United Farm Agency v. McFarland

• Decision Date: 16 March 1966
• Citation: 243 Or. 124,411 P.2d 1017
• Parties: UNITED FARM AGENCY, a corporation, Appellant, v. Orval McFARLAND, Respondent.
• Court: Oregon Supreme Court

Page 1017

411 P.2d 1017

243 Or. 124

UNITED FARM AGENCY, a corporation, Appellant, v. Orval McFARLAND, Respondent.

Supreme Court of Oregon, Department 2.

Argued and Submitted Oct. 8, 1965.

Decided March 16, 1966.

A. J. Morris, Eugene, argued the cause for appellant. On the briefs were Bailey, Hoffman, Spencer & Morris, Eugene.

Kendrick M. Mercer, Eugene, argued the cause for respondent. On the brief were Johnson, Johnson & Harrang, Eugene.

Before McALLISTER, C. J., and SLOAN, GOODWIN, HOLMAN, and LUSK, JJ.

GOODWIN, Justice.

This is an action to recover a real estate commission. In a trial before the court without a jury the court entered judgment for the defendant and plaintiff has appealed.

Under date of February 18, 1963, plaintiff, United Farm Agency, a corporation, duly licensed as a real estate broker, and defendant, Orval McFarland, entered into a listing agreement in writing. The defendant agreed to pay to the plaintiff as a commission ten per cent of the selling price if plaintiff procured a purchaser for defendant's ranch in Lane County, Oregon. The price stipulated in the agreement was $57,000, with a down payment of $24,000. The balance was to be paid in annual installments of $3,500 each, with the unpaid balances to bear interest at the rate of six per cent per annum. The listing agreement provided that defendant would pay the commission when a purchaser should be procured through plaintiff 'at the stated price and terms, or at any other price and terms acceptable to' the defendant.

Plaintiff procured purchasers who offered to pay for the property $55,000, of which $12,000 was to be paid down, the balance in annual installments of $4,000, and the unpaid balances to bear interest at the rate of six per cent per annum. Defendant accepted the offer, but only on the condition, to which the plaintiff assented, that the commission would be payable in annual installments of $800 commencing July 15, 1964.

After the sale was consummated, plaintiff commenced this action to recover the full amount of the commission: $5,500. Defendant in his answer alleged the oral modification of the listing agreement.

By way of reply plaintiff alleged that after the sale of the real property defendant stated that he would pay the commission in installments and thereafter plaintiff tendered to the defendant a note calling for payment of annual installments of $800 each, with interest, but that the defendant refused to pay interest and thereby repudiated the alleged agreement for payment of the commission in installments.

The defendant testified as follows regarding his conversation with the plaintiff's agent, Ottar Bakke, at the time Bakke brought to the defendant the proposal to purchase the property:

'A Well, he [plaintiff's agent] said those ladies wanted to buy the ranch real bad, and they only had $12,000.00 to put down, and I said, 'I can't sell it under the circumstances for that.' And Bakke said, 'if you will sell it to them for that,' he says, 'I'll defer on my commission.' And I said, 'what do you mean, defer your commission?' He says, 'I will take 1400 a year, every year when you get your payments from the ranch until it's paid.' I says, 'I can't do that.' He says, 'how about 1200 a year?' I says, 'I can't do that.' He says, 'how about a thousand?' I says, 'No, I can't do that.' He says, 'what can you do?' I figured things out and I said, 'if those ladies that's buyin' it, they want to buy the ranch, if they will pay the payment of 3500 a year, if they'll give me all the 1963 calves, I'll give you $800.00 a year until it's paid.' Bakke says, 'Okay, I'll accept it."

Both Bakke and defendant testified that nothing was said about interest at this time.

The testimony of Bakke was to the effect that at the time referred to in defendant's testimony, May 26, 1963, he agreed to accept payment of his commission in installments, but nothing was said then as to the amount of the installments. On that day defendant signed an earnestmoney agreement for the sale of the property on the terms above stated. The earnest-money agreement had previously been signed by the purchasers procured by Bakke.

On July 13, 1963, defendant entered into a formal contract of sale with the purchasers pursuant to the May 26 earnestmoney agreement. According to Bakke, after the sale had been consummated defendant offered to pay the commission in annual installments of $800, and Bakke assented to this scheme on condition that defendant sign a promissory note carrying interest, to which condition the defendant refused to agree.

Defendant swore that he would never have accepted the terms of the sale if he had known that the broker expected to receive interest on his deferred commission payments. The broker, electing to stand on the statute of frauds, took the position that the whole sum was immediately due and payable, and that installment payments were not an acceptable alternative, with or without interest.

