Opinion
No. 11-99-16717
September 20, 2001
Jack N. Hardwick, Attorney for Claimant, Santa Fe, NM.
Thomas E. Tapia, Attorney for Debtor, Albuquerque, NM.
MEMORANDUM OPINION
THIS MATTER came before the Court on the Debtors Objection to Claim of Dwight Hartwick (Objection to Claim). The Court held a final hearing on the Objection to Claim on August 8, 2001. Dwight Hartwicks claim is based on an oral agreement with the Debtor to perform pre-development services in connection with certain potential real estate development projects. At the close of the hearing, the Court made the following findings of fact: 1) the amounts paid to Mr. Hartwick after funding of the Stone Ridge project in McKinney, Texas fully compensated Mr. Hartwick for any pre-development services performed in connection with any projects contemplated in McKinney, Texas; and 2) the hourly rate of compensation that the parties had agreed to is $100.00 per hour, which is not an unreasonable rate. Based on these findings, the Court concluded that any portion of Mr. Hartwicks claim relating to the McKinney project should be disallowed. At closing argument, the Debtor raised the statute of frauds as a defense to bar any recovery, claiming that the oral agreement was for services longer than one year. The Court directed counsel to provide letter memoranda on this issue. After reviewing the memoranda, considering the evidence and the relevant case law, and being otherwise fully informed, the Court finds that the parties reached an oral agreement which entitles Mr. Hartwick to an unsecured claim in this bankruptcy proceeding; however, further proceedings are necessary to determine the amount of the claim.
FACTS AND DISCUSSION
A. The Agreement
Both Mr. Hartwick and Mr. Willis agree that they had an oral agreement whereby Mr. Hartwick would assist Mr. Willis in the pre-development of certain real estate projects. They also agree that Mr. Hartwick was to be reimbursed for his out of pocket expenses incurred in connection with his pre-development services and that he would submit bills to Mr. Willis for those expenses. The portion of the agreement that is in dispute is the method of payment. Mr. Willis contends that Mr. Hartwick would be paid only if and when a project was funded. Under Mr. Willis view of the agreement, the funding of a project was a condition precedent to any payment due Mr. Hartwick.
Mr. Willis did, in fact, pay Mr. Hartwick for his expenses. No portion of Mr. Hartwicks claim is for reimbursement of out of pocket expenses. Mr. Hartwick also submitted invoices to Mr. Willis for services through March 1998, but submitted no invoices to Mr. Willis for services performed after that date.
Alternatively, Mr. Willis contends that the agreement is barred by the statute of frauds because it is an oral agreement for services not to be performed in one year. Mr. Hartwick asserts that his arrangement with Mr. Willis was two-fold. He would either receive compensation for his pre-development services from the funding of a project that went forward; or, he would receive payment for his pre-development services in the form of land owned by Mr. Willis and valued for purposes of the agreement at $6,000 per acre. At the time of the oral agreement, only ten-acre parcels of land were available. No specific parcel, or parcels, or any method for identifying one, was alleged to be part of the agreement.
Mr. Willis testified that he always maintained that he would not be able to pay Mr. Hartwick in cash for any services he performed. This is consistent with Mr. Hartwicks version of the contract that, in the event a project did not go forward, Mr. Willis would still compensate him, but in land, not money.
Mr. Hartwick testified that sometime after he began performing services pursuant to the oral agreement he picked out a specific ten-acre parcel of land as a goal to work toward. The Court finds Mr. Willis testimony that Mr. Hartwick would only get paid if a project got funded not credible.
After further weighing the evidence and the credibility of the witnesses, the Court finds that the terms of the oral agreement are as follows: 1) Mr. Hartwick was to perform pre-development services in connection with the development of certain real estate projects; 2) the hourly rate to be charged for these services was $100.00; 3) in the event a project went forward, Mr. Hartwick would be paid for his services through the funding of the project; 4) Mr. Hartwick was to be reimbursed by Mr. Willis for his expenses incurred in connection with his performance of the pre-development services; 5) if a project did not get funded, Mr. Willis agreed to compensate Mr. Hartwick for his services in the form of land, valued at $6,000 per acre.
