NMAC assert that they never breached any agreement and this claim should be dismissed. I agree.
First of all, the claim against Nissan must be dismissed. Even from plaintiffs' perspective, all of the evidence discussed here relates to plaintiffs' relationship with NMAC, not Nissan. Plaintiffs have offered no evidence that Nissan had any obligations whatsoever with respect to NMAC's financial dealings with plaintiffs. Nissan and NMAC are separate entities and there is no evidence that Nissan participated in any formal manner in considering plaintiffs' application for financing from NMAC. Therefore, this cause of action concerning Nissan must be dismissed.
The claim against NMAC must also be dismissed. Plaintiffs do not dispute that they never agreed to the written offer of financing proposed in NMAC's August 14, 1989 commitment letter. Plaintiffs' present theory, on this count, is that NMAC "breached" an oral agreement made sometime in "early 1989" between NMAC's representative, Frank Keenan, and plaintiff Ingrassia.
According to Ingrassia, he and Keenan discussed the specific terms of the financing, including a $ 1 million mortgage, a "fair" interest rate, personal guarantees by Ingrassia and Pelligrino, and a capital infusion by plaintiffs in the amount of $ 370,000.00. According to Ingrassia, Keenan orally assured Ingrassia that NMAC would provide the financing on the terms discussed.
The August 14th written offer -- made upon final approval from the national Credit Committee -- offered essentially the same financing but with some different conditions. The most dramatically different condition was that $ 550,000 in unencumbered funds be infused into the dealership by plaintiffs. This was a condition that allegedly made the proposal impossible for the plaintiffs to meet. Because the terms of the August 14, 1989 proposal were different, in this respect, from those discussed between Keenan and the plaintiffs, plaintiffs assert that NMAC breached the prior oral contract.
NMAC asserts that no oral agreement was ever made. Alternatively, NMAC argues that even if an oral understanding were reached between Keenan and Ingrassia in the weeks prior to the August 14th letter, it is unenforceable for three reasons: doing so would violate the Statute of Frauds; any such agreement lacked specific terms and thus was too vague to be enforced; and any such agreement was merged into the final, written proposal of August 14, 1989.
Although I am not convinced that any "agreement" was made between Keenan and Ingrassia, even had there been such an agreement, it is unenforceable under the Statute of Frauds.
First of all, at best, it appears that Keenan and Ingrassia talked in general terms about the nature of the financing. Both Keenan and Ingrassia, experienced businessmen, may have been hopeful and optimistic that a deal could be achieved, but the exact arrangement does not appear to have been finalized. All the facts and inferences suggest that plaintiffs knew and understood that NMAC would memorialize the arrangement in a written commitment.
Ingrassia telephoned Keenan several times during the week before the closing in order to obtain written confirmation. "Prior to [the closing] I kept asking them when will I have the letter. ... I was concerned not having the letter up front." Ingrassia Depo. at pp. 91-92. Obviously, plaintiffs were not comfortable closing on the sale without having written financing approval.
Plaintiffs are not unsophisticated individuals. They are experienced businessmen who have borrowed money from financial institutions in the past. Written commitments for financing are the norm. As such, their alleged reliance on any financing commitment prior to having it in writing is unreasonable and highly risky, if financing from NMAC was truly crucial.
Moreover, I am troubled by plaintiffs' current assertions because they are not entirely consistent with the assertions in their earlier opposition to NMAC's original motion for summary judgment.
In their earlier opposition, plaintiffs did not assert that NMAC breached the oral agreement allegedly made prior to the August 14th written offer. The gist of their earlier opposition was that, for several months after making their August 14, 1989 financing proposal, NMAC impeded the plaintiffs' ability to comply with its terms, thus allowing NMAC to renege on its offer. As stated in their earlier memorandum of law --
the letter of August 14, 1989 ... speaks for itself in establishing the threshold agreement on the part of NMAC to extend mortgage and capital financing to plaintiffs. What is at issue thereafter is whether the actions of the Nissan Defendants ... precluded plaintiffs from complying with the conditions either of the loan or of Nissan's conditions for relocating the Franchise to 785 Ridge Road, thus rendering the subsequent refusal to disburse the loan proceeds a breach of the letter agreement. (Plaintiffs' Brief in Opposition, p. 24, filed March 22, 1994).
While discovery can certainly shift the focus of a legal position, the change in the plaintiffs' position appears to be a wholesale revision of the basic claim. I find that plaintiffs' marked change of theory undermines the persuasiveness of their present contentions.
