Fannin v. Cratty , 331 Pa. Super. 326 ( 1984 )

POPOVICH, Judge:

This is an appeal by appellants, Ward and Rachel Cratty, from a judgment which was entered in favor of appellee, Wilda Fannin, after a trial involving an auction sale of the Cratty’s house.¹ We affirm.

On Tuesday, June 30, 1981, Wilda Fannin attended the auction of a house owned by appellants and successfully outbid all competing entrants. The property was “knocked down” to her at a price of $45,500, and she immediately posted a 10 per cent downpayment in accordance with the terms of the sale. Prior to the auction, appellee had inspected the house in the company of Blanche E. Miller, attorney-in-fact for and a representative of appellants. During Fannin’s inspection, personal belongings were in the process of being removed from the house. Boxes of assorted paraphernalia were positioned temporarily in a manner which obstructed the view of a deteriorating basement wall.

On Saturday, July 4, 1981, appellee reappeared at appellants’ property and commenced a further tour, accompanied by her insurance agent. At this time, the basement was vacant. Sometime after that visit, appellee demanded the return of her $4,550. Appellee’s insurance agent testified at trial that he refused to insure the property at that time because of the hazard posed by the collapsing basement wall.

After appellee’s request was denied, she commenced suit on July 23, 1981, seeking the return of her downpayment. Appellants filed a counterclaim alleging damages in the amount of $6,500, which represented the difference between the bid price of $45,500 and $39,000, the price subsequently offered to them by a third party. A jury trial commenced on May 19, 1983, which resulted in a verdict for appellee in the amount of $3,500 and against appellants’ counterclaim. Post trial motions were filed and denied. Judgment was entered, and this appeal followed.

Appellants present two issues for our consideration. First, they argue that the trial court erred in instructing the jury on the applicability of the Statute of Frands.² They contend that, notwithstanding the oral nature of the contract, either party may seek damages incurred as a result of the other’s breach. Since they claim that appellee breached the oral agreement, they seek damages equal to the loss of their bargain.³

Second, appellants argue that the trial court erred in submitting to the jury the question of whether the condition of the defective basement wall was a latent defect. According to appellants, this legal question was an issue to be resolved by the trial court.

Turning to the applicable legal standard which governs the instant case, we recognize that this Court will not reverse the trial court’s order “ ‘absent an abuse of discretion or error of law which controlled the outcome of the case.’ ” Allison v. Snelling & Snelling, Inc., 425 Pa. 519, 521, 229 A.2d 861, 862 (1967); see also, McDevitt v. Terminal Warehouse Co., 304 Pa.Super. 438, 450 A.2d 991 (1982), Litman v. Peoples Natural Gas Co., 303 Pa.Super. 345, 449 A.2d 720 (1982). Moreover, in reviewing the verdict, we must view the evidence in a light most favorable to the verdict winner, the appellee. Our sole duty is to decide where there was sufficient evidence to sustain the verdict. McDevitt v. Terminal Warehouse Co., supra. With the foregoing principles in mind, we must affirm.

To begin with, the Statute of Frauds provides in effect that no agreement for the sale of real estate will be enforced unless it is in writing and signed by the party to be charged.⁴ Its fundamental purpose is to prevent assertions of verbal understandings and thus to obviate the opportunity for fraud and perjury. Brotman v. Brotman, 353 Pa. 570, 46 A.2d 175 (1946); Manley v. Manley, 238 Pa.Super. 296, 357 A.2d 641 (1976).

Appellants contend that the Statute of Frauds has no application to the instant case because the relief sought is monetary damages, rather than the alternative equitable remedy of specific performance. Appellants correctly point out that we have held that liability will be imposed for breach of an oral agreement in an action for monetary damages notwithstanding the fact that the Statute of Frauds rendered the oral agreement unenforceable in an action for specific performance. Polka v. May, 383 Pa. 80, 118 A.2d 154 (1955); Weir v. Rahon, 279 Pa.Super. 508, 421 A.2d 315 (1980). However, in order to accept appellants’ contention, the record must establish first that a breach by the buyer has occurred. In view of the jury’s verdict in favor of appellee, the buyer, we may infer that the buyer did not breach the contract, and that she was entitled to rescind the oral agreement because of the existence of the latent defect. See Adams v. Euliano, 299 Pa.Super. 348, 445 A.2d 788 (1982), Shane v. Hoffmann, 227 Pa.Super. 176, 324 A.2d 532 (1974).

