Davis v. Hillman , 288 Pa. 16 ( 1926 )

Argued September 30, 1926. Davis, plaintiff, brought this action of assumpsit against defendant, Hillman, to recover damages for breach of a parol contract to acquire and resell land, the profits derived to be equally divided between the parties. The former had acquired knowledge of coal properties in southwestern Pennsylvania, and at various times had interested the latter in purchases and sales of such. In June of 1919, he learned that the Ellsworth Collieries Company desired to secure a certain acreage, which he could buy, and that it was willing to sell a portion of its tract. It was orally agreed between the two that the first properties should be acquired, and deeded to the company named, which should then transfer in return a part of its land to Hillman. To effect this result the necessary funds were supplied solely by the defendant Davis contributing his services in conducting the negotiations, and was promised in consideration one-half of the gain which might be secured on a resale for the best price obtainable. On October 18, 1920, the conveyance of the land, purchased for $574,274.64 was made to the Collieries Company, and it in turn deeded to Hillman 630 acres of its property, as promised. After this date defendant denied that plaintiff had any interest, and, on November 4th of the same year, the former conveyed the land to the Hillman Gas Coal Company, a corporation of which the stock was nearly all owned by him, for the sum of one dollar, setting forth in the deed that it had been acquired from the Collieries Company in trust for the grantee.

The statement filed sets forth the verbal agreement, which it was claimed had been repudiated, as already recited, and asked as damages, for loss of the bargain, one-half of the excess market value over the sum paid by Hillman. It is further alleged that the transfer to the Gas Coal Company, later made, was fraudulent, and, as appellant states in his argument, was in reality a "conveyance to himself." No averment appears that any offer to purchase at an increase has been made, or could have been secured, plaintiff contenting himself with the statement as to market value, nor is it set forth that there had been any profit made when the property was deeded for one dollar in November. An affidavit of defense was filed, raising the legal question of the sufficiency of the statement to show a good cause of action, and denying the enforceability of the oral agreement in view of the prohibition of the statute of frauds. The trial judge sustained the objections, and dismissed the proceeding, a conclusion approved by the court in banc, and this appeal resulted.

The Statute of Frauds (March 21, 1772, 1 Sm. L. 389) prohibits the creation of interests or estates in any land by parol. Its purpose is to prevent the assertion of verbal understandings, and eliminate the possibility of perjury in the enforcement of obligations depending for their support on the memory of witnesses, and therefore makes necessary reduction of the understanding of the parties to writing. "The rule that requires claims to land, or its equivalent value, to be written, is plain, simple, reasonable and just": Hertzog v. Hertzog, 34 Pa. 418, 438. "Neither party could plead ignorance of the statute, and hence both are presumed to have known that either might take advantage of its terms. Either party had a right to refuse its execution, and the defendants were guilty of no fraud in availing themselves of such right": Sausser v. Steinmetz, 88 Pa. 324; Wilson v. Pennsy Coal Co., 269 Pa. 127,130.

Like legislative provision is made where parol trusts in land are claimed, and such cannot be successfully asserted: Act April 22, 1856, P. L. 533; Meason v. Kaine, 67 Pa. 126. Unless the understanding of the parties is in writing, rights contracted for cannot be enforced. This is subject to exception where the relation arises by implication or legal construction, but there are no allegations in the statement before us to make out any resulting trust. There was no wrong done by Hillman in taking title in his name, nor did plaintiff pay any portion of the purchase money. No fraud in the inception of the contract is claimed, and the showing of an unkept promise is not sufficient to create a trusteeship ex maleficio: Dorr v. Leippe, 286 Pa. 17. The mere fact of a refusal to perform as agreed is not enough (Meredith v. Punxsutawney National Bank,275 Pa. 314; McClosky v. McClosky, 205 Pa. 491), and it is in this regard only that wrongdoing on the part of defendant is asserted, followed by his later transfer of the land to the Gas Coal Company.

