Caseflicks

New Jersey Superior Court Appellate Division • 1998

Pop's Cones, Inc. v. Resorts International Hotel, Inc.

307 N.J. Super. 461 | 704 A.2d 1321 | 1998 N.J. Super. LEXIS 27

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Takeaway

In short, this case holds that even without a finalized contract, specific assurances that foreseeably induce a party to surrender an existing business opportunity can support promissory estoppel and reliance damages.

Background

Pop's Cones operated a TCBY frozen-yogurt franchise in Margate, New Jersey. In 1994, its president, Brenda Taube, discussed moving the business to Resorts' Boardwalk property. Resorts' business-development executive, Marlon Phoenix, showed Taube possible sites, including the Players Club space, and allowed Pop's to operate a free TCBY cart at the hotel to test customer traffic.

As the October 1 deadline to renew Pop's Margate lease approached, Taube told Phoenix that she needed Resorts' position. According to Taube, Phoenix said the parties were "95% there," needed only senior executive John Belisle's signature, and that Phoenix expected Belisle to approve the arrangement. Phoenix allegedly told Taube not to renew the Margate lease and to "pack up the Margate store and plan on moving." Pop's then declined renewal, vacated the Margate store, stored its equipment, began planning the new site, and hired counsel to finalize a lease.

Resorts later sent a nonbinding December 1 letter proposing lease terms and expressly making them subject to further negotiations and execution of a definitive agreement. After additional discussions, Resorts withdrew its offer in January 1995. Pop's could not return to Margate because the space had been relet and did not reopen elsewhere until July 1996.

Pop's sued for reliance damages, including loss of the Margate location, expenses, and costs of finding another site. It did not seek to enforce a lease with Resorts or recover anticipated profits from the proposed Boardwalk business. The Law Division granted Resorts summary judgment, reasoning that no clear and definite promise existed because essential lease terms remained unresolved. Pop's appealed.

Issues

Issue #1

Whether Pop's presented a prima facie promissory-estoppel claim sufficient to survive summary judgment despite the absence of a completed lease agreement.

Holding

Yes. Viewing the evidence and reasonable inferences in Pop's favor, a jury could find promissory estoppel and award reliance-based damages.

Reasoning

New Jersey traditionally states promissory estoppel as requiring a clear and definite promise, an expectation that the promisee will rely, reasonable actual reliance, and definite and substantial detriment. The doctrine exists to prevent substantial hardship or injustice when a party relies on another's promise.

The trial court treated Pop's claim as an attempt to enforce a lease whose essential terms had never been settled. That would fail, because the parties had not agreed on such matters as the lease term, starting date, and rent. But Pop's instead sought damages caused by its reliance before October 1, 1994, when it gave up its existing Margate leasehold after Resorts' alleged assurances.

The court read Restatement (Second) of Contracts § 90 and more recent New Jersey authority, especially Peck v. Imedia, as supporting a more equitable approach than a rigid search for every essential contractual term. A promise made during unsuccessful negotiations may support recovery for detrimental reliance even though the contemplated final contract never comes into existence.

Under Pop's evidence, Phoenix knew that Pop's had to decide immediately whether to renew its Margate lease. He allegedly said the deal was 95% complete, represented that final approval was expected, instructed Pop's not to renew its lease, and told it to pack up and prepare to move. A factfinder could regard these assurances as promises on which Resorts should have expected Pop's to act.

Pop's offered evidence that it acted exactly as Phoenix allegedly directed: it surrendered the Margate location, moved its equipment into storage, hired a lawyer, prepared for relocation, and later incurred costs securing a replacement location. That evidence created at least a jury question on both detrimental reliance and the reasonableness of that reliance.

Section 90 permits a remedy limited as justice requires. Consistent with that principle, Pop's sought to recover losses flowing from its reliance, not speculative profits from the unconsummated Boardwalk lease. The court therefore reversed summary judgment and remanded for further proceedings.