New York Law Review

Tag: Part Performance

  • 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”.

  • American Bartenders’ School, Inc. v. 105 Madison Company, Inc., 59 N.Y.2d 796 (1983): Application of Equitable Estoppel and Part Performance

    American Bartenders’ School, Inc. v. 105 Madison Company, Inc., 59 N.Y.2d 796 (1983)

    Equitable estoppel requires unconscionable injury and loss to the party invoking it, stemming from reliance on another’s promise; similarly, part performance requires actions unequivocally referable to the alleged oral agreement to be enforceable.

    Summary

    American Bartenders’ School sued 105 Madison Company seeking to enforce an alleged oral agreement to modify a lease. The plaintiff argued that the defendant should be equitably estopped from denying the modification and that their actions constituted part performance of the oral agreement. The New York Court of Appeals held that equitable estoppel did not apply because the plaintiff did not demonstrate unconscionable injury, and part performance was inapplicable because the actions were not unequivocally referable to the alleged oral agreement. The court affirmed the order denying the lease modification.

    Facts

    American Bartenders’ School, Inc. (plaintiff) was a tenant of 105 Madison Company, Inc. (defendant). The plaintiff alleged that the parties orally agreed to modify the existing lease. The plaintiff asserted that they acted in reliance on the defendant’s promise to execute the lease modification. When the defendant refused to execute the modification, the plaintiff brought suit, arguing that the defendant should be estopped from denying the modification based on equitable estoppel and part performance doctrines.

    Procedural History

    The lower court denied the plaintiff’s request for the lease modification. The Appellate Division affirmed this decision. The New York Court of Appeals granted leave to appeal and affirmed the Appellate Division’s order.

    Issue(s)

    1. Whether the doctrine of equitable estoppel should be applied to prevent the defendant from refusing to execute the lease modification.
    2. Whether the plaintiff’s actions constitute part performance sufficient to enforce the alleged oral agreement.

    Holding

    1. No, because the plaintiff failed to demonstrate an unconscionable injury resulting from the defendant’s refusal to execute the lease modification.
    2. No, because the alleged part performance was not unequivocally referable to the alleged oral agreement.

    Court’s Reasoning

    The court reasoned that equitable estoppel is invoked to prevent “unconscionable injury and loss upon one who has relied on the promise of another.” The court found that the plaintiff’s allegation that the defendant’s profit motive made its conduct inequitable was irrelevant. The critical question was whether the defendant’s conduct unjustly injured the plaintiff. The court concluded that the circumstances did not rise to a level of unconscionability warranting application of equitable estoppel.

    Regarding part performance, the court stated that the performance must be “unequivocally referable” to the alleged oral agreement. Because the plaintiff’s actions were not solely and unmistakably referable to the alleged lease modification, the doctrine of part performance did not apply.

    The court cited Imperator Realty Co. v Tull, 228 NY 447, 453, regarding the purpose of equitable estoppel. Regarding part performance, the court cited Burns v McCormick, 233 NY 230, emphasizing the requirement that the performance be unequivocally referable to the oral agreement.

  • Anostario v. Vicinanzo, 59 N.Y.2d 662 (1983): Enforceability of Oral Agreements and the Doctrine of Part Performance

    59 N.Y.2d 662 (1983)

    The doctrine of part performance may be invoked to remove an oral agreement from the Statute of Frauds only if the plaintiff’s actions are unequivocally referable to the agreement alleged.

    Summary

    Anostario sued Vicinanzo seeking to enforce an oral agreement for equal shares in a corporation formed to manage a building. The lower courts disagreed on whether Anostario’s actions constituted sufficient part performance to overcome the Statute of Frauds. The Court of Appeals reversed the Appellate Division’s order, holding that Anostario’s actions were not unequivocally referable to the alleged oral agreement. The court emphasized that the actions alone must be unintelligible or extraordinary without reference to the oral agreement; simply giving significance to the actions is insufficient. Since Anostario’s actions could be explained by other expectations, the Statute of Frauds applied, and the complaint was dismissed.

    Facts

    Anostario and Vicinanzo allegedly made an oral agreement to form a corporation to purchase and manage a seven-story office building. Vicinanzo, an attorney, would handle legal and financial aspects, while Anostario would manage the building. Both signed a purchase agreement as co-promoters and a bank note for the down payment. Anostario later assigned his interest in the purchase contract to the newly formed corporation. Anostario claimed these actions constituted part performance of the oral agreement for equal shares in the corporation.

    Procedural History

    Anostario sued Vicinanzo in Supreme Court, Montgomery County, seeking specific performance of the alleged oral agreement. The Supreme Court dismissed the complaint based on the Statute of Frauds. The Appellate Division reversed, granting specific performance based on sufficient part performance. Vicinanzo appealed to the New York Court of Appeals.

    Issue(s)

    Whether Anostario’s actions (signing a purchase agreement as co-promoter, signing a bank note for the down payment, and assigning his interest to the corporation) were unequivocally referable to the alleged oral agreement to convey a one-half interest in Vicinanzo’s corporation, thus removing the agreement from the Statute of Frauds.

    Holding

    No, because Anostario’s actions were not unequivocally referable to the alleged oral agreement; they could be explained by other expectations, such as receiving compensation in a form other than an equity interest in the corporation, or as preparatory steps toward a future agreement.

    Court’s Reasoning

    The Court of Appeals reversed, reinstating the Supreme Court’s dismissal. The court emphasized that the doctrine of part performance requires actions to be unequivocally referable to the alleged agreement. “It is not sufficient…that the oral agreement gives significance to plaintiff’s actions. Rather, the actions alone must be ‘unintelligible or at least extraordinary’, explainable only with reference to the oral agreement.” The court found Anostario’s actions were equivocal, reasonably explained by expectations other than an equity interest, such as compensation. The court also noted the actions could be viewed as preparatory steps toward a future agreement. Therefore, the Statute of Frauds applied, barring enforcement of the oral agreement. The court cited Burns v. McCormick, 233 N.Y. 230, 232 and Grade Sq. Realty Corp. v Choice Realty Corp., 305 N.Y. 271, 282 to support its reasoning. The court concluded that because no exception to the Statute of Frauds was demonstrated, the Supreme Court correctly dismissed Anostario’s complaint.