Opinion
No. 301-11305
February 13, 2003
CONTESTED MATTER MEMORANDUM OPINION
This matter is before the Court upon the debtor's motion for summary judgment regarding its objection to the claim filed by MidRiver Theatres, LLC (hereinafter "MidRiver"). For the following reasons, the Court finds that summary judgment should be granted to the debtor and that MidRiver's claim should be denied.
I. ARGUMENTS
MidRiver asserts claims for breach of oral contract, unjust enrichment, promissory estoppel, and lost profits, seeking compensatory damages of $209,917.53 in development costs and an additional $1,362,000 of anticipated lost profits revolving around the development of a theater location in the St. Louis, Missouri, area, referred to as the "St. Peters Project." MidRiver's theory is that the debtor, trough its employee, Roger Keith Thompson, orally promised Fedele V. Scutti, MidRiver's principal, that if the St. Peters Project was developed, parties would incorporate the same terms and conditions used by them in two previous theater developments in New York and Florida. Based on this promise, MidRiver located and secured the property, and two non-binding summary of intent letters, dated April 22, 1998, and June 19, 1998, were prepared, reviewed, and signed. However, when the lease agreement was actually presented, the debtor would not agree to the terms and sought to use its own lease form, which included less favorable terms for MidRiver. Further discussions were had, but a lease was never consummated and the property was not developed. MidRiver is seeking payment for development costs and future lost profits based on theories of breach of oral contract, unjust enrichment, promissory estoppel, and lost profits on the St. Peters Project.
Originally, MidRiver filed five Proofs of Claim seeking to recover from the debtor certain development costs and lost profits at four sites it allegedly developed or was engaged to develop on behalf of the debtor, totaling $3,830,739.53. MidRiver has withdrawn its claims related to the other sites and is only pursuing its claim regarding the St. Peters Project.
In seeking summary judgment, the debtor submits that even if MidRiver allegation of an oral agreement is true, the agreement is not enforceable under Missouri's Statute of Frauds because there is no writing signed by the debtor indicating its agreement to the previous lease terms. Moreover, even if the agreement was enforceable, the debtor submits that such an agreement was modified by MidRiver's acceptance of the new format proposed by the debtor. For purposes of its summary judgment motion, the debtor admits the material facts alleged by MidRiver.
The debtor also asserts that MidRiver changed the basis of its claim midstream. Because the Court finds that the debtor is entitled to summary judgment on the merits of MidRiver's current basis for its claim, the Court has not considered whether a change in theory is permissible.
II. SUMMARY JUDGMENT STANDARD
Federal Rule of Bankruptcy Procedure 7056, which incorporates Federal Rule of Civil Procedure 56(c), provides that summary judgment is proper if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." On a motion for summary judgment, the evidence, all facts, and any reasonable inferences that may be drawn from the facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986). To prevail, the nonmoving party must show sufficient evidence to create a genuine issue of material fact. Klepper v. First Am. Bank, 916 F.2d 337, 342 (6th Cir. 1990). The Court finds that, according to these standards, no material facts remain in dispute, and the Court will, therefore, determine whether the debtor is entitled to judgment as a matter of law.
III. DISCUSSION A. STATUTE OF FRAUDS
Under the Missouri Statute of Frauds, "[n]o action shall be brought . . . upon any contract made for the sale of lands, . . . or any lease thereof, for a longer time than one year, . . . unless the agreement upon which the action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or some other person by him thereto lawfully authorized. . . ." Mo. Rev. Stat. § 432.010 (2002).
The alleged oral contract in this matter is a lease agreement for land, and accordingly, falls under the Missouri Statute of Frauds. MidRiver has not pointed to, and the Court has not found, any written document alluding to the debtor's agreement to use the lease agreement form used in two prior transactions. In fact, the two non-binding summary letters of intent make no mention of such a promise, and thus, the statute of frauds must apply.
The Court notes that under Missouri law, equity may, in some circumstances, require performance of such an oral agreement to prevent a fraud despite the statute of frauds. Lederle v. Lederle, 916 S.W.2d 423, 428 (Mo.App. 1996). To qualify for the exception, the party seeking enforcement of the contract must, at least, establish three elements:
(1) He must prove the performance of acts by him which are clear, evidence of the existence of the pleaded contract.
