Newby v. Atlantic Coast Realty Co.

• Decision Date: 14 September 1921
• Docket Number: 18.
• Parties: NEWBY ET AL. v. ATLANTIC COAST REALTY CO. ET AL.
• Court: North Carolina Supreme Court

108 S.E. 323

182 N.C. 34

NEWBY ET AL. v. ATLANTIC COAST REALTY CO. ET AL.

No. 18.

Supreme Court of North Carolina

September 14, 1921

Appeal from Superior Court, Perquimans County; Allen, Judge.

Action by W. G. Newby and another against the Atlantic Coast Realty Company and another. From a judgment of nonsuit, plaintiffs appeal. Reversed, and new trial granted.

Where defendants, who, under agreement with plaintiffs were to take title to land in themselves, furnishing the money for taking up an option thereon, and on resale were to divide the profits with plaintiffs, breached the contract and sought to thwart or forestall plaintiffs in the enforcement of the trust by associating with them others and taking title in them as well as themselves, plaintiffs need not resort to equity, but may sue for damages for breach of the contract or trust.

This case was here at a former term, and is reported in 180 N.C at page 51, 103 S.E. 909, to which we refer for a statement of the facts other than those to be found herein. The land was purchased at the sale thereof at public auction, and was bought in for the joint and equal benefit of the plaintiffs and the defendants, and under the new, or substituted contract, which was in parol, previously made, the land was to be sold under an option and trust deed, plaintiffs to receive one half of the net proceeds of the sale of real and personal property, and defendants the other half, and the property was to be held by the parties for resale; and, it was further provided that the farm should be cultivated during the year 1919, all of which was to be done at the sole expense of the defendants and without any personal obligation on the part of the plaintiffs, the land and crops, and other property, to stand as security to the defendants for any money so advanced or expended by them for the joint benefit of the parties, and in furtherance of their agreement, the profits from the whole transaction to be equally divided between the parties. It is alleged that defendants failed to perform the contract on their part, and, instead thereof that they entered into an agreement with other parties for the purpose of enabling them to relieve themselves of the burden of paying all the expenses, as they had contracted to do. Instead of paying the money due on the sale and to close the option for the purchase of the land, which was held by plaintiffs, defendants united with other parties, who they thought could assist them in raising the funds to pay for the land and to defray the other expenses, and took the title to them jointly, the purpose being to break their contract with plaintiffs and to defeat or disregard their rights thereunder. The judge nonsuited the plaintiffs, and they appealed.

J. S. McNider, of Hertford, Ehringhaus & Small and Meekins & McMullan, all of Elizabeth City, for appellants.

Aydlett & Sawyer, of Elizabeth City, Small, MacLean, Bragaw & Rodman, of Washington, N. C., Chas. Whedbee, of Hertford, and Thompson & Wilson, of Elizabeth City, for appellees.

WALKER J. (after stating the facts as above).

When the case was here before, we did not consider the question as to the statute of frauds, because there was no exception requiring us to do so. But in this appeal there was a nonsuit, which may have been granted upon the ground that if there was a contract, as alleged, it was not in writing, and therefore defendants were not bound by it, although the plaintiffs may have established it by their evidence. We will therefore pass upon it, as the question is presented and may arise again unless disposed of by us now. In order to decide this question, we must have a clear conception, or understanding, of the terms of the contract, and, as these were tersely and lucidly stated by Judge Cranmer at the first trial of the case, we adopt what he said about them, though not literally. Plaintiffs contend, said he, that they made a contract with defendants on the 6th day of December, 1918, under which it was agreed that the property be bought by them and held for resale for the joint account of both plaintiffs and defendants, they to share equally in all the profits, and that the farm was to be operated for their joint account, and that the profits from the farming were also to be divided equally; further, that all money necessary for the purchase of the land and the operation of the farm was to be furnished by the defendants, and that plaintiffs were not to furnish any money whatever, or to become in any way liable for any money for the purchase of the land or the farming operations.

