Becker v. Lagerquist Bros., Inc.

348 P.2d 423, 55 Wash. 2d 425, 1960 Wash. LEXIS 514

• Court: Washington Supreme Court
• Decided: January 14, 1960
• Docket: 34535
• Status: Published

Opinions

Foster, J.

Appellant corporation, defendant below, appeals from a judgment requiring specific performance of an oral agreement to pave a street or, in the alternative, to pay the cost thereof.

The gravamen of appellant’s contention is that, under the parol evidence rule, the earnest-money receipt precluded extrinsic proof of an oral agreement to pave the street. Quite recently, in Barber v. Rochester, 52 Wn. (2d) 691, 328 P. (2d) 711, we reviewed the subject and concluded that the so-called parol evidence rule was not an exclusionary device but, on the contrary, was a basic tenet of substantive law and the trial court’s duty was to consider all relevant extrinsic evidence, either oral or written, in order to determine if the writing embraced the entire agreement of the parties. If it does, the writing is the sole memorial of the agreement, otherwise it is not.

A detailed statement of the evidence is not required to understand the claimed errors.

The appellant corporation acquired a tract of land adjacent to the city of Seattle. Thereafter, it subdivided said tract into building lots and offered the same for sale. To promote the sale of the lots, appellant advertised that it would pave the streets. It employed, for this purpose, display advertising and an elaborate illustrated brochure. Moreover, the court found that respondents’ purchases were made in response to direct oral promises to them by appellant’s agent that the street in question would be paved.

Sales of the property were made by agents or brokers who gave earnest-money receipts which, while varying in form, all contained a recital that there were no agreements not contained in the receipt.

The trial court further found that neither party contemplated that the earnest-money receipt covered the entire agreement between them.²

It is fitting to say that the primary function of an earnest-money receipt is to satisfy the statute of frauds. In Gronlund v. Andersson, 38 Wn. (2d) 60, 227 P. (2d) 741, although an action for fraud, the court was dealing with an earnest-money receipt which contained the precise words relied upon here, and held that such words had nothing to do with the application of the parol evidence rule to an oral contract relating to improvements. We there said:

“ . . . There seems to be some suggestion that, since the earnest-money receipt given by the sellers to the buyers contains the words, ‘There are no verbal or other agreements which modify or affect this agreement,’ it was a violation of the parol evidence rule to introduce evidence concerning the statements of the real-estate agent as to the sufficiency of the water supply. Even were the quoted clause contained in the contract of sale, this contention would be quite without merit; for, where the issue is whether a contract was procured by fraud, the doctrine that parol or other extrinsic evidence is inadmissible to contradict, vary, or explain the terms of a written contract is inapplicable. See Annotation, 56 A. L. R. 13. Parol evidence of false and fraudulent representations inducing one to enter into a written contract is admissible notwithstanding the contract contains an express recital that there have been no representations, or that all oral representations shall be inoperative. Dieterich v. Rice, 115 Wash. 365, 197 Pac. 1. But, in the present instance, the clause in question was not in the contract of sale at all, but in the earnest-money receipt, a document which, for our purposes, was no more than a contract to enter into a contract of sale within a specified time. An agreement concerning the adequacy of the water supply would not vary or modify such a contract in any sense, and in fact would have nothing whatever to do with it.” (Additional italics ours.)

A similar view was expressed in Whaley v. Milton Const. & Supply Co. (Mo. App.), 241 S. W. (2d) 23:

“It is next urged that the execution of the earnest money receipt was the final act of the parties expressing the terms of their agreement, and that all prior negotiations and agreements were merged therein, and for that reason the contract sued on could not be established without violating the parol evidence rule.

