Citation. N.M. Ct App., 148 N.M. 172, 231 P.3d 628 (2010)
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Brief Fact Summary.
the contention of the Beavers (P) who had orally agreed to sell land to the Brumlows (D) reneged on the agreement on the ground that the statute of fraud prevented specific performance of the agreement because the part performance of the Brumlows (D) was not “unequivocally referable” to the verbal agreement, of which the verbal agreement was not certain as to the purchase price and time of performance.
Synopsis of Rule of Law.
the statute of fraud does not bar the specific performance of an oral contract for the sale of land, where the terms of contract other than the purchase price have been proved, part performance to the agreement by both parties have occurred, the part performance refers unequivocally to the sale of the land through possession and the making of improvements and a remedy of law would not be adequate.
At the time Mr. Brumlows (D) was working with the Beavers (P), an agreement was reached between both parties in which the Beavers (P) verbally agreed to sell property to Brumlows (D) on which he was to site a house. The Brumlows (D) later withdrew all their retirement plans, bought and installed a mobile home on the property and then added permanent improvements to it because they trusted the Beavers (P) promise and had taken this step after they had received the blessings of the Beavers (P). A total amount of $85,000 was utilized to buy the house and to make improvements. The necessary permits and application which the Brumlows (D) needed were also facilitated with the help of the Beavers (P).
The Beavers (P) however did not put their agreement to paper throughout this time even at the instance of the Brumlows (D), although they promised to and even consulted an attorney about drafting the necessary documents. The price as well as the date of closing was also not agreed by both parties. The Beavers (P) throughout this period did not raise any dust but allowed the Brumlows (D) to enjoy their possession until Mr. Brumlows (D) terminated his employment with them to work for their competitor. This action of Brumlows (D) did not go down well with the Beavers (P), and later manifested their displeasure by their refusal to sell the tract of land they had earlier agreed upon.
They thereby attempted to change the agreement they had with Brumlows (D) into a lease by having Brumlows (D) sign an agreement under which he would pay $400 per month to the Beavers (P) as lease payment, although this agreement did not have the language of a lease and even Brumlows (D) thought he was paying for the land. This led Brumlows (D) to start writing “Land Payment” on the checks, but the Beavers (P) kicked against this narration on the check on the ground that the “agreement” they had with the Brumlows (D) was for rentals. Brumlows (D) amicably attempted to resolve the discrepancy by offering to pay cash equivalent to the market fair value for the property and to have the property surveyed at their expense. The Beavers (P) refused this proposal and in turn filed an ejection action which alleged that the Brumlows (D) violated their rent agreement.
The Brumlows (D) however refuted the existence of a rental agreement and affirmatively alleged that their stay on the land was in pursuant to an agreement to purchase the property. But the Brumlows (D) claimed breach of contract, frauds and prima facie tort in the counterclaim they filed. A statute of frauds as defense was pleaded by the Beavers (P), contending that the Brumlows (D)s part performance was not “unequivocally referable” to the verbal agreement and the verbal agreement was not certain as to the purchase price and time of performance. The conclusion of the trial court on this dispute was that the Beavers (P) had injured Brumlows (D) by committing a prima facie tort because the parties had entered into an agreement for the sale of land and had reneged on it.
The statute of defense raised by the beaver’s was also rejected by the court on the ground that part performance of the contract by both parties was enough ground to remove the contract from the statute of frauds. A choice between money damages for tort and specific performance of the contract was given by the court to Brumlows (D), with the purchase price to be determined by an independent appraisal of the fair market value of the property, payable in cash within a period of 30days. The specific performance option was however chosen by the Brumlows (D). Review was granted by the intermediate appellate court.
Does statute of fraud bar the specific performance of an oral contract for the sale of land, where the terms of contract other than the purchase price have been proved and part performance to the agreement by both parties have occurred, where part performance refers unequivocally to the sale of the land through possession and the making of improvements and a remedy of law would not be adequate?
