In Schweiter v. Halsey, the Washington Supreme Court held that if a vendor of real property has not repudiated, but is ready, willing and able to perform, the vendee cannot recover payments made upon the purchase price although the earnest-money agreement does not satisfy the Statute of Frauds

Barer, Stanley H.

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Washington Law Review Volume 37 Number 2 Washington Case Law—1961 7-1-1962 Contracts—Earnest-Money Payments—Vendee's Recovery Denied Where Agreement Fails to Comply with Statute of Frauds Stanley H. Barer Follow this and additional works at: https://digitalcommons.law.uw.edu/wlr  Part of the Contracts Commons Recommended Citation Stanley H. Barer, Washington Case Law, Contracts—Earnest-Money Payments—Vendee's Recovery Denied Where Agreement Fails to Comply with Statute of Frauds, 37 Wash. L. Rev. 152 (1962). Available at: https://digitalcommons.law.uw.edu/wlr/vol37/iss2/7 This Washington Case Law is brought to you for free and open access by the Law Reviews and Journals at UW Law Digital Commons. It has been accepted for inclusion in Washington Law Review by an authorized editor of UW Law Digital Commons. For more information, please contact cnyberg@uw.edu. WASHINGTON LAW REVIEWCONTRACTSEarnest-Money Payments-Vendees Recovery Denied WhereAgreement Fails to Comply with Statute of Frauds. In Schweiter v.Halsey,' the Washington Supreme Court held that if a vendor of realproperty has not repudiated, but is ready, willing and able to perform,the vendee cannot recover payments made upon the purchase pricealthough the earnest-money agreement does not satisfy the Statute ofFrauds.In October, 1956 the vendor and vendee had executed an earnest-money receipt. This receipt, the court held, failed to comply withthe Statute of Frauds because it did not contain an adequate legaldescription of the land at the time that it was executed.2 In January,1957 the vendor executed a deed and requested the vendees to executea note and mortgage with an insurance company to provide the neces-sary financing. The vendee refused to sign the papers and gave noticeof recission. The vendor promptly tendered performance, which wasrefused by the vendee.The vendee instituted an action seeking a declaration of its rightsand duties under the receipt. The vendor, having sold the land to athird party for seven-thousand dollars less than the vendee had agreedto pay, answered with a counter-claim, seeking recovery of the seven-thousand dollars plus special damages. The trial court permitted thevendee to recover his earnest-money payment and dismissed the ven-dor's counter-claim. The vendor appealed.The supreme court, stating that an action at law presupposes a validbinding contract,' affirmed the lower court's dismissal of the counter-claim. It refused to allow recovery of the earnest-money payment,however, since the vendor had not repudiated the agreement and hadtendered performance to the defaulting vendee.In refusing to allow recovery of the earnest-money payments, al-though the agreement would not have been enforceable against the157 Wn.2d 707, 359 P.2d 821 (1961).2 Only oral authority was given the broker to subsequently attach the legal descrip-tion. The vendors could not only have kept the earnest-money payments, but also hada valid cause of action for specific performance of the contract, or in the alternative,an action for damages, had they authorized their broker to attach the legal descriptionat a later date by noting such on the receipt at the time of execution. Edwards v.Meader, 34 Wn.2d 921, 210 P.2d 1019 (1949).Such an authorization to attach the legal description can not be implied from thefact of the real estate brokers' possession of the earnest-money-agreement signed byboth parties. Barth v. Barth, 19 Wn.2d 543, 143 P.2d 542 (1943).3 57 Wn.2d 707, 714, 359 P.2d 821, 825 (1961). Accord, Hedges v. Hurd, 47 Wn2d683, 289 P.2d 706 (1955).[VOL. 37WASHINGTON CASE LAW-1961defaulting vendee at law or in equity, the court followed prior Wash-ington case law' and the weight of authority.' The court's result isachieved in many jurisdictions on the theory that an agreement inviolation of the Statute of Frauds is unenforceable rather than void.'The elements essential to the existence of a contract are found to exist,including the consideration necessary to justify the vendor's retentionof earnest-money payments.7 Failure to comply with the statute resultsonly in loss of the right to enforce the contract directly.'In judisdictions where recovery of earnest-money payments by abuyer in default is allowed, the Statute of Frauds is usually interpretedto void contracts which do not comply with it.' No contract exists andno legal relations result from the purported contract. The lack ofconsideration results in the defaulting buyer's right to a return of theearnest-money in an action for restitution.10 In some jurisdictionswhere recovery is allowed, the Statute of Frauds is not interpreted tovoid non-complying contracts. Rather, restitution is granted on thebelief that the statute must prevent indirect as well as direct enforce-ment of contracts which do not comply with