Davidson v. Wyatt

• Decision Date: 22 April 1980
• Docket Number: No. 38-248,38-248
• Citation: 289 Or. 47,609 P.2d 1298
• Parties: William G. DAVIDSON, George R. Davidson, and Barry F. Davidson, Respondents, v. Robert S. WYATT, Petitioner. ; CA 13176; SC 26445.
• Court: Oregon Supreme Court

Page 1298

609 P.2d 1298

289 Or. 47

William G. DAVIDSON, George R. Davidson, and Barry F.

Davidson, Respondents, v. Robert S. WYATT, Petitioner.

No. 38-248; CA 13176; SC 26445.

Supreme Court of Oregon, In Banc.

Argued and Submitted Feb. 5, 1980.

Decided April 22, 1980.

Fred A. Anderson of Anderson, Dittman & Anderson, Tigard, argued the cause and filed a brief for petitioner.

Frank Noonan of Winfree & Noonan, Portland, argued the cause and filed a brief for respondents.

PETERSON, Justice.

This is a suit by optionees to obtain specific performance of a written option to purchase real property. The trial court sustained defendant optionor's demurrer to the plaintiffs' second amended complaint, and judgment was thereafter entered for the defendant. The Court of Appeals, in a per curiam opinion, reversed and remanded. 41 Or.App. 187, 597 P.2d 379 (1979).

The defendant, in his petition for review, contends that the trial court's ruling should be upheld for either of two reasons. The first is that the complaint did not allege that the option was exercised according to its terms either during the period originally prescribed or during the period allowed by an alleged oral agreement to extend the option. The second is that the oral extension agreement as alleged is void under the statute of frauds, ORS 41.580(5). ¹

More specifically, the primary issues before us are:

1. When an option provides, by its terms, that it is to be exercised by payment of a portion of the purchase price, is tender of payment excused by the optionor's repudiation of the option prior to the expiration of the time for its exercise?

2. Assuming that an agreement to extend the time for exercise of an option is within the statute of frauds, ² is a complaint seeking enforcement of the option as extended sufficient to withstand a demurrer if it alleges that the optionee did not exercise the option during its initial term in reliance upon an oral extension agreement but does not allege that the oral agreement was made at the request of the optionor?

We first consider the problem of the oral extension.

EFFECT OF ORAL EXTENSION AGREEMENT

The allegations of the complaint which are relevant to this issue read as follows:

"Prior to June 1, 1977 (the date provided in the option as the final date for its exercise), plaintiffs and defendant entered into a verbal (sic) agreement to extend the time for exercise of the above option contract up to and including January 1, 1978.

"Defendant received a valuable consideration for extension of the option in that defendant deferred certain tax liabilities from 1977 to 1978.

"Plaintiffs, although able to do so, did not exercise their right to purchase the above described real property prior to June 1, 1977, in reliance on the above verbal agreements to extend the time for exercise of the option."

The trial court, in its memorandum opinion, reasoned that it was not enough for plaintiffs to allege that they relied on the oral agreement for an extension of time. It is necessary, the court said, "to show that the waiver was at the instance and request of the party waiving the agreement in order that such party might obtain a benefit therefrom." This requirement, the court concluded, is found in our decisions in Neppach v. Or. & Cal. R. R. Co., 46 Or. 374, 80 P. 482 (1905), and Osburn v. DeForce, 122 Or. 360, 257 P. 685, 258 P. 823 (1927). The Court of Appeals, in reversing, also cited the Neppach case as well as the more recent decisions in Stevens v. Good Samaritan Hosp., 264 Or. 200, 504 P.2d 749 (1972), and United Farm Agency v. McFarland, 243 Or. 124, 411 P.2d 1017 (1966).

Although the parties and the trial court, under the influence of our prior cases, treated this aspect of the case as depending on the applicability of an exception to the statute of frauds or of an estoppel to rely on the statute, we do not believe that this case presents a true statute of frauds problem. As we discuss in more detail below, it is more accurate to frame the issue in terms of waiver of a contract provision and estoppel to later retract the waiver and rely on the strict terms of the contract.

