SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-1023-96T1
POP'S CONES, INC., t/a
TCBY YOGURT,
Plaintiff-Appellant,
v.
RESORTS INTERNATIONAL
HOTEL, INC.,
Defendant-Respondent.
Argued October 28, 1997 - Decided January
23, 1998
Before Judges Stern, Kleiner and Kimmelman.
On appeal from the Superior Court of
New Jersey, Law Division, Atlantic County.
Patrick M. Flynn argued the cause for
appellant (Archer & Greiner, attorneys; Mr.
Flynn and Steven J. Fram, on the brief).
John M. Donnelly argued the cause for
respondent (Levine, Staller, Sklar, Chan,
Brodsky & Donnelly, attorneys; Mr. Donnelly,
of counsel; Brian J. Cullen, on the brief).
The opinion of the court was delivered by
KLEINER, J.A.D.
Plaintiff, Pop's Cones, Inc., t/a TCBY Yogurt, ("Pop's"),
appeals from an order of the Law Division granting defendant,
Resorts International, Inc. ("Resorts"), summary judgment and
dismissing its complaint seeking damages predicated on a theory
of promissory estoppel. Affording all favorable inferences to
plaintiff's contentions, Brill v. Guardian Life Ins. Co. of
America,
142 N.J. 520, 536 (1995), we conclude that Pop's
presented a prima facie claim sufficient to withstand summary
dismissal of its complaint. See R. 4:46-2; Brill, supra, 142
N.J. at 540. In reversing summary judgment, we rely upon
principles of promissory estoppel enunciated in Section 90 of the
Restatement (Second) of Contracts, and recent cases which, in
order to avoid injustice, seemingly relax the strict requirement
of "a clear and definite promise" in making a prima facie case of
promissory estoppel.
Pop's is an authorized franchisee of TCBY Systems, Inc. ("TCBY"), a national franchisor of frozen yogurt products. Resorts is a casino hotel in Atlantic City that leases retail space along "prime Boardwalk frontage," among other business ventures.
From June of 1991 to September 1994, Pop's operated a TCBY franchise in Margate, New Jersey. Sometime during the months of May or June 1994, Brenda Taube ("Taube"), President of Pop's, had "a number of discussions" with Marlon Phoenix ("Phoenix"), the Executive Director of Business Development and Sales for Resorts, about the possible relocation of Pop's business to space owned by Resorts.See footnote 1 During these discussions, Phoenix showed Taube one
location for a TCBY vending cart within Resorts Hotel and "three
specific locations for the operation of a full service TCBY
store."
According to Taube, she and Phoenix specifically discussed
the boardwalk property occupied at that time by a business
trading as "The Players Club." These discussions included
Taube's concerns with the then-current rental fees and Phoenix's
indication that Resorts management and Merv Griffin personallySee footnote 2
were "very anxious to have Pop's as a tenant" and that "financial
issues . . . could easily be resolved, such as through a
percentage of gross revenue." In order to allay both Taube's and
Phoenix's concerns about whether a TCBY franchise at The Players
Club location would be successful, Phoenix offered to permit
Pop's to operate a vending cart within Resorts free of charge
during the summer of 1994 so as to "test the traffic flow." This
offer was considered and approved by Paul Ryan, Vice President
for Hotel Operations at Resorts.
These discussions led to further meetings with Phoenix about
the Players Club location, and Taube contacted TCBY's corporate
headquarters about a possible franchise site change. During the
weekend of July 4, 1994, Pop's opened the TCBY cart for business
at Resorts pursuant to the above stated offer. On July 6, 1994,
TCBY gave Taupe initial approval for Pop's change in franchise
site. In late July or early August of 1994, representatives of
TCBY personally visited the Players Club location, with Taube and
Phoenix present.
Based on Pop's marketing assessment of the Resorts location,
Taube drafted a written proposal dated August 18, 1994,
addressing the leasing of Resorts' Players Club location and
hand-delivered it to Phoenix. Taube's proposal offered Resorts
"7" of net monthly sales (gross less sales tax) for the duration
of the [Player's Club] lease . . . [and] [i]f this proposal is
acceptable, I'd need a 6 year lease, and a renewable option for
another 6 years."
