Dixie Berryhill, Administratrix of the Estate of Helen Ferguson v. Rusty Carroll and Rebecca Carroll ( 1995 )

Berryhill TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN



NO. 03-94-00523-CV



Dixie Berryhill, Administratrix of the Estate of Helen Ferguson, Deceased, Appellant

v.

Rusty Carroll and Rebecca Carroll, Appellees





FROM THE COUNTY COURT AT LAW NO. 1 OF BELL COUNTY NO. 18,104, HONORABLE EDWARD S. JOHNSON, JUDGE PRESIDING

Appellant Dixie Berryhill, administratrix of the estate of Helen Ferguson, refused to acknowledge the validity of an option agreement executed by Charles Cleveland, Ferguson's former guardian, and appellees Rusty and Rebecca Carroll. The Carrolls brought this action requesting specific performance of the agreement, which the probate court ⁽¹⁾ subsequently ordered. Berryhill appeals from the judgment of the probate court. She argues that the court should not have enforced the agreement because it did not meet the requirements of section 27 of the Texas Probate Code and the Statute of Frauds. We will affirm the probate court's judgment.

BACKGROUND

In 1988, Charles Cleveland was appointed guardian of the estate of Helen Ferguson. At that time, Ferguson lived in a nursing home and needed someone to manage her personal affairs. When Cleveland took over as guardian, he discovered that Ferguson did not have enough money to cover her expenses; however, she did own property in Bell County. Cleveland decided to sell Ferguson's house and the land surrounding it to support her. ⁽²⁾

Before Cleveland placed the house on the market in 1989, he walked through it and found it uninhabitable. ⁽³⁾ Cleveland also had the house and the land surrounding it appraised and the appraiser estimated the market value of the house to be between $23,400 and $25,000. After the appraisal, Cleveland obtained the probate court's approval to sell the house as the Probate Code required. See Tex. Prob. Code Ann. §§ 341, 346 (West 1980). ⁽⁴⁾

In the spring of 1990, appellees Rusty and Rebecca Carroll expressed an interest in purchasing Ferguson's house. However, the Carrolls told Cleveland that they were interested in the house only if it included both the North and South Gardens. Additionally, the Carrolls told Cleveland that they could not afford to buy the house outright until they sold their own house. Because Ferguson's house was not ready for occupancy, the Carrolls did not sell their house immediately. Therefore, they wanted to finance the purchase of the Ferguson house. They discovered, however, that the Probate Code required them to make a twenty percent downpayment on the house in order to finance it. Tex. Prob. Code Ann. § 348(a) (West 1980). The Carrolls could not afford this downpayment and could not obtain third-party financing for the purchase because of the poor condition of the house. As a result, Cleveland and his attorney, Mike Gibbs, devised a lease-option plan that allowed the Carrolls to sign a two-year lease and included an option to buy the house at any time during the term of the lease. The option permitted the Carrolls to either pay in cash or finance the purchase of the house. ⁽⁵⁾ Their lease payments would be applied to the purchase price of the house.

Gibbs attempted to draft lease and option agreements to fit the Carrolls' specifications. The option agreement specified that the option period would run from July 20, 1990 to July 19, 1992. The agreement included a description of the property; however, this description was not based upon any survey taken of the land. The agreement also allowed for third-party financing, but it did not allow for owner financing. Cleveland applied to the probate court for permission to execute the lease and option agreements. On June 26, 1990, the probate court approved those agreements. ⁽⁶⁾ Cleveland signed the option agreement on July 6, 1990. He then brought it before the probate court for approval. On July 10, 1990, the probate court rendered an order confirming the lease of the Ferguson house and approving the option agreement between Cleveland and the Carrolls.

When Cleveland forwarded the option agreement to the Carrolls for their signature, they discovered two problems: (1) an inadequate legal description of the property that did not include the South Garden, and (2) no provision for owner financing. As a result, the Carrolls did not sign the agreement. They did, however, execute the lease and start making improvements to the house.

Cleveland acknowledged that the South Garden should have been included in the property's description. He informed the probate court that the option agreement inaccurately described the property that was supposed to be conveyed and asked the court's permission to hire a surveyor to make a description that would include the South Garden. In early December 1990, the probate court granted Cleveland's request; later that month, the property was surveyed. Gibbs then attached the new description to the option agreement and placed it in his file. ⁽⁷⁾ The Carrolls did not sign the 1990 agreement.

