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STATUTE OF FRAUDS - BUILDERS SUPPLY AND SALVAGE COMPANY, INC.

In Builders Supply and Salvage Company, Inc. v. Regions Bank [Ms. 2090467, July 9, 2010] __ So. 3d __ (Ala. Civ. App. 2010), the Alabama Court of Civil Appeals held that a promise barred by the Statute of Frauds cannot support an action for promissory fraud. In that case, Jerome Griffin contracted with builder Daryl Cosby to construct a house. Griffin took out a loan from Regions Bank to pay Cosby. Cosby purchased construction materials from Builders Supply and Salvage Company (BSC) on credit. Cosby walked away from the project before it was completed. BSC planned to retrieve the unused construction materials, but a loan officer from Regions Bank asked BSC not to, stating "this would be worked out, and [BSC] would be paid." When BSC was not paid, it filed claims against Cosby, Griffin, and Regions Bank in an attempt to collect the debt. Based on the conversation BSC had with the loan officer from Regions, BSC claimed, in part, that Regions breached a promise to repay the debt and committed fraud by falsely representing that it would repay it. However, the Court held that the breach of contract claim was barred by the Statute of Frauds because the agreement between BSC and Regions was collateral in nature (i.e., an agreement in which the object of the promise is to become the guarantor of another's debt). Because the alleged promises were void under the Statute of Frauds, they could not serve as the basis for a promissory fraud claim.

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