In mid-September 1994, Taube spoke with Phoenix about the
status of Pop's lease proposal and "pressed [him] to advise [her]
of Resorts' position. [Taube] specifically advised [Phoenix]
that Pop's had an option to renew the lease for its Margate
location and then needed to give notice to its landlord of
whether it would be staying at that location no later than
October 1, 1994." Another conversation about this topic occurred
in late September when Taube "asked Phoenix if [Pop's] proposal
was in the ballpark of what Resorts was looking for. He
responded that it was and that `we are 95" there, we just need
Belisle'sSee footnote 3 signature on the deal." Taube admits to having been
advised that Belisle had "ultimate responsibility for signing off
on the deal" but that Phoenix "assured [her] that Mr. Belisle
would follow his recommendation, which was to approve the deal,
and that [Phoenix] did not anticipate any difficulties." During
this conversation, Taube again mentioned to Phoenix that she had
to inform her landlord by October 1, 1994, about whether or not
Pop's would renew its lease with them. Taube stated: "Mr.
Phoenix assured me that we would have little difficulty in
concluding an agreement and advised [Taube] to give notice that
[Pop's] would not be extending [its] Margate lease and `to pack
up the Margate store and plan on moving.'"
Relying upon Phoenix's "advice and assurances," Taube
notified Pop's landlord in late-September 1994 that it would not
be renewing the lease for the Margate location.
In early October, Pop's moved its equipment out of the
Margate location and placed it in temporary storage. Taube then
commenced a number of new site preparations including: (1)
sending designs for the new store to TCBY in October 1994; and
(2) retaining an attorney to represent Pop's in finalizing the
terms of the lease with Resorts.
By letter dated November 1, 1994, General Counsel for
Resorts forwarded a proposed form of lease for The Players Club
location to Pop's attorney. The letter provided:
Per our conversation, enclosed please
find the form of lease utilized for retail
outlets leasing space in Resorts Hotel. You
will note that there are a number of
alternative sections depending upon the terms
of the deal.
As I advised, I will contact you . . .
to inform you of our decision regarding TCBY.
. . .
By letter dated December 1, 1994, General Counsel for
Resorts forwarded to Pop's attorney a written offer of the terms
upon which Resorts was proposing to lease the Players Club space
to Pop's. The terms provided:
[Resorts is] willing to offer the space for
an initial three (3) year term with a rent
calculated at the greater of 7" of gross
revenues or: $50,000 in year one; $60,000 in
year two; and $70,000 in year three . . .
[with] a three (3) year option to renew after
the initial term . . .
The letter also addressed a "boilerplate lease agreement"
provision and a proposed addition to the form lease. The letter
concluded by stating:
This letter is not intended to be
binding upon Resorts. It is intended to set
forth the basic terms and conditions upon
which Resorts would be willing to negotiate a
lease and is subject to those negotiations
and the execution of a definitive agreement
. . . [W]e think TCBY will be successful
at the Boardwalk location based upon the
terms we propose. We look forward to having
your client as part of . . . Resorts family
of customer service providers and believe
TCBY will benefit greatly from some of the
dynamic changes we plan.
. . . [W]e would be pleased . . . to
discuss this proposal in greater detail.
(emphasis added).
In early-December 1994, Taube and her attorney met with
William Murtha, General Counsel of Resorts, and Paul Ryan to
finalize the proposed lease. After a number of discussions about
the lease, Murtha and Ryan informed Taube that they desired to
reschedule the meeting to finalize the lease until after the
first of the year because of a public announcement they intended
to make about another unrelated business venture that Resorts was
about to commence. Ryan again assured Taube that rent for the
Players Club space was not an issue and that the lease terms
would be worked out. "He also assured [Taube] that Resorts
wanted TCBY . . . on the boardwalk for the following season."
Several attempts were made in January 1995 to contact
Resorts' representatives and confirm that matters were
proceeding. On January 30, 1995, Taube's attorney received a
letter stating: "This letter is to confirm our conversation of
this date wherein I advised that Resorts is withdrawing its
December 1, 1994 offer to lease space to your client, TCBY."See footnote 4
According to Taube's certification, "As soon as [Pop's]
heard that Resorts was withdrawing its offer, we undertook
extensive efforts to reopen [the] franchise at a different
location. Because the Margate location had been re-let, it was
not available." Ultimately, Pop's found a suitable location but
did not reopen for business until July 5, 1996.