“The rule referred to has no application to the facts in this case. The original contract between the parties was oral, and it does not appear that the execution of the earnest money receipt was intended as a reduction of that entire contract to writing. The purpose of the earnest money receipt was to bind the bargain, and its terms were limited to the terms of the sale. It contained nothing in relation to that part of the agreement that had to do with the construction of the house. Its purpose was merely to acknowledge receipt of the earnest money, identify the property to be conveyed, and specify the terms of the sale and the time and place of closing. Nor were the terms of the contract with reference to the character of the building to be constructed so related to the subject matter of the sale and conveyance of the property as to require, under the parol evidence, their inclusion in the earnest money contract before they could be enforced. Oral proof of the terms of the contract with respect to the kind of house contracted for in no way tended to vary, add to, or contradict the earnest money contract. Scott v. Asbury, Mo. App., 198 S. W. 1131; Corn v. McDowell, Mo. App., 185 S. W. 235; Bowers v. Bell, 193 Mo. App. 210, 182 S. W. 1068; Hart v. Riedel, Mo. App., 51 S. W. 2d 891; Eggimann v. Houck, Mo. App., 240 S. W. 478; Meyer v. Dubinsky Realty Co., Mo. App., 133 S. W. 2d 1106; Morris v. Mahn, 208 Mo. App. 575, 235 S. W. 827; Heath v. Beck, Mo. App., 231 S. W. 657.”

Indeed, the objection was that the matter was not dealt with in .the earnest-money receipt. Counsel’s objection is:

“Mr. Towne: I object, Your Honor, to any testimony regarding other things that were to be done in addition to the matters incorporated in the earnest money agreement.”³

It would be strange indeed if all of the terms of sale were required to be in an earnest-money receipt. The entire method of selling real estate would have to be revised.

“ . . . The parol evidence rule does not exclude evidence of an oral agreement which the parties could not reasonably be expected to embody in the written agreement.” 55 Am. Jur. 573, 574, § 98.

Where a contract required to be in writing is in writing, an independent collateral agreement with reference to the same subject matter may be in parol where the statute does not require it to be in writing. Brumley v. Miller, 2 Shannon’s Cases 454 (1877); Lewis v. Turnley, 97 Tenn. 197, 36 S. W. 872 (1896); McGannon v. Farrell, 141 Tenn. 631, 214 S. W. 432; Haynes v. Morton, 32 Tenn. App. 251, 222 S. W. (2d) 389.⁴

The so-called parol evidence rule is not an exclusionary device to prevent the introduction of oral testimony. The primary test for applying it was stated in Gaffney v. O’Leary, 155 Wash. 171, 283 Pac. 1091, as follows:

“The first question is whether the entire contract of the parties was embodied in the order referred to and therefore was not subject to be supplemented by oral testimony. The well settled rule is that, where it appears that only a part of a contract is in writing, the part not in writing may be proved by oral testimony in so far as it is not inconsistent with the written portion. Interstate Engineering Co. v. Archer, 64 Wash. 629, 117 Pac. 470. ...”

The situation is reminiscent of Judge Robinson’s words in Bond v. Wiegardt, 36 Wn. (2d) 41, 216 P. (2d) 196:

“We are here concerned with the mysterious parol evidence rule, the recondite character of which has traditionally provided a sore trial for even such eminent authorities as Thayer, who wrote of it that, ‘Few things are darker than this, or fuller of subtle difficulties’ (Thayer, A Preliminary Treatise on Evidence at the Common Law, chapter 10, p. 390), and Wigmore, who described it as ‘the most discouraging subject in the whole field of Evidence’ (9 Wigmore on Evidence (3d ed.) 3, § 2400). ...”

At the time of the execution of the earnest-money receipts, the contract was partly, if not wholly, executory on both sides, so that our decision in Nielsen v. Northern Equity Corp., 47 Wn. (2d) 171, 286 P. (2d) 1031, controls:

“Since the earnest money agreement was executory on both sides, no new or additional consideration was necessary to make the modification agreement enforcible. LaPlante v. Hubbard, 125 Wash. 621, 217 Pac. 20; Hunters Cattle Co. v. Carstens Packing Co., 129 Wash. 377, 225 Pac. 68; Meyer v. Strom, 37 Wn. (2d) 818, 226 P. (2d) 218.”⁵

But we need not rest our decision on that ground alone for at least in the case of respondents Beach, the earnest-money receipt was never signed by the seller, so that in the Beaches’ case the parol evidence rule could not possibly apply because there was no written contract.

Appellant’s argument is that, because the matter of paving the street in question was not mentioned in the earnest-money receipt, the parol evidence rule precludes proof' of a collateral oral agreement to pave the street. Such is contrary to the main current of decisional law both in this country and in England.⁶ The law is summarized in the following quotation from 27 R. C. L. 533, § 265:

“ . . . Evidence of an oral promise to grade and build a street and to cause city water to be put into it may be given to show an inducement to buy a lot fronting on the street, as such promise is an independent collateral one which need not be included in the deed.”

