Case Title: Young v. NEILL

Citation: 190 Or. 161, 225 P.2d 66

Docket Number: 

State: oregon

Court: Oregon Supreme Court

Date: 1950-12-05T00:00:00Z

Document:
Reversed June 27, 1950.
On rehearing former decision sustained December 5, 1950.
*163 Otto J. Frohnmayer argued the cause for appellant. On the brief were Neff & Frohnmayer, of Medford.
Frank J. Van Dyke argued the cause for respondent-cross appellant. On the brief were Van Dyke & Lombard, of Medford.
George M. Roberts and Edward Branchfield argued the cause for respondents. With them on the brief was G.W. Kellington, all of Medford.
Before LUSK, Chief Justice, and BELT, ROSSMAN, HAY and LATOURETTE, Justices.
REVERSED.
LATOURETTE, J.
This is an appeal from a decree denying specific performance of an alleged lease of a grocery store in Ashland, Oregon, the terms and conditions thereof being embraced in a written, unsigned instrument. Plaintiff-appellant Young and her ex-husband Neill, respondent-cross *164 appellant, were the lessees, and the defendants-respondents McGee, husband and wife, were the lessors. Mr. Neill and Mrs. McGee are brother and sister; Mr. McGee is a minister of the gospel. Since Mrs. Young and Mr. Neill were married at the time of the transactions involved herein, we will hereinafter designate them as "the Neills."
The McGees were co-partners in a grocery business known as the "Boulevard Market" and owner as tenants by the entirety of the premises where the grocery business was located. About the middle of June 1946, they contemplated disposing of their business because of McGee's ill health. Negotiations were had between the parties, whereupon the Neills quit the business in which they were engaged and took possession of the grocery store, paying to the McGees the sum of $12,797.31 for the stock of goods and $1,000.00 for the goodwill of the business. A lease to the premises involved and a bill of sale covering the stock of goods were prepared by William Briggs, attorney for the McGees, at the instance of McGee, this lease being the one involved in this controversy. These documents were not signed by any of the parties but were delivered to the Neills who placed them in the safe in the store building. The Neills paid the McGees on a monthly basis as provided for in the written lease on the following terms: three per cent of the gross sales of the business each month up to $12,000.00, plus two per cent on all sales in excess of that amount.
1. The Neills were divorced in December 1946, and in July 1947, Mrs. McGee, who was very much exercised about the divorce, told Mrs. Neill that she should sell the business "because so many people were asking why we didn't get that mess out of there." The matter *165 continued until October 24, 1947, when the McGees served notice upon the Neills to quit the premises, claiming a tenancy from month to month. Thereupon, the Neills, in looking over their paper, found that the lease and bill of sale were unsigned. This suit was then brought to compel specific performance, the claim being that the unsigned lease was the lease actually entered into between the parties. The ex-husband Neill refused to join in the suit and was made a party defendant; however, he filed an answer which contained most of the allegations of the complaint and also asked for specific performance. The McGees answered and inter alia admitted the sale of the stock of goods at its inventory value of $12,797.31, plus an additional $1,000 for the goodwill of the business but denied that the parties ever agreed upon the terms of said lease, and alleged that said unsigned lease was null and void and of no effect. They alleged that the Neills' occupancy was based on a tenancy from month to month and asked that the tenancy be cancelled and that they be given possession of the real property. As a separate defense they alleged, among other things, that the Neills were estranged at the time of the culmination of the transaction and withheld knowledge of such estrangement from the McGees, and had they known of such estrangement, they would not have made the sale to the Neills nor allowed them to conduct the grocery business on said premises, and, therefore, they should be estopped from asserting that the McGees agreed to be bound by the terms of the alleged lease. This defense cannot be considered as the evidence shows the McGees had knowledge of the marital troubles between the Neills at the time the transaction was closed.
*166 The McGees contend that this case falls within the statute of frauds, and, since the lease was unsigned, no evidence of its contents could be received. The Neills counter by contending that the case was taken out of the statute of frauds because of part performance, and that the McGees should be estopped to deny the validity of the lease.
2, 3. In Oregon a lease for more than one year is void unless it is in writing, however, equity will relieve a party from the effects of such statute where the lease can be shown to be clear, certain and unambiguous in its terms and where there is part performance on the part of the lessee, such as taking possession of the premises and payment of rental under the lease. Wallace v. Scoggins, 18 Or. 502, 21 P. 558. The statute of frauds was never designed to shield against the perpetration of a fraud.
4. There are three essential elements of a lease, namely, description of the property, duration of term and rental consideration. Bevan v. Templeman et al, 145 Or. 279, 289, 26 P. (2d) 775.
There is sharp conflict in the testimony of the witnesses concerning the lease, but on a close analysis of the evidence, we find that the same established the following facts: after discussions were had between the parties regarding the sale of the business, all four of the parties went to the Ashland branch of the First National Bank of Portland for the purpose of discussing the feasibility of the Neills obtaining a loan of $10,000.00 to complete the deal. Mr. Wenner, manager of the bank, testified as follows:
Discussion was had about the extent of the business which the McGees had done; whereupon McGee submitted to Wenner a profit and loss statement covering the years 1944 and 1945 and told Wenner "* * * that they (the Neills) should have no difficulty in realizing that amount of income from the business which was potential." Thereupon McGee and Neill went to the office of William Briggs, attorney for the McGees, and asked him to draw a lease covering the premises involved. Mr. Briggs testified as follows:
*172 When handed a copy of the lease in question, McGee admitted that that was the lease Mr. Briggs prepared and delivered. When asked about the terms of the lease, McGee further testified: "As I recall, we didn't discuss a great deal about it. I left most of that to the lawyer, feeling that he was representing me. We did discuss, though, the amount of income I should receive  the three per cent and two per cent, and we discussed that and concerning the length of the lease."
The Neills continued to occupy the premises, pay the rentals as provided for in the lease, and everything progressed satisfactorily until Mrs. McGee learned of the Neills' divorce and then claimed that she had not signed the lease because it did not contain a clause prohibiting the Neills from assigning the same, and thereupon ordered the Neills out.
5. From the foregoing, it clearly appears that the lease drawn by attorney Briggs was clear, certain and unambiguous in its terms, that it contained all the elements of a lease, i.e., description of the property, duration of term and rental consideration, that the lease as drawn was drawn at the behest of the Neills and McGee, and that there was part performance on the part of the lessees in taking possession of the premises and paying rental as called for in the lease. It is clear, therefore, that McGee should be held and bound by the terms of such lease.
It is next contended that even though we should find McGee bound by the written lease, Mrs. McGee could not be held because McGee had no authority to act for her. In regard to this matter, the following occurred at the trial when Mrs. McGee was being questioned:
She further testified that she and her husband consulted each other freely in connection with their business affairs. Although the McGees were partners, Mrs. McGee permitted Mr. McGee to conduct the grocery business in his own name, he having filed an assumed business name certificate with the county clerk of Jackson county showing that he was the sole owner of the grocery business known as the "Boulevard Market." A portion of the building owned by the McGees was leased out to a man by the name of Arney for a butcher shop under a written lease for a three-year period. McGee alone signed this lease, with the knowledge and consent of Mrs. McGee. In this regard McGee testified as follows:
6. An agency may be implied from attending circumstances and the apparent relations and conduct of the parties. Boise-Payette Lumber Co. v. Dominican Sisters, 102 Or. 314, 325, 202 P. 554.
7. Where the issue is whether a husband was the agent of his wife, with the authority to act for her, evidence that he had previously acted for her in the same type of transaction is admissible. Hawkins v. Windhorst, 77 Kan. 674, 96 P. 48; Sidle v. Kaufman et al., 345 Pa. 549, 29 A. (2d) 77; 41 C.J.S., 552 § 74; Restatement, Agency, 65 § 22.
8. The fact of the close relationship between the McGees; the fact that Mrs. McGee took part in the loan application at the bank and helped the Neills obtain a loan of $10,000.00 based on the assumption that there would be a lease; the fact that she had permitted her husband to conduct the business in his own name; the fact that she had permitted him to lease the butcher shop in his own name; the fact that she accepted rentals under the lease; the fact that she had knowledge of the lease as drawn by Briggs and did not object to the same until becoming apprised of the Neills' divorce, and other facts adduced by the evidence, impel us to hold that Mrs. McGee was bound by the terms of the lease, and that both she and her husband are estopped to deny the validity of the same. This court, speaking through the late Mr. Justice KELLY in Marshall v. Wilson, 175 Or. 506, 518, 154 P. (2d) 547, said:
9. At the conclusion of the conference between attorney Briggs, Neill and McGee, concerning the drawing of the lease, it will be remembered that McGee told Briggs that he would attend to having the lease and bill of sale signed. This he failed to do, and as equity regards as done that which ought to be done, this court will compel specific performance in strict accordance with the original intention and agreement of the parties.
The decree of the lower court will be reversed, and a decree will be entered in accordance with the relief prayed for by appellant Young and respondent-cross appellant Neill in their respective pleadings.
Otto J. Frohnmayer argued the cause for appellant. On the brief were Neff, Frohnmayer & Lowry, of Medford.
Frank J. Van Dyke argued the cause for respondent-cross appellant. On the brief were Van Dyke & Lombard, of Medford.
George M. Roberts argued the cause for respondents. With him on the brief were G.W. Kellington and Edward Branchfield, all of Medford.
FORMER DECISION SUSTAINED.
TOOZE, J.
*176 Respondents have filed a petition for rehearing based on the following grounds:
Referring to respondents' first ground above, it is stated in the accompanying brief that: "The present decision introduces an element of great uncertainty into the law relative to the application of the Statute of Frauds." This claim is based on the language of the court (Young v. Neill, 50 Or. Adv. Sh. 957, 960, 220 P. (2d) 89) where it is stated:
In their brief, the respondents state:
A careful examination of the Oregon decisions does not disclose that this court has directly made any distinction between sales and leases in the respects under discussion. Mr. Pomeroy makes no distinction. In Pomeroy, Specific Performance of Contracts (3d ed.) 283, § 115, it is stated:
Mr. Story reaches the same conclusion. In 2 Story, Equity Jurisprudence (14th ed.) 430, § 1049, it is stated as follows:
The statements of both these authorities are commented upon with approval by the late Mr. Justice RAND in Dunis v. Director et al., 121 Or. 500, 255 P. 474.
10. The mere taking of possession of premises and the payment of rent may not in all cases be such part performance of an oral lease as to take the case out from the operation of the Statute of Frauds and permit oral evidence to establish the agreement of the parties, nevertheless it is well established that such taking of possession and payment of rent in conjunction with other facts and circumstances may be sufficient. Each case must necessarily depend upon its own peculiar facts and circumstances, and it is, of course, impossible to lay down a rule that will fit all situations that may arise. In some cases, the placing of substantial improvements upon the premises by the lessee, or the making of repairs, in addition to possession and payment of rent, have been deemed sufficient part performance. Dunis v. Director et al., supra; Friberg v. Bjelland, 95 Or. 320, 186 P. 1113; West v. Washington Railway Co., 49 Or. 436, 90 P. 666; Wallace v. Scoggins, 18 Or. 502, 21 P. 558. But whether or not there has been such part performance does not depend solely upon whether or not improvements have been made.
In Dunis v. Director et al., supra, at page 507, this court said:
11. Where one party in addition to taking possession of the premises and paying the rent, performs other acts pursuant to the terms of the oral lease and directly referable thereto, such as materially changing his position to his disadvantage, incurring substantial expenses, making substantial improvements or repairs to the premises, or otherwise doing something which he would not have done but for the agreement and which would result in substantial injury to himself if the other party were permitted to hide behind the statute of frauds and disavow the same, and when the other party has received and enjoyed the benefits of the oral lease, equity will step in and compel specific performance, the other party being estopped to set up the statute as a defense.
The foundation of this doctrine is fraud; not necessarily an antecedent or positive fraud, but a fraud inhering in the consequence of this setting up the statute. It applies where to permit the defense would be inequitable and unconscionable. Seymour v. Oelrichs, 156 Cal. 782, 106 P. 88, 134 Am. St. Rep. 154, and note; Pomeroy, Specific Performance of Contracts (2d ed.), §§ 104, 107; Pomeroy, Specific Performance of Contracts (3d ed.), § 96; Story, Equity Jurisprudence (3d ed.), § 1409, et seq.; 49 Am. Jur., Statute of Frauds, §§ 578, 580.
It must be remembered in the case at bar that these *180 parties were not dealing at arm's length. There was a very close relationship existing between them, with resulting trust and confidence in each other. As so often happens  and, unfortunately, in too many instances  the parties, relying upon such mutual trust and confidence, neglected to give attention to strict legal and business requirements which they otherwise would have done had they been dealing with strangers. Obviously, it would be grossly inequitable and unconscionable to permit one who has received benefits from such trust to betray the same to the serious disadvantage of the other.
In this case, the sale and purchase of the stock of merchandise, the payment of a substantial consideration for the goodwill of a going business, which included the transfer of the assumed name, the leasing of the premises for a term of five years with an option of renewal, the borrowing of the money at the bank with which to complete the purchase, the use of the entire marital savings of the purchasers in making the purchase, the severance of employment by one of the purchasers in order to conduct the business purchased, were all integral parts of a single transaction, each part dependent upon the others.
In taking possession of the stock of merchandise and conducting the business, in the occupancy of the premises, in the manner and time of paying rental, in taking care of the expenses of the utilities, water and lights, in the redecorating of the store itself  in fact, in everything done, the parties performed in strict accordance with the terms of the unsigned lease prepared by respondents' attorney, Mr. Briggs, at the instance and under the direction of the respondent Everett McGee. The respondent McGee so admitted.
*181 Everything done by the parties was directly in pursuance of and referable to the oral lease.
When we speak of acts of part performance as being done in pursuance of and directly referable to an oral lease, we do not wish to be understood as meaning acts referable to any oral lease, but to such acts only as are directly referable to an oral lease for a term of more than one year.
By operating under this form of lease for approximately fifteen months without objection, accepting its benefits and obligations, respondents must be deemed to have acquiesced in and ratified the same as a true expression of their actual agreement, and by their silence when it was their duty to speak if they were not satisfied, they are estopped now to take a position inconsistent with their conduct, for to permit them to do so, would result in gross injustice and be wholly inequitable and unconscionable.
We have given consideration to the other points raised in the petition for rehearing but do not deem it necessary to further discuss them inasmuch as we adhere to what was said in the original opinion.
We adhere to our former decision.