United States District Court, Eastern District of New York
June 4, 2002
TODD M. ROBERTS, PLAINTIFF,
DR. MAHMOOD KARIMI AND JOHANNA KARIMI, DEFENDANTS.
The opinion of the court was delivered by: Arthur D. Spatt, United States District Judge.
MEMORANDUM OF DECISION AND ORDER
This action arises out of a claim by the plaintiff Todd M. Roberts
("Roberts" or the "plaintiff") against the defendants Dr. Mahmood Karimi
("M. Karimi") and Johanna Karimi ("J. Karimi") (collectively, the
"defendants") alleging that the defendants breached a contract to sell
their home to him. Also, the plaintiff asserts a claim for promissory
estoppel on the ground that he detrimentally relied upon the defendants'
promise to sell their home to him. Presently before the Court is a motion
for summary judgment by the defendants to dismiss the claim for
A. The Facts
The following facts are not disputed. In the Spring of 1997, the
plaintiff contacted Deborah Foglia ("Foglia"), a real estate agent
employed by the defendants, to set up a tour of the defendants' vacation
home at 79 Dune Road in East Quogue, New York. After a tour, the
plaintiff negotiated to purchase the home through Foglia as intermediary.
The plaintiff never spoke with the defendants.
On or about May 27, 1997, Foglia prepared a memorandum of sale (the
"Memorandum") which reflected, among other things, that the home was sold
for $610,000, subject to some minor conditions. In particular, the
Memorandum contained the names and addresses of the plaintiff, the
defendants and their attorneys; the address of the property; the sale
price; a closing to be held "ASAP"; and a listing of the conditions of the
sale as "home inspection-termite, owner will hold $200,000 mortgage for 5
years, rental will be prorated at closing." At the bottom of the
Memorandum, Foglia signed her name under the line marked "Selling
Agent". The defendants never signed the Memorandum.
Shortly thereafter, M. Karimi described the above sale as follows in a
note to his lawyer:
Attention Mr. Munzel!
The house is sold as is and as is rented.
Immediately after May 27, 1997, in order to secure a tax benefit, the
plaintiff designated the home at 79 Dune Road as replacement "like-kind"
property under the Internal Revenue Code (the "IRC"). In connection with
this designation, the plaintiff transferred his interest in an apartment
on May 29, 1997. At no time on or before May 27, 1997 had any person
informed the defendants that the plaintiff intended to designate 79 Dune
Road as a replacement "like-kind" property.
On June 17, 1997, the defendants' attorney sent the plaintiff's
attorney a standard-form real estate contract including a rider
specifying that the purchaser "agrees to take the premises as is," and
excised certain sellers' representations in the contract, namely,
representations that all mechanical and electrical systems including
heating, plumbing, and air conditioning would be in working order on the
date of the closing.
On June 25, 1997, the plaintiff's attorney sent the defendants'
attorney a letter suggesting certain changes to the standard-form
contract which included replacing the phrase "to take the premises as is"
with "to take the premises as is subject to the provisions of ¶
16(f) of the standard form." In addition, the plaintiff sought from the
defendants a six month warranty after the closing covering the plumbing
and heating systems.
On or about July 15, 1997, the plaintiff's attorney sent the
defendants' attorney an executed contract for the proposed sale of 79
Dune Road and a check for $60,000 as a security deposit. The signed
contract contained a sellers' warranty that all systems were in working
order. On July 16, 1997, the defendants' attorney sent the signed
contract to the defendants requesting that they sign it. The defendants'
attorney also deposited the $60,000 check in an escrow account.
On July 18, 1997, the plaintiff sold a second apartment and designated
79 Dune Road as the substitute property for a "like-kind exchange" under
the IRC. The defendants never executed the contract and refused to
proceed with the scheduled closing on July 22, 1997.
B. The Procedural History
On August 15, 1997, the plaintiff filed the complaint in this action.
The plaintiff sought to recover damages and specific performance based on
two causes of action: (1) breach of contract; and (2) promissory
estoppel. The parties cross-moved for summary judgment. In particular,
the plaintiff argued that an enforceable contract to sell the property
existed as a matter of law, while the defendants contended that the
alleged contract was barred by the Statute of Frauds. The Court reserved
decision on the motions.
In December of 1999, a jury trial was conducted. After the conclusion
of the plaintiff's case, the Court denied the defendants' motion stating
that the requirement of a sufficient writing was satisfied by the
combined weight of three documents. See Roberts v. Karimi,
79 F. Supp.2d 174, 178 (E.D.N.Y. 1999), rev'd on other grounds,
251 F.3d 404, 408 (2d Cir. 2001). After the completion of the evidence,
the case was submitted to the jury. Id. at 176.
Upon consent of both parties, the special verdict form asked the jury
only whether there was a "meeting of the minds", namely an agreement on
all of the material terms of the contract on May 27, 1997. Id. The
special verdict form did not ask the jury whether the plaintiff performed
what he was obligated to do under the terms of the contract and was
ready, willing and able to do all that the contract required. Id.
Finally, the special verdict form instructed the jury not to address the
for promissory estoppel if they find that a valid contract existed
between the parties.
