Racutt et al v. U.S. Bank, N.A. et al

Filing 36

ORDER on Plaintiffs' request for clarification. (Written Opinion.) Signed by Judge Paul A. Magnuson on March 27, 2012. (alt)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Bradley Racutt and Elizabeth Racutt,

Civil No. 11-2948 (PAM/JJK)

Plaintiffs,
v.

ORDER

U.S. Bank, N.A., and Firstar
Bank, N.A.
Defendants.

Plaintiffs have requested that the Court clarify its Order granting in part and denying
in part Defendant’s Motion to Dismiss. (Docket No. 31.) The Court ordered the parties to
brief whether a breach of contract claim otherwise barred by the statute of frauds survives
when equitable estoppel or part performance may apply, and both parties filed memoranda
on the issue. (Docket Nos. 34, 35.)
Equitable estoppel is a doctrine in which “the party sought to be charged may be
estopped from relying on the absence of a written memorandum and precluded from pleading
the Statute of Frauds as an affirmative defense.” Williston on Contracts 4th § 27.13. This
definition makes clear that the application of equitable estoppel allows a breach of contract
claim to go forward, despite the defendant’s protestations that the statute of frauds prohibits
that claim.
US Bank contends that application of equitable estoppel is never appropriate in cases
involving the statute of frauds, because enforcing an agreement through estoppel whose

enforcement would otherwise be barred by the statute of frauds eviscerates the purpose of
the statute. While it may be true that over-use of estoppel to enforce agreements that fall
within the statute of frauds could potentially swallow the rule, this case does not present such
a situation. Indeed, the Court reminds US Bank that the Motion before the Court was a
Motion to Dismiss, testing only the allegations of the Complaint. The Court found merely
that the Complaint had sufficiently alleged that equitable estoppel or part performance may
apply, and thus US Bank was precluded from raising the statute of frauds as an affirmative
defense at this stage.
Minnesota courts have long recognized the use of estoppel to enforce agreements
otherwise required to be in writing. In a case involving an easement, for example, the
Minnesota Supreme Court enforced the parties’ oral agreement, despite the longstanding rule
that conveyances of land must be in writing to be enforceable. Berg v. Carlstrom, 347
N.W.2d 809, 812 (Minn. 1984). As the court stated, “[a]n agreement may be taken out of the
statute of frauds [ ] by part performance or by application of the doctrines of promissory or
equitable estoppel.” Id. The application of estoppel in the real property situation is
noteworthy, because the rule against enforcement of oral agreements for the conveyance of
such property is generally a hard and fast one.
In any case, the danger of which US Bank warns can be avoided through application
of equitable estoppel only in cases alleging real and substantial injurious reliance. As the
Indiana Supreme Court found, “to establish an estoppel to remove the case from the
operation of the Statute of Frauds, the party must show [ ] that the other party’s refusal to
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carry out the terms of the agreement has resulted not merely in a denial of the rights which
the agreement was intended to confer, but the infliction of an unjust and unconscionable
injury and loss.” Coca-Cola Co. v. Babyback’s Int’l, Inc., 841 N.E.2d 557, 569 (Ind. 2006)
(quotations omitted). While Minnesota courts might not place so high a bar on the use of
estoppel in statute of frauds cases, here the injury of which Plaintiffs complain is both unjust
and unconscionable. Thus, they have sufficiently established at this stage of the litigation
that estoppel might save their claims, including their breach of contract and promissory
estoppel claims, from the statute of frauds. Plaintiffs are therefore entitled to proceed on
these claims.

Dated:

March 27, 2012

s/Paul A. Magnuson
Paul A. Magnuson
United States District Court Judge

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