Reeves v. San Antonio Building Materials Co.

ESKRIDGE, Special Chief Justice. In August, 1928, appellee, the San Antonio Building Materials Company, executed and delivered to appellants a warranty deed purporting to convey certain property in San Antonio. An express vendor’s lien was retained in the face of the instrument, and, in addition thereto, deed of trust was given to better secure the payment of what purported to be purchase price notes. Upon default in payment of the notes, the trustee advertised the property for sale, and this suit was instituted to enjoin the threatened sale and to cancel the liens as a cloud upon appellants’ title. The theory upon which it is claimed ■this relief should have been given is as follows: It is alleged that prior to the transaction just referred to appellants entered into a contract -with one Helene Korff, a feme sole, whereby she agreed to sell to appellants, for a consideration of $1,759, the lot, title to which is now in controversy; that Helene Korff executed a deed in which appellants “or one of them” were named as grantees; that said “Helene Korff placed said deed with her agent in San Antonio to be delivered to plaintiffs upon payment by plaintiffs of said purchase price.” It is further alleged that, shortly after making the contract of sale, appellants entered into possession of the property, and with the actual or constructive knowledge of Helene Eorff made valuable and permanent improvements thereon, to the extent of about $8,000; that the appellants and their family moved into said improvements and there lived as their place of residence and domicile, and “that by reason of said facts the plaintiffs became entitled to specific performance of said contract, which was oral”; that appellant A. O. Reeves, while making the improvements on the real estate, bought certain materials and received certain money advancements from San Antonio Building Materials Company, and, when the improvements on said lot were about to be completed, the materials company suggested that a deed be made by Helene Korff direct to it, and that thereupon it would convey to appellants, taking the notes and liens, and that this plan was followed; that this was “a scheme and subterfuge” on the part of appellee, and “was simulated and conceived for the sole purpose of attempting to place a lien on plaintiff’s homestead in violation of law.” The general demurrer was sustained to the petition in the court below, and, the plaintiffs declining to amend, the suit was dismissed. The appeal is from this judgment. The Statute of Frauds (Rev. St. 1925, art. 3995, subd. 4) requires contracts for the sale of real estate to be in writing. The one here involved is alleged to have been oral. Equity under certain circumstances seeks to soften the harsh legal rule and for the purpose of preventing manifest injustice and the perpetration of fraud will enforce performance of a parol contract for sale of real estate. Hence, if the appellants, relying upon a parol contract, met and performed all of the essential elements necessary to take the contract out of the Statute of Frauds, an equitable title passed from Helene Korff to them, and the homestead' exemption attached, and the effort to; fix a lien for the advancements of money and materials would be void. Appellants in their petition and in their brief 'before this court seem to recognize that whether they had such title or interest in the property depends upon whether or not they could have, if occasion demanded, enforced specific performance against Helene Korff. We think this position is sound, and that therefore the sole inquiry here is whether the petition alleges facts which, taken as true, would have given appellants grounds for specific performance of the contract. It is stated, in the case of Bringhurst v. Texas Co., 39 Tex. Civ. App. 500, 87 S. W. 893, 895, what is necessary to take a parol contract for the sale of real estate out of the Statute of Frauds, as follows: “First, the minds of the parties must have met in an oral agreement to sell; second, the purchase money must have been paid, and possession de *906 livered by tbe vendor to tbe vendee; third, on tbe faitb of tbe transaction tbe vendee must bave made valuable improvements upon tbe property. If t-bese three things concur, it is immaterial whether tbe sale be evidenced by any writing.” This case is cited with approval and this particular bolding reaffirmed in tbe case of Page v. Vaughan et al. (Tex. Civ. App.) 173 S. W. 541. In this latter case one of tbe essential elements, to wit, valuable improvements, was lacking, and tbe court held that tbe claimed vendee bad neither a legal nor an equitable title, and there was no basis for tbe homestead claim, even though it be admitted that tbe original contract price bad been paid. Certainly, if tbe presence of tbe three elements is essential and in tbe case now at bar the requirements with reference to possession and valuable improvements were both met but tbe purchase price was not paid, and no equities are pleaded excusing payment, then for no less strong reason than in tbe Vaughan Case it must be held that neither a legal nor an equitable title passed, and hence no homestead exemption claim attached. Tbe Texarkana Court of Civil Appeals, in tbe case of Wells v. Foreman, 199 S. W. 1174, 1175, in passing upon the question of tbe enforcement of the parol sale of land, said: “And this court has held, and adheres to the ruling, that there must be not only payment of purchase money and change of possession, but valuable improvements as well must be made upon the property by the vendee.” In the case of Babcock v. Lewis, 52 Tex. Civ. App. 8, 113 S. W. 584, the court enforced the specific performance of a parol contract