The jury found that a valid contract existed and returned a verdict
against the defendants in the amount of $100,000. Id. The jury did not
address the claim for promissory estoppel. Both parties moved for
post-trial relief. The defendants argued that they were entitled to
judgment as a matter of law on the ground that no reasonable juror could
have found a meeting of the minds. Id. at 179. The Court denied the
defendants' motion stating that sufficient evidence existed to establish
that the parties reached an agreement to sell the home on an "as is"
basis on May 27, 1997. Id.
The Court also denied the plaintiff's post-trial application for
specific performance because the plaintiff failed to prove that he
substantially performed or that he was ready, willing and able to perform
his obligations under the May 27, 1997 agreement. Id. at 180-81. In
particular, the court found that "the plaintiff's last communication with
the defendants a few days prior to closing included a proposed contract
and confirming letter that requested that the plumbing and heating system
be repaired by the defendants and warranted for six months after the
conveyance of the sale." Id. at 180.
The Second Circuit reversed the judgment on the ground that the Court's
finding of fact that the plaintiff did not prove that he was ready,
willing and able to perform his obligations under the May 27, 1997
agreement negated an essential element of the breach of contact claim.
Roberts v. Karimi, 251 F.3d 404, 407-08 (2d Cir. 2001). The Second
Circuit remanded the case to this Court for further proceeding on the
remaining claim of promissory estoppel. Id. at 408.
The defendants now move for summary judgment on the promissory estoppel
claim on the ground that there are no genuine issues of material fact and
they are entitled to judgment as a matter of law.
A. The Standard for Summary Judgment
Summary judgment must "be rendered forthwith if the pleadings,
depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as
a matter of law." Fed.R.Civ.P. 56(c). The burden is on the party moving
for summary judgment to establish the absence of any genuine issues of
material fact, see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256,
106 S.Ct. 2505, 2514 (1986), and any ambiguities must be resolved in
favor of the non-movant, see Celotex Corp. v. Catrett, 477 U.S. 317, 330
n. 2, 106 S.Ct. 2548, 2556 n. 2 (1986).
"When the movant demonstrates through competent evidence that no
material facts are genuinely in dispute, the non-movant `must set forth
specific facts showing that there is a genuine issue for trial.'" Western
World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990)
(quoting Fed.R.Civ.P. 56(e)). "The non-movant cannot escape summary
judgment merely by vaguely asserting the existence of some unspecified
disputed material facts, or defeat the motion through mere speculation or
conjecture." Id. (internal quotation marks and citations omitted).
Lastly, the existence of disputed facts that are not material to the
issues at hand may not defeat summary judgment. Id.
"As to materiality, the substantive law will identify which facts are
material." Liberty Lobby, 477 U.S. at 248, 106 S.Ct. at 2510. "Only
disputes over facts that might affect the outcome of the suit under the
governing law will properly preclude
the entry of summary judgment."
Id. A genuine issue of material fact exists if "a reasonable jury could
return a verdict for the nonmoving party." Id. If there is evidence in
the record, including affidavits, exhibits, interrogatory answers, and
depositions, as to any material fact from which an inference could be
drawn in favor of the non-movant, summary judgment is unavailable. Lane
v. New York State Electric & Gas Corp., 18 F.3d 172, 176 (2d Cir. 1994);
Rattner v. Netburn, 930 F.2d 204, 209 (2d Cir. 1991).
"[T]he trial court's task at the summary judgment motion stage of
litigation is carefully limited to discerning whether there are any
genuine issues of material fact to be tried, not to decid[e] them. Its
duty, in short, is confined at this point to issue-finding; it does not
extend to issue-resolution." Gallo v. Prudential Residential Servs.
Ltd., 22 F.3d 1219, 1224 (2d Cir. 1994).
B. The Promissory Estoppel Claim
It is undisputed that New York law governs the promissory estoppel
claim. Under New York Law, the elements of a claim for promissory
estoppel are (1) a clear and unambiguous promise; (2) reasonable and
foreseeable reliance by the party to whom the promise was made; and (3)
an injury to the party to whom the promise was made by reason of the
reliance. Cyberchron Corp. v. Calldata Sys. Dev., Inc., 47 F.3d 39, 44
(2d Cir. 1995); R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 78
(2d Cir. 1984).
When a claim for promissory estoppel provides relief to a party where a
contract is rendered unenforceable by operation of the Statute of
Frauds, the party must prove that her injury was "unconscionable". See
Cyberchron, 47 F.3d at 44 (illustrating that an unconscionable injury is
required when promissory estoppel is asserted to contravene the effect of
the Statute of Frauds); Merex A.G. v. Fairchild Weston Sys., Inc.,
29 F.3d 821, 825-26 (2d Cir. 1994) (stating that an unconscionable injury
is required for a claim of promissory estoppel to negate the Statute of
In this case, the Statute of Frauds does not bar the enforcement of the
contract. See Roberts, 79 F. Supp.2d at 178-79 (finding that the note and
affidavit of the defendant, the memorandum of sale, the affirmation of
one of the defendant's attorneys combine to form a "writing" sufficient
to meet all of the requirements of the Statute of Frauds). As such, the
plaintiff does not have to prove that his injury was "unconscionable".
