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Stewart v. Gray

Commonwealth of Kentucky Court of Appeals
Jun 19, 2020
NO. 2019-CA-000284-MR (Ky. Ct. App. Jun. 19, 2020)

Opinion

NO. 2019-CA-000284-MR

06-19-2020

FRANK STEWART; WILLIAM S. STEWART, JR.; MARY D. STEWART; AND LEISA STEWART APPELLANTS v. HENRY GRAY APPELLEE

BRIEFS FOR APPELLANTS: Scott M. Webster London, Kentucky BRIEF FOR APPELLEE: Jeffery W. Helton Al Merrick Pineville, Kentucky


NOT TO BE PUBLISHED APPEAL FROM BELL CIRCUIT COURT
HONORABLE ROBERT V. COSTANZO, JUDGE
ACTION NO. 17-CI-00396 OPINION
AFFIRMING IN PART, REVERSING IN PART, AND REMANDING

** ** ** ** **

BEFORE: JONES, KRAMER, AND TAYLOR, JUDGES. TAYLOR, JUDGE: Frank Stewart, William S. Stewart, Jr., Mary D. Stewart, and Leisa Stewart bring this appeal from the August 6, 2018, and January 16, 2019, Judgments of the Bell Circuit Court. We affirm in part, reverse in part, and remand.

The facts are disputed by the parties; however, it is uncontroverted that in August of 2017, Frank, William, Mary, and Henry Gray executed a Contract for the Purchase and Sale of Real Estate. Therein, Frank, William, and Mary agreed to sell "certain real property located near Balkan and Calloway, in Bell County" to Gray for the sum of $80,000. Frank and William owned the real property as tenants in common; each owned an undivided one-half interest in the whole. Apparently, the parties were unable to provide a description of the real property or to provide the acreage of the real property to be sold. So, the parties agreed that a surveyor, Neil Grande, would survey the real property to be sold and provide a description thereof.

The Kentucky Supreme Court has explained that "[a] tenancy in common is an estate in which two or more persons hold title to land in such fashion as to give each of them undivided possession" but without a survivorship interest. Sanderson v. Saxon, 834 S.W.2d 676, 678 (Ky. 1992).

The surveyor completed the survey and provided a description of the real property that included 411 acres. A deed was subsequently created incorporating the survey description of the real property. Eventually, Gray tendered a check for $80,000 to Frank. Frank accepted the check, signed the deed, and delivered the deed to Gray. Frank never cashed the check. Gray then traveled to Lexington, Kentucky, to meet William and Mary to obtain their signatures on the deed. However, William and Mary refused to sign the deed. They claimed that the description of the real property set out in the deed was incorrect and included more acreage than they intended to sell.

Frank was single when he executed the contract. He married Leisa on October 26, 2017.

In November 2017, Gray filed complaints in the Bell Circuit Court against Frank, William, Mary, and Leisa seeking specific performance of the Contract for the Purchase and Sale of Real Estate (purchase contract) executed by the parties and for damages flowing from breach of said contract.

Frank, William, Mary, and Leisa filed a joint answer. They alleged that the purchase contract violated the statute of frauds and was unenforceable. Additionally, they specifically asserted that "there can be no enforcement of the purported contractual agreement of the parties, because the minds of the parties failed to meet upon the essential element." Record on appeal at 227. In particular, they claimed "the parties never reached any contractual or otherwise enforceable agreement because the parties never agreed as to what property was to be conveyed." Record on appeal at 227.

Leisa Stewart was joined as a defendant by amended complaint in April 2018, due to her marriage to Frank. The four defendants filed a joint answer to the amended complaint.

By Judgment entered August 6, 2018, the circuit court concluded that the purchase contract was valid and enforceable, and did not violate the statute of frauds. The court also found that the parties had agreed that the boundary of property to be sold to Gray was that as surveyed by Neil Grande. The court ordered specific performance of the purchase contract and ordered Frank, William, and Mary to pay one-half ($13,500) of the surveying costs. Then, by Judgment entered January 16, 2019, the circuit court awarded Gray damages of $19,286.30 for breach of contract relating to lost rental income against "[d]efendants, jointly and severally." This appeal follows.

