Court Opinion

ID: 3881366
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:12:44.722239+00
Date Added: 2024-06-11T09:18:18.007153
License: Public Domain

Appeal from a decree of the Circuit Court, confirming the report of the special master, recommending that the motion of the defendants, made at the conclusion of the testimony for the plaintiffs, to dismiss the complaint, be granted. No testimony on behalf of the defendants was received.
The action is for the specific performance of an alleged parol agreement entered into between J.W. Copeland and W.H. Workman, on February 20, 1919, covering two storehouses in the town of Clinton for five years from that date at a rental of $500 per annum. *Page 227 
The testimony for the plaintiffs (which was alone before the Court) tended to establish the following facts:
A corporation known as the Copeland Company, of which the defendant J.W. Copeland was principal stockholder and manager, in the year 1919 was engaged (as it had been for several years) in an extensive mercantile business, occupying two storehouses in Clinton, which were the individual property of J.W. Copeland. They fronted on the principal street of the town, and occupied a most desirable location for business. In February of that year negotiations opened up between Copeland and Workman looking to a purchase by Workman of the hardware stock of goods in one of the stores. The trade was concluded by an agreement, all verbal, by which Copeland agreed to sell to Workman the stock of goods at 90 cents on the dollar, and to lease him the two stores at $500 per annum for five years, as the special master finds:
"I find also that the lease of those buildings was an inducement to Mr. Workman's entering into this contract, and that under the testimony if it had not been for the fact that he thought he would get possession of the buildings for five years, he would not have purchased the stock of goods."
Workman did not want to take the smaller store, but upon Copeland's insistence agreed to do so; he is positive in his declaration that the location was extremely desirable, that there was no other available place open to him, and that, if he had not been able to secure the lease for five years, he would not have embarked in the business at all; that he was setting up two of his nephews in business and that the acquisition of a stock of goods, without a place of business, was a matter not to be thought of. An inventory of the stock was taken. Workman complied with the terms of the purchase, settling with Copeland in full, and was put into possession of both the stock of goods and the two stores; that he or the firm or corporation subsequently organized *Page 228 
paid the rent, $41.66 per month, regularly, until February 19, 1920. In December, 1919, Copeland notified Workman that his lease would expire on February 19, 1920. Workman replied promptly that he had a verbal contract with him for five years; that "this was the agreement when we bought the stock of goods as a part of the sale." Copeland did not reply until February 12, 1920, repeating, without reference to Workman's letter, his former statement as to the expiration of the lease, and on the 21st, the day after the year was up, notified Workman that he was a tenant at will at $60 per month. On March 19, 1920, Copeland conveyed the two stores to the defendant Tribble Company. The latter notified Workman on March 22, 1920, that they had bought the stores, and demanded possession by April 1st. They notified Workman that they wanted $75 per month for one store and $50 for the other, a mild increase of $1,000 per annum over the rent previously paid by Workman. Workman refused to give up possession or to pay the increased rent. The defendant D.E. Tribble Company was notified, before they complied with their trade with Copeland for the stores, that Workman was claiming possession under his verbal lease as stated.
After finding the facts practically as above, the special master concluded: (1) That the parol lease in excess of one year was void for the excess of one year, under Section 3502 of the Code; (2) that the parol lease was void under the statute of frauds (Sections 3735-3737 of the Code: (3) that in selling the stock of goods Copeland was acting for the Copeland Company, and in making the lease he was acting for himself individually; that the sale and lease could not therefore constitute an entire contract, as there were two separate contracts, made by two separate entities, having no legal connection with each other; (4) that the parol lease was not taken out of the statute of frauds by part performance, for the reason that the possession by the lessee *Page 229 
was referable to that part of the contract which was valid, the lease for a year, and that the payment of the rent was made by the month and not by the year. He gives no reason for this distinction, or why it should not be considered as evidence of part performance, if in fact it was made upon the parol lease for five years; (5) that there was no written assignment of the lease to the partnership of Stanton 
Johnson or to the corporation Workman Company, and that Workman Company, to establish their right to possession, must show, not only a lease originally valid, but an assignment thereof complying with Section 3736 of the Code.
The Circuit Judge in a decree of more amplified form confirmed the report of the special master upon the grounds above stated, which will form the basis of observations to follow, and from his decree the plaintiffs have appealed.
It is conceded that Copeland did make an oral agreement with Workman that he should have the occupation of the stores for five years at a rental for the two of $500 per annum. The testimony is all one way as to that fact, and the master so finds, to which the defendants have filed no exception. It is also conceded that in reliance upon that agreement, and upon the further agreement that Copeland would give him a lease, Workman took over one of the stores which he did not need, went into possession of the hardware stock and both houses, paid the purchase price of the goods in full, embarked in a mercantile venture of great risk, with two young men whom he was setting up in business (which he would not have done without the assurance of a suitable location), and regularly paid the rent called for by the agreement. For the purposes of this appeal (there having been a motion to dismiss granted before the defendant put up any testimony) these facts are taken for granted, as being admitted by the defendants.
