Daily Development for
Tuesday, April 14, 1998

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

STATUTE OF FRAUDS; CONSIDERATION; SHARED EXPENSES: Written memorandum between parties to share equally in profits and losses was insufficient to satisfy Statute of Frauds and parole evidence of consideration did not remove agreement from Statute of Frauds; consideration must be set forth in written note or memorandum of agreement.

Pate v. Billy Boyd Realty and Construction, Inc., 699 So.2d 186 (Ala.Civ.App. 1997).

Billy Boyd acquired a parcel of land for $40,000. Pate claimed that he had a joint venture interest in the land. Billy Boyd acknowledged that Pate had some understanding with him, but claimed that it was that Pate would pay half the purchase price, which Pate never did. Pate, however, attempted to prove his interest in the land through an alleged written "joint venture" agreement, as follows:

"The 4.82 acres on the Watermelon Road, Northport, Al. Purchased [sic] on March 20 1992 by Billy Boyd Realty & Construction, Inc is a Joint Venture between Billy Boyd Realty & Construction, Inc. and Stan Pate. They both agree to share equally in any profits or losses until this property is sold or leased. Attached to this [agreement] is the Settlement Statement and a copy of the commission check to Elon Miller Realty."

Held: An agreement to share profit and loss does not establish consideration for a promise to transfer land. Consequently, there is no consideration shown in writing for Pate's interest in the property, joint venture or otherwise. Summary judgment for Billy Boyd affirmed.

STATUTE OF FRAUDS; PART PERFORMANCE; TRANSFER OF POSSESSION: Where joint venture agreement pertaining to real property does not satisfy the Statute of Frauds, party alleging part performance must demonstrate that it has taken possession of the property pursuant to the agreement. No other part performance will suffice without a transfer of possession.

Pate v. Billy Boyd Realty and Construction, Inc., 699 So.2d 186 (Ala.Civ.App. 1997).

The facts of this case are set forth in a separate discussion of the case under the heading: "Statute of Frauds; Consideration; Shared Expenses." Basically, Pate alleged that he had a one half interest in certain land as a result of an alleged agreement with Billy Boyd. Pate claimed that any monies he was supposed to pay to Billy Boyd for this interest were satisfied by work that Pate did on the property or otherwise.

Pate also argued that he did work on the land after Billy Boyd acquired it, thus providing "part performance" that takes the contract out of the Statute of Frauds. The court held, however, that in Alabama part performance is available to take a land contract out of the Statute of Frauds only when a party has entered into possession of the land pursuant to the alleged agreement. Here, although Pate's employees did work on the land after the written agreement above was executed, Billy Boyd's employees also worked on the land, and Billy Boyd did not surrender possession to Pate.

Pate then argued that estoppel will bar the defense of the Statute of Frauds under Alabama law. The court acknowledged the theory, but stated that the only estoppel argument that would do this would be one in which the original agreement was fraudulent. Here, there was no argument that Billy Boyd intended to defraud Pate at the outset, whatever Billy Boyd's subsequent actions might have shown. The court differentiated this estoppel argument from an argument based upon promissory estoppel, which the court said was not before it. There was no argument that Billy Boyd induced Pate to do the work in exchange for a promised reward of an interest in the agreement.

The court noted that Pate had not alleged on appeal that he was entitled to some restitutionary remedy for the value conferred by the work that he did, and thus did not rule on that issue.

Comment: In the DD for March 13, the editor discussed Johnson Farms v. McEnroe, 568 N.W.2d 920 (N.D. 1997), which holds that in North Dakota part performance can arise to take a contract out of the Statute of Frauds even when there is no transfer of possession. The Alabama court obviously has less confidence in the ability of finders of fact to sift through often conflicting verbal evidence to identify the true agreement.

The Alabama approach obviously will reduce the total number of disputes. Whether it will result in more justice or less justice depends upon whether one feels that a trial of facts reaches truth or only an acceptable compromise of disputed facts. If the latter, then it would seem to be appropriate to propose that parties who fail to put important agreements into writing deserve very little extra effort from the courts unless they have been defrauded or unless there has been such a change in the relative positions of the parties that judicial intervention seems necessary.

Where the parties have transferred possession of real property, obviously they have some significant agreement that perhaps deserves to be "proven up." But one might argue that other types of performance consistent with an unwritten agreement might be equally compelling. It is unclear why transfer of possession is such a unique type of performance that nothing else can substitute for it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 16, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Stacy Woodward at the ABA. (312) 988 5260 or woodwars@staff.abanet.org

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