Enforcing an oral contract to transfer land – Equitable estoppel
October 8, 2024 § Leave a comment
By: Donald Campbell
William Howard, Jr. and John Carpenter Nelson, Jr. own property in Forrest County, Mississippi just north of Camp Shelby. The area is wooded and undeveloped. There is a “woods road” that runs from a paved road (Northgate Road) that traverses the land owned by Howard and Nelson, but the location of the road requires Howard and Nelson to cross the other’s property.
In May/June 2021, Howard and Nelson orally entered into an agreement whereby Nelson would convey about .06 acres to Howard, which would allow Howard to use the existing road without crossing Nelson’s property. In exchange, Howard agreed to convey to Nelson a 15-foot strip of property to provide full access off of Northgate Road to Nelson’s property and also a right of ingress/egress to existing woods road. The agreement was never reduced to writing.
In reliance on the agreement, Howard paid to have a survey completed, had deeds drafted, and obtained a partial release from a bank in anticipation of the transaction being completed.
May 5, 2022, before executing the deeds, Nelson passed away and his estate refused to recognize the agreements.
Howard filed a complaint in Forrest County Chancery Court alleging breach of the oral contract for the exchange of land. Although recognizing that the statute of frauds ordinarily required a contract for the transfer of property to be in writing, Howard alleged an exception to the statute of frauds applied – equitable estoppel. The case was assigned to Chancellor Rhea Hudson Sheldon. Chancellor Sheldon held that the agreement had to be in writing to be enforceable and that equitable estoppel did not apply and granted Nelson Estate’s motion to dismiss.
Howard appealed and the case was assigned to the Court of Appeals. A panel consisting of Judges Wilson, Westbrooks, and McDonald heard the case. Judge Wilson wrote for a unanimous court affirming the chancellor: Howard v. Nelson, 2024 WL 4354185 (Miss. Ct. App. 2024).
The Court of Appeals began its analysis by noting that, ordinarily, the transfer of an interest in land must satisfy the statute of frauds to be enforceable. However, there is a “well-established” exception to the statute of frauds – equitable estoppel. If a claim for equitable estoppel can be established, a party can enforce an agreement even though it does not satisfy the statute of frauds.
The elements to establish equitable estoppel are: (1) belief and reliance on some representation; (2) change of position as a result thereof; and (3) detriment or prejudice caused by the change of position. The court of appeals noted that equitable estoppel should only be allowed in exceptional circumstances.
Here, Howard did not allege any facts that would demonstrate the type of detriment that would justify the application of equitable estoppel – instead “he undertook some typical preparations for a land transaction” (hiring a lawyer, having surveys done, obtaining a partial release). Furthermore, a year passed between the time of the oral agreement and the death of Nelson, further indicating that Howard did not suffer the type of detrimental reliance contemplated by equitable estoppel.
The court affirmed the chancellor’s dismissal of Howard’s complaint.
Professor’s Notes
The equitable estoppel exception to the statute of frauds is premised on the idea that a party should not be able to make an oral agreement, know/expect that the other party would rely on that oral promise and then, after that reliance has occurred, seek to refuse enforcement of the agreement. Crucial to an equitable estoppel claim is sufficient evidence of reliance to an extent that it would be unjust to deny enforcement of the oral agreement.
To give an example of when equitable estoppel would apply, consider Martin v. Franklin, 245 So. 2d 602 (Miss. 1971). In this case (which was cited by the Court of Appeals), the state straightened a road that went across property owned by Martin and Franklin. The parties agreed to verbally swap land so that the road became the agreed-upon border of the property. Thereafter, Martin, relying on the oral agreement, constructed a house on the property. Franklin, who observed the construction, did not say anything until the contractor was putting locks on the doors and then asked the contractor, “Do you know you are building a house on my land?” The Supreme Court held Franklin could not enter into an oral agreement, stand by and allow Martin to incur the cost of a house in reliance on the oral promise and then seek to deny the existence of an agreement. Therefore, the oral promise to convey the property was enforceable.
The court of appeals is correct to note that the type of reliance and prejudice contemplated by equitable estoppel is more than “typical” costs that would be incurred in the purchase of property. If that was all that was required it would make the statute of frauds meaningless. The prejudice such that it would be inequitable to allow the other party (here Nelson) to deny enforcement of the agreement despite there being no writing. This might be building on the property or selling their home in reliance on the promise of the seller to convey the property (the Property textbook favorite Hickey v. Green, 442 N.E.2d 37 (Mass. Ct. App. 1982)).
Just Enrichment
December 11, 2018 § 1 Comment
Lamar Bond built a workshop and apartment on the property of Lee and Jennifer Bond, who were his son and daughter-in-law. Lamar moved into the apartment during a divorce and lived there for a couple of years. When Lee, a police officer, discovered that Lamar was smoking marijuana on the property, he ordered Lamar off of the land.
Lamar filed suit claiming that had spent a lot of money building the structure and that Lee and Jennifer had violated a promise that he could live there for the rest of his life.
Lee and Jennifer responded that Lamar’s use of the place was only intended to be temporary, until his divorce was finalized. They argued that he had spent the money to dissipate assets on the divorce, and that the workshop/apartment was a gift intended to be an advance on Lee’s inheritance. They contended that the structure was meant to be used for visits by other family members and a workshop where Lee and Lamar could work on projects together after years of strained relationship. Lee’s brother’s confirmed that Lamar had never mentioned that it was planned to be a permanent residence.