The question is, Shall the defendant Copeland be permitted to repudiate his agreement, and under the cloak of *Page 230 
statutory protection perpetrate a gross wrong upon Workman? So far as I am concerned he shall not be, if there is any law in the land to prevent it.
There is no question but that under Section 3502 of the Code a parol lease for more than a year does not confer upon the lessee a right of possession for more than 12 months, and that all such leases shall be understood to be for one year only.
It is provided in Section 3735 that a parol lease for more than a year shall have the force and effect of an estate at will only.
Under Section 3737, no action can be brought upon a parol lease for any length of time, one year or less or more. Davis v. Pollock, 36 S.C. 544, 15 S.E. 718.
There seems to be a conflict between the provisions of Sections 3502 and 3735. In the former, a parol lease for more than a year creates a lease for a year; in the latter, an estate at will.
Notwithstanding the imperative terms of inhibition contained in Section 3737, against the institution of an action upon a contract of the character there mentioned, not in writing, the Court of equity will allow it under circumstances which would amount to a fraud if denied. As is declared in 2 Story, Eq. (14th Ed.) p. 423:
"The distinct ground upon which Courts of equity interfere in cases of this sort is that otherwise one party would be enabled to practice a fraud upon the other; and it could never be the intention of the statute to enable any party to commit such a fraud with impunity. Indeed fraud in all cases constitutes an answer to the most solemn acts and conveyances; and the objects of the statute are promoted, instead of being obstructed, by such a jurisdiction for discovery and relief.
The ground on which Courts of equity proceed, in holding that part performance of a contract within the statute *Page 231 
of frauds takes the case out of the statute, is that it would amount to a fraud on the party who, in reliance on the contract and pursuant thereto, has partly performed it, to permit the other party to refuse performance on his part. The enforcement is made in harmony with the principle that Courts of equity will not allow the statute of frauds to be used as an instrument of fraud. This being the basis of the doctrine, it follows that nothing can be regarded as a part performance, to take a verbal contract out of the operation of the statute, which does not place the party in the situation which is a fraud upon him unless the contract be executed. The partial performance must be such as would prevent the Court from restoring the promise to the situation in which he was when the agreement was made." 25 R.C.L. 259.
As Judge Story remarks:
"That they [the principles of equity] do, however, interfere in some cases within the reach of the statute, is equally certain. But they do so, not upon any notion of any right to dispense with it, but for the purpose of administering equities subservient to its true objects, or collateral to it and independent of it."
I can see no reason why Sections 3502 or 3735 should be invested with a sanctify not possessed by Section 3737, which would relieve them from the application of so just a rule.
As long as the parol contract stands in its original form, and the proceeding is one at law, Sections 3502 and 3735 have full force; but in equity they are subject to the same great rules for enforcing justice as prevail in and are the pride of a Court of equity.
In 25 R.C.L. 284, it is declared:
"The great weight of authority is to the effect that equity will intervene to protect the rights of one who by reason of part performance has taken an oral lease out of the statute of frauds." *Page 232 
"Thus if a tenant has entered into possession under an oral agreement for a lease and has paid rent, incurred expenses in improvements, and changed his circumstances and conditions, relying upon the oral agreement, to such an extent that a refusal on the part of the landlord to perform operates as a fraud on the tenant, there is such part performance as will take the case out of the statute of frauds, and authorize the Court to decree specific performance of the parol agreement." 25 R.C.L. 284; Zelleken v. Lynch,80 Kan. 746, 104 P. 563, 46 L.R.A. (N.S.) 659; Wallacev. Scoggins, 18 Or. 502, 21 P. 558, 17 Am. St. Rep. 749.
"Some Courts have inclined to the view that there can be no part performance of an oral lease which will take it out of the statute. It is the geneal view, however, as in case of oral sales or contracts for the sale of land, that part performance under an oral lease or contract for a lease may be such as to take the transaction out of the operation of the statute. The usual ground on which Courts of equity interfere in case of oral leases as to which there has been part performance is that equity will not permit the statute to operate as an engine of fraud, or, in other words, that it will interfere for the purpose of preventing the injustice which would arise from permitting a party to escape from the obligations of his agreement, where the other party, on the faith of such agreement, has in presumptively good faith acted in execution thereof." 25 R.C.L. 567, citing Halligan v. Frey, 161 Iowa, 185, 141 N.W. 944, 49 L.R.A. (N.S.) 112; Parkhurst v. Van Cortland, 14 Johns. (N.Y.) 15, 7 Am. Dec. 427; Wallace v. Scoggins,18 Or. 502, 21 P. 558, 17 Am. St. Rep. 749; Seaman v.Aschermann, 51 Wis. 678, 8 N.W. 818, 37 Am. Rep. 849.