1. A Clear and Unambiguous Promise
The Court finds that genuine issues of material fact exist with respect
to whether the Memorandum of May 27, 1997 was a clear and unambiguous
promise. In particular, the Memorandum contained the names and addresses
of the parties and their attorneys, the address of the property, the sale
price, a closing to be held "ASAP" and minor conditions on the sale.
Thereafter, the defendants sent the plaintiff a real estate contract and
a closing date of July 22, 1997 was set. The issue of whether the terms
in the Memorandum constitute a clear and unambiguous promise is for a
jury to decide, not this Court. See Gallo, 22 F.3d at 1224 (stating that
at the summary judgment stage the district court's duty is to determine
whether there are genuine issues of material fact to be tried, not to
decide these issues).
2. Reasonable and Foreseeable Reliance on the Promise
The Court finds that genuine issues of material fact exist with respect
to whether the plaintiff reasonably relied upon the
Memorandum of May
27, 1997 that he would be entitled to purchase the home "as is". It is
undisputed that after May 27, 1997, the plaintiff designated 79 Dune Road
as replacement "like-kind" property, transferred his interest in an
apartment and sold a second apartment. The plaintiff took these steps to
secure a tax benefit under the IRC. The issue of whether the plaintiff's
actions were in reasonable reliance upon the Memorandum is for a jury to
decide, not this Court.
In addition, it is foreseeable that when a party purchases a home that
she or he will take steps in anticipation of tax consequences associated
with the purchase. For example, it is foreseeable that a buyer will sell
other properties to purchase the home. As such, the issue of whether it
was foreseeable for the plaintiff to designate 79 Dune Road as
replacement "like-kind" property, transfer his interest in an apartment
and sell another apartment is for the jury to decide.
3. An Injury based upon the Reliance
As a result of designating 79 Dune Road as the substitute property for
a "like-kind" exchange under the IRC, the plaintiff allegedly lost a tax
benefit of $55,000. In addition, because the sale of the property did
not take place, the plaintiff alleges that he had to store furniture for
a thirty month period, which cost him $6,000. Finally, the plaintiff
alleges that he ceased his search for "like-kind" investment property
depriving him of rental income and appreciation in connection with
replacement property. The defendants fail to show that there are no
genuine issues of material fact as to this element and that they are
entitled to judgment as a matter of law.
Accordingly, the motion for summary judgment is denied.
C. The Right to a Jury Trial
The Seventh Amendment provides that "[i]n Suits at common law, where
the value in controversy shall exceed twenty dollars, the right of trial
by jury shall be preserved." U.S. Const. amend. VII. To determine
whether a party is entitled to a jury trial under the Seventh Amendment
for a claim of promissory estoppel, a district court must apply a two
part historical test: "first whether the action would have been deemed
legal or equitable in 18th century England, and second whether the remedy
sought is legal or equitable in nature." Merex A.G. v. Fairchild Weston
Sys., Inc., 29 F.3d 821, 823 (2d Cir. 1994). A district court "must
balance the two, giving greater weight to the latter." Id.
The "doctrine of `promissory estoppel' eludes classification as
either entirely legal or entirely equitable, and the historical evidence
is equivocal." Merex A.G., 29 F.3d at 825. "It is clear, however, that
both law and equity exert gravitational pulls on the doctrine, and its
application in any particular case depends on the context in which it
appears." Id. Where a plaintiff "uses promissory estoppel to avoid a
draconian application of the Statute of Frauds, the pull of equity
becomes irresistible." Id. In this case, the Court determined that the
Statute of Frauds does not bar the enforcement of the contract. See
Roberts, 79 F. Supp.2d at 178-79. Accordingly, the plaintiff is not
pursuing the promissory estoppel cause of action to avoid the Statute of
Frauds and thus the claim is more legal, than equitable.
As to the nature of the remedy, the plaintiff seeks to recover a lost
tax benefit of $55,000, fees for storing furniture of $6,000 and an
unspecified loss of rental income and appreciation in connection with
replacement property when he ceased his search for "like-kind" investment
property. The Court finds that the remedy sought is
more legal, than
equitable. See Merex A.G., 29 F.3d at 825 ("A claim for money damages
. . . constitutes legal relief, for such relief was the traditional form of
relief offered in the courts of law.") (internal quotation marks and
citations omitted). Accordingly, the Court concludes that the plaintiff's
claim for promissory estoppel is legal in nature and thus the plaintiff
is entitled to a trial by jury.
It should also be noted that the defendants raise the argument that the
plaintiff is not entitled to a jury trial on the claim for promissory
estoppel for the first time at this stage of the litigation. The
defendants did not raise this argument during the first trial and did not
object to the Court presenting this claim to the jury.
Based upon the foregoing, it is hereby
ORDERED, that the motion for summary judgment dismissing the claim for
promissory estoppel is DENIED; and it is further
ORDERED, that the plaintiff is entitled to a trial by jury on the claim
for promissory estoppel; and it is further
ORDERED, that the parties are directed appear before this Court to
select a jury on July 8, 2002 at 9 a.m.
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