New York Law Review

Tag: statute of frauds

  • Marvin M. Saffren v. D.M. White, Inc., 24 N.Y.3d 761 (2015): Statute of Frauds and Contracts for Financial Advisory Services Related to Business Opportunities

    Marvin M. Saffren v. D.M. White, Inc., 24 N.Y.3d 761 (2015)

    The Statute of Frauds, specifically General Obligations Law § 5-701(a)(10), bars oral contracts for compensation for services rendered in negotiating the purchase of real estate or a business opportunity, but not for services that inform the decision of whether or not to negotiate.

    Summary

    The case concerns the Statute of Frauds and its applicability to contracts for financial advisory services. The plaintiff, a financial consultant, sued to recover compensation for services related to various real estate and business investment opportunities. The court addressed whether the Statute of Frauds barred the claims, focusing on General Obligations Law § 5-701(a)(10), which requires certain contracts to be in writing. The court differentiated between services rendered in direct negotiation of a deal, which are covered by the statute, and services that inform the decision of whether or not to negotiate, which are not. The court modified the lower court’s decision, finding that the Statute of Frauds did not bar claims for some of the projects because the services provided were related to the decision-making process rather than direct negotiation.

    Facts

    The plaintiff, Marvin M. Saffren, provided financial advisory services to the defendant, D.M. White, Inc., regarding several investment opportunities. These services included financial analysis and market research for various projects. The services rendered included analysis of investments in a hotel/water park portfolio, and other projects for which the plaintiff was not compensated. Saffren sued to recover compensation based on quantum meruit and unjust enrichment for nine project groups. The defendant moved to dismiss the amended complaint under CPLR 3211(a)(7), claiming the Statute of Frauds barred the claims.

    Procedural History

    Saffren initially filed a complaint, which was dismissed, but with leave to amend. He filed an amended complaint asserting claims for quantum meruit and unjust enrichment. The defendant moved to dismiss the amended complaint, which was granted in part by the Supreme Court, dismissing claims related to some project groups. The Appellate Division modified, dismissing the entire amended complaint, holding that the Statute of Frauds applied. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether General Obligations Law § 5-701(a)(10) bars claims for compensation for financial advisory services rendered to inform the decision of whether to negotiate a business opportunity?

    Holding

    1. No, because the statute applies to services related to negotiation, not the provision of information to determine whether to negotiate.

    Court’s Reasoning

    The Court of Appeals examined General Obligations Law § 5-701(a)(10), which requires a written agreement for contracts to pay compensation for services rendered in negotiating the purchase of real estate or a business opportunity. The court distinguished between services that assist in the direct negotiation of a business opportunity and services that inform the decision of whether to negotiate. The Court noted that “‘negotiating’ includes procuring an introduction to a party to the transaction or assisting in the negotiation or consummation of the transaction”. The court held that services provided to inform the defendant’s decision to negotiate did not fall under the statute, while services assisting in the negotiation were covered. The court reviewed the allegations in the amended complaint and determined which project groups involved services related to direct negotiation (covered by the statute) and which involved advisory services that informed the decision to negotiate (not covered). The court distinguished the case from Snyder v. Bronfman, where the intermediary work was deemed to be covered by the statute because of the nature of the services provided. The Court also noted a distinction between an intermediary providing “know-how” or “know-who” versus services that help the client evaluate whether to pursue a deal.

    Practical Implications

    This case clarifies the scope of the Statute of Frauds regarding contracts for financial advisory services related to business opportunities. It reinforces the importance of documenting agreements where services relate to the negotiation phase of a deal, but it also provides a distinction for services that aid in the decision of whether to negotiate at all. Attorneys must carefully analyze the nature of the services provided to determine whether a written contract is required. This ruling impacts how such cases are analyzed by separating services related to the negotiation of a deal (subject to the Statute of Frauds) versus services that inform the decision to negotiate, which may not require a written agreement. The decision emphasizes the importance of clearly defining the scope of services in contracts to avoid litigation related to the statute of frauds. This case has been cited in subsequent cases to determine whether a contract falls within the scope of GOL § 5-701(a)(10).