But, in any event, I find as a matter of law that the alleged oral understandings between Keenan and Ingrassia are unenforceable under the Statute of Frauds.
The alleged oral agreement primarily was for a $ 1 million loan secured by a mortgage on the Webster property. While the financing package also included a line of wholesale credit for new and used vehicles, the plaintiffs' primary concern was receiving the cash mortgage loan: it was the key to their being able to close the deal and relocate the dealership. "[The] primary focus of what we wanted from [NMAC] was the mortgage. That was our primary focus, the mortgage." Ingrassia Depo. at p. 92.
With respect to the mortgage loan, even if an oral agreement were found to exist, New York's Statute of Frauds would render it unenforceable. See New York General Obligations Law § 5-703(1)(An... interest in real property ... cannot be created, granted, assigned ... unless by ... conveyance in writing).
Under New York law, mortgages are considered to be conveyances of interests in real property within the meaning of this subdivision. See Kolbe v. Projects & Joint Ventures Intern., Inc., 186 A.D.2d 988, 588 N.Y.S.2d 451 (4th Dep't 1992)(a mortgage is a conveyance of an interest in real property and therefore falls within the ambit of the Statute of Frauds); see also Huntington Towers, Ltd. v. Franklin Nat. Bank, 559 F.2d 863, 871 (2d Cir. 1977)("a contract to give a mortgage is a contract for the sale of an interest in real property" and thus governed by the Statute of Frauds), cert. denied, 434 U.S. 1012, 98 S. Ct. 726, 54 L. Ed. 2d 756 (1978); U.S. West Financial Services, Inc. v. Tollman, 786 F. Supp. 333, 341 (S.D.N.Y.)("An agreement to provide a mortgage -- such as the alleged oral agreement to finance [certain real property] -- is a conveyance of an interest in real property and therefore subject to the statute of frauds")(citations omitted), reargument denied, 1992 U.S. Dist. LEXIS 3169, 1992 WL 58863 (S.D.N.Y. 1992).
Thus, the alleged oral financing package pertaining to the $ 1 million mortgage loan could be valid only if written. Even if an oral contract were determined to have been formed, plaintiffs could not enforce it. I find that the Statute of Frauds bars the decisive aspect of plaintiffs' third claim.
Nor is NMAC estopped from asserting the Statute of Frauds defense. To establish a claim of promissory estoppel, plaintiffs must demonstrate that NMAC made a clear and unambiguous promise to them, that they reasonably and foreseeably relied upon the promise, and that they suffered an injury as the result of their reliance. See CyberChron Corp. v. Calldata Systems Development, Inc., 47 F.3d 39, 44 (2d Cir. 1995); Steinborn v. Daiwa Securities America, Inc., 1995 U.S. Dist. LEXIS 19165, 1995 WL 761286, *6 (S.D.N.Y. 1995). Additionally, "the doctrine of promissory estoppel as a bar to assertion of a Statute of Frauds defense has been strictly construed to apply only in those cases where 'the circumstances [are] such as to render it unconscionable to deny the oral promise upon which the promisee has relied.'" Steinborn, supra, at *6 (citations omitted); see also, Merex A.G. v. Fairchild Weston Sys., Inc., 29 F.3d 821, 825-26 (2d Cir. 1994)(unconscionable injury required for promissory estoppel to negate Statute of Frauds), cert. denied, 130 L. Ed. 2d 639, 115 S. Ct. 737 (1995).
I find promissory estoppel inapplicable in these circumstances. Initially, I question whether a "clear and unambiguous promise" was either made or broken. As noted, Keenan may have been highly optimistic about NMAC providing financing to plaintiffs. But such representations were not breached or broken. NMAC did offer financing to plaintiffs, just not on the precise terms that plaintiffs preferred.
Further, I do not find plaintiffs' reliance particularly reasonable. As noted above, for two experienced businessmen to close a real estate transaction without having the financing commitment in place is careless and unreasonable.
