Facts

    Varrington Corporation, a Netherlands Antilles company, held a 97.5% limited partnership interest in Richfield Investment Company, Ltd., a New York limited partnership owning a commercial building in New York City. This investment was Varrington’s sole business activity in New York. For tax years 1984-1986, Varrington paid New York City general corporation taxes. In 1988, based on a new interpretation by the City, Varrington received a refund of these taxes. In 1990, the City reversed its position again, enacting General Corporation Tax Rules § 1-5, which stated that owning a limited partnership interest in a partnership doing business in the City constituted doing business in the City for tax purposes. The City then sought to recover the refund it had previously issued to Varrington.

    Procedural History

    Varrington filed an Article 78 proceeding to annul the Commissioner’s determination. The Appellate Division denied the petition, confirming the Commissioner’s determination. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the Tax Commissioner’s determination imposing retroactive effect to Rules of the Commissioner of Finance Relating to the New York City General Corporation Tax § 1-5 (a) is justified and supported by substantial evidence, considering Varrington’s claim of detrimental reliance on the prior policy and the change in tax policy.

    Holding

    Yes, because the retroactive application of the tax rule did not constitute a deprivation of property without due process, and Varrington’s reliance on the City’s temporary changed position regarding the taxability of foreign limited partners did not amount to cognizable detrimental reliance.

    Court’s Reasoning

    The court reasoned that retroactive tax legislation is generally valid unless it reaches so far into the past or is so unfair as to violate due process. The court emphasized that tax laws are not governmental promises, and taxpayers have no vested right in a particular tax statute or regulation. The court distinguished Varrington’s situation from cases involving genuine detrimental reliance, stating that Varrington initially paid the tax believing it was legally owed and only later sought a refund based on a change in the City’s interpretation. The court noted that from 1954 until the temporary Finance Letter Ruling 67, it was the City’s consistent position that foreign limited partners were subject to the tax. The court found that Varrington’s payment of the tax in 1984, 1985 and 1986 without protest demonstrated its understanding of the City’s long-standing policy. Citing Welch v. Henry, 305 U.S. 134, 146-147, the court reiterated that taxation is simply a way of apportioning the cost of government and its retroactive imposition does not necessarily infringe due process. The court highlighted that the question of retroactivity turns on a “balancing of equities” to assess potentially harsh effects on the taxpayer (Clarendon Trust v State Tax Commn., 43 NY2d 933, 934-935). Therefore, the court concluded the Finance Letter Ruling 67 was a temporary “blip on the screen” and the City was within its right to reinstate the tax.

  • People v. Selikoff, 35 N.Y.2d 227 (1974): Enforceability of Plea Agreements Before Detrimental Reliance

    People v. Selikoff, 35 N.Y.2d 227 (1974)

    A defendant is not entitled to specific performance of a plea agreement if they have not detrimentally relied on the agreement, even if no new facts emerged to justify the court’s change of heart regarding the sentence.

    Summary

    Defendants pleaded guilty based on a judge’s sentencing indication, but the judge later deemed a harsher sentence appropriate. Although the defendants were allowed to withdraw their pleas, they instead sought specific performance of the original agreement. The New York Court of Appeals held that, absent detrimental reliance on the plea agreement, the defendants were not entitled to specific performance because vacating the plea restores them to their original position. The court retains sentencing discretion until the moment of sentencing, provided that the reasons for departing from the agreement are documented.

    Facts

    The defendants entered guilty pleas after the County Court Judge indicated a likely sentence. Prior to sentencing, the Judge reconsidered the nature of the crime and determined that a lengthier sentence was warranted.

    Procedural History

    The defendants appealed, seeking specific performance of the original plea agreement, arguing that no new facts justified the judge’s change in sentencing. The Appellate Division orders were affirmed by the Court of Appeals.

    Issue(s)

    Whether a defendant is entitled to specific performance of a plea agreement when the sentencing court decides to impose a harsher sentence than initially indicated, but allows the defendant to withdraw their plea, and the defendant has not demonstrated detrimental reliance on the original agreement.

    Holding

    No, because absent detrimental reliance on the plea agreement, the defendant is restored to their original position by being allowed to withdraw the plea, and the court retains discretion in fixing an appropriate sentence until the time of sentencing, as long as the reasons for departing from the sentencing agreement are placed on the record.