  • William J. Jenack Estate Appraisers and Auctioneers, Inc. v. Rabizadeh, 22 N.Y.3d 470 (2013): Satisfying the Statute of Frauds in Auction Sales

    William J. Jenack Estate Appraisers and Auctioneers, Inc. v. Rabizadeh, 22 N.Y.3d 470 (2013)

    In auction sales, the statute of frauds may be satisfied by piecing together related writings, such as an absentee bidder form and a clerking sheet, even if the clerking sheet alone does not fully comply with the statute, and the auctioneer’s name on the clerking sheet can serve as the “person on whose account the sale was made.”

    Summary

    Jenack, an auction house, sued Rabizadeh for failing to pay for an item he won at auction. Rabizadeh argued the absence of a written contract satisfying the statute of frauds. Jenack contended the absentee bidder form Rabizadeh signed and the clerking sheet documenting the sale together met the statutory requirement. The Court of Appeals held that the combination of the absentee bidder form (containing Rabizadeh’s signature and details) and the clerking sheet (listing Jenack as the auctioneer and agent of the seller) satisfied the statute of frauds. Thus, Rabizadeh was liable for breach of contract.

    Facts

    Jenack sells art and antiques at public auctions, including online and absentee bidding. Rabizadeh submitted a signed absentee bidder form with his name, contact information, credit card details, and a list of items he wanted to bid on, including “Item 193,” described in the catalogue. Jenack assigned Rabizadeh bidder number 305. At the auction, Rabizadeh successfully bid $400,000 on Item 193. Jenack’s chief clerk recorded Rabizadeh’s bidder number and winning bid on the clerking sheet. Jenack sent Rabizadeh an invoice, but Rabizadeh refused to pay.

    Procedural History

    Jenack sued Rabizadeh for breach of contract. Rabizadeh moved for summary judgment, arguing the statute of frauds was not satisfied. Jenack cross-moved, claiming the documents met the requirements. Supreme Court denied Rabizadeh’s motion and granted Jenack’s, finding Rabizadeh liable. The Appellate Division reversed, concluding the clerking sheet lacked the seller’s name as required by the statute. The Court of Appeals granted Jenack leave to appeal.

    Issue(s)

    Whether the combination of an absentee bidder form signed by the buyer and an auction clerking sheet can satisfy the statute of frauds requirement of a written memorandum for auction sales under General Obligations Law § 5-701(a)(6), specifically regarding the identification of the buyer and the person on whose account the sale was made.

    Holding

    Yes, because the absentee bidder form, when read together with the clerking sheet listing the auctioneer, contains all the information required by General Obligations Law § 5-701(a)(6), including the buyer’s name and the name of the person on whose account the sale was made, where the auctioneer acts as the seller’s agent.

    Court’s Reasoning

    The Court of Appeals noted that summary judgment requires demonstrating the absence of material issues of fact. While a single document might not suffice, related writings can be pieced together to satisfy the statute of frauds. The Court agreed with the Appellate Division that the clerking sheet alone was insufficient, as it used numbers instead of names for the buyer and seller/consignor. However, the absentee bidder form provided Rabizadeh’s name as the buyer, fulfilling that requirement when combined with the clerking sheet. Regarding “the person on whose account the sale was made,” the Court cited Hicks v. Whitmore, holding that listing an agent with legal authority to sell satisfies the statute, even if the actual owner’s name is not present. Since Jenack was acting as the seller’s agent, its name on the clerking sheet fulfilled this requirement. The Court emphasized that the statute of frauds should not be used to evade legitimate obligations. “The Statute of Frauds was not enacted to afford persons a means of evading just obligations; nor was it intended to supply a cloak of immunity to hedging litigants lacking integrity; nor was it adopted to enable defendants to interpose the Statute as a bar to a contract fairly, and admittedly, made.”

  • Ryan v. Kellogg Partners Institutional Services, 19 N.Y.3d 1 (2012): Enforceability of Oral Agreements for Bonuses

    19 N.Y.3d 1 (2012)

    An oral agreement for a guaranteed bonus is enforceable, even for an at-will employee, if the agreement is supported by consideration and capable of being performed within one year, and an employee can recover attorney fees if the unpaid bonus qualifies as “wages” under Labor Law § 190(1).

    Summary

    Daniel Ryan left his job at a brokerage firm to join Kellogg Partners, allegedly based on an oral promise of a $175,000 salary and a $175,000 guaranteed bonus. After joining, Ryan signed an employment application and received an employee handbook stating his employment was at-will and that benefits were not guaranteed. Kellogg failed to pay the bonus, and later fired Ryan. Ryan sued for breach of contract and violation of New York Labor Law. The jury found in favor of Ryan on the breach of contract claim. The Court of Appeals affirmed, holding that the oral agreement was enforceable because it was supported by consideration and capable of being performed within a year, and the bonus constituted “wages” under the Labor Law, entitling Ryan to attorney’s fees.