its requirements."The Washington Statute of Frauds' 2 has been interpreted as voiding4 Dubke v. Kassa, 29 Wn2d 486, 187 P2d 611 (1947) ; Johnson v. Puget Mill Co., 28Wash. 515, 68 Pac. 867 (1902) (dicta). But see Hooper v. First Exchange Nat. Bankof Coeur D'Alene, 53 F.2d 593 (9th Cir. 1931). The court allowed recovery of moneypaid on void agreement by a purchaser who had defaulted on mortgage payments. Thecourt disposed of the defenses of estoppel and laches and stated at page 597: "It seemsquite unwarranted to say that in such circumstances there was such conduct... as topreclude him from relief to which he otherwise would be entitled."5 49 AM. Jul. Statute of Frauds § 564 (1943) ; RESTATE ENT, CONTRACTS § 355(1932). The Restatement of Contracts gives no right of restitution unless such a rightwould exist if the requirement of the statute were satisfied and the contract an enfor-ceable one.049 AM. JuR. Statute of Frauds § 564 (1943) ; 2 CoRaix, CoNTRAcTs § 279 (1950);RESTATE mENT, CONTRACTS § 344, comment on subsection (4) (1932).7 2 CoRmIN, CONTRACrs § 286 P.945 (1950) : "An oral promise is a sufficient consid-eration for a return promise, even though the oral promise is within the statute offrauds and not directly enforceable.... Such an oral promise is not void."8 49 Am. Jun. Statute of Frauds § 564 (1943) ; 169 A.L.R. 192 (1947) ; RESTATE-mENT, CoNTRAcTS § 355 (1932).0 49 AM. Jul. Statute of Frauds § 564 (1943).'0 Scott v. Bush, 26 Mich. 418, 12 Am. Rep. 311 (1873) ; Reedy v. Ebsen, 60 S.D. 1,242 N.W. 592 (1932).11 See, e.g., Garbarino v. Union Say. & Loan Ass'n, 107 Colo. 149, 109 P.2d 638(1941). 49 Ams. Ju. Statute of Frauds § 564 (1943). Colorado, Minnesota. New York,Oklahoma, and Oregon have refused recovery when the applicable Statute of Fraudsprovided that agreements in violation were void or not to be valid, rather than merelyunenforcible. 169 A.L.R. 191 (1947).12 Wash. Sess. Laws 1929, ch. 33, § 1. "[E]very conveyance of real estate, or anyinterest therein, and every contract creating or evidencing any encumbrance upon realestate, shall be by deed: . . !' But see Comment, The English Statute of Frauds inWashington, 34 WAsHrNGTON L. Rv. 124, 133 (1959).1962]WASHINGTON LAW REVIEWcontracts which do not comply with its requirements.13 Thus theWashington court has adopted an underlying rationale which, in mostjurisdictions that have adopted it, allows the defaulting vendee torecover his down payment if the statute is not complied with. 4 Whilethe court in Schweiter v. Halsey followed the weight of authority interms of result, it neglected to make clear the reasoning by which itreached its conclusion.The court had considered whether a defaulting vendee can recoverearnest-money payments under an agreement failing to comply withthe Statute of Frauds on two previous occasions. In Stanek v. Peterson5the vendor had conceded the vendee's right to "ask for and receivethe return of the initial payment." 6 In view of the conceded pointthe court readily allowed the vendee to recover without a review ofthe question. Dubke v. Kassa"' presented facts nearly identical withthose in Sckweiter v. Halsey: The vendee had refused to purchaseproperty after executing a defective earnest-money agreement andpaying the vendor two-hundred and fifty dollars. Accepting the ven-dor's argument 8 that Stanek was not controlling, the court did notallow the vendee to recover. In support of its decision the court citedsources which say that an agreement not complying with the Statuteof Frauds is unenforceable rather than void."9In finding that the agreement in the Schweiter case was void, yetmaking its decision turn on the vendee's repudiation and the vendor'swillingness to perform, the court has committed itself to a logicalinconsistency. If the agreement was void, it gave rise to no legalrelations.20 There was no legal excuse for refusing to return thevendee's earnest-money; no consideration had been given for holdingit." If the vendee's repudiation was significant, it was because he oweda legal duty to the seller. In attaching significance to the vendee'srepudiation the court impliedly recognized a legal duty, created by a13 Martin v. Seigel, 35 Wn2d 223, 212 P.2d 107 (1949) ; Leo v. Casselman, 29 Wn.2d47, 185 P.2d 107 (1947); Fosburgh v. Sando, 24 Wn2d 586, 166 P2d 850 (1946);Martinson v. Cruikshank, 3 Wn2d 565, 101 P.2d 604 (1940).14 See authorities cited note 8 supra.15 26 Wn2d 385, 174 P2d 308 (1946).16 Id. at 387, 174 P2d at 309.17 29 Wn.2d 486, 187 P.2d 611 (1947).18 Brief for Appellant, p. 15.19Johnson v. Puget Mill Co., 28 Wash. 515, 68 Pac. 867 (1902) (dicta). 49 Am.JUR. Statute of Frauds § 564 (1943). 37 CJ.S. Statute of Frauds § 256 (1943);RESTATEMENT, CONTRACTS § 355 (1932).20 "A contract void under the statute of frauds is a mere nullity, and can not be usedfor any purpose whatever." Scott v. Bush, 26 Mich. 418, 12 Am. Rep. 311, 312 (1873).21 "The parol contract being void, furnishes no consideration for the payment." Reedyv. Ebsen, 60 S.D. 1, 242 N.W. 592, 594 (1932).