One of the significant cases is Drew v. Wiswall, 183 Mass. 554, 67 N. E. 666, in which the supreme court of Massachusetts held:

“It is true that the plaintiff’s title to the land comes by deed from the defendants, which is silent as to such an agreement. The rule that a contract in writing cannot be added to or varied by the introduction of oral stipulations or agreements, made before or contemporaneous with its execution, is not violated by holding that the contract proved by the plaintiff was not merged in the deed but was independent and separate, though the sale of the land and building the house furnished the consideration by which it is supported. . . . ”

Illustrative of the many cases enforcing collateral oral contracts for improvements made to induce the purchase of real property is Roof v. Jerd, 102 Vt. 129, 146 Atl. 250, 68 A. L. R. 235. There the plaintiff sold lots in an undeveloped tract of land near Sarasota, Florida. To induce the defendant to purchase two lots, he was promised orally that streets would be opened, sidewalks laid, water mains and sewers extended, and electric lights provided. The defendant purchased the two lots and executed notes for the balance of the unpaid purchase price. In a suit upon the notes and the contract to purchase, the defendant counterclaimed upon the oral agreement respecting the improvements, but evidence in support of the counterclaim was rejected under the parol evidence rule. However, the supreme court of Vermont reversed and, in its opinion, declared:

“Though this rule is very familiar to the courts, in applying it and its so-called exceptions, they have been much perplexed and have reached conflicting results. Sure it is, that the rule does not exclude parol proof of a prior or contemporaneous oral contract that is independent of, collateral to, and not inconsistent with the written contract, though it relates to the same general subject-matter and grows out of the same transaction. Green v. Randall, 51 Vt. 67, 71; Buzzell v. Willard, 44 Vt. 44, 48; Cook v. Littlefield, 98 Me. 299, 56 Atl. 899, 901; 10 R. C. L. 228. It all depends upon how closely the oral contract is bound to the writing. Williston, Contracts, § 637. It is said, too, that the policy of the acting court is for consideration. Mitchill v. Lath, 247 N. Y. 377, 160 N. E. 646. Our own cases, as will hereinafter appear, have been very liberal in construing the rule.

“That the agreement relied upon by this defendant belongs to the class of contracts to which the rule does not apply, we have no doubt. It does not in any way affect the written contract or impair its force or effect. It merely shows an undertaking on the part of the plaintiff not shown by the writing, but collateral to it and independent of it. The bond between the two is that the contract of purchase was the consideration of the parol promise only.

“The Massachusetts cases are especially interesting and instructive in this connection. In McCormick v. Cheevers, 124 Mass. 262, the oral contract was for the filling of the land sold. In Durkin v. Cobleigh, 156 Mass. 108, 30 N. E. 474, 17 L. R. A. 270, 32 A. S. R. 436, Cole v. Hadley, 162 Mass. 579, 39 N. E. 279, and Drew v. Wiswall, 183 Mass. 554, 67 N. E. 666, the oral agreements were to grade a street. In Carr v. Dooley, 119 Mass. 294, the oral agreement was to construct a sewer. In each of these cases, the oral agreement was sustained on the ground that the contract was independent and could be shown by parol. Anderson v. American Suburban Corporation, 155 N. C. 131, 71 S. E. 221, 36 L. R. A. (N.S.) 896, resembles the case in hand very closely. There, the selling corporation had a tract of land which it had divided up into lots. These were being sold by an agent. This agent promised a purchaser that if he would buy certain of these lots, the corporation would build a street car line to them, put in granolithic sidewalks, extend the water main, and make other improvements on the tract. The sale was made, and made by way of an executory contract. The corporation failed to make good the promise. But the agent there seems to have had a rather unusual sense of honor for one engaged in that kind of an occupation, for when the corporation refused to perform, he took an assignment from the deluded purchaser, and himself sued the corporation. It was held that the oral contract was binding upon the corporation, that it was independent of the written contract, and that it could be proved by parol. ...”

