Hankins v. Bartlett

• Decision Date: 21 August 2012
• Docket Number: No. COA11–1394.,COA11–1394.
• Citation: 731 S.E.2d 275
• Parties: Judith Vaughn HANKINS and Ronald L. Hankins, Sr., Plaintiffs, v. Janice Vaughn BARTLETT, Individually and in Her Official Capacity as Executrix of the Estate of Edwin Lee Vaughn, Deceased, Defendant.
• Court: North Carolina Court of Appeals

731 S.E.2d 275

Judith Vaughn HANKINS and Ronald L. Hankins, Sr., Plaintiffs,

v.Janice Vaughn BARTLETT, Individually and in Her Official Capacity as Executrix of the Estate of Edwin Lee Vaughn, Deceased, Defendant.

No. COA11–1394.

Court of Appeals of North Carolina.

Aug. 21, 2012.

Appeal by plaintiffs from order entered 21 July 2011 by Judge Patrice A. Hinnant in Guilford County Superior Court. Heard in the Court of Appeals 20 March 2012.

Smith, James, Rowlett & Cohen, LLP, by Norman B. Smith, for plaintiffs-appellants.

Sigmon, Clark, Mackie, Hanvey & Ferrell, P.A., by Forrest A. Ferrell and Stephen L. Palmer, for defendant-appellee.

GEER, Judge.

Plaintiffs Judith Vaughn Hankins and Ronald L. Hankins, Sr. appeal from the trial court's order granting defendant's motion for judgment on the pleadings. Plaintiffs, who had sought a declaratory judgment that they were the owners of certain real property, contend on appeal that the statute of frauds does not void their contract for the purchase of the property. We hold that because plaintiffs' allegations do not demonstrate that the contract was fully executed and because plaintiffs cannot point to any writing that sufficiently describes the property, the statute of frauds does apply. We, therefore, affirm.

Facts

Plaintiffs filed suit against defendant Janice Vaughn Bartlett, Mrs. Hankins' sister and executrix of their father's estate, seeking a declaratory judgment. In their complaint, plaintiffs alleged that in 1970, they purchased a business known as Vaughn Auto Supply from Mrs. Hankins' father, Edwin Lee Vaughn. According to the complaint, this purchase included not only the business inventory, accounts receivable, trade fixtures, supplies, and good will, but also the real estate where the business was located on Spring Street in Greensboro, North Carolina.

The complaint alleged that plaintiffs fully paid the purchase price for the business, due in installments, and requested a declaratory judgment that they are the owners of the real property. The complaint acknowledged, however, that the parties entered into only an oral contract and that no deed was ever prepared transferring ownership of the real estate.

On 13 April 2011, defendant filed her answer, admitting that Mr. Vaughn sold the business to plaintiffs but denying this sale included the real property. She asserted as affirmative defenses the statute of frauds and estoppel. On 6 May 2011, defendant filed a motion for judgment on the pleadings based on the statute of frauds.

Plaintiffs then moved to amend their complaint. The proposed amended complaint alleged that the purchase agreement between plaintiffs and Mr. Vaughn was formalized in a writing that was “written by, signed by, and dated by Edwin Lee Vaughn, but which may have contained ambiguities that can be resolved by extrinsic evidence.” The writing, dated 25 December 1972, was on Vaughn Auto Supply letterhead and read:

To Whom it May Concern

Vaughn Auto Supply has been sold to Mr & Mrs Ronald Hankins and I have no claim to any assets or not liable [sic] to any claims other than balance of $8057.00 still due me from sale of business.

Plaintiffs' motion to amend was allowed by a consent order filed 6 July 2011, which specified that the 1972 letter “is the only paper writing which plaintiffs claim was the written memorandum of sale, although defendant does not acknowledge that this document has validity for that purpose or any other purpose....” In an order filed 21 July 2011, the trial court granted defendant's motion for judgment on the pleadings. Plaintiffs timely appealed to this Court.

Discussion

“This Court reviews de novo a trial court's ruling on motions for judgment on the pleadings. Under a de novo standard of review, this Court considers the matter anew and freely substitutes its own judgment for that of the trial court.” Reese v. Mecklenburg Cnty., 200 N.C.App. 491, 497, 685 S.E.2d 34, 38 (2009) (internal citations omitted), disc. review denied,364 N.C. 242, 698 S.E.2d 653 (2010).¹

The parties agree that the basis for the trial court's order granting judgment on the pleadings was the statute of frauds. North Carolina's statute of frauds provides that “[a]ll contracts to sell or convey any lands, tenements or hereditaments, or any interest in or concerning them ... shall be void unless said contract, or some memorandum or note thereof, be put in writing and signed by the party to be charged therewith, or by some other person by him thereto lawfully authorized.” N.C. Gen.Stat. § 22–2 (2011).

