New York Court Explains What It Takes for Promissory Estoppel to Trump the Statute of Frauds

A recent case out of New York, In re Estate of Edmund Felix Hennel, No. 78, explains when promissory estoppel will overcome the statute of frauds, and the answer is: not always. Sometimes unfairness may result from the failure to overcome the statute of frauds, but promissory estoppel only saves a party in cases of unconscionable injury. 

In the case, Hennel’s grandsons allegedly reached an agreement  with him whereby they would assume maintenance for a particular property and eventually assume ownership, and their grandfather would pay off the property’s mortgage in his will. A 2006 will seemed to have terms that supported this oral agreement. However, a 2008 will revoked all previous wills and did not include the same terms, although the grandsons claimed Hennel told them nothing had changed in their agreement. The grandsons assumed ownership of the property but the 2008 will failed to pay off the property’s mortgage. 

After Hennel’s death, his grandsons sued to have the property’s mortgage satisfied by their grandfather’s estate, but they admitted that they could not satisfy the statute of frauds, since their agreement with their grandfather had been oral. Instead, the grandsons sought to rely on promissory estoppel. The court held, however, that even if they satisfied the elements of promissory estoppel, they would not suffer unconscionable injury if the statute of frauds was enforced, and unconscionable injury was required to allow promissory estoppel to trump the statute of frauds. Here, the grandsons had been able to pay the mortgage out of the rental income the property generated, and the grandsons did not have to expend any personal money to pay the mortgage. In such a case, there was no unconscionable injury.

The court noted that the grandsons could always sell the property if they wished to get out from under the mortgage, considering that the property had an estimated $150,000 worth of equity. The grandsons contended that, had the mortgage been paid as they had been promised, they would have received the full value of the property ($235,000) as equity. The court agreed this loss was unfair, but it was not unconscionable. In fact, the court stated, “cases where the party attempting to avoid the statute of frauds will suffer unconscionable injury will be rare.”