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AMERICAN LAW REGISTER.
REFORMATION IN EQUITY OF CONTRACTS VOID
UNDER THE STATUTE OF FRAUDS.
Of all the points where the jurisdiction of courts of equity may come into conflict with the provisions of the Statute of Frauds, the one indicated by the title of this article is perhaps the most important as it is certainly the most disputed. It is a well-known principle that equity will relieve against the consequences of fraud, accident or mistake. But suppose that the relief proposed necessitates the reconstruction of an instrument of writing which, on its face, is void, as not fulfilling the requirements of the statute. Will equity withdraw it from the operation of the statute, reform it upon parol evidence, and then decree its specific performance ?
It is believed that there are only two classes of cases where this direct conflict can occur: (1) Where the written agreement, as it stands, is too large; that is, where the parol evidence introduced to throw light upon the transaction shows that the contract, through fraud, accident or mistake, is made to include more in its subject matter than was originally intended by the parties, and where the relief demanded is the rescission of the agreement as to this extraneous matter and its specific performance upon lines conforming to the real meaning of the parties : (2) Where the written agreement, as it stands, is too narrow--where it does not embody all the elements of the original contract, whether as to subject-matter or other provisions. And this will also include the Vol. XXXIII.-11
case of an agreement hopeless under the statute, in consequence of defects, omissions or obscurities. In regard to the first class, it seems to be generally admitted that since the acceptance of parol evidence to correct and reform it does not make a new contract, but only narrows one alreally made, it does not materially conflict with the statute. But in regard to the second class of cases, it is contended on the one hand, that the admission of oral testimony to enlarge the agreement to the full measure intended by the parties would be, in effect, to create a new contract out of elements previously resting in parol, by making it include a subject-matter not otherwise within its scope, and that under such circumstances the Statute of Frauds is conclusive and irrefragible. On the other hand, it is urged that it lies within the general jurisdiction of courts of equity to reform and enforce all agreeinents defective or imperfect through fraud or error. llere there occurs a decided conflict of authorities. One line of decisions holds that while parol evidence may be admissible in the first class of cases mentioned above, it must be strictly confined thereto. Another series of cases holds that parol evidence is alike to be entertained in either class of
The decisions are not to be reconciled—they can only be placed side by side. And it will be expedient first to review the cases upholding the strict application of the statute, and then those to the contrary.
Among the former class of cases, the most important and authoritative is that of Glass v. Hulburt, 102 Mass. 24, from the Supreme Court of Massachusetts. The opinion is by WELLS, J., and the following is an abridgment of it: The relief prayed for was that the contract (for the sale of land) should be made to include a certain portion of the tract which had been, through fraud or mistake, omitted from the conveyance already made. The opinion begins by stating the general jurisdiction of equity courts in cases of fraud and mistake, which is even, at times, concurrent with the remedy at law, but is always administered with reference to certain recognised rules and principles of chancery jurisprudence and often restricted by provisions of positive law. If there exists merely an oral contract, in such a case, then the Statute of Frauds is a perfect bar, and there can be no remedy except rescission. If there has been a part performance of the agreement, then, according to the general principles of equity, the case will be removed from the operation of the statute. But (1) payment of the whole consideration is not a sufficient performance for this purpose; nor (2) is possession under a defective agreement; nor (3) a conveyance only of a portion of the land, for that is in direct disregard and implied disavowal of the oral contract. The court then shows that to grant the relief demanded by the plaintiff would be to enforce the specific performance of a contract for the sale of land, for which there exists no memorandum, note, or other evidence in writing signed by the party to be charged therewith. Can this be done? The power to rectify deeds and other instruments in writing exists in this court under one of two statutory clauses—that which confers jurisdiction in cases of fraud, accident or mistake, or that which provides for relief in chancery where there is no adequate remedy at law. But this power will always be exercised in subordination to statutory provisions. Among such provisions is the Statute of Frauds. This statute is not a mere rule of evidence, but a positive restriction upon judicial authority in affording remedies. It requires the contract to be substantiated by some writing, and the fact that the want of such writing is occasioned by fraud, accident or mistake, is not a material circumstance, unless superior equities intervene which will estop the defendant to set up the statute. “Where the proposed reformation of an instrument involves the specific performance of an oral agreement within the Statute of Frauds; or where the term sought to be added would so modify the instrument as to make it operate to convey an interest or secure a right which can only be conveyed or secured through an instrument in writing, and for which no writing has ever existed, the Statute of Frauds is a sufficient answer to such a proceeding, unless the plea of the statute can be met by some ground of