B. The Statute of Frauds
The English statute of frauds requires that certain agreements must be in writing in order to be enforceable. The English statute of frauds has been adopted in New Mexico as part of the common law. Alvarez v. Alvarez, 72 N.M. 336, 341, 383 P.2d 581, 586 (1963). Oral agreements for services not to be completed in one year are barred by the statute of frauds. See, Skarda v. Skarda, 87 N.M. 497, 501, 536 P.2d 257, 261 (1975); Westerman v. City of Carlsbad, 55 N.M. 550, 553-554, 237 P.2d 356, 358-359 (1951). However, an oral agreement for services for an indefinite time period falls outside the statute of frauds. Kestenbaum v. Pennzoil Co., 108 N.M. 20, 23, 766 P.2d 280, 283 (1988) (. . . indefinite permanent employment contracts . . . fall outside the statute . . .) (quoting Hodge v. Evans Fin. Corp., 823 F.2d 559, 564 (D.C. Cir. 1987)). An agreement for services for an indefinite term falls outside the statute of frauds because the agreement could be performed within one year. Id. The oral agreement between Mr. Willis and Mr. Hartwick, though it, in fact, lasted longer than one year, was an agreement for services for an indefinite time period; therefore, it does not fall within the statute of frauds requiring written agreements for services longer than one year.
Section 4 of the English statute of frauds provides as follows: No action shall be brought upon any agreement that is not to be performed within the space of one year from the making thereof, 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 some other person thereunto by him lawfully authorized. Skarda v. Skarda, 87 N.M. 497, 501, 536 P.2d 257, 261 (1975) (citing Jennings v. Ruidoso Racing Association, 79 N.M. 144, 146, 441 P.2d 42, 44 (1968)).
Though not raised directly by the Debtor, an oral agreement does fall within the statute of frauds to the extent it characterized as an agreement for the conveyance of land. See, Boswell v. Rio De Oro Uranium Mines, Inc., 68 N.M. 457, 461, 362 P.2d 991, 995 (1961); Pitek v. McGuire, 51 N.M. 364, 370-371, 184 P.2d 647, 653-654 (1947). The oral agreement between Mr. Willis and Mr. Hartwick for the performance of services in exchange for land is unenforceable. Not only is the agreement not in writing, but the land is not identified with specificity. See, Pitek v. McGuire, 51 N.M. 364, 371, 184 P.2d 647, 654 (1947) (even when there is a writing, the property must be described sufficiently so that it is capable of identification). Given the fact that the parcels are ten-acre parcels, there would be no way to convey only a portion of a parcel in the event Mr. Hartwick failed to work enough hours to earn a full, ten-acre parcel.
Section 4 of the English statute of frauds concerning oral agreements for the conveyance of land provides as follows: No action shall be brought upon any contract or sale of 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 therewith by nim lawfully authorized. Pitek v. McGuire, 51 N.M. 364, 370-371, 184 P.2d 647, 654-655 (1947) (quoting 29 Charles II, C. 3).
Mr. Hartwicks claim does not seek to enforce this portion of the oral agreement. He has not requested specific performance of the oral agreement and conveyance of land. Such a claim would be barred by the statute of frauds. However, the terms of the oral agreement provide for only two compensation alternatives: 1) payment from funding when a project goes forward; or 2) payment in land. As previously discussed, Hartwick cannot sustain a claim for land because that portion of the agreement is unenforceable due to the statute of frauds. No project other than the McKinney project went forward; thus, the condition precedent to the other form of compensation contained in the oral agreement has not been met with respect to any other project. The Court therefore concludes that the oral agreement is unenforceable because it violates the statute of frauds. Mr. Hartwick cannot sustain a claim for breach of contract based on the oral agreement.
