McIntosh v. Murphy

• Decision Date: 11 May 1970
• Docket Number: No. 4828,4828
• Citation: 469 P.2d 177,52 Haw. 112
• Parties: , 52 Haw. 29, 54 A.L.R.3d 707 Dick McINTOSH and Martha McIntosh v. George MURPHY and Murphy Motors, Limited, a Hawaii Corporation.
• Court: Hawaii Supreme Court

Page 177

469 P.2d 177

52 Haw. 112, 52 Haw. 29, 54 A.L.R.3d 707

Dick McINTOSH and Martha McIntosh v. George MURPHY and Murphy Motors, Limited, a Hawaii Corporation.

No. 4828.

Supreme Court of Hawai'i.

May 11, 1970.

Rehearing Denied June 12, 1970.

Syllabus by the Court

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise.

L. Richard Fried, Jr. and Ted Gamble Clause, Honolulu (Pratt, Moore, Bortz & Case, Honolulu, of counsel), for defendants-appellants.

Katsugo Miho, Honolulu (Fong, Miho, Choy & Robinson, Honolulu), for plaintiffs-appellees.

Before RICHARDSON, C. J., and MARUMOTO, ABE, LEVINSON and KOBAYASHI, JJ.

LEVINSON, Justice.

This case involves an oral employment contract which allegedly violates the provision of the Statute of Frauds requiring 'any agreement that is not to be performed within one year from the making thereof' to be in writing in order to be enforceable. HRS § 656-1(5). In this action the plaintiff-employee Dick McIntosh seeks to recover damages from his employer, George Murphy and Murphy Motors, Ltd., for the breach of an alleged one-year oral employment contract.

While the facts are in sharp conflict, it appears that defendant George Murphy was in southern California during March, 1964 interviewing prospective management personnel for his Chevrolet-Oldsmobile dealerships in Hawaii. He interviewed the plaintiff twice during that time. The position of sales manager for one of the dealerships was fully discussed but no contract was entered into. In April, 1964 the plaintiff received a call from the general manager of Murphy Motors informing him of possible employment within thirty days if he was still available. The plaintiff indicated his continued interest and informed the manager that he would be available. Later in April, the plaintiff sent Murphy a telegram to the effect that he would arrive in Honolulu on Sunday, April 26, 1964. Murphy then telephoned McIntosh on Saturday, April 25, 1964 to notify him that the job of assistant sales manager was open and work would begin on the following Monday, April 27, 1964. At that time McIntosh expressed surprise at the change in job title from sales manager to assistant sales manager but reconfirmed the fact that he was arriving in Honolulu the next day, Sunday. McIntosh arrived on Sunday, April 26, 1964 and began work on the following day, Monday, April 27, 1964.

As a consequence of his decision to work for Murphy, McIntosh moved some of his belongings from the mainland to Hawaii, sold other possessions, leased an apartment in Honolulu and obviously forwent any other employment opportunities. In short, the plaintiff did all those things which were incidental to changing one's residence permanently from Los Angeles to Honolulu, a distance of approximately 2200 miles. McIntosh continued working for Murphy until July 16, 1964, approximately two and one-half months, at which time he was discharged on the grounds that he was unable to close deals with prospective customers and could not train the salesmen.

At the conclusion of the trial, the defense moved for a directed verdict arguing that the oral employment agreement was in violation of the Statute of Frauds, there being no written memorandum or note thereof. The trial court ruled that as a matter of law the contract did not come within the Statute, reasoning that Murphy bargained for acceptance by the actual commencement of performance by McIntosh, so that McIntosh was not bound by a contract until he came to work on Monday, April 27, 1964. Therefore, assuming that the contract was for a year's employment, it was performable within a year exactly to the day and no writing was required for it to be enforceable. Alternatively, the court ruled that if the agreement was made final by the telephone call between the parties on Saturday, April 25, 1964, then that part of the weekend which remained would not be counted in calculating the year, thus taking the contract out of the Statute of Frauds. With commendable candor the trial judge gave as the motivating force for the decision his desire to avoid a mechanical and unjust application of the Statute. ¹

The case went to the jury on the following questions: (1) whether the contract was for a year's duration or was performable on a trial basis, thus making it terminable at the will of either party; (2) whether the plaintiff was discharged for just cause; and (3) if he was not discharged for just cause, what damages were due the plaintiff. The jury returned a verdict for the plaintiff in the sum of $12,103.40. The defendants appeal to this court on four principal grounds, three of which we find to be without merit. The remaining ground of appeal is whether the plaintiff can maintain an action on the alleged oral employment contract in light of the prohibition of the Statute of Frauds making unenforceable an oral contract that is not to be performed within one year.

