Benedek v. Mechanical Products, Inc. , 314 Mich. 494 ( 1946 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The order dismissing count 1 of the declaration should be affirmed. In count 1 plaintiff declares on an oral agreement not to be performed within a year and relies on a casual reference to it in a letter to the selective service board, as being a sufficient memorandum to satisfy the statute of frauds. As stated by Mr Justice BUSHNELL, this is the controlling question in the case. I hold that the memorandum is not sufficient.

There is no dispute but that the oral agreement was not to be performed within a year. This brings to bear 3 Comp. Laws 1929. § 13417 (Stat. Ann. § 26.922),^** the applicable part of which provides as follows:

"In the following cases specified in this section, every agreement, contract and promise shall be void, unless such agreement, contract or promise, or some note or memorandum thereof be in writing and signed by the party to be charged therewith, or by some person by him thereunto lawfully authorized, that is to say:

"1. Every agreement that, by its terms, is not to be performed in one year from the making thereof."

The memorandum on which plaintiff relies is a statement in a letter signed by the defendant's president and sent to the selective service board, as follows:

"Recently our company secured the exclusive manufacturing rights of a complete line of industrial and aeronautical high pressure hydraulic pumps from Dr. Elek K. Benedek, consulting engineer, who is a specialist in fluid pressure variable speed pumps and transmissions. Dr. Benedek's office and laboratory is located at 9243 South Oakley Ave., Chicago, Ill."

If this statement does not sufficiently disclose the terms of the alleged agreement, plaintiff cannot recover under count 1. In that event it matters not, for the purposes of this case, that the letter was sent to a third party, not a party in interest. Under the authority quoted by Mr. Justice BUSHNELL from 112 A.L.R. 491:

"Letters, telegrams, or other written communications by a party to a contract to one who is not a party thereto, whichsufficiently disclose the terms of the agreement and admit it or affirm it, are, according to the great weight of authority, valid memoranda thereof within the requirements of the statute of frauds."

Does such statement in this letter "sufficiently disclose the terms of the agreement" to satisfy the statute? Naturally, we look to plaintiff's allegations in count 1, which under the circumstances of the case are accepted as true, to ascertain what are claimed to be the terms of the alleged agreement.

Count 1 alleges that plaintiff is an experienced engineer, that he was the inventor of various improvements in fluid pressure variable speed pumps and transmissions, pitch propeller hubs and accessories and had various patents in relation thereto; that the defendant had a manufacturing plant; that plaintiff on November 29, 1943, granted the defendant a license to manufacture and sell the aforesaid devices, that the defendant agreed to manufacture and sell said pumps and devices and to pay plaintiff certain royalties with a minimum annual royalty of $10,000 during the life of the patents; that at defendant's request plaintiff gave the defendant an option to purchase all of said patents and pending applications; that the defendant carried out its agreement for only about three months, breached its alleged agreement, wherefore plaintiff claimed $10,000 per year royalties and other damages amounting to $45,000.

The only "memorandum thereof" relied on by plaintiff is the statement in defendant's letter to the selective service board that it (the defendant) had "recently * * * secured the exclusive manufacturing rights of a complete line of industrial and aeronautical high pressure hydraulic pumps" from the plaintiff. No mention is made in the memorandum of defendant's agreement to sell, to pay royalties, the option to purchase patent rights, the length of term of the alleged agreement, that it covered transmissions and hydraulic pitch propeller hubs and accessories as well as high pressure hydraulic pumps. The memorandum is silent as to all the essential terms of the alleged contract claimed by plaintiff in count 1, on which plaintiff relies for recovery under that count.

The identical language now found in the statute of frauds above referred to (3 Comp. Laws 1929, § 13417 [Stat. Ann. § 26.922]) has been in the statute law of this State since 1846 (Rev. Stat. 1846, chap. 81, § 2).^*** It has remained unchanged in so far as it applies to this case. The court has frequently held that a memorandum such as relied upon by the plaintiff in this case is not sufficient to validate an oral agreement which would otherwise be void under the statute.

In Hall v. Soule (1863), 11 Mich. 494, a letter relied upon as the memorandum in writing to validate an otherwise void promise to pay stated (p. 496):

"I think, on the whole, that you will have to rely on my pledge already made, that as soon and fast as I can, I will see that $500 of the demand you hold against Harry is paid; beyond that I do not think myself under obligation."

In holding that this letter was not a sufficient memorandum, the court said (p. 496):

"It is entirely clear from the tenor of this letter that it does not undertake to set forth the terms or conditions of any previous contract, but refers to it as a matter understood."

