On March 5, the Pennsylvania Superior Court handed down a precedential decision that is instructive on how the statute of frauds has no bearing on the outcome of a matter where the gravamen of the complaint lies in breach of contract and unjust enrichment, despite the fact that the dispute centers on an oral contract to co-own real estate. In the case of Vacula v. Chapman, No. 775MDA 2019, the Superior Court reversed an order of the Schuylkil County Court of Common Pleas sustaining defendant Chapman's preliminary objection as to a failure to state a claim and remanded for further proceedings.

Before recounting the procedural history, the essence of Judith Vacula's complaint was that Robert Chapman breached on oral agreement: he and Vacula would jointly own a home but that only Chapman would be the owner of record. In reliance on that promise, Vacula contributed $4,630 toward closing costs, the deposit and a home inspection, in April 2017. Both parties attended the closing and established residence along with Vacula's minor children. Their verbal agreement also provided that Vacula pay certain utilities as well as pay for all groceries, and in short order, she was also contributing to maintenance and repairs to the property. For his part, Chapman was to make the mortgage payments, pay the cable TV bill and contribute to the payment of other utility bills.

The relationship soured in less than six months, so much so that Chapman would not reside on the property for days or weeks at a time. Critically, in his absence, Vacula bore the burden of paying all utilities and maintenance costs as well as the mortgage payments. By early February 2018, Chapman had Vacula and the children evicted pursuant to an award of possession in the local district court. According to the facts of the case, Vacula was denied access to her personal property that remained in the residence.

Another round of litigation followed, initiated pro se by Vacula, resulting in a district court award in her favor in excess of $12,000. Vacula then filed an appeal to Common Pleas Court, followed by Chapman's praecipe for a rule to file a complaint, which resulted in a second amended complaint filed by Vacula and a prayer for relief for $24,000 in damages and interest under theories of breach of contract and unjust enrichment. The matter reached the Superior Court as a result of the trial court sustaining Chapman's preliminary objections, raising the statute of frauds as defense to both counts, and resulting in her second amended complaint being dismissed with prejudice. The trial court held that Vacula's second amended complaint failed to state a claim because "the statute of frauds has clearly made any oral agreement in support of breach of contract and unjust enrichment unenforceable."

Although a number of procedural issues were raised on appeal (failure to endorse with a notice to plead, objections concerning estoppel/res judicata), this article concerns itself with the lessons to be gleaned from the inapplicability of the statute of frauds to the instant matter. "The term statute of frauds originates in an act of the Parliament of England (29 Chas. 2 c. 3) passed in 1677 (authored by Lord Nottingham assisted by Sir Matthew Hale, Sir Francis North and Sir Leoline Jenkins and passed by the Cavalier Parliament), the title of which is an Act for Prevention of Frauds and Perjuries." The original legislation states: "Noe Action shall be brought … whereby to charge the Defendant upon any speciall promise to answere for the debt default or miscarriages of another person … unlesse the Agreement upon which such Action shall be brought or some Memorandum or Note thereof shall be in Writeing and signed by the partie to be charged therewith or some other person thereunto by him lawfully authorized."   

In Strausser v. PRAMCO, III, 944 A.2d 761, 765 (Pa.Super. 2008), the Superior Court held, "The statute of frauds 'prevents the enforcement of unfounded fraudulent claims by requiring that contracts pertaining to interests in real estate be supported by written evidence.' However, "the statute of frauds does not void those oral contracts relating to land which fail to comply with the Statute's formal requirements," see Fannin v. Cratty, 480 A.2d 1056, 1059 (Pa.Super. 1984)." The Vacula court set forth the operative decisional law in our commonwealth addressing this very statute; the law which arguably has construed the statute rather liberally. Notably even specific performance may be ordered in the context of enforcing an oral contract supported by evidence of part performance of an oral promise.

Vacula is not asserting an ownership in the subject property. There is no request for specific performance and her claim is strictly in monetary in nature. To the contrary, her complaint sounds in contract and quasi contract (quantum meruit). This fact proved decisive for the Vacula court, which cited a seminal state supreme court decision for guidance, that of Polka v. May, 118 A.2d 154, 156 (Pa. 1955) (the Polka case concerned the refusal of a spouse to convey her interest to a purchaser at auction). Critically, "recovery of monetary damages for nonperformance of an agreement to create or transfer an interest in land is available, 'the measure of such damages being the money that was paid on account of the purchase and the expenses incurred on the faith of the contract.'" The Vacula court also held that Vacula was permitted to be reimbursed for mortgage and utilities remitted on Chapman's behalf, along with eviction-related expenses. As to the unjust enrichment claim, the Superior Court cited to Stoeckinger v. Presidential Financial Corporation of Delaware Valley, 948 A.2d 828, 833 (Pa.Super. 2008) to conclude that the statute of frauds has no relevance to such a claim.

The Vacula court made it clear that the statute of frauds may not be used as a shield to defeat otherwise valid monetary claims in the context of a verbal promise to co-own real estate; enforceability and compensation requests for losses are distinct remedies.

James M. Lammendola is an associate professor and deputy chair of the legal studies department at Temple University's Fox School of Business. He was in private practice for 20 years. Contact him at [email protected] or 215-204-4124.

Harper J. Dimmerman is also an adjunct professor at Temple University's Fox School of Business and realtor with Berkshire Hathaway. Contact him at [email protected] or 215-545-0600.