In the year 1800 the English Chancery Court decided the case of Forster v. Hale1 which decision was the forerunner of a new doctrine. The importance of the case justifies a somewhat detailed statement of the facts and the substance of the opinion. One Burdon was a partner with Forster and two others in the banking business. The three partners were largely in debt to Burdon. The latter in order to obtain security for these debts, persuaded his partners in the banking business to become partners with him in the purchase of a lease of a colliery, the lease to be executed to Burdon in trust for himself and his partners. This trust was not reduced to writing. After the firm had operated the colliery for some time, Burdon died and his executor claimed that the other partners had no beneficial interest in the lease. The partners sought to establish their interest in the colliery by the introduction of certain letters and documents which did not constitute a valid memorandum as required by the Statute of Frauds. The Lord Chancellor really decided the case on the ground that the partnership was one to share in the profits of the lease only and therefore not within the Statute of Frauds, no interest in land being involved. But the Lord Chancellor went on to say that even if the agreement constituted a trust in lands, it had been "established" by written evidence and it was not necessary that the trust should have been "created" by written evidence. Then followed this paragraph which later cases have so often quoted as authority for the proposition that an oral agreement to create a partnership to deal in land is not within the Statute of Frauds: "The partnership being established by evidence, upon which a partnership may be found, the premises necessary for the purposes of the partnership are by operation of law held for the purposes of that partnership."4a As applied to this particular case the above quotation was a correct statement of the law. The court found that the partnership had actually been in existence for a year and therefore it was true that whatever property one of the partners acquired in his own name on behalf of the firm, constituted a constructive trust for the benefit of money was paid by you, you cannot compel him to convey the estate to you, because that would be directly in the teeth of the statute of frauds." Accord: Botsford v. Burr, 2 Johns. Ch. (N. Y.) 405, 409 (1817); White v. Carpenter, 2 Paige (N. Y.) 217, 241 (1830); Sayre v. Townsend, 15 Wend. (N. Y.) 647 (1836); Bartlett v. Pickersgill, 1 Cox Ch. (Eng.) 15 (1760): "Parol evidence cannot be admitted to shew that a party having agreed for the purchase of an estate in his own name, had in fact purchased it on behalf of another person"; Crop v. Norton, 9 Mod. (Eng.) 233, 235 (1740): “But this [a resulting trust] is where the consideration moved from [one] person; but I never knew it where the consideration moved from several persons"; Atkins v. Rowe, Moseley (Eng.) 39 (1728).

45 Ves. Jr. (Eng.) 309 (1800); 3 Ves. Jr. (Eng.) 696 (1798). 4aIdem, 5 Ves. Jr. (Eng.) at p. 309.

all the members of the firm. This case did not decide that an oral partnership agreement to deal in land was valid where there was no other evidence of the partnership than such oral agreement and no partnership had ever come into existence by the conduct of the partners. The most that can be claimed for the case is that it contained a dictum to the effect that an oral agreement to form a partnership to deal in land is valid.

Thus the law of England remained until the decision of the leading case of Dale v. Hamilton, decided by Vice-Chancellor Wigram in 1846. According to the facts of the case, plaintiff, a surveyor, Hamilton the defendant, and one McAdam, entered into an oral agreement to buy and resell certain land and divide the profits. Dale was to do all the work of surveying and dividing the tract into lots, while McAdam and Hamilton were to furnish the capital. After Dale had nearly completed the task assigned to him and after the land had increased in value from £6,000 to £30,000, McAdam died. Hamilton denied that Dale had any interest in the firm. There was a valid memorandum of the contract signed by Dale so that had he been defendant instead of plaintiff the agreement would have been binding upon him. The plaintiff did not set up part performance to take his case out of the Statute of Frauds, nor did he attempt to establish a partnership resulting from the conduct of the parties. Instead, he founded his right to recover squarely on the proposition that a partnership could be established as an indedenpent fact by virtue of the oral agreement, and the court without regarding the Statute of Frauds would inquire of what the partnership stock consisted, whether it be of land or of property of any other kind.