With this understanding of the salient features of the contract, we are of the opinion that it is not within the language or spirit of the statute of frauds, which provides that all contracts to sell or convey lands, or any interest in or concerning them, shall be void, unless the 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. Revisal,§ 976 (Consol. Statutes, § 988). There is no such contract in this case as is described in the statute. The plaintiffs have not contracted to sell or convey any land to the defendants, nor have the defendants agreed to buy and pay for the same, nor vice versa. While the question was not considered in the opinion of this court, by Justice Allen, in the first appeal, the learned justice thus referred to it when deciding as to the measure of damages:

"In the first place, the plaintiffs are not asking to recover damages for breach of contract to convey land. If they had done so, and the contract had been in writing, the rule laid down by his honor would have been the true measure of damages, being one-half of the difference between the option price and the market value of the land at the time of the breach, but being by parol, if one to convey the land, the statute of frauds would be a complete defense." Newby v. Realty Co., 180 N.C. 51, at page 53, 103 S.E. 909, at page 910.

He then continues, and states the terms of the contract very succinctly and clearly as follows:

"The plaintiffs are asking to recover damages for breach of a contract by the terms of which, as they allege, the defendants agreed to furnish the money to take up the option, which expired on January 1, 1919, and to sell the land and pay the plaintiffs one-half the profits, less one-half the expenses of sale, and to furnish the money for the cultivation of the lands for the year 1919, under the management of one of the plaintiffs, and to pay the plaintiffs one-half the profits from the crops."

The parties contracted with reference to the profits to be realized upon a resale of the land, and not with the view of acquiring title to any part of the land. They already had the title, and the land itself was to be held in trust, for the purpose of realizing the profits by another sale of it.

The section of the English statute of frauds, relating to declarations of trust, was never adopted in this state, though enacted in the same or similar form in some other states of the Union. And in this distinction will be found the explanation of the minority decisions in such other states, holding, in an action to raise and declare a trust, that the statute of frauds was applicable in those cases where, upon an agreement similar to this, title to the lands had been taken in the name of one party who wrongfully refused to execute the agreement. The majority view in all the states, however, is that to an agreement of this kind the statute of frauds has no application. 25 R. C. L. pp. 595-597; Morgart v. Smouse, 103 Md. 463, 63 A. 1070, 115 Am. St. Rep. 367, 7 Ann. Cas. 1140. In the majority view of the courts such an agreement for the purchase of land for the purpose of resale is regarded, not as a contract to sell or convey lands, but as a contract of partnership or a joint venture, as the case may be, which contemplates, not the transfer of any interest in lands from one party to the contract to the other, but only a division of profits upon a resale of the lands. In Morgart v. Smouse, supra, 103 Md. 468, 63 A. 1072, 115 Am. St. Rep. 371, 7 Ann. Cas. 1141, the court said:

"It has been repeatedly held in different jurisdictions that an agreement by two or more persons to buy land and sell it and share either the profits or the profits and losses constitutes them partners for that venture, and entitles either of them to an accounting in equity from the others of the joint transactions. * * * A verbal agreement is sufficient to constitute a partnership to deal in lands; the statute of frauds not being applicable to such a contract." Parsons on Partnership (4th Ed.) § 6; Lindley on Partnership, 88, 89, and other cases cited.

In the note in Morgart v. Smouse, supra, 7 Ann. Cas. 1142, it is said:

"The widely accepted rule is that a partnership agreement between two or more persons that they will become jointly interested in a speculation for buying and selling lands is not within the section of the statute of frauds, providing that no estate or interest in lands shall be created, assigned, or declared, unless by act or operation of law, or by a deed or conveyance in writing."

In this state, as stated above and in effect, the only statute requiring consideration is Revisal, § 976, providing that contracts to sell or convey lands shall be void unless some sufficient memorandum thereof be reduced to writing. The uniform construction of this statute is that it has reference to those cases alone in which, as the result of sale exchange, or other form of bargaining, a conveyance of land is contemplated from one of the contracting parties to the other. By the uniform decisions of this court, the statute has...