The full case caption appears at the
end of this opinion. The issue in this case is whether written contracts which allow either party toterminate the contract at will are subject to a claim of equitable estoppel, the essence ofwhich is that the words or conduct of the terminating party preclude that party from usingthe written contract to deny the other party’s claim of detrimental reliance and damages.In 1996, appellees, former distributors of The Pittsburgh Press newspaper, sued theMonterey County Herald Company, formerly The Pittsburgh Press, for breach of contract,estoppel, unjust enrichment, and misappropriation of trade secrets, after The Press wentout of business following a labor dispute and appellees were no longer able to operate theirbusinesses distributing The Press. All of the appellees acquired their distributorships from third parties who hadpreviously contracted with The Press to distribute newspapers. The appellees assert thatthey paid consideration in various amounts to the former distributors in order to take overthe former distributors’ businesses. No appellee paid anything to The Press to distributepapers; however, all of the appellees had an agreement with The Press that they wouldpurchase newspapers from The Press at wholesale and distribute the papers to thenewspaper’s customers, charging the customers the retail price. Fifteen of the distributor-appellees entered into written distribution agreements withThe Press which provided that the distributors would buy the newspapers from The Pressand deliver the newspaper at retail rates to home-delivery subscribers and others. Theremaining six former distributors purchased and delivered newspapers from The Presspursuant to verbal agreements. The written distribution agreements were terminable at will by either party upon thirtyday’s notice:
This Agreement . . . shall remain in effect from month to month.. . unless and until terminated by the Seller giving the Buyer .. . at least thirty (30) days written notice of its desire andintention to terminate this Agreement, or by the Buyer. . . givingthe Seller not less than thirty (30) days written notice of his ortheir desire and intention to terminate this Agreement.
The essence of the appellees’ claim is that although there was no express promiseto compensate appellees should The Press discontinue business, and although there wasno express promise that The Press would stay in business for a certain period of time, andalthough the written distribution agreement was terminable at will, The Press was,nonetheless liable to the former distributors for their damages when The Press ceasedbusiness because The Press behaved in ways that led the distributors to believe that ThePress either would remain in business longer than it did or that it would pay them for theirdistributorships if it went out of business. The appellees attach particular significance tothe fact that The Press was aware that distributorships were sold and that The Pressapproved new distributors when a sale of a distributorship was contemplated.[FOOTNOTE 1] The trial court sustained The Press’s preliminary objections in the nature of ademurrer as to the contract claim on the grounds that under Pennsylvania law a distributionagreement is terminable at will unless otherwise agreed. The court also sustainedpreliminary objections in the nature of a demurrer as to the estoppel claim on the groundsthat none of the promises and activities of The Press alleged in the complaint would havecreated any reasonable expectation on the part of distributors that The Press could notexercise its right to terminate the distribution agreement. Superior Court reversed. It agreed with the trial court that the contract claims wereproperly dismissed, but it determined that the estoppel claim should not have beendismissed. Superior Court’s estoppel analysis was based largely on Straup v. TimesHerald, 423 A.2d 713 (Pa. Super. 1980). In that case, when newspaper distributors beganreceiving newspapers without the advertising sections inserted, they attempted to negotiatea change in the way the advertising sections were handled, and when this failed, theyannounced that they would not distribute the newspapers unless the advertising sectionswere already inserted. The newspaper refused to agree, and the dealers then refused topick up the newspapers. The newspaper then began distributing its papers itself, thusremoving the distributors from their accustomed duties. At the time the Straup actioncommenced, all written agreements between the parties had expired. Although the Straupcourt acknowledged that the oral contracts pursuant to which the parties operated werepresumably terminable at will, it held that the newspaper’s words and conduct establisheda kind