On July 17, 1995, Pop's filed a complaint against Resorts
seeking damages. The complaint alleged that Pop's "reasonably
relied to its detriment on the promises and assurances of Resorts
that it would be permitted to relocate its operation to
[Resorts'] Boardwalk location . . . ."
After substantial pre-trial discovery, defendant moved for
summary judgment. After oral argument, the motion judge, citing
Malaker Corp. Stockholders Protection Comm. v. First Jersey Nat'l
Bank,
163 N.J. Super. 463 (App. Div. 1978), certif. denied,
79 N.J. 488 (1979), rendered a detailed oral opinion in which he
concluded, in part:
The primary argument of the defendant is
that the plaintiff is unable to meet the
requirements for a claim of Promissory
Estoppel as there was no clear and definite
promise ever made to plaintiff; and,
therefore, any reliance on the part of
plaintiff upon the statements of the Resorts
agent were not reasonable.
. . .
. . . I think that even if a jury would
find that a lease was promised, there was
lack of specificity in its terms so as to not
rise to the level of what is necessary to
meet the first element for Promissory
Estoppel.
There was no specificity as to the term
of this lease. There was no specificity as
to the starting date of this lease. There
was no specificity as to the rent, although
it was represented that rent would not be a
problem. Rent had not been agreed upon, and
it is not certified that it had been agreed
upon. When they left that meeting, according
to . . . plaintiff's own facts, they didn't
have a lease; they would still have to work
out the terms of the lease. It was not in
existence at the time.
. . .
. . . We don't have facts in dispute.
Neither side, neither the defendant nor the
plaintiff, can attest to the terms of the
lease, of the essential terms of the lease or
still not agreed upon at the time of that the
meeting was over in December of 1994.
Based on Brill, supra, 142 N.J. at 540, the judge concluded
that the evidence was so one-sided that defendant was entitled to
prevail as a matter of law.
It is quite apparent from the motion judge's reasons that he
viewed plaintiff's complaint as seeking enforcement of a lease
which had not yet been fully negotiated. If that were
plaintiff's intended remedy, we would agree with the judge's
conclusion. However, plaintiff's complaint, after reciting the
facts from the inception of Taube's initial contact with
defendant until January 30, 1995, stated:
19. As a result of its reasonable
reliance on the promises and assurances made
to it by Resorts, Pop's has been
significantly prejudiced and has suffered
significant damages, including the following:
a. the loss of its Margate location and
its ability to earn profits during the
1995 summer season;
b. out-of-pocket expenses, including
attorney's fees; and
c. out-of-pocket expenses in attempting
to locate an alternate location.
Wherefore, Pop's demands judgment
against defendant, Resorts International
Hotel, Inc., for damages, costs of suit and
for other and further legal and equitable
relief as the Court may deem just and proper.
It seems quite clear from plaintiff's complaint that
plaintiff was not seeking damages relating to a lease of the
boardwalk property, but rather was seeking damages flowing from
its reliance upon promises made to it prior to October 1, 1994,
when it failed to renew its lease for its Margate location.
Thus, plaintiff's claim was predicated upon the concept of
promissory estoppel and was not a traditional breach of contract
claim.
The doctrine of promissory estoppel is well-established in
New Jersey. Malaker, supra, 163 N.J. Super. at 479 ("Suffice it
to say that given an appropriate case, the doctrine [of
promissory estoppel] will be enforced."). A promissory estoppel
claim will be justified if the plaintiff satisfies its burden of
demonstrating the existence of, or for purposes of summary
judgment, a dispute as to a material fact with regard to, four
separate elements which include:
(1) a clear and definite promise by the
promisor; (2) the promise must be made with
the expectation that the promisee will rely
thereon; (3) the promisee must in fact
reasonably rely on the promise, and (4)
detriment of a definite and substantial
nature must be incurred in reliance on the
promise.
[Ibid.]
The essential justification for the promissory estoppel doctrine
is to avoid the substantial hardship or injustice which would
result if such a promise were not enforced. Id. at 484.
In Malaker, the court determined that an implied promise to
lend an unspecified amount of money was not "a clear and definite
promise" justifying application of the promissory estoppel
doctrine. Id. at 478-81. Specifically, the court concluded that
the promisor-bank's oral promise in October 1970 to lend $150,000
for January, February and March of 1971 was not "clear and
definite promise" because it did not describe a promise of
"sufficient definition." Id. at 479.