In August 1991, Helen Ferguson died. Cleveland applied to the probate court to be appointed the administrator of her estate; however, Dixie Berryhill, Ferguson's cousin, also came forward and applied to be administratrix. Because she was a relative, the court named Berryhill administratrix of Ferguson's estate.

In 1992, Cleveland and the Carrolls discovered that the option agreement had never been changed to allow owner financing. They asked Gibbs to prepare a new option agreement (the "1992 option agreement") that allowed such financing. This agreement contained an accurate description of the property to be conveyed. In May 1992, the probate court once again confirmed the new option agreement by rendering an order confirming the sale of real estate. Both Cleveland and Rusty Carroll signed this new option agreement on June 9, 1992. On June 10, 1992, the Carrolls exercised their option to buy the Ferguson house. The Carrolls continued to make monthly payments on the house after giving notice of their exercise of the option.

This cause arose when Berryhill refused to honor the option agreement. The Carrolls filed suit in the probate court seeking specific performance of the option agreement and paid the remainder of what they owed on the house into the registry of the court. Berryhill contended that neither option agreement could be specifically enforced. She argued that the 1992 option agreement was void due to the death of Helen Ferguson in 1991. She claimed that the 1990 agreement was also void because the Carrolls never signed it and because it did not accurately describe the land to be sold to the Carrolls.

The same probate court that ordered the sale of the Ferguson home found that, in July of 1990, Cleveland and the Carrolls executed an option agreement that did not accurately describe the property that was the subject of their agreement. The court further found that a court-approved survey was prepared and that the property description in the option agreement was clarified on December 30, 1990. The court concluded that this clarification "accurately described the property which the parties always intended to convey." The probate court also found that the Carrolls relied upon the validity of the option agreement by selling their old house and by spending in excess of $30,000 to refurbish the Ferguson house. Finally, the court determined that the Carrolls had fully performed the conditions of the option agreement by paying the estate the purchase price of $30,000 in cash. As a result of these findings, the court concluded that the Carrolls exercised their option to buy the Ferguson house on June 10, 1992 and, therefore, were entitled to specific performance of the agreement. Berryhill challenges the probate court's judgment in six points of error.

DISCUSSION

Probate Code

In her first, second, and third points of error, Berryhill contends that the probate court erred as a matter of law in concluding that the Carrolls were entitled to specific performance of the option agreement. She contends that the court did not have the authority to order specific performance under section 27 of the Probate Code for two reasons: (1) the 1992 option agreement was executed after Ferguson's death, and (2) the 1990 option agreement was defective under the Probate Code requirements.

The Texas Probate Code gives the probate court the authority to order specific performance of agreements entered into prior to a decedent's death. Tex. Prob. Code Ann. § 27 (West 1980). For an agreement to be enforceable by specific performance, it must be in writing and legally effective as an agreement. Id. Additionally, the party seeking to enforce the agreement must show that it has a right to specific performance. Id.

For the option agreement between Cleveland and the Carrolls to be legally enforceable, it must meet both the Code requirements and the normal requirements for a sale of real estate. A guardian has authority to sell real estate belonging to a ward. See Tex. Prob. Code Ann. § 341 (West 1980); 42 Tex. Jur. 3d Guardianship and Conservatorship § 213 (1985). To sell a ward's real estate, the guardian must apply for permission from the probate court. See Tex. Prob. Code Ann. § 342 (West 1980) (outlining required contents of application for sale of real estate); 42 Tex. Jur. 3d Guardianship and Conservatorship §§ 217, 219. For the sale to be legally executed under the Code, the probate court must determine that the sale is necessary or advisable and order the sale to be made. Tex. Prob. Code Ann. § 346 (West 1980).

Berryhill argues that the 1992 option agreement does not meet the requirements of section 27 of the Code because Cleveland had no power to execute an option agreement after Ferguson's death. As a result, Berryhill contends that the probate court cannot order specific performance of that agreement. She also asserts that the probate court had no authority to order the sale of real estate after Ferguson's death.

