Brandeis v. Neustadtl

By,< the Court,

DIXON, C. J.

There is no doubt that many cases may exist where tbe purchaser of real estate under a binding executory contract of sale, bas a choice among several modes of redress afforded by law against tbe seller, for a breach of such contract. He may go into a court of equity and compel a specific performance, or sue at law upon tbe contract and recover tbe damages which be bas sustained; or-be may abandon it altogether, and bring bis action for tbe price paid and interest, as for money bad and received to bis use. But I doubt whether under a statute like our own, all these remedies- can at any time be said to be open to tbe purchaser under a verbal or unwritten contract of purchase, except in the single instance of a part performance, which, by the terms of the statute itself, is exempted from its operation.. Indeed I am at a total loss to discover any sound or rational principle upon which either of tbe two first courses can be adopted or sustained in cases of verbal contracts, save such as have been partly performed, and then only tbe first or equitable proceeding to compel specific performance. There is a plain and most important difference between tbe phraseology of our statute and that of tbe English statute, 2.9 Car.. H,, and of tbe statutes of most of tbe states of tbe union, upon this subject. The fourth section of the English statute provides, among other things, that no action shall brought upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or by some person thereunto by him lawfully authorized. The same or similar language, “ no action shall be brought whereby, &c.,” or that which is of lite effect, “no evidence of any such contract shall be competent unless it be in writing and signed by the party to be charged, or his lawfully authorized agent,” occurs in the statutes of all the states excepting five, among which are Wisconsin and New York. In the latter state, a statute in terms like the English prevailed down to the revision in 1830, when it was abolished, and the present statute, of which ours is a transcript, was enacted.

' Our statute is entirely silent as to the bringing or maintaining of actions upon such contracts, or the kind of evidence by which they shall be established, but the 8th section (chap. 106), declares that 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, expressing the consideration, be in writing, and be subscribed by the party by whom the lease or sale is to be made. By the 10th section it is enacted that nothing therein contained shall be construed to abridge the powers of courts to compel the specific performance of. agreements, in cases of part performance of such agreements.

By the common law, such contracts were valid and obligatory, and actions could be maintained upon them in courts of law as well as equity. The statute of England, and those which are copied after it, do not touch the contracts embraced in them, nor declare that they shall be illegal or void unless put in writing. They do not affect their substance, but merely declare that no action shall be brought upon them unless they are in writing, and signed by the party to be charged ; or, what amounts to the same thing, they prescribe as a rule of evidence, that in all actions where an enforce-meirt ^em sought, oral proof of them shall not be admitted. Accordingly where those statutes prevail, contracts which were legal and actionable before the statute, are legal and they may be acted on and enforced by the courts whenever the proofs consist of such waitings as the statutes require. But the effect of statutes which reach contracts themselves, and make them void, is widely different from that of those which extend to the remedy only, and make them simply not actionable. It may be very true that in many cases, the legal effect of statutes of the latter kind is the same as if they had declared the promises or agreements void; but in many others, the consequences of considering them void, and of considering them simply not actionable, are very different. This distinction might be illustrated by reference to a great number of cases to be found in the books, but in none more aptly and pointedly than in two which were heretofore decided in this court, and which arose under two statutes formerly in force, regulating the sale of spirituous and intoxicating liquors. In the first case (Johnson vs. Meeker, 1 Wis., 436), where the cause of action, being two promissory notes given for the price of a quantity of liquors purchased by the makers, accrued during the continuance of the statute of 1849, but the suit was commenced after its repeal, it was determined that the action might be maintained, notwithstanding the repealed statute, which was in force when the liquors were sold and the notes executed, provided that no suits for liquor bills should be entertained by any of the courts of the state; and that whenever it should appear to any court before which a suit might be pending on a promissory note, that such note was given, in whole or in part, for liquor bills, such court should immediately dismiss such suit at the cost of the plaintiff. The statute did not make the notes void, but suspended the remedy merely, which, by its repeal, was at once restored. The other (Gorsuth vs. Butterfield, 2 Wis., 237) was a transaction of a similar character, which took place under the act of 1850. The action was commenced after the act was repealed, upon a promissory note given while it was in force, for a retail liquor bill. The act declared that all notes, accounts or evidences of debt, given for such bills, should be void. It was held that as it did not affect the remedy simply but cause of action itself, by declaring that it should have no legal existence, the legislature could not, by a repeal of the law or otherwise, restore it, or give vitality to the supposed contract out of which it arose.

