Wheeler v. White

SMITH, J. This is a suit for damages brought by petitioner, Ellis D. Wheeler, against respondent, S. E. White. Wheeler alleged that White had breached a contract to secure a loan or furnish the money to finance the construction of improvements upon land owned by Wheeler. Wheeler further pleaded, in the alternative, that if the contract itself was not sufficiently definite, then nevertheless White was estopped from asserting such insufficiency. White filed special exceptions to all of Wheeler's Third Amended Original Petition. The special exceptions asserted that the pleaded contract did not contain essential elements to its enforceability in that it failed to provide the amount of monthly installments, the amount of interest due upon the obligation, how such interest would be computed, when such interest would be paid, and that the alternative plea of estoppel was, as a matter of law, insufficient to establish any ground of recovery. All special exceptions were sustained, and upon Wheeler's declination to amend his pleadings, the trial court entered its judgment dismissing the case and ordered that Wheeler take nothing from White by reason of his suit. The Court of Civil Appeals has affirmed the judgment of the trial court. We have concluded that the trial court did not err in sustaining the special exceptions directed at the sufficiency of the contract itself, but that Wheeler's pleadings on the theory of estoppel state a cause of action. Accordingly, we reverse the judgments of the trial court and the Court of Civil Appeals and remand the cause for trial.

Since the trial court sustained White's special exceptions to Wheeler's petition, we necessarily must assume that all the alleged material facts are true. Wheeler alleged that as the owner of a three-lot tract of land in Port Arthur, Texas, he desired to construct a commercial building or shopping center thereon. He and White entered into an agreement, embodied in the written contract involved here, whereby White was to obtain the necessary loan for Wheeler from a third party or provide it himself on or before six months from the date of the contract. The loan as described in the contract, was to be ". . . in the sum of SEVENTY THOUSAND DOLLARS and to be payable in monthly installments over a term of fifteen years and bear interest at a rate of not more than six per cent per annum." Additionally, under the contract White was to be paid $5,000.00 for obtaining the loan and a five per cent commission on all rentals received from any tenants procured by White for the building. Wheeler alleged that he has been ready and willing to comply with his part of the agreement at all times since the contract was made.

After the contract had been signed by both parties, White assured Wheeler that the money would be available and urged him to proceed with the necessary task of demolishing the buildings presently on the site so as to make way for construction of the new building. The buildings on the site had a reasonable value of $58,500.00 and a rental value of $400.00 per month. By way of reassurance, White stressed the fact that in the event the money was unobtainable elsewhere, he would make the loan himself. Pursuant to such promises Wheeler proceeded to raze the old building and otherwise prepare the land for the new structure; thereafter, he was told by White that there would be no loan. After White's refusal to perform, Wheeler made reasonable efforts to obtain the loan himself but was unsuccessful. In the pleadings Wheeler pleaded the necessary elements of inducement and reliance which entitle him to recover if he can prove the facts alleged.

The binding thread which runs through the cases applying promissory estoppel is the existence of promises designedly made to influence the conduct of the promisee, tacitly encouraging the conduct, which conduct, although not necessarily constituting any actual performance of the contract itself, is something that must be done by the promisee before he could begin to perform, and was a fact known to the promisor. As to the argument that no new cause of action may be created by such a promise regardless of its established applicability as a defense, it has been answered that where one party has by his words or conduct made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the party who gave the promise cannot afterward be allowed to revert to the previous relationship as if no such promise had been made. This does not create a contract where none existed before, but only prevents a party from insisting upon his strict legal rights when it would be unjust to allow him to enforce them.

The function of the doctrine of promissory estoppel is, under our view, defensive in that it estops a promisor from denying the enforceability of the promise.

The Court in the Goodman case, in refusing to allow damages based on a loss of anticipated profits, apparently acted in harmony with the theory that promissory estoppel acts defensively so as to prevent an attack upon the enforceability of a contract. Under this theory, losses of expected profits will not be allowed even if expected profits are provable with certainty. The rule thus announced should be followed in the present case. We agree with the reasoning announced in those jurisdictions that, in cases such as we have before us, where there is actually no contract the promissory estoppel theory may be invoked, thereby supplying a remedy which will enable the injured party to be compensated for his foreseeable, definite and substantial reliance. Where the promisee has failed to bind the promisor to a legally sufficient contract, but where the promisee has acted in reliance upon a promise to his detriment, the promisee is to be allowed to recover no more than reliance damages measured by the detriment sustained. Since the promisee in such cases is partially responsible for his failure to bind the promisor to a legally sufficient contract, it is reasonable to conclude that all that is required to achieve justice is to put the promisee in the position he would have been in had he not acted in reliance upon the promise.

The judgments of the trial court and the Court of Civil Appeals are both reversed and judgment is here entered remanding the cause to the trial court for trial on its merits in accordance with this opinion.