estoppel, to deprive the party of the right to set up that defence." Accident or mistake will not alone constitute such estoppel. There must also be a change of condition or position, made on the faith of the contract, with the knowledge and acquiescence, actual or implied, of the other party, and without redress if the agreement is defeated. Where courts of equity reform instruments and make them operative, it is because the oral agreement is binding, though imperfectly reduced to writing. But this is not the case where the oral agreement falls under the statute. If the statute intervenes, and the writing is imperfect, it is the same as if no writing in fact existed. Under the other head—fraud—if the party has changed his rights, it would be a fraud to set up the statute against him, and therefore it is not allowed. But this, again, supposes part performance. Fraud in the preparation, form or execution of the instrument, only applies where the writing is perfect on its face and satisfies the statute; e. y., where an absolute deed is declared a mortgage. “ Fraud may destroy a title or right acquired by its means, but it has no creative force. It will not confer title. In the absence of a legal contract by the agreement of the parties, it will not establish one, nor authorize the court to declare one by its decree.” " The tendency of the human mind, when fraud and injustice are manifest, is to strain every point to compass its defeat, and to render full redress to the party upon whom it has been practised. This influence has led to decisions in which the facts of the particular case were regarded more than the considerations of public policy upon which the statute is founded and entitled to be maintained. Courts have sometimes regarded it as a matter of judicial merit to wrest from under the statute all cases in which the lineaments of fraud in any form were discernible. But the impulse of moral reprobation of deceit and fraud, however commendable in itself, is liable to mislead if taken as the guide to judicial decrees. * * * We are satisfied that, upon principle, the conveyance of land cannot be decreed in equity by reason merely of an oral agreement therefor, against a party denying the agreement and relying upon the Statute of Frauds, in the absence of evidence of change of situation or part performance creating an estoppel against the plea of the statute. This rule applies as well to the enforcement of such an agreement by way of rectifying a deed as to a direct suit for its specific performance. We are satisfied, also, that this is the rule to be derived from a great preponderance of the authorities.” Glass v. Hulburt, 102 Mass. 24. See also Pierce v. Colcord, 113 Id. 372.
The next case in importance, and one entirely in accordance with the foregoing, is Elder v. Elder, 10 Me. 80. There the plaintiff sought to add certain terms to the written agreement, but this was held to be within the prohibition of the Statute of Frauds. The court holds the following lauguage: “It is one thing to limit the effect of an instrument, and another to extend it beyond what its terms import. A deed by mistake conveys two farms instead of one. If the suffering party is relieved in such a case by a court of chancery, full effect is not given to the terms of a written instrument. But the Statute of Frauds does not prescribe what effect shall be given to contracts in writing; it leaves that to be determined in courts of
law and equity. A deed conveys one farm when it may be proved by parol that it should have conveyed two. Here equity cannot relieve without violating the statute. To do so, would be to enforce a contract, in relation to the farm omitted, without a memorandum in writing signed by the party to be charged or by his authorized agent. These are distinctions, which may be fairly taken, between the case cited from New York (Gillespie v. Moon, 2 Johns. Ch. 585), where the plaintiff sought to be relieved from the undue operation of a deed which conveyed too much, and the case before us, where the prayer of the plaintiff is, that a contract in writing may be so extended by parol testimony as to embrace more land than the contract covers. But whether this court, sitting as a court of equity, would receive parol evidence of a mistake in a deed, to restrain its operation, it is not necessary to decide. There may be a great appearance of equity in such a proceeding; but it may admit of question whether more perfect justice would not be administered by holding parties to abide by their written contracts deliberately made and free from fraud. As far as this rule has been relaxed by the clear, unequivocal, and settled practice of chancery, we are doubtless bound by it in administering that of our system, but we are not disposed to adopt any new or doubtful exceptions to so salutary a rule :” Elder v. Elder 10 Maine 80. See also 2 Wharton on Evidence, SS 904, 1024.
In a later case in the same court, the description of the land was found to be defective, and specific performance was refused, on the ground of the statute: Jordan v. Fay, 40 Maine 130.
Another case following in the same line is found in the Connecticut reports: Osborn v. Phelps, 19 Conn. 63.
The facts were as follows : A. and B. made an agreement for the sale of land, and separate writings were drawn up for their respective signatures, one for A. as the vendor, and the other for B. as purchaser ; but by a mistake the former was signed by B. and the latter by A. And consequently neither of the papers presented the true intention of the parties. The papers did not refer to each other in such a way that they could be connected. The court held that there could be no reformation of this contract; on the ground that it was necessary for the plaintiff to establish: (1) that the contract had been reduced to writing, and (2), that it was signed by the party to be charged. Failing this, the Statute of Frauds intervenes peremptorily and the suit cannot be maintained. The deci.