A contract declared void by statute, is in all respects a nullity. It cannot for any purpose be considered as ever having had a being or existence. Excepting the single case reserved from its operation, all verbal contracts for the sale of lands or any interest in them, are, under our statute, as if no words had ever been spoken concerning them, and no negotiations whatever been had between the parties; and I confess my utter inability to perceive, how, upon any acknowledged principle of jurisprudence, they can be treated for any purpose as ever having been made at all. If in the construction of this statute, we are to be governed by the same principles which governed the court in the decision of Gorsuth vs. Butterfield, it is evidently quite useless for any party to ask us specifically to enforce, or to'give damages for the alleged breach of any such contract, except it likewise be made to appear that it had been partially performed, within the old equity rule on the subject; and then we can only compel a performance according to the reservation of power contained in the statute. If I am right in this position — and my judgment will permit me to take no other — it furnishes a complete answer to all those taken by the counsel for the respondent for the purpose of sustaining the judgment of the circuit court and establishing the respondent’s claim to a specific performance, as set forth in his answer. In this view, it makes no difference whether the original bargain was for a clear title or only for a warranty deed. It makes no difference whether the plaintiff acted in good or bad faith in abandoning his first form of action, in which he insisted upon a conveyance, and in changing it, by amendment, into a suit to recover back the money which he had paid. Nor is the demand for such relief aided by the consideration that the parol contract is definitely stated and admitted in the pleadings of both parties, and the statute not urSed as a ^a1' ’ nor ^ faob ^ ^ conceded, tbat tbe respondent bas been guilty of no lacbes, bad faitb, nor negligence ; nor tbat be bas offered to give a warranty deed, and tbat time was not of tbe essence of tbe agreement. It is immaterial for wbat purpose tbe plaintiff desired to make tbe purchase, and whether or not be was aware of tbe defects in tbe respondent’s title at tbe time tbe conveyance was made. All these and other like considerations, which might be very properly urged before a court sitting to adjudicate upon tbe rights of parties under a statute like tbe English, can be of no avail here. Tbe simple answer to them is, tbat whilst under tbe English and other similar statutes, there is a legal contract — one which tbe party is morally and conscientiously bound to perforin — under ours there is none— nothing which creates any right or imposes any obligation or duty whatever; and that all that the parties may say or do, short of reducing their agreement to writing, expressing the consideration, and causing it to be subscribed by the party making the sale, affords( the court no solid ground, or colorable pretext even, for noticing it or knowing that anything of the kind has ever transpired. Under the former statute, which affects the remedy or evidence merely, there is some plausibility in the argument that it is designed to guard against the frauds and perjuries occasioned by the free admission of parol evidence, and that where the contract is confessed in tbe answer or other pleading of the defendant or party to be charged, the danger is removed ; that the confession dispenses with the necessity of parol or other proof, and takes away the temptation to commit either, and makes a case not within the mischief which the legislature intended to obviate. There is, likewise, some plausibility in the further reason sometimes given, that the agreement, although originally by parol, is now in part evidenced by writing, under the signature of the party, which is a compliance with the terms of the statute. However sound this reasoning, which has met with strong disapprobation on the part of some of the greatest masters of the English and American equity system, may be conceded to be, it clearly has no application to a statute like ours. "When the statute does not disturb or annul tbe agreement, but suspends the remedy until written evidence of it, signed by the party be charged, shall be produced before the court, there may be some reason for saying that his written admission, made and exhibited to the court in the form of a pleading, satisfies it. It then becomes legal evidence of a legal contract. But there is obviously no propriety in saying the same thing of a void contract. No matter by what evidence such contract may be established, aside from the production .of the written document itself, it is nevertheless void. It is still a nonentity, which can neither be strengthened nor weakened by the admission of the parties, and to which the court, if governed by the legislative will and the well settled rules of the law, is powerless to impart life or vigor. It is all alike evidence of a void agreement, and the stronger and more satisfactory the proof, the more firmly should the court be convinced of its inability to interfere or aid in its enforcement. It is then not a question of the evidence of, or remedy upon, a previously existing legal agreement, but of power on the part of the court to create and enforcé one, between persons who, in contemplation of law, have never entered into any agreement at all. I do not believe that courts possess any such power, and if I did, or if it were a mere matter of policy and expediency, my respect for the harmony and consistency of legal principles, as well as what I conceive to be the lawful rights of suitors, would never permit me to exercise it. I do not believe that courts have any legislative power, by which they are enabled to dispense with the plain and positive provisions of statutes, which the legislature may constitutionally enact. Such statutes are guides for their action as well as for that of the whole people of the state. I cannot, therefore, assent to the position, that a party must insist on the statute in his complaint, or answer, in order to escape the performance of a void agreement. If he states facts which, when admitted or proved, show it to be void, that is sufficient. The facts being thus brought to its attention, it is presumed that the court knows the law, and will see that its mandates are complied with. If the parties are anxious to abide by such agreement, they have no need of the assistance of the court; ^ ^hey ^ire tbat assistance, wben it is so entirely . unnecessary, tbey bave but to comply witb tbe statutory requirement, and tbe powers of tbe court will b*e successfully invoked. It can make no exceptions where none are made by tbe statute.