(Vigil, J.) No. the statute of fraud does not bar the specific performance of an oral contract for the sale of land, where the terms of contract other than the purchase price have been proved, part performance to the agreement by both parties have occurred, the part performance refers unequivocally to the sale of the land through possession and the making of improvements and a remedy of law would not be adequate. Actions on contracts for the sales of land or interests in land are generally barred by the statute of frauds where there has been no written agreement for the sale, authenticated by the party to be charged or the party’s proxy.
The doctrine of part performance-applied to overcome the rigidity and injustice that might result from a liberal and mechanical application of the rule-stipulates that where a verbally non-binding under the statute of frauds has been performed to an extent as to make it not equitable to deny effect thereto, the contract may be considered as removed from the point of view of equity, from the workings of the statute of frauds and decree specific performance. This however is a judicially created exception. In this case, the agreement between the parties is not the issue because it is uncontestable or even that the parties partially performed. The primary issue which was disputed by the Beavers (P) was in connection to the application of the part performance doctrine which is the character of the Brumlows (D) performance was not sufficiently indicative of a verbal agreement to sell land to qualify as partial performance.
Part performance must thereby be referable to the contract for the fulfillment of the part performance doctrine. This implies that, it must be proved that there was no other reason for the performance than performance under the contract. According to the Beavers (P), the Brumlows (D) actions was consistent with those taken by a person who needs a place to live and who is given a chance to reside on another person’s property. The argument of the beaver was that if there is an alternative explanation for the conducts exhibited in reliance of the verbal contract, those actions are not “unequivocally referable” to the contract, and it is not proper to apply the part performance doctrine. This argument is rejected. The “unequivocally referable” concept implies that an outsider, knowing all the circumstances of a case excluding the claimed verbal agreement, would instinctively and reasonably conclude that a contract was formed regarding the land, of the same general nature as that purported by the claimant. This does not mean that outside the contract, there cannot be other reasonable explanation for the part performance. This implies that for conclusion to be reached that the contract alleged actually exists, the performance must be able to lead an outsider “naturally and reasonably.”
Taking possession of the property and making valuable, permanent, and substantial improvement to the property are two indicators of performance. Looking at these two indicators, Brumlows (D) fulfilled both. Hence, Brumlows (D) part performance and reliance on agreement constituted enough ground to take the verbal agreement outside of the statute of frauds. The Brumlows (D) also contended the purchase price which the trial court imposed on them to which they never agreed even when the court ordered that the purchase price would be established by an appraisal and gave a time frame of 30days for which the terms of payment was to be settled in cash. It can be seen from precedent that a claim for the specific performance of a contract which involves a land will not fail for failure to specify a contract is other complete and it can be verified that there have been part performance of the contract by the transfer of possession.
In this type of situations, inequality is avoided by a reasonable price that is implied by equity. The Brumlows (D) reliance on the contract which was complete, worked to their detriment after they had taken possession and improved the property. Therefore, the trial court was not wrong in the discharge of its equitable powers by ordering that the purchase price be arrived at by an independent appraisal at fair market value and this determination of the purchase price was not disputed by the Beavers (P). Also, equity may supply a reasonable time for performance where a closing date has not been agreed to. Finally, the Brumlows (D) did not have remedy at law because land is unique and it is assumed to have special value not replaceable in money. The ruling was therefore affirmed.
two principal factors are looked for by majority of courts, as did the court in this case in deciding whether a promisee’s performance is “unequivocally referable” to the contract; (1) whether possession of the property has been obtained by the party seeking the enforcement, and (2) whether a valuable improvement have been made to the property by the party. The performance exception would be applied by most courts if these two principal factors were available. Majority of these courts do not attach more importance to the payment of money. The “unequivocally referable” standard is not used by the Restatement (Second) of Contracts but instead, attention is given to the likelihood of party seeking enforcement, in reliance on the contract, so changed his position that only specific performance can avoid injustice.