The circuit court held that Leisa did not acquire a dower interest in the property by virtue of Frank entering into the contract to sell the property prior to their marriage.

Frank, William, Mary, and Leisa contend that the purchase contract was invalid and unenforceable. They initially assert the purchase contract fails to sufficiently identify the real property to be sold and is unenforceable per the statute of frauds. Frank, William, Mary, and Leisa also believe there was no meeting of the minds as to the real property to be conveyed under the purchase contract, thus invalidating the purchase contract. Alternatively, Frank, William, Mary, and Leisa argue that if the purchase contract is valid and enforceable, the award of damages was improper as the court ordered specific performance of the purchase contract.

To begin, we must point out that Frank, William, Mary, and Leisa do not occupy identical legal positions in this action. Frank signed the deed, gave it to Gray, and took Gray's $80,000 payment. By contrast, William and Mary refused to sign the deed and received no payment from Gray. This distinction is pivotal. As hereinafter explained, the purchase contract was extinguished by the merger doctrine when Frank signed and delivered the deed to Gray. Whereas, the purchase contract still controls the rights and liabilities of William and Mary, as they did not sign the deed. Our analysis begins with Frank and Leisa.

In Kentucky, the merger doctrine provides that "upon delivery and acceptance of a deed the deed extinguishes or supersedes the provisions of the underlying contract for the conveyance of the realty." Drees Co. v. Osburg, 144 S.W.3d 831, 832 (Ky. App. 2003). Under the merger doctrine, "all prior statements and agreements, both written and oral, are merged into the deed and the parties are bound by that instrument. Yeager v. McLellan, 177 S.W.3d 807, 809 (Ky. 2005) (quoting Borden v. Litchford, 619 S.W.2d 715, 717 (Ky. App. 1981)). There are recognized exceptions to the merger doctrine - "fraud, mistake, or [a] contractual agreement clearly not intended to be merged into the deed." Harrodsburg Indus. Warehousing, Inc. v. MIGS, LLC, 182 S.W.3d 529, 532 (Ky. App. 2005).

In this case, it is uncontroverted that Frank signed the deed, gave the deed to Gray, and took the $80,000 payment. Under the merger doctrine, the purchase contract was extinguished between Frank and Gray, and the deed thereafter controlled. Frank has advanced no arguments as to an exception to the merger doctrine or the validity of deed. He neither seeks to reform nor set aside the deed. Rather, Frank's arguments center upon the validity and enforceability of the purchase contract, which was extinguished by the deed, as concerns his one-half undivided interest in the property. Therefore, we conclude that Frank is bound by the terms of the deed and that Frank transferred his one-half undivided interest in the real property described therein to Gray. As concerns Leisa, we agree with the circuit court that she acquired no interest in the property by virtue of her marriage to Frank, which occurred after he signed the contract. Likewise, appellants have failed to raise any issue regarding Leisa's interest in the property and thus we decline to address the same. See Commonwealth v. Pollini, 437 S.W.3d 144, 148 (Ky. 2014). Accordingly, under the terms of the deed, Frank is entitled to retain one-half of the total purchase price ($40,000) paid by Gray for the property to purchase Frank's undivided one-half ownership interest therein.

As neither William nor Mary signed the deed, their rights and liabilities are resolved by our review of the purchase contract, rather than the deed. A contract for the sale and purchase of real property must comply with the statute of frauds. Smith v. Williams, 396 S.W.3d 296, 299 (Ky. 2012). In Kentucky, the statute of frauds is codified in Kentucky Revised Statutes (KRS) 371.010 and reads, in relevant part:

No action shall be brought to charge any person:

. . . .

