Clark v. City of Bradford Gas & Power Corp.

98 A. 368, 11 Del. Ch. 178, 1916 Del. Ch. LEXIS 33

• Court: Court of Chancery of Delaware
• Decided: August 2, 1916
• Status: Published

Opinion

The Chancellor.

It is clear-that the complainant is not entitled to the relief asked for in his bill. He seeks to compel the defendants to execute and deliver to him a contract entered into between-him and the defendant company, and annexes to his bill a written draft of that agreement, all the terms of which had been agreed upon orally. Briefly stated, this court is asked to specifically enforce a verbal contract to enter into a written contract, and is not asked to enforce performance of the agreement.

The principles of law, applicable here are these: An action at law for damages will lie for a breach of an oral agreement to execute a written agreement, the terms of which are fully agreed upon, and the same damages would be recoverable as for a refusal to perform the contract after its execution in writing. In 3 Elliott on Contracts, §2219, it is thus expressed:

“The refusal of one to execute a contract which he has agreed to execute would seem to render him -liable for the same damages as would be recoverable for an entire refusal to perform the contract after its execution in writing.”

Indeed, both sides admit this proposition, and Pratt v. Hudson River R. R. Co., 21 N. Y. 305, cited by each of them, well illustrates the rule. A court of law will not give damages for a breach of an oral agreement to make a written Agreement, when the oral agreement is unenforceable by reason of its being within the Statute if Frauds. As expressed in Browne on Statute oj Frauds (5th Ed.) §284: ■■

“ * * an oral agreement to put in writing a contract which will require more than a year to perform, is within the statute, and no action will lie for its non-performance.”

In McLachlin v. Village of Whitehall, 114 App. Div. 315, 99 N. Y. Supp. 721, the plaintiff had agreed orally with the defendant that the written contract with the village to furnish light would be extended five years; but notwithstanding the fact, that the plaintiff expended money to enlarge his plant in order to fulfill his agreement, the court held he could not recover damages for the failure of the village to sign the contract, which being oral was within the statute because not to be completed within a year. After observing that the oral agreement to enter into a written agreement might have been performed within a year, yet the damages for a breach of the oral agreement would be the same.as for a breach of the contract for lighting, the court said:

“It is conceded that a contract for lighting for a term of five years would be void if not in writing, but if an oral agreement to enter into such a written contract is not also void, where the damages claimed for the breach of the oral agreement are not.independent of it, but necessarily are the same as those which would arise from the breach of the written contract, the door would be open for the practical nullification of the Statute of Frauds in a large class of cases.”

In Green v. Penna. Steel Co., 75 Md. 109, 23 Atl. 139, it was orally agreed between the plaintiff and defendant that the plaintiff should buy a certain steamboat and that the defendant would give the plaintiff an exclusive privilege to carry passengers and freight between Baltimore and the defendant’s manufacturing plant at Sparrow’s Point. After the plaintiff had bought the steamboat the defendant refused to execute the contract, and the plaintiff sued for damages. The contract was unenforceable because not in writing. The court held that the action would not lie, saying:

“Such a contention is * * * a contradiction in terms. If no action will lie on the agreement, upon what principle can the appellee [the defendant] be held liable in damages for a refusal to carry out the terms of the agreement?”

And after stating that no case had been found to the contrary said:

“ * * * if one could not be held liable on a verbal agreement within the Statute [of .Frauds], neither could he be held liable in an action at law for a refusal to carry out the terms of such an agreement.”

In Chase v. Fitz, 132 Mass. 359, 361, the court thus expressed itself:

" It would leave but little if anything to the Statute of Frauds to hold that a party might be mulcted in damages for refusing to execute in writing a verbal agreement, which unless in writing is invalid under the Statute of Frauds.”

■ In Yates v. Martin, 2 Pin. (Wis.) 171, a paroi promise to make a written contract touching an interest in land was broken by a refusal to execute it. A demurrer to the declaration in a suit for damages was sustained, the court saying:

“A contract for a contract'is within the Statute [of Frauds] provided the second contract conveys an interest in land.”

A court of equity will in general not compel one of the parties to a complete oral agreement to execute and deliver the contract reduced to writing, where the contract not being in writing as required by the Statute of Frauds in unenforceable. To do so in order that suit may be'brought on the contract would be an evasion of the provisions of the statute and nullify its effectiveness. A court of equity will not assist a person to obtain indirectly what he could not obtain directly.

