Boyer v. Karakehian, 95SC89

• Decision Date: 22 April 1996
• Docket Number: No. 95SC89,95SC89
• Parties: Fred Y. BOYER, Petitioner, v. George M. KARAKEHIAN, Respondent.
• Court: Colorado Supreme Court

Page 1295

915 P.2d 1295

Fred Y. BOYER, Petitioner, v. George M. KARAKEHIAN, Respondent.

No. 95SC89.

Supreme Court of Colorado,

En Banc.

April 22, 1996.

As Modified on Denial of Rehearing

May 20, 1996.

Boyer & Snively, L.L.C., Robert W. Snively, Boulder, for Petitioner.

Martin & Mehaffy, L.L.C., Joel C. Maguire, Boulder, for Respondent.

Chief Justice VOLLACK delivered the Opinion of the Court.

We granted certiorari to review the decision of the court of appeals in Karakehian v Boyer, 900 P.2d 1273 (Colo.App.1994), affirming the trial court's entry of judgment pursuant to a jury verdict in favor of the respondent George Karakehian and against the petitioner Fred Boyer. The court of appeals held, inter alia, that the trial court correctly refused to instruct the jury on the statute of frauds, and that the trial court correctly allowed the respondent to introduce certain parol evidence. We affirm the court of appeals' holding regarding the statute of frauds and reverse the court of appeals' holding regarding the parol evidence.

I.

On May 1, 1991, Boyer and Karakehian executed a written agreement entitled "Lease and Option" (the "Agreement"). The agreement provided that Boyer was to rent Karakehian's house for the four month period from May 8, 1991 through September 8, 1991 for $1,750 per month. The Agreement also stated that Boyer was to provide Karakehian a security deposit of $1,750. The Agreement further provided that Boyer had the option to purchase the property at any time during the term of the lease for the sum of $275,000. ¹ Boyer then gave Karakehian a check for $3,500, representing the first month's rent and security deposit, and moved into the house.

On August 8, 1991, Karakehian informed Boyer that he wished to discuss closing a sale on the house. On September 5, 1991, Boyer sent Karakehian a rent check in the amount of $1,750 marked, "September rent," ² along with a handwritten note stating: "George--Let's get together Monday to discuss closing. Lunch would be a good time.--FYB."

Boyer and Karakehian met for lunch on September 9, 1991. The parties are in dispute over what occurred at that meeting. Karakehian claims the parties set a closing date at the meeting, while Boyer maintains that he told Karakehian that he was unsure at that time whether he wanted to purchase the property. When Karakehian was subsequently unable to contact Boyer in order to set a closing date, Karakehian served Boyer with a notice to quit on September 27, 1991, terminating Boyer's tenancy effective October 8, 1991. Karakehian also notified Boyer that he was retaining Boyer's security deposit of $1,750.

Boyer then filed suit in county court demanding return of the security deposit, and Karakehian counterclaimed for breach of contract and promissory estoppel. The cases were consolidated and transferred to district court, where, after a trial, a jury rendered a verdict in favor of Karakehian on the breach of contract claim and against Boyer on the security deposit claim.

Boyer appealed, claiming, inter alia, that the trial court erred by refusing to instruct the jury on the statute of frauds, and that the trial court erred by allowing the respondent to introduce certain parol evidence. The court of appeals affirmed the trial court as to both of Boyer's allegations of error.

With regard to the statute of frauds instruction, the court of appeals held that because the Colorado statute of frauds requires a writing signed by the party by whom the sale is to be made, the purpose of the statute is to protect the vendor, and the statute thus may not be asserted by the vendee. The court also held that because the Agreement did not specify any particular form in which the option was to be exercised, that Boyer's oral exercise of the option constituted a valid acceptance. The court of appeals therefore held that the trial court correctly refused to instruct the jury on the statute of frauds.

With regard to the parol evidence, the court of appeals held that Karakehian's testimony regarding the Agreement was properly admitted by the trial court. The court held that because Karakehian's testimony did not contradict the terms of the written agreement, and because the testimony was permissible as to Karakehian's promissory estoppel count, the trial court allowed the testimony to be admitted into evidence. Boyer then filed a petition for certiorari which we granted.

II.

Boyer claims that the court of appeals erred by affirming the trial court's refusal to instruct the jury on the statute of frauds. Specifically, Boyer asserts that the jury should have been instructed that:

The defendant, Fred Boyer, is not legally responsible to the plaintiff, George Karakehian, on the plaintiff's claim of breach of contract if the affirmative defense of the statute of frauds is proved. This defense is proved if you find the following:

1. There is no note or memorandum, signed by the defendant, establishing that he timely and unequivocally exercised the option.