Plaintiffs first argue that the statute of frauds does not apply in this case because the contract of sale was fully executed. Our Supreme Court has held that “[t]he Statute of Frauds, G.S. 22–2, has no application to a fully executed or consummated contract. It may be invoked only to prevent the enforcement of executory contracts.” Dobias v. White, 240 N.C. 680, 687, 83 S.E.2d 785, 790 (1954) (internal citations omitted). On the other hand, when a contract is partially executed—and, therefore, partially executory—it is still governed by the statute of frauds. Holt v. Holt, 47 N.C.App. 618, 620, 267 S.E.2d 711, 713 (1980), rev'd on other grounds,304 N.C. 137, 282 S.E.2d 784 (1981).

Plaintiffs argue that once they paid the purchase price in full for the business and entered into possession and ownership of the business and property, the statute of frauds did not apply. Our Supreme Court has, however, specifically “held that the payment of the purchase price, the taking of possession of the premises, and making improvements thereon would not entitle the vendee to specific performance of the parol agreement[.]” Rochlin v. P.S. West Constr. Co., 234 N.C. 443, 445, 67 S.E.2d 464, 465 (1951). See also Ebert v. Disher, 216 N.C. 36, 47, 3 S.E.2d 301, 308 (1939) (holding that oral agreement was void and of no effect despite payment of purchase price and improvements, but that “the party who has advanced the purchase price or has made improvements shall be refunded his advances”); Mauney v. Norvell, 179 N.C. 628, 630, 103 S.E. 372, 373 (1920) (“In cases where there has been a sale of land without being in writing, if the vendor accepts the whole of the purchase money, or any part thereof, it is not an estoppel on him to recover the land, but he must account for the purchase money received, and betterments.”), overruled in part on other grounds by Kent v. Humphries, 303 N.C. 675, 281 S.E.2d 43 (1981).

It appears that, under North Carolina law, in order for an oral contract for the purchase of land to be fully executed, and, therefore, not governed by the statute of frauds, a deed must have been delivered by the actual seller to the purchaser. Dobias, 240 N.C. at 687, 83 S.E.2d at 790 (holding that if deed was deposited with attorney for delivery to and acceptance by seller, contract was still executory, whereas if delivery of deed to attorney was sufficient for delivery to purchaser, then oral contract was fully executed and statute of frauds did not apply). See also Sprinkle v. Ponder, 233 N.C. 312, 316, 64 S.E.2d 171, 175 (1951) (holding that statute of frauds did not apply when plaintiff had delivered deed because “here the contract, if such there was, had been executed, and the statute of frauds does not apply to executed contracts; it can be invoked only to prevent the enforcement of executory contracts”).

Because no deed was ever delivered to plaintiffs, the contract remained executory, and the statute of frauds applies notwithstanding the fact plaintiffs paid the purchase price and took possession of the property. Plaintiffs were, therefore, required to show that the contract had been set out in writing.

Plaintiffs, however, contend that Herndon v. Durham & S. R.R. Co., 161 N.C. 650, 77 S.E. 683 (1913), is identical to this case in that every act under a land purchase contract had been accomplished except for the delivery of the deed. We disagree with plaintiffs' reading of Herndon. In Herndon, a farmer had sold land to a railroad with the railroad's agreeing, in addition to the purchase price and other stipulations, that the railroad would grant the farmer an easement and construct an underpass for the farmer's cattle. Id. at 652, 77 S.E. at 684. The farmer requested that the agreement for the underpass be put in writing, but the railroad's agent said a writing was unnecessary. Id. Although the railroad initially built the underpass, it subsequently attempted to close it. When the farmer sued to enforce the agreement, the railroad asserted the statute of frauds. Id. at 653, 77 S.E. at 684.

The Supreme Court first set out the general principles: “A parol contract relating to land is not void, but voidable, and we have held that, when executory, it may be enforced if it is not denied that the statute is not pleaded, and the evidence to prove it is not objected to, and that, when executed, the plea of the statute of frauds is no longer applicable.” Id. at 653–54, 77 S.E. at 684 (internal citation omitted). The Court concluded, however, that because an easement, such as the farmer claimed, could not “pass except by deed or prescription, and as there is no deed for the cattle-way under the track, and it has not been used long enough to confer the right by prescription, the agreement as to the easement has not been executed.” Id. at 654, 77 S.E. at 685. The Court, therefore, held that the statute of frauds did apply.

Nevertheless, the Court proceeded to conclude that the farmer was not left without a remedy. First, the Court pointed out that although the railroad argued that its agent had acted without authority in promising the underpass, the railroad had substantially performed the agreement, thereby ratifying the agent's acts, including accepting a deed from the farmer. The Court held that given the ratification, “the law will not permit the defendant to retain the benefit of the contract and repudiate its obligations.” Id. at 655, 77 S.E....