In a footnote contained in Dwight Hartwicks Memorandum Regarding Debtors Statute of Frauds Defense, Mr. Hartwick contends that his full performance of the contract would take the agreement for conveyance of real property outside the statute of frauds, citing Nashan v. Nashan, 119 N.M. 625, 894 P.2d 402 (Ct.App. 1995). Mr. Hartwick extends this notion too far. It takes more than full performance to remove an oral agreement from the operation of the statute of frauds. Among other things, the actions taken by the party seeking to enforce the oral agreement for the conveyance of land must be unequivocally referable to the agreement. See, Candelaria v. Sandoval, 84 N.M. 387, 389, 503 P.2d 1165, 1167 (1972); Alvarez v. Alvarez, 72 N.M. 336, 342, 383 P.2d 581, 585 (1963); Nashan v. Nashan, 119 N.M. 625, 630, 894 P.2d 402, 407 (Ct.App. 1995). . . . Here, Mr. Hartwicks pre-development services do not unequivocally relate to an agreement to convey land. They are easily explainable by the other provision in the oral agreement that he would be compensated from the funding of a project if and when a project was funded.
C. Restitution (Quantum Meruit)
Despite the unenforceability of the oral agreement, Mr. Hartwick still has a claim for the value of his services. See, Westerman v. City of Carlsbad, 55 N.M. 550, 555, 237 P.2d 356, 359 (1951) (noting that a party can sustain an action to recover the reasonable value of services rendered even if a contract cannot be enforced). A party to a contract unenforceable because of the statute of frauds can nevertheless maintain an action for restitution (provided he would otherwise have a claim for restitution), because restitution does not require the Court to enforce the contract. See Restatement (Second) of Contracts § 375 (1979 Main Vol.). Recovery is limited to the value of the services conferred. Even though the contract itself is unenforceable, the contract price is some evidence of the value of services. See, Clark v. United States, 95 U.S. 539 (1877); General Paint Corp. v. Kramer, 68 F.2d 40, (10th Cir. 1933); Restatement (Second) of Contracts § 375 (1979 Main Vol.); 21 A.L.R. 3d 9 § 4.
Here, the only evidence of the value of Mr. Hartwicks services is the term contained in the oral agreement between the parties that he would bill his time at $100.00 per hour. He stated that $100.00 was his normal hourly rate for architectural services, yet he conceded that the services he performed for Mr. Willis were not strictly architectural services. Absent any additional evidence as to the value of those non-architectural, pre-development services, Mr. Hartwick has failed to meet his burden to establish the amount of his claim based on the theory of quantum meruit. Mr. Willis did not raise the statute of frauds defense until closing argument on the final hearing on the Objection to the Claim. Because Mr. Willis did not raise the statute of frauds as a defense until closing argument, Mr. Hartwick was not given an opportunity to present additional evidence as to the value of his services. The Court allowed the parties to brief the issue of the statute of frauds after the close of the evidence. It would be inequitable to deny Mr. Hartwicks claim absent an opportunity to present further evidence in support of a claim based not on the oral agreement, but under a theory of quantum meruit.
The Objection to Claim merely claims that Mr. Willis is not indebted to Mr. Hartwick, that Mr. Hartwick has already been paid for his services rendered in connection with the Stone Ridge project, and that any claim for services rendered in connection with Mission Del Prado Verde should be a claim in the Prado Verde Ranch, Inc. and Prado Verde, Ltd. consolidated bankruptcy proceeding.
For the foregoing reasons, the Court concludes that the oral agreement between the parties is unenforceable, but that Mr. Hartwick is entitled to a claim for the value of his services. The Court will determine the amount of Mr. Hartwicks claim after further proceedings. This opinion constitutes the Courts findings of fact and conclusions of law in accordance with Rule 7052, Fed.R.Bankr.P. An appropriate order will be entered.