The court found in accordance with defendant's version of the transaction. While finding that on May 26, 1963, defendant became indebted to plaintiff in the sum of $5,500, the court also found that the defendant was not presently liable to pay the entire sum, and accordingly entered a judgment for the defendant for costs.

The principal question, properly raised on the trial and by the assignments of error, is whether the defendant is precluded by the statute of frauds from proving the oral agreement modifying the time and manner of payment of the commission. The contract with the broker was within the statute of frauds and was required to be in writing. ORS 41.580(7). Unless an exception to the general rule applies, the contract could subsequently be modified only by an agreement also in writing. Callaghan v. Scandling et al., 178 Or. 449, 456, 167 P.2d 119 (1946); Craswell v. Biggs, 160 Or. 547, 566, 86 P.2d 71 (1939); Osburn v. DeForce et al., 122 Or. 360, 368, 369, 257 P. 685, 258 P. 823 (1927); Kingsley v. Kressly, 60 Or. 167, 173, 111 P. 385, 118 P. 678, Ann.Cas. 1913E, 746 (1911); Willman v. Alver, 252 F.2d 895 (9th Cir.1958).

The defendant contends that the rule against oral modification does not apply where the modification relates only to the time of performance. This question was left open in Neppach v. Oregon & Cal. R. R. Co., 46 Or. 374, 394-395, 80 P. 482 (1905). In Kingsley v. Kressly, 60 Or. at 173, 111 P. 385, it was said that such an oral modification was void, and in Osburn v. DeForce, 122 Or. at 369, 257 P. 685, the Kingsley case was cited with approval upon this point, although the point was not involved. In Scott v. Hubbard, 67 Or. 498, 506, 136 P. 653 (1913), and Osborne v. Eldriedge et al., 130 Or. 385, 390, 280 P. 497 (1929), neither of which cites the Kingsley case, there are dicta to the contrary. In Sherman, Clay & Co. v. Buffum & Pendleton, 91 Or. 352, 356, 179 P. 241 (1919), Scott v. Hubbard is cited with approval, although again, the point was not involved.

It is unnecessary to decide now whether or under what circumstances an oral time-of-performance modification can be proved in the face of ORS 41.580(7). The oral agreement in this case was, by its terms, not to be performed within a year from the making and therefore ran afoul of ORS 41.580(1). A verbal agreement for the payment of money by annual installments for a fixed period of years is within the statute. 37 C.J.S. Frauds, Statute of § 60, p. 566 (1943); Jackson Iron Co. v. Negaunee Concentrating Co., 65 F. 298 (6th Cir.1895); Meyer v. E. G. Spink Co., 76 Ind.App. 318, 124 N.E. 757, 127 N.E. 455 (1921). Such an oral modification of the time of performance, being itself within the statute of frauds, is invalid. Osburn v. DeForce, supra, 122 Or. at 370, 257 P. 685; 37 C.J.S. Frauds, Statute of § 232, p. 736 (1943). There can be no doubt but that the statute of frauds covers the oral agreement in this case.

The controlling question, therefore, is whether plaintiff is estopped to rely on the statute of frauds. Our decisions recognize the rule that if a modification of a written contract by parol has been acted on by the parties and the position of one of them has been changed for the worse in reliance on the modification, the other party will be denied the right to set up the statute of frauds and stand on the original agreement. Rogers v. Maloney, 85 Or. 61, 64, 165 P. 357 (1917). See, also, Osburn v. DeForce, supra, 122 Or. at 370, 257 P. 685. As stated by Mr. Justice Robert S. Bean in Neppach v. Oregon & Cal. R. R. Co., supra, 46 Or. at 397, 80 P. at 487:

'* * * 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. * * *'

The wrong or injury suffered by the defendant, according to his brief, is that 'he was damaged in that he received only one-half of the down payment that he originally asked; and he did not receive the price originally asked; defendant's position is irrevocable in that he signed a contract with a third party in reliance upon the representation * * *.'

The correctness of the trial court's disposition of this case turns upon the legal effect of the defendant's change of position. If his being induced to accept $12,000 down and a $55,000 total purchase price instead of the $24,000 down and $57,000 which he asked in his listing agreement was detrimental to the defendant, there would seem to be no doubt that an estoppel would lie.

On the issue of detriment, the defendant testified that he needed the larger down payment. He testified that if it were not for the promise of a deferred payment of the broker's commission 'Well, I just wouldn't have done it, because I didn't get my money out of it by taking the $12,000 down.'

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