Tbe only circumstance wbicb will takesucb agreement out of tbe sweeping operation of tbe statute, is tbat wbicb tbe statute itself declares shall bave. tbat effect, and wbicb has already been adverted to, viz., a part performance of it. What constitutes such part performance has been already .determined by this court in tbe case of Blanchard v. McDougal, 6 Wis., 167. It is there said tbat 11 mere payment of a portion of tbe purchase money, unaccompanied by any other act, is not sufficient. But where possession is delivered and continued, upon payment of a considerable part of tbe purchase money, it will take tbe case out of tbe statute; for the reason tbat it would perpetrate a fraud upon tbe vendee to accept a portion of the contract price from him, induce him to move bis household goods upon tbe premises, or otherwise incur trouble or expense, and per-baps improve tbe same, and then to repudiate tbe contract because it was not in writing. Tbe object of tbe statute was to prevent frauds and perjuries, not to encourage them. Hence tbe delivery ofpossession, in addition to tbe payment of a portion of tbe purchase money, has been held to be essential to tbe claim for specific performance, and for obvious reasons.” And I may here add, tbat although these are tbe reasons assigned by tbe English courts of chancery, for creating an exception to a statute wbicb makes none, there is, is, my judgment, a much better and more substantial reason for allowing part performance to take a case out of our statute, wbicb is because tbe statute itself declares tbat it may bave tbat effect. It is not witb us, as witb them, a judicial, but a statutory exception. It is not legislation on tbe part of courts against tbe positive provisions of a statute, but a compliance witb them, and witb tbe plainly expressed will of tbe legislature; and hence is not subject to tbe strictures of Lord Redesdale in Lindsay vs. Lynch, 2 Scb. and Lefr., 4, upon tbe doctrines of tbe English courts upon tbe same subject, wbicb are quoted witb much apparent approbation by Judge Story in §766 of yol. 2, of Ms Equity Jurisprudence. A correct use of language would require us to say, that part performance shows that the contract is not within, rather than that it takes it out of, the operation of the statute. In this case it is admitted that the purchaser has not possession of the premises in question, and therefore a specific performance cannot be decreed for or against either party.

