Schmidt v. McKaySchmidt v. McKay
- Reporters:
- Before:
- Lumbard, Oakes, Bryan
In this diversity action, Reginald V. Schmidt, a citizen of Florida, appeals from an order of the Eastern District, Bruchhausen, Judge, entered on August 9, 1976, dismissing his second amended complaint on the ground that the claims alleged therein are time-barred under the applicable New York statute of limitations,
Schmidt alleges that from about May 15, 1948 until 1972, he was a member in good standing of MEBA, and was employed as an engineer by Cities Service Tanker Corporation from 1946 until 1966, during which time Cities Service did not have a collective bargaining agreement with MEBA.
Schmidt claims that in May, 1966 MEBA was engaged in an intensive effort to organize the engineers employed by Cities Service and that prior to May 12, 1966 two representative elections had been held, both resulting in tie votes. According to Schmidt, around May 12, 1966 McKay and Brady sought his help and McKay orally promised him that, regardless of whether the campaign against Cities Service was successful, in return for his support in the campaign they would ensure that he was included in the MEBA pension plan with full benefits upon his retirement.
According to the affidavit of Thomas J. Mackell, Jr., the administrator of the MEBA pension plan, the plan is a jointly administered Taft-Hartley trust. Pension credits are earned by MEBA members through service as licensed marine engineer officers on oceangoing vessels under contract with MEBA. In order to qualify for a normal pension, 20 years credited service is required; benefits of greater value may be acquired through continued work in the industry beyond 20 years.
Schmidt alleges that on May 12, 1966 McKay sent a letter to him aboard the SS Council Grove; apparently, similar letters were sent to the other engineers aboard the Council Grove. The letter advised that Cities Service was about to violate an election agreement with MEBA by negotiating with a competing union. It explained that under the terms of the MEBA plan, the past service credits of engineers employed by “newly participating companies” could be picked up after the company had paid one year‘s contribution into the plan and that this would be done for engineers in the Cities Service fleet if Cities Service became a party to the plan. The letter then stated that action had been taken against Cities Service‘s breach of the election agreement and that MEBA made the “following additional commitment to all the Engineers employed by the Cities Service Tanker Corp.:
A) District 2 MEBA will satisfactorily conclude with the Trustees of the District 2 MEBA Pension Plan an agreement permitting the Plan to pick up all the past service credits of any Engineer who supports District 2 MEBA in its current action against the violation of the election agreements regardless of how this action comes out.
B) District 2 MEBA further guarantees that in the unlikely event that A) above is not accomplished by the Trustees’ action, District 2 MEBA will make the appropriate contributions in behalf of said Engineers supporting District 2 MEBA in this action, with the result that the past service credits of the Engineers supporting District 2 MEBA will be totally accredited to their accounts for pensions from the District 2 MEBA Pension Plan.”
The letter on MEBA stationery was signed, “Raymond T. McKay, President.”
On May 26, 1966 a second letter, also on MEBA stationery and signed by McKay and Brady, was sent to all Cities Service engineers. This letter enclosed the May 12 letter and stated that Cities Service had “reconsidered” its position and had agreed to another representation election. The letter warned, however, that action against the company might still be necessary and stated that “(s) hould the Company refuse to agree to fair election conditions and permit the elections to progress without prejudicial interference, we will then institute our original plan.” The letter advised that should such action become necessary, “then the terms, commitments and conditions for the Council Grove Engineers will apply to all Cities Service Engineers.” (emphasis in original).
Apparently, MEBA later concluded that action against the company was necessary and Schmidt took over direction of a picket line around the SS Bradford Island, a Cities Service vessel docked at Mobile, Alabama. Schmidt took part in the strike action from October 26, 1966 to November 16, 1966, when it appears the picket line was terminated because the engineers and mates aboard the Bradford Island were successfully organized. Schmidt claims that his support of MEBA on this occasion was taken in reliance upon McKay‘s oral promise and the letters of May 12 and 26. Although the Bradford Island battle was won, the union lost the war and MEBA never became the collective bargaining representative for the Cities Service engineers.2
Schmidt alleges that because of his union activity he was demoted by Cities Service and resigned. He then found employment for the next four years (from 1967 to 1971) with companies under contract with MEBA. On September 22, 1967 he wrote to Brady stating that he had heard rumors that the union had refused to pick up his time with Cities Service and he “told them this was all a big lie.” He then stated, “I wonder if it would do any good to . . . have the union certify my time for retirement . . .” The Mackell affidavit explains that under the MEBA pension plan, employees “are entitled to periodically request from the Plan certification . . . of their earned pension credits.” Certification enables the individual to establish the amount of pension credits earned under the plan and thereby determine whether he has qualified for a pension or for increased benefits. In his deposition, Schmidt testified that prior to May, 1966 he was aware that in order to earn pension credits it was necessary to be employed by a company under contract with MEBA. Schmidt never received an answer to his letter of September 22 and did not request certification of his credits prior to his application for a pension. In his deposition Schmidt also stated that he believed a binding contract had been established when he engaged in the strike action at the Bradford Island dock. Brady indicated in his deposition that although he assumed that something could be worked out to make good the commitments referred to in the letters of May 12 and 26, no efforts were made to carry them out because appellant was the first to raise the issue. McKay testified along similar lines in his deposition.
