## Facts

- In January 1955, Florence Lustig Crossman, who operated women’s dress shops, was asked by Fontainebleau Hotel Corp. to open a dress shop in its new Miami hotel.
- Crossman and the hotel orally agreed on the terms of a lease, and Crossman agreed to move in immediately so the hotel could offer shopping to guests without waiting for execution of a formal lease.
- Crossman took possession of the shop space, spent about $50,000 on fixtures and improvements, and paid the hotel $5,000 as a good-faith deposit.
- After Crossman began improvements, the hotel provided a written lease that Crossman claimed did not match the earlier oral agreement.
- Crossman’s husband and a hotel representative penciled changes into the proposed written lease, and Crossman alleged the parties’ representatives approved those changes.
- The hotel’s representative said the lease would be taken back to the hotel’s attorneys for redrafting, but Crossman never received a revised document.
- Crossman nevertheless remained in possession and began paying rent on March 1, 1955.
- In July 1958, Crossman notified Fontainebleau that she was exercising an option to renew that she contended was part of the parties’ agreement.
- Fontainebleau denied that Crossman had any renewal right and demanded that she surrender the premises no later than September 1959.
- Crossman sued in federal court seeking a declaratory judgment that she held a lessee’s interest that included a renewal clause and seeking injunctive relief to prevent a state-court dispossessory action while her rights were determined.
- Fontainebleau moved to dismiss, arguing the lease was invalid under Florida’s statute of frauds because it was not properly executed.
- Crossman responded that her possession, payment of rent, and substantial expenditures on improvements removed the agreement from the statute of frauds under Florida equity rules.
- The district court dismissed for failure to state a claim; Crossman appealed. While the federal dismissal was pending, the hotel pursued a state dispossessory proceeding that relied on the federal dismissal as res judicata.

## Issues

1. Whether a complaint alleging an oral or defectively memorialized lease states a claim under Florida law when it alleges possession, rent payments, and substantial improvements as part performance.
2. Whether the district court erred by dismissing at the pleading stage on the ground that Florida’s statute of frauds automatically barred the claim.

## Decision

- The Fifth Circuit reversed the dismissal and remanded for further proceedings.
- The court held that Crossman’s allegations of possession, payment of rent, and about $50,000 in improvements were sufficient, at the motion-to-dismiss stage, to state a claim for equitable relief notwithstanding the statute of frauds.
- Because the complaint alleged facts that, if proved, could justify equitable enforcement (including the claimed renewal right), dismissal for failure to state a claim was improper.

## Legal Principles

- On a motion to dismiss, the court accepts well-pleaded facts as true and asks only whether the allegations state a legally recognized claim for relief.
- Florida’s statute of frauds generally requires specified formalities for interests in real property, including long-term lease arrangements.
- Equity may treat the statute of frauds as inapplicable where a party’s part performance—such as taking possession, paying rent or other consideration, and making substantial improvements in reliance on the agreement—would make it unjust to allow the other party to invoke the statute to defeat the arrangement.
- Allegations of substantial performance can be enough to proceed beyond the pleading stage; whether the plaintiff can prove an enforceable agreement and the precise terms (such as a renewal option) is for later proceedings.

## Conclusion

The Fifth Circuit held that Crossman’s complaint, which alleged immediate possession, payment of rent, a good-faith deposit, and major expenditures on improvements in reliance on the parties’ lease arrangement, stated an equitable claim that could avoid the statute of frauds under Florida law; therefore, the district court’s dismissal was reversed and the case was remanded for adjudication on the merits.


Crossman v. Fontainebleau Hotel Corp., 273 F.2d 720 (1959)