for the sale of land even though the purchase money had not been paid, but this was done upon the theory that the findings of the jury, based upon sufficient evidence to support it, showed that the vendor repudiated the contract and rendered it unnecessary for the vendee to make a formal tender of the amount due. The Austin Court of Civil Appeals, in the case of Hofheinz v. Wilson, 286 S. W. 958, 960, says: “A yerbal sale of real estate, where vendee takes possession and makes impi-ove-ments in good faith and pays the agreed purchase price, is not within the statute of frauds.” We take it that this amounts to holding that the converse of the proposition is true; that is, that a verbal sale of real estate, where vendee takes possession and makes1 valuable improvements, but does not pay the purchase price or offer any reason in equity for failing to do so, then such contract is within the Statute of Frauds and therefore not enforceable. The Amarillo Court of Civil Appeals, in the case of Hickman v. Talley, 8 S.W.(2d) 267, 270, says: “We understand that it is settled law in this state that, in order to take a parol sale • of real estate out of the statute of fraud, it must be alleged and shown that the vendee took possession of the property under the contract and made valuable and ■permanent improvements thereon, relying on the contract, and must also' allege and show the payment of a consideration.” This court, in the case of Mondragon v. Mondragon, 239 S. W. 650, 653, made the following statement with reference to enforcement of parol contracts for the sale of real estate: “Payment of a substantial part, or all, of the purchase price must be accompanied by the grantee taking possession of the property, and placing substantial improvements of a permanent nature thereon. The three elements must concur in order to constitute a parol sale of land.” This case was reversed by the Supreme Court, but on other grounds; the Supreme Court holding that the instrument involved was a valid contract of sale and enforceable under the Statute of Frauds. Appellants seem to rely largely upon the statement made by this court through Chief Justice Fly in the case of Dixon v. McNeese, 152 S. W. 675, 676, wherein it is stated: “It is well settled in Texas that a parol sale of land will be upheld where the vendee has been put in possession of the land, and, relying on the parol sale, has made valuable improvements thereon. Such circumstances create an equitable title in the vendee, and courts of equity will enforce his rights. To constitute a valuable consideration, it is not necessary that the purchase money should have been paid, but, if money has been expended in improvements on the property on, the faith of the verbal contract, it constitutes a valuable consideration.” We think that part of the preceding quotation which apparently asserts that money expended for improvements may stand in lieu of the payment of the purchase money can be considered only as obiter dictum, for preceding statements in the opinion show that the vendee had paid $4,000 on the land prior to the filing of the abstract of judgment, and that he thereafter paid the balance of the purchase money. Furthermore, this opinion was rendered prior to the decision by the Supreme Court in the case of Hooks v. Bridgewater, reported in 111 Tex. 122, 229 S. W. 1114, 1116, 15 A. L. R. 216, and, until this latter case is overruled or modified, the duty is incumbent upon this court to faithfully follow it. In the Bridgewater Case, Chief Justice Phillips, in plain and unambiguous language, says that it has been the law of Texas since the case of Garner v. Stubblefield, 5 Tex. 552: “That to relieve a parol sale of land fr'om the operation of the statute *907 of frauds, three things were necessary: 1. Payment of the consideration, whether it be in money or services. 2. Possession by the vendee'.. And 3. The making by the vendee of valuable and permanent improvements upon the land with the consent of the vendor.” The only exception, if indeed it may be called such, that seems to us now to be left to the rule as above given, is “the presence of such facts as would make the transaction a fraud upon the purchaser if it were not enforceable.” For instance, where the purchase price was not paid because the vendor, in repudiation of his contract, refused to accept it. The case at bar presents no such situation. We think that no title passed out of Helene Korff until her deed was delivered to the materials company. As a part of this transaction, appellants accepted title from said company, executing the notes and deed of trust in consideration therefor, and in so doing they became bound. To hold otherwise would not be protecting them against fraud, but rather would be condoning the commission of a gross inequity upon appellee. ; After the rendition of the Bridgewater Case, this court again had occasion to pass upon the question of enforcement of a parol contract for the sale of land, and to discuss the elements essential to taking it out of the Statute of Frauds. In Hauser v. Zook (Tex. Civ. App.) 278 S. W. 518, this court, speaking through, Justice Cobbs, followed and approved the holding in the Bridgewater Case. Application for writ of error was dismissed. [ Following, therefore, the unequivocal rule laid down by the Supreme Court in the Bridgewater Case and the long line of decisions upon which it is based, we are of opinion that the plaintiff in the court 'below did not allege all of the essential facts to bring their case without the Statute of Frauds, and that hence the general demurrer was properly sustained. The judgment of the trial court is affirmed. The opinion of this court heretofore filed is withdrawn, and this opinion substituted therefor.