[VoT- 37WASHINGTON CASE LAW-1961confessedly void agreement. It enforced this duty indirectly by refus-ing restitution.22Chief Justice Finley, in dissent, recognizes this logical inconsistencyof the majority. He states in his opinion2" that if the purported contractis void, recovery of the earnest-money should be granted. He justifiablydemands a clarification of the majority's reasoning in arriving at itsdecision.In stating the accepted rule against recovery of earnest-money bya defaulting purchaser, the court cites24 the Restatement of Contracts"as authority. In commenting on the cited subsection the Restatementexplains: "Contracts within the statute of frauds are neither illegalnor void, even though the requirements for direct enforcement are notcomplied with." (Emphasis added.) In holding the agreement betweenSchweiter and Halsey void, the majority rejects the Restatementrationale, yet adopts and cites the conclusion of that rationale indenying recovery. The court also cited Johnson v. Puget Mill Co.2"and Browne v. Anderson7 as authority for its decision. In Johnsonthe agreement had been taken without the statute by part performance "so that the question of a vendee's recovery under an agreementviolative of the statute was not presented. The rule against recoverywas stated as a dictum in Johnson, however. In Browne, which reliedon Johnson and Dubke v. Kassa," the vendee was denied recoverybecause the agreement was found to comply with the statute. Thecourt did not intimate what its decision would have been if the agree-ment had violated the statute.If the Washington court wishes to clarify its rule of denying earnest-money restitution to defaulting purchasers, it could follow one of twoalternatives. It could establish this policy as one of protection to thevendor which will be administered in the face of legal inconsistency.Washington would not be alone if such a course were followed." Or, itcould recognize that agreements which fail to comply with the Statuteof Frauds are not void, but incapable of being enforced directly.3 Ifthe latter course were followed, indirect enforcement would not result22 2 CoirNm, CONTRACTS § 332 (1950).23 Schweiter v. Halsey, 57 Wn2d 707, 716, 359 P2d 821, 826 (1961).2- Id. at 711, 359 P.2d at 823.25 RrsTATSmNT, CONTRACTS § 355 (4) (1932).2628 Wash. 515, 68 Pac. 867 (1902).27 36 Wn2d 321, 217 P.2d 787 (1950).28 Johnson v. Puget Mill Co., 28 Wash. 515, 519, 68 Pac. 867, 868 (1902).2 Dubke v. Kassa, 29 Wn2d 486, 187 P.2d 611 (1947).30 See authorities cited note 11 supra.31 See authorities cited note 6 supra.19621WASHINGTON LAW REVIEW 3in inconsistency. It makes no great difference to the attorney whetherthe Washington court chooses to solidify its position in denying restitu-tion on the Sckweiter facts by declaring such agreements merely un-enforceable, or continues to treat them as void. The court's decisionwill apparently be to deny restitution in keeping with Washington caselaw." Non-compliance with the Statute of Frauds will prevent only thedirect enforcement of the contract. Legal relations will continue tobe indirectly enforced, with the unenforceable contract serving as avalid defense to the defaulting purchaser's action for restitution.STANLEY H. BARERCRIMINAL LAWMurder- Negligent Medical Treatment Intervening BetweenDefendant's Act and Decedent's Death. In reviewing a murder con-viction, the Washington court recently was confronted with the prob-lem of negligent medical treatment intervening between the defendant'sact and the ensuing death. In affirming, the court apparently tookthe extreme position that proximate causation is solely a jury question,the inquiry on appeal being limited to a cause-in-fact analysis.In State v. Little', the defendant Little and the decedent, Ross John-son, were both inmates of the state prison at Walla Walla. In settlinga previous disagreement, Little punched and kicked Johnson about thehead, sending him to the prison hospital in a dazed and semiconsciouscondition. In a cursory preliminary examination, his injuries werediagnosed as a concussion with possible skull fracture and braindamage. Johnson remained in a bed without side rails or other meansof restraint for five days, during which time he was described as con-tinually "thrashing around . . . throwing his arms about."2 While atthe prison hospital, he fell out of bed five times, striking his headagainst the wall, an iron radiator, and on the terrazzo floor. On thefifth day, X-rays and a thorough examination counseled his promptremoval via the prison doctor's station wagon to Western State Hospi-tal, where he died before an operation could be performed.The case presented a serious causation problem, for it was impossibleto ascertain the source of the fatal injuries. Both the beating and thefive falls had occurred before any X-rays were made. At the trial,32 See cases cited note 4 supra.'57 Wn.2d 516, 358 P2d 120 (1961).2 Id. at 518, 358 P.2d 121.[VoL. 7

Contracts—Earnest-Money Payments—Vendee\u27s Recovery Denied Where Agreement Fails to Comply with Statute of Frauds

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Contracts—Earnest-Money Payments—Vendee\u27s Recovery Denied Where Agreement Fails to Comply with Statute of Frauds

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