The guardianship of an incompetent ward ceases when the ward dies. Id. § 404(b)(2). Upon a ward's death, the guardian retains the power to make funeral arrangements, to pay debts out of the estate, and to submit a final accounting. See id. §§ 404A, 405(b). The guardian, however, retains no authority to sell the deceased ward's property. The death of the ward also terminates the probate court's authority to order the sale of real estate. Files v. Buie, 112 S.W.2d 714, 716 (Tex. 1938); Gutierrez v. Gutierrez, 786 S.W.2d 112, 113 (Tex. App.--San Antonio 1990, no writ). As a result, we agree that Cleveland did not have the power to execute the 1992 option agreement and that the probate court did not have the power to order a sale of the Ferguson house based on that agreement. However, the court's judgment did not order the specific performance of the 1992 option agreement. Instead, it ordered that the 1990 option agreement be enforced.

Berryhill argues that, as a matter of law, the probate court could not order specific performance of the 1990 option agreement because this agreement was not a legally executed written agreement under section 27 for two reasons: (1) the Carrolls failed to sign it, and (2) the description of the property in the order of sale is incorrect. The effect of the Carrolls' failure to sign is controlled by the law of contracts rather than by the Probate Code. Options are unilateral contracts. They bind the optionor to hold an offer open; however, they do not bind the optionee to do anything. Northside Lumber & Bldg. Co v. Neal, 23 S.W.2d 858, 859 (Tex. Civ. App.--Fort Worth 1929, no writ). In the instant cause, the Carrolls are optionees seeking to enforce an option signed by Cleveland, the optionor. Cleveland's signature is binding, and the option agreement is not invalid due to the Carrolls' failure to sign. See Augusta Dev. Co. v. Fish Oil Well Servicing Co., 761 S.W.2d 538, 544 (Tex. App.--Corpus Christi 1988, no writ) ("[I]n order to constitute a contract in writing, a writing does not necessarily have to be signed by both parties, so long as the party not signing accepts the contract by his acts, conduct or acquiescence.").

Berryhill also contends that the 1990 agreement was not legally executed because the descriptions of the property in the option agreement and in the probate court's order of sale are insufficient. She argues that these descriptions do not describe the same tract of land that the probate court ordered conveyed.

A probate court's order for the sale of real estate must specify the property to be sold and give a description of that property. Tex. Prob. Code Ann. § 346(a) (West 1980). The description in the order of sale is essential to the validity of the sale by a guardian. Schaeffer v. Williams, 208 S.W. 220, 223 (Tex. Civ. App.--San Antonio 1918, writ ref'd). Thus, when there is a dispute concerning the description of the property sold, the description in the order of sale must control. Id. However, in this cause, there was never any dispute over what property the Carrolls had an option to buy. From their first negotiations with Cleveland, the Carrolls insisted that the South Garden be included with the Ferguson home, and Cleveland agreed that the South Garden should be included in the sale. The probate court recognized that both parties understood what land was to be included in the option agreement. Therefore, when the parties informed the court that the description of the Ferguson home in the 1990 option agreement was inadequate, the court allowed Cleveland to hire a surveyor to correct the description. At trial, the same probate court found that the December 30, 1990 survey accurately described the property that the parties had always intended to convey. As a result, the probate court found that the survey clarified the option agreement and established an accurate legal description of the property conveyed. This was all accomplished at a time when Ferguson was still living and her guardian, Cleveland, had full authority to act on her behalf.

Given these facts, the 1990 option agreement was a legally executed written agreement for the purposes of section 27 of the Code. We overrule Berryhill's first, second, and third points of error.

Statute of Frauds

In her fourth, fifth, and sixth points of error, Berryhill asserts that, as a matter of law, the December 30, 1990 legal description of the property cannot modify the July 6, 1990 option agreement. She claims that the Statute of Frauds and the parol evidence rule prevent such a modification. As a result, she contends that the 1990 option agreement is too indefinite to be enforced by specific performance.

An option to purchase real estate is within the Statute of Frauds; therefore, it must be in writing and signed by the optionor. Tex. Bus. & Com. Code Ann. § 26.01(a) (West 1987); Haskell v. Merrill, 242 S.W. 331, 334 (Tex. Civ. App.--Amarillo 1922, writ dism'd). Essential elements of a contract to sell real estate cannot be supplied orally. Hereford v. Tilson, 200 S.W.2d 985, 988 (Tex. 1947). The Statute of Frauds, however, does not require that the written evidence of an agreement be contained in a single document. Central Power & Light Co. v. Del Mar Conservation Dist., 594 S.W.2d 782, 789 (Tex. Civ. App.--San Antonio 1980, writ ref'd n.r.e.). Even a letter or a telegram not intended for the other contracting party may be sufficient to satisfy this requirement. Id. at 790. However, under the parol evidence rule, terms in a written contract cannot be supplemented by prior or contemporaneous agreements. Black's Law Dictionary 1117 (6th ed. 1990); see Massey v. Massey, 807 S.W.2d 391, 405 (Tex. App.--Houston [1st Dist.] 1991), writ denied, 867 S.W.2d 766 (Tex. 1993). The parol evidence rule applies to both oral and written prior or contemporaneous agreements. Black's Law Dictionary, supra, at 1117.

