Hoffman v. Red Owl Stores, Inc.

• Decision Date: 02 March 1965
• Citation: 26 Wis.2d 683,133 N.W.2d 267
• Parties: Joseph HOFFMAN et al., Respondents, v. RED OWL STORES, INC., a foreign corp., et al., Appellants.
• Court: Wisconsin Supreme Court

Page 267

133 N.W.2d 267

26 Wis.2d 683

Joseph HOFFMAN et al., Respondents, v. RED OWL STORES, INC., a foreign corp., et al., Appellants.

Supreme Court of Wisconsin.

March 2, 1965.

Rehearing Denied April 27, 1965.

Benton, Bosser, Fulton, Menn & Nehs, Appleton, for appellants.

Van Hoof, Van Hoof & Wylie, Little Chute, for respondents.

CURRIE, Chief Justice.

The instant appeal and cross-appeal present these questions:

(1) Whether this court should recognize causes of action grounded on promissory estoppel as exemplified by sec. 90 of Restatement, 1 Contracts?

(2) Do the facts in this case make out a cause of action for promissory estoppel?

(3) Are the jury's findings with respect to damages sustained by the evidence?

Recognition of a Cause of Action Grounded

on Promissory Estoppel.

Sec. 90 of Restatement, 1 Contracts, provides (at p. 110):

'A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action of forbearance is binding if injustice can be avoided only by enforcement of the promise.'

The Wisconsin Annotations to Restatement, Contracts, prepared under the direction of the late Professor William H. Page and issued in 1933, stated (at p. 53, sec. 90):

'The Wisconsin cases do not seem to be in accord with this section of the Restatement. It is certain that no such proposition has ever been announced by the Wisconsin court and it is at least doubtful if it would be approved by the court.'

Since 1933, the closest approach this court has made to adopting the rule of the Restatement occurred in the recent case of Lazarus v. American Motors Corp. (1963), 21 Wis.2d 76, 85, 123 N.W.2d 548, 553, wherein the court stated:

'We recognize that upon different facts it would be possible for a seller of steel to have altered his position so as to effectuate the equitable considerations inherent in sec. 90 of the Restatement.'

While it was not necessary to the disposition of the Lazarus Case to adopt the promissory estoppel rule of the Restatement, we are squarely faced in the instant case with that issue. Not only did the trial court frame the special verdict on the theory of sec. 90 of Restatement, 1 Contracts, but no other possible theory has been presented to or discovered by this court which would permit plaintiffs to recover. Of other remedies considered that of an action for fraud and deceit seemed to be the most comparable. An action at law for fraud, however, cannot be predicated on unfulfilled promises unless the promisor possessed the present intent not to perform. Suskey v. Davidoff (1958), 2 Wis.2d 503, 507, 87 N.W.2d 306, and cases cited. Here, there is no evidence that would support a finding that Lukowitz made any of the promises, upon which plaintiffs' complaint is predicated, in had faith with any present intent that they would not be fulfilled by Red Owl.

Many courts of other jurisdictions have seen fit over the years to adopt the principle of promissory estoppel, and the tendency in that direction continues. ¹ As Mr. Justice McFADDIN, speaking in behalf of the Arkansas court, well stated, that the development of the law of promissory estoppel 'is an attempt by the courts to keep remedies abreast of increased moral consciousness of honesty and fair representations in all business dealings.' Peoples National Bank of Little Rock v Linebarger Construction Company (1951), 219 Ark. 11, 17, 240 S.W.2d 12, 16. For a further discussion of the doctrine of promissory estoppel, see 1A Corbin, Contracts, pp. 187, et seq., secs. 193-209; 3 Pomeroy's Equity Jurisprudence (5th ed.), pp. 211, et seq., sec. 808b; 1 Williston, Contracts (Jaeger's 3d ed.), pp. 607, et seq., sec. 140; Boyer, Promissory Estoppel: Requirements and Limitations of the Doctrine 98 University of Pennsylvania Law Review (1950), 459; Seavey Reliance Upon Gratuitous Promises or Other Conduct, 64 Harvard Law Review (1951), 913; Annos. 115 A.L.R. 152, and 48 A.L.R.2d 1069.