of conditional property right which could not be terminated at will. Superior Courtheld that because the newspaper treated dealers as “exclusive owners” of distributorshipsand remained silent when distributorships were sold for consideration, the newspaper was”estopped from depriving appellants of their reasonable expectations that they ‘owned’ theirrespective distributorships.” The holding, therefore, was based on the theory of equitableestoppel. The concept of equitable estoppel originated in the fourteenth century: Historically speaking equity validated and enforced promisespredicated on what we now label “promissory estoppel”centuries before bargained-for consideration was conceived.What is presently referred to as “equity” originated in 1349,when Edward III by a general writ referred all matters as werewithin the king’s divine “prerogative of Grace” to the Chancellorfor adjudication. This general authority (prerogative of Grace)required the Chancellor to base all decisions on the principlesof “Conscience, Good Faith, Honesty and Equity.” If someonehad committed any unconscientious act or breach of faith andthe “rigour of the law” favored that party, then the other partywho suffered thereby would be granted corrective relief “underthe head of conscience.” With its source in that writ, the “GoodFaith” basis of promissory estoppel was subsequentlyrecognized and applied by American courts. Based on good faith and conscience, Chancery, during thefourteenth and fifteenth centuries, applied the four principles(which are commingled and now referred to as “equity”) andgave “promissory estoppel” relief to plaintiffs who had incurreddetriment on the faith of a defendant’s promise. III Corbin on Contracts, Section 8.11, (1996) (footnotes omitted).Mr. Justice Stearn, later Chief Justice, writing for this court in 1938,recognized the equitable basis of promissory estoppel and its origins in themore ancient concept of equitable estoppel: [J]ust as the law has consistently upheld the doctrine that,under given circumstances, a person may be estopped by hisconduct, his statements, or even his silence, if another hasthereby been induced to act to his detriment, so from theearliest times there was recognized the principle that anestoppel might similarly arise from the making of a promise,even though without consideration, if it was intended that thepromise be relied upon and in fact it was relied upon. . . .[Thebasis of promissory estoppel] is not so much one of contract,with a substitute for consideration, as an application of thegeneral principle of estoppel to certain situations. It isimportant to bear in mind that, as already pointed out, thedoctrine is much older in its origin and applications than theterminology now employed to describe it. Fried v. Fisher, 328 Pa. 497, 500-01, 196 A. 39, ___ (Pa. 1938)(footnotes omitted). This court more recently has defined equitable estoppel as follows: Equitable estoppel is a doctrine that prevents one from doingan act differently than the manner in which another wasinduced by word or deed to expect. A doctrine sounding inequity, equitable estoppel recognizes that an informal promiseimplied by one’s words, deeds or representations which leadsanother to rely justifiably thereon to his own injury or detrimentmay be enforced in equity. Novelty Knitting Mills v. Siskind, 457 A.2d 502, 503 (Pa. 1983).Promissory estoppel is defined by Restatement of Contracts (2d)(1979) � 90, whichprovides in pertinent part: � 90. Promise reasonably inducing Action or Forbearance(1) A promise which the promisor should reasonably expect toinduce action or forbearance on the part of the promisee or athird person and which does induce such action or forbearanceis binding if injustice can be avoided only by enforcement of thepromise. The remedy granted for breach may be limited asjustice requires. Since the matter relied upon by the distributors to create an estoppel is the conduct of ThePress, not promises, the applicable theory is equitable estoppel,[FOOTNOTE 2] not what is termedpromissory estoppel. The question presented in this case, however, is not whether theestoppel relied upon is equitable or promissory, the initial question is whether estoppel ofany kind is applicable where there is a written contract. It is hornbook law that a contract, either oral or written, may be modified by asubsequent agreement which is supported by legally sufficient consideration or a substitutetherefor and meets the indicia of contract formation. Additionally, under the estoppelconcept, a contract may be modified if either words or actions of one party to the contractinduce another party to the contract to act in derogation of that contract, and the otherjustifiably relies upon the words or deeds of the first