In February, 1971 Schmidt sought to retire and submitted an application to participate in the MEBA pension plan. Around September 1, 1971 Schmidt was notified by the claims coordinator of the plan that he was ineligible for a pension; the Mackell affidavit explains that the ground for the denial was that Schmidt had worked for a covered employer for only four years (1967-1971) and had not accumulated sufficient credits to qualify.
On November 27, 1972 Schmidt filed this action in district court. His complaint stated three claims that appellees had breached their contract with him, that they were bound by the doctrine of promissory estoppel, and that they had committed fraud, as described, supra.3 After an extended jurisdictional dispute, see note 1, supra, appellees made a motion on November 21, 1975 seeking, inter alia, summary judgment on the grounds that Schmidt‘s claims were barred by the statute of limitations.
Judge Bruchhausen held that all three claims were time-barred. He found that the six-year New York statute of limitations applied to all three claims and had begun to run on all three claims on November 16, 1966. See
Turning first to appellant‘s contract claim, the parties agree that the New York statute of limitations governs appellant‘s state law claims. See Ragan v. Merchants Transfer and Warehouse Co., 337 U.S. 530, 69 S.Ct. 1233, 93 L.Ed. 1520 (1949); Guaranty Trust Co. v. York, 326 U.S. 99, 109, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945); Witherow v. Firestone Tire & Rubber Co., 530 F.2d 160, 165 (3rd Cir. 1976).
The district court appears to have held that if an enforceable contract did arise on November 16, 1966, it was breached by appellees that same day and the statute of limitations commenced to run. Appellant argues, however, that under New York law where, as here, a contract calls for a party to take action other than the simple payment of money and no time for performance is specified, then a reasonable time for performance will be implied before the promisor will be deemed in breach; further, appellant contends that a “reasonable time” for the performance of appellees’ contractual obligations was not on November 16, 1966 or as soon as eleven days thereafter and, thus, the statute of limitations had not run when his complaint was filed. We agree.
The May 12 letter indicated that those engineers aboard the Council Grove who aided MEBA in its campaign against Cities Service‘s breach of the election agreement would receive the following commitments: (1) MEBA would seek to gain the trustees’ approval of an agreement permitting the engineers’ past service credits to be picked up; and, (2) in the “unlikely event” that this could not be accomplished, MEBA would make the appropriate contributions to the pension plan to ensure that the past service credits would be picked up. The May 26 letter indicated that action against Cities Service‘s breach of the election agreement was no longer necessary but that further action against the company might still be required and, in that event, the “commitments and conditions” of the May 12 letter would apply to all Cities Service engineers. Assuming that Schmidt‘s actions during October-November, 1966 were sufficient to create an enforceable contract, under the terms of the May 12 letter MEBA would then come under an obligation to make a good faith effort to negotiate with the trustees to gain their approval of an arrangement permitting Schmidt‘s past service credits to be picked up, cf. Van Gemert v. Boeing Co., 553 F.2d 812, at 815 (2d Cir. 1977) (“every contract contains the implied requirement of good faith and fair dealing“); it was only in the “unlikely event” that the trustees’ approval could not be obtained that MEBA would be obligated to make direct monetary contributions to the pension plan.4
Since the alleged contract did not specify a time for MEBA‘s performance, under New York law appellees were entitled to a reasonable time in which to attempt to reach an agreement with the trustees. See City of New York v. N. Y. Central R. R. Co., 275 N.Y. 287, 292-93, 9 N.E.2d 931 (1937); Schochet v. Public National Bank, 220 App.Div. 201, 203-04, 221 N.Y.S. 154 (1st Dep‘t 1927); Bykowsky v. Public National Bank, 209 App.Div. 61, 63, 204 N.Y.S. 385 (1st Dep‘t 1924), aff‘d, 240 N.Y. 555, 148 N.E. 702 (1925); Brockhurst v. Ryan, 2 Misc.2d 747, 751, 146 N.Y.S.2d 386 (Sup.Ct.N.Y. County 1955). Thus, had Schmidt gone to court on November 16, 1966 and attempted to enforce the alleged contract, as the district court suggested, he would have been told that MEBA had a reasonable time in which to conclude negotiations with the trustees before any breach of contract could be claimed. Under the circumstances, it is enough to say that a reasonable time to attempt to conclude what both sides seem to agree was a rather unusual arrangement was not on the day appellees’ obligation first arose, November 16, 1966, or eleven days thereafter. See, e. g., Brockhurst v. Ryan, supra, 2 Misc.2d at 752-53, 146 N.Y.S.2d 386. Accordingly, we hold that the six-year statute of limitations had not run on November 27, 1972 when this action was filed.