The Vice-Chancellor carefully distinguished the case at issue from the case of a partnership already in existence, where one of the partners buys land on behalf of the firm, taking title in his own name, and later claims the entire beneficial interest. In such a case it is well settled that if a partner uses firm funds, a resulting trust is created, if he uses no firm funds, a constructive trust is created, neither of which trusts are within the Statute of Frauds. From the following quotation it is evident that the Vice-Chancellor was himself doubtful of the soundness of his decision: "When the proposition was first advanced by the plaintiff, I confess, it appeared to me that to admit the argument to the extent contended for would virtually be to repeal the Statute of Frauds, or nearly so; ***Thus if A. alleges that B. agreed to give him an interest in land, the statute applies; but, if he adds, that the land was to be improved and resold at their joint risk for $5 Hare (Eng.) 369 (1846).

profit and loss, then, according to the argument, the statute does not apply."5a The Vice-Chancellor, however, overcame his doubts and relying partly on the quotation from Forster v. Hale, supra, and partly on certain English cases which contain dicta to the effect that lands held for speculation are treated like personalty, reached the conclusion that an oral agreement to form a partnership to deal in lands was not within the Statute of Frauds because the partnership may be established by parol evidence as an independent fact and the court will then allow evidence to be admitted as to what its property consisted of.

The fallacy of this argument lies in the fact that the oral agreement is all one agreement and cannot be separated into distinct parts, the part creating the partnership being valid and the part conferring an interest in lands being invalid. If part of the agreement is invalid because it creates an interest in lands by parol agreement, it taints the whole contract and no valid partnership is created. If the partners had proceeded to form the partnership and had then sought to prove its existence by some evidence other than the parol agreement, doubtless they could have done so. It would then have been permissible to have shown of what its assets consisted.

6

The later English cases follow the rule laid down by Dale v. Hamilton, supra.7

The early American cases were unanimous in holding that an oral agreement whereby A promised to buy land in his own name for the joint benefit of himself and B was within the Statute of Frauds. While these cases seem to involve the result that the holding would be the same whether those claiming a joint interest were or were not partners, the point does not appear to have been definitely decided in this country prior to the decision rendered in the case of Smith v. Burnham, decided by Judge Story in the Federal District Court in 1838. This case was decided eight years prior to the case of Dale v. Hamilton, supra. The bill stated that the plaintiff and the defendant entered into an oral agreement to become partners in the business of buying and selling lands and lumber in Maine, upon a joint capital to be furnished by both, the profits and losses to be equally shared between them. The bill then stated that certain purchases of land

ba Idem, pp. 382, 383.

"Smith v. Burnham, 3 Sumner (U. S. C. C.) 435 (1838); Schultz v. Waldons, 60 N. J. Eq. 71 (1900); Bird v. Morrison, 12 Wis. 153 (1860); Clarke v. McAuliffe, 81 Wis. 104 (1892); 13 Har. L. Rev. 455, "Oral Agreements for Real Estate Copartnerships."

Gray v. Smith, L. R. 43 Ch. D. (Eng.) 208 (1889); In re DeNicols, [1900], 2 Ch. 410; 22 Laws of Eng., p. 21.

See supra, n. 3, American cases cited.

Supra, n. 6.

ga

were made and the same land resold. The bill prayed for an accounting of these sales and a dissolution of the partnership. The answer contained a plea on the merits of the case and also set up the Statute of Frauds. On the latter issue Judge Story analyzing the paint.at issue with his usual acumen, said: "If the agreement could be treated as a sale by the defendant to the plaintiff of any interest in the lands to be purchased, it would be within the statute. If it could be treated as the case of an estate created in lands, it would be a mere estate at will. *** I incline to think that *** it is the case of the declaration or creation of a trust *** in lands, not arising or resulting by implication or operation of law." Judge Story went on to say that even if the fact was, as contended by the plaintiff, that the interest was to be in the land contracts and not in the land itself, the same result would obtain because a contract to buy land creates an equitable interest in the land. "A contract for the sale of an equitable interest in lands, whether it be under a contract for the conveyance by a third person, or otherwise, is clearly a sale of an interest in lands within the Statute of Frauds."9a It seems clear from the above quotations that the court was of the firm conviction that an oral agreement to acquire an interest in land in the future is within the Statute of Frauds as well as an oral agreement which creates an interest in land at the time the agreement is made.

Other well considered cases in accord with Smith v. Burnham, supra, are cited below.10

The American cases holding that an oral contract to form a partnership to deal in lands is not within the Statute of Frauds, numerically, represent the great weight of authority." As will be seen from the dis

9a Idem, at p. 459.

