Sullivan v. Porter

Brief Fact Summary.

Porter (Defendant) orally agreed to sell his property to Sullivan (Plaintiff) and then tried to change the terms after Plaintiff had renovated the property and started a business from the property. Plaintiff sued to enforce the oral agreement.

Synopsis of Rule of Law.

1) An oral agreement for the sale of real property falls outside of the statute of frauds when all of the elements of a contract exist, the party seeking to enforce the contract has partially performed, and the partial performance was induced by the other parties’ misrepresentations. 2) A court can order specific performance of a contract to sell real property when the terms of the contract are reasonably certain, the party seeking specific performance has made significant improvements to the property, and the property is unique.

Facts.

Defendant owned a 52-acre farm with a barn, house, and stables on the premises, which Plaintiff and Andrews managed. Defendant offered to sell the farm to Plaintiff for $350,000 with a $20,000 down payment and the remainder financed through Defendant at between five and seven percent interest for a period of 20 to 30 years. Plaintiff accepted the offer and Defendant told him he would contact his attorney and start the paperwork. Plaintiff told Defendant that he would refinance his house to get the money for the down payment. Defendant moved out of the farmhouse and gave Plaintiff the keys. Plaintiff took possession of the property and began to improve the property in order to begin a horse trail riding and lesson business on the property. A couple of months later, Defendant told Plaintiff that there was interest from another buyer, but that he intended to honor their agreement. The next day, Plaintiff and Defendant met and Plaintiff offered Defendant $10,000 in cash towards the down payment. Defendant did not accept the money, saying that he did not want to take the money before the paperwork was completed. Defendant did eventually accept $3000 towards the down payment. Plaintiff began renovations on the house and began his horse riding business. Defendant visited the property and saw the work being done. When Plaintiff asked about the paperwork, Defendant claimed to be too busy to contact his attorney. More than six months later, Plaintiff sent Defendant an appraisal on the property showing it to be worth $250,000 and affirmed that he would still pay the agreed upon $350,000. Defendant responded by offering to sell Plaintiff the property for $450,000 with $50,000 down. Plaintiff sued, claiming the existence of the oral contract and requesting specific performance of that contract. A jury found for Plaintiff and the trial court ordered Defendant to perform under the original terms of the oral contract. Defendant appealed.   

Issue.

1) Is an oral agreement for the sale of real property outside of the statute of frauds when all of the elements of a contract exist, the party seeking to enforce the contract has partially performed, and the partial performance was induced by the other parties’ misrepresentations?

2) Can a court order specific performance of a contract to sell real property when the terms of the contract are reasonably certain, the party seeking specific performance has made significant improvements to the property, and the property is unique?

Held.

(Saufley, C.J.) 1) Yes. An oral agreement for the sale of real property falls outside of the statute of frauds when all of the elements of a contract exist, the party seeking to enforce the contract has partially performed, and the partial performance was induced by the other parties’ misrepresentations. Ordinarily, a contract for the sale of real property must be in writing, unless there is clear and convincing evidence that an oral contract exists and that an exception to the statute of frauds applies. One exception to the statute of frauds is the part performance doctrine. Under this doctrine, the party seeking to enforce the contract must establish by clear and convincing evidence that the parties entered into a contract that contained all of the required elements; that the party seeking to enforce the contract partially performed the contract; and that the other party induced that performance through misrepresentation, including acquiescence. Here, there is clear evidence that there was a meeting of the minds and that the agreement contained all required elements, including the identification of the property and the parties, the price and down payment amount, and the type of financing. Secondly, Plaintiff partially performed by making improvements to the property and offering a portion of the down payment. Finally, Defendant knew of the renovations and accepted a portion of the down payment, inducing Plaintiff’s performance by his silence. Defendant’s silence when informed that Plaintiff was refinancing his house to get the down payment and action in claiming his attorney was drafting the paperwork is the misrepresentation that induced Plaintiff to perform. Because the part performance exception to the statute of frauds is satisfied, the contract falls outside of the statute and may be enforced. Affirmed on this issue.

2) Yes. A court can order specific performance of a contract to sell real property when the terms of the contract are reasonably certain, the party seeking specific performance has made significant improvements to the property, and the property is unique. A trial court may order specific performance when a legal remedy would be insufficient or impractical. Ordering the sale of real property may be appropriate, since each parcel is unique. In order for enforcement by specific performance, the terms of a contract must be reasonably certain. Here, the terms were sufficiently certain and the property was unique. Plaintiff had also invested time and money into the property and the business. The trial court did not abuse its discretion in ordering that Defendant sell Plaintiff the property under the terms of their oral contract. Affirmed as to this issue.

Discussion.

Promissory estoppel and part performance are exceptions to the statute of frauds. Other exceptions include admission, when the defendant admits under oath that the contract existed; the merchant confirmation rule under the Uniform Commercial Code, when one merchant sends a sufficient writing to another merchant, who knows its contents and does not object within 10 days; and specially manufactured goods, when the goods were custom manufactured for the buyer and the seller either began to manufacture them or entered into a third party contract for their manufacture and the seller cannot sell those goods to anyone else without undue burden.