In Whipple v. Parker (1874), 29 Mich. 369, the verbal agreement was one not to be performed within one year. The court held that the plaintiff, having fully performed his part, could recover under the common counts (which is not a question raised in the instant appeal). The court said (pp. 374, 375):

"It has sometimes been said that if the unwritten contract was to be performed on one side within the year, especially if it were even in fact so performed, this takes the contract out of the statute as to both, though the other party was not to perform his part till after that period. — Donellan v. Read, 3 Barn. Adol. 899 (110 Eng. Rep. 330); and this has been followed by several cases, both in England and some of the United States, in which it seems to have been intimated that, if the consideration was actually paid by one party, he might maintain an action upon the verbal contract or undertaking of the other party, though that was not to be performed till after the expiration of the year. But I confess my inability to see how the fact of the consideration having been paid down, or within the year, or yet to be paid, affects at all the question whether the defendant's undertaking, contract or promise sued upon, was to be performed within or after the year; or if only to be performed after the expiration of the year, how the action can be maintained against the `party charged thereby;' or, under our statute, how the contract can be valid and the defendant be `charged therewith,' unless that portion of the contract, at least, upon which his obligation arises, is in writing. To hold otherwise, would, it seems to me, be a direct and palpable violation of both the letter and purpose of the statute, and a clear disregard of the considerations and policy which led to its enactment. Nor can I see what bearing the question of consideration has upon this particular point, whether the action can be maintained upon the special contract itself.

"But if the contract has been executed by the other party, and he has received the consideration, and accepted its benefit, an action may be maintained against him for the benefit thus conferred, the money, property or value thus accepted and appropriated by him; not, however, upon the contract, but upon the appropriate common counts in assumpsit, and upon the duty, promise or obligation springing from the property, money or benefit thus conferred by the plaintiff and received and appropriated by the defendant. * * *

"It is, I think, entirely clear, that as the contract, agreement or promise of the defendant on which he is sought to be charged, was not to be performed till the expiration of the three years, it was void by our statute of frauds, and no action can be maintained upon it."

"In Palmer v. Marquette Pacific Rolling Mill Co. (1875),32 Mich. 274, plaintiff counted upon an oral contract not to be performed within a year and to validate the same relied upon a telegram from the defendants as follows (p. 275):

"To Dwight Palmer: You may come on at once at salary of two thousand, conditional only upon satisfactory discharge of business.

(Signed) "H.A. BURT, Agent."

The court said (p. 275):

"It was this telegram, with the previous negotiations, that the plaintiff relied upon to make out the contract.

"As he had counted upon a contract not to be performed within a year from the time it was made, it was incumbent on the plaintiff to show that the contract, or a memorandum thereof, was reduced to writing and signed by or on behalf of the defendants. And a memorandum, when the contract is not written out, must embrace all its substantial terms (except the consideration. 2 Comp. Laws 1871, § 4702), and cannot be aided by parol evidence when essentially defective. Hall v. Soule, 11 Mich. 494; Abell v. Munson, 18 Mich. 306 (100 Am. Dec. 165). It is impossible to say that the telegram contains all the essential terms of a contract."

In Fuller v. Rice (1884), 52 Mich. 435, the court again held that plaintiff might recover under the common counts for valuable services performed for the defendant of which the defendant had reaped the advantage, but indicated that plaintiff could not recover under the agreement itself void under the statute of frauds. The court said (p. 436):

"Special counts in the case were entirely unnecessary, and if the contract was void the plaintiff must recover, if at all, on the common counts."

Mr. Justice BUSHNELL quotes from and relies on Cochran v.Staman, 201 Mich. 630, and Badger v. Finlayson, 219 Mich. 660. Both cases arose under No. 5 of the section of the statute of frauds here under consideration, referring to "every agreement, promise or contract to pay any commission for or upon the sale of any interest in real estate."

The distinction between this requirement (No. 5) and the one here involved is plainly pointed out in these two opinions. In the Cochran Case the court said (pp. 639, 640):

"The writing relied upon, in my opinion, is a promise to pay a commission for or upon a sale of real estate. So far as the statute of frauds is concerned, no more is required. * * *

"`Every agreement, promise or contract to pay any commission for or upon the sale of any interest in real estate,' is the language of the statute. There need be no resort to parol evidence in this case to add to what the words of the promise import, if only we confine our attention to what it is that must be in writing in order to satisfy the law."

In the Badger Case, supra, the agreement was in the following form (p. 661):

"February 9, 1916.

