Court Opinion

ID: 9858971
Source: CourtListenerOpinion
Date Created: 2023-09-24 17:53:10.808282+00
Date Added: 2024-06-11T10:13:26.558674
License: Public Domain

REYNOLDSON, Chief Justice
(dissenting).
I respectfully dissent. The contract in issue falls squarely within the language and intent of the statute of frauds, § 554.2201, The Code 1973. The majority opinion, in my view, misapprehends and misapplies our rules relating to promissory estoppel. Further, the facts in this case do not bring it within the new principles pioneered in this decision.
I. In 1965 the Iowa legislature enacted the “Uniform Commercial Code — Sales.” Sixty-First General Assembly, ch. 413, § 2101. It was “a complete revision and modernization of the Uniform Sales Act.” D. Stanley & C. Coulter, Iowa Code Comment, 35 I.C.A. § 554.2101 at 118 (1967). Section 554.2201, the UCC’s statute of frauds, underwent a substantial liberalizing overhaul designed to eliminate undesirable and overly technical features of the former law. See D. Stanley & C. Coulter, supra, at 145-48; 3 R. Dusenberg & L. King, Sales & Bulk Transfers under the UCC § 2.05 (1978); R. Hudson, Contracts In Iowa Revisited, 15 Drake L.Rev. 61, 75-77 (1966); A. Squillante, Sales Law In Iowa Under The UCC — Article 2, 20 Drake L.Rev. 1, 61-65 (1970).
At the same time the statute was modified to clarify that its exceptions were limited to those contained in its provisions. Before 1919 the predecessor to § 622.32, our general statute of frauds, covered “sale[s] of personal property.” See § 4625, The Code 1897. In 1919 the Uniform Sales Act and its statute of frauds were enacted and the general statute was correspondingly revised. Compare §§ 554.4 and 622.32, The Code 1962. The catch-all exception in § 622.33, “or when there is any other circumstance which, by the law heretofore in force, would have taken the case out of the statute of frauds,” ceased to be applicable to sales of goods. Retained as applicable, however, were the “failure to deny” and “oral evidence of the maker” exceptions contained in § 622.34 and .35 respectively. See § 554.5, The Code 1962.
The lead sentence in § 554.2201 now provides: •
Except as otherwise provided in this section a contract for the sale of goods for the price of five hundred dollars or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.
(Emphasis provided.) The § 622.34 and .35 exceptions are now incorporated in (3)(b) of the section. The specific limitation of exceptions to those contained “in this section” reflects a marked change from former § 554.4.
With exceptions to the statute of frauds now specifically limited by the terms of the statute to those enumerated in its provi*345sions, the majority’s claim that promissory estoppel may be engrafted as simply another exception by virtue of § 554.1103 loses viability. Section 554.1103 permits application of other legal principles, including es-toppel, “unless displaced by the particular provisions of this chapter.” Plainly, the limiting language of § 554.2201 constitutes such a displacement. Had the legislature intended the concepts of §§ 90 and 217A of the tentative draft of the Restatement (Second) of Contracts to serve as an exception to its statute of frauds, it would have incorporated them as an exception in the act.
Displacing § 554.1103 with the exceptions in § 554.2201 does not render ineffectual the common-law principles contained in the former. First, they supplement other sections of the UCC except those, like § 554.-2201, which provide otherwise. Second, the victim of fraud who has no legal remedy because § 554.2201 prevents proof of the oral contract is not left out in the cold. The equitable remedy of restitution is not dependent upon proof of a contract. The basic elements of equitable estoppel and fraud are (1) intentional misrepresentation, (2) innocent, reasonable and foreseeable reliance, and (3) injury. See Walters v. Walters, 203 N.W.2d 376, 379 (Iowa 1973), quoted in Merrifield v. Troutner, 269 N.W.2d 136, 137 (Iowa 1978) (equitable estoppel); Grefe v. Ross, 231 N.W.2d 863, 864 (Iowa 1975) (fraud). Nor is a contract enforced in those situations. Recovery is based on the injury suffered in the course of reliance. As we stated in Grefe, the liability is predicated on the fraud, not on any contract. 231 N.W.2d at 868. With these remedies available, the statute of frauds gives a fraudulent party little protection.