    Facts

    Daniel Ryan was recruited by Kellogg Partners, a new broker-dealer, in early 2003. Ryan stated he wanted a $350,000 package to change jobs. Kellogg’s managing partner allegedly agreed to a $175,000 salary and a $175,000 guaranteed bonus. Ryan accepted the offer and started on July 14, 2003. Prior to starting, on June 21, 2003, Ryan signed an employment application acknowledging his at-will employment status and lack of guaranteed compensation. On February 18, 2004, he signed a receipt for Kellogg’s employee handbook, reiterating the at-will nature of his employment. Kellogg did not pay the bonus. In February 2004, Kellogg’s managing partner allegedly asked Ryan to defer the bonus to 2004, which Ryan reluctantly agreed to. Ryan was fired on February 8, 2005, after rejecting a $20,000 bonus offer. Kellogg filed a negative U-5 form alleging Ryan was terminated for cause, namely insubordination and disparagement.

    Procedural History

    Ryan sued Kellogg for failure to pay wages and breach of contract. The Supreme Court held a jury trial, which found Kellogg had breached an oral agreement to pay Ryan a guaranteed bonus, but did not find that the failure to pay was willful. Kellogg moved for judgment notwithstanding the verdict or a new trial, arguing the oral agreement was unenforceable under the Statute of Frauds and related provisions of the General Obligations Law. Supreme Court denied Kellogg’s motion. The Appellate Division affirmed. Kellogg appealed to the Court of Appeals based on a two-Justice dissent.

    Issue(s)

    1. Whether the statements in the employment application and employee handbook negated Ryan’s expectation of, or entitlement to, a guaranteed bonus.

    2. Whether the oral agreements regarding the bonus were unenforceable because they were not in writing, as required by the General Obligations Law.

    3. Whether Ryan was entitled to attorney’s fees pursuant to Labor Law § 198(1-a).

    Holding

    1. No, because the employment application and employee handbook only confirmed Ryan’s at-will status and did not explicitly negate the possibility of a guaranteed bonus.

    2. No, because the oral agreements were supported by consideration and capable of being performed within one year, and therefore did not fall within the scope of the Statute of Frauds.

    3. Yes, because Ryan’s bonus was expressly linked to his labor, making it “wages” under Labor Law § 190(1), entitling him to attorney’s fees.

    Court’s Reasoning

    The Court reasoned that the employment application and employee handbook only addressed Ryan’s at-will status, not whether he was entitled to the promised bonus. The Court distinguished the case from others where written contracts or handbooks explicitly vested discretion in the employer regarding bonus amounts. The Court found that Ryan’s testimony, which the jury clearly believed, established that the bonus was a guaranteed part of his compensation package. As such, the signed documents did not bar Ryan’s recovery.

    The Court addressed Kellogg’s Statute of Frauds defense, noting that the oral agreement was supported by consideration (Ryan leaving his old job and continuing to work at Kellogg) and could be performed within one year. Therefore, the General Obligations Law sections requiring a signed writing did not apply. The court noted that “[a]s long as (an) agreement may be fairly and reasonably interpreted such that it may be performed within a year (of its making), the Statute of Frauds will not act as a bar however unexpected, unlikely, or even improbable that such performance will occur during that time frame”.

    Finally, regarding attorney’s fees, the Court distinguished Truelove v. Northeast Capital & Advisory, where the bonus was discretionary and not directly linked to the employee’s performance. Here, Ryan’s bonus was tied to his work as a floor broker, making it “wages” under the Labor Law. The court noted “[u]nlike the situation in Truelove, Ryan’s bonus was “expressly link[ed]” to his “labor or services personally rendered” namely, his work as a floor broker for Kellogg.” Thus, Kellogg’s failure to pay entitled Ryan to attorney’s fees.

  • Snyder v. Bronfman, 13 N.Y.3d 507 (2009): Oral Agreements for Business Acquisition Services and the Statute of Frauds

    13 N.Y.3d 507 (2009)

    An oral agreement to compensate someone for services rendered in negotiating the purchase of a business opportunity falls within the Statute of Frauds and is unenforceable.