This yiew of the case renders it unnecessary for us to comment upon the supposed effect of the admissions contained in the plaintiff’s original complaint. But I may be permitted to say that if it were a case where such admissions might have been made to operate injuriously to him, in my opinion they should not. The change, or amendment, was allowed by the court upon his sworn statement of facts, and if such statement was then satisfactory, why should it not be afterwards, unless upon the trial it turned out to be untrue ? The affidavit itself discloses nothing which should cause suspicion, except it be the singularity of the mistake that occurred, which is fairly and reasonably explained. The testimony taken before the commissioner, and read at the hearing, fully corroborates it, and shows, that as to some of the averments of the original verified complaint, he was either laboring under a mistake, or else he was wilfully and corruptly false. He swears without contradiction or impeachment, that so far as he was concerned, they were introduced through misapprehension on the part of his counsel, and that he did not know that they were contained in the complaint. Why should he be prejudiced by such an innocent mistake ? Clearly no good reason can be given.

The next and most difficult question presented in cases of this kind, is as to the right of the purchaser under such void agreement, to sue for and recover back from the seller, the money or other property which he has paid. It is insisted by the counsel for the respondent, that so long as the seller is in no default, and is ready and willing to perform the agreement on his part, according as it is fulfilled by the purchaser, the latter is not at liberty to abandon it and recover back what he has paid. This is certainly the rule un der tbe English statute, and those which are fashioned after . it. But I very much doubt whether the same rule ought to be applied under ours. It seems to me that the same objection exists to its application, as to the application of that by which, under the former, oral agreements admitted by the pleadings, are specifically enforced when the statute is not relied upon as a bar. The decision of this question is not, as will be presently seen, strictly necessary to a determination of the controversy between these parties, and therefore we reserve it. But for myself I may say that my present impression is, that the purchaser under such circumstances is entitled, after a demand for the repayment or restoration by the seller of the money or property paid or delivered, and a reasonable time given him for that purpose, or after a refusal by him to repay the money or restore the property, to maintain such action. The agreement being void, it is money paid or property delivered without any consideration whatever, from which the law implies a promise of repayment or redelivery, unless the transaction is interdicted by some rule of public policy or sound morals. And I think it is not. The general rule is, that money paid upon an illegal consideration, or expended in an illegal or immoral transaction, cannot be recovered back. But here it is neither. There is nothing criminal or wrong in either. The consideration is not illegal, because the sale of lands by one person to another is perfectly lawful and proper. Such sale is not only not prohibited by'the statute, but on the contrary, its legality is expressly recognized by the affirmance of contracts for that purpose, provided only they are evidenced in the way pointed out by it. The transaction is not immoral for the same reasons. The defect consists in the failure or neglect of the parties to go far enough in the performance of that which they may legally do, instead of their attempting to perform what the law forbids. The parol bargain itself is not only innocent but serviceable, as it must precede the written consummation of almost all transactions of the kind. But where they stop with the parol bargain, the statute declares the contract void, not because it is illegal, immoral or fraudulent, but because they omitted to take another step, made necessary to its validity in law. There being neither fraud nor illegality, why should the purchaser not be permitted to cover back the money which he has paid ? The case, it seems to me, would not fall within any settled principle which would cut him off. The parol contract, being void, furnishes no consideration for the payment. A consideration, to be sufficient, must be either a benefit to one party or a damage to the other. The purchaser can derive no benefit from the supposed contract. Nothing passes to him by virtue of it; he obtains no interest in the land, and no promise or agreement on the part of the seller to convey him any; and he can never derive any advantage from what has transpired, except it be as a matter of favor on the seller’s part. The latter suffers no damage by what has happened. He has lost or parted with nothing. His interest, control and ownership of the land remain the same, and he is at liberty to do with it just as he might have done before. It appears to me that such a case must come directly within the authority of Fowler vs. Shearer and Shearer vs. Fowler, 7 Mass., 14 and 31, and other cases hereafter cited. The case of Tollenson vs. Gunderson, in our own court (1 Wis., 113), seems also equally in point.