party. The question in this case, then, resolves itself into whether The Press induced thedistributors to act in derogation of the written contract (that the distribution agreement wasterminable at will) and whether the distributors justifiably relied on this inducement to theirdetriment. We are unable to find anything in the record which supports the claim that thedistributors were induced to rely on acts or words in derogation of the written provisions ofthe contract that the distribution agreement was terminable at will. In fact, the claim seemsto resolve itself into the notion that because The Press went out of business and this wasfinancially injurious to the distributors, The Press ipso facto should be liable for any lossessuffered by the distributors. Such a claim is frivolous. We expressly reject the holding of the Superior Court in the Straup case thatdistributors have “a kind of conditional property right which could not be terminated at will.”The distributors have contract rights which may, as stated above, be modified bysubsequent contracts or by conduct or words which would create an estoppel. But, as wehave determined, estoppel does not apply in this case. And when there is no more than aconflict of testimony as to whether the inducement to breach the contract did or did notoccur, courts are properly suspicious of the claim, for persons of ordinary prudence willmodify a writing with another writing in any matter of importance.[FOOTNOTE 3]In this case, there was no inducement and so we need not even reach the questionof justifiable reliance. Order of the Superior Court is reversed.[FOOTNOTE 4] Mr. Justice Zappala concurs in the result. FOOTNOTES FN1 When distributorships were sold, The Press furnished assurances to prospective newdistributors that it would enter into a distribution agreement with them. Thus, the Pressapproved the sale of distributorships in the sense that it agreed to deal with the purchaseras a new distributor. FN2 The distributors’ amended complaint simply refers to “estoppel.” The allegations of theestoppel counts are, in essence, that the distributors reasonably relied upon the “customs,practices and courses of dealing” created by the Press. This is an equitable estoppelclaim. Amended Complaint, Count V, Estoppel. FN3 Although we have upheld the modification of written contracts by estoppel in other cases,see Ridley Park Shopping Center v. Sun Ray Drug Co., 180 A.2d 1 (Pa. 1962) and Friedv. Fisher 196 A. 39 (Pa. 1938), such cases, as we observed in Thatcher’s Drug Store v.Consolidated, 636 A.2d 156 (Pa. 1994), present evidentiary problems and often becomea credibility dispute between the parties. FN4 The six former distributors who operated on oral agreements, did not allege that the Pressever expressly agreed to distribute newspapers indefinitely or that it would compensateindividual distributors for the value of their distributorships and there was nothing in theother words or acts of the Press which would induce an expectation that any distributorswould be compensated by the Press for the loss of their distributorships. Thus, both thecontract claims and the equitable estoppel claims of these appellees were properlydismissed.
Kreutzer, et al. v. Monterey County Herald Company In the Supreme Court of Pennsylvania, Western District EDWARD A. KREUTZER; CHARLES R.REINECKER, JR., AND KATHY S.REINECKER, HIS WIFE, I/T/D/B/ABROUGHTON NEWS; ERNEST W.STEPHAN; THOMAS WAGNER ANDJOAN M. WAGNER, HIS WIFE; JOHN J.DELANEY, JR.; ALVAR R. ERLANDSONAND LOIS J. ERLANDSON, HIS WIFE;ROBERT BRAYER and MARIANNBRAYER, HIS WIFE; DANIEL BULFORD,LINDA A. BULFORD, HIS WIFE,GREGORY KOENIG, KEVIN WALSHAND NANCY WALSH, HIS WIFE, APARTNERSHIP, T/D/B/A BROOKLINENEWS; MICHAEL PENDEL AND SUSANIERACI PENDEL, HIS WIFE; JERRY M.RICHARD; MARTIN S. FELDMAN;GREGORY GALANDOO AND BRENDAGALANDOO, HIS WIFE; DAVID PAULKOENIG; GREGORY G. KOENIG ANDGINA BIANCO KOENIG, HIS WIFE;JAMES W. SCHIEDENHELM, KARENSCHIEDENHELM, HIS WIFE, ANDPLEASANT HILLS NEW, INC., APENNSYLVANIA CORPORATION;KENNETH WALKER STEPHAN;SUZANNE M. RICHARD; MICHAELVENTRONE AND FRANCES M.VENTRONE, HIS WIFE; JOHN DAVIDO’DONNELL; WILLIAM W. WILLS, JR.,AND VIRGINIA C. WILLS, HIS WIFE;RICHARD J. MCKENNA,SR., CARLA A.MCKENNA, HIS WIFE; PAUL V.MCKENNA, II AND MARGARETMCKENNA, HIS WIFE, Appellees v. MONTEREY COUNTY HERALDCOMPANY, F/K/A PITTSBURGH PRESSCOMPANY, Appellant No. J-128-1999 No. 33 Western District, Appeal Docket 1999 Appeal from the Order of Superior Courtentered 8/21/98 at 2551PGH97 affirmingin part and reversing in part the Order ofthe Court of Common Pleas of AlleghenyCounty entered 12/12/96 at No. GD93-6729 and remanding the matter for furtherproceedings. Argued: September 15, 1999 Decided: March 22, 2000 Before: CHIEF JUSTICE FLAHERTY