    Summary

    Snyder sued Bronfman for compensation related to Snyder’s role in Bronfman’s acquisition of Warner Music. Snyder claimed an oral agreement existed where he would act as Bronfman’s advisor and be compensated fairly for his services. After Snyder helped Bronfman acquire Warner Music, Bronfman refused to pay him. Snyder sued for breach of a joint venture agreement, breach of fiduciary duty, accounting, unjust enrichment, promissory estoppel, and quantum meruit. The lower courts dismissed all claims except unjust enrichment and quantum meruit, but the Appellate Division reversed. The Court of Appeals affirmed the Appellate Division, holding that the Statute of Frauds barred Snyder’s claims because they sought compensation for services in negotiating the purchase of a business, and the agreement was not in writing.

    Facts

    Snyder and Bronfman had an oral agreement to acquire and operate media companies. Snyder would be Bronfman’s advisor. Bronfman assured Snyder he would share in the proceeds of any deal without putting up his own funds and that he would receive a fair and equitable share of the value created. Snyder worked on several potential acquisitions. Eventually, Bronfman acquired Warner Music for $2.6 billion, with Snyder’s help. Bronfman then refused to compensate Snyder for his contribution.

    Procedural History

    Snyder sued Bronfman in Supreme Court, asserting several causes of action, including unjust enrichment and quantum meruit. The Supreme Court dismissed most claims but allowed the unjust enrichment and quantum meruit claims to proceed, finding the Statute of Frauds inapplicable. Bronfman appealed. The Appellate Division reversed, dismissing the remaining claims, holding that the Statute of Frauds applied. Snyder appealed to the Court of Appeals.

    Issue(s)

    Whether the Statute of Frauds, specifically General Obligations Law § 5-701(a)(10), bars Snyder’s claims for unjust enrichment and quantum meruit, which are based on an oral agreement to compensate him for services rendered in negotiating the purchase of a business opportunity.

    Holding

    Yes, because Snyder’s claims seek compensation for services rendered in negotiating the purchase of a business opportunity, namely Warner Music, and the agreement was not in writing as required by the Statute of Frauds.

    Court’s Reasoning

    The Court of Appeals reasoned that unjust enrichment and quantum meruit claims, in this context, are essentially identical claims under a “contract implied … in law to pay reasonable compensation.” General Obligations Law § 5-701(a)(10) requires agreements to compensate services rendered in negotiating the purchase of a business opportunity to be in writing. Negotiating includes procuring an introduction to a party to the transaction or assisting in the negotiation or consummation of the transaction. The court stated, “The essence of plaintiffs claim is that he devoted years of work to finding a business to acquire and causing an acquisition to take place—efforts that ultimately led to defendant’s acquisition of his interest in Warner Music. In seeking reasonable compensation for his services, plaintiff obviously seeks to be compensated for finding and negotiating the Warner Music transaction. His claim is of precisely the kind the statute of frauds describes.” The court distinguished Dura v Walker, Hart & Co., stating that the Statute of Frauds applies to dealings with principals, not between finders. The court also referenced Freedman v. Chemical Constr. Corp., clarifying that providing “know-how” or “know-who” to facilitate a complex enterprise or acquisition falls within the Statute of Frauds.

  • American Committee for Weizmann Institute of Science v. Dunn, 10 N.Y.3d 82 (2007): Standard for Vacating Probate Decree Based on Undue Influence

    American Committee for Weizmann Institute of Science v. Dunn, 10 N.Y.3d 82 (2007)

    A party seeking to vacate a probate decree based on undue influence must establish a substantial basis for challenging the will and a reasonable probability of success on the merits.

    Summary

    The American Committee for Weizmann Institute of Science sought to vacate a probate decree, claiming a will was executed under undue influence and breached a contract to bequeath property. The New York Court of Appeals held that the charity failed to demonstrate a substantial basis for its challenge and a reasonable probability of success on the merits of its undue influence claim. The Court also ruled that correspondence between the decedent and the charity did not constitute a binding contract to make a testamentary provision because it lacked clear evidence of the decedent’s intent to renounce her right to alter her will.

    Facts

    Doris Dunn Weingarten died on January 16, 2004. Five days prior, she executed a will leaving her co-op apartment to her niece, Jennifer Dunn, and the residuary estate to other relatives. The American Committee for Weizmann Institute of Science (Weizmann) petitioned to vacate the probate decree, alleging undue influence by Irving and Jennifer Dunn and claiming a contract existed where Weingarten was obligated to leave Weizmann the co-op’s sale proceeds. Weizmann presented letters from 1994 and 1998 as evidence of the contract. They argued that a longstanding relationship existed and Weingarten always intended to donate to Weizmann.

