State Bank of Standish v. Curry

• Decision Date: 13 April 1993
• Docket Number: No. 92311,92311
• Citation: 500 N.W.2d 104,442 Mich. 76
• Parties: STATE BANK OF STANDISH, Plaintiff, Counter-Defendant-Appellee v. Robert N. CURRY and Kathleen Curry, d/b/a Ev Wal Farms, Defendants, Counter-Plaintiffs-Appellants
• Court: Michigan Supreme Court

Page 104

500 N.W.2d 104

442 Mich. 76

STATE BANK OF STANDISH, Plaintiff, Counter-Defendant-Appellee v. Robert N. CURRY and Kathleen Curry, d/b/a Ev Wal Farms,

Defendants, Counter-Plaintiffs-Appellants

No. 92311.

Supreme Court of Michigan.

April 13, 1993.

[442 Mich. 78] Patrick R. Winter, Standish, for plaintiff.

Braun, Kendrick, Finkbeiner Schafer & Murphy by Kenneth Kable and Scott Strattard, Craig W. Horn, Saginaw, for appellee.

Cubitt, Cubitt & Trowhill by H. Dale Cubitt, Bad Axe, for appellants.

Warner, Norcross & Judd, James H. Breay, David E. Kirtley, Grand Rapids, Howard & Howard, James H. Geary, Kalamazoo, for Michigan Bankers Assn.

OPINION

BOYLE, Justice.

We granted leave in this case to determine whether there was sufficient evidence of a clear and definite promise to support a claim for relief on the theory of promissory estoppel. After careful review of the record, we find that there was. Accordingly, we affirm in part and reverse in part the decision of the Court of Appeals. We reinstate the jury's verdict in favor of the Currys and remand the case to the trial court for further proceedings consistent with this opinion.

I

Robert and Kathleen Curry are dairy farmers. Beginning in 1975, the Currys annually obtained funds from the State Bank of Standish to purchase seed, fertilizer, and chemicals for spring planting. The sum of the operating loan varied little from year to year and was used solely for the planting of crops. Early each year, Mr. and Mrs. Curry would visit the bank to discuss the upcoming spring loan and crop plan with the bank's officers. The bank would complete the required paperwork and, after the initial visit with the Currys to discuss the loan, simply call the Currys back to the bank in March or April to sign the promissory note. Any outstanding balance on the previous year's loan was rolled over and added into a new loan bearing an interest rate of two points over the bank's prime rate, which was then amortized over a five-year period. Monthly payments were made directly from the Michigan Milk Producers Association (MMPA) by assignment of the proceeds from the Currys' milk contract. As collateral, the bank had a security agreement on all of the Currys' personal property, which was, at a minimum, twice the value of the loan.

The federal government, in an attempt to stabilize prices in the dairy market in March 1986, implemented a dairy herd buy-out program. ¹ Although never in default on any of his loans, Mr. Curry, discouraged by the increasing economic difficulties with dairy farming in the 1980's, seriously considered the program. The buy-out would have afforded him a debt-free termination of his dairy business. In addition to the money received from the government buy-out, the Currys' registered dairy herd could be sold in Canada for a greater amount than those unregistered herds in the program that would be slaughtered.

Mr. and Mrs. Curry went to the bank in January and February of that year with the sole purpose of discussing the government buy-out program to decide whether they should continue in or get out of the dairy farming business. At that time, Mr. Curry brought to the bank a written breakdown of the $20,000 needed for the upcoming spring loan. As usual, the Currys spoke with Mr. Garry, the assistant vice president and loan officer, and were later joined by Mr. Pelts, the executive vice president of the bank. The discussion centered on the current trying economic times and whether the Currys should enter the buy-out program. Mr. Curry testified that in the context of discussing whether he should continue dairy farming or get out of the dairy business, he asked the bank officers whether the bank would continue to support their farm. Mr. Garry and Mr. Pelts responded that the Currys were doing a good job and had made all their payments and that there was no reason to worry about their future in the dairy business because the bank would support them. Believing they had a promise for the upcoming spring loan on the basis of this conversation with bank officers, the Currys continued with their dairy farming operation and did not submit a serious bid in the government's March 1986 buy-out program. ²

In mid-April, Mr. Curry stopped at the bank to request an additional $5,000 to tile a field and to inquire about the delay in signing the papers for the spring operating loan. Although it was now well into the spring planting season, Mr. Garry stated that "it would probably be a couple weeks before he got it all done." Mr. Curry contacted the bank in May and was informed by Mr. Garry that the bank would not renew their operating loan for 1986. Mr. Curry sought alternative financing from an arm of Farm Credit Services, but was told that he would first have to pay off his existing loan at the State Bank of Standish because it held all of his personal property as collateral. He was unable to do so. To acquire the necessary cash to sustain the dairy operation, the Currys obtained credit from suppliers and subsequently defaulted on the outstanding promissory note with the bank. Because of late planting and necessary cutbacks, the production and health of the dairy herd declined.

