This is an appeal from an order granting specific performance of an alleged oral contract for the sale of Appellant George Digh's interest in a condominium to Respondents Larry Fesmire, Jr., and Teresa Fesmire. We reverse the master's order and remand the case for an accounting and partition by sale.
In 1990, the parties to this action, along with Shelley Digh, jointly purchased a Myrtle Beach condominium from Shelley's employer, B.W. Miller. Shelley, who is now deceased, was the wife of George Digh. The two couples were longtime friends who took trips together. They executed a promissory note to Miller in the amount of $85,000 and a mortgage on the property to secure the note. They also entered into a written agreement among themselves setting forth their understanding of their respective ownership interests in the property, the division of the property's income and expenses, and the disposition of their respective interests in the property in the event of a future sale. They intended to use the condominium as rental property and also for their occasional personal use.
Shelley, who was an accountant, kept the financial records on the property. From July 1990 through April 1996, she sent mortgage payments to Miller. On a quarterly basis, she determined the amount of income collected and total expenses for the property and notified Larry Fesmire if any funds were due from him at that time.
In February 1994, Shelley was diagnosed with acute myeloblastic leukemia. From that point forward, the Dighs' personal use of the condominium significantly diminished. The leukemia went into remission, and Shelley had a bone marrow transplant; but in January 1996, the Dighs learned that the leukemia had returned. When they were about to exhaust health insurance coverage for Shelley's medical expenses, the Dighs learned that they would have to raise $250,000 for a second bone marrow transplant. Among their options for fund-raising was a proposal for the Fesmires to purchase the Dighs' interest in the Myrtle Beach condominium. George Digh's understanding of the proposal was that both couples
According to Larry Fesmire, the proposal that Shelley submitted to him was for a net amount due of $20,000 for the Dighs' interest in the property. Larry Fesmire's account of events includes his payment of $20,000 in cash to Shelley during a visit to the Dighs' home in April 1996. He allegedly used a cigar box to carry the $20,000 in $100 denominations to Shelley's bedroom where she was lying ill, and he allegedly placed the box on Shelley's dresser.
Shelley's last mortgage payment was the April 1996 payment. In May 1996, the Fesmires took over the mortgage payments and started paying for all of the other expenses associated with the property. In July 1996, Shelley died.
In April 1998, George Digh wrote a letter to Larry Fesmire indicating his impression that Fesmire had never completed the purchase of Digh's interest in the Myrtle Beach condominium. Digh expressed his desire for Fesmire to complete the purchase of his interest or for the condominium to be placed on the market for sale. A few days later, Fesmire responded to the letter with two alternative proposals: (1) complete the "original agreement of March 1996" by paying what Fesmire considered to be the balance due on the net purchase price— $70,000 less the $20,000 "down payment paid in March of 1996," less Fesmire's share of the debt on the property as of March 1996 ($33,000), for a net amount due of $17,000; or (2) place the condominium on the market. Fesmire indicated his preference for the option of buying out Digh's interest. Digh responded with confusion over Fesmire's mention of a $20,000 payment.
The parties engaged in several unsuccessful efforts to resolve the matter, and the Fesmires eventually stopped making the mortgage payments on the Myrtle Beach condominium;
ISSUES ON APPEAL
I. Did the master err in admitting into evidence redacted versions of two letters authored by counsel for the purpose of settlement negotiations?
II. Did the master err in granting specific performance of the alleged oral contract in violation of the Statute of Frauds, S.C.Code Ann. § 32-3-10(4) (2007)?
III. Did the master err in failing to grant the parties' requests for a partition and an accounting?
STANDARD OF REVIEW
This Court reviews all questions of law de novo. E.g., Fields v. J. Haynes Waters Builders, Inc., 376 S.C. 545, 564, 658 S.E.2d 80, 90 (2008). Review of the trial court's factual findings, however, depends on the whether the underlying action is an action at law or an action in equity. See Townes Assocs. Ltd. v. City of Greenville, 266 S.C. 81, 85-86, 221 S.E.2d 773, 775-76 (1976) (setting forth standards of review to apply in actions at law and actions in equity).
To determine whether an action is legal or equitable, this Court must look to the action's main purpose as reflected by the nature of the pleadings, evidence, and character of the relief sought. Ex parte Wheeler v. Estate of Green, 381 S.C. 548, 673 S.E.2d 836, 839 (Ct.App.2009). Here, the Fesmires have asserted causes of action for specific performance of an alleged oral contract, a partition, and an accounting.
This case is distinguishable from McGill v. Moore, 381 S.C. 179, 672 S.E.2d 571 (2009), in which our Supreme Court applied the legal standard of review to the trial court's findings of fact in an action for specific performance of three written contracts for the sale of land. Because the contracts were in writing, their existence was not in dispute and the statute of frauds was not raised as a defense. Rather, before determining the suitability of specific performance as a remedy, the Court was required to
Rather, the circumstances of the instant action are virtually identical to those in Settlemeyer, which involved an action for specific performance of an alleged oral contract for the conveyance of land. In its opinion in Settlemeyer, this Court set forth the standard of review as follows: "In an action in equity, tried by the judge alone[ ] ... this Court has jurisdiction to find facts in accordance with its views of the preponderance of the evidence." Settlemeyer, 359 S.C. at 320, 596 S.E.2d at 516.
