This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
A contract by which one party agrees to acquire the legal title by purchase at a judicial sale and to recognize and protect a preexisting equitable interest of another in such land is not within the statute, where the legal title has been acquired under such contract. A contract whereby A agrees to purchase and does purchase mortgaged realty at a foreclosure sale and hold it subject to B's right to redeem it is not within the statute of frauds,1 as where the mortgagee agrees to buy it in for the amount of the debt if the mortgagor agrees to pay costs and attorney's fees,2 or a third person agrees to buy the realty and then sell it and apply the proceeds to the mortgage debt and costs, the balance if any to go to the mortgagor.3 So a contract whereby one of two joint mortgagees is to buy in the mortgaged property at judicial sale for the benefit of both is not within the statute;4 nor is a contract whereby a second mortgagee agrees to buy in the property and pay off the first mortgage.5 So a contract whereby a vendor of realty allows such realty to be sold under proceedings foreclosing his lien6 is not within the statute. So where realty is sold on an order of the Probate Court, entered by consent in an action to pay the debts of the decedent, the oral contract under which such order was entered by consent may be shown.7
3 Hemmings v. Doss, 125 N. C. 400; 34 S. E. 511.
4 Hughes v. Lansing, 34 Or. 118; 75 Am. St. Rep. 574; 55 Pac. 95.
5 Allen v. Caylor, 120 Ala. 251; 74 Am. St. Rep. 31; 24 So. 512.
6 Townsend v. White, 102 la. 477; 71 N. W. 337; Loewen v. Forsee, 137 Mo. 29; 59 Am. St. Rep. 489; 38 S. W. 712; reversing on rehearing, 35 S. W. 1138.
7 Allen v. Caylor, 120 Ala. 251; 74 Am. St. Rep. 31; 24 So. 512.
8Goldbeck v. Bank, 147 Pa. St. 267: 23 Atl. 565.
9 Whitehead v. Jones, 197 Pa. St. 511; 47 Atl. 978.
10 City of Natchez v. Vandervelde, 31 Miss. 706; 66 Am. Dec. 581.
11 Winberry v. Koonce, 83 N. C. 351.
1 Turpie v. Lowe, 158 Ind. 314; 92 Am. St. Rep. 310; 62 N. E. 484; Butt v. Butt, 91 Ind. 305; Reyman v. Mosher, 71 Ind. 596; Fishback v. Green, 87 Ky. 107; 7 S. W. 881; Griffen v. Coffey, 9 B. Mon. (Ky.) 452; 50 Am. Dec. 519; Leahey v. Witte, 123 Mo. 207; 27 S. W. 402; Turner v. Johnson, 95 Mo. 431; 6 Am. St. Rep. 62; 7 S. W. 570; Brown v. Jackson (Tex. Civ. App.), 40 S. W. 162; McGinnis v. Cook, 57 Vt. 36; 52 Am. Rep. 115.
In some of these cases the person whose interest was to be protected took possession of the realty and such part performance took the contract out of the statute.8 This element of part performance by change of possession is not, however, a necessary element to the validity of such contracts. They are held not within the statute on the same principle that a deed absolute in form may be shown to be a mortgage. The purchaser under such a contract is held as trustee for the adversary party to prevent him from retaining the benefits of the fraud by means of which he has acquired the legal title.9 Furthermore, they are "The statute of frauds cannot be invoked by one who purchases with such an agreement, and this for the further reason that the statute was never designed to aid a party in the per substantially contracts to extend the period of redemption.10 If, however, such a contract is made after the sale, so that the purchaser does not acquire the legal title under such contract, the statute of frauds applies.11 However, if the purchaser acquires the legal title, subject to the right of the mortgagor to redeem, given him by the statute under which the property is sold, an oral contract to extend such period of redemption is not within the statute.12 A contract made after the time of redemption has expired to convey the realty to another is within the statute.13
2 McOuat v. Cathcart, 84 Ind. 567. Contra, Levis v. Kengla, 8 App. D. C. 230; citing May v. Sloan, 101 U. S. 231.
3 Murphy v. Murphy, 84 111. App. 292; Jones National Bank v. Price, 37 Neb. 291; 55 N. W. 1045; Mc-Ginnis v. Cook, 57 Vt. 36; 52 Am. Rep. 115.
4 Hunt v. Elliott, 80 Ind. 245; 41 Am. Rep. 794.
5 Turner v. Johnson, 95 Mo. 431; 6 Am. St. Rep. 62; 7 S. W. 570.
6 Morris v. Gaines, 82 Tex. 255; 17 S. W. 538.
7Suber v. Richards, 61 S. C. 393; 39 S. E. 540.
8 Morgan v. Battle, 95 Ga. 663; 22 S. E. 689; Fishback v. Green, 87 Ky. 107; 7 S. W. 881; Watts v. Witt, 39 S. C. 356; 17 S. E. 822. See Sec. 719, et seq.
9Leahey v. Witte, 123 Mo. 207; 27 S. W. 402; Tatem v. Powell, 50 N. J. Eq. 316; 24 Atl. 436.
If the person to whom by the oral contract the realty is to be conveyed has no interest therein outside of his contract, the statute applies.14 While such contracts are usually made with reference to judicial sales, the same principles apply to private sales. A contract whereby A agrees to furnish B money to enable him to redeem mortgaged realty, and B agrees to and does convey to A, and A further agrees to sell such realty and pay the balance over to B is not within the statute.15