D & N Boening, Inc. v. Kirsch Beverages, Inc.

• Decision Date: 20 November 1984
• Citation: 472 N.E.2d 992,63 N.Y.2d 449,483 N.Y.S.2d 164
• Court: New York Court of Appeals Court of Appeals
• Parties: , 472 N.E.2d 992 D & N BOENING, INC., Appellant, v. KIRSCH BEVERAGES, INC., et al., Respondents.

Page 164

483 N.Y.S.2d 164

63 N.Y.2d 449, 472 N.E.2d 992

D & N BOENING, INC., Appellant, v. KIRSCH BEVERAGES, INC., et al., Respondents.

Court of Appeals of New York.

Nov. 20, 1984.

Abel Jack Schwartz and Brad Becker, Carle Place, for appellant.

Stanley Israel, New York City, and Fred E. Scharf, Mineola, for respondents.

OPINION OF THE COURT

JASEN, Judge.

We are asked on this appeal to decide whether the alleged oral franchise agreement between the parties is barred by the Statute of Frauds.

In 1955, defendants' predecessor, Minck Beverages, the prime distributor of "Yoo-Hoo" chocolate beverage, entered into a verbal agreement with plaintiff's predecessors, Joseph Boening and his sons. Pursuant thereto, the Boenings were granted the subdistribution rights of "Yoo-Hoo" beverage in Nassau County and a portion of Suffolk County as well. They were required to cease distribution of a competitor's chocolate drink and, in return, their subdistributorship was to be exclusive and would continue "for as long as they satisfactorily distributed the product, exerted their best efforts and acted in good faith."

In 1963, defendant American Beverage Corp. (American) acquired the prime "Yoo-Hoo" beverage franchise from Minck and continued the exclusive subdistributorship agreement with plaintiff's predecessors until Joseph Boening's death in 1965, after which his sons continued in business under the name of D & N Boening, Inc., the plaintiff in this action. At that time, plaintiff requested that American reduce the exclusive franchise arrangement to writing, which it refused. American did agree verbally, however, to continue the prior arrangement on the condition that plaintiff's performance remain satisfactory. In 1982, defendant Kirsch Beverages, Inc. (Kirsch), purchased American, assuming the latter's obligations to plaintiff. Thereafter, in that same year, Kirsch informed plaintiff that it was terminating the subdistributorship agreement and would henceforth distribute "Yoo-Hoo" itself. Plaintiff then instituted this action against both American and Kirsch seeking damages for breach of contract or, in the alternative, for specific performance, asserting that "defendants unilaterally terminated the exclusive franchise agreement, without cause thereby breaching the agreement between the parties." (Emphasis added.)

Defendants made separate motions to dismiss the complaint pursuant to CPLR 3211 (subd. par. 5) on the ground that the agreement was barred under the Statute of Frauds in that section 5-701 (subd. a, par. 1) of the General Obligations Law requires all agreements to be in writing which cannot be performed within one year from the date of its making. Special Term denied the motions, holding that the oral agreement by its terms was terminable by defendants at any time and, hence, did not necessarily extend beyond one year and was not within the ambit of the Statute. The Appellate Division, 99 A.D.2d 522, 471 N.Y.S.2d 299 unanimously reversed, holding instead that the agreement could not actually be performed within one year but could only be terminated by a breach. Consequently, that court found the agreement to be governed by the Statute of Frauds and void because unwritten. We agree and now affirm.

The ancient Statute of Frauds is derived from the original English "Act for Prevention of Frauds and Perjuries" enacted in 1677, which provided in part that "no action shall be brought * * * upon any agreement that is not to be performed within the space of one year from the making thereof * * * unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith" (29 Charles II, C.3, 8 Stat at Large 405; see 6 Holdsworth, History of English Law pp. 379-397). The entire Statute was intended to prevent fraud in the proving of certain legal transactions particularly susceptible to deception, mistake and perjury and, with regard specifically to the requirement for a signed writing for a contract not to be performed within one year, "the design of the statute was, not to trust to the memory of witnesses for a longer time than one year". (Smith v. Westfall, 1 Lord Raymond 316, 317 see Calamari and Perillo, Contracts § 19-1; Fuller and Eisenberg, Basic Contract Law at p. B-2.)

Unfortunately, the Statute does not in many cases provide an effective means of serving that purpose. There is no necessary relationship between the time of the making of a contract, the time within which its performance is required, and the time when it might come to court to be proven. Accordingly, the courts have generally been reluctant to give too broad an interpretation to this provision of the Statute and instead have limited it to those contracts only which by their very terms have absolutely no possibility in fact and law of full performance within one year. (2 Corbin, Contracts § 444; 3 Williston, Contracts § 495.)

In a leading case on this provision of the Statute of Frauds, the United States Supreme Court in 1896 reviewed the case law of both Great Britain and the several States throughout this country and concluded, with regard to the oral agreement before it, that "parties may well have expected that the contract would continue in force for more than one year; it may well have been very improbable that it would not do so; and it did in fact continue in force for a much longer time. But they made no stipulation which in terms, or by reasonable inference, required that result. The question is not what the probable, or expected, or actual performance of the contract was; but whether the contract, according to the reasonable interpretation of its terms, required that it should not be performed within the year." (Warner v. Texas & Pacific Ry., 164 U.S. 418, 434, 17 S.Ct. 147, 153, 41 L.Ed. 495.) Likewise, this court almost 40 years previous gave a similar construction of this State's Statute of Frauds. At that time, we explained that "is not the meaning of the statute that the contract must be performed within a year. If it can be so performed consistently with the language in which the parties have expressed themselves, in other words, if the obligation of the contract is not, by its very terms, or necessary construction, to endure for a longer period than one year, it is a valid agreement, although it may be capable of an indefinite continuance." (Trustees of First Baptist Church v. Brooklyn Fire Ins. Co., 19 N.Y. 305, 307; see, also, Calamari and Perillo, Contracts § 19-18; Restatement, Contracts 2d, § 130, Comment a.)

This narrow interpretation was unaltered by subsequent legislative reenactments of the Statute of Frauds and by more recent decisions of this court. As presently found in section 5-701 of the General Obligations Law, the statute today provides in pertinent part:

"a. Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking:

"1. By its terms is not to be performed within one year from the making thereof or the performance of which is not to be completed before the end of a lifetime".

The General Obligations Law thus preserves unchanged the critical language which was contained in the earlier statutes (see, e.g., 2 Rev Stats, part II, ch VII, tit II, § 2) and construed in the earliest judicial decisions of this State (see, e.g., Plimpton v. Curtiss, 15 Wend. 336; Moore v. Fox, 10 John. 244). Moreover, consistent with that narrow interpretation, this court has continued to analyze oral agreements to determine if, according to the parties' terms, there might be any possible means of performance within one year. Wherever an agreement has been found to be susceptible of fulfillment within that time, in whatever manner and however impractical, this court has held the one-year provision of the Statute to be inapplicable, a writing unnecessary, and the agreement not barred. So, for example, in the following situations, the oral agreements which were challenged under the Statute of Frauds were all upheld as fully performable within one year: where either party had the option to terminate the agreement on seven months' notice (Blake v. Voigt, 134 N.Y. 69, 31 N.E. 256); where the agreement merely set the terms of anticipated prospective purchases but did not bind either party to any particular transaction (Nat. Nal Serv. Stas. v. Wolf, 304 N.Y. 332, 107 N.E.2d 473); where defendant had the option to discontinue at any time the activities upon which the agreement was...