ERIC M. RAUCH VS. STUART RAUCH(L-4177-10, PASSAIC COUNTY AND STATEWIDE)
A-4745-14T4
| N.J. Super. Ct. App. Div. | Aug 30, 2017Background
- Stuart and Phyllis Rauch owned two companies that operated a loss-making nursing facility; their son Eric and daughter-in-law Shan began working there (Eric from Feb 2009, Shan from Feb 2006), with Eric working without salary and improving results.
- In Aug 2009 Eric demanded a 50% equity interest (25% each for him and Shan) in exchange for continued work; Stuart agreed orally (handshake), with no written agreement and no discussion of many key terms.
- Eric and Shan continued working for about ten months; negotiations over other family ownership (their brother Daniel), company liabilities, encumbrances, timing and term of employment remained unresolved.
- Plaintiffs sued in Aug 2010 asserting breach of contract, declaratory relief, promissory estoppel, unjust enrichment and other claims. After discovery, the trial court denied initial summary judgment motions but later granted defendants summary judgment as to most counts, leaving promissory estoppel and unjust enrichment for trial.
- The trial court limited damages to reliance (value of services for the ten months minus compensation received), excluded plaintiffs’ damages expert for lacking a basis to value plaintiffs’ services to these companies, and entered a directed verdict for defendants for failure to prove damages.
- The Appellate Division affirmed: the oral promise was too indefinite to be an enforceable contract because essential terms were missing; promissory-estoppel recovery was limited to reliance damages; plaintiffs failed to present competent proof of those reliance damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of oral agreement | Eric: clear mutual agreement to transfer 50% for continued work; parties intended to be bound | Stuart: agreement lacked essential terms (timing, source/allocation of transfer, liabilities, encumbrances, term of employment) and was the product of coercion | Agreement unenforceable as contract; missing essential terms made obligations too indefinite |
| Waiver / acceptance of performance as curing indefiniteness | Eric: defendants accepted 10 months of performance, so cannot assert indefiniteness or lack of consideration | Stuart: performance did not supply the missing essential terms (duration, liabilities, encumbrances, etc.) | Performance did not cure the absence of essential terms; part performance insufficient to create definite contract here |
| Measure of damages for promissory estoppel | Eric: entitled to expectation damages (half the company) as measure of benefit promised | Stuart: recovery limited to reliance—reasonable value of services rendered for ten months minus compensation received | Court limited recovery to reliance damages because the promise was unenforceable for lack of essential terms; expectation damages unavailable |
| Exclusion of plaintiffs’ damages expert / directed verdict | Eric: expert and Department of Labor data could support a reasonable valuation of services; court erred in excluding expert and directing verdict | Stuart: expert lacked basis to value services specific to plaintiffs’ roles and company; plaintiffs produced no competent proof of damages | Trial court did not abuse discretion excluding the expert; without competent proof of reliance damages, directed verdict for defendants was proper |
Key Cases Cited
- Weichert Co. Realtors v. Ryan, 128 N.J. 427 (1992) (contract requires sufficiently definite terms so performance can be ascertained)
- Malaker Corp. Stockholders Protective Comm. v. First Jersey Nat'l Bank, 163 N.J. Super. 463 (App. Div. 1978) (enforceability requires essential terms described to ascertain promisor's obligations)
- Pop's Cones, Inc. v. Resorts Intern. Hotel, Inc., 307 N.J. Super. 461 (App. Div. 1998) (recovery may be limited to reliance when promise unenforceable for indefiniteness)
- Pacifico v. Pacifico, 190 N.J. 258 (2007) (courts may supply reasonable terms only for gaps parties reasonably overlooked)
- Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (1995) (summary judgment standard reviewed de novo)
- State v. Morton, 155 N.J. 383 (1998) (trial court's evidentiary rulings afforded deference)