The bank filed an action for claim and delivery. The Currys counterclaimed, alleging economic and emotional damages arising from breach of the bank's duty of good faith and fair dealing, fraud, duress, and promissory estoppel. The trial court granted the bank's motion for summary disposition pursuant to MCR 2.116(C)(8) on all counterclaims except promissory estoppel. The court also found no defense to the bank's claim and delivery action, but stayed judgment until after trial for the purpose of setoff, if any.

At trial, the jury found by special verdict that the bank made a clear and definite promise to loan money to the Currys for their 1986 farm operating needs and that the Currys had justifiably relied on that promise to their detriment. The jury award was set off against the amount due the bank on the promissory note, resulting in a judgment for the Currys of $56,243.44.

On appeal, conceding the facts alleged by the Currys as true, the bank contended that there was no evidence of a clear and definite promise by it to make the loan. The Court of Appeals agreed, 190 Mich.App. 616, 476 N.W.2d 635 (1991), reversed the trial court's judgment in favor of the Currys on the promissory estoppel claim, and affirmed the summary disposition on the fraud, duress, and good-faith and fair-dealing claims. We granted leave to appeal. 439 Mich. 1021, 485 N.W.2d 566 (1992).

Because we agree with the Court of Appeals regarding summary disposition of the fraud, duress, and good-faith and fair-dealing claims, we address only the promissory estoppel issue. In its brief and at oral argument, the bank conceded reliance and did not raise the issues of consideration or damages. The only issue before us is whether the Court of Appeals correctly found insufficient evidence to permit the jury to sustain the Currys' claim of promissory estoppel.

II

The Currys do not allege a promise to loan money on the basis of assurances by the bank that they were in compliance with the farm plan discussed the previous year, nor do they allege a promise solely on the basis of their ten-year financial relationship with the bank. ³ What the Currys do claim is that the bank made a clear manifestation that it would continue to extend credit to finance their farming operation for the upcoming spring planting season, and that the material terms for that loan can be determined from the nature of that transaction and through the course of dealings between the parties. The bank, as counter defendant, does not dispute the element of reliance. Rather, as appellant below, the bank argued only that there was no record support for a finding of a clear and definite promise as a matter of law.

The doctrine of promissory estoppel is set forth in 1 Restatement Contracts, 2d, § 90, p. 242:

"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 such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires." ⁴

Promissory estoppel developed to protect the ability of individuals to trust promises in circumstances where trust is essential. It is the value of trust that forms the basis of the entitlement to rely. Farber & Matheson, Beyond promissory estoppel: Contract law and the "Invisible Handshake," 52 U.Chi.L.R. 903, 928, 942 (1985). ⁵ However, the reliance interest protected by § 90 is reasonable reliance, and "reliance is reasonable only if it is induced by an actual promise." School Dist. No. 69 of Maricopa Co. v. Altherr, 10 Ariz.App. 333, 340, 458 P.2d 537 (1969).

In Williston on Contracts, Professor Lord observes that although the elements required to invoke the doctrine are straightforward, they necessarily involve a threshold inquiry into the circumstances surrounding both the making of the promise and the promisee's reliance as a question of law. The existence and scope of the promise are questions of fact, and "a determination that the promise exists will not be overturned ... unless it is clearly erroneous." 4 Williston, Contracts (4th ed.), § 8:5, pp. 84-85, 102-103. ⁶ Thus, while we agree with the Court of Appeals in the instant case that the sine qua non of the theory of promissory estoppel is that the promise be clear and definite, we cannot agree with its narrow review of the record as evidence that such a promise did not exist.

The term promise is defined in 1 Restatement Contracts, 2d, § 2, p. 8:

"A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made." ⁷

Courts are variably strict and flexible in...