Kelly v. Sullivan

Action commenced on May 2, 1946, by Paul T. Kelly against William C. Sullivan for specific performance of an alleged contract for the sale of real estate. Sullivan had sold the premises in question to Robert C. Johnson and Helen J. Johnson, his wife, who were impleaded as defendants. In an amended complaint the alternative remedy of damages was sought. Judgment was entered May 21, 1947, dismissing the action as to the impleaded defendants and awarding the plaintiff damages and costs against the defendant in the total sum of $2,879.45. Defendant appeals.

In November, 1945, the plaintiff and the defendant, a contractor, negotiated for the construction and sale of a house to the plaintiff. The defendant submitted plans which were modified by the plaintiff and then approved by the defendant. The parties orally agreed on a price and also agreed that they would complete their negotiations through the First Federal Savings Loan Association of La Crosse, hereinafter referred to as the "Loan Association."

On November 24, 1945, in the presence of an employee of the Loan Association, the parties entered into a written agreement, using a mimeographed form supplied by the Loan Association. The agreement read as follows:

"This agreement made this 24 day of Nov., 1945, between Wm. C. Sullivan hereinafter called seller, and Paul T. Kelly hereinafter called purchaser.

"Witnesseth, in consideration of $5 receipt of which is hereby acknowledged, seller hereby agrees to furnish merchantable title to and convey by warranty deed to purchaser, his heirs or assigns, on or before the 1st day of April, 1946, for the sum of $8,600 the following described real estate situated in La Crosse county, Wisconsin, to wit:

"^*It is hereby agreed that the consideration for this option shall apply as down payment toward the purchase price mentioned herein.

"^*It is hereby agreed that in the event purchaser is unable to secure a loan from the First Federal Savings Loan Association of La Crosse in the sum of $7,400, then this agreement is null and void, and the consideration mentioned herein shall be returned to the purchaser.

"Dated at La Crosse, Wisconsin, this 24th day of Nov., 1945.

"WM. C. SULLIVAN, Seller.
"In presence of:
"J. R. JOHNSON.                      "PAUL T. KELLY, Purchaser.

^* Note; May be deleted upon agreement of parties.

No description of the property was supplied= on the form. Filled out as indicated above, it was placed in a file in the office of the Loan Association. Other papers were kept in that same file. One was a price list of the materials to be used in the construction of the building. That was dated November 12, 1945, and the address of the premises in question appears on it, but only the defendant's and not the plaintiff's name appears on it. Another paper in that file was a document called, "Mortgagors' Property Description." That contained both the address and the legal description of the premises. A fourth paper, dated December 1, 1945, and signed by the plaintiff, is called, "Mortgagee's Application for Mortgage Insurance." This paper expressly refers to the "Mortgagors" Property Description" and on its face these facts, among others; appear: Title to the premises is in the defendant; total amount for construction is $8,600; the amount of the mortgage loan applied for is $7,400.

When the arrangements with the Loan Association had been completed, the defendant began construction in accordance with the blueprints previously approved. The plaintiff and his wife visited the premises frequently and made suggestions which were carried out. In February, 1946, plaintiff paid the installation of additional electrical outlets. He had a telephone installed in his name. He moved furniture onto the premises. On April 2d he made a payment of $700 to the defendant. In May he paid for linoleum floor covering and for fuel oil used upon the premises.

On April 15, 1946, the parties met at an attorney's office. The defendant refused to sell at $3,600 but demanded $9,150. Later, and without the plaintiff's knowledge, he arranged with the impleaded defendants for the sale of the property to them $10,500. He delivered a warranty deed for the premises to them on May 1, 1946. They did not know of his previous agreement with the plaintiff.

When the plaintiff was notified of the sale to the impleaded defendants, he removed his furniture and commenced this action.

On the trial the defendant testified that $10,500 was the reasonable value of the house. Exhibits were introduced showing that the plaintiff had paid out a total of $843.50, including his down payment, to the defendant for the items which he had purchased for the house.

The trial court found that the plaintiff's damages included the difference between the contract price and $10,500, or $1,900, and added to that the $843.50 which plaintiff had expended to make a total in damages of $2,743.50. Costs amounting to $145.95 were also assessed against the defendant. Appellant's main contention is that his agreement with the respondent was not a valid contract because the recited consideration of $5 was not paid and because no description of the property was given in the writing of November 24, 1945.

If it was otherwise valid, the November 24th agreement would be enforceable even if the phrase, "in consideration of $5," had not been included. It is clear from the rest of the writing that there is ample consideration for the seller's promise to convey a warranty deed, for the buyer in effect promises to pay the sum of $8,600 mentioned in the agreement. There is no failure of consideration. See Day v. Elmore (1855), 4 Wis. *190, *196; Cheney v. Cook (1858), 7 Wis. *413, *423.

The November 24th agreement, standing alone, would be unenforceable for its failure to describe or give a key to the description of the premises. The Wisconsin statute of frauds, sec. 240.08, Stats. 1945, provides that "every contract . . . for the sale of any lands or any interest in lands shall be void unless the contract or some note or memorandum thereof, expressing the consideration, be in writing and be subscribed by the party by whom the . . . sale is to be made or by his lawfully authorized agent."

The written contract or memorandum required by such a statute need not consist of one writing alone, but may be made up of several. It is not necessary that all the writings constituting the memorandum be signed. It is enough if one is signed and the others, (1) are physically annexed to it, (2) are expressly referred to, or (3) show on their face that they refer to the same transaction. Restatement, 1 Contracts, p. 283, sec. 208; 2 Page, Contracts (2d ed.), p. 2281, sec. 1321.