The limiting language of § 554.2201 at least ought to displace a doctrine which would gut the legislative intent of the statute. Distilled to its essence, § 217A, as interpreted by the majority, provides that if one contracting party should know the other contracting party will rely on the contract and injustice will result if the oral contract is not enforced, the statute of frauds will be ignored. It is a rare case when either promisor in a bilateral contract does not rely on the contract. Del Hayes & Sons, Inc. v. Mitchell, 304 Minn. 275, 284, 230 N.W.2d 588, 594 (1975). Any party to a contract should realize such reliance occurs. Most situations in which such an oral contract is breached result in injustice.
But the § 554.2201 statute of frauds obviously is designed to suffer these injustices in isolated oral contract cases in favor of the general public policy to reduce fraud and perjury, curtail litigation and controversy, and encourage written contracts in sales of goods for a price of $500 or more. It is significant that by trial time the plaintiff corporation in the case at bar was using written sales contracts with its customers.
Adopting §§ 90 and 217A as an unwritten exception to § 554.2201 will not only encourage oral contracts, it will bring a massive infusion of litigation to our overloaded courts. Trial courts will be compelled to determine, on an ad hoc basis, whether there was a contract, whether the promisor could “reasonably expect” the other party to rely on it, whether reasonable action or forbearance resulted, whether “justice requires” a remedy, and otherwise engage in the delicate balancing maneuvers mandated by § 217A(2).
In the final analysis, the majority opinion means written contracts are unnecessary in initial purchases of agricultural products, probably Iowa’s largest economic marketplace and involving almost three billion dollars worth of goods each year. We should proceed down that road with great caution.
It is just as clear the majority is moving against a long-time trend:
This attitude [to extend exceptions to the statute of frauds] has given way gradually, and from quite an early period the statute of frauds has frequently been spoken of as a most beneficial statute which should be liberally construed to effect its object. The wisdom of the statute is a matter within the control of the legislature, not the judiciary, but it has been said to be justified by long experience. The tendency has long been to *346restrict rather than to enlarge and multiply the cases of exceptions to the statute, and the right to invoke the statute as a defense is no longer regarded with disfavor. The courts should not be tempted to turn aside from its plain provisions merely because of the hardship of the particular case. They should not be controlled by the consequences following upon an application of the statute, or deem obnoxious a law which the legislature has placed in the statutes and allowed to remain for many years, and they cannot disregard the statute. They certainly should refuse to sanction such a construction as would permit the evils that the statute was intended to prevent.
73 Am.Jur.2d Statute of Frauds § 511 (1974).
II. Aside from the above factors, I am convinced promissory estoppel is not an appropriate device to serve as an exception to the statute of frauds.
Promissory estoppel is related to equitable estoppel and the two are frequently confused. 1 Williston on Contracts § 140 at 607-09 (3d ed. 1957). We recently defined the two in Merrifield v. Troutner, 269 N.W.2d 136, 137 (Iowa 1978). In promissory estoppel a unilateral promise is relied upon, while in equitable estoppel reliance is placed on a misrepresentation or concealment of material fact. In either instance the party who reasonably and detrimentally relies will be protected if the equities of the situation require it, even to the extent in promissory estoppel of enforcing an otherwise gratuitous promise. See Miller v. Lawlor, 245 Iowa 1144, 1153, 66 N.W.2d 267, 273 (1954).
But there is no logical basis for using either equitable doctrine to enforce a bilateral, executory contract. The exchange of promises provides the requisite consideration to make such a contract valid and enforceable if its existence can be proved. To hold plaintiff corporation’s immediate resale of defendant’s grain constitutes detrimental reliance and makes defendant’s promise to sell enforceable is unnecessary and distorts basic precepts of contract law.
Worse yet, a rule that such detrimental reliance (which is in every bilateral, execu-tory contract to some degree) permits the promisee to avoid the statute of frauds misconceives the nature and purpose of § 554.2201.
The § 554.2201 statute of frauds is only a rule of evidence. Stauter v. Walnut Grove Products, 188 N.W.2d 305, 313 (Iowa 1971). It regulates the proof of contracts or agreements relating to sales of goods — the type of contract or agreement which should be reduced to writing. The exceptions itemized in the statute cover situations in which the legislature determined a signed writing was unnecessary to prove the contract. Promissory estoppel is a method by which courts enforce unilateral promises. A unilateral promise is not a contract or agreement. It follows the § 554.2201 statute of frauds does not regulate proof in those situations in which promissory estoppel may be invoked. It should also follow that promissory estoppel, as a substantive source of enforceability, has no place in a list of exceptions to a rule of evidence covering enforceable bilateral contracts.