In reaching this conclusion, we must set forth the following guidelines:

The Statute of Frauds does not void those oral contracts relating to land which fail to comply with the Statute’s formal requirements. Zlotziver v. Zlotziver, 355 Pa. 299, 49 A.2d 779 (1946). It is to be used as a shield and not as a sword, as it was designed to prevent frauds, not to encourage them. Gerlock v. Gabel, 380 Pa. 471, 112 A.2d 78 (1955).

In the case of a breach of a valid oral contract by a buyer, the Statute of Frauds cannot be employed to recover a downpayment voluntarily made, in the absence of nothing more. Roberts v. Roesch, 306 Pa. 435, 159 A. 870 (1932). Similarly, in the case of a breach by the seller, the Statute has been construed as allowing damages to the buyer of “the money that was paid on account of the purchase”. Polka v. May, supra, 383 Pa. 84, 118 A.2d 156. Moreover, either party who is injured as a consequence of the other party’s breach may recover “the expenses incurred on the faith of the contract.” Polka v. May, supra, 383 Pa. 84, 118 A.2d 156; Weir v. Rahon, 279 Pa.Super. 508, 421 A.2d 315 (1980).

The ease of Weir v. Rahon, supra, is illustrative. In Weir, plaintiffs-appellees entered into an oral contract to purchase a parcel of land in a development owned by defendant-appellant, Elsie Rahon. Appellees believed that the property wag owned by appellant and her sister. In reality, the property was owned by appellant and her husband as tenants by the entireties. Plaintiffs then entered into a real estate listing agreement with a real estate agency. Elsie Rahon signed the listing agreement as the real estate agent. The written agreement provided that the sale of appellees’ house would be contingent upon their purchase of the parcel of land. The appellees had planned on building a house on the land. Rahon’s agency located a willing buyer. The closing for the Weir’s property occurred on December 2, 1978.

Rahon told the Weirs that she preferred to delay the closing on the vacant lot until after the first of the year for income tax purposes. On January 2, 1978, Rahon mailed an agreement of sale to the Weirs which provided for two installments, $2,000 to be paid before the closing and $10,-000 to be paid upon delivery of the deed. The Rahons however did not sign the agreement.

On February 17, 1978, appellees mailed Elsie Rahon $2,000. Three days later, Rahon returned the check to the Weirs stating that she would not sell the property because the Weirs failed to comply with certain time deadlines set forth in the agreement. Plaintiffs filed a complaint in equity seeking specific performance and such other relief as the court deemed appropriate. Appellants raised the statute of frauds as a defense. The trial court denied appellee’s request for specific performance but scheduled another hearing to determine if monetary damages should be granted.

At the second hearing, appellees presented evidence of their expenses which had been incurred after they had entered into the oral contract to sell: (1) $35.00 for digging a septic tank; (2) $40.00 to a Board of Supervisors for a septic tank test; and (3) $2,250.00 for renting a cabin for ten months from December, 1977. Appellees stated that if the sale of the parcel of the land had been completed, they only would have rented the cabin for six months during which time their house was being built. Appellants also stated that they had spent $4,100 for the real estate commission. The trial court entered a verdict in favor of appellees for all the costs incurred except the cabin expenses which the court limited to an amount covering four months.