The chancellor ruled that Lee and Jennifer’s testimony was more credible. He rejected Lamar’s position that he was entitled to an equitable lien or a constructive trust. Lamar appealed.
In Bond v. Bond, decided October 30, 2018, the COA affirmed. Judge Fair penned the court’s opinion:
¶5. At trial, Lamar claimed he was entitled to a constructive trust regarding the property, but the chancery court found that issue foreclosed upon by Lamar’s failure to show that a confidential relationship existed among him, Lee, and Jennifer. On appeal, Lamar abandoned that claim; he instead argues he is entitled to an equitable lien. The chancery court can grant an equitable lien to prevent unjust enrichment “where it would be contrary to equity and good conscience for an individual to retain a property interest acquired at the expense of another.” Neyland v. Neyland, 482 So. 2d 228, 230 (1986).
¶6. Lee and Jennifer contend that this issue is procedurally barred on appeal because Lamar did not expressly seek an equitable lien in his complaint in the chancery court. The record reveals that the issue was suggested in the original pleadings, and it was clearly articulated in briefing and arguments prior to the judgment. Lee and Jennifer made no objection. “Where a party offers no timely objection, we treat the issue as having been tried by implied consent.” Queen v. Queen, 551 So. 2d 197, 200 (Miss. 1989). Thus, the question of an equitable lien is squarely before us on appeal.
¶7. The chancery court denied relief on this particular claim based on the statute of frauds. [Fn 1] The court noted that the Mississippi Supreme Court held in Barriffe v. Estate of Nelson, 153 So. 3d 613, 620-21 (¶36) (Miss. 2014), that “an equitable lien is not appropriate to enforce a contract that otherwise fails to meet the requirements of the statute of frauds.” “Under Mississippi’s statute of frauds, contracts involving the transfer of real property must be in writing.” Id. Our supreme court quoted, with approval, the New Mexico Supreme Court’s holding in Van Sickle v. Keck, 81 P.2d 707, 710 (N.M. 1938): “A court of equity will not relieve an individual from the operation of the statute of frauds, which requires that interest in lands be created by an instrument of writing, and impose an equitable lien upon the land in favor of one who makes improvements thereon knowing that the title is in another.” Bariffe, 153 So. 3d at 621 n.22.
[Fn 1] There might have been a potential issue with waiver of this defense because the statute of frauds is an affirmative defense that must be timely asserted by the defendant; and arguably it was not in this case. See Brown v. Gravlee Lumber Co., 341 So. 2d 907, 912 (Miss. 1977). But Lamar has not argued waiver, and, thus, he has waived the issue. See Thornton v. Freeman, 242 So. 3d 188, 190 (¶3) (Miss. Ct. App. 2018) (explaining that “waiver . . . can itself be waived”).
¶8. Lamar conceded that he knew the title to the property was held by Lee and Jennifer. So, like the chancery court, we are bound by the supreme court’s holding in Barriffe that the statute of frauds bars an equitable lien. This issue is without merit.
Lamar also asked for restitution to prevent unjust enrichment by Lee and Jennifer. The COA found no merit in that claim, either.
¶9. Finally, we address Lamar’s claim for money damages. He appears to argue he is entitled to restitution for unjust enrichment. Our analysis of this issue is complicated by the paucity of argument in the chancery court (and, indeed, on appeal). In Lamar’s complaint “for a constructive trust,” he also contended he was entitled to a money judgment for the money he gave Lee and Jennifer (or the money he allowed them to take). Lamar contended that Lee and Jennifer used their authority as joint owners of Lamar’s retirement account to transfer about $158,000 to their own bank account and then spent or converted it. Lee and Jennifer said Lamar transferred the funds and then used Lee’s debit card to spend most of the
money; the rest was given to them for living expenses while Lamar stayed with them and while Lee could not work while building the disputed workshop/apartment. Voluminous bank records were introduced at trial, but neither side made much effort to trace where the money went; both sides said the other would know how the money was spent. Lamar claims he is entitled to restitution for the value of the improvement and for the money that was taken above and beyond the realistic cost of constructing it, which comes out to about $120,000.
¶10. But despite alleging that he was entitled to a money judgment in his complaint, Lamar never expressly articulated a cause of action that entitled him to recover it; unjust enrichment is only addressed, in cursory fashion, in his contentions concerning constructive trusts and equitable liens (of which unjust enrichment is an element). Restitution is never mentioned at all. The chancery court, in its judgment, noted that Lamar sought money damages, but it did not address them directly except perhaps when it stated in closing that “all other relief is denied.” The chancellor did say he found Lee’s and Jennifer’s testimonies credible, and Lamar’s not; but he did not explicitly resolve the many of the factual disputes surrounding Lamar’s unjust enrichment theory, nor did he make any express finding that is dispositive of the claim.
¶11. This case is appropriate for the application of the oft-repeated maxim that “where a chancellor does not make explicit findings, [appellate courts] will assume that all disputed issues were resolved in favor of the appellees.” Ross v. Brasell, 511 So. 2d 492, 495 (Miss. 1987). Lee and Jennifer testified that Lamar gave them the money as a gift, without conditions. Lamar testified otherwise. The factual issue raised and the finding by the chancellor that the children were more credible than Lamar is sufficient to defeat Lamar’s unjust enrichment claim; there is nothing unjust in Lee and Jennifer being enriched by a gift, nor in Lamar not being able to take it back. See Cates v. Swain, 215 So. 3d 492, 496 (¶¶18-19) (Miss. 2013).
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