    Procedural History

    The Surrogate’s Court dismissed Weizmann’s petition, finding that the contract claim was insufficient and Weizmann failed to raise a prima facie case of undue influence. The Appellate Division affirmed, stating there was no nonspeculative reason to allow discovery. The Court of Appeals granted Weizmann’s motion for leave to appeal.

    Issue(s)

    1. Whether the correspondence between the decedent and Weizmann constituted a contract to make a testamentary provision sufficient to satisfy the statute of frauds (EPTL 13-2.1)?

    2. What standard applies to a petition to vacate a probate decree brought by a nonparty to the initial probate proceeding based on “newly-discovered evidence” of undue influence?

    Holding

    1. No, because the correspondence does not indisputably demonstrate the decedent’s intent to renounce her right to freely execute a subsequent will during her lifetime.

    2. A party seeking to vacate a probate decree based on undue influence must establish a substantial basis for its challenge to the probated will and a reasonable probability of success on the merits of its claim.

    Court’s Reasoning

    Regarding the contract claim, the Court of Appeals emphasized that freedom of testation is a jealously guarded right, and any promise to restrict that right must be analyzed closely for fraud. Agreements not to revoke prior wills demand the most indisputable evidence. The court cited Edson v. Parsons, 155 N.Y. 555, 568 (1898), noting such contracts are “easily fabricated and hard to disprove, because the sole contracting party on one side is always dead when the question arises.” Here, the 1994 and 1998 letters did not clearly evidence the decedent’s promise to bequeath the co-op’s proceeds to Weizmann; they were ambiguous and did not rise to the level of an indisputable promise.

    Regarding the undue influence claim, the Court held that to establish entitlement to vacatur, a party must demonstrate a substantial basis for its contest and a reasonable probability of success through competent evidence that would have probably altered the outcome of the original probate proceeding. Permitting vacatur based upon mere allegations of undue influence would be unduly disruptive. The verified petition offered evidence of the decedent’s alleged intent in 1981, 1994, and 1998, but no evidence of her intent in the years prior to her death was presented. The court noted the will left the co-op to her niece, a close relative, whose father opened his home to the decedent while she received hospice care.

  • Sheehy v. Clifford Chance Rogers & Wells, 3 N.Y.3d 585 (2004): Statute of Frauds and Oral Promises of Retirement Benefits

    3 N.Y.3d 585 (2004)

    An oral agreement to provide retirement benefits that extend beyond one year is unenforceable under the Statute of Frauds unless there is a written agreement subscribed by the party to be charged.

    Summary

    John Sheehy, a former partner at Rogers & Wells (later Clifford Chance Rogers & Wells), sued the firm for breach of contract, alleging he was wrongfully denied retirement benefits (SRPs) promised orally in exchange for early retirement. The firm argued the Statute of Frauds barred the claim because the agreement wasn’t in writing and performance extended beyond one year. The Court of Appeals held that the oral agreement was indeed barred by the Statute of Frauds, reversing the Appellate Division’s decision and reinstating the Supreme Court’s dismissal of the complaint because the firm’s obligation to make payments began five years after Sheehy’s retirement and extended until his death.

    Facts

    Sheehy was a partner at Rogers & Wells. The firm’s retirement plan provided different benefits for early (ages 60-64), normal (age 65), and mandatory (age 70) retirement. Early retirees received less, specifically no supplemental retirement payments (SRPs), unless the Executive Committee made a written exception. In December 1994, the firm asked Sheehy to resign, effective January 1, 1996. Sheehy claimed James Asher of the Executive Committee orally promised him the full retirement benefits, including SRPs, in exchange for his resignation. Sheehy, then 57, retired as senior counsel and received the four-year payout from 1996-1999, but the firm later refused to pay SRPs.

    Procedural History

    Sheehy sued for breach of contract, unjust enrichment, and breach of fiduciary duty. The firm raised the Statute of Frauds as a defense. Supreme Court granted the firm’s motion for summary judgment, dismissing the complaint. The Appellate Division modified, reinstating the breach of contract claim (except for future payments) and dismissing the firm’s Statute of Frauds defense. The Court of Appeals reversed the Appellate Division and reinstated the Supreme Court’s order dismissing the complaint.

