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Equitable Estoppel May Halt Statute Of Frauds Bar

In this contract dispute over defendants, a tenant and guarantor, having failed to sign a lease for and departure from plaintiff landlord’s auto recycling business, a Roanoke County Circuit Court says defendants waited too long to file a motion to dismiss, and the landlord may defend against a statute-of-frauds bar by asserting equitable estoppel.

Plaintiff H&H Associates LC, landlord, negotiated with defendant John Blankenship, guarantor, for the lease of business premises through a legal entity not yet formed at the time of the initial negotiations. The intent of the parties was that the new legal entity, subsequently formed and called Big John’s Auto Recycling LLC, tenant, would sign a five-year lease for the business premises and Blankenship would sign as a guarantor. A letter of intent was executed and tenant moved into the premises on Oct. 1, 2010, prior to actually executing the written lease and prior to it being signed by guarantor.

After taking possession of the business premises and opening its new auto salvage yard, tenant argued with landlord concerning the condition of one of the business buildings and refused to execute the written lease. On June 30, 2011, eight months after taking over the business property, tenant vacated the premises claiming that landlord had no recourse as a written lease and guarantee agreement had not been signed by either tenant or guarantor. During its tenure on the business premises tenant paid landlord the previously negotiated monthly lease payments. It also agreed to purchase $17,000 worth of landlord’s scrap automobile but failed to do so, even though tenant sold parts from them and kept all the proceeds.

On Aug. 11, 2011, landlord sued both tenant and guarantor for damages for breach of the lease, loss of monthly lease payments accelerated and conversion and sale of landlord’s personal property. Tenant and guarantor jointly filed an answer on Aug. 31, 2011. After more than a year of discovery, negotiations and trial preparation, on Sept. 18, 2012, defendants filed a motion to dismiss. The motion to dismiss is not timely under S.Ct. Rule 3:8.

In the alternative, assuming the motion to dismiss was properly before the court, plaintiff has alleged sufficient facts to support each of the elements of equitable estoppel, which would be a defense to the allegation of a violation of the statute of frauds.

Notwithstanding the equitable estoppel defense to a claim of a violation of the statute of frauds, plaintiff has also alleged in his complaint that the agreement has been partially performed. If proven, partial performance would also amount to a legal justification for violation of the statute of frauds.

H&H Associates LC v. Bug John’s Auto Recycling LLC (Doherty) No. CL 11-1004, Nov. 26, 2012; Roanoke County Cir.Ct.; B. Webb King, Leon P. Ferrance for the parties. VLW 012-8-188, 3 pp.

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