This section is from the book "A Treatise On The Construction Of The Statute Of Frauds", by Causten Browne. Also available from Amazon: A treatise on the construction of the Statute of frauds.
§ 437. We now come to consider the doctrines which courts of equity maintain and apply in cases where verbal contracts, such as the Statute of Frauds has required to be put in writing, come before them. These courts, as has been many times affirmed by the wisest and most learned of their judges, are as much bound by the express provisions of the statute as courts of law. They cannot in general specifically enforce contracts embraced by them, any more than courts of law can give damages for their non-performance. But they have always been clothed with the salutary power of preventing fraud, or affording positive relief against its consequences; and this power they have not hesitated to exercise by compelling the specific execution of a verbal contract to which the provisions of the Statute of Frauds apply, where the refusal to execute it would amount to practising a fraud. In so doing they disclaim the power of ingrafting exceptions upon the statute, but proceed upon the ground that to prevent fraud is their supreme duty as courts of equity and conscience.
§ 438. It is, indeed, often said that as the statute itself was intended for the suppression of frauds, it is but subserving more effectually the ends of its enactment for courts of equity to interpose, and prevent it from being made, by the liberty which it affords a party of protecting himself under its cover, the very engine and instrument of fraud. To this view it might be replied, however, that the fraud which the statute was intended to suppress consists in the assertion of a contract which was never made, whereas the fraud against which courts of equity, in the cases we have to consider, afford relief, consists in the repudiation of a contract which has been made, and upon which an innocent party has actually proceeded to do that for which the jurisdiction of the law courts affords him no just recompense. Again, it seems to be no less than a contradiction in terms to say that the object of a statute is promoted by rejecting its authority. The correct view appears to be that equity will at all times lend its aid to defeat a fraud, notwithstanding the Statute of Frauds; and upon this simple ground it is believed that the many decisions in equity which it is now our duty to examine will be found substantially to rest.
§ 439. The fraud against which equity will relieve, notwithstanding the statute, is not the mere moral wrong of repudiating a contract actually entered into, which, by reason of the statute, a party is not bound to perform for want of its being in writing.1 This was early laid down by Lord Macclesfield, Chancellor, in a case arising upon a promise of a defendant, about to marry, that his wife should enjoy all her own estate, to her separate use after the marriage, which promise, as one made "upon consideration of marriage," could not regularly be enforced. His Lordship declared that "in cases of fraud, equity should relieve, even against the words of the statute; as if one agreement in writing should be proposed and drawn, and another fraudulently and secretly brought in and executed in lieu of the former; in this or such like cases of fraud, equity would relieve; but where there is no fraud, only relying upon the honor, word, or promise of the defendant, the statute making those promises void, equity will not interfere." 2
1 See § 94, ante.
2 Montacute v. Maxwell, 1 P. Wms. 620; s. c. 1 Stra. 236, nom. Mountacue v. Maxwell; s. c. 1 Eq. Cas. Abr. 19, nom. Maxwell v. Montacute; s. c. Finch. Prec. Ch. 526, nom. Maxwell v. Mountacute, Schmidt v. Gatewood, 2 Rich. (S. C.) Eq. 162; Kinard v. Hiers. 3 Rich (S. C.) Eq. 423; Whitridge v. Parkhurst, 20 Md. 62; McClain v. McClain, 57 Iowa, 167; Caylor v Roe, 99 Ind. 1; Jackson v. Myers, 120
§ 440. This distinction commends itself at once as one which must be regarded, or courts of equity be deemed not at all bound by the Statute of Frauds. Mr. Justice Story has, indeed, dissented from it in the following strong language: "I doubt the whole foundation of the doctrine, as not distinguishable from other cases, which courts of equity are accustomed to extract from the grasp of the Statute of Frauds."1 This doubt does not appear to have been asserted in his Commentaries, and, as he says himself, it was unnecessary to act upon it in the case before him; and, although there are in some late cases2 expressions from which the question seems to be considered in some degree an open one, at least where the contract is one of marriage settlement, no decision has ever passed in opposition to the ancient doctrine.
§ 441. A simple illustration of the rule that when the Statute of Frauds has been used as a cover to a fraud, equity will relieve against the fraud, notwithstanding its provisions, is found in a case reported by Viner, and stated by him to have occurred in Lord Nottingham's time, and to have been the first instance in which any equitable exception to the statute appears. There was a verbal agreement for an absolute conveyance of land, and for a defeasance to be executed by the grantee; but he, having obtained the conveyance, refused to execute the defeasance and relied upon the statute; but his plea was overruled, and he was compelled to execute according to his agreement.8 Here the attempted
Ind. 504; Dnnphy v. Ryan. 116 U. S. 491; Patton v. Beecher, 62 Ala. 579; Crabill v. Marsh, 38 Ohio St. 331.
1 In Jenkins v. Eldredge, 6 Story, 292, quoted ante, § 112, note.
2 In De Biel v. Thompson, 3 Beav. 469, Lord Langdale, M. R., passed it by as a question which it was unnecessary to decide; and in Surcome v. Pinniger, 3 De G.. M. & G. 571, Lord Justice Knight Bruce said that it was probably true that marriage only would not suffice understandings, or promises stated in the bill. The case was reported to the full court, it being found as a fact that the plaintiff believed, with reason, that the money had been advanced as a loan and that the defendant would, on repayment of it, reconvey the property. The opinion of the court, by Wells, J., after pointing out that the plaintiff was precluded by his deed, and its recitals and covenants, from setting up any trusts by implication against its express terms,1 and also that the case was not one showing any breach of an agreement to execute a written defeasance, but was "a transaction between borrower and lender, and not a real purchase," proceeds to discuss the question, can equity relieve in such a case? It says that the parol evidence is admissible, "not to vary, add to, or contradict the writings, but to establish the fact of an inherent fault in the transaction or its consideration, which affords ground for avoiding the effect of the writings, by restricting their operation, or defeating them altogether." The evidence is admissible to show that the transaction was not in reality a sale, but a pledge; and when this fact is clearly established,2 the deed, which no longer truly represents the nature of the transaction, will be construed as constituting a mortgage, or defeasible conveyance. This doctrine, say the court, "may be adopted without violation of the Statute of Frauds, or of any principle of law or evidence; and, if properly guarded in administration, may prove a sound and salutary principle of equity jurisprudence. It is a power to be exercised with the utmost caution, and only when the grounds of interference are fully made out, so as to be clear from doubt." This case, which is here noticed at length on account of its careful and thorough statement and dicussion of the question involved, is entirely in accordance with the current of judicial opinion on the point.1