Shaughnessy v. Eidsmo

• Decision Date: 07 June 1946
• Docket Number: No. 34221.,34221.
• Citation: 23 N.W.2d 362,222 Minn. 141
• Parties: SHAUGHNESSY et al. v. EIDSMO et al.
• Court: Minnesota Supreme Court

23 N.W.2d 362

222 Minn. 141

SHAUGHNESSY et al. v. EIDSMO et al.

No. 34221.

Supreme Court of Minnesota.

June 7, 1946.

Appeal from District Court, Hennepin County; Edmund A. Montgomery, Judge.

Action by Mark Shaughnessy and another against Bernt Eidsmo and Ellen Eidsmo for specific performance of option in oral lease to purchase dwelling house at expiration of the lease term. The action against Ellen Eidsmo was dismissed. From an order denying Bernt Eidsmo's motion for a new trial, Bernt Eidsmo appeals.

Order affirmed.

Robins, Davis & Lyons and A. W. Uhl, all of Minneapolis, for appellant.

John J. Stoller, of Minneapolis, for respondents.

MATSON, Justice.

In an action for specific performance, defendant Bernt Eidsmo¹ appeals from an order denying his motion for a new trial.

Plaintiffs, husband and wife, on April 5, 1943, by oral agreement, leased from the defendant Bernt Eidsmo a dwelling house and lot described as follows: The north 28 feet of lot 3 and the south 24 feet of lot 2, both in block 18, Roslyn Park Addition, also known as and numbered 4852 N. E. 6th Street, Columbia Heights, Anoka county, Minnesota, for a term of one year from May 1, 1943, at a rental of $47.50 per month, and, in consideration for the making of said lease and as a part thereof, defendant agreed to give, and gave, plaintiffs an option to purchase said property at the expiration of the lease term at a price between $4,750 and $5,000 on a contract for deed, subject to the proviso that plaintiffs should be allowed as a credit on the purchase price the total rent paid for the lease term with the balance of the purchase price to be paid in monthly installments of $32.50, inclusive of unpaid taxes and five percent interest per annum on the unpaid balance. Defendant also agreed to sell plaintiffs a stove for $119.50, payable in installments of $4 per month without interest. Plaintiffs entered into possession May 1, 1943, and continued in possession throughout the one-year lease term ending April 30, 1944, and paid during said term a total rental of $570 and a total of $48 on the purchase price of the stove. At and before the expiration of said lease term, plaintiffs notified defendant that they wished to exercise their option of purchase according to the terms thereof, and on several occasions they demanded of defendant that he deliver a contract for deed as agreed. On each of these occasions, defendant told plaintiffs that he did not have time to have a contract drawn, but that his word was good and they should not worry. Plaintiffs fully performed their part of the option agreement and have at all times been ready, willing, and able to execute a contract for deed. Since the expiration of the lease term, plaintiffs have continued in possession, and from May 1, 1944, to May 1, 1945, have paid an additional $570 on the purchase of said property and a further sum on the purchase of the stove. When the option and lease agreement were made, the premises were subject to a $4,200 mortgage of which no mention was made to the plaintiffs and in regard to which no agreement was made that plaintiffs should assume said mortgage or take the property subject to the same.

Contrary to the above facts as established by the findings of the trial court, defendant contends that he had given no option, but that he had assured plaintiffs that at the end of the lease term he would give them the first opportunity to buy the premises for something in excess of $5,200, subject to a certain mortgage, on which the monthly payments were about $32, and that he would give them credit for the rent paid after making deductions for interest, taxes, and insurance. Defendant alleges that plaintiffs have done nothing to exercise any option, but that they merely asked him for a written lease and not for a contract for deed.

The trial court decreed that plaintiffs have a vendees' interest in the property and that they were entitled to a contract for deed from defendant specifying a purchase price of $5,000, subject to a credit on said price for the gross sum of all rents and purchase money paid, with a proviso that the balance of the price should be paid in monthly installments of $32.50 each, inclusive of taxes and interest at five percent per annum.

Two issues arise for consideration, namely (1) whether the findings of the trial court are supported by the evidence, and (2) whether the oral agreements involved are within the statute of frauds.

1. Defendant's evidence contradicted that of plaintiffs to produce an issue of fact for determination by the trial court. Conflicts in evidence are not to be resolved on appeal, and the trial court's findings will not be disturbed unless they are manifestly and palpably contrary to the evidence. We find here ample evidence to sustain the findings. Seitz v. Sitze, 215 Minn. 452, 455, 10 N.W.2d 426, 428; Johlfs v. Cattoor, 193 Minn. 553, 556, 259 N.W. 57, 58; Bicanic v. J. C. Campbell Co., 220 Minn. 107, 113, 19 N.W.2d 7, 10; 1 Dunnell, Dig. & Supp. § 411.