The reason given for not allowing the purchaser under the English statute, and those like it, to repudiate the agreement and recover back what he has paid, so long as the seller is in no default, is very obvious. But it cannot be given here. It is that the agreement is not void but voidable, or, to speak more correctly, not actionable. Sims vs. Hutchins, 8 S. & M., 328; Newton vs. Swazey, 8 N. H., 9; Shaw vs. Shaw, 6 Vt., 69; Philbrook vs. Belknap, id., 383; Dougherty vs. Goggin, 1 J. J. Marsh, 373; Bedinger vs. Whittamore, 2 id., 552; and Minns vs. Morse, 15 O., 568. The repeal of the statute in such case would at once enable the purchaser to maintain his action upon the agreement. With us it is otherwise. Its repeal would leave Mm in no better situation than formerly. There is in that case a valid living contract between the par: ties, and though the remedy be suspended, it binds the conscience, and, until it has been broken, constitutes a sufficient consideration for the payment of the money. There being thus a good consideration, if the purchaser chooses to rely _ upon the honor of the seller for the performance of his contract, instead of putting it in such form that the courts can enforce it, it is no injustice to say to him that he shall not ignore it, at least until that honor has been violated. There is a contract both in law and in fact, to which the payment may be and is in reality applied, and it would be a hardship, so long as the seller is able and willing to comply, to permit the purchaser to deny it and turn around and treat him as a borrower. But under our statute there is no contract; nothing which can be the foundation of any legal or equitable obligation; and how can the court create one ? How can it say to the supposed purchaser that he must buy and pay for a tract of land, simply because the imagined seller avers himself to be ready and willing to sell and convey, when it is legally informed that no agreement to that effect was ever made between them ? How can it say that the money which has passed was a payment, when it appears that there was no consideration or contract to which it could be applied ? And how can it determine that the seller has abided by his agreement, and is able and willing to perform, when it is shown that he made no agreement, and that there was nothing which he promised to do ? To me these things seem logically impossible. So far as the law is concerned, the whole affair is a mere false show, except the delivery of the money. It finds one party in the unexplained possession of the money of another, which he knowingly received without any legal equivalent, and not as a gift, and which he has no legal or equitable right to retain; and ,why should he not refund?

I am aware that the opposite doctrine is maintained in Dowdle vs. Camp, 12 John., 451, though a different opinion is intimated in Rice vs. Peet, 15 id., 503. But both cases arose under the old statute of New York, and the former is therefore undoubtedly the correct law. I know also that it has been indirectly sustained in Abbott vs. Draper, 4 Denio, 51, and fully, decided by the present supreme court in Collier vs. Coates, 17 Barb., 471, both of which come under the statute of 1830. I say indirectly sustained in the former case, because tbe question was not directly before tbe court, and because Chief Justice BRONSON speaks doubtingly, and in tbe positive and unequivocal manner wbicb usually cbar-acterizes bis opinions. After an attentive perusal, I think tbe doctrine cannot be said to bave received bis sanction. Tbe vendee, by whom tbe action was instituted, bad taken possession and made considerable payments, and, without restoring tbe possession or demanding payment, bad brought suit to recover back tbe money paid, on tbe ground that tbe contract was void. I bave already attempted to show that such a case is not within tbe statute. No reference is made to tbe language of tbe statute, and no notice taken of tbe difference between it and tbe English, or of the change wrought by tbe revision of 1830, and Dowdle vs. Camp is tbe only authority cited. Tbe following language occurs in tbe opinion: “ But when tbe vendee has received possession and paid a part of tbe price, tbe contract is not so utterly void that be can recover back tbe money just as though there bad never been an agreement. If be can recover at all, so long as tbe vendor is not in tbe wrong, be must, at tbe least, first restore tbe possession, and then demand tbe repayment of tbe money. It is impossible to maintain that be can retain tbe possession and yet recall tbe money. And though be has' never bad the possession, nor any other benefit under tbe contract, yet as be did not part with bis money as a loan, but as a payment, he cannot recover it back without first demanding it from tbe vendor and giving him notice that tbe contract is abandoned. When a man has paid money as due upon a contract to another, and there is no mistake, and no fraud or other wrong on tbe part of tbe receiver, there is ’ no principle upon wbicb it can be recovered back until after demand has been made.”

