Daily Development for
Friday, March 19, 1999

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

STATUTE OF FRAUDS; WILLS: A will, though freely revocable, may still constitute a memorandum of a collateral agreement that would satisfy the Statute of Frauds.

Collins v. Morris, 122 Md.App. 764, 716 A.2d 384 (Md.App. 1998).

Claimant alleged that a now deceased title holder, accompanied by Claimant, went to a lawyer for the purpose of having a will prepared. According to Claimant, the decedent explained to the attorney that he wanted the friend to have the decedent's house provided that the friend paid for it. The attorney explained that the parties needed a contract of sale, but the decedent refused to pay the quoted fee. All he wanted was a will. No written contract of sale was executed.

The will contained a provision giving, devising, and bequeathing the house and land to Claimant subject to the following conditions: (a) that Claimant buy the property for the price of $88,000 at the rate of $1,000 per month plus the payment of all outstanding and on going property taxes; (b) if the testator died prior to obtaining the money, then Claimant would continue to pay $1,000 per month plus $85 interest per month and all outstanding property taxes to the personal representative; and (c) when the entire sum was paid, the personal representative was to convey a deed to Claimant acknowledging that Claimant owned the property as sole tenant in fee simple.

The decedent died about six months later. Beginning about a year prior to execution of the will, Claimant claimant made $1,000 monthly payments and continued to make those same payments after the will was executed. They were not always made at the same time in a given month and payments were not made in all months.

About 21/2 years after the decedent's death, the payments stopped. The estate then filed a complaint seeking possession for nonpayment of rent. That case was dismissed by the court. A second action was filed in which the estate essentially contended that this matter should be analyzed as a conditional bequest of real property, which bequest lapsed for failure of the condition.

Claimant contended that the case should be analyzed as an oral contract to convey real property under the statute governing land installment sales. He testified that he started to make payments after the parties that entered into an oral agreement and by the time they visited the attorney, the original contract price of $100,000 had already been paid down to $88,000 and this arrangement was memorialized in the will.

Under Maryland law, a land installment contract means a legal and binding executory agreement under which: (1) the vendor agrees to sell an interest in property to the purchaser and the purchaser is to pay the purchase price in five or more subsequent payments exclusive of the down payment, if any, and (2) the vendor retains title as security for the purchaser's obligation. The estate claimed there was no legally binding executory agreement because there was no written agreement of sale sufficient to satisfy the Statute of Frauds. Further, it argued that the statute was not satisfied by part performance because the payments were pursuant to the bequest and not pursuant to a contract. It also argued that the agreement was too vague and uncertain to be enforceable and that the agreement violated the rule against perpetuities.

The court found that an oral contract existed, based, in part, on the attorney's testimony that the contract price was $100,000 and that $12,000 had already been paid.

The estate argued that because a decedent can revoke the terms of his will at any time prior to his death, a bequest in a will cannot constitute and is "completely different from a contractually binding memorandum sufficient to take a case out of statute of frauds." The court did not disagree that a will is freely revocable, but held that a will may still constitute a memorandum of a collateral agreement that would satisfy the Statute of Frauds. While the will did not specifically reference the earlier oral agreement, the draftperson's testimony clearly established that the omission was his fault. Also, the court felt that in the absence of any evidence that the relationship between the parties was that of a landlord and tenant, the claimant's taking possession of the premises and making payments over the course of four years were consistent only with the existence of a contract to purchase the property.

In addition, the court did not find the terms of the agreement to be ambiguous. Although the estate argued that interest could not be calculated, the court found that there were minimum and maximum amounts of interest potentially due under the contract, each of which could be calculated quite easily and a weighted average could be determined. In addition, the absence of a default provision does not render a contract invalid for vagueness. With respect to the argument that the contract violated the Rule Against Perpetuities, the court was unimpressed by the estate's argument that because the claimant was permitted to occupy the property indefinitely without making payments, and ownership could not vest until full payment was made, the contract violated the Rule Against Perpetuities. Here, the court found that the Rule Against Perpetuities was inapplicable because, under the circumstances, the law implies a reasonable time for payment.

Comment 1: The case is not of earthshaking consequence, but the notion that a well can serve as a memorandum of a contract of sale is something one doesn't see every day.

Comment 2: The court concluded that the $85 per month was indeed paid and was intended to be paid as an additional payment (actuallly the claimant paid $88 per month). Note that the interest rate of $85 per month would total $1020 each year, regardless of the amount of principal outstanding. The court does not do the math to compute the actual rate of interest, adjusting for present value (maybe one of the number crunchers on DIRT will do it for us), but one wonders whether a court in every case would be so comfortable with this method of establishing interest. In the instant case, the estate had repudiated the contract and the Claimant actually was pursuing a reimbursement of all payments made (less restitution), and consequently the characterization of an individual payment as either principal or interest would not matter.

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