    Issue(s)

    Whether an oral agreement promising retirement benefits, including supplemental retirement payments (SRPs) beginning five years after retirement, is barred by the Statute of Frauds where there is no written agreement authorizing such payments.

    Holding

    Yes, because the Statute of Frauds requires a written agreement for any contract that cannot be performed within one year. Here, the alleged oral agreement promised SRPs beginning five years after retirement and continuing for life, which is beyond the one-year limit.

    Court’s Reasoning

    The Statute of Frauds (General Obligations Law § 5-701(a)(1)) requires a written contract for agreements not performable within one year to prevent fraud. The court reasoned that Sheehy conceded no written agreement existed for SRPs and that payments wouldn’t begin until five years after his retirement. Sheehy’s reliance on Kane v. Rodgers, where an oral agency agreement was deemed enforceable despite stock transfers extending beyond one year, was misplaced. In Kane, the acts beyond a year concerned enforcing rights under a written agreement, not the oral agreement itself. Here, Sheehy had no right to SRPs under the written partnership documents. The court stated, “[U]nder the retirement plan, a partner taking early retirement is not entitled to receive SRPs unless the early retirement was made at the specific written request of the Executive Committee.” The oral promise to provide SRPs was a separate agreement, requiring a writing to be enforceable. The court rejected the Appellate Division’s theory that the parties could orally “deem” a written request to exist, finding no basis for this in the complaint or the agreement. The court concluded that absent a written agreement, the Statute of Frauds barred Sheehy’s claim.

  • 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”.

  • Held v. Kaufman, 91 N.Y.2d 425 (1998): Fraudulent Inducement and the Underlying Claim’s Validity

    Held v. Kaufman, 91 N.Y.2d 425 (1998)

    To state a claim for fraudulent inducement to settle a prior claim, the plaintiff must demonstrate that the underlying claim had some merit and value; however, at the pleading stage, the plaintiff benefits from all favorable inferences.

    Summary

    Herman Held sued Anita and Ivan Kaufman, alleging he was fraudulently induced to settle a claim for a 6% partnership interest in a mortgage lending venture. Held claimed the Kaufmans misrepresented the value of his interest and concealed plans for a public offering. The Kaufmans moved to dismiss, arguing that the contract was unenforceable under the Statute of Frauds, void for indefiniteness, and time-barred. The Court of Appeals held that while the breach of contract and unjust enrichment claims were time-barred, the fraudulent inducement claim could proceed because, at the pleading stage, Held was entitled to favorable inferences regarding the underlying claim’s validity.

    Facts

    In 1982, Herman Held agreed with Morris Kaufman to provide advice and assistance in launching a mortgage lending venture in exchange for a 6% partnership interest. Held also promised to transfer 6% of another real estate partnership to Ivan Kaufman, which he did. In 1983, American Equity Funding, Inc. (later Arbor) was formed to carry out the mortgage lending project. Morris Kaufman died in 1988. In 1992, Anita and Ivan Kaufman allegedly fraudulently induced Held to accept $150,000 in full satisfaction of all claims, misrepresenting the value of his 6% interest and denying any immediate plans for a public offering. Shortly after the settlement, Arbor filed a registration statement for a public offering, which would have made Held’s interest worth $3.6 million.

    Procedural History

    Held sued the Kaufmans alleging fraudulent inducement, breach of contract, and unjust enrichment. The defendants moved to dismiss under CPLR 3211. The Supreme Court denied the motion. The Appellate Division reversed and granted the motion to dismiss. The Court of Appeals modified the Appellate Division’s order, reinstating the fraudulent inducement claim.

    Issue(s)

    1. Whether raising additional grounds for dismissal in a reply affidavit violates the “single motion” rule under CPLR 3211(e)?

    2. Whether the plaintiff’s claim for fraudulent inducement to settle should be dismissed because the underlying claim lacked merit?

    Holding

    1. No, because introducing additional grounds for dismissal in a reply affidavit on what was a single CPLR 3211 motion violates neither the letter nor the spirit of the single motion rule, especially where the plaintiff was afforded an opportunity to respond.

    2. No, because at the pleading stage, the plaintiff is entitled to all favorable inferences regarding the validity of the underlying claim, and the defendants have not conclusively established that the underlying claim was entirely valueless.