Furthermore, plaintiffs' injury is not sufficiently unconscionable. Based upon the plaintiffs' relative sophistication in the business world, and their choice to commit to a closing date that was not contingent upon completed mortgage financing, I find that plaintiffs were not unconscionably injured. See, e.g., Steinborn, supra, at *6 (lost salary and bonus insufficient injury to invoke promissory estoppel)(summary judgment); Greenbaum v. Weinstein, 131 A.D.2d 430, 515 N.Y.S.2d 866 (2d Dep't 1987)(decision to forego purchase of luxury home in reliance on promises of other not sufficient injury to invoke promissory estoppel)(summary judgment); Cunnison v. Richardson Greenshields Securities, Inc., 107 A.D.2d 50, 53, 485 N.Y.S.2d 272 (1st Dep't 1985)(relocating from Toronto to New York City and foregoing other employment offers insufficient injury to invoke promissory estoppel) (reversing Supreme Court's denial of motion to dismiss); Ginsberg v. Fairfield-Noble Corp., 81 A.D.2d 318, 321, 440 N.Y.S.2d 222 (1st Dep't 1981)("choice to forego current employment because of rosy promises" insufficient injury to invoke promissory estoppel)(reversing Supreme Court's denial of summary judgment).
In addition, plaintiffs have failed to establish that NMAC was the only source for obtaining financing for construction of the facility at the new site. Even if financing on NMAC's terms were not to plaintiffs' liking, no reason has been advanced here as to why financing could not have been obtained from other sources.
D. Count IV - Fraudulent Inducement To Close on the Webster Project.
Finally, plaintiffs assert that Keenan's oral representations fraudulently induced them to close on the Webster contract. To recover under a theory of fraudulent inducement, a plaintiff must show: 1) misrepresentation of material fact; 2) falsity of the representation; 3) scienter; 4) reasonable reliance; and 5) damages. See, e.g., Chase v. Columbia Nat'l Corp., 832 F. Supp. 654, 660 (S.D.N.Y. 1993); see also May Dep't Stores Co. v. International Leasing Corp., Inc., 1 F.3d 138, 141 (2d Cir. 1993). Additionally, in a case arising out of a contract, a plaintiff must show that the defendant breached a duty separate and collateral from the contract between the parties. Americana Petroleum Corp. v. Northville Indus. Corp., 200 A.D.2d 646, 606 N.Y.S.2d 906 (2d Dep't 1994).
This is because the failure to perform promises of future acts, alone, is merely a breach of contract -- not a tort. The "failure to perform promises of future acts is merely a breach of contract to be enforced by an action on the contract. A cause of action for fraud does not arise when the only fraud relates to a breach of contract." Zinaman v. USTS New York, Inc., 798 F. Supp. 128, 134 (S.D.N.Y. 1992) (citing, Grant v. DCA Food Indus., 124 A.D.2d 909, 508 N.Y.S.2d 327 (3d Dep't 1986) (S.D.N.Y. 1992); see also Chase, supra, at 660 ("While New York law recognizes a cause of action for fraud in the inducement of a contract, this claim cannot be based solely upon the failure to perform the promises of future acts which constitute the contractual obligations themselves").
In other words, to sustain a claim for fraud the alleged fraud must relate to a "present" fact, which is the inducement for the contract (i.e., "my company is debt-free"). A promise of future intent (i.e., "I'll provide certain services as part of this contract") is not separable from the breach of contract claim itself. See Chase, supra, at 661. Thus, "while under New York law an action for fraud will lie where 'a promise [is] actually made with a preconceived and undisclosed intention of not performing it' ... [it] will be dismissed when 'the only fraud charged relates to a breach of contract.'" Vista Co. v. Columbia Pictures Industries, Inc., 725 F. Supp. 1286 (S.D.N.Y. 1989)(citations omitted).
"Similarly, statements will not form the basis of a fraud claim when they are mere 'puffery' or are opinions as to future events." Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir. 1994).
In this case, plaintiffs' allegations of fraud are essentially the same as their allegations of breach of contract. The alleged misrepresentations were about whether NMAC would enter into the financing contract itself, on certain terms, not about a collateral matter such as the financial condition or long term stability of NMAC.
Moreover, although plaintiffs allege that NMAC made oral commitments having "no intention of honoring same" (Complaint at P 54) -- they have provided no evidence of this whatsoever. There is no affidavit or deposition testimony to this effect. The only evidence offered by plaintiffs consists of allegations that NMAC failed to honor oral statements made prior to August 14, 1989. While plaintiffs may believe Keenan made promises regarding financing which NMAC ultimately did not "keep," such allegations alone are insufficient to sustain a claim for fraud.
Accordingly, I grant the motion for summary judgment as to this claim as well.
For all the above reasons, I hereby GRANT Nissan and NMAC's motion for summary judgment (docket # 47) in its entirety. The complaint is dismissed.
IT IS SO ORDERED.
DAVID G. LARIMER
UNITED STATES DISTRICT COURT
Dated: Rochester, New York
January 30, 1996.