Lechenger v. Merchants' Nat. Bank

• Decision Date: 28 June 1906
• Citation: 96 S.W. 638
• Parties: LECHENGER v. MERCHANTS' NAT. BANK OF HOUSTON.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

96 S.W. 638

LECHENGER v. MERCHANTS' NAT. BANK OF HOUSTON.^*

Court of Civil Appeals of Texas.

June 28, 1906.

Dissenting Opinion July 5, 1906.

Rehearing Denied October 4, 1906.

Appeal from District Court, Harris County; Norman G. Kittrell, Judge.

Trespass to try title by the Merchants' National Bank of Houston against L. Lechenger and another. From a judgment for plaintiff, defendant Lechenger appeals. Affirmed.

Hogg, Watkins & Jones and Baker, Botts, Parker & Garwood, for appellants. Lane, Jackson & Higgins, for appellee bank. John W. Parker, for appellee Burns.

GILL, C. J.

The Merchants' National Bank, of Houston, Tex., sued L. Lechenger and Hugh Burns to recover the property known as the "Burns Building" in Houston, Tex. The action was in the form of trespass to try title. By amendment the bank disclosed that it based its right to the building upon a written lease from Hugh Burns, the owner, whereby it acquired the right to possession and the right to hold it for five years from February 1, 1905, in accordance with the terms of the lease. Hugh Burns answered, admitting the execution of the lease as alleged by the bank, set up his duty and obligation to make delivery, and prayed for judgment against his codefendant, Lechenger, for possession of the building for the use of the bank. The pleadings of Lechenger are very lengthy, and we shall undertake to state only their substance. After the general denial he alleged: That he was in possession of the building on the 10th of October, 1904, under a written lease for one year, which was to expire on February 1, 1905. That be was in the jewelry business, doing an annual business of $75,000, and making a profit of about $11,000. That shortly prior to October 10, 1904, he desired to arrange for a place of business for the succeeding year, and as the Burns Building suited him he had an interview with Burns, to whom he stated his situation and his purposes. He also told Burns that he (Lechenger) had an opportunity at that time to secure another suitable building in case Burns refused to extend the lease then current. That Burns expressed satisfaction with him as a tenant, whereupon he and Burns entered into a verbal agreement that Lechenger should have the entire building at a net rental of 6 per cent. on the value of the building, it being valued at $100,000; Lechenger to pay for water, light, ordinary repairs, insurance, and taxes, and he should have the right to sublet. That this lease should extend from February 1, 1905, to February 1, 1910. Under the one-year lease for 1904, Lechenger occupied only the lower story of the building; the remainder being occupied by other tenants of Burns. It was understood in the alleged agreement that the other tenants should continue to pay their rent to Burns until February 1, 1905, and thereafter pay to Lechenger. The latter was to pay up to February 1, 1905, under the terms of his current lease, which covered only the lower story. Burns promised to reduce the agreement to writing. Relying upon the promise, Lechenger, with Burns' knowledge, declined to rent another building, which he could have rented at that time, and proceeded with his arrangements with reference to the five-year verbal lease. He erected a small addition at the rear of his store at a cost of $300, and redecorated the ceiling of the store and made some alteration in the fixtures at a cost of $100. On or prior to December 9, 1904, he learned that Burns had leased the building to the plaintiff bank and had repudiated his oral lease to him (Lechenger), whereupon he notified the bank of his agreement with Burns. It is also alleged generally that the bank knew of the oral agreement prior to the agreement between the bank and Burns. He refused to vacate upon the demand of the bank, still has possession of the property, and on the 1st of February, 1905, and each month thereafter, tendered to Burns the agreed rent in cash. Upon his refusal to accept, the sum was deposited in bank to his credit, where it yet remains subject to his order. No money or other thing of value passed to Burns at the date of the alleged oral contract, nor was anything due thereunder until February 1, 1905. It is further averred: That Burns, the bank, and one Sweeney, a competitor of appellant, have conspired to exclude him from the building and thereby ruin his business. That his stock is of the value of $60,000. That his fixtures are suitable to no other building. That his trade is largely among the ladies of Houston, who refuse to go on the opposite side of Main street, where the saloons and gambling houses are situated, and trade only on the side of Main street on which the Burns Building is situate. That the retail business district in Houston is restricted, and he cannot now procure any other building in or near that district, or on that side of Main street, nor any other suitable building in Houston, and that the building which he forbore to rent was on the same side of Main street, in the desirable district, and in every way suitable to his purposes. That the surrender of the building will result in loss and damage to him, in inconvenience and loss of trade, amounting to $100,000, for which he will have no adequate remedy. Wherefore he says Burns and the bank (who leased with notice of his equities) are estopped to say that the oral lease is void under the statute of frauds, and he prays that the lease be upheld. To this answer both the bank and Burns demurred on the ground that the pleading disclosed that the alleged lease was not in writing, and set up no facts which, if true, would take the contract out of the statute of frauds. The demurrer was sustained, and, Lechenger refusing to amend, the court heard proof of the bank's lease from Burns and rendered judgment in favor of the bank and Burns against Lechenger. The latter has appealed, and his counsel present here with much force the contention that the equities alleged take the contract out of the statute.

