Klinke v. Famous Recipe Fried Chicken, Inc.

• Citation: 616 P.2d 644,94 Wn.2d 255
• Decision Date: 03 September 1980
• Docket Number: No. 46670,46670
• Parties: Paul KLINKE, Brent Klinke, Gregory Klinke and Mitch Gasparovich, Respondents, v. FAMOUS RECIPE FRIED CHICKEN, INC., a corporation, Petitioner.
• Court: United States State Supreme Court of Washington

Page 255

94 Wn.2d 255 616 P.2d 644 Paul KLINKE, Brent Klinke, Gregory Klinke and Mitch
Gasparovich, Respondents,
v.
FAMOUS RECIPE FRIED CHICKEN, INC., a corporation, Petitioner. No. 46670. Supreme Court of Washington, En Banc. Sept. 3, 1980.

Page 256

[616 P.2d 645] Eisenhower, Carlson, Newlands, Reha, Henriot & Quinn, Ronald Roberts, Tacoma, for petitioner.

Mann, King, Anderson, Bingham & Scraggin, Gordon Scraggin, James Heller, Tacoma, for respondents.

UTTER, Chief Justice.

This is an appeal from the Court of Appeals reversal of a summary judgment in favor of petitioner Famous Recipe Fried Chicken, Inc., in an action for damages for breach of an oral agreement. Two issues are presented: (1) May equitable or promissory estoppel be utilized in an action for damages? and (2) Should section 217A of the Restatement (Second) of Contracts be adopted?

Paul Klinke, Brent Klinke, Gregory Klinke and Mitch Gasparovich sued Famous Recipe Fried Chicken, Inc. for $200,000 for lost time and wages and other damages stemming from the alleged breach of an oral agreement under which respondents were to open and operate a fried chicken franchise outlet in the Tacoma area. After summary judgment in favor of petitioner, respondents appealed. In ruling on a motion for summary judgment, the court must consider the material evidence and all reasonable inferences therefrom in favor of the nonmoving party. If reasonable persons might reach different conclusions, the

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motion should be denied. Millikan v. Board of Directors of Everett School District No. 2, 93 Wash.2d 522, 532, 611 P.2d 414 (1980); Novenson v. Spokane Culvert & Fabricating Co., 91 Wash.2d 550, 552, 588 P.2d 1174 (1979). When viewed most favorably to plaintiff Paul Klinke, the nonmoving party, the summary judgment evidence and inferences establish the following facts. In 1974, Famous Recipe Fried Chicken, Inc. (Famous) issued to Klinke a 10-year franchise to operate a Famous Recipe Restaurant in Yuba City, California. They were not authorized to issue franchises in California when negotiations began and agreed to apply for State approval. The parties then executed a written area deposit agreement for which Klinke paid $1,000. Klinke next secured a location approved by Famous and built a facility. More than a month passed before State approval was obtained. The actual franchise agreement was not executed until after the business opened.

In late 1974 and early 1975 Klinke wished to move to the Tacoma area and discussed the possibility of opening a franchise outlet in Washington with representatives of Famous. In early 1975 Klinke sold the highly successful Yuba City operation and moved to Alaska where he obtained temporary employment. While in Alaska, Klinke contacted the corporation's authorized representative for franchises, Robert Skinner. Skinner agreed that if Klinke left his job, returned to Washington and located a suitable restaurant site, Famous would register in the state and issue a franchise agreement [616 P.2d 646] incorporating the terms and provisions of the Yuba City contract. Unlike the Yuba City arrangement, however, no deposit agreement was executed and no money changed hands.

In August 1975, relying upon the agreement with Famous, Klinke left his Alaska job and moved to the Tacoma area. Famous wrote to Klinke in September of 1975 expressing satisfaction that he had made the move and that they would be doing business together in Washington. Klinke, together with Famous representatives,

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found a location in Tacoma and, working with representatives from Famous, began to negotiate for its acquisition and development. In turn, Famous applied for Washington registration as a dealer in franchises. Although the application was returned to Famous for minor changes in the late fall, Skinner told Klinke to proceed with site acquisition.

Klinke was still engaged in negotiating for the property when, in April 1976, Famous notified him of its decision not to qualify in Washington and that there would be no franchise. In October 1976, Klinke, his two sons, Brent and Gregory, and his "partner," Mitch Gasparovich, filed this suit against Famous. Interposing the statute of frauds ¹ as a defense, Famous moved for summary judgment. Plaintiffs countered by pleading both equitable and promissory estoppel. The trial court granted summary judgment.

The Court of Appeals, Division Two, reversed the trial court, holding that: (1) the theories of equitable or promissory estoppel are available to prevent assertion of the statute of frauds defense, and (2) Paul Klinke's evidence was sufficient to permit submission of the case to the jury under these theories.

I.

Will equitable or promissory estoppel support an action for damages? Petitioner Famous relies on Goodwin v. Gillingham, 10 Wash.2d 656, 117 P.2d 959 (1941). That case is inapplicable inasmuch as it addresses equitable estoppel, not promissory estoppel.

Equitable estoppel is based upon a representation of

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existing or past facts, while promissory estoppel requires the existence of a promise. Hellbaum v. Burwell & Morford, 1 Wash.App. 694, 700, 463 P.2d 225 (1969); Annot: Promissory estoppel as basis for avoidance of the statute of frauds, 56 A.L.R.3d 1037, 1042 (1974) (hereafter cited as Annot: Statute of Frauds). Equitable estoppel also is available only as a "shield" or defense, while promissory estoppel can be used as a "sword" in a cause of action for damages. Tiffany Incorporated v. W.M.K. Transit Mix, Inc., 16 Ariz.App. 415, 493 P.2d 1220, 1224 (1972); Annot: Statute of Frauds, supra at 1041-42, 1047. Promissory estoppel...