Similar conclusions were reached in the cases collected in the margin.⁷

The court of appeal in England was confronted with this identical problem in Jameson v. Kinmell Bay Land Co., 47 Times L. Rep. 593 (1931). The report of that case shows:

“An estate company, by their agent, orally promised an intending purchaser of a building plot that a road, marked on a plan shown to him and giving access to the plot, would be constructed by them and be ready for use within a reasonable time. Relying on this promise, the purchaser entered into a written agreement to purchase, and the plot was duly conveyed to him.”

The plaintiff sued for the breach of the oral agreement. The court held:

“ . . . that the oral promise did not form part of the contract to purchase, but was a separate contract, and that evidence of its terms could be given without contravening the rule that parol evidence may not be given to vary the provisions of a written agreement, and . . . that a promise to construct a road, apart from any conveyance of the land over which it was intended to run, was not a ‘contract for the sale or other disposition of land or any interest in land’ and consequently that an action would lie upon it, although it was oral, without infringing the provisions of s. 40 (1) of the Law of Property Act, 1925.”

The agreement to pave the street in nowise conflicts with anything in the earnest-money receipt. It is entirely consistent with it. Indeed, there was no reason to deal with that subject at all in the receipt. The statute of frauds required the contract for the sale to be in writing, but there is no such requirement respecting the paving of the street. No aspect of the parol evidence rule is here involved. It is impossible to escape the conclusion that the promise to pave the street in question was a material inducement to the respondents’ purchase, so much so that the court found there was an oral contract to do so.

An additional contention must be dealt with. Appellant asserts that the agreement to pave the street was a sale of an interest in land and void because it was not in writing, and that a contract modifying one required to be in writing must, likewise, be in writing.

The answer to the contention is twofold: (1) An agreement to pave a street is not one for the sale of an interest in land and, consequently, may be oral; and (2) where one party has fully performed his part of the agreement, the other party is estopped to assert the defense of the statute.

In Drew v. Wiswall, supra, the supreme court of Massachusetts specifically held:

“ . . . The agreement by which the defendants undertook to build certain of these streets if the plaintiff would buy the lots and build a house did not relate to or concern the sale of the interest of either in the land, whether treated as house lots or streets. . . . ”

In Tsuboi v. Cohn, 40 Idaho 102, 231 Pac. 708, 39 A. L. R. 851, the supreme court of Idaho held that an agreement to build and maintain a partition fence was not within the statute. The supreme court of New Jersey in Okin v. Selidor, 78 N. J. L. 54, 78 Atl. 770, held a contract to lay and maintain a sidewalk was not within the statute. It is stated in 37 C. J. S. 580, § 74:

“. . . Thus a verbal agreement to make or pay for improvements on land is one for labor and materials or for payment therefor and is not within the operation of the statute. . . . ”

In 29 Halsbury’s Laws of England (2d ed.) 240, note (r), it is stated:

“A collateral agreement, not involving an obligation on either party to acquire an interest in land, though depending for its operation upon the acquisition of such an interest, is not within the statute (see Angell v. Duke (1875), L. R. 10 Q. B. 174; 12 Digest 127, 844; Boston v. Boston, [1904] 1 K. B. 124, C. A.; 12 Digest 128, 850 (where A. agreed verbally that if B. bought certain land A. would pay B. the amount of the purchase-money); see also Erskine v. Adeane (1873), 8 Ch. App. 756; 12 Digest 127, 841, followed in Jameson v. Kinmell Bay Land Co. (1931), 47 T. L. R. 593, C. A.; Digest Supp. (promise to construct a road); Re Banks, Weldon v. Banks (1912), 56 Sol. Jo. 362; 12 Digest 121, 799), although in general a stipulation made in reference to the subject-matter of the contract must be found in it (Jones v. Lavington, [1903] 1 K. B. 253, 256, C. A.; 31 Digest 127, 2620; Crawford v. White City Rink (Newcastle-on-Tyne), Ltd. (1913), 57 Sol. Jo. 357; Digest Supp.).

The street in question had already been dedicated to public use, and the court’s conclusion of law that “The paving agreements were not for the conveyance of land and therefore this action is not barred by the Statute of Frauds” is not only fully justified, but, indeed, no other is possible. The judgment requires no more than the paving of the street thus already dedicated.