As in the instant case, the plaintiff in Settlemeyer alleged that his part performance of the alleged oral contract removed it from the statute of frauds. The Court treated the existence of the alleged oral contract as a question of fact rather than a question of law and stated, "Based on
At trial, Fesmire introduced into evidence redacted versions of two letters written by the parties' attorneys during settlement negotiations. Digh argues that the master erred in admitting these letters into evidence because their introduction violates Rule 408, SCRE, which prohibits the introduction of statements made in compromise negotiations. Digh also argues that the master exacerbated the prejudice to him by allowing Fesmire to redact most of the contents of the letters because the redaction resulted in a false interpretation of statements taken out of context. We agree.
Plaintiffs Exhibit # 16 is a redacted version of a letter dated June 18, 2001, authored by Digh's former counsel and addressed to Larry Fesmire. The redacted version presented to the master reads as follows:
However, the unredacted version of the letter clearly indicates that the isolated phrase presented in the redacted version was an assumption made for the purpose of negotiating a settlement of the terms of a buyout and that it was inextricably linked to the offer of settlement. Notably, the following words appeared at the top of the letter:
Moreover, the letter also states the following:
Plaintiffs Exhibit # 17 is the redacted version of a second letter dated August 23, 2001, also authored by Digh's former counsel and addressed to Larry Fesmire. The redacted version presented to the master reads as follows:
However, the unredacted version of the letter indicates that the isolated phrases presented in the redacted version were assumptions made for the purpose of negotiating a settlement and that they were inextricably linked to the offer of settlement. The isolated phrases in the redacted version were prefaced by the following language:
Once again, the settlement letter also states the following:
Clearly, in both letters, the request of Digh's attorney for documentary proof of Fesmire's financial contributions to the property, including the alleged $20,000 payment for the Dighs' interest in the property, indicated that the statements made in the letters were assumptions for settlement purposes only.
The master concluded that the redacted versions of these letters were admissible because they were admissions of fact and therefore were not privileged as statements made in connection with settlement negotiations. The master also set forth the following additional grounds for the admissibility of the redacted letters: (1) the material did not constitute hearsay because it was not offered for the truth of the matter asserted; (2) the material was not hearsay because it qualified as an admission of a party-opponent; and (3) the material qualified as a prior inconsistent statement of a witness under Rule 613(b), SCRE. The master then concluded that the letters could be used to (1) impeach Digh's testimony that he did not know about Fesmire's alleged payment of $20,000; and (2) satisfy the writing requirement of the Statute of Frauds.
Rule 408, SCRE provides as follows:
This rule contemplates that the parties need to feel free to make certain assumptions for the purpose of settlement
The statements highlighted in the redacted versions of the settlement letters admitted into evidence in this case were undoubtedly "statements made in compromise negotiations." When these respective statements are viewed in the context of the unredacted version of the letters, it is clear that the references to the alleged $20,000 payment were assumptions made for purposes of negotiating a compromise settlement. The references were inextricably linked to the offer of settlement.
Further, the master's citation to McCormick on Evidence in Conclusion of Law # 6 is incomplete. In this conclusion, the master cites the treatise for the proposition that an admission of fact in the course of negotiations is not privileged. However, the McCormick treatise significantly qualifies that proposition. 2 McCormick on Evidence § 266 (6th ed. 2006) (discussing the trend to extend the protection to all statements made in compromise negotiations and discouraging the use of inconsistent statements made in compromise negotiations for general impeachment of the testimony). Therefore, the master's reliance on this treatise excerpt to support the admission of the redacted settlement letters into evidence is misplaced.
Additionally, regardless of whether the master used the redacted letters for impeachment purposes or to satisfy the writing requirement of the Statute of Frauds, the statements in the letters were undoubtedly offered for the truth of the matter asserted because they were offered to show that Larry Fesmire paid $20,000 to the Dighs for their interest in the condominium. Further, the statements in the settlement letters were not admissions of a party-opponent because they were assumptions made for the purpose of negotiating a compromise settlement. Therefore, contrary to the master's conclusion, the disputed material constituted inadmissible hearsay. See Rule 802, SCRE.
Moreover, the admission of the redacted letters into evidence clearly prejudiced Digh because the master used this evidence to support his conclusion that the alleged oral contract asserted by the Fesmires satisfied the Statute of Frauds. This undoubtedly affected the outcome of the case.
Digh argues that the master erred in granting specific performance of the alleged oral contract because the Fesmires' action is barred by the Statute of Frauds, S.C.Code Ann. § 32-3-10(4) (2007). We agree.