Boyer contends that he was entitled to such an instruction based upon his theory that the statute of frauds requires that any exercise of the written option contained in the lease/option instrument be in writing. Because Karakehian's theory was that Boyer was liable to him based on an oral exercise of the option, Boyer claims that the jury should have been instructed that the statute of frauds precludes such an oral exercise.

Karakehian maintains that the court of appeals correctly affirmed the trial court's rejection of this instruction because the Colorado statute of frauds was drafted for the protection of the vendor, rather than the vendee, and the vendee thus may not assert the statute against the vendor. Karakehian further asserts that the statute of frauds does not preclude the enforcement of the option contract where the option was exercised orally. We agree with Karakehian that our prior cases hold that the vendee in a real estate transaction is precluded from asserting the statute of frauds against the vendor.

A purchase option in a lease is an irrevocable offer to sell the leased property to the lessee for a specified consideration. Polemi v. Wells, 759 P.2d 796, 798 (Colo.App.1988), cert. denied, No. 88SC249 (Colo. Aug. 22, 1988). As a purchase option is a contract for the sale of an interest in land, it is required by statute to be in writing. Simpson v. Nelson, 71 Colo. 490, 491, 208 P. 455, 455-56 (1922).

The Colorado Statute of Frauds provides:

Contracts for interests in land--must be written. Every contract for ... the sale of any lands or any interest in lands is void unless the contract or some note or memorandum thereof expressing the consideration is in writing and subscribed by the party by whom the lease or sale is to be made.

§ 38-10-108, 16A C.R.S. (1973). The Colorado statute differs from the majority of state statutes of fraud, which generally require a memorandum signed "by the party to be charged." See, e.g., Ariz.Rev.Stat. Ann. § 44-101 (West 1994); Cal. Civ.Code § 1624 (West 1985); Conn. Gen.Stat. § 52-550 (1995); see also 72 Am.Jur.2d Statute of Frauds § 364 (1974). Colorado's statute, however, requires that contracts for an interest in land be evidenced by a memorandum signed by the party by whom the sale is to be made, in other words, the vendor. We interpreted the Colorado statute in the context of an option contract for the purchase of land in Garbarino v. Union Savings & Loan Association, 107 Colo. 140, 109 P.2d 638 (1941), wherein we stated that:

the purpose of the statute, so far as it relates to the sale of land, is to protect the vendor only, and the vendee, seeking to recover purchase money, cannot set up the statute against a vendor who is ready and willing to perform.

Id.; accord Houtchens v. United Bank of Colo. Springs, 797 P.2d 814, 815 (Colo.App.1990).

Thus in the instant case, the statute operated for the protection of Karakehian, the vendor, rather than Boyer, the vendee. Karakehian asserted, and the jury found, that Boyer orally accepted Karakehian's offer to sell his property pursuant to the purchase option contained in the Agreement. The record indicates that Karakehian was ready, willing, and able to perform, and brought suit against Boyer as the result of Boyer's refusal to perform. Garbarino and its progeny hold that in such a situation, the vendee may not assert the statute of frauds as an affirmative defense in an attempt to avoid the contract. Boyer is therefore precluded from raising the statute of frauds as an affirmative defense in Karakehian's action against him. We thus hold that the court of appeals properly held that the trial court did not err in refusing to instruct the jury on the statute of frauds.

III.

Boyer contends that the trial court erred by admitting testimony by Karakehian at trial as to why he entered into the Agreement. Karakehian maintains that the trial court correctly admitted evidence of his and Boyer's oral representations to each other because those representations did not vary or contradict the terms contained in the Agreement. We agree with Boyer, and hold that the trial court improperly admitted parol evidence at trial.

At trial, Karakehian testified as follows on direct examination:

MR. MAGUIRE (Karakehian's attorney): Mr. Karakehian, when we left off you had talked about Mr. Boyer coming out looking at the house, giving him the purchase price, and him saying fine basically. After that point what happened?

KARAKEHIAN: The next part in the equation was I believe it was the next day Fred told me that we had a problem. And I said, you know, what's the problem. And he said that in fact he had signed ....

....

... an agreement with a realtor where the realtor would in fact represent him. And because of that agreement Fred would have to pay this realtor a commission if in fact a house...