10Young v. Wheeler, 34 Fed. 98 (1888); McKinley v. Lloyd, 128 Fed. 519 (1904); Rowland v. Boozer, 10 Ala. 690 (1846); Morton v. Nelson, 145 Ill. 586 (1893); Miller v. Miller, 156 Ky. 267 (1913); Dunbar v. Bullard, 2 La. Ann. 810 (1847) (Statutory); Raub v. Smith, 61 Mich. 543 (1886); Brosnan v. McKee, 63 Mich. 454 (1886); Schultz v. Waldons, supra, n. 6; Bird v. Morrison, 12 Wis. 153 (1860); Clarke v. McAuliffe, 81 Wis. 104 (1892); McMillen v. Pratt, 89 Wis. 612 (1895); Scheuer v. Cochem, 126 Wis. 209 (1905); Huntington v. Burdeau, 149 Wis. 263 (1912). Several of the above cases involved not only an oral agreement to form a partnership to deal in land but also a conveyance by one partner to the other of an interest in land which is held to bring the case within the Statute of Frauds in all jurisdictions. The cases cited show, however, that even in the absence of a stipulation calling for a conveyance, the agreement would be held to be within the statute.

"Brown v. Spencer, 163 Cal. 589 (1912); Maguire v. Kiesel, 86 Conn. 453 (1912); Lane v. Lodge, 139 Ga. 93 (1912); Holmes v. McCray, 51 Ind. 358 (1875); Richards v. Grinnell, 63 Ia. 44 (1884); Garth v. Davis, 120 Ky. 106 (1905); Fountain v. Menard, 53 Minn. 443 (1893); Chester v. Dickerson, 54 N. Y. 1 (1873); Bissell v. Harrington, 18 Hun (N. Y.) 81 (1879); Babcock v. Read, 99 N. Y. 609 (1885); Thompson v. McKee, 43 Okla. 243 (1914); Flower v. Barnekoff, 20 Or. 132 (1890); Floyd v. Duffy, 68 W. Va. 339 (1910); 16 L. R. A. 745, note; 4 L. R. A. (N. S.) 427, note; 33 L. R. A. (N. S.) 883, note; L. R. A.

cussion of the cases, the reasons advanced for this bald exception to the Statute of Frauds are many and varied. Perhaps the best reasoned case of those last cited is Chester v. Dickinson. In that case the plaintiff was seeking to hold the defendant and two others aspartners in a fraudulent land transaction. The defendants objected to the admission of the evidence establishing the existence of the partnership on the ground that it rested entirely in parol. The court held that a partnership to deal in land may be formed by parol agreement. In reaching this conclusion the court said: "But suppose two persons, by parol agreement, enter into a partnership to speculate in lands, how do they come in conflict with the statute of frauds? No estate or interest in land has been granted, assigned or declared. When the agreement is made no lands are owned by the firm, and neither party attempts to convey or assign any to the other. The contract is a valid one, and in pursuance of this agreement they go on and buy, improve and sell lands. While they are doing this, do they not act as partners and bear a partnership relation to each other?"a

It must be admitted that they do act as partners but if a partnership is formed it results from their conduct and not from their oral agreement. The first question asked by the court involves this issue: is it within the Statute of Frauds to make an oral agreement "concerning" an interest in land if no such interest is to pass from one contracting party to the other at the time the contract is made? The wording of the Statute of Frauds is: "no action shall be brought on any contract for any interest in or concerning lands." This question was answered in the affirmative by the United States Supreme Court in Dunphy v. Ryan, 12 in which case the facts established an oral agreement by A to buy certain land, take title in his own name and later convey a half interest to B. Counsel argued that the agreement was not within the Statute of Frauds because at the time the contract was made A did not own the land he orally promised to convey, and hence no interest in land could pass at the time the contract was entered into. In reply to this argument the court said: "The circumstance that the defendant, not owning the land which he agreed to convey, undertook to acquire title, instead of taking the case out of the statute, brings it more clearly and unequivocally

1915 A 521, note; 23 Cent. Dig., Frauds, Stat. of, secs. 83-89, also 135-139; 9 Dec. Dig., Frauds, Stat. of, secs. 56 (5), 56 (9), 76; 2nd Dec. Dig., Frauds, Stat. of, secs. 56 (5), 56 (9), 76.

lla Chester v. Dickerson, supra, n. 11, at p. 8. 12116 U. S. 491, 496 (1886).