Nakamura v. Fujii
677 N.Y.S.2d 113, 1998 N.Y. App. Div. LEXIS 8953, 253 A.D.2d 387 (1998)
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Rule of Law:
An oral agreement is not barred by the Statute of Frauds' one-year rule if it can be fairly and reasonably interpreted to be performed within one year, even if unlikely, or if performance depends on a contingency that may or may not occur within one year; it is also not barred by the suretyship provision if it constitutes an independent promise to repay monies advanced by the promisor, rather than a guaranty of another's debt.
Facts:
- In August 1992, Masaki and Isako Fujii informed Spencer that they could not afford their daughter Aki's tuition at the University of Southern California (USC).
- The Fujiis requested Spencer pay "certain tuition invoices" for Aki.
- Spencer orally agreed to pay Aki's tuition in exchange for the Fujiis' express promise to repay the amounts on demand.
- Between August 1992 and December 1993, Spencer, through his corporation Calinax, issued checks totaling $40,339.33 to USC for Aki's tuition.
- In August 1993, the Fujiis made a similar request for their younger daughter, Sawako.
- Spencer orally agreed to make Sawako's tuition payments under the same repayment terms.
- Between August 1993 and January 1996, Spencer, through Calinax, issued checks totaling $60,964.20 to USC for Sawako's tuition.
- The Fujiis later confirmed their repayment obligations in several meetings with Spencer in New York, but refused repayment when Spencer demanded it.
Procedural Posture:
- By summons and complaint dated June 20, 1996, Spencer commenced an action in Supreme Court, New York County (trial court), alleging breach of an oral agreement to repay tuition advances, unjust enrichment, and that the promise constituted an indemnity.
- Defendants, the Fujiis, filed an answer denying the allegations and asserting affirmative defenses, including lack of privity and the Statute of Frauds, along with counterclaims for defamation, negligent and intentional infliction of emotional distress, and tortious interference with contractual relations, based on allegations of sexual harassment and disparaging comments.
- In October 1996, Spencer moved to dismiss the Fujiis' affirmative defenses and counterclaims.
- The Fujiis cross-moved for dismissal of Spencer's complaint pursuant to CPLR 3211 (a) (3), (5) and (7), arguing lack of capacity to sue and that the claims were barred by the Statute of Frauds.
- The Supreme Court, New York County, denied Spencer's motion to dismiss the affirmative defenses and counterclaims, and severed the counterclaims.
- The Supreme Court granted the Fujiis' cross-motion to dismiss Spencer's complaint, finding it barred by the Statute of Frauds under both the one-year performance rule and the suretyship provision, while rejecting the argument concerning Spencer's capacity to sue.
- Spencer appealed the Supreme Court's dismissal of his complaint.
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Issue:
Does the Statute of Frauds, specifically the one-year performance rule or the suretyship provision, bar enforcement of an oral agreement where a plaintiff advanced tuition payments for defendants' daughters based on defendants' independent promise to repay on demand?
Opinions:
Majority - Authored by the Court
No, the Statute of Frauds does not bar enforcement of the oral agreement for tuition advances because it could be performed within one year and constituted an independent promise by the defendants, not a guaranty of their daughters' debt. The court held that the oral agreement to repay tuition advances was not subject to General Obligations Law § 5-701 (a) (1), the one-year rule, because it did not by its terms mandate payments or repayments at specific times, and there was no guarantee the daughters would remain at USC for a full year. Citing Cron v Hargro Fabrics (91 NY2d 362), the court reiterated that the one-year provision only applies to contracts with "absolutely no possibility in fact and law of full performance within one year." Since the agreement merely required payment of "certain tuition invoices" and repayment "on demand," and performance depended on contingencies like the daughters remaining enrolled, it could have been performed within a year. Furthermore, the court found General Obligations Law § 5-701 (a) (2), the suretyship provision, inapplicable because the complaint alleged an independent promise by the Fujiis to repay the monies Spencer advanced at their express request, rather than a guaranty of a debt owed by their daughters to Spencer. The daughters owed no debt to Spencer. The court also reinstated the unjust enrichment claim, noting that it could proceed simultaneously with the breach of contract claim where a bona fide dispute exists as to the contract's existence, but affirmed dismissal of the indemnity claim.
Analysis:
This case clarifies the application of New York's Statute of Frauds, particularly the one-year performance rule and the suretyship provision. It reinforces that the one-year rule is narrowly construed, applying only when performance is an "absolute impossibility" within a year, and emphasizes that contracts contingent on external events (like a student's enrollment) generally fall outside this rule. Moreover, it provides an important distinction for the suretyship provision, confirming that an independent promise to repay funds advanced directly to the promisor's benefit, even if it benefits a third party, is not considered a promise to answer for the debt of another. This decision protects individuals who make advances based on oral promises, preventing the Statute of Frauds from being used to escape clear repayment obligations where no true third-party debt exists.
