# FILED
September 17, 1997 Cecil W. Crowson Ap pellate Cou rt Clerk CLELLAND DAV ID COLLINS, JR., ) and wife, CAR OL V. COLLINS, ) ) Plaintiffs/Appelle e, ) ) Appeal No. ) 01-A-01-9702- CH-00108 VS. ) ) Smith Chancery ) No. 5992 ROGER V. WELLBROOK and wi fe, ) CAROLE I. WELLBROOK, ) ) Defendants/Ap pellants. )

COURT OF APPE ALS OF TENNESSEE MIDDLE SECTION AT NASHVILLE
APPEALE D FRO M THE C HANC ERY C OURT O F SMI TH COU NTY AT CARTHAGE, TENN ESSEE THE HONORABLE C. K. SMITH, CHANCELLOR

JACKY O. B ELLAR 212 Main Street P. O. Box 332 Carthage, Tennes see 37030 Attorney for Plaintiffs/Appelle es JAMES B. DANCE 216 N. Main St reet P. O. Box 278 Carthage, Tennes see 37030 Attorney for Defendants/Appellants

AFFIRMED AND REMAN DED

BEN H. CAN TRELL, JUDGE
CONCUR: TODD, P.J., M .S. KOCH, J.


## O P I N I O N- 2 - Appellantspresent on e issue for our review: Wh ether the trial court erred in finding th at the statuteo f frauds did not bar a ppellees' re covery of $10,000 plus interest l oaned to appellants pursuant toan oral contract. Though this contract falls within the statute of fraud s, we find that, under the c ircumstances of this case, appellants are equitably estopped from rely ing on the statute to avoid repay ment of the loan under the t erms of the contrac t. Accordin gl y, we affirm the decision of the trial cour t.

I.

David Collins a nd Roger Wellbrook befriended one a nother during their years together ser

ving i n the armed forces. Al ong wit h their w ives, Ca rol Colli ns and Carole Wellbrook, the men made retire ment plans to purc hase and tooperate a farm in Smith County , Tenn essee. With no written agreement, the Colli nses and the Wellbr ooks formed a partnershi p and commenced a farmingoperation know n a s Collinbrook

Farm whi ch was i n the business of rai sing c attle and growing apples. Subsequent

to and independen t of a fifty-fif ty percent purchase of the f arm la n d in 1984, each of the couples was to cont ribut e $35,000 to the pa rtnership. However, because the Wellbrooks were not able to pay $10,000 oftheir half of the investment , someti me in 1989 the Collinse s agreed to l oan them this money at ten percent interest. Later, Car

ol Collins

put an additional $17,500 into thepartnership at which time the parties agreed to become sixty-forty percent partne rs wit h the Collins es having t he greater i nterest.

There is no dispute that the $10,0 00 loan was made to the W ellbrooks. In his testimony , Mr. Wellbrook readily admits that he did borrow the money and that the loan was to carry interest at ten percent per year. He said that the parties orally agreed that the loan was not to be repaid f or five years. Mr. Collin s' te stimony regardingthe loan differe d only in that he said that the term wa s origi nally three years- 3 -

with an option for the Wellbrooks to ex tend it to five years w hich they di d take. I n accord with M r. Wellbrook's testimony , Mr. Col lins testi fied that the loan was to b e repaid by one lump s um payment at the end of the loan ter m rather than by monthly installments. It was Mr. Collins' position that the loan was a per sonal loan from his per sonal assets whi ch the Wellbrooks invested into the par tnership. H e said that there was only one transaction which was in the form of a capital cont ribution made to the business by the Collinses.

In June of 1992, Mr. W ellbrook experienced medical problem s which disabled him from furth er work on the farm. Apparentl y, after stoppi ng work , he agreed to the Colli nses' continuedefforts on the farm whi le he maintained ownership of forty percent of the f arm's assets including orchards, equipment, and cattle. When the Collinses

finally dec ided to quit

the operation, they sold some of the items ow ned bythe farming oper

ation keep ing the m oney for t hems elves i n order to pa rti all y s atisfy the debt owed them by the Wellbrooks. When Mr. and Mr s. Collins

filed the instant lawsuitfor partition and sale of the farm as wel l as the division of all other partnership assets, the Collins es requested that the bal ance of the debt due them be deduc ted from the Wellbrooks' share of money from the divi sion. Before the cas e cameto trial
on June 3, 1996, the real prop erty had been sold and the proceeds distributed to the satisfaction of the pa rties. In ad dition, the per sonal property

had been sold and the onlyissue remaining was the equitable division of the proceed s received from the sale of these personal as sets.