The Restatement avoids use of the term 'promissory estoppel,' and there has been criticism of it as an inaccurate term. See 1A Corbin, Contracts, p. 232, et seq., sec. 204. On the other hand, Williston advocated the use of this term or something equivalent. 1 Williston, Contracts (1st ed.), p. 308, sec. 139. Use of the word 'estoppel' to describe a doctrine upon which a party to a lawsuit may obtain affirmative relief offends the traditional concept that estoppel merely serves as a shield and cannot serve as a sword to create a cause of action. See Utschig v. McClone (1962), 16 Wis.2d 506, 509, 114 N.W.2d 854. 'Attractive nuisance' is also a much criticized term. See concurring opinion, Flamingo v. City of Waukesha (1952), 262 Wis. 219, 227, 55 N.W.2d 24. However, the latter term is still in almost universal use by the courts because of the lack of the better substitute. The same is also true of the wide use of the term 'promissory estoppel.' We have employed its use in this opinion not only because of its extensive use by other courts but also since a more accurate equivalent has not been devised.

Because we deem the doctrine of promissory estoppel, as stated in sec. 90 of Restatement, 1 Contracts, is one which supplies a needed tool which courts may employ in a proper case to prevent injustice, we endorse and adopt it.

Applicability of Doctrine to Facts of this Case.

The record here discloses a number of promises and assurances given to Hoffman by Lukowitz in behalf of Red Owl upon which plaintiffs relied and acted upon to their detriment.

Foremost were the promises that for the sum of $18,000 Red Owl would establish Hoffman in a store. Afte Hoffman had sold his grocery store and paid the $1,000 on the Chilton lot, the $18,000 figure was changed to $24,100. Then in November, 1961, Hoffman was assured that if the $24,100 figure were increased by $2,000 the deal would go through. Hoffman was induced to sell his grocery store fixtures and inventory in June, 1961, on the promise that he would be in his new store by fall. In November, plaintiffs sold their bakery building on the urging of defendants and on the assurance that this was the last step necessary to have the deal with Red Wol go through.

We determine that there was ample evidence to sustain the answers of the jury to the questions of the verdict with respect to the promissory representations made by Red Owl, Hoffman's reliance thereon in the exercise of ordinary care, and his fulfillment of the conditions required of him by the terms of the negotiations had with Red Owl.

There remains for consideration the question of law raised by defendants that agreement was never reached on essential factors necessary to establish a contract between Hoffman and Red Owl. Among these were the size, cost, design, and layout of the store building; and the terms of the lease with respect to rent, maintenance, renewal, and purchase options. This poses the question of whether the promise necessary to sustain a cause of action for promissory estoppel must embrace all essential details of a proposed transaction between promisor and promisee so as to be the equivalent of an offer that would result in a binding contract between the parties if the promisee were to accept the same.

Originally the doctrine of promissory estoppel was invoked as a substitute for consideration rendering a gratuitous promise enforceable as a contract. See Williston, Contracts (1st ed.), p. 307, sec. 139. In other words, the acts of reliance by the promisee to his detriment provided a substitute for consideration. If promissory estoppel were to be limited to only those situations where the promise giving rise to the cause of action must be so definite with respect to all details that a contract would result were the promise supported by consideration, then the defendants' instant promises to Hoffman would not meet this test. However, see. 90 of Restatement, 1 Contracts, does not impose the requirement that the promise giving rise to the cause of action must be so comprehensive in scope as to meet the requirements of an offer that would ripen into a contract if accepted by the promisee. Rather the conditions imposed are:

(1) Was the promise one which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee?

(2) Did the promise induce such action or forbearance?

(3) Can injustice be avoided only by enforcement of the promise? ²

We deem it would be a mistake to regard an action grounded on promissory estoppel as the equivalent of a breach of contract action. As Dean Boyer points out, it is desirable that fluidity in the application of the concept be maintained. 98 University of Pennsylvania Law Review (1950), 459, at page 497. While the first two of the above listed three requirements of promissory estoppel present issues of fact which ordinarily will be resolved by a jury, the third requirement, that the remedy can only be invoked where necessary to avoid injustice, is one that involves a policy decision by the court. Such a policy decision necessarily embraces an element of discretion.

We conclude that injustice would result here if plaintiffs were not granted some relief because of the failure of defendants to keep their promises which induced plaintiffs to act to their detriment.

Damages.

Defendants attack all the items of damages awarded by the jury.

The bakery building at Wautoma was sold at defendants' instigation in order that Hoffman might have the net proceeds available as part of the cash capital he was to invest in the Chilton store venture. The evidence clearly establishes that it was sold at a loss of $2,000. Defendants contend that half of this loss was sustained by Mrs. Hoffman because title stood in joint tenancy. They point out that no dealings took place between her and defendants as all negotiations were had...