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JOSEPHS v. PIZZA HUT OF AMERICA

September 20, 1989

NATALIE JOSEPHS and JEROME JOSEPHS, Plaintiffs
v.
PIZZA HUT OF AMERICA, INC., and PIZZA HUT, INC., and PEPSICO, INC., Defendants



The opinion of the court was delivered by: SMITH

 D. BROOKS SMITH, UNITED STATES DISTRICT JUDGE

 This matter is before the Court pursuant to a motion for summary judgment filed by defendants, Pizza Hut of America, Inc. (PHA) and Pizza Hut, Inc. (Pizza Hut). *fn1" This controversy arises out of the negotiations for a lease for a Pizza Hut franchise in a building at 531-535 Penn Avenue in the City of Pittsburgh which plaintiffs were interested in purchasing. To secure financing for their purchase, however, plaintiffs had to obtain two tenants. Plaintiffs allege that PHA's representative promised to lease the building in PHA's name and represented that corporate approval was only a mere formality. Based on this representation, plaintiffs closed on the property and obtained title. Subsequently, PHA's corporate officials rejected the lease. Plaintiffs seek damages, including rental payments which would have come due during the term of the proposed lease.

 Plaintiffs assert a cause of action for promissory estoppel. *fn2" That is, plaintiffs assert that PHA's representative made a clear promise which induced plaintiffs to complete the purchase of the property to their detriment. See Restatement (Second) of Contracts § 90 (1979). PHA contends that summary judgment is in order because the plaintiffs are unable to establish by clear and convincing evidence that PHA's representative had the requisite authority to make a promise to lease on which plaintiffs could reasonably rely. PHA also submits that partial summary judgment should be granted because the Statute of Frauds precludes the enforcement of the lease.

 Preliminarily, we address the burden of proof to be applied to plaintiffs' claim of promissory estoppel. PHA contends that the applicable standard of proof for promissory estoppel is the clear and convincing evidence standard applicable to equitable estoppel. Plaintiffs recognize that equitable estoppel requires proof by clear and convincing evidence. Blofsen v. Cutaiar, 460 Pa. 411, 333 A.2d 841 (1975). Plaintiffs argue, however, that the doctrine of equitable estoppel requires that there must be deception relied upon by the promisee to his detriment. The lack of this element in claims of promissory estoppel, plaintiffs contend, dictates a simple preponderance of evidence burden.

 To determine the applicable burden of proof for promissory estoppel, we look to the development of this doctrine in Pennsylvania. It is well recognized that equitable estoppel is the predecessor of promissory estoppel. Fried v. Fisher, 328 Pa. 497, 196 A. 39 (1938). The phrase "promissory estoppel" was described by the Pennsylvania Supreme Court in Fried as "well chosen as indicating that the basis of the doctrine is not so much one of contract, with a substitute for consideration, as an application of the general principle of estoppel to certain situations." 328 Pa. at 501, 196 A. at 41-42. (emphasis added).

 Again, in 1980, the Pennsylvania Superior Court stated that the "equitable estoppel doctrine is one of the antecedents of the modern doctrine of detrimental reliance or promissory estoppel." Straup v. Times Herald, 283 Pa. Super. 58, 69, 423 A.2d 713, 719 (1980). The court then noted that "courts often held the doctrine of equitable estoppel to apply even where no false representation or concealment of material fact existed." It then reasoned that regardless of the phrase used, the essence of the doctrine is that representations were made which justifiably induced another to act to his detriment. Therefore, the court held that the plaintiffs would not be precluded from framing the issue as one of estoppel merely because they did not use the labels "equitable estoppel" or "detrimental reliance." Id., at 70, 423 A.2d at 720.

 We now turn our attention to the motion for partial summary judgment on damages. PHA and Pizza Hut argue that the Statute of Frauds precludes the plaintiffs from recovering in this action. Pennsylvania's

 
Statute of Frauds is satisfied by the existence of a written memorandum signed by the party to be charged and sufficiently indicating the terms of the oral agreement so that there is no serious possibility of consummating fraud by its enforcement.

 Keil v. Good, 467 Pa. 317, 322, 356 A.2d 768, 771 (1976). Moreover, the Statute applies to all leases which exceed a term of three years. 33 Pa.Stat.Ann. § 1. The effect of the Statute would be to bar enforcement of the lease unless it could be shown that it was signed by PHA. See Green v. Interstate United Management Serv. Corp., 748 F.2d 827 (3rd Cir.1984); Polka v. May, 383 Pa. 80, 118 A.2d 154 (1955).

 Nevertheless, plaintiffs urge this Court to enforce the promise notwithstanding the Statute of Frauds. *fn4" As support, plaintiffs cite Haines v. Minnock Construction Company, 289 Pa.Super. 209, 433 A.2d 30 (1981). Haines presented an equity action by a plaintiff homeowner who sought to restrain the defendant developer from constructing certain dwelling units, based on an oral promise by the developer that the site behind plaintiff's town-house would remain open. The defendant contended that the Statute of Frauds barred the action. The court agreed that the plaintiff had failed to satisfy the requirements of the Statute of Frauds, but enforced the promise on the basis of the Restatement of Property § 524.

 We find Haines inapposite to the issue at bar. Unlike the case before us, it concerned a situation in which a prospective purchaser was induced to buy residential property based on certain negative covenants respecting land use made by the vendor that the Court held need not be in writing. See Restatement of Property, § 524 comment c.

 Green v. Interstate United Management Serv. Corp, supra, did concern a lease which was subject to the Statute of Frauds. The plaintiffs in Green had negotiated the construction of a building for subsequent lease to the defendants. The defendants sent a letter to the plaintiffs regarding their intent to enter into the lease. On the strength of the letter of intent, the plaintiffs purchased the site on which the building would be constructed. Subsequently, the defendants refused to sign the lease. Plaintiffs brought suit alleging a breach of contract, promissory and equitable estoppel and ...


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