(2) He must prove the terms of the verbal contract by clear, cogent, unequivocal and convincing testimony.
(3) He must prove that the acts, referred to in the first mentioned element, were done in reliance on the contract and that, as a result of the acts, the positions of the parties were so changed that to permit the other party to rely on the statute of frauds would result in a grossly unjust and deep-seated wrong, constituting fraud or something akin thereto. . . .
Pointer v. Ward, 429 S.W.2d 269, 272-73 (Mo. 1968). See also Conkle v. Conkle (In re Conkle), 982 S.W.2d 312, 316 (Mo.App. 1998). The exception, however, "is rigidly scrutinized and sparingly invoked" so that "relief will be denied if there is doubt as to whether there has been a meeting of minds or full understanding of the terms sought to be enforced." Lederle, 916 S.W.2d at 428.
In the present case, business negotiations were entered into by experienced businessmen. The hope was that the discussions would lead to a theater being built and a lease agreement entered into. If the promise of using the same lease agreement form and specific terms was essential to MidRiver's moving forward with the deal, it should have gotten it in writing. Nothing in the record hints at a reason for avoiding the statute of frauds.
B. PROMISSORY ESTOPPEL
Even if MidRiver's other theories of liability placed the agreement outside the statute of frauds, MidRiver would not be entitled to relief. The essential elements of promissory estoppel include: "1) a promise; 2) detrimental reliance on the promise; 3) the promisor should have or did in fact clearly foresee the precise action which the promisee took in reliance; and 4) injustice can only be avoided by enforcement of the promise." Geisinger v. A B Farms, Inc., 820 S.W.2d 96, 98 (Mo.App. 1991); Midwest Energy, Inc. v. Orion Food Sys., Inc., 14 S.W.3d 154, 159 (Mo.App. 2000). The doctrine of promissory estoppel is to be used "with caution, sparingly, and only in extreme cases to avoid unjust results." Geisinger, 820 S.W.2d at 98.
Critical elements of promissory estoppel are missing at the outset. First, the terms of the alleged promise are unclear. Even if it is assumed that the debtor agreed to use the same lease agreement form as those used in the New York and Florida deals, certainly all of the terms would not be applicable to the new property and it is not clear which specific terms were to be omitted and which were to be excluded to comport with local conditions and different state laws. Next, there is no proof in the record indicating that the debtor did or should have foreseen MidRiver's actions in reliance on the illusory promise. Finally, enforcement of the agreement is not necessary to avoid unjust results. As the Court stated earlier, the parties were experienced business persons working toward an agreement who both understood the essentials of contracting. Mr. Scutti's November 18, 2002, Declaration in this case is the only written indication by anyone that the debtor's representative made oral statements regarding the lease form or terms to be used, and he raised the statements well into the discovery schedule, thus requiring MidRiver's sudden shift in theory. This does not support the presence of such unjust results as would require application of this extreme and sparingly used remedy.
C. UNJUST ENRICHMENT
Moreover, the Court finds that MidRiver would not be entitled to its claim under a theory of unjust enrichment. The remedy for unjust enrichment is quasi-contract or quantum meruit. To establish a quantum meruit claim under Missouri law, the following elements must be proven: "(1) a benefit conferred upon the defendant by the plaintiff, (2) appreciation by the defendant of the fact of such benefit, (3) acceptance and retention by the defendant of that benefit under circumstances in which retention without payment would be inequitable." of these, "`[t]he most significant requirement is that the enrichment to the defendant be unjust; that retention of the benefit be inequitable.'" White v. Pruiett, 39 S.W.3d 857, 863 (Mo.App. 2001) (citations omitted); Lucent Tech., Inc. v. Mid-West Elec., Inc., 49 S.W.3d 236, 241 (Mo.App. 2001). There is no indication in the record that the debtor retained any benefit. The only benefit to the debtor would have been if the deal had been consummated with a lease agreement.
IV. CONCLUSION
Accordingly, the Court finds that MidRiver is not entitled to development costs or lost profits under any of its theories of recovery and that the debtor is entitled to summary judgment on its objection to MidRiver's claim.
An appropriate order will enter.
ORDER
For the reasons set forth in the Memorandum Opinion entered contemporaneously with this Order, the debtor's motion for summary judgment is GRANTED and MidRiver Theatres, LLC's claim is DENIED.
It is so ORDERED.