    Court’s Reasoning

    The Court of Appeals relied on People v. McConnell, which stated that a defendant who has not changed their position is generally only entitled to the vacation of their plea if the court cannot adhere to the promise given. This is because vacating the plea restores them to their initial position. The court emphasized that it retains discretion in fixing an appropriate sentence up until the time of sentencing, citing People v. Farrar. The court also noted that reasons for departing from the sentencing agreement must be placed on the record to ensure effective appellate review, citing People v. Danny G. Because the defendants were afforded an opportunity to withdraw their pleas, didn’t argue detrimental reliance, and the County Court demonstrated proper sentencing criteria for the revised sanction, the Court of Appeals held that the County Court had not abused its discretion as a matter of law. The court stated that the defendants are not entitled to specific performance of the original sentencing representations. The court emphasized that “[a] defendant who has not * * * changed his position will generally be entitled to no more than the vacation of his plea if the court concludes that it cannot adhere to the promise given, for the simple reason that vacating the plea restores him to the same position he was in before the plea was taken”. This highlights the court’s focus on restoring the defendant to their original position absent detrimental reliance.

  • People v. McConnell, 49 N.Y.2d 340 (1980): Enforceability of Plea Bargains After Defendant’s Detrimental Reliance

    People v. McConnell, 49 N.Y.2d 340 (1980)

    When a defendant detrimentally relies on a plea agreement by testifying before a grand jury and at trial, resulting in the indictment and conviction of codefendants, specific performance of the plea agreement is required unless new information reveals the defendant’s conduct was substantially more egregious than initially understood.

    Summary

    McConnell pleaded guilty to manslaughter in the second degree with an agreed-upon sentence of no more than 10 years, in exchange for his testimony against codefendants. He testified before a grand jury, resulting in indictments, and at the trial of one codefendant, resulting in a conviction. Two other codefendants pleaded guilty based on his availability as a witness. The trial judge, however, imposed a 15-year sentence, stating he learned during the trial that McConnell had stabbed the victim. The Court of Appeals held that McConnell was entitled to specific performance of the plea bargain, because his extensive cooperation had placed him in an irreversible position, and the new information about the stabbing did not warrant overriding the agreement given his level of cooperation.

    Facts

    McConnell, along with Carroll, Rock, and Bridges, were airmen. Following a night of heavy drinking and drug use, McConnell, Carroll, and Hasman (the victim) went to a deserted road where Hasman was fatally beaten. McConnell’s attorney agreed with the prosecutor that if McConnell testified before the grand jury and in subsequent proceedings, the prosecutor would accept a guilty plea to manslaughter in the second degree (punishable by up to 15 years) and recommend a maximum sentence of 10 years. The County Judge concurred, stating that if McConnell testified truthfully, he would not consider a sentence greater than 10 years.

    Procedural History

    McConnell testified before the grand jury, resulting in indictments against him and the others. Rock and Bridges pleaded guilty. McConnell testified at Carroll’s trial, and Carroll was convicted. The prosecutor recommended the agreed-upon 10-year maximum sentence for McConnell, but the County Judge imposed a 15-year sentence based on information learned at Carroll’s trial that McConnell had stabbed the victim. McConnell’s motion to vacate the sentence was denied. The Appellate Division affirmed, but noted they would vacate the sentence and allow withdrawal of the plea; however, McConnell’s attorney expressly stated he did not seek that relief. The Court of Appeals then heard the case.

    Issue(s)

    Whether a trial judge abuses discretion by imposing a 15-year sentence on a defendant who pleaded guilty to manslaughter with a 10-year maximum agreement, where the defendant testified before the grand jury (resulting in indictments), testified at a codefendant’s trial (resulting in a conviction), and whose availability to testify led other codefendants to plead guilty, based on information learned at trial that the defendant had stabbed the victim?

    Holding

    Yes, because McConnell had detrimentally relied on the plea agreement by providing substantial cooperation, placing himself in a “no-return position,” and the additional information concerning the stabbing did not justify overriding the plea agreement.

    Court’s Reasoning

    The court emphasized the importance of plea bargaining and ensuring defendants can rely on agreements made on the record. Citing People v. Selikoff, the court acknowledged that sentence promises are conditioned on the appropriateness of the sentence based on subsequently received information. However, a sentencing judge must exercise sound judicial discretion, considering the integrity of the criminal justice system. Because McConnell had changed his position so significantly by testifying, he could not be restored to his original position. The court distinguished the case from situations where vacating the plea would be sufficient because McConnell waived his right to trial and his privilege against self-incrimination. The court found the additional information – that McConnell had stabbed the victim – was not significant enough to justify breaking the plea agreement, especially considering that the judge believed McConnell had missed when stabbing the victim. The court stated: “Use of a knife adds little to the heinousness of taking Hasman’s life by beating, punching or kicking, especially when one recalls that it followed an orgy of drink and drugs.” The court held that “a promise made by a State official authorized to do so and acted upon by a defendant in a criminal matter to his detriment is not lightly to be disregarded.” The court also noted that enforcing the plea bargain benefited the state by ensuring cooperation in future cases and addressing staleness issues with the indictment. Specific performance of the plea bargain was deemed a matter of “essential fairness”.