Full performance by one party removes the case from the operation of the statute. 1 Restatement, Contracts, 260, § 197. It is stated in 37 C. J. S. 762, § 251:

“. . . Particularly is this said to be true where the agreement has been completely performed as to the part thereof which comes within the provisions of the statute, and the part remaining to be performed is merely the payment of money or the performance of some act, the promise to do which is not required to be put in writing. . . . ”

Hart v. Riedel (Mo. App.), 51 S. W. (2d) 891 (1932), states:

“The evidence discloses that plaintiffs were induced to purchase the land by the agreement of appellants to erect a line for the transmission of electricity to the building respondents would, and did, erect on said land. If the agreement fell within the statute of frauds, appellants are in no position to invoke such statute as a defense, because it is a well-settled rule of law that, where one party to a contract, which is within the provisions of the statute of frauds, has fully performed his part of the agreement, the other party cannot avail himself of the statute. In the instant case plaintiffs, if their testimony be true, had fully performed all the terms and complied with all the provisions of the contract. . . . ”

The trial court found upon ample evidence that in order to sell its lots appellant advertised it would pave the streets and that it agreed to do so. The record leaves no doubt that this was a major factor inducing respondents to purchase such property. The statute of frauds is designed to prevent, not to promote, fraud. No valid reason appears for releasing appellant from its agreement.

Because the relief is the same irrespective of the number of prevailing parties, it is of no consequence that the actions of two of the original plaintiffs were dismissed below.

The judgment is affirmed.

Weaver, C. J., Mallery, Hill, Finley, Ott, and Hunter, JJ., concur.

2 Neither plaintiffs nor defendant intended the earnest money agreement . . . which made no mention of paving West 105th Street, and under which each purchase was made, to be a complete and comprehensive record of the entire agreement between the respective buyers and the seller. ...”

3 “The rule is subject to an exception relied upon by appellant, that it ‘. . . has no application to a collateral agreement upon which the instrument is silent, and which does not purport to affect the terms of the instrument.’ (Savings Bank of So. Calif. v. Asbury, 117 Cal. 96, 103 [48 P. 1081]; 18 Cal. Jur. 2d, Evidence, § 266, p. 750.)” Dillon v. Sumner, 153 Cal. App. (2d) 639, 315 P. (2d) 84.

Accord: Goerig v. Elliott, 27 Wn. (2d) 600, 179 P. (2d) 320.

4 “ . . . So where there is an oral collateral agreement not contradicting the terms of a written agreement, the fact that the written agreement is within such an enactment does not prevent the collateral agreement from being enforced without written evidence.” 8 Halsbury’s Laws of England (3d ed.) 112, § 196.

5 “. . . where a parol contemporaneous agreement is the inducing and moving cause of a written contract, or where a parol agreement forms part of the consideration for a written contract, and it appears that the written contract was executed on the faith of the parol contract or representations, then such evidence is admissible. . . .” McGregor v. First Farmers-Merchants Bank & Trust Co., 180 Wash. 440, 40 P. (2d) 144.

6 “Under certain conditions evidence may be given of a parol agreement contemporaneous with and touching the subject matter of a written agreement and as to which the written agreement is wholly silent. The necessary conditions are that the parol agreement shall be entirely collateral to the written agreement, that it shall not contradict the written agreement, and that it shall be proved strictly. The parol agreement will be more readily enforced if it was an inducement to entering into the written agreement. The.parol agreement, moreover, must not be such as is required by the Statute of Frauds or otherwise to be in writing.” 11 Halsbury’s Laws of England (3d ed.) 404, § 657.

7 Sale v. Figg, 164 Va. 402, 180 S. E. 173; Luck v. Wood, 144 Va. 355, 132 S. E. 178; Meyer v. Dubinsky Realty Co. (Mo. App.), 133 S. W. (2d) 1106; Reed v. Dent, 194 Va. 156, 72 S. E. (2d) 255; Anderson v. American Suburban Corp., 155 N. C. 131, 71 S. E. 221; Boyd v. Tucker (Tex. Civ. App.), 288 S. W. (2d) 202; Hart v. Riedel (Mo. App.), 51 S. W. (2d) 891; Sparhawk v. Gorham, 101 Ohio App. 362, 139 N. E. (2d) 652.