521 S.W.3d 591
Ky. Ct. App.2017Background
- In 2008 Scott obtained a written loan from Forcht Bank to buy two lots (Lot #23 and Lot #26) and to build a rental home on Lot #26; he later claimed oral assurances that the bank would make a second loan to build on Lot #23.
- Scott completed construction on Lot #26 in 2009 and sought a second loan from Forcht Bank to build on Lot #23; the bank denied the second loan.
- Scott alleged he detrimentally relied on the bank’s alleged oral promise of a second loan and sued for breach of promise, promissory estoppel/detrimental reliance, breach of contract, and breach of fiduciary duty.
- Forcht Bank moved for judgment on the pleadings; the trial court dismissed Scott’s complaint, holding the claims were barred by Kentucky’s statute of frauds and that no fiduciary duty was pleaded.
- On appeal the court reviewed de novo and affirmed, finding (1) loans to establish a rental (business) fall within the statute of frauds; (2) promissory estoppel/detrimental reliance did not overcome the statute because Scott failed to show reasonable detrimental reliance or produce the alleged writing; and (3) no facts supported a fiduciary relationship between Scott and the bank.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the statute of frauds bars Scott’s claim that the bank promised a second loan | Scott: oral promises + his detrimental reliance estops bank from invoking statute of frauds | Forcht: statute of frauds bars oral promise to loan; no signed writing by bank | Held: statute of frauds applies (loan for rental is business) and bars claim |
| Whether promissory estoppel/detrimental reliance defeats the statute of frauds | Scott: detrimental reliance on oral assurances makes promise enforceable | Forcht: estoppel cannot overcome the statute absent proof of fraud or extreme circumstances | Held: promissory estoppel did not defeat statute—Scott failed to show reasonable detrimental reliance or produce the alleged writing |
| Whether the merger clause in the written loan prevents reliance on alleged oral promises | Scott: alleged oral assurances existed before/around loan origination | Forcht: written loan includes merger clause disavowing oral promises; Scott signed it | Held: merger clause bars reliance on conflicting oral representations |
| Whether a fiduciary duty existed between bank and Scott | Scott: bank’s conduct created reliance and fiduciary obligations | Forcht: ordinary creditor–debtor relationship; no confidential-information gain by bank | Held: no fiduciary duty pleaded or shown; bank did not profit from any confidential disclosure |
Key Cases Cited
- City of Pioneer Village v. Bullitt Cty., 104 S.W.3d 757 (Ky. 2003) (standard for judgment on the pleadings)
- Schultz v. General Electric Healthcare Financial Services, Inc., 360 S.W.3d 171 (Ky. 2012) (de novo review and CR 12.03 treated like summary judgment)
- Meade Construction Co. v. Mansfield Commercial Electric, Inc., 579 S.W.2d 105 (Ky. 1979) (elements of promissory estoppel)
- Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636 (Ky. Ct. App. 2003) (promissory estoppel alone insufficient to defeat statute of frauds; equitable estoppel requires fraud)
- Sawyer v. Mills, 295 S.W.3d 79 (Ky. 2009) (Kentucky Supreme Court discussing limits of promissory/equitable estoppel against statute of frauds)
- United Parcel Service Co. v. Rickert, 996 S.W.2d 464 (Ky. 1999) (discussing equitable estoppel/fraud exceptions)
- Farmers Bank & Trust Co. v. Willmott Hardwoods, Inc., 171 S.W.3d 4 (Ky. 2005) (statute of frauds generally not defeated by estoppel except in extreme circumstances)
- De Jong v. Leitchfield Deposit Bank, 254 S.W.3d 817 (Ky. Ct. App. 2007) (banks generally do not owe fiduciary duties to customers)
- Snow Pallet, Inc. v. Monticello Banking Co., 367 S.W.3d 1 (Ky. Ct. App. 2012) (fiduciary duty on a bank is rare; requires confidential information used for bank’s gain)