Kern v. Robertson

*287 MR. JUSTICE FORD delivered the opinion of the court. On and prior to January 3, 1917, Milburn G. Kern was the owner of two tracts of land in Ravalli county. On that date he entered into a contract with James Weber, under the terms of which Kern agreed to sell, and Weber agreed to buy, one tract on deferred payments. On November 17, 1920, Kern deeded both tracts of land to his wife, Cynthia J. Kern. Thereafter, in November, 1922, Mrs. Kern entered into a contract with Paul D. Lear, under which she agreed to sell, and Lear agreed to purchase, the second of these tracts, on deferred payments, deed to be delivered upon final payment. The purchaser in each instance went into, and has at all times remained in, possession, and both contracts are in full force and effect. On February 12, 1926, Mrs. Kern executed her will, which contains the following provision: “I give, devise and bequeath all my estate, both real and personal, to my husband, Milburn G. Kern, to have and hold the same during his natural life with the power, however, to him to sell and convey all or any part thereof, or to mortgage the same or any part thereof, and to use the proceeds thereof to all intents and purposes as if he were the owner thereof in fee, and if any thereof *288 remain at the time of his death, I devise and bequeath the same to his heirs and to my heirs, share and share alike.” Kern was nominated and appointed executor of the will without bond and with authority to “sell or mortgage any of the property of my estate devised to him as hereinabove mentioned without an order of the court authorizing him to do so.” Mrs. Kern died on November 17, 1927, and plaintiff was appointed executor of her estate which is in process of administration. On January 24, 1925, a judgment was duly made and entered against Kern, and thereafter, and on January 17, 1930, execution was issued on the judgment and the lands referred to were levied upon and sold by the sheriff, and a certificate of sale issued to defendant. This action was commenced by Kern, as executor and devisee under the will, to quiet title to the lands; he claiming “that the said sheriff’s certificate of sale constitutes and is a cloud on the title of the plaintiff herein and to the above described lands, and if left outstanding may cause serious injury to the plaintiff herein. ’ ’ There was judgment for defendant, and plaintiff appeals. The determinative question presented for consideration is: Upon the death of Mrs. Kern, what, if any, interest in the lands described in the complaint passed to Kern as devisee under the will? The authorities are in accord that an enforceable contract for the purchase and sale of real property passes to the purchaser the equitable and beneficial ownership thereof, leaving only the naked legal title in the seller, as trustee for the purchaser, and as security for the unpaid purchase price. If the purchaser dies while the contract is in force and effect, his interest passes to his heirs as real property. If the seller dies while the contract is in force and effect, his interest passes to his personal representative as personal property, and not to his heirs. “Applying one of its fruitful principles, that what ought to be done is regarded as done, equity says that from the contract, even while yet executory, the vendee acquires a ‘real’ *289 right, a right of property in the land, which though lacking legal title, and therefore equitable only, is none the less the real, beneficial ownership, subject, however, to a lien of the vendor as security for the purchase price as long as that remains unpaid. This property in the land, upon the death of the vendee, descends to his heirs, or passes to his devisees, and is liable to the dower of his widow. The vendor still holds an equitable ownership of the purchase money; his property, as viewed by equity, is no longer real estate, in the land, but personal estate, in the price, and if he. dies before payment, it goes to his administrators, and not to his heirs. In short, equity regards the two contracting parties as having changed positions, and the original estate of each as having been ‘converted,’ that of the vendee from personal into real property, and that of the vendor from real into personal property.” (1 Pomeroy’s Equity Jurisprudence, 4th ed., sec. 105, pp. 117, 118; see, also, sec. 368, p. 685, Id.; 3 Id. sees. 1159-1168, pp. 2744-2769; Story’s Equity Jurisprudence, 14th ed., p. 486.) The text is fully borne out by the authorities. (Detroit Trust Co. v. Baker, 230 Mich. 551, 203 N. W. 154, 204 N. W. 773; Detroit & Security Trust Co. v. Kramer, 247 Mich. 468, 226 N. W. 234; Colignon v. Artz, 205 Wis. 51, 236 N. W. 585; Berndt v. Lusher, 40 Ohio App. 172, 178 N. E. 14; Retsloff v. Smith, 79 Cal. App. 443, 249 Pac. 886; Pinson v. Pinson, 150 S. C. 368, 148 S. E. 211; Taylor v. Interstate Inv. Co., 75 Wash. 490, 135 Pac. 240; Robinson v. Pierce, 278 Pa. 372, 123 Atl. 324; Blair v. Snodgrass, 1 Sneed (33 Tenn.), 1; Flomerfelt v. Siglin, 155 Ala. 633, 130 Am. St. Rep. 67, 47 South. 