Central Ceilings, Inc. v. National Amusements, Inc.
2007 Mass. App. LEXIS 999, 873 N.E.2d 754, 70 Mass.App.Ct. 172 (2007)
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Rule of Law:
An oral promise to pay the debt of another is not barred by the Statute of Frauds if the promisor's main purpose or leading object in making the promise is to secure a direct, personal economic benefit for themselves.
Facts:
- National Amusements, Inc. (National), the owner of a cinema complex project, hired Old Colony Construction Corporation (Old Colony) as the general contractor.
- Old Colony hired Central Ceilings, Inc. (Central) as a major subcontractor for drywall, acoustical, and carpentry work.
- The project was significantly delayed, but National wanted to accelerate completion to open by the lucrative Labor Day holiday weekend.
- Old Colony was experiencing severe financial problems and owed Central over a million dollars for past work, causing subcontractors, including Central, to refuse to continue working on the project.
- Central's manager, Joseph McPherson, informed Old Colony that Central would not proceed without direct payment assurances from National.
- At a meeting, McPherson told National's vice-president, Peter Brady, that National must guarantee payment for Central's work on the project.
- In response, Brady orally promised that National would pay Central for its work.
- Relying on Brady's promise, Central dramatically increased its manpower, accelerated its work schedule, and achieved substantial completion by National's deadline.
Procedural Posture:
- Central Ceilings, Inc. sued Old Colony Construction Corporation for breach of contract and sought to establish a lien on property owned by National Amusements, Inc. in state trial court.
- A default judgment was entered against Old Colony.
- Central amended its complaint to add claims against National for breach of its oral agreement to pay.
- The trial court dismissed Central's other claims against National, leaving only the breach of oral contract claim for trial.
- A jury returned a verdict for Central, finding in response to special questions that National made an enforceable promise to pay Central and breached it.
- The trial court judge denied National's post-trial motions for a directed verdict, judgment notwithstanding the verdict, and a new trial, and entered judgment for Central.
- National Amusements, Inc. (appellant) appealed the judgment to the Massachusetts Appeals Court.
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Issue:
Does the Statute of Frauds bar enforcement of a property owner's oral promise to pay a subcontractor for its work, when the owner's main purpose for making the promise is to ensure the timely completion of a construction project for its own substantial financial benefit?
Opinions:
Majority - Perretta, J.
No. The Statute of Frauds does not bar enforcement of the oral promise because it falls within the 'main purpose' or 'leading object' exception. This exception applies when the primary motive of the person making the promise is to serve their own economic or business interests, rather than to simply answer for another's debt. Here, the evidence showed National's promise was not primarily to cover Old Colony's debt, but to secure a direct and substantial benefit for itself: the continued and expedited performance by a key subcontractor to ensure the theater could open for the profitable Labor Day weekend. This direct benefit to National makes the promise an original undertaking, enforceable despite not being in writing. Furthermore, Central's agreement to continue and accelerate its work, which it had hesitated to do, constituted valid consideration for National's new promise.
Analysis:
This case solidifies the application of the 'main purpose' exception to the Statute of Frauds within the context of construction contracts. It affirms that a property owner's oral promise to a subcontractor can create an original, enforceable obligation, distinct from a mere guarantee of the general contractor's debt. The decision provides a critical avenue for subcontractors to enforce promises made by owners who directly benefit from the subcontractor's continued performance, especially when a general contractor becomes unreliable. Future cases will look to the promisor's primary motivation, focusing on whether they sought a direct personal advantage, to determine if an oral promise to pay another's debt is enforceable.