Neppach v. Or. & Cal. R. R. Co., supra, appears to be the principal case upon which the trial court relied in considering whether an optionee may successfully assert the terms of an oral modification of an option contract which is within the statute of frauds. In Neppach the plaintiff was purchasing land from the defendant under a written contract calling for installment payments. While the contract was in force, a controversy arose between defendant and a third party over the title to the land. Because of defendant's uncertainty as to whether it would be able to deliver clear title when the full price was paid, its agents agreed with plaintiff that no further installment payments were to be made until the controversy over title was settled. Later, after title was cleared and without allowing the plaintiff a reasonable time in which to make up the payments, defendant notified plaintiff that the contract was canceled because the installment payments had not been made on time. Plaintiff brought an action for breach, and we held that the defendant, under the circumstances, could not rely on the statute of frauds to deny the validity of the oral agreement. Assuming, we said, that the oral agreement was within the statute and therefore void, nevertheless it was relied upon by the plaintiff and the defendant could not thereafter deny its validity to the injury of the plaintiff. 46 Or. at 395, 80 P. 482.

In explanation of this holding, we pointed out that the provision in the contract of sale for the time of the payments was for the defendant's benefit and could be waived. Id. We also pointed out that it was the defendant which had requested the extension agreement because of the uncertainty whether, when the plaintiff had made all of the payments, defendant would be able to perform its promise to deliver title. 46 Or. at 396, 80 P. 482. In the opinion we quoted from cases holding that it would be inequitable, and would open the door to fraud, to permit one party to a contract to induce the other to depart from the terms of the written agreement and then, relying on the statute, to insist upon a strict adherence to its terms. 46 Or. at 396-97, 80 P. 482. Neppach, however, contains no suggestion that we believed that the applicable rule is limited to situations in which the oral agreement was made at the request of the party who later asserts the bar of the statute:

" * * * The statute of frauds may not be invoked to perpetrate a fraud, nor will a party be permitted to insist upon the statute to protect him in the enjoyment of advantages procured from another, who, relying on an oral agreement, has acted and placed himself in a situation in which he must suffer wrong and injustice if the agreement is not enforced. A party to a contract for the sale of land, who knowingly consents or agrees to a postponement of the performance by the other at the time specified of some stipulation for his benefit, cannot, after the other has acted upon such consent, avail himself of the default, and treat the contract as forfeited, although the performance of the stipulation at the time specified may have been made of the essence of the contract: * * *." 46 Or. at 397, 80 P. at 487.

The facts in some of our later cases are consistent with defendant's position and the trial court's rationale. In Scott v. Hubbard, 67 Or. 498, 136 P. 653 (1913) and United Farm Agency v. McFarland, 243 Or. 124, 411 P.2d 1017 (1966), the modification was induced by the party who later attempted to rely on the statute, and we held that a party who had changed position in reliance on an oral modification could assert the terms of the modification in spite of the statute of frauds. But the opinions do not hold that the right to prove an oral modification and detrimental reliance upon it depends on which party requested it. See also the discussion in Kingsley v. Kressly, 60 Or. 167, 173-174, 111 P. 385, 118 P. 678 (1911).

Osburn v. DeForce, 122 Or. 360, 257 P. 685, 258 P. 823 (1927), also contains language which could support the trial court's reading of the Neppach decision. Osburn was an action by an employee to enforce a written contract of employment as orally modified. We held that the defendant was not estopped to claim the benefit of the statute of frauds, ORS 41.580(1). We said that the estoppel principle was well illustrated in Neppach and that, in contrast, the case before us did not contain the necessary elements of estoppel. We pointed out that it was the employee, rather than the employer, who had requested the oral modification of the contract, and that the modification benefited only the plaintiff. No conduct on the defendant's part, we said, "induced the plaintiff to seek the modification." 122 Or. at 372, 257 P. at 689.

In spite of that language in the opinion, Osburn does not stand for the proposition that reliance on an oral modification of a contract which is within the statute of frauds has no effect unless the modification was requested by the party who later attempts to rely on the statute. The court appears to have based its holding that there was no estoppel upon this premise: The plaintiff had not changed his position in reliance on the oral agreement in such a way that it would be inequitable to enforce the written contract according to its terms. 122 Or. at 373, 257 P. 685. In light of the reasoning in previous and later cases, the suggestion in Osburn that estoppel in this context only operates against a party who requested the oral modification, or induced the other party to request it, is not an accurate statement of the law.

Neppach was most recently cited in Stevens v. Good Samaritan Hosp., 264 Or. 200, 504 P.2d 749 (1972), which was an action for breach by an employee against his employer of an alleged oral contract to employ the...