Plaintiff sought equipment financing from Defendant. Defendant subsequently learned that Plaintiff was in the midst of a shareholder litigation suit. Defendant indicated that if Plaintiff adhered to the Defendant’s requirements and the lawsuit was settled, then the loan would close. Plaintiff took steps to settle the lawsuit and comply with the terms of the proposed agreement. Defendant then told Plaintiff that it would not fund the loan. Plaintiff sued Defendant for promissory estoppel, and the jury returned specific factual findings.
Provided equity considerations necessitate enforcement, recovery under promissory estoppel is appropriate when a party reasonably relies to their detriment on another party’s clear promise.
Fortress Systems, LLC (Plaintiff) sought equipment financing from Bank of the West (Defendant). Defendant told Plaintiff that if it adhered to the Defendant’s requirements, then the loan would be approved. The loan terms were documented in a commitment letter, and the loan was set to close. However, Defendant subsequently learned that Plaintiff was in the midst of a shareholder litigation suit. The loan closing was stalled. However, Defendant indicated that if the lawsuit was settled, then the loan would close. Defendant continued to request financial information from Plaintiff, and Plaintiff entered into a proposed settlement agreement with the parties to the shareholder litigation suit. Plaintiff also entered into a building contract based on the belief that the loan would close, and Plaintiff invested its own money in the construction per Defendant’s requirements. Defendant then told Plaintiff that it would not fund the loan.
Whether a promise is enforceable, even if the promise does not constitute a contract, when one party reasonably and detrimentally relies on another party’s promise.
Yes. Provided equity considerations necessitate enforcement, recovery under promissory estoppel is appropriate when a party reasonably relies to their detriment on another party’s clear promise.
Promissory estoppel is an equitable remedy that is applicable even where the statute of frauds would otherwise prohibit recovery. The amount of recovery is based on the damages incurred as a direct result of reasonable reliance. In this case, the jury found that Defendant promised Plaintiff that the loan would close if the lawsuit was settled. Plaintiff took steps to settle the lawsuit and comply with the terms of the proposed agreement. Plaintiff’s actions were in reliance on Defendant’s assertions, and Plaintiff was harmed as a result of these actions. Plaintiff is therefore entitled to a judgment if their reliance was reasonable. The jury found that Plaintiff’s reliance was reasonable due to Plaintiff’s prior dealings and the Defendant’s continued requests for financial information. In light of these findings, Plaintiff is entitled to recover the amount expended as a result of its reliance on the Defendant’s promise.