As noted above, the 1990 option agreement was a written agreement. It is true that the copy of the option agreement attached to the probate court's order of sale did not contain the period of the option or a sufficient legal description of Ferguson's property. However, the option term was spelled out in the probate court's order of sale and the legal description was clarified by the court-ordered survey in December 1990. Because these clarifications were both in writing, they are not prohibited by the Statute of Frauds. Additionally, because these clarifications were made subsequent to the original option agreement, they are not precluded by the parol evidence rule. The 1990 option agreement was in writing and was sufficiently definite to be enforced by specific performance.

Even were we to conclude that the 1990 agreement did not meet the requirement of the Statute of Frauds, it still would be enforceable by specific performance. Sufficient partial performance of an oral agreement can take it out of the Statute of Frauds. Oak Cliff Realty Corp. v. Mauzy, 354 S.W.2d 693, 695 (Tex. Civ. App.--Fort Worth 1962, writ ref'd n.r.e.).

[A]n oral contract which has been partially performed may be enforced in equity if denial of enforcement would amount to a "virtual fraud" in the sense that the party acting in reliance on the contract has suffered a substantial detriment . . . and the other party, if permitted to plead the statute, would reap an unearned benefit.

Central Power & Light Co., 594 S.W.2d at 790. Purchasers of real estate can show sufficient partial performance to overcome the Statue of Frauds by (1) paying the consideration; (2) possessing the property; and (3) making valuable and permanent improvements upon the land with the consent of the seller. Hooks v. Bridgewater, 229 S.W. 1114, 1116 (Tex. 1921); Rittgers v. Rittgers, 802 S.W.2d 109, 113 (Tex. App.--Corpus Christi 1990, writ denied).

The probate court found that the Carrolls have (1) fully paid the purchase price of the Ferguson house, (2) continually possessed the property since July 6, 1990, and (3) made over $30,000 worth of improvements to the property. Invalidating the option agreement because of an alleged Statute of Frauds violation would constitute fraud. The Carrolls, who have relied on the validity of this agreement, would suffer a substantial loss and Berryhill would reap an unearned benefit. Therefore, the 1990 option agreement is enforceable notwithstanding the Statute of Frauds. Because the 1990 option agreement met the requirements of the Statute of Frauds and because the Carrolls fully performed their obligations under the agreement, Berryhill's fourth, fifth, and sixth points of error are overruled.

Having concluded that the 1990 option agreement met the requirements of section 27 of the Probate Code and the Statute of Frauds, the judgment of the probate court is affirmed.

Mack Kidd, Justice

Before Justices Powers, Kidd and B. A. Smith

Affirmed

Filed: August 16, 1995

Do Not Publish

1.   County courts have the general jurisdiction of probate courts. Tex. Prob. Code Ann. § 4 (West 1980 & Supp. 1995). In the instant case, the county court acted as a probate court. The Honorable Edward Johnson presided over both the trial in this case and the sale of the Ferguson home.

2.   The land surrounding the house included the "North Garden" and the "South Garden." Ferguson also owned other property near the house; however, Cleveland did not intend to sell this property with the house.

3.   The house was in great need of repair. For example, the floors in some of the rooms were unstable and needed replacing. Sewer lines were unconnected, and the bathroom was unusable. Also, the house was occupied by cats and smelled of their excrement.

4.   Many sections of the Probate Code were amended in 1993. See Act of June 16, 1993, 73d Leg., R.S., ch. 712, 1993 Tex. Gen. Laws 2788-2796. However, these amendments do not apply to the estates of persons who died before their effective date; the former code applies to these estates. Id. § 8. Because Ferguson died in 1991, we cite to the former code provisions in this opinion.

5.   The lease was to allow either owner financing or third-party financing.

6.   The court approved a two-year option agreement. At the time the court signed the order granting permission to execute the agreements, the specific dates had not been filled in. However, it is clear from the order that the court approved a two-year option period to coincide with the term of the lease.

7.   The 1990 option agreement was never modified with respect to owner financing.