In the trial court below , the judge fir st f ound that the W ellbrooks were indebted to the Colli nses in the amount of $19,610 which was th e amou nt of the $10,000 loan plus theten percent i nterest whi ch had a ccumul ated by the ti me of the trial. As for the money owed to the Wellbrooks, the court ac cepted the undisputed proofpresented by

the Collins es that they had received $23,166.48 for the eq uipment and other personal assets of the farm that were sold between 1992 and 1994. The- 4 -

court found that the Wellbrooks' forty percent of this $23,166.48 sum computed to $9,266.59. Because the Collins es actually receivedthis $9,266.59 of theW ellbrooks' moneyearly, t he court did not think it fair

that the Wellbrooks continue to be charged ten percent inter

est on t h is portion on ce it was "paid back." The court then determined that, due to the fact that the Collinses had this $9,266.59 e arly, $2, 658.08 worth of interest never accrued on the loan thus necessitating that the Wellbrooks be credited not onlythe $9,266.59 kept by the Collins es upon the sale of the property but
an additional $2,658.08 totaling $11, 924.67. The court thus set off the $19,610 owed to the Collins es by the Wellbrooks on t he loan by the$11,924.67 owed to the W ellbrooks by the Col linsesfrom the property sold and interest w hich never accrued. Therefore, the fin al jud gment was $19,610 minus $11,924.67 equaling $7,685.33 owed by the Wellbrooks to the Coll inses.

On appeal, the Wellbrooks dispu te only one as pect ofthe lower court's holding --they arg ue that the statut e of frauds prohibits recover y of the $19,610.00 amount due on the oral loan made to them by the Collinses. T hey therefore request that th is court reverse the trial court's award with respect to the loan and enter a judgment for them i n the amount of $11,924.67.

II.
The pertinent port ion of the statute of frauds provides

that "[n]o actio n shall be broug ht . . . [u]pon any agreement or contract w hich is not to be performed within the space of one (1) year from the making the reof; unless the pr omise or agreement, upon which such action shall be brought, or some memorandum or note- 5 -

thereof, shall be in writi ng, and sig ned by the par ty to be char

ged therew ith, or som e other person by him thereunto law fully authori zed." Te nn. Code Ann. § 29-2-101(a)( 5) (Supp. 1996). TheW ellb rook s asse rt th at th e evid ence clea rly sho ws that the loan ag reementat issue was an oral ag reement whic h was not to be repaid within the space ofone year. The Collinses counter w ith a looser interpretati on of the statue of frauds arguing that because the partnership could have dissolve d within a year and the loan could have been repa id withi n a year, t his loan is outside of the statute. In the alternative, they co ntend thatthe doctrine of equitable esto ppel prohibitsthe Wellbrooks from rely ing on the statute offrauds to avoid repayment of the loan.

There is no quest ion thatthe defendants should r epay the $10,000.0 0. The only qu estion is w hether the plai nt iff is entitled to collect t he interest the defendants orally promised to pay. W e do not think any court in this state would allow
a borrower , who admits he borrowed a specific sum of money , to keep themoney he received because the statu te of frauds barred an action on the pr omise to repay

it. In such cases th e lender clear ly has an ac tion formoney had and received. Steelman
v. Ford Motor

Credit Co. , 911 S.W.2d 720 (Tenn. App. 1995). The act ion is not on t he contract buton the proposition that in justice and fairness the money belongs to the lender. Id.

In this case, however, the cha ncellor all owed an acti on on the oral promise to repay the money with interest. For a number of reaso ns w e think the chancellor

correctly

held that thepromise was enforceable, des pite the prov isions of Tenn. Code Ann. § 2 9-2-101(a)(5)(Supp. 1996).

In this state the doctrine of pa rt performance “removes this agreement from the mandate of t he statute of f rauds.” Trew v. Ogle , 767 S.W.2d 662 at 6651 See Bali les v. Cit

ies Serv. , 578 S. W .2d 621 ( Tenn. 1979) and C ob ble v. Langford , 190 Tenn. 38 5, 2 30 S.W .2d 19 4 (1 95 0) for the rule with res pe ct to rea l pro pe rty.