In Collier vs. Coates there is an opinion of some length, and several authorities are cited. But tbe reasoning is entirely unsatisfactory to me, because tbe grand distinction between tbe various statutes is wholly lost sight of The cases referred to arose under statutes tbe terms of wbicb are very different, and hence they are quite inapplicable. It is assumed that there is no difference between tbe case of a ven-dee in possession and one to whom possession lias never been delivered. It is likewise assumed that there is a promise on the part of the vendor, which promise is declared to constitute a sufficient consideration for the money parted with. These and other like positions constitute the premises from which the conclusion is drawn.

But the change occasioned by the revision of 1830 has not escaped the observation of the courts of New York. It is noticed by the Chancellor in Coles vs. Bowne, 10 Paige, 536; in McWhorter vs. McMahan, id., 386, and in Champlin vs. Parish, 11 id., 410, and probably in several other instances. It is likewise clearly pointed out in Miller vs. Pelletier, 4 Edw. Ch. R., 102. The latter is also an authority directly favoring the right of the plaintiff to sue for and recover back the money paid. It was a bill of interpleader, and the question to be decided between the vendor and the vendee was as to which of them was entitled to a sum of money which the latter had paid upon a contract for the purchase of real estate declared void by the statute. It was shown that the vendor was able and anxious to complete the sale, and had executed and tendered the vendee a deed; but the vice-chancellor said : “ The contract must be deemed void, as the statute declares it to be. The subsequent execution and tender of the deed by the party does not remove the difficulty. This was not making the contract of sale, or the agreement for the sale to be made, as contemplated by the statute, but it was the intended fulfillment of the previously made supposed contract. If the deed had been accepted, then it would have been an executed contract, and all well enough ; but the purchaser had a right to repose, as he did, upon the statute, and to repudiate the transaction.” It was accordingly decreed that the money be returned to him, with costs to be paid by the vendor. Upon this question, see also Comyn on Contracts, 424, and authorities there cited; and Ins. Co. vs. Kip, 8 Cowen, 20; and Munt vs. Stokes, 4 T. R., 562.

But I have already said that the decision of this question is not strictly necessary to the determination of the present case. The record shows that in March, 1858, which was some six months after tbe making of the supposed contract, the respondent agreed with the appellant to return him money which he had received, or to give him a clear title to the lot, within two weeks from that time. This agreement is established by the testimony of three disinterested witnesses, in addition to that of the appellant. Against it there is no evidence except that given by the respondent, and it is not positively denied by him. He did not make the title clear within the time specified ; and I suppose no one will dispute that the previous payment of the money upon the void but innocent agreement, formed a good moral or conscientious consideration for the promise to repay it. Whatever doubt there may be about the appellant’s right of recovery upon other grounds, upon this we say there is none.

The judgment of the circuit court must, therefore, be reversed, and the case remanded for further proceedings in accordance with this opinion.

Case Details

Case Name: Brandeis v. Neustadtl

Court Name: Wisconsin Supreme Court

Date Published: Jan 2, 1860

Citation: 13 Wis. 142

Court Abbreviation: Wis.