It should be noted that the court in Malaker seems to have
heightened the amount of proof required to establish a "clear and
definite promise" by searching for "an express promise of a
`clear and definite' nature." Id. at 484 (emphasis added). This
sort of language might suggest that New Jersey Courts expect
proof of most, if not all, of the essential legal elements of a
promise before finding it to be "clear and definite."
Although earlier New Jersey decisions discussing promissory
estoppel seem to greatly scrutinize a party's proofs regarding an
alleged "clear and definite promise by the promisor," see, e.g.,
id. at 479, 484, as a prelude to considering the remaining three
elements of a promissory estoppel claim, more recent decisions
have tended to relax the strict adherence to the Malaker formula
for determining whether a prima facie case of promissory estoppel
exists. This is particularly true where, as here, a plaintiff
does not seek to enforce a contract not fully negotiated, but
instead seeks damages resulting from its detrimental reliance
upon promises made during contract negotiations despite the
ultimate failure of those negotiations.
In Peck v. Imedia, Inc.,
293 N.J. Super. 151 (App. Div.)
certif. denied,
147 N.J. 262 (1996), we determined that an at-will employment contract offer was a "clear and definite promise"
for purposes of promissory estoppel. See id. at 165-68. The
employment contract offer letter contained the position title, a
"detailed position description . . . as well as information on .
. . benefits" and an annual salary. Id. at 156. We recognized
that even though an employer can terminate the employment
relationship at any time, there may be losses incident to
reliance upon the job offer itself. Id. at 167-68. See also
Mahoney v. Delaware McDonald's Corp.,
770 F.2d 123, 127 (8th Cir.
1985) (holding that plaintiff's purchase of property for lease to
defendant in reliance upon defendant's representation that "[w]e
have a deal" created cause of action for promissory estoppel);
Bercoon, Weiner, Glick & Brook v. Manufacturers Hanover Trust
Co.,
818 F. Supp. 1152, 1161 (N.D. Ill. 1993) (holding that
defendant's representation that lease was "done deal" and
encouragement of plaintiff to terminate existing lease provided
plaintiff with cause of action for promissory estoppel).
Further, the Restatement (Second) of Contracts § 90 (1979),
"Promise Reasonably Inducing Action or Forbearance," provides, in
pertinent part:
(1) 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.
[Ibid. (emphasis added).]
The Restatement approach is best explained by illustration
10 contained within the comments to Section 90, and based upon
Hoffman v. Red Owl Stores, Inc.,
133 N.W.2d 267 (Wis. 1965):
10. A, who owns and operates a bakery,
desires to go into the grocery business. He
approaches B, a franchisor of supermarkets.
B states to A that for $18,000 B will
establish A in a store. B also advises A to
move to another town and buy a small grocery
to gain experience. A does so. Later B
advises A to sell the grocery, which A does,
taking a capital loss and foregoing expected
profits from the summer tourist trade. B
also advises A to sell his bakery to raise
capital for the supermarket franchise, saying
"Everything is ready to go. Get your money
together and we are set." A sells the bakery
taking a capital loss on this sale as well.
Still later, B tells A that considerably more
than an $18,000 investment will be needed,
and the negotiations between the parties
collapse. At the point of collapse many
details of the proposed agreement between the
parties are unresolved. The assurances from
B to A are promises on which B reasonably
should have expected A to rely, and A is
entitled to his actual losses on the sales of
the bakery and grocery and for his moving and
temporary living expenses. Since the
proposed agreement was never made, however, A
is not entitled to lost profits from the sale
of the grocery or to his expectation interest
in the proposed franchise from B.
[Restatement (Second) of Contracts § 90 cmt.
d, illus. 10 (1979).]
We particularly note our recent discussion in Mazza v.
Scoleri,
304 N.J. Super. 555 (App. Div. 1997). Although Mazza
did not focus on the issue of promissory estoppel, it expressly
adopted the exception to the Statute of Frauds enunciated in
Restatement (Second) of Contracts, § 139(1) (1979). Mazza,
supra, 304 N.J. Super. at 560. That section provides:
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 the action
or forbearance is enforceable notwithstanding
the Statute of Frauds if injustice can be
avoided only by enforcement of the promise.
The remedy granted for breach is limited as
justice requires.
[Restatement (Second) of Contracts § 139(1)
(1979).]
