Stepp v. Freeman

Nature of the Case

Freeman (D) appeals a holding in favor of Stepp (P) on equitable estoppel and implied contract.

Facts

Stepp and Freeman were members of a group of Chrysler employees that had been jointly purchasing lottery tickets for over 5 years. Freeman had taken over running the group for the last two years. There were no written rules but rules of conduct prevailed. The group was restricted to twenty members. The members pooled their lottery monies whenever a jackpot reached $8. Each member was to contribute $2.20 to the pool and Freeman kept track of who paid or had not yet paid. Stepp was in charge of making copies for all the members. Freeman had to occasionally remind the members that their monies were due. Members covered other members’ shares if they missed seeing Freeman. None of the members had failed to participate while Freeman ran the pool. Members were not removed from the list unless they spoke to Freeman first.

Stepp and Freeman had a work related dispute and were not on speaking terms. The jackpot reached $8 million and Freeman collected from the group but did not collect from Stepp. Freeman gave Krueger the money to buy his 20 tickets and did not inform him that Stepp was not in the pool. Freeman did not consult anyone on the waiting list to enter the group. Freeman only purchased 19 tickets.

The group won the lottery. Stepp learned that he had not been included but the group had let one of its members pay his $2.20 share after the ticket was won. Stepp sued for his share and brought claims for breach of an express contract, an implied contract, and equitable estoppel.

A magistrate ruled in favor of Stepp on equitable estoppel and breach of contract. The trial court reviewed objections by Freeman and rendered for Stepp. Freeman appealed on the grounds that equitable estoppel is an affirmative defense and not a separate cause of action for the recovery of monies, equitable estoppel claims require proof of actual or constructive fraud and the trial court had granted summary judgment for Freeman on Stepp’s fraud claim, the holdings were against the manifest weight of the evidence, and Stepp failed to prove all of the essential contract elements and thus cannot recover under implied contract theories.

Issue

May an implied in fact contract be created from the facts and circumstances surrounding the conduct of parties that would make it reasonably inferable that a contract does exist?

Holding and Rule of Law

Yes. An implied in fact contract can be created from the facts and circumstances surrounding the conduct of parties that would make it reasonably inferable that a contract does exist.

There are three categories of contracts: express, implied in fact and implied in law. Contracts implied in law are not contracts. They are legal fictions used to bring about an equitable result. The existence of an implied in law contract does not depend on whether the elements of a contract are proven. Both express and implied in fact contracts must have proof of all the elements of a contract.

Assent in express contracts is expressed in the form of an offer and acceptance. In implied in fact contracts, the meeting of the minds is shown by the surrounding circumstances including the conduct of the parties that make it inferable under the circumstances that it was reasonably certain that an agreement was intended.

Stepp has proved all the elements of an implied in fact contract. The circumstances made it inferable that a contract existed as a tacit understanding between the twenty members of the pool. There was an implied agreement that all the members would be informed as to when their monies were due. All the members knew that the group was run informally and they also knew that they could count on not being dropped from the group and could only be dropped after they talked face to face with Freeman.

Under these facts a contract that was breached when Freeman failed to inform Stepp that the group was playing the lottery. Freeman breached the agreement when he unilaterally dropped Stepp from the group.

Disposition

Affirmed.