In Glass v. Hulbert, 102 Mass. 24, 3 Am. Rep. 418, a bill in equity was filed to reform a contract partly performed, on the ground of fraud, but the court denied the relief because the agreement related to the sale-.of land and was not in writing as required by the Statute of Frauds. It was pithily said by Wells, J::

“From the oral agreement there can be derived no legal right, either to have performance of its stipulations or written evidence of its terms. * * * The statute is not a mere rule of evidence, but a limitation of judicial authority to afford remedy.”

In McKinley v. Lloyd, (C. C.) 128 Fed. 519, 521, the court said:

“A paroi agreement void under the statute is not aided by a further paroi agreement to reduce the principal agreement to writing. The cases where this has been permitted are cases where there has been such performance of the agreement by the party seeking relief, or his position has been so changed in reliance upon it, that his loss and injury cannot be measured in damages, and, without specific performance, there will be a failure of justice.”

In Henderson v. Henrie, 68 W. Va. 562, 71 S. E. 172, 34 L. R. A. (N. S.) 628, Ann. Cas. 1912B, 318, it was held that a contract not valid at law will not be enforced in equity, and to enable a court of equity to enforce a verbal contract for the sale of land there must be an independent equity. See, also, Garnes v. Frazier; (Ky.) 118 S. W. 998; Caylor vs. Roe, 99 Ind. 1. Indeed, there is ample authority in Delaware in Godwin v. Collins, 4 Houst. 28, 55, that a court of equity will not decree specific performance of a contract which does not comply with the Statute of Frauds.

Where, however, there are equitable considerations, such as part performance by the complainant of the oral agreement, a court of equity will enforce specifically performance by the other parties to the agreement in order that injustice be not done, even where the agreement, not being in writing, is unenforeceable. Such was the case of Matthes v. Wier, 10 Del. Ch. 63, 84 Atl. 878 (1912), where this court enforced specifically an oral agreement to lease land, the lessee having a right to purchase the demised premises, there being in that case part performance by payment of some of the purchase money, which made it inequitable to enforce the prohibition of the Statute of Frauds of Delaware.

The case of Equitable Gas Light Co. v. Baltimore, etc., Co., 63 Md. 285, relied on by the complainant, is one where the principle of an independent equity was applied.

The oral agreement in this case is clearly unenforceable by the law of Delaware, because it is not to be performed within the space of one year from the making thereof. Harris v. Porter, 2 Harr. 27.

Applying the above stated principles to the facts alleged in the bill and admitted by the demurrer to be true for the purpose of testing the right of the complainant to the relief sought, the following conclusions result: If the law of Delaware applies, the oral contract is unenforceable at law. There is here no equitable reason for requiring the defendant company to perform the agreement between the complainant and defendant company. There is no allegation of part performance by the complainant, or the making of any outlay, or incurring of any expense after the making of the oral agreement in contemplation thereof, or any other such matter. By the bill the complainant only avers that he is ready to carry out the contract when it is reduced to writing, and does not say that he has done anything in execution of it. Therefore, if the Statute of Frauds of Delaware applies, the complainant is not entitled to the relief sought.

For the complainant it was contended that the law of Pennsylvania, the State where the oral contract was made and where it was to be performed, governs and not the law of Delaware, the State where the remedy is sought, and undertook to show by citation of authorities that by the law of Pennsylvania the oral contract is enforceable at .law. Much of the discussion of counsel was whether the lex loci contractus and solutionis, or the lex loci fori was applicable. But it is not necessary to decide this question, as to which a great diversity of views have been expressed by courts and commentators. Obviously if the law of Pennsylvania controls the courts of Delaware in the matter of remedies for breach of the oral agreement and makes the contract enforceable at law, then a court of equity would in Delaware, as well as in Pennsylvania, be without jurisdiction because an adequate remedy at law exists; while if the law of Delaware must rule, or if the law of Pennsylvania is the same as that of Delaware, then, as the contract is unenforceable here at law, because not in writing, this court, as herein above stated, will not compel its being put into written form in order that it may be enforced at law. The complainant is impaled on one or the other of the horns of the dilemma, and this court is powerless under the allegations of the bill to extricate him.

In his brief the solicitor for the complainant argues that, the terms of the oral contract being complete, and the execution of the written evidence of it having been authorized, and it having been signed by the president of the-defendant company, though not by the secretary thereof, it was in fact duly executed; and that the bill could be maintained as one to enforce delivery of the written contract and not to compel the execution and delivery of the written contract. But the allegations of the bill and the prayers of it do not agree with this proposition, and on this demurrer the rights have to be determined by the bill as a whole.

The demurrer filed by the defendant company to the bill must be sustained.