Monday, March 21, 2016

If It Isn't in Writing It Probably Didn't Happen: New Opinion Touches on the Texas Statute of Frauds and Real Estate

In a short opinion, the Fourth Court of Appeals appears to have reaffirmed the importance of the statute of frauds in agreements related to real estate. However, its "re-affirmation" turns on a legal technicality, and the Court could well have missed an opportunity to clarify and expound-upon the law relating to a legally-recognized exception to the SOF, and done so under an interesting set of facts.

In its opinion issued in Bakke Development Corp. v. Albin on March 16, 2016, the 4th Court upheld a summary judgment granted by the trial court on a waiver-type basis by focusing on the fact that one of the possible grounds upon which the summary judgment could have been rendered was not challenged by the Appellant (Bakke). 

Bakke did challenge the trial court's ruling on the "traditional" portion of the Motion for Summary Judgment granted in Albin's favor, but apparently failed to challenge the no-evidence portion on appeal.  In such instances,"we must uphold the summary judgment" said the 4th Court, citing Krueger v. Atascosa Cnty., 155 S.W.3d 614, 621 (Tex. App.—San Antonio 2004, no pet.) (“Unless an appellant has specifically challenged every possible ground for summary judgment, the appellate court need not review the merits of the challenged ground and may affirm on an unchallenged ground.”) and Lowe v. Townview Watersong, L.L.C., 155 S.W.3d 445, 447 (Tex. App.—Dallas 2004, no pet.) (“Because summary judgment may have been granted on the unchallenged no-evidence grounds, we must affirm the trial court’s summary judgment.”). Ultimately, the Court concluded that "the no-evidence grounds raised in Albin’s hybrid motion for summary judgement could, if meritorious, fully support the judgment..." and since they were not challenged, the trial court's ruling could not be disturbed.

The facts and trial court's grant of summary judgment in the case are worth review: 

Bakke, a real estate development firm, contacted the Albins to discuss the prospect of a joint venture to develop real property in Boerne that the Albins had inherited. Under the proposal, the Albins were to dedicate their land to the venture, and Bakke would contribute finances and development expertise. The ultimate objective was to develop the property for apartment and mixed-use.

The parties never signed a written partnership agreement or otherwise  signed any writing embodying the terms of the the alleged oral agreement. Rather, it appears that both parties employed lawyers for the purpose of negotiating the terms of a limited partnership agreement, but ultimately reached an impasse. After the negotiations were terminated, Bakke filed suit in Kendall County District Court alleging that there was already an oral general partnership that achieved the same ends as would have the limited partnership that could not be negotiated, that Albin had breached the fiduciary duty owed to Bakke, constructive trust, fraud, unjust enrichment, and promissory estoppel.

The trial court granted Albin's “Motion for Partial Summary Judgment on Applicability of the Statute of Frauds” and adjudged that “the Texas ‘statute of frauds,’ Texas Business and Commerce Code Section26.01, applies to the oral agreement alleged by the Plaintiff in this cause and prohibits judicial enforcement of that agreement under any theory or cause of action for which the statute of frauds is a defense recognized under law.”  Bakke later amended its claims in the suit, and Albin then filed a hybrid motion for summary judgment, asserting that the agreement was unenforceable as a matter of law, and that there was no evidence to support Bakke Corp.’s claims for breach of the partnership agreement, breach of fiduciary duty, fraud, constructive trust, and unjust enrichment. This MSJ, too, was granted by the trial court, but the court did not specify whether the "traditional" or "no-evidence" grounds formed the basis for the Summary Judgment.

On appeal, Bakke failed to challenge the no-evidence basis (if any) of the trial court's grant of Albin's hybrid MSJ.  As described above, this defect in the appeal resulted in a technical victory for Albin without the Fourth Court addressing the merits of the parties' arguments.

After reading the parties' briefs, this commentator believes that the trial court (and in-turn the Fourth Court) reached the right decision. However, the Court of Appeals passed on a golden opportunity to expound-upon and clarify the "Partial Performance Exception" to the Texas Statute of Frauds, as it relates to agreements for the conveyance of real estate. 

Under that exception, if an agreement involves an oral (non-written) conveyance of real property, it may be removed from the Statute of Frauds upon proof of: 1) payment of consideration; 2) possession by vendee that is exclusive and adverse to the owner of title of the land; and 3) the making of valuable improvements upon the land without consent of the conveying party. Carpenter v. Phelps, 391 S.W. 3d 143, 149 (Tex. App.—Houston [1st Dist.] 2011, no pet.); see also Pappas v. Gounaris, 311 S.W.2d 644, 646 (Tex. 1958). 

While Bakke alleged facts that might have fit into the Partial Performance Exception, the Court never reached that issue. Thus, we'll have to wait for another day and another case for the Texas courts of appeals to develop this important concept in Texas real estate law.

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