2 For the spec ifi c rules with respect to the sale of goods see T enn. Cod e Ann. § 47-2 -201(3).
3 These precedent s supply suffi cientreasons for uph oldi ng the l ower court ’s deci sion. Perhaps a more fundamental r ea so n lie s in a n int erpret ati on of t he stat ute i tsel f. The secti on of t he stat ute of frauds on w hich the a ppe llants re ly prohibits an acti on on “any agreement or cont ract which i s not t o be perfor med wit hin t he space of one (1) year fr om the m aking t hereof. ” A majori ty of t he c ourt s in this country hold thatthe st atut e appl ies onl y t o contr acts notto be perfor med on eit her si de with in the year. See 72 Am.Jur.2d Statute of Frauds§ 19. A co ntrac t to be ful ly perfor med on one side wi thi n the y ear is not cov ered by

the statu tory lang uag e. Id. This has been call ed the “ one side r ule”, City of Tyl er v. St. Louis Southwester n Ry. Co. of

Texas , 91 S .W . 1 (1906), and i t i s the i nter pret ati on the E nglish cou rts gave to the o riginal sta tute o f frau ds. Id. Th e lang uag e of th e En glish s tatute with re spe ct to c ontra cts not to be p erfor med withi n a ye ar i s the same as the l anguage i n Tenn. Code Ann. § 29-2- 101(a) (5)( Supp. 19 96 ). T he Ke ntu ck y Su pr em e C ou rt s tate d w ha t se em s to us to b e a se ns ible int erpret ati on of t he stat ute: “I t seems to us t hat t he stat ute was i ntended an d do es pro pe rly ap ply o nly to an agreement t hat i s not t o be perfor med by eit her party wi thi n a ye ar, but notto one which i s to be or has been perf ormed by one oreit her of t hem wit hin such period.” Dant v. Head , 13 S. W . 1073, 1075 (K y. 189 0). See al

so Beaco n Fed. Sav. & Loan As s’ n v. Panor

amic En ter. , Inc. , 8 W is .2d 550, 99 N.W .2d 696 (195 9); Puget M il l Co. v. Kerry , 183 Wash. 542, 49 P.2d 57 (1 935 ); W ood & Brooks Co. v. D.E. Hewit

t Lumber Co. , 89 W .Va. 254, 109 S.E. 242 (1921). It could be argued t hat the case of Thom pson v. Fo rd , 145 Ten n. 335, 236 S.W . 2 (1921), he ld a con tract to be unenfor ceable even t hough one party to t he agreement had f ull y performed. That i ssue, howeve r, was not r aised i n th at c as e a nd we are no t pe rs ua de d th at th e c as e is au tho rity fo r a r ule contrary to the “ one side r ule.” The same argum ent coul d be made with r espect to Tr ewv. O gle , 767 S.W

. 2d 662 (Tenn. App. 1988) . W e do not adopt t he “one si de rul e” i n thi s case because i t was not rai sed by

the part ie s and t he pr ecedent s ci ted are s uff ici ent to sust ai n th e deci sio n bel ow. - 6 - (Tenn. App. 1988 ). In c ontr acts not i nvolvi ng real estate 1 part performance by the plai ntiff turns an other

wise unenforceable agreement into one that may

be enforced. Buice v. Scru ggs Equ ipment Co

. , 194 Tenn. 129, 250 S.W .2d 44 (1952). 2 This doctrineis related t o equitable estoppel whe re one party has induced the other to change his positi on so as to inc ur an “unjust and unconsciousinjury and loss, in case the defendant is permit ted after all to rel y upon the statutory defense.” Id. at 48. See also GRW Enter., Inc. v. Davis , 797 S.W.2d 606 (Tenn. App. 1990); Baliles v. Cities Serv. Co. , 578 S.W .2d 621 (Tenn. 197 9). 3

The judgment of the cour t below i s affirmed and the cause is remanded to the Chancery Court of Smith Coun ty for any further necessary proceedings . Tax the costs on appeal to the appellants.

_____________________________ BEN H. CAN TRELL, JUDGE- 7 -

CONCUR:

_______________________________ HENRY F . TODD, PRESID ING JUDGE MIDDLE SECTION

_______________________________ WILLIAM C. KOCH, JR., J UDGE