Schmidt was free to bring suit on his contract claim any time after a reasonable time for appellees’ performance had elapsed, regardless of whether he had attempted to certify his pension credits. Consequently, the significance of the district court‘s finding that he had an obligation to seek certification of his pension credits is unclear. There is nothing in the record to indicate that the certification procedure is anything other than a voluntary system by which employees may definitively ascertain the number of pension credits they have earned. Although Schmidt‘s failure to seek certification until he applied for a pension may be relevant to the reasonableness of his reliance on appellees’ alleged promises, it did not affect the running of the statute of limitations on his contract claim.
As his second claim, Schmidt alleges that he reasonably relied on appellees’ promises to his detriment and that appellees are bound under the doctrine of promissory estoppel. Although there is no express provision for a statute of limitations in promissory estoppel cases,
Under the doctrine of promissory estoppel a promise without any agreed consideration may be enforced if there has been a substantial change of position by the promisee in reasonable reliance upon the promise. See 1A Corbin on Contracts § 204 (1963); 1 Williston on Contracts § 140 (1957); In re Flying W. Airways, Inc., 341 F.Supp. 26, 74 (E.D.Pa.1972). The New York courts have indicated that where the doctrine applies, “a substitute for consideration or an exception to its ordinary requirements can be found in what is styled a ‘promissory estoppel.’ ” Allegheny College v. National Chautauqua County Bank, 246 N.Y. 369, 373-74, 159 N.E. 173, 175 (1927) (Cardozo, J.). See Matter of Lipsky, 45 Misc.2d 320, 322, 256 N.Y.S.2d 429 (Sur.Ct.N.Y. County 1965); Harvey v. Morgan & Co., 166 Misc. 455, 457, 2 N.Y.S.2d 520 (Mun.Ct. Queens 1937), rev‘d on other grounds, 25 N.Y.S.2d 636 (Sup.Ct.App. Term 2d Dep‘t 1938), aff‘d, 260 App.Div. 873, 23 N.Y.S.2d 844 (1940). Although there do not appear to be any New York cases directly on point, we hold that, as in the case of Schmidt‘s contract claim, since appellees had a reasonable time to perform their alleged promises before they could be deemed in breach of promise, the six-year statute of limitations had not run on Schmidt‘s claim of promissory estoppel. See, e. g., Van Hook v. Southern California Waiters Alliance, 158 Cal.App.2d 556, 323 P.2d 212, 217-221 (1958). Cf. Scheuer v. Scheuer, 308 N.Y. 447, 450, 126 N.E.2d 555 (1955); Crump v. Christy, supra, 28 A.D.2d at 1179-80, 284 N.Y.S.2d 472. Under New York law the essence of either a claim of promissory estoppel or a claim of breach of contract is a claim of damages for breach of promise.
Finally, Schmidt alleges as his third claim that appellees’ promises were made with no intention to attempt their fulfillment and with the intent to cause him to rely on these misrepresentations to his detriment.
The issue before the district court was whether Schmidt had discovered, or with reasonable diligence could have discovered, the alleged fraud at any time on or before November 27, 1970 two years prior to the date the action was filed. See, e. g., Rutland House Associates v. Danoff, supra; McCabe v. Gelfand, supra, 57 Misc.2d at 14-15, 295 N.Y.S.2d 583. In this regard, the district court held simply that Schmidt could have discovered the alleged fraud with reasonable diligence “commencing November 16, 1966.”
Under New York law the issue of when a plaintiff, acting with reasonable diligence, could have discovered an alleged fraud turns upon whether the plaintiff possessed knowledge of facts from which he could reasonably have inferred the fraud; although a plaintiff may not shut his eyes to facts which call for investigation, mere suspicion will not suffice as a ground for imputing knowledge of the fraud. See Erbe v. Lincoln Rochester Trust Co., 3 N.Y.2d 321, 325-26, 165 N.Y.S.2d 107, 144 N.E.2d 78 (1957); Higgins v. Crouse, 147 N.Y. 411, 416, 42 N.E. 6 (1895). This inquiry has been described as a “mixed question of law and fact,” Erbe v. Lincoln Rochester Trust Co., supra, 3 N.Y.2d at 326, 165 N.Y.S.2d 111, 144 N.E.2d 80, which ordinarily should not be disposed of by summary disposition. See Erbe v. Lincoln Rochester Trust Co., supra, 3 N.Y.2d at 326, 165 N.Y.S.2d 107, 144 N.E.2d 78; McCabe v. Gelfand, supra, 57 Misc.2d at 15-16, 291 N.Y.S.2d at 264 (“the better practice is to allow the defense to stand until trial,” quoting Mahfouz v. Mahfouz, 24 A.D.2d 988, 265 N.Y.S.2d 114 (2d Dep‘t 1965)).
In granting appellees’ motion for summary judgment5 the district court was required to resolve all genuine disputes as to material facts in Schmidt‘s favor and in appraising his claims, we must accept his version of the facts. Bishop v. Wood, 426 U.S. 341, 347, and note 11, 96 S.Ct. 2074, 48 L.Ed.2d 684 (1976);
Reversed and remanded for further proceedings.