The respondent contends that the November 24th agreement and the other papers mentioned in the statement of facts should be considered physically attached since they were all kept in the same file. Keeping several documents in the same file for the sake of convenience does not seem to us to be the physical attachment which alone would justify considering the documents together.

There is evidence appearing on the face of the documents indicating reference to the same transaction, but this evidence is not strong enough to warrant holding that the writings together comply with the statute of frauds. The November 24th agreement, signed by both parties, sets forth the purchase price and expressly refers to the loan of $7,400 which the respondent purchaser was to get from the Loan Association. These same facts, together with the names of the parties and a reference to the purchase agreement, later appear on the "Mortgagee's Application for Mortgage Insurance," which in turn expressly refers to the "Mortgagors' Property Description," in which the legal description of the premises, lacking in the November 24th agreement, appears. The "Mortgagee's Application for Mortgage Insurance" and the "Mortgagors' Property Description" were both executed several days after the November 24th agreement. These later papers were not signed by the seller; and there is no writing to show his approval of their terms. Yet they are the only papers which contain a description of the property. It so happens here that the property described on the papers which were signed only by the buyer actually was the property that was the subject matter of the parties' negotiations. However, if we were to say that a subsequent writing which supplies the description of the property, but is unsigned by the seller, is enough when considered with an earlier defective writing, to satisfy the statute of frauds, we would be sanctioning a situation where a buyer could easily work a fraud upon the seller by inserting a description of property which the seller had no intention of selling to him. It would be dangerous and contrary to the purpose of the statute of frauds to give papers which are completely under the control of the buyer the effect of being a part of the seller's agreement unless the seller has signed or acknowledged them in some way. So, while we recognize the existence of several writings in this case, still they do not supply the controlling factor which is the seller's part in the making of a contract of sale of land.

The effect of the statute of frauds, sec. 240.08, Stats. 1945, is qualified by sec. 240.09, which provides: "Nothing in this chapter contained shall be construed to abridge the powers of courts to compel the specific performance of agreements in case of part performance of such agreements." This latter principle is of equal antiquity in our statutes with the principle of the statute of frauds. The ground upon which the remedy of specific performance in cases of part performance rests is that of equitable fraud. If a defendant, after permitting the acts of part performance, were to be allowed to interpose the statute of frauds as a bar to the plaintiff's remedial right, a virtual fraud upon the plaintiff would thereby be perpetrated. 4 Pomeroy, Eq. Jur. (4th ed.) p. 3345, sec. 1409; Seamanv. Aschermann (1881), 51 Wis. 678, 8 N.W. 818; Booher v.Slathar (1918), 167 Wis. 196, 167 N.W. 261; Karrels v.Karrels (1940), 234 Wis. 44, 290 N.W. 624; Trebeschv. Trebesch (1915), 130 Minn. 368, 153 N.W. 754. It follows that the acts of part, performance must be done in pursuance of the contract with the purpose of executing the contract and must be done with the consent, express or implied, or the knowledge of the other party. Generally speaking, if a plaintiff buyer, acting under an oral contract and with the assent of the seller, either makes valuable improvements on the land or takes possession of the land, he is entitled to specific performance of the contract. Restatement, 1 Contracts, p. 260, sec. 197; 1 Wis. Anno. Coat. 118.

The record here leaves no doubt about there being a contract between these parties, though it failed to comply with sec. 240.08, Stats. 1945. The respondent in good faith carried out all the acts that were to be done by him in consummating that Contract. He secured the loan which was referred to in the agreement of November 24th, signed by both parties. The house in question was under construction by the appellant, but the respondent, with the knowledge and consent of the appellant, not only made substantial improvements, but entered into possession of the premises. The trial court's findings of fact on this issue are as follows:

"7. That thereafter and prior to April 1, 1946. the plaintiff Paul T. Kelly by himself and through his wife Anita J. Kelly supervised the construction of the dwelling and made slight alterations therein including the changing of windows. the rearrangement of kitchen cabinets selecting color schemes for the rooms selecting paint for the woodwork and for the outside of the house, and changing the fireplace from a brick to colonial style.

"8. That thereafter and in reliance upon the agreement of the defendant William C. Sullivan, the plaintiff Paul T. Kelly took possession of the premises in conjunction with the defendant and with the consent of the defendant William C. Sullivan made valuable and substantial improvements on said premises. including the installation of a telephone in his own name, the purchasing and laying of linoleum, the contracting for and the installation of electrical equipment, and electrical outlets, moved his household furnishings onto said premises, and paid on the purchase price of said premises the sum of $700 cash."

The establishment of these facts compels us to conclude, as the trial court did, that the appellant's refusal to perform under the circumstances amounted to the perpetration of a fraud upon the respondent.

Because title to the premises had passed to others, who had not known of appellant's prior arrangements with the defendant, and because the respondent did have at the time suit was begun a cause of action in equity, it was appropriate for the court to grant the alternative relief sought in damages. An alleged error in the computation of damages, although not treated in the briefs, was called to our attention by the appellant in oral argument. The sum of $10,500 was considered to be the fair value of the premises. That amount includes the value of the improvements made on the premises by the respondent. For that reason the respondent ought not to have been awarded the sum of $143, representing what he had spent on those improvements. Any other conclusion will result in duplication of damages because it must be assumed that the $143 worth of improvements was included in the price obtained by the vendor in the sale of the house.

By the Court. — The judgment must be modified by deducting from the total damages allowed below the sum of $143, and, as so modified, affirmed. Because this question was not timely raised, respondent to have costs.

FOWLER, J., took no part.