Promissory estoppel is defined as a promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance and is binding if injustice can be avoided only by enforcement of its promise.
Defendants gave plaintiff credit union a promissory note secured by a mortgage on defendants' automobile. The mortgage obligated defendants to maintain insurance and stipulated that plaintiff could pay the premium and add the cost to defendants' loan. Defendants procured the required insurance, but failed to make premium payments. Defendants and plaintiff received a notice of impending cancellation from the insurer. Plaintiff sent a letter to defendants stating that if the premium was not paid, plaintiff would renew the policy and apply this amount to the loan. Defendant wife contacted plaintiff and indicated that plaintiff should pay the premium. Plaintiff did not pay the premium and, when the automobile was demolished, the insurer refused indemnification. Plaintiff sued to recover the balance on the promissory note. The court held that plaintiff was precluded from recovering on its loan contract because of its failure to fulfill the promise to pay the overdue premium. On appeal, the court affirmed the order of dismissal.
Is plaintiff precluded from recovering on its loan contract by reason of its failure to fulfill a promise to defendants to pay the overdue insurance premium?
The plaintiff's failure to successfully carry out its promise must be deemed a breach of that contract entitling defendants to assert a right of action which would at the very least offset any amount of money found owing to plaintiff on their loan. We would point out that, even if it could be shown by plaintiff that it never intended to compute any interest on amounts paid by it for insurance premiums on defendants' car and that its promise was truly a pure gratuitous undertaking, we believe such a showing would be of no avail to it since we would not hesitate in finding from this record evidence sufficient to establish a case for the application of promissory estoppel.