Part performance is not an exception to the statute of frauds for oral contracts that cannot be performed within a year, a unanimous Appellate Division, First Department panel has ruled, rejecting a line of earlier First Department cases on the issue.
Justice David Saxe (See Profile) wrote in an opinion handed down Tuesday in Gural v. Drasner, 103283/08, that the earlier First Department cases had gone against longstanding Court of Appeals case law and the language of the relevant statutes. He was joined by Justices Rolando Acosta (See Profile), Karla Moskowitz (See Profile), Helen Freedman (See Profile) and Sallie Manzanet-Daniels (See Profile).
The case involves a dispute between two neighbors in Dutchess County over a tract of land used for grazing horses.
The plaintiff, Jeffrey Gural, and the defendant, Fred Drasner, owned neighboring properties in Stanfordville. Gural’s property included a horse-breeding farm.
In 2001, the two men allegedly made an oral agreement under which Gural agreed to clear trees from part of Drasner’s property, plant grass for horses to graze, and build a road, well, fence and horse shed. In return, Drasner allegedly agreed to let Gural’s horses occupy the land until he sold his property, at which point he agreed to reimburse Gural for his work from the sale proceeds.
Gural alleges that he did the work over several years, spending over $180,000. In 2005, soon after the work was done, Drasner told Gural that he was selling the land and the horses could no longer use it. Drasner sold the land in 2006, for $3.5 million, and the new buyer began using the land that Gural improved for her own horses. Gural demanded payment, but Drasner refused. Gural subsequently sued Drasner for breach of contract and unjust enrichment.
Drasner, moving for summary judgment, claimed that the oral agreement was unenforceable, citing General Obligations Law §5-701(a)(1), which states that an oral contract incapable of being performed within a year falls under the statute of frauds and must be in writing. Drasner claimed that the contract could not be performed in a year because it necessarily took at least two years for grazing grass to grow after being seeded.
Gural argued that even if that were true, his partial performance of the contract took it out of the statute of frauds and made it enforceable. He also said that it would have been possible to perform the contract within a year, even though he didn’t do so, because horses could have been allowed on the land before the grass was fully grown.
Manhattan Supreme Court Justice Saliann Scarpulla (See Profile) agreed with Drasner that the contract could not be performed in a year. However, she ruled that there were issues of fact about whether Gural’s work constituted part performance, and denied summary judgment.
Drasner appealed. He argued that, even if Gural had partially performed the contract, the part performance exception does not apply to contracts that can’t be performed within a year.
Before deciding the issue of part performance, Saxe said that he was “troubled” by Scarpulla’s decision that the contract could not be performed within a year.
Even though Gural had not made the improvements in a year, Saxe wrote, “the determination of whether an alleged oral contract can possibly be performed within one year of its making is not conducted by looking back at the actual performance; it requires analysis of what was possible, looking forward from the day the contract was entered into.”
“As an abstract matter, it is difficult to believe that it would be impossible to accomplish the creation of a grazing field within one year, at least if cost were not an issue,” Saxe said.
However, he said, there was not enough evidence on the record to disturb Scarpulla’s decision on that matter.
Saxe conceded that the First Department had, in multiple past cases, recognized a part performance exception for oral contracts that could not be performed in a year, citing Travis v. Fallani & Cohn, 292 AD2d 242, 244 (2002); Hideyo Chow v. Anew XCVIII, 30 AD3d 253 (2006); and RTC Props. v. Bio Resources, 295 AD2d 285 (2002).
However, Saxe said, those cases went against the Court of Appeals’ holdings on the issue going back to 1889, when it explicitly ruled in Wahl v. Barnum, 116 NY 87, 98, that an “oral contract, invalid by the statute of frauds, because by its terms it is not to be performed within one year from the making thereof, is not validated by part performance.”
Saxe noted that a much more recent Court of Appeals decision, Messner Vetere v. Aegis Group, 93 NY2d 229, 234 (1999), contained language saying that the Court of Appeals had never recognized a part performance exception for contracts that can’t be completed in a year, but apparently did not rule out the possibility. However, Saxe said, that was not enough to disturb the older precedent.
Furthermore, Saxe said, allowing a part performance exception went against the language of the General Obligations Law, which did not create any part performance exception for contracts that can’t be performed in a year, while explicitly creating one for certain real estate contracts.
Despite the earlier First Department cases on part performance, Saxe wrote, “we now reject the reasoning of those cases.”
He therefore ruled that summary judgment be granted for Drasner.
Matthew Hearle, a partner at Goldberg Weprin Finkel Goldstein, who represents Gural, said he would likely seek leave to appeal. He said that more recent Court of Appeals decisions leave open the possibility of a part performance exception for oral contracts like the one in this case.
“I obviously was disappointed,” he said of the decision. “I think Judge Saxe acknowledged that we had appropriately relied on their precedent, but now they just decided to go in another direction.”
“We believe the court made the correct decision,” said Michael Hefter, a partner at Bracewell & Giuliani, who represents Drasner along with David Shargel, an associate at the firm. “The decision is important because it clarifies and confirms longstanding law in the state of New York as set forth by the Court of Appeals that there’s no partial performance exception in connection with that section of the General Obligations Law.”
@|Brendan Pierson can be reached at firstname.lastname@example.org.