If the parol agreement made by the parties created an interest or trust in land, then it cannot be made the basis of an action here. There could be no specific performance decreed, nor ordinarily a recovery of damages for loss of the bargain, for this would in effect have the same result: Breniman v. Breniman, 281 Pa. 304. It is, however, insisted that the transaction is in effect a partnership or joint adventure to deal in lands, and as a result without the statute, since interests so held are to be treated as personalty, and by the weight of authority it is so held, provided the parties bear such relation: Howell v. Kelly,149 Pa. 473; Chester v. Dickerson, 54 N.Y. 1, relied on by appellant, distinguished and compared, with other authorities of the same state, in Edgecomb v. Clough, 275 Pa. 90; Schultz v. Waldons, 60 N.J. Eq. 71, 47 A. 187; Morton v. Nelson,145 Ill. 586, 32 N.E. 916; Steinhoff v. Bullock, 214 Mich. 273,183 N.W. 31. In this case, there was no allegation of partnership, nor was there a "joint adventure" with reference to profits from sale of land, a term usually applied to a single partnership transaction, for the land was not to be purchased for common account, nor was any portion of the consideration paid by plaintiff, nor did any liability for possible losses attach: Clark v. Muir, 298 Ill. 548, 132 N.E. 193. It was rather a contract similar to brokerage or agency in carrying on the negotiations (Tuttle v. Bristol, 142 Mich. 148,105 N.W. 145; Johnston v. Brown, 300 Fed.R. 737; Manker v. Tough,79 Kan. 46, 98 P. 792), or of employment: Goodwin v. Camp, 295 Fed.R. 785. This was not a dealing in real estate by partners as a part of the regular business, and the rule that an agreement, creating a firm so engaged, need not be in writing, does not apply.

Appellant argues further that this agreement is no longer within the statute, if it could ever have been said to apply, since the land has been transferred by defendant. "It is well settled that the statute of frauds applies only to executory contracts, and not to agreements which have been completely executed and performed on both sides. In such case the rights, duties and obligations of both parties are entirely unaffected by the statute": 27 C. J. 321. Applying this rule, it has been held a recovery of contingent profits actually realized could be had. In a leading Pennsylvania case this language is used: "The claim is not for consideration money which he agreed to pay for title which he acquired to the land; but for profits which he afterwards acquired by a sale thereof. The obligation to pay the claim in contention in no manner affected the title which he acquired and held. It was wholly contingent on his selling the land for a sum larger than he paid therefor. . . . . . His liability originating in the contract became fixed and determined on his sale at a profit": Benjamin v. Zell, 100 Pa. 33,36. Following this decision, the distinction between performance and the actual receipt and holding of the gain obtained, and the executory contract to resell, not completely carried out, is well illustrated by Everhart's App., 106 Pa. 349, where recovery was permitted of a share of profits derived from one property sold, and denied as to another, it appearing this contingency had not occurred. Other cases, cited by appellant, wherein recovery was had, will be found to come within the principle, and show the contracts involved to have been executed, and excess funds received to be in the hands of defendant: Howell v. Kelly, supra; McBride v. West Pa. Paper Co., 263 Pa. 345.

The facts averred in plaintiff's statement do not bring the claim within the rule stated. It sets forth that the contract was repudiated on October 18, 1920, and claims the right to damages from that date, when defendant refused to perform. Whether this was indicative of an election to accept the rescission, it is not necessary to decide, though, if this was true, plaintiff's rights would be measured as of that time: Ætna Explosives Co. v. Diamond Alkali Co., 277 Pa. 392. No action for specific performance, or the equivalent, could be maintained while Hillman remained the owner as he was on October 18th, the date from which claim is made in this case, for the statute clearly would prevent recovery. There is no allegation that he subsequently disposed of the land at a profit, and that he has moneys in his possession as a result, to a part of which Davis is entitled, and without proof of which his demand cannot be sustained.

It is urged that in making a conveyance to the Hillman Gas Coal Company, practically to himself, in November, he was fraudulently putting it beyond his power to carry out the parol agreement. The same argument could be advanced if he refused to resell, and continued to hold indefinitely in his own name. If in fact the ownership remained in him, this action must fall, and if transferred, the same is true, unless he realized thereby a profit, a fact not asserted. It was not claimed that any other purchaser was produced, or was willing to give a price which would net an excess, or that such was received from the grantee. As we have heretofore noticed, the refusal to carry out the oral agreement did not form the basis for a recovery. The denial of any interest in Davis is not evidence of fraud, and such must be established, if there is to be an award for the loss of the bargain, as here claimed, based on the market value of the land on October 18, 1920. No claim for advances made, expenses incurred, or value of service rendered is asserted: Breniman v. Breniman, supra; Meason v. Kaine, supra; Thompson v. Sheplar, 72 Pa. 160.

Considering the statement filed to correctly and fully explain the transaction, and admitting the truth of all facts sufficiently set forth, though not legal conclusions based thereon, the learned court below held the parol contract to come within the prohibition of the statute. In so holding we see no error, and the assignments of error are overruled.

The judgment is affirmed.