On appeal, w.e said the following:

“ ‘It is ... elementary that, because of the provisions of the statute of frauds, an agreement for the sale of land cannot be specifically enforced unless in writing signed by the parties to be charged or their agents thereunto lawfully authorized by writing____’ Polka v. May, 383 Pa. 80, 82, 118 A.2d 154, 155 (1955). Our statute of frauds, however, has been construed as permitting recovery of damages for breach of an oral agreement to sell land. See, e.g., Polka v. May, supra; Hertzog v. Hertzog’s Administrator, 34 Pa. 418 (1859); Immel v. Herb, 43 Pa.Super. 111 (1910); Stephens v. Barnes, 30 Pa.Super. 127 (1906); Swayne v. Swayne, 19 Pa.Super. 160 (1902). Generally, the measure of damages in such a case is ‘the money that was paid on account of the purchase and the expenses incurred on the faith of the contract.’ Polka v. May, supra, 383 Pa. at 84, 118 A.2d at 156. See also Corace v. Balint, 418 Pa. 262, 210 A.2d 882 (1955); McCafferty v. Griswold, 99 Pa. 270 (1881); Meason v. Kaine, 67 Pa. 126 (1870). Where the oral agreement has been obtained by fraud, however, the buyer ‘may recover as damages the loss of his bargain ____’ Seidlek v. Bradley, 293 Pa. 379, 383, 142 A. 914, 915 (1928). Such fraud ‘must be actual fraud that reaches back to the original contract.’ Id., 293 Pa. at 382, 142 A. at 915. See also Rineer v. Collins, 156 Pa. 342, 352, 27 A. 28 (1893) (‘According to all authorities, the fraud necessary to entitle the vendee to recover must be such as inheres in the original agreement. A subsequent fraudulent purpose is not enough.’).”

Weir v. Rahon, supra, 279 Pa.Superior Ct. 512-513, 421 A.2d at 317.

In Weir, we held that the buyers did not prove that Elsie Rahon committed fraud at the inception of the contract. Although this Court conceded that Elsie Rahon failed to tell the buyers that her husband jointly owned the property, we said the following:

“There was no evidence, however, that Elsie Rahon intended to mislead plaintiffs. Moreover, there was no evidence that Elsie Rahon planned at that time not to sell the property to plaintiffs. Her later refusal to sell the property to plaintiffs is insufficient to prove fraud at the time the contract was entered into. See Rineer v. Collins, supra. Consequently, because there was no fraud in this case and Elsie Rahon returned the $2,000.00 paid by plaintiffs, plaintiffs are entitled only to damages for ‘the expenses incurred on the faith of the contract. ’ Polka v. May, supra. ” Id. (Emphasis added)

The appellants did not dispute the propriety of that aspect of the jury’s verdict which awarded damages for the costs incurred in connection with the septic tank. With respect to the other expenses, this Court concluded that appellees could recover the real estate commission since “the plaintiffs paid the real estate commission on the faith of their own oral contract.” Id.

This Court modified the award of $900 for the rental of the cabin and said that because the rental expense was incurred after the appellees learned of the breach, no damages would be awarded for that purpose.

Thus, a fair reading of the case law reveals that the measure of damages appropriate in an action for breach of an oral agreement to sell land is to restore the seller to the status quo which existed at the time that the parties entered into the agreement. A party may be compensated for the loss of a bargain only where the agreement was obtained by fraud.⁵ In this case, the record is devoid of any evidence which would support a conclusion that the appellee breached the contract or otherwise secured the contract through the use of fraud.

However, even assuming that appellee breached an oral contract, to award appellants damages representing the difference between the bid price and the price obtained in a later sale to a third party would be to compensate appellants for the loss of their bargain. Such an award would be tantamount to enforcing a contract which is otherwise unenforceable under the Statute of Frauds.⁶ This we will not do.⁷

Under this line of reasoning, we agree with the trial court which denied appellants’ counterclaim and granted appellee’s claim for the return of her downpayment.

Appellants also contend that the trial court erred in submitting the question of the existence of a latent defect to the jury with respect to the deteriorating wall.⁸ We reject this contention.⁹

We recognize that where the evidence alone would justify an inference of the disputed fact, the issue must be submitted to the jury, no matter how strong or pervasive may be the countervailing evidence. Hawthorne v. Dravo Corp., 313 Pa.Super. 436, 460 A.2d 266 (1983), Heffernan v. Rosser, 419 Pa. 550, 215 A.2d 655 (1966). At trial, conflicting testimony was presented concerning the time and frequency of appellee’s inspection of the property, the exact time when the deteriorating wall became evident, and the degree to which the basement was illuminated. Accordingly, we will not disturb the trial court’s resolution of the issue.