    Court’s Reasoning

    The Court addressed the procedural issue first, finding no violation of CPLR 3211(e). It then addressed the merits, noting that a CPLR 3211 dismissal is appropriate when documentary evidence conclusively establishes a defense. While breach of contract and unjust enrichment claims were time-barred, the fraudulent inducement claim was timely. The Court emphasized that to state a claim for fraud, the plaintiff must show a misrepresentation of a material fact resulting in injury. Citing Urtz v. New York Cent. & Hudson Riv. R. R. Co., 202 N.Y. 170 (1911), the Court stated that if the underlying claim has no viability, there is no recovery for fraud in the inducement. The Court clarified that the plaintiff ultimately bears the burden of proving the underlying claim’s merit. However, because the case was at the pleading stage, the plaintiff was entitled to all favorable inferences. The Court found that the defendants failed to conclusively establish the underlying claim was worthless based on indefiniteness, the statute of limitations, or the Statute of Frauds. Regarding the Statute of Frauds, the court noted, “Although, plaintiff ultimately will have the burden to submit evidentiary facts taking the agreement outside the Statute of Frauds, by exception or otherwise, at this CPLR ,3211 motion stage, we must credit the assertions in plaintiffs surreply papers suggesting certain factual grounds which may defeat the Statute of Frauds defense.” The court emphasized that the defendants could reassert their defenses in a summary judgment motion.

  • Cron v. Hargro Fabrics, Inc., 91 N.Y.2d 362 (1998): Statute of Frauds and Bonus Agreements

    Cron v. Hargro Fabrics, Inc. 91 N.Y.2d 362 (1998)

    An oral agreement to pay a bonus based on a percentage of a company’s annual pre-tax profits is not automatically barred by the Statute of Frauds simply because the calculation occurs after one year, if the employment itself is terminable at will.

    Summary

    Cron sued Hargro Fabrics, alleging breach of an oral agreement for a bonus based on 20% of annual pre-tax profits, in addition to his base salary matching the president’s. Hargro moved to dismiss based on the Statute of Frauds, arguing the bonus calculation couldn’t be completed within one year. The Court of Appeals reversed the Appellate Division’s dismissal, holding that because Cron’s employment was at-will, the agreement could be performed within a year, even if the bonus calculation extended beyond that timeframe. The court reasoned that the key is whether the contractual relationship, not merely a calculation of compensation, necessarily extends beyond a year.

    Facts

    Cron was employed by Hargro Fabrics for 13 years until January 1996. He alleged an oral agreement with Hargro, stipulating that in addition to his annual salary, he would receive a bonus equal to 20% of Hargro’s annual pre-tax profits. Cron claimed that Hargro failed to pay him the proper share of the profits and that the company president received a much higher salary. The alleged agreement was reached through annual discussions where anticipated profits were estimated, and Cron received monthly payments toward the bonus based on these estimations. Cron affirmed his at-will employment status, stating that if his employment ended mid-year, his bonus would be calculated only up to his termination date.

    Procedural History

    The Supreme Court denied Hargro’s motion to dismiss. The Appellate Division reversed, granting the motion and dismissing the complaint, reasoning the amount owing was not ascertainable or payable before the year’s end and the contract imposed obligations exceeding one year, even if employment ended sooner. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether an oral agreement to pay a bonus based on a percentage of annual pre-tax profits, where the employment is at-will, falls within the Statute of Frauds and is unenforceable if the bonus calculation extends beyond one year from the agreement’s making.

    Holding

    No, because when the employment relationship is terminable within a year, and the compensation measure is fixed and earned within that period, the obligation to calculate that compensation does not bring the contract under the Statute of Frauds’ one-year proscription.

    Court’s Reasoning

    The Court of Appeals emphasized that the Statute of Frauds applies only to contracts that have absolutely no possibility of full performance within one year. Since Cron’s employment was at-will, it could be terminated by either party at any time. The court distinguished cases where the obligation to pay commissions extended indefinitely based on business relationships initiated during employment, as in Martocci v. Greater N.Y. Brewery, 301 N.Y. 57 (1950). The court cited Nat Nal Serv. Stas. v Wolf, 304 N.Y. 332 (1952), emphasizing that contracts terminable within a year do not fall under the Statute of Frauds. The Court found persuasive the reasoning in Rifkind v. Web IV Music, 67 Misc.2d 26 (1971), which held that the mere calculation of a bonus after termination relates to past performance and doesn’t create new obligations. The court acknowledged conflicting Appellate Division rulings but adopted the reasoning that the bonus calculation method does not determine the contract’s duration. The court reinforced the purpose of the Statute of Frauds, which is to prevent fraud, not to allow the evasion of just obligations. The court stated that “when the employment relationship is terminable within a year and the measure of compensation has become fixed and earned during the same period, the sole obligation to calculate such compensation will not bring the contract within the one-year proscription of the Statute of Frauds.” The court also noted that even if the Statute of Frauds were applicable, Cron’s allegations raise a factual question as to whether complete performance by all parties was possible within a year.