106; Stockfleth v. Britten, 105 N. J. Eq. 3, 146 Atl. 583, 586; Clapp v. Tower, 11 N. D. 556, 93 N. W. 862; Ward v. Williams, 282 Ill. 632, 118 N. E. 1021; Koehne v. Beattie, 36 R. I. 316, 90 Atl. 211; In re Denning’s Estate, 112 Or. 621, 229 Pac. 912; Bowne v. Ide, 109 Conn. 307, 66 A. L. R. 1036, 147 Atl. 4.) The doctrine of equitable conversion does not apply to option contracts. The distinction between contracts such as the ones before us, where the vendor has undertaken to *290 sell to a vendee who undertakes to buy the land involved, and a unilateral option, is clear. The former are mutually enforceable, while the latter is a mere offer to sell — a continuing offer of a contract — which may be accepted, within the time designated in the option, but is not enforceable against the optionee. (Gallup v. Sterling, 22 Misc. Rep. 672, 49 N. Y. Supp. 942.) Taking the option contract, we are committed to the doctrine that such a contract does not work an equitable conversion and that title remains in the owner until full compliance with the terms of the contract by the purchaser. (Knapp v. Andrus, 56 Mont. 37, 180 Pac. 908; Tyler v. Tyler, 50 Mont. 65, 144 Pac. 1090.) “When an option to purchase land is given, according to the doctrine most in accord with authority and principle the conversion is deemed to have taken place at the time the option is declared and not from the date of the contract giving the option. The maxim underlying the doctrine of equitable conversion rests on a duty to do something, and until the option is exercised there is no dutjr and it cannot be known whether there ever will be a duty. Hence, conversion should not be presumed as of a date earlier than the date when the duty becomes certain, as that would be unreasonable and the same in effect as if the duty existed from the outset. The person granting the option must in reason be presumed to intend that the discharge of the duty shall take effect for all purposes only from the date when by his direction the duty becomes absolute through the occurrence of an uncertain event. To hold otherwise would carry a rule, unknown to the common law and created by courts of equity because founded on reason, far beyond the bounds of reason. As intention is involved, or presumed intention, which must be reasonable, the manifest inconvenience of holding otherwise cannot be ignored.” (6 R. C. L., p. 1088, sec. 21; Inghram v. Chandler, 179 Iowa, 304, L. R. A. 1917D, 713, 161 N. W. 434; Rockland-Rockport Lime Co. v. Leary, 203 N. Y. 469, Ann. Cas. 1913D, 62, L. R. A. 1916F, 352, 97 N. E. 43.) *291 Here, under each of the contracts, the vendor and vendee mutually bound themselves to each other — one to sell and the other to buy, the land described upon deferred payments, and under the doctrine of equitable conversion the interest of the vendor was converted into personal property, and upon her death her interests in the partially performed contracts passed to her personal representative as personal property, and were not subject to the attempted execution upon real property for the debts of Kern, the devisee under the will. (Bowen v. Lansing, 129 Mich. 117, 95 Am. St. Rep. 427, 57 L. R. A. 643, 88 N. W. 384; Beaver v. Ross, 140 Iowa, 154, 17 Ann. Cas. 640, 20 L. R. A. (n. s.) 65, 118 N. W. 287.) The sheriff’s certificate of sale under execution upon a judgment against Kern was ineffectual and did not pass title to the purchaser; it constitutes a cloud upon the naked title held by the executor and the court erred in entering judgment for defendant. The judgment is reversed and the cause remanded to the district court of Ravalli county, with direction to enter judgment for plaintiff Kern, as executor. Mr. Chief Justice Callaway and Associate Justices Galen, Angstman and