2. The oral agreement to lease the premises to plaintiffs for a term of one year embodied a provision giving to plaintiffs an option to purchase the premises upon the expiration of the lease term. This option, prior to its execution or acceptance, did not of itself contribute anything to bring the agreement under the statute of frauds. In the first place, a contract conferring an option to purchase is nothing more than an irrevocable and continuing offer to sell, and conveys no interest in land to the optionee, but vests in him only a right in personam to buy at his election. At best it is but an irrevocable right or privilege of purchase and does not come within Minn.St.1941, § 513.04, Mason St. 1927, § 8459.²

3. In the second place, an option agreement is a unilateral contract³ and as such it is, however long the time for the exercise of the option may run, not within the statute of frauds. By its very nature it is, from its inception, fully performed by the optionee as far as the acquirement of an irrevocable right of purchase is concerned. Obviously, it does not therefore fall within the provision of § 513.01 (§ 8456) that no action shall be maintained on any agreement "that by its terms is not to be performed within one year from the making thereof."⁴ The result is the same even though the option of purchase is a part of an oral lease. Place v. Johnson, 20 Minn. 219, 20 Gil. 198; Willard v. Tayloe, 8 Wall. 557, 19 L.Ed. 501; Richanbach v. Ruby, 127 Or. 612, 271 P. 600, 61 A.L.R 1441; Rease v. Kittle, 56 W.Va. 269, 49 S. E. 150.

4. The oral lease, however, aside from the option contained therein, as a bilateral contract, was not capable of performance within one year from the date of its making on April 5, 1943, and was therefore subject to §§ 513.01, 513.04 (§§ 8456, 8459), unless taken out of the statute by part performance. § 513.06 (§ 8461). An oral lease of real estate for a term of one year, to commence in futuro, is within the statute of frauds.⁵ Here, however, the entire oral lease agreement had been fully performed when plaintiffs exercised the option, and the statute was no longer applicable. Bjornstad v. Northern States Power Co., 195 Minn. 439, 442, 263 N.W. 289, 290; Theopold v. Curtsinger, 170 Minn. 105, 108, 212 N.W. 18, 19; Nelson v. McElroy, 140 Minn. 429, 431, 168 N.W. 179, 180, 587; 6 Dunnell, Dig. & Supp. § 8852.

5-6-7. The instant, however, plaintiffs exercised their option by notifying defendant of their election to buy the premises a new contract, an oral contract for the purchase and sale of land, came into being. It was clearly within the statute of frauds (§ 513.04 [§ 8459]), unless taken therefrom by part performance, § 513.06 (§ 8461). According to Restatement, Contracts, § 197, the applicable rule is as follows:

"Where, acting under an oral contract for the transfer of an interest in land, the purchaser with the assent of the vendor

* * * * * *

"(b) takes possession thereof or retains a possession thereof existing at the time of the bargain, and also pays a portion or all of the purchase price,

the purchaser or the vendor may specifically enforce the contract."

In other words, the acts of taking possession and of making part payment, when they are performed under or in reliance upon the oral contract as to be unequivocally referable to the vendor-vendee relationship and not referable to any other relation between the parties, are sufficient to remove the contract from the statute of frauds. The doctrine of part performance, exemplified by the above rule, was followed by this court in Wentworth v. Wentworth, 2 Minn. 277, 2 Gil. 238, 72 Am.Dec. 97; Gill v. Newell, 13 Minn. 462, 13 Gil. 430; and Bresnahan v. Bresnahan, 71 Minn. 1, 73 N.W. 515. In Brown v. Hoag, 35 Minn. 373, 375, 29 N. W. 135, 137, however, the court expressly rejected the unequivocal reference theory upon which the earlier cases were based and adopted the fraud theory under which the plaintiff must show that his acts of part performance in reliance upon the contract so altered his position that he would incur an unjust and irreparable injury in the event the defendant were permitted to rely on the statute of frauds. This latter decision, though apparently overlooked in Bresnahan v. Bresnahan, supra, has been followed in subsequent cases.⁶ We now adopt the Restatement principle to the effect that the taking of possession coupled with the making of part payment,⁷ in reliance upon and with unequivocal reference to the vendor-vendee relationship,⁸ without proof of irreparable injury through fraud, is sufficient to avoid the statute. Brown v. Hoag, supra, and subsequent decisions based thereon, in so far as they require proof of irreparable injury or great hardship in addition to part performance, are expressly overruled. In other jurisdictions, as well as our own, in losing sight of historical antecedents considerable confusion has resulted in determining the basis...