Under the proposition which arises on the state of facts alleged, counsel for appellant contend that, even if it be held that the improvements are insufficient in character and value to take the contract out of the statute, the independent consequences which will flow from its repudiation are of a nature so grave and irremediable as to call for the interposition of a court of equity. Counsel for appellees contend that, as there was no possession referable to the oral contract and no payment of lease money until after its repudiation, the consequential damages which will flow from its repudiation cannot be considered in determining whether the statute of frauds shall be applied.

The authorities bearing upon the question, when the grounds upon which they proceed are considered, are peculiarly confusing and unsatisfactory. Our statute of frauds, in so far as it relates to the question before us, is as follows: "No action shall be brought in any of the courts in any of the following cases unless the promise or agreement upon which such action shall be brought or some memorandum thereof shall be in writing and signed by the party to be charged therewith or by some person by him thereunto lawfully authorized. * * * (4) Upon any contract for the sale of real estate or the lease thereof for a longer time than one year." The urgent necessity for such a statute has been universally recognized, but, on account of the hard consequences following its application in particular cases, courts of equity were induced at an early day to invent means for avoiding its harsh effects. In England and in most of the states of the Union the statute is avoided when the oral contract is followed by substantial part performance referable alone to the contract, such as entry into possession and payment of all or part of the consideration. Pomeroy's Equity, vol. 6, § 821. The English courts seem to have proceeded upon the theory that the overt act of the parties in delivering possession on the one part, and entry on the part of the other, admitted of such clear proof and was such conclusive evidence of the contract as would safely justify them In dispensing with the written evidence of the sale. Pomeroy's Equity, vol. 6, §§ 817, 819. While our statute is practically the same as the English statute, the Texas courts have steadfastly refused to allow mere part performance to dispense with written evidence in matters affecting the conveyance of lands. While Mr. Pomeroy (volume 6, § 823) states that the Texas doctrine is rested alone upon the ground of fraud, we think a careful review of our cases will show that, while the distinction has not always been made plain, the sum of their holdings amounts to this: That possession is not enough. That possession and payment of purchase money is not enough. That possession, payment of purchase money, followed by insignificant improvements, is not enough. Possession referable to the contract, followed by valuable improvements of such a nature as to raise an equity in favor of the vendee, which no action at law could satisfy, and which would render it fraudulent on the part of the vendor to repudiate the verbal contract, are all required to take the case out of the statute. In other words, our courts seem to have adopted the English doctrine that there must be part performance as an earnest of certainty of proof, but have wisely required that in addition the situation of the vendee must have been so changed thereby that nothing short of specific performance will make him whole. Indeed, in practical application, there has been small difference between the course of the English courts proceeding upon the theory of part performance and those courts of this country, such as Texas and Massachusetts, who proceed upon the broad ground of equitable estoppel.

The wisdom of interposing in any case to suspend the application of the statute has been always gravely questioned and courts of equity everywhere have justified...