Court Opinion

ID: 9480040
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:35:59.25716+00
Date Added: 2024-06-11T17:47:26.493294
License: Public Domain

WELLFORD, Circuit Judge,
dissenting:
I dissent from the majority view in this case, and I would reverse and remand the case for the reasons indicated.
As conceded by plaintiff, the alleged agreement between the parties was not in writing and there was no documentary evidence establishing its precise terms. I find the statement by the magistrate in this case to set forth the facts succinctly:
[W]hen the facts are construed in a light most favorable to Jarrett, as required in consideration of this motion for summary judgment, Jarrett, by his own testimony and the testimony of other employees, has presented sufficient facts to establish an oral agreement between Jarrett and Epperly for Epperly to convey a 49% interest in UBSI’s Nashville operation upon Jarrett’s successful completion of 10 years employment with Epperly and UBSI. Jarrett testified that Epperly so agreed in 1976 and gave subsequent assurances to Jarrett in the following years. Other employees described conversations with Epperly in which Epperly acknowledged the agreement. Jarrett left his prior employment to take the position and declined to pursue subsequent employment offers and business ventures in reliance upon Epperly’s promise. Although the dollar value of these other offers are [sic] unclear, the length of Jarrett’s commitment suggests an unjust loss if the agreement were breached. To be sure, Epperly disputes these facts, but these factual disputes can not be resolved by a motion for summary judgment.
... It appears that Jarrett [sic] version of the 1976 agreement include [sic] a subsequent promise to convey the real estate on which UBSI’s Nashville branch was located. Of course, UBSI did not acquire ownership of the real estate on which its Nashville branch was located until 1980. However, in his deposition testimony, Jarrett clearly states that this real estate was to be embedded in the agreement.
STATUTE OF FRAUDS
An oral contract for sale of an interest in land is clearly not enforceable in Tennessee. Blasingame v. American Materials, Inc., 654 S.W.2d 659 (Tenn.1983); Baliles v. Cities Service Co., 578 S.W.2d 621 (Tenn.1979). It is error to rely upon a sixty-one year old district court decision (Interstate Co. v. Bry-Block Mercantile Co., 30 F.2d 172 (W.D.Tenn.1928) to “su-percede” the holding of the Tennessee Supreme Court in this regard.
The doctrine of partial performance, relied upon by plaintiff, does not change the rule on sale of real estate in Tennessee. Blasingame, supra, n. 2; Baliles, supra. The Blasingame court specifically noted that a situation where real estate is the subject matter of an oral agreement is distinguishable from a situation which involves the partial performance of a verbal employment contract. 654 S.W.2d at 663.
Plaintiff formally pleaded that real estate was part of the alleged contract upon which he relied:
*1022It was understood by the parties that the forty-nine percent (49%) of the Nashville operation, included inventory, equipment, accounts receivable, accounts payable, business goodwill and real estate.
Joint Appendix 21 and 91 (emphasis added).
Plaintiff is suing for the value of real estate assets acquired in 1980 and claims that since there was no real estate involved in 1976 when he made the oral agreement, he is not barred by the Statute of Frauds. Jarrett cannot escape, however, from the fact that he is nevertheless claiming an interest in real estate based on an unenforceable oral agreement. To the extent the district court and the majority have permitted recovery for the value of real estate, contrary to the Tennessee Statute of Frauds as construed by the Tennessee Supreme Court, I am convinced they are in error and to this extent, at least, I would reverse and remand for a redetermination of damages, excluding the value of real estate entirely. This would be the case if the alleged oral contract were deemed to be severable giving plaintiff the benefit of very considerable doubt under Womble v. Walker, 181 Tenn. 246, 181 S.W.2d 5 (1944), and Brockett v. Pipkin, 25 Tenn.App. 1, 149 S.W.2d 478 (1941).
In sum, then, I dissent from the majority’s holding that the Statute of Frauds was inapplicable to the real estate assets claimed by plaintiff. The entire basis for plaintiffs claim is breach of an oral contract, an oral agreement which purportedly included and involved a 49% interest in Epperly’s “Nashville operation.” The Statute of Frauds is clearly applicable to breach of contract claims as plaintiff admits in his brief, citing Haynes v. Cumberland Builders, Inc., 546 S.W.2d 228 (Tenn.Ct.App.1976) (Appellee’s Brief at 11). Later Tennessee Supreme Court cases also make this clear. Plaintiff characterizes in both the complaint and amended complaint that he is suing on a “breach of contract” claim.
PROMISSORY FRAUD
The other claim asserted by Jarrett in his amended complaint is for promissory fraud. Plaintiff claims in this regard that defendant Epperly made false representations in the agreement, discussed above, with the idea at the outset to deceive plaintiff, because he had “no reasonable expectation of performing those promises.” Plaintiff claims, therefore, that defendant “expected to induce reliance” and did so, causing him “to change his position,” and then Epperly “repudiated” the oral agreement to plaintiff’s “irreparable detriment.” This claim amounts to an alleged oral offer and acceptance by plaintiff and the subsequent failure on the part of defendant-offeror to carry out the parol agreement, his part of the bargain.