In England it has been held that taking possession under the parol lease will of itself alone constitute the necessary part performance. This principle has been repudiated in *Page 233 
many States, and has not been adopted in South Carolina. It is conceded everywhere, however, that possession and valuable improvements will do so; upon the ground that they amount to such an alteration in the lessee's position as will warrant the Court in entering a decree of specific performance. It follows upon the same reasoning that any acts, on the part of the lessee, which have the effect of so altering his circumstances and condition as to make it inequitable on the part of the lessor to insist upon the statute, will have the same effect. The impossibility of the lessee's retracing his steps in the case at bar really presents a stronger case for specific performance than if he had made improvements after taking possession, for the reason that the improvements might be compensated for in money, but his changed position could not be restored or compensated for.
In a note to 49 L.R.A. (N.S.) 113, it is said:
"The great weight of authority is to the effect that equity will intervene to protect the rights of one who has taken an oral lease out of the statute of frauds by part performance."
Cases supporting the text are cited from C.C.A., Arkansas, California, Connecticut, Illinois, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Ohio, Oregon, Rhode Island, Texas, Virginia, Wisconsin, Canada, Ireland, and England.
It has also been held in a majority of cases that payment alone will not constitute part performance. But in those jurisdictions which uphold the doctrine of part performance it is held that possession and payment of rent under the contract do constitute part performance. Certainly it should follow that possession, payment of rent under contract, and the material alteration of the lessee's circumstances and condition will have that effect. *Page 234 
In a note to 17 Am. St. Rep. 756, Judge Freeman says:
"It follows, as a necessary result of the decisions hereinbefore cited, that whether a lease is oral or written is not very material, if the lessee has entered into possession and paid rent under it, and can establish its terms to the satisfaction of the Court to which he resorts for the purpose of compelling specific performance. In other words, a lease may be regarded as a sale of a limited interest in real estate, and although, like a sale of the fee, it ought to be evidenced by some writing in substantial conformity to that exacted by the statute of frauds, it may, like a sale of the fee, be followed by acts constituting such part performance as to remove it from the operation of that statute, and entitle the lessee to compel the lessor to execute the appropriate evidence of the demise."
In Seaman v. Aschermann, 51 Wis. 678, 8 N.W. 818, 37 Am. Rep. 849, there was a verbal agreement by defendant (tenant) to lease the plaintiff's store for five years; the plaintiff (landlord) broke off negotiations with another prospective tenant, and went to some expense in altering the store for the defendant's accommodation; the defendant went into possession and paid rent for two years; he declined to execute the lease and plaintiff sued for specific performance. Held, that the landlord was entitled to the relief.
In Eaton v. Whitaker, 18 Conn. 222, 44 Am. Dec. 586, it was held that an agreement to lease land is within the statute of frauds, but that part performance will take it out of the statute; that delivery of possession, continued occupation, and payment of rent according to the terms of the agreement are a sufficient part performance for that purpose. The Court makes this significant observation:
"There are many cases where contracts for the absolute sale of the fee of lands have been decreed to be executed, on the ground of part performance; and it would seem not a little remarkable, for a Court to hold, that a contract for a *Page 235 
three years' lease is, in this respect, in a worse condition than would be a sale of the land is perpetuity."
The point has not been suggested, and I am not to be understood as expressing a definite opinion upon it for the lack of time for investigation, but it is questionable whether the parol agreement under the circumstances is within the statute. The trade was an entire one, that the plaintiff should buy the stock of goods and the defendant Copeland should lease the store. The plaintiff's part of the contract was fully performed, and the defendant should be required to perform his. See Gee v. Hicks, Rich, Eq. Cas. 5; Comptonv. Martin, 5 Rich. 14; Hill v. Smith, 12 Rich. 698.
That there was, according to these authorities, sufficient part performance by Workman to take the case out of the statute and to warrant a decree of specific performance I have not a doubt. Workman fully complied with his bargain; paid the purchase price of the stock of goods; went into possession of the stores under the contract; paid the rent every month; and, what is of the greatest consequence in my opinion, so altered his circumstances and condition, that it would be impossible to restore him thereto; he bought a stock of goods, had them on his hands with the burden of disposing of them at a profit, embarked upon a new and uncharted sea for him, with all the risks of storm and shipwreck, none of which he would have undertaken but for Copeland's agreement. To hold that at a time of inflated values and rent profiteering Copeland should be allowed to sell his property and the buyer to raise the rent from $500 to $1,500 a year, after the discovery that a verbal lease is good only for one year, is a conclusion to which I do not subscribe.
The argument that Copeland and his company were separate entities, and that for that reason the contracts were separate and distinct, suggests a conclusion that is in the teeth of the facts and has no support in the law. If *Page 236 
they were separate entities, I know of no principle of law or justice that would prevent a third party from being bound by his personal undertaking, upon the consideration of which one of the contracting parties assumed obligations to the other. Copeland was deeply interested personally in the corporation and in disposing of the stock of goods which belonged to it; I can see no reason why his personal obligations, which induced the trade with the corporation, should not be supported by the risk of loss which Workman assumed.
I think therefore that the decree should be reversed, and that the case should be recommitted to the special master to complete the testimony and make his report in conformity with the conclusions herein announced, which, however, should not be deemed decisive of the issues of fact in the case.