Schwedes v. Romain
587 P.2d 388 (1978)
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Rule of Law:
An oral agreement for the sale of real property is unenforceable under the Statute of Frauds. Acts undertaken merely in contemplation of performance, such as securing financing or hiring an attorney, do not constitute part performance sufficient to create an exception to the statute's writing requirement.
Facts:
- In August 1976, Dorlaine A. Romain sent a letter to Lawrence and Billy Ann Schwedes offering to sell approximately 20 acres of land in Flathead County for $60,000 cash.
- On August 16, 1976, Lawrence Schwedes telephoned Romain to accept the offer.
- Romain then hired an attorney, Tom Hoover, to manage the closing. Hoover ordered a title commitment and prepared deeds for the transaction.
- The parties agreed to a closing date of September 20, 1976, which was later postponed by Hoover to October 3, 1976.
- On September 20, Schwedes offered to send the full purchase price to Hoover, who advised him it was unnecessary and could be handled at the later closing date.
- Schwedes never signed any written document obligating them to purchase the property, nor did they take possession, make improvements, or pay any money to Romain.
- On September 30, 1976, before the rescheduled closing date, Romain sold the property to a third party for $64,000.
Procedural Posture:
- Lawrence and Billy Ann Schwedes filed a lawsuit against Dorlaine A. Romain and LeRoy Mudgett in the District Court, Eleventh Judicial District, Flathead County.
- The plaintiffs (Schwedes) sought either specific performance of the alleged land sale contract or damages for its breach.
- The defendants (Romain and Mudgett) filed a motion for summary judgment.
- The District Court granted summary judgment in favor of the defendants.
- Schwedes' subsequent motion to alter, amend, or vacate the summary judgment was denied by the District Court.
- Schwedes (as appellants) appealed the District Court's grant of summary judgment to the Supreme Court of Montana.
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Issue:
Does an oral agreement for the sale of land, followed by the buyer securing financing and the seller hiring an attorney to prepare closing documents, create an enforceable contract that is exempt from the Statute of Frauds through the doctrine of part performance or estoppel?
Opinions:
Majority - Justice Sheehy
No, an oral agreement under these circumstances does not create an enforceable contract because it fails to satisfy the Statute of Frauds. The court reasoned that no valid, enforceable contract existed for several reasons. First, there was no consideration from Schwedes, as a mere oral promise to pay is insufficient to create a binding obligation. Second, and most importantly, contracts for the sale of real estate are invalid unless they are in writing and subscribed by the party to be charged, as required by the Statute of Frauds. Schwedes never signed any document binding them to the purchase. Third, the doctrine of part performance does not apply because the actions taken by both parties—Schwedes securing financing and Romain's attorney preparing for closing—were merely acts in contemplation of eventual performance, not acts of part performance that are unequivocally referable to the contract itself. Finally, promissory estoppel cannot be used to overcome the Statute of Frauds in this case, as the mere moral wrong of refusing to be bound by a non-compliant oral agreement does not constitute fraud.
Analysis:
This decision strictly construes the Statute of Frauds for real estate transactions, reinforcing the necessity of a signed written agreement. It establishes a clear distinction between acts of 'part performance,' which can create an exception to the statute, and mere preparatory acts, which cannot. The ruling limits the ability of parties to enforce oral land sale agreements by claiming reliance on preliminary steps like securing financing or hiring attorneys. This precedent solidifies that courts will not easily allow doctrines like part performance or promissory estoppel to circumvent the fundamental statutory requirement of a writing for the sale of land, absent clear evidence of fraud or performance unequivocally linked to the alleged contract.
