Filo v. Liberato
2013 Ohio 1014 (2013)
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Rule of Law:
An oral promise to answer for the debt of another is not barred by the Statute of Frauds when the promisor's main purpose is to serve their own pecuniary or business interest (the "leading object" rule). Separately, a claim for promissory estoppel is a distinct cause of action for damages based on detrimental reliance and is not barred by the Statute of Frauds.
Facts:
- Anthony Filo, a subcontractor, was hired by D & R Construction (the general contractor) to perform concrete and excavation work for a commercial building project.
- Michael Liberato was the owner of the property where the construction project was located.
- D & R Construction became delinquent in its payments to Filo, owing him $33,600.
- In August 2006, Filo approached Liberato directly about the unpaid amount.
- Liberato orally promised Filo that he would be fully paid.
- In reliance on Liberato's promise, Filo continued to work on the project and did not take other actions to secure his financial interest, like filing a mechanic's lien.
- Liberato subsequently paid Filo $7,000, but the remaining balance of $26,600 was never paid.
- Liberato, who controlled the project's financing, released full payment to another subcontractor who performed work after Filo.
Procedural Posture:
- Anthony Filo (Plaintiff) filed a complaint against Michael Liberato (Defendant) in the Mahoning County Court of Common Pleas (trial court), alleging promissory estoppel, unjust enrichment, conversion, and fraud.
- Liberato filed a motion to dismiss under Civ.R. 12(B)(6), arguing the claims were barred by the Statute of Frauds.
- Filo filed an amended complaint.
- The trial court granted Liberato's motion and dismissed the amended complaint in its entirety.
- Filo (Appellant) appealed the trial court's dismissal to the Seventh District Court of Appeals of Ohio.
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Issue:
Does the Statute of Frauds bar a subcontractor's claims for promissory estoppel, unjust enrichment, and fraud against a property owner based on the owner's oral promise to pay the general contractor's debt, when the subcontractor alleges the promise was made to induce completion of the project?
Opinions:
Majority - Waite, J.
No, the Statute of Frauds does not bar the subcontractor's claims for promissory estoppel, unjust enrichment, and fraud at the pleading stage. Promissory estoppel is a separate cause of action for damages resulting from detrimental reliance on an unenforceable promise and is not barred by the Statute of Frauds. The court, citing Olympic Holding Co., L.L.C. v. ACE Ltd., explained that promissory estoppel provides a remedy when contract requirements are not met but enforcement is needed to avoid injustice. The allegations in Filo's complaint—that Liberato made a promise, Filo reasonably relied on it to his detriment, and suffered damages—are sufficient to state a claim. Furthermore, the fraud claim survives under the "leading object" rule, an exception to the Statute of Frauds. Citing Wilson Floors v. Sciota Park, Ltd., the court reasoned that when a promisor's main purpose in promising to pay another's debt is to serve their own business or financial interest (in this case, ensuring the completion of the construction project), the promise is enforceable even if oral. Therefore, the trial court erred in dismissing these claims on a motion to dismiss.
Analysis:
This case clarifies two important equitable doctrines in Ohio contract law, particularly within construction disputes. First, it reinforces that promissory estoppel is not merely a defense or an exception to the Statute of Frauds, but an independent cause of action to recover damages for detrimental reliance on an oral promise. Second, it affirms the application of the "leading object" rule, making it more difficult for property owners, lenders, or other interested parties to use the Statute of Frauds to dismiss claims at an early stage when they have made oral promises to subcontractors for their own financial benefit. The decision protects subcontractors who rely on such promises to continue working and provides a clear path for them to pursue claims against owners directly.