The promissory fraud claim should not have been submitted to the jury. The Tennessee Supreme Court has not expressly recognized promissory fraud as a tort in Tennessee. It has not yet found the “right” set of facts to apply such a doctrine. Fowler v. The Happy Goodman Family, 575 S.W.2d 496 (Tenn.1978); Bolan v. Caballero, 220 Tenn. 318, 417 S.W.2d 538, 541 (1967). The Tennessee Supreme Court has, nevertheless, expressly held that there is no judicial remedy for breach of an oral promise within the statute of frauds even if “the promise [was made] with no intention of complying with it.” Southern States Development Co. v. Robinson, 494 S.W.2d 777, 782 (Tenn.Ct.App.1972), cert. denied, (Tenn.1973) (quoting Webb v. Shultz, 184 Tenn. 235, 198 S.W.2d 333, 336 (1946)).
When enforcement of a promise is barred by the Statute of Frauds, a claim for promissory fraud on that same promise is likewise barred. In the Webb decision, the Tennessee Supreme Court stated:
In Hackney v. Hackney, 27 Tenn. 452, it was held that the fraud which will take a case from the operation of the statute of frauds is not fraud in making the promise with no intention of complying with it; but a fraud by which the reduction of it to writing is prevented, the parties so intending; and the complaining party being induced to believe that it has been done, and this fraud may be perpetrated in two ways — one by signing a false pa*1023per, at the same time inducing the belief that it is the true one, and the other by inducing the belief that the paper had been signed when in fact it had not. If there was no intention of reducing the promise to writing, or if there were knowledge that though there was an intention of reducing it to writing, that this had not been done, the promise is void under the statute.
... It is, therefore, clear that a false promise to sign an instrument in the future [or to do any act in the future] is not such fraud as will take the case out of the operation of the statute of frauds.
198 S.W.2d at 336. Webb thus distinguished between fraud in the inducement— e.g., having someone sign a false paper— from fraud in factum, such as the fraud alleged in this case in which Jarrett alleges that Epperly had no intention of complying with the promise at the time he made it. While fraud in the inducement will take a case away from the operation of the Statute of Frauds where there was allegedly no intention of ever complying with the promise, “the promise is void under the statute.” Id. The Webb language was quoted with approval by the Tennessee Court of Appeals in Southern States. See 494 S.W.2d at 782.
Southern States was decided five years after the Tennessee Supreme Court discussed the theory of promissory fraud in Caballero, supra. Even though the Tennessee Court of Appeals was on notice of the consideration of the concept of promissory fraud by the Tennessee Supreme Court in Bolán, it nevertheless recognized that certain oral promises are not actionable regardless of the maker’s intent.
The district court should have been guided by those decisions and recognized that submitting the promissory fraud claim to the jury would be contrary to Tennessee law. Neither the magistrate nor the district judge even acknowledged the existence of the Webb and the Southern States decisions.
The plaintiff has elected first to go forward to sue for a breach of contract and obtain damages for the breach. To the extent he is entitled to recover damages for the oral contract (not involving real estate), plaintiff cannot also claim a recovery for a remedy for promissory fraud saying there was never such an agreement because defendant never intended to perform it. See Dunham v. Fortner Furniture Co., 1987 WL 6372 (Shelby Law No. 99, 2/13/87, Tenn.Ct.App.).
Tennessee appellate courts have not seen fit to allow a promissory fraud recovery for the type of claim made in this case. Brungard v. Caprice Records, Inc., 608 S.W.2d 585 (Tenn.Ct.App.1980), involved a claim for rescission of a contract and for relief based on fraudulent misrepresentation, a different situation from the instant ease. The Tennessee Court of Appeals in Farmers & Merchants Bank v. Petty, 664 S.W.2d 77, 81 (Tenn.Ct.App.1983), recognized that the Supreme Court of Tennessee has not adopted the doctrine of promissory fraud. In Fowler, the Supreme Court of Tennessee stated:
Although a minority view, the rule established by the cases in this state has been that a misrepresentation of intention or a promise without intent to perform is legally insufficient to support a claim for rescission or damages. This rule has been adhered to in a number of decisions, including the fairly recent case of Bolan v. Caballero.
Fowler, 575 S.W.2d at 499 (citations omitted).
I would agree, therefore, with magistrate William J. Haynes, Jr. in this case that the defendants’ Statute of Frauds defense was sound as to “any agreement to convey any interest in the UBSI-Nashville realty,” and that the promissory fraud claim simply cannot stand under applicable Tennessee law and the facts of this case.
Jarrett was never denied fair consideration during the time he worked for defendants. He testified that he was “well paid” during this period and was treated fairly during the employment relationship. From the outset defendants paid plaintiff more than he had previously ever been paid and he received regular and generous raises. I find no proven basis for equitable *1024estoppel to preclude defendants’ reliance on the Statute of Frauds. See Webb, supra; Southern States, supra.
Giving plaintiff, then, the benefit of doubt about severability of the oral agreement and about application of equitable estoppel in this situation, I would reverse and remand to the district court only for a determination of compensatory damages for the personalty value of the breach of the oral contract I would also reverse and set aside the punitive damages award entirely.