Mazza also instructs, citing Citibank v. Estate of Simpson,
290 N.J. Super. 519, 530 (App. Div. 1966), that "New Jersey typically
gives considerable weight to Restatement views, and has, on
occasion, adopted those views as the law of this State when they
speak to an issue our courts have not yet considered." Mazza,
309 N.J. Super. at 560 (citations omitted).
It is thus quite clear that Section 90 of the Restatement
complements the exception to the Statute of Frauds discussed in
Section 139(1).
As we read the Restatement, the strict adherence to proof of
a "clear and definite promise" as discussed in Malaker is being
eroded by a more equitable analysis designed to avoid injustice.
This is the very approach we adopted in Peck, supra, wherein even
in the absence of a clear and definite contract of employment, we
permitted the plaintiff to proceed with a cause of action for
damages flowing from plaintiff's losses based on her detrimental
reliance on the promise of employment. 293 N.J. Super. at 168.
The facts as presented by plaintiff by way of its pleadings
and certifications filed by Taube, which were not refuted or
contradicted by defendant before the motion judge or on appeal,
clearly show that when Taube informed Phoenix that Pop's option
to renew its lease at its Margate location had to be exercised by
October 1, 1994, Phoenix instructed Taube to give notice that it
would not be extending the lease. According to Phoenix,
virtually nothing remained to be resolved between the parties.
Phoenix indicated that the parties were "95" there" and that all
that was required for completion of the deal was the signature of
John Belisle. Phoenix assured Taube that he had recommended the
deal to Belisle, and that Belisle would follow the
recommendation. Phoenix also advised Pop's to "pack up the
Margate store and plan on moving."
It is also uncontradicted that based upon those
representations that Pop's, in fact, did not renew its lease. It
vacated its Margate location, placed its equipment and personalty
into temporary storage, retained the services of an attorney to
finalize the lease with defendant, and engaged in planning the
relocation to defendant's property. Ultimately, it incurred the
expense of relocating to its present location. That plaintiff,
like the plaintiff in Peck, relied to its detriment on
defendant's assurances seems unquestionable; the facts clearly at
least raise a jury question. Additionally, whether plaintiff's
reliance upon defendant's assurances was reasonable is also a
question for the jury.
Conversely, following the Section 90 approach, a jury could
conclude that Phoenix, as promisor, should reasonably have
expected to induce action or forbearance on the part of plaintiff
to his precise instruction "not to renew the lease" and to "pack
up the Margate store and plan on moving." In discussing the
"character of reliance protected" under Section 90, comment b
states:
The principle of this Section is
flexible. The promisor is affected only by
reliance which he does or should foresee, and
enforcement must be necessary to avoid
injustice. Satisfaction of the latter
requirement may depend on the reasonableness
of the promisee's reliance, on its definite
and substantial character in relation to the
remedy sought, on the formality with which
the promise is made, on the extent to which
evidentiary, cautionary, deterrent and
channeling functions of form are met by the
commercial setting or otherwise, and on the
extent to which such other policies as the
enforcement of bargains and the prevention of
unjust enrichment are relevant. . . .
[Restatement (Second) of Contracts § 90 cmt.
b (1979) (citations omitted).]
Plaintiff's complaint neither seeks enforcement of the lease
nor speculative lost profits which it might have earned had the
lease been fully and successfully negotiated. Plaintiff merely
seeks to recoup damages it incurred, including the loss of its
Margate leasehold, in reasonably relying to its detriment upon
defendant's promise. Affording plaintiff all favorable
inferences, its equitable claim raised a jury question. See
Brill, supra, 142 N.J. at 540. Plaintiff's complaint, therefore,
should not have been summarily dismissed.
Reversed and remanded for further appropriate proceedings.
Footnote: 1 The record on appeal is unclear as to who initiated these discussions. Footnote: 2 Merv Griffin was the Chief Executive Officer and a large shareholder of Resorts. Footnote: 3 The reference to Belisle is John Belisle, then-Chief Operating Officer of Resorts. Footnote: 4 Apparently, in late January 1995, Resorts spoke with another TCBY franchise, Host Marriott, regarding the Players Club's space. Those discussions eventually led to an agreement to have Host Marriott operate a TCBY franchise at the Players Club location. That lease was executed in late May 1995, and TCBY opened shortly thereafter.