Judgment is affirmed.

WIEAND, J., filed a dissenting opinion.

1 . Rachel Cratty is now deceased.

2 . Section 1 of the Act of March 21, 1772, 1 Sm.L. 389, 33 P.S.Sec. 1.

3 . Contrary to the position reflected in the dissent, appellants do not raise an issue regarding the jury’s verdict to return the hand money to the buyer nor do they claim that the Statute of Frauds was explained incorrectly. Appellants raise only one issue. They claim that "THE STATUTE OF FRAUDS DOES NOT PRECLUDE A SUIT FOR DAMAGES WHERE THE SUCCESSFUL BIDDER AT AUCTION BREACHES AN ORAL AGREEMENT TO PURCHASE REAL PROPERTY.” (Brief for Appellants at 10) (Emphasis added). Thus, they simply assert their claim to damages equal to the difference between the bid price and the proposed sale price, a claim which they argue is not precluded by the Statute of Frauds. It is this issue to which we direct our review.

4 . "... it is universally held that sales by auction are within the provisions of the Statute of Frauds to the same extent as any other sale ... relating to land.” Polka v. May, 383 Pa. 80, 83, 118 A.2d 154, 156 (1955).

5 . The dissent agrees with appellants and presupposes the existence of a breach by the buyer of a valid oral contract and characterizes the outcome as one where the buyer is given the opportunity to use the Statute of Frauds as a sword. In the instant case, the jury was informed of the three contentions of appellee and the alternative theories of appellants. The judge never implied which was the correct theory but instead apprised the jury of the formal requirements of the Statute of Frauds and the effect of the nondisclosure of a latent defect so that the jury could employ such legal precepts as tools with which to form their verdict, thereby choosing the legally acceptable theory. The judge informed the jury:

“When there exists in the property, which is the subject of a sale — this is to help you in determining some of these things that you must determine — latent defects or hidden conditions not discoverable on a reasonable examination of the property, the seller, if he has knowledge thereof, is bound to disclose such latent defects or conditions to the buyer, and his failure to do so may be made the basis of charge of fraud, or a basis to rescind the contract. If the condition is readily ascertainable upon a reasonable examination, then the seller is not under a duty to disclose.” (T-145)

In light of the jury’s findings, the buyer was permitted to avoid the purchase on the basis of the existence of a latent defect. See infra at 5.

6 . Appellants’ reliance on Harris v. Dawson, 479 Pa. 463, 388 A.2d 748 (1978) is misplaced as that case involved a written contract for the sale of real estate.

We note that there is also some question as to whether appellants could successfully prove a direct causal relationship between appellee’s action in rescinding the agreement and the drop in appellants’ sale price.

7 . It should be noted that appellee herein was able to avoid the contract through appellants’ fraudulent concealment of a latent defeet. We do not decide whether she could have recovered damages for her loss of the bargain. See, Seidlek v. Bradley, supra.

8 . This issue is omitted from appellants’ Statement of Questions Involved. Although normally no point is to be considered which is not set forth, because the issue was raised below, addressed by the lower court and covered at length in appellants’ brief, in the interests of fairness we will dispose of the issue. See Pa.R.A.P. 2116, In Re Davis, 288 Pa.Super. 453, 432 A.2d 600 (1981), Commonwealth v. Jones, 256 Pa.Super. 366, 389 A.2d 1167 (1978).

9 . The dissent further asserts that because the jury was instructed that the buyer and seller both must sign an agreement to satisfy the Statute of Frauds, the jury was misled into finding that there was no written contract. On appeal, neither party asserts the existence of a written contract. Thus, the dissent reaches an issue which was not raised by the parties and which has therefore been waived. It should also be noted that the auctioneer’s signature on the Buyer’s Agreement was inserted by his wife.