(6) Upon any contract for the sale of real estate, or any lease thereof for longer than one year;
. . . .

unless the promise, contract, agreement, representation, assurance, or ratification, or some memorandum or note thereof, be in writing and signed by the party to be charged therewith, or by his authorized agent. It shall not be necessary to express the consideration in the writing, but it may be proved when necessary or disproved by parol or other evidence.

Under KRS 371.010(6), a contract to sell real property must be in writing and signed by the parties. To satisfy the statute of frauds, our Courts have held that a written contract to sell real property must sufficiently describe the property so that its identity can be ascertained without the aid of parol evidence. Hall v. Cotton, 180 S.W. 779, 780 (Ky. 1915); Montgomery v. Graves, 191 S.W.2d 399, 401 (Ky. 1945). Thus, the writing itself must be sufficiently specific to identify the property to be sold thereunder. If the real property is sufficiently identified by the written agreement, parol evidence is then admissible to designate the particular property identified by the written contract. Wheeler v. Keeton, 242 S.W.2d 1013, 1016 (Ky. 1951). This rule has been more particularly stated:

[W]hen the description contained in the writing, either by reference to a water course, or a town, or some well-known local object, or to a former conveyance of record, so identifies the property, which is the subject-matter of the contract, that it may be designated or pointed out in parol testimony by reason of such reference in the writing to such stream, town, conveyance, or well-known object, then parol testimony is competent for that purpose, but that, when the description in the writing has no such
reference, and it is necessary to resort to parol testimony to identify the subject-matter of the contract, as distinguished from a designation of it, then parol evidence is incompetent, and the writing will be held insufficient to satisfy the demands of the statute.

. . . .

The evidence of identity must be furnished by the description in the writing; and where in such writing there is no reference to any town, village, or stream, or other well-known local object, or to a former record conveyance of the same property, which would enable one to point out such property from the reference in the description, and there must be a resort to evidence not furnished by the writing itself to identify the subject-matter, then it will be regarded as insufficient. The description in the writing involved in this case was not sufficient to enable one to designate or point out the land which was the subject-matter of the contract, and was therefore insufficient under the statute.
Hall, 180 S.W. at 781.

In this case, the purchase contract executed by the parties provided, in relevant part:

WHEREAS, Sellers are the owners of certain real property located near Balkan and Calloway, in Bell County, Kentucky (the "Property"), and Sellers desire to sell and Buyer desires to purchase the Property.

. . . .

1. Buyer agrees to pay, and Seller agree to accept, the sum of $80,000 for the Property.

2. The parties have agreed on the boundaries of the Property to be transferred, but are unable to determine
the precise acreage thereof or to prepare a written description of the Property sufficient for recording purposes. Therefore, the parties agree to employ Neil Grande, a surveyor licensed in the Commonwealth of Kentucky, to survey and prepare a written description of the Property. The parties agree to share the surveying cost on the 50/50 basis, with each party to pay one-half of Grande's fees and expenses.

. . . .

5. Sellers represent to Buyer that there are no outstanding, enforceable contracts or leases affecting the Property, except for a lease in favor of Gatliff Coal Company. Gatliff has previously mined a portion of the Property and retains the right to come upon the Property for reclamation purposes until its reclamation bond is released by the Commonwealth of Kentucky. Buyer acknowledges the validity of Gatliff's lease and agrees not to interfere with Gatliff's access to the Property for these limited reclamation purposes.

. . . .

12. This Contract constitutes the entire written understanding of the parties and supersedes all oral and written communications and understandings of the parties, all of which are deemed to be merged herein. This Contract may not be modified or amended except in writing, signed by each if [sic] the parties hereto.
Contract for the Purchase and Sale of Real Estate at 1-2.

Under provision 2 of the purchase contract, the parties clearly state they have agreed upon the boundaries of the real property but do not know the acreage thereof and cannot provide any written description thereof. Thus, the purchase agreement plainly and unambiguously states that the parties are unable to provide a written description to identify the property to be sold thereunder. The parties intended that the real property would be later identified by a description provided by the surveyor.