Many courts have declined to create an additional exception based on promissory estoppel. They continue, as I am convinced we should, to view promissory estoppel as a doctrine of equity which provides only a means of enforcing unilateral promises, not a method of proving bilateral contracts. See, e. g., Cox v. Cox, 292 Ala. 106, 111-12, 289 So.2d 609, 613 (1974); Tiffany Inc. v. W. M. K. Transit Mix, Inc., 16 Ariz.App. 415, 420-21, 493 P.2d 1220, 1225-26 (1972); Tanenbaum v. Biscayne Osteopathic Hospital, Inc., 173 So.2d 492, 495 (Fla.App.1965); Sacred Heart Farmers Co-op Elevator v. Johnson, 305 Minn. 324, 326-27, 232 N.W.2d 921, 922-23 (1975) (sale of grain); Del Hayes & Sons, Inc. v. Mitchell, 304 Minn, at 281-85, 230 N.W.2d at 592-94 (sale of grain); Farmland Serv. Coop, Inc. v. Klein, 196 Neb. 538, 244 N.W.2d 86 (1976) (sale of grain).
The majority distinguishes these cases as based on a view of promissory estoppel not held in Iowa. I cannot agree. Each appli*347cation of promissory estoppel by this court has occurred in a case involving a unilateral promise. We have never permitted a party to evade a clear statute of frauds proof problem with bilateral contract by the promissory estoppel device.
In Miller v. Lawlor, 245 Iowa at 1144, 66 N.W.2d at 267, relied on by the majority, a landowner orally assured the prospective purchaser of a neighboring residence that the landowner would not obstruct a scenic view. In Shell Oil Co. v. Kelinson, 158 N.W.2d 724 (Iowa 1968), the alleged promise was the plaintiff’s oral notice of intent to rescind its exercise of an option to purchase. In Johnson v. Pattison, 185 N.W.2d 790 (Iowa 1971), the owner of a large tract of land orally assured the prospective purchaser of a portion of the property previously sold to another that the area would always be used for residential purposes. In Merrifield v. Troutner, 269 N.W.2d at 136, we held promissory estoppel was not established because the noncustodial parent had not relied on any “promise” by the custodial parent not to seek back support payments. The noncustodial parent had not promised to relinquish visitation rights in return for the promise.
Although the relevant element in these cases has been termed “a clear and definite oral agreement,” taken in the context of each case the word “agreement” was always used in the sense of a unilateral, gratuitous promise, not a contract. The majority perpetuates this inaccurate terminology.
Our cases on this point trace back to Lawlor where this court clearly grounded its use of the doctrine on unilateral promises by quoting, inter alia, § 90 of the Restatement of Contracts, still in effect. 245 Iowa at 1153, 66 N.W.2d at 273. Of course, § 90 and its illustrations relate solely to unilateral promises. These Iowa cases the majority relies on hold only that the statute of frauds does not forbid oral proof of the unilateral promise for the purpose of establishing promissory estoppel. They do not provide authority for using oral proof of bilateral contracts in violation of the statute of frauds.
I agree that new § 217A (aided by revised § 90 as it is interpreted under the tentative draft) moots these problems and blends unilateral and bilateral promises, but that is why I would not adopt them. The tentative draft has essentially created a concept which is indistinguishable from promissory estoppel and applies it to bilateral contract proof problems.
The effect of promissory estoppel on § 554.2201 under the majority opinion is devastating. If the statute is to be repealed the policy decision should be left with the legislature.
III. Finally, it should be noted the facts in this case would not warrant application of § 217A of the Restatement Tentative Draft.
Imposition of § 217A would require proof the defendant seller in this case “should reasonably expect” that the plaintiff corporation would promptly resell the grain. There is no evidence in the transcript in this ease to show defendant either knew this was plaintiff’s practice or that it was a custom in the industry.
Majority seeks to supply this crucial missing proof by asserting “it is reasonable to believe a farmer who sells grain regularly to country elevators knows they may immediately sell the grain which they purchase.”
Majority seems to be judicially noting not only what defendant knew about elevator operations but also the sales practices in a private industry. I doubt these matters qualify for judicial notice as being within common knowledge or capable of certain verification. Motor Club of Iowa v. Department of Transp., 251 N.W.2d 510, 517 (Iowa 1977). Plaintiff corporation’s operating officer did not assume defendant had this knowledge. He felt compelled to tell defendant the grain had been resold. This, of course, was long after the event and had no bearing on whether defendant should have “reasonably expect[ed]” such action.
I would reverse and remand for a new trial, during which proof of the alleged contract would be regulated by § 554.2201 undiluted by promissory estoppel.