Supreme Court Enforces Oral — Agreement to Purchase Investment Property

In a recent case, the Texas Supreme Court enforced an agreement between friends to purchase 3,800 acres for investment property.

The case was Ganim v. Alattar, ___ S.W.3d ___ (Tex. 2011)(6/24/11). In it, two friends decided to invest in property and form a partnership to own it. After they made an offer on the property and exchanged documents creating the partnership, the deal fell apart when a dispute arose over the terms of the partnership. Meanwhile, Alattar bought the property “as trustee.” He then refused to share the property with the proposed partnership or Ganim. When Ganim sued him, Alattar claimed that the statute of frauds, which requires agreements to sell realty to be in writing in order to be enforceable, barred Ganim’s suit.

The Supreme Court held that the suit by Ganim was not barred by the statute of frauds or the Trust Code. Suit on an “agreement to acquire real property for the benefit of a partnership [is not] barred by the statute of frauds.” Specifically, “‘[a]n agreement between two or more persons for the joint acquisition of land is not a contract for the sale of land and is not required by our statute of frauds to be in writing.'”

“Section 112.004 of the Trust Code provides that a trust in real property ‘is enforceable only if there is written evidence of the trust’s terms bearing the signature of the settlor or the settlor’s authorized agent.’ The Trust Code’s provision applies only to express trusts. . . .” But the “‘mere designation of a party as ‘trustee’ does not create a trust.'” Here, no express trust was created, so 112.004 did not apply.

“The agreement found by the jury was that Alattar purchased the Property for [the proposed partnership]. It was not an agreement for the sale of real estate nor did it create an express trust. Thus, it was not required to comply with the provisions of either Business and Commerce Code section 26.01 or Property Code section 112.004.”