I. TIME OF ACCEPTANCE OF THE EMPLOYMENT AGREEMENT

The defendants contend that the trial court erred in refusing to give an instruction to the jury that if the employment agreement was made more than one day before the plaintiff began performance, there could be no recovery by the plaintiff. The reason given was that a contract not to be performed within one year from its making is unenforceable if not in writing.

The defendants are correct in their argument that the time of acceptance of an offer is a question of fact for the jury to decide. But the trial court alternatively decided that even if the offer was accepted on the Saturday prior to the commencement of performance, the intervening Sunday and part of Saturday would not be counted in computing the year for the purposes of the Statute of Frauds. The judge stated that Sunday was a non-working day and only a fraction of Saturday was left which he would not count. In any event, there is no need to discuss the relative merits of either ruling since we base our decision in this case on the doctrine of equitable estoppel which was properly briefed and argued by both parties before this court, although not presented to the trial court.

II. ENFORCEMENT BY VIRTUE OF ACTION IN RELIANCE ON THE ORAL CONTRACT

In determining whether a rule of law can be fashioned and applied to a situation where an oral contract admittedly violates a strict interpretation of the Statute of Frauds, it is necessary to review the Statute itself together with its historical and modern functions. The Statute of Frauds, which requires that certain contracts be in writing in order to be legally enforceable, had its inception in the days of Charles II of England. Hawaii's version of the Statute is found in HRS § 656-1 and is substantially the same as the original English Statute of Frauds.

The first English Statute was enacted almost 300 years ago to prevent 'many fraudulent practices, which are commonly endeavored to be upheld by perjury and subornation of perjury'. 29 Car. 2, c. 3 (1677). Certainly, there were compelling reasons in those days for such a law. At the time of enactment in England, the jury system was quite unreliable, rules of evidence were few, and the complaining party was disqualified as a witness so he could neither testify on direct-examination nor, more importantly, be cross-examined. Summers, The Doctrine of Estoppel and the Statute of Frauds, 79 U.Pa.L.Rev. 440, 441 (1931). The aforementioned structural and evidentiary limitations on our system of justice no longer exist.

Retention of the Statute today has nevertheless been justified on at least three grounds: (1) the Statute still serves an evidentiary function thereby lessening the danger of perjured testimony (the original rationale); (2) the requirement of a writing has a cautionary effect which causes reflection by the parties on the importance of the agreement; and (3) the writing is an easy way to distinguish enforceable contracts from those which are not, thus chanelling certain transactions into written form. ²

In spite of whatever utility the Statute of Frauds may still have, its applicability has been drastically limited by judicial construction over the years in order to mitigate the harshness of a mechanical application. ³ Furthermore, learned writers continue to disparage the Statute regarding it as 'a statute for promoting fraud' and a 'legal anachronism.' ⁴

Another method of judicial circumvention of the Statute of Frauds has grown out of the exercise of the equity powers of the courts. Such judicially imposed limitations or exceptions involved the traditional dispensing power of the equity courts to mitigate the 'harsh' rule of law. When courts have enforced an oral contract in spite of the Statute, they have utilized the legal labels of 'part performance' or 'equitable estoppel' in granting relief. Both doctrines are said to be based on the concept of estoppel, which operates to avoid unconscionable injury. 3 Williston, Contracts § 533A at 791 (Jaeger ed. 1960), Summers, supra at 443-49; Monarco v. Lo Greco, 35 Cal.2d 621, 220 P.2d 737 (1950) (Traynor, J.).

Part performance has long been recognized in Hawaii as an equitable doctrine justifying the enforcement of an oral agreement for the conveyance of an interest in land where there has been substantial reliance by the party seeking to enforce the contract. Perreira v. Perreira, 50 Haw. 641, 447 P.2d 667 (1968) (agreement to grant life estate); Vierra v. Shipman, 26 Haw. 369 (1922) (agreement to devise land); Yee Hop v. Young Sak Cho, 25 Haw. 494 (1920) (oral lease of real property). Other courts have enforced oral contracts (including employment contracts) which failed to satisfy the section of the Statute making unenforceable an agreement not to be performed...