  • Parma Tile Mosaic & Marble Co., Inc. v. Estate of Fred Short, 87 N.Y.2d 524 (1996): Fax Header and Statute of Frauds

    Parma Tile Mosaic & Marble Co., Inc. v. Estate of Fred Short, 87 N.Y.2d 524 (1996)

    An automatically generated header on a fax, imprinted by the sending machine, does not satisfy the Statute of Frauds requirement that a writing be ‘subscribed’ by the party to be charged unless there is demonstrated intent to authenticate the particular writing.

    Summary

    Parma Tile sought to enforce a guaranty against MRLS Construction based on a faxed document. The fax had an automatically imprinted header with MRLS’s name and contact information on each page. Parma Tile argued this header satisfied the Statute of Frauds’ subscription requirement. The New York Court of Appeals held that the automatically generated header did not constitute a valid subscription because it lacked demonstrated intent to authenticate the specific document as a guaranty. The court emphasized that the purpose of the Statute of Frauds is to prevent the enforcement of contracts that were never actually made, requiring both a writing and a subscription by the party to be charged.

    Facts

    Sime Construction sought to purchase tile from Parma Tile. Parma Tile requested a guaranty due to the large order. Sime suggested MRLS Construction, the general contractor, as a guarantor. MRLS faxed a two-page document to Parma Tile. Each page of the fax had a header automatically imprinted by MRLS’s fax machine containing “MRLS Construction,” a phone number, date, time, and page number. The fax was not accompanied by a cover letter. After the fax, Parma Tile supplied tile to Sime. When Sime’s principal died, Parma Tile sought payment from MRLS, claiming the fax was a guaranty. MRLS refused, arguing the document wasn’t a valid, subscribed guaranty.

    Procedural History

    Parma Tile sued MRLS and Sime’s estate to recover payment for the tiles. The trial court initially denied summary judgment for both parties, finding factual issues. After reargument, the trial court granted Parma Tile’s motion for summary judgment on the guaranty claim, severing it from the rest of the complaint. The trial court held the automatically imprinted fax header satisfied the Statute of Frauds. The Appellate Division affirmed. MRLS appealed to the New York Court of Appeals.

    Issue(s)

    Whether an automatically imprinted header on a fax transmission satisfies the Statute of Frauds requirement that a writing be “subscribed” by the party to be charged.

    Holding

    No, because a subscription requires an act to authenticate the writing as the defendant’s, and the automatically imprinted header lacked demonstrated intent to authenticate the specific document as a guaranty.

    Court’s Reasoning

    The Court of Appeals reversed, holding that the automatically imprinted fax header did not satisfy the Statute of Frauds. The Court relied on the principle that a signature, for Statute of Frauds purposes, requires an intent to authenticate the writing. The court quoted Mesibov, Glinert & Levy v Cohen Bros. Mfg. Co., 245 NY 305, 310, stating that a signature “is not to be reckoned as a signature unless inserted or adopted with an intent, actual or apparent, to authenticate a writing.” The Court found that MRLS’s act of programming its fax machine to automatically imprint its name did not demonstrate an intent to authenticate the specific document as a guaranty. The court reasoned that the automatic imprinting occurred regardless of whether the Statute of Frauds applied to a particular document. The court stated, “The intent to authenticate the particular writing at issue must be demonstrated.” The Court emphasized that the Statute of Frauds serves to prevent the enforcement of contracts that were never made, as stated in Fox Co. v Kaufman Org., 74 NY2d 136, 140: “The purpose of Statutes of Frauds is to avoid fraud by preventing the enforcement of contracts that were never in fact made.” To satisfy the Statute of Frauds, there must be both a writing and a subscription. The absence of either cannot be remedied by arguing that obligations were nevertheless incurred.