Specific performance should be granted only if there is no adequate remedy at law and specific enforcement of the contract is equitable between the parties. Ingram, 340 S.C. at 105-06, 531 S.E.2d at 291. Here, the master concluded that the settlement correspondence of Digh's counsel was sufficient to satisfy the writing requirement of the Statute of Frauds. In the alternative, the master concluded that even if there was not a writing that was sufficient to satisfy the Statute of Frauds, the Fesmires' part performance of the contract took it out of the purview of the Statute of Frauds. Digh argues that the master erred in making these conclusions. We agree.
The Statute of Frauds provides, in pertinent part, as follows:
S.C.Code Ann. § 32-3-10(4) (2007) (emphasis added).
The settlement correspondence of Digh's counsel could not satisfy the writing requirement of the Statute of Frauds because the very admission of those letters into evidence violated Rule 408, SCRE, which prohibits the admission of statements made in compromise negotiations, and violated
Further, when there is no writing, but part performance is alleged to remove an oral contract from the Statute of Frauds, a court of equity must find the following factors before it may compel specific performance of the oral contract: 1) clear evidence of an oral contract; 2) the contract had been partially executed; and 3) the party who requested performance had completed or was willing to complete his part of the oral contract. Settlemeyer, 359 S.C. at 320, 596 S.E.2d at 516. In Scurry v. Edwards, 232 S.C. 53, 61, 100 S.E.2d 812, 816-17 (1957), the Court explained the nature of the part performance exception to the Statute of Frauds:
Scurry, 232 S.C. at 61, 100 S.E.2d at 816-17 (internal citations omitted) (emphasis added).
1. No clear evidence
Initially, there is no clear evidence of a contract with the specific terms asserted by the Fesmires. Therefore, specific performance is not an appropriate remedy because the Fesmires have not satisfied the first prong of the part performance exception to the Statute of Frauds. See Settlemeyer, 359 S.C. at 320, 596 S.E.2d at 516 (holding that to compel specific performance of an oral agreement where part performance is alleged to remove the contract from the Statute of Frauds, a court of equity must find: 1) clear evidence of an oral agreement; 2) the agreement had been partially executed; and 3) the party who requested performance had completed or was willing to complete his part of the oral agreement).
The testimony concerning the terms of the alleged oral contract was very contradictory, and the Fesmires' evidence of the existence of a contract with the specific terms asserted by them rested on the following questionable evidence: (1) improperly admitted statements taken out of the context of settlement negotiations; and (2) the self-serving testimony of Larry Fesmire regarding alleged statements of Shelley Digh, a woman who died before the Fesmires brought this action. Assuming, without deciding, that the Dead Man's Statute, S.C.Code Ann. § 19-11-20 (1985), did not render Fesmire incompetent to testify as to any transaction with Shelley Digh, this statute addresses merely the competency of the witness and not the weight that should be given to such testimony in any particular case. Here, we view the testimony as suspect and do not accord it much weight.
In sum, the Fesmires have not satisfied the first prong of the standard for compelling specific performance where part performance is alleged to remove an oral agreement from the Statute of Frauds because they have not presented clear evidence of an oral agreement.
2. No partial execution
As to the second prong of the standard for compelling specific performance where part performance is alleged to remove an oral agreement from the Statute of Frauds, the evidence does not indicate that the Fesmires partially executed the alleged agreement. There is no clear evidence that the
Moreover, these actions could have been consistent with Digh's version of the parties' contract and subsequent events, despite the expiration of the thirty-day deadline for closing the sale.
3. No evidence of willingness to complete
The Fesmires also failed to satisfy the third prong of the standard for compelling specific performance where part performance is alleged to remove an oral agreement from the Statute of Frauds because the evidence does not indicate that Larry Fesmire was willing to complete his part of the alleged agreement. He stopped making mortgage payments in July 2002, forcing Digh to take over the mortgage payments and to pay off the balance of the debt secured by the mortgage. In fact, Larry Fesmire admitted that he abandoned the mortgage
Based on the foregoing, the master erred in granting specific performance of the alleged oral contract.
Partition and Accounting
Digh argues that the master should have granted the parties' requests for a partition and accounting.
The remedy of partition is provided in S.C.Code Ann. § 15-61-10 (2005):
Further, section 15-61-50 of the South Carolina Code (2005) provides for partition by sale when partition in kind is not practical:
"Ordinarily, partition is compellable among co-tenants as a matter of right ... and is not suspended by an interest in
Here, the Fesmires did not clearly establish the specific terms of their alleged contract for the purchase of the Dighs' interest in the condominium. Because they did not satisfy the Statute of Frauds, specific performance was not an appropriate remedy. Further, the Fesmires requested partition as an alternative remedy and Digh also requested partition, a remedy to which the parties are entitled under sections 15-61-10 and -50.
Accordingly, the master's order granting specific performance is
WILLIAMS and PIEPER, JJ., concur.