Citation. 454 N.W.2d 361, 1990 Iowa Sup.
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Brief Fact Summary.
Two brothers conveyed their interest in land to another brother for him to use as security for a loan. He did not re-convey their interest when the loan was denied.
Synopsis of Rule of Law.
When a party partially performs under an oral agreement, the statute of frauds will not be a valid defense. Parol evidence may be used to establish the agreement.
Harry Gardner (Defendant) was in debt and needed security for a loan. His brothers, Mark and James Gardner (Plaintiffs) conveyed their interest in real estate to him by quitclaim deed, which did not mention an agreement to re-convey. According to Plaintiffs, Defendant told them he would re-convey the interest if the refinancing fell through. The loan was denied, and when Plaintiffs asked for the interest, Defendant refused to return it.
When a party partially performs under an oral agreement, will the statute of frauds bar the introduction of evidence of an oral contract?
A party who partially performs under an oral agreement may escape the impact of the statute of frauds and introduce evidence of the oral agreement. Here, the brothers performed by conveying their interest in land, and that act is sufficient to take the oral agreement form the operation of the statute of frauds.
Plaintiffs also contend that Defendant admitted to the oral contract, and so the contract may be established notwithstanding the statute of frauds. Parol evidence proving the agreement may be admitted where the agreement is established by oral evidence of the adverse party. There is some evidence on the record that Defendant admitted to an oral agreement to re-convey.
The statute of frauds will not apply when there has been part performance on the oral contract because of the performing parties’ reliance.