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Baliles v. Cities Serv. Co. - 578 S.W.2d 621 (Tenn. 1979)

Rule:

An oral contract for the sale of land is not enforceable on the basis of part performance alone. Part performance of a parol contract for the sale of land will not take the agreement out of the statute of frauds. The harshness of this rule has been mitigated by the application of the doctrine of equitable estoppel in exceptional cases where to enforce the statute of frauds would make it an instrument of hardship and oppression, verging on actual fraud. Equitable estoppel, in the modern sense, arises from the conduct of the party, using that word in its broadest meaning, as including his spoken or written words, his positive acts, and his silence or negative omission to do any thing. Its foundation is justice and good conscience. Its object is to prevent the unconscientious and inequitable assertion or enforcement of claims or rights which might have existed, or been enforceable by other rules of law, unless prevented by an estoppel; and its practical effect is, from motives of equity and fair dealing, to create and vest opposing rights in the party who obtains the benefit of the estoppel.

Facts:

In July 1974, the respondent Cities Service Company orally agreed to sell lots 99 and 100 in the Cherokee Hills Subdivision to one of its employees, Dewey Newman, Jr. In order for Newman to secure a loan, respondent sent a letter to the bank setting forth its commitment to sell lots 99 and 100 to Newman. In 1975, Newman assigned his interest in lots 99 and 100 to petitioner, Billy Baliles for $6,500, the approximate value of the labor and materials expended in improving lot 100. Baililes wrote Cities Service, informing the company that Baliles had acquired Newman’s interest in lot 100. By letter, Cities Service took the position that the agreement between it and Newman was not assignable. Thereafter, Baliles filed a complaint seeking specific performance of the agreement between Cities Service and Newman or, in the alternative, damages for its breach. Cities Service defended the action based on the ground that the written memorandum signed by Baliles was not sufficient to comply with the statute of frauds.

The trial court found the memorandum of the agreement for the sale of lots 99 and 100 met the requirements of the statute of frauds.  The court further found that the assignment by Newman of his rights in lot 100 under the contract to Baliles was valid and would be enforceable when the residence on lot 100 was "well under construction" -- which the trial court concluded to be when the residence was "under roof." The chancellor then ordered Cities Service  to execute a deed to Baliles for lot 100 when the residence was put "under roof." On appeal by Cities Service, the court of appeals reversed, holding that the contract was invalid under the statute of frauds. Baliles appealed.

Issue:

Did the memorandum of agreement meet the necessary requisites of the statute of frauds? If it did not, would it invalidate the contract, rendering the enforcement of the statute of frauds?

Answer:

No, to both questions.

Conclusion:

The Court noted that the purpose of the statute of frauds was to reduce contracts to a certainty, in order to avoid perjury on the one hand and fraud on the other. Consequently, to comply with the statute of frauds, a memorandum of an agreement to sell must show, with reasonable certainty, the estate intended to be sold. After a review of the record, the Court determined that the contract did not comply with the requirements of the statute of frauds because it had not properly described the land. Notwithstanding this, however, the Court held that the doctrine of equitable estoppel precluded enforcement of the statute of frauds. The Court said that equitable estoppel mitigated the harshness of the statute and the jurisdiction's rejection of the partial performance exception, under exceptional cases. The Court found that the present case was an exceptional case because Cities Service had placed Newman in possession, permitted him to construct improvements, and helped him secure a loan. Therefore, the Court reversed the decision of the appellate court, and concluded that the assignment to Baliles was enforceable.

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