"I do hereby agree to pay to Joseph B. Grow, agent, a commission of 2 1/2% for services in disposing of my farm of 80 acres.

"D.G. FINLAYSON."

The court said (pp. 661, 662):

"In the case of Cochran v. Staman, supra, the majority opinion held that the writing relied upon was a promise to pay a commission for or upon a sale of real estate, and so far as the statute of frauds was concerned no more was required. Defendant's counsel argue that the agreement should be as definite and certain as though the agreement had been one to purchase real estate. The majority opinion in the case cited holds this is unnecessary. That if the agreement shows a promise to pay a commission upon the sale of real estate the statute is satisfied. * * * It may be reasonable to say that when a written agreement to pay a commission for the sale of real estate is shown, it complies with the demand of the statute without any further proof as to the details of the sale."

See, also, Jaynes v. Petoskey, 309 Mich. 32.

These cases arose under No. 5 of the act, which only requires that the agreement or promise to pay the commission be in writing. The distinction between the requirements of No. 5, and other parts of the act, is apparent from the above cases.

The instant case comes within the language used by the court inWagner-White Co. v. Holland Co-operative Ass'n (1923),222 Mich. 58. In that case the memorandum relied upon by the plaintiff to validate the previous oral agreement was even more specific than the one in the case now before us. It was (p. 60):

"Please cancel our order dated July 21st for two 30-ton cars, 36% cottonseed meal."

This case arose under the provision in the statute of frauds that a contract to sell goods or choses in action of the value of $100 or upwards shall not be enforceable unless there is part acceptance, part payment, or "unless some note or memorandum in writing of the contract or sale be signed by the party to be charged, or his agent in that behalf." 2 Comp. Laws 1929, § 9443 (Stat. Ann. § 19.244).

In holding that the memorandum was not sufficient to validate the oral order for the two cars of cottonseed meal, the court said (pp. 60-62):

"The sole question is whether the note or memorandum is sufficient to satisfy the statute. This court, quite early in its history, declared that a memorandum to be sufficient under the statute of frauds must be complete in itself and leave nothing to rest in parol. Hall v. Soule, 11 Mich. 494; James v.Muir, 33 Mich. 223; McElroy v. Buck, 35 Mich. 434; Gault v. Stormont, 51 Mich. 636; Paul v. Graham, 193 Mich. 447;Sheley v. Whitman, 67 Mich. 397.

"In the last case cited the situation appears to be quite similar to that in the present case. * * * Chief Justice CAMPBELL, in considering the case, said in part:

"`If a verbal contract was valid defendant made one. But here the purchaser never accepted or received any article. He never paid anything. The letter, which is the only writing, does not show what the contract was. It conveys no information except by reference to the verbal agreement, and has none of the requisites of a definite agreement. It comes within the principle of James v. Muir, 33 Mich. 223, and of cases decided since, some of which are referred to in the notes of the last edition. The case is so plain that it need not be dwelled upon. The judgment must be reversed.'

"This holding is in accord with the rule of construction stated in Cyc.:

"`Accordingly if an oral contract falling within the scope of the statute has terms not stated in the memorandum, or if the memorandum contains a reference to such terms or imports their existence by fair inference without clearly stating them, or if the memorandum merely refers to the contract without stating its terms, the case falls within the statute.' 20 Cyc. p. 258."

In the case now before us, the reference in the letter of the defendant company to the selective service board, that it hadsecured from Dr. Benedek the exclusive manufacturing rights of a complete line of high pressure hydraulic pumps, indicates acompleted contract. There is no indication that the defendant company had secured such manufacturing rights by an agreement to manufacture and sell, and a promise to pay annual royalties for the use of certain patents. The letter does not even indicate that the defendant company had agreed to manufacture and sell such devices. It merely stated that the defendant had secured manufacturing rights.

In Dodge v. Blood, 299 Mich. 364 (138 A.L.R. 322), the court said (pp. 369, 370):

"Plaintiff relies on exhibit `A' as a sufficient memorandum signed by First of Michigan Corporation, as agent for defendant Blood, the party herein sought to be charged, to take the contract evidenced thereby out of the statute. * * *

"Defendant contends that exhibit `A' is insufficient as a memorandum because it does not identify him as the vendor. It is well settled that a memorandum is insufficient if it fails to state any element essential to the contract it purports to evidence, and concededly a vendor is indispensable in a contract of sale."

In the instant case no reference is made in the memorandum to consideration for the claimed oral agreement. Appellant argues that no consideration need be expressed in the memorandum, and in that contention he is correct. If this were the only deficiency in the memorandum, and if it otherwise sufficiently expressed the essential elements and terms of the contract, the omission of a reference to the consideration would not destroy its effect. Section 6 of chapter 81 of the Revised Statutes of 1846, continued in effect in the law to the present time (3 Comp. Laws 1929, § 13420 [Stat. Ann. § 26.925]), expressly provides that the consideration need not be expressed in the written agreement, or in any note or memorandum thereof. However, the failure to express consideration, in the memorandum here in question, is only one of many omissions in the memorandum, referring to essential terms of the oral contract which are requisite to the validity or effectiveness of the memorandum.

In connection with the above reference to consideration, some confusion seems to result from the fact that the provision of the statute last above referred to (3 Comp. Laws 1929, § 13420 [Stat. Ann. § 26.925]) also is expressed in 3 Comp. Laws 1929, § 13414 (Stat. Ann. § 26.909). Examination of the statute law readily dispels the confusion. This provision (referring to consideration) has been carried down through the years since 1846 as a part of chapter 80, Revised Statutes 1846, which chapter applies to fraudulent conveyances and contracts relative to lands (3 Comp. Laws 1929, §§ 13406-13415 [Stat. Ann. §§ 26.901-26.910]). Likewise, this provision has been carried down as a part of chapter 81, Revised Statutes 1846, which chapter applies to fraudulent conveyances and contracts relative to goods, chattels and things in action (3 Comp. Laws 1929, §§ 13416-13430 [Stat. Ann. §§ 26.921-26.935]). In the decided cases referred to by counsel in their briefs, it is apparent that these decisions are equally applicable to both sections of the statute law brought down from chapter 80 and chapter 81 of the Revised Statutes of 1846.

Similarly, corresponding provisions are found in both chapter 80 and chapter 81 of the Revised Statutes of 1846, with reference to the requirement that the contract, or some note or memorandum thereof, be in writing and signed by the party to be charged, or by some person thereunto by him lawfully authorized in writing. The provision in section 8, chapter 80, referring to contracts and conveyances relative to sale of lands or leasing for longer than one year, is found in 3 Comp. Laws 1929, § 13413 (Stat. Ann. § 26.908).^**** A similar provision in section 2, chapter 81, Revised Statutes 1846, in regard to conveyances and contracts relative to goods, chattels and things in action, is now found in 3 Comp. Laws 1929, § 13417 (Stat. Ann. § 26.922). While it is the latter provision that is directly applicable to the instant case, both sections are substantially the same, and decisions under one section apply equally to a similar question arising under the other. The material part of 3 Comp. Laws 1929, § 13413 (Stat. Ann. § 26.908), reads as follows:

"Every contract for the leasing for a longer period than one year, or for the sale of any lands, or any interest in lands, shall be void, unless the contract, or some note or memorandum thereof be in writing, and signed by the party by whom the lease or sale is to be made, or by some person thereunto by him lawfully authorized in writing."

For comparison, we again quote the applicable part of the provision in 3 Comp. Laws 1929, § 13417 (Stat. Ann. § 26.922), which is as follows:

"In the following cases specified in this section, every agreement, contract and promise shall be void, unless such agreement, contract or promise, or some note or memorandum thereof be in writing and signed by the party to be charged therewith, or by some person by him thereunto lawfully authorized, that is to say:

"1. Every agreement that, by its terms, is not to be performed in one year from the making thereof."

Under the first of the above-quoted provisions, the court has said:

"There was not enough of this agreement to constitute a contract for the sale of lands. It was insufficient to answer the requirements of the statute of frauds. It did not specify the purchase price, and failed to express the time or times of payment. Under the decisions of this court, such a contract must be complete in itself, and leave nothing to rest in parol. Hall v. Soule, 11 Mich. 494; James v. Muir, 33 Mich. 223;McElroy v. Buck, 35 Mich. 434; Gault v. Stormont,51 Mich. 636." Webster v. Brown, 67 Mich. 328, 331.

"Complainants filed their bill of complaint to enforce the specific performance of the following written option:

"`Pontiac, Mich., Apr. 21, 1910.

"`For and in consideration of the sum of one dollar, I hereby give to Hilberg Doerr an option on building and lot known as No. 20 South Saginaw St., Pontiac, Mich., for a period of sixty days. Purchase price to be five thousand five hundred dollars. Int. 5% easy terms.

"`CHARLES H. GREER.' * * *

"The only question in the case to be determined is whether this option given by defendant Greer is sufficient to satisfy the requirements of the statute of frauds. * * *

"The infirmity of the writing, if any, depends upon its construction as to the time and terms of payment of the purchase price of the premises. The statute provides:

"`Every contract * * * for the sale of any lands, or any interest in lands, shall be void, unless the contract, or some note or memorandum thereof, be in writing, and signed by the party by whom the lease or sale is to be made, or by some person thereunto by him lawfully authorized by writing.' 3 Comp. Laws [1897], § 9511.

"The question of the sufficiency of such writings has been frequently before this court. * * *

"As to the length of time and the amounts of the payments — whether in one sum or in different amounts — the writing is absolutely silent. The words `easy terms' have no well-defined and accepted meaning, but are absolutely indefinite. * * *

"The decree of the circuit court (sustaining the demurrer to the bill of complaint) is affirmed, with costs." Hilberg v.Greer, 172 Mich. 505-508.

"It has been held by this court that a memorandum, to be sufficient under the section involved (3 Comp. Laws 1915, § 11975^*****), must be complete in itself, and leave nothing to rest in parol. Gault v. Stormont, 51 Mich. 636. And that it must be certain and definite as to the parties, property, consideration, premises, and time of performance. Rosenbaum v.Tyszka, 192 Mich. 457. The present option appears to be sufficiently certain and definite as to the parties, consideration, terms and time of performance, but not as to the property which was to be conveyed. * * * We must, therefore, conclude that the option, considered by itself, was not sufficiently definite and certain to satisfy the statute.Droppers v. Marshall, 206 Mich. 560." Cooper v. Pierson,212 Mich. 657, 660.

"A memorandum of agreement for the sale of a lot, in the form of a receipt, in which no State, county, city, or village is given, in describing the lot, is insufficient, under the statute of frauds." Klasky v. Burkheiser (syllabus), 225 Mich. 121.

In Windiate v. Leland, 246 Mich. 659, one John Windiate gave a receipt to one Frank Tyack as follows (p. 661):

"$200.00 "Pontiac, Michigan, "July 21, 1920.

"Received from Frank Tyack, two hundred and no-100 dollars to apply on the purchase price of land at Silver Lake, payment to begin November 1, 1920; purchase price agreed on eight thousand dollars.

"JOHN WINDIATE, "Per L.M. EATON."

The court said (p. 666):

"In order to satisfy the statute of frauds, the memorandum must be complete in itself and leave nothing to rest in parol. The receipt given by John Windiate to Tyack does not comply with this requirement. Gault v. Stormont, 51 Mich. 636; Webster v.Brown, 67 Mich. 328; Hilberg v. Greer, 172 Mich. 505;Ebert v. Cullen, 165 Mich. 75 (33 L.R.A. [N.S.] 84);Rosenbaum v. Tyszka, 192 Mich. 457; Holland v. Holland,195 Mich. 513."

Count 1 of the declaration in the instant case relies solely on the memorandum in question, attached to it as exhibit A, to satisfy the requirement of the statute of frauds, and to allow plaintiff to recover royalties and other damages under the claimed oral agreement. The memorandum, exhibit A, does not satisfy the statute, the defect is apparent on the face of the declaration, and count 1 does not state a cause of action. As hereinbefore stated, this does not affect plaintiff's rights under the second and third counts, under which plaintiff claims the right to recover for having performed his part of the oral contract.

Affirmed, with costs.

BUTZEL, C.J., and CARR, SHARPE, REID, NORTH, and STARR, JJ., concurred with BOYLES, J.

^** The amendments by Act No. 238, Pub. Acts 1913, adding No. 5 relative to commissions upon sale of real estate, and by Act No. 261, Pub. Acts 1945 (Comp. Laws Supp. 1945, § 13417, Stat. Ann. 1945 Cum. Supp. § 26.922), adding No. 6 relative to assignments of things in action, have no application to the case at bar.

^*** Rev. Stat. 1846, chap. 81, § 2; 2 Comp. Laws 1857, § 3183; 2 Comp. Laws 1871, § 4698; 2 How. (1882), § 6185; 3 Comp. Laws 1897, § 9515; 3 Comp. Laws 1915, § 11981; 3 Comp. Laws 1929, § 13417.

^**** Rev. Stat. 1846, chap. 80, § 8; 2 Comp. Laws 1857, § 3179; 2 Comp. Laws 1871, § 4694; 2 How. (1882) § 6181; 3 Comp. Laws 1897, § 9511; 3 Comp. Laws 1915, § 11977; 3 Comp. Laws 1929, § 13413.

^***** See 3 Comp. Laws 1929, § 13411 (Stat. Ann. § 26.906). — REPORTER.