In an effort to salvage the purchase contract, the circuit court utilized language in provision 5 concerning the outstanding lease to Gatliff Coal Company as a means of identifying the real property to be conveyed. We, however, believe this interpretation of the purchase contract is legally flawed. Provision 5 merely sets forth that an outstanding lease existed on the real property to be sold. It does not provide that Gray would be conveyed all the real property subject to the lease. Provision 5 was not intended to identify the real property to be sold; rather, it was intended to simply provide notice that the real property to be conveyed is subject to a coal lease, for which the lessee had continuing reclamation obligations. Of course, the property to be sold could be just a portion of the real property actually subject to the coal lease.

When interpreting a written instrument, the intentions of the parties are paramount. Vorherr v. Coldiron, 525 S.W.3d 532, 543 (Ky. App. 2017).

Accordingly, we conclude the purchase contract did not provide a sufficient written description of the real property to identify it, and the circuit court erred by considering parol evidence to identify the property. Consequently, we hold that the statute of frauds bars enforcement of the purchase contract as to William and Mary, and the circuit court erred by concluding otherwise. Effectively, Gray became a co-owner of the real property with William and Mary as successor to Frank's undivided one-half interest therein.

In the circuit court's initial judgment entered on August 6, 2018, the court awarded a judgment against Frank, William, and Mary for one-half of the $27,000 surveying costs incurred by Gray in accordance with the contract. Frank, William, and Mary have not challenged the survey or this award on appeal, nor do we find any error in such agreed allocation of expenses. The judgment on this issue is affirmed.

As for damages in the January 16, 2019, judgment, the circuit court awarded Gray $19,286.30 for lost rental income against "[d]efendants, jointly and severally." We do not believe these damages are proper against Frank or Leisa as Frank signed the deed and delivered it to Gray and Leisa had no interest in the property. As Frank conveyed his interest in the real property to Gray, Frank performed under the purchase contract. And, as to William and Mary, they are not liable for damages to Gray given our holding that the purchase contract was unenforceable against them per the statute of frauds. The award of damages is reversed.

We view any remaining contentions of error as moot or without merit.

In summary, we affirm the circuit court's ruling that Leisa acquired no interest in the property. As to Frank, we reverse and hold that Frank is bound by the deed to convey his one-half interest in the real property described therein to Gray. Frank is also entitled to retain $40,000 (one-half of the total purchase price) for the conveyance of his one-half undivided interest to Gray. Gray is entitled to judgment for one-half of the survey costs against Frank, William, and Mary, which we affirm. Additionally, we also conclude that the purchase contract fails to conform to the statute of frauds and is unenforceable as to William and Mary. We reverse the circuit court's judgment enforcing the contract and award of damages. As Frank conveyed his interest in the subject property to Gray and as William and Mary are not bound by the purchase contract, the circuit court erred by awarding Gray damages of $19,286.30 for lost rental income.

For the foregoing reasons, the Judgments of the Bell Circuit Court are affirmed in part, reversed in part, and remanded for the circuit court to enter a judgment consistent with this Opinion.

ALL CONCUR. BRIEFS FOR APPELLANTS: Scott M. Webster
London, Kentucky BRIEF FOR APPELLEE: Jeffery W. Helton
Al Merrick
Pineville, Kentucky


Summaries of

Stewart v. Gray

Commonwealth of Kentucky Court of Appeals
Jun 19, 2020
NO. 2019-CA-000284-MR (Ky. Ct. App. Jun. 19, 2020)
Case details for

Stewart v. Gray

Case Details

Full title:FRANK STEWART; WILLIAM S. STEWART, JR.; MARY D. STEWART; AND LEISA STEWART…

Court:Commonwealth of Kentucky Court of Appeals

Date published: Jun 19, 2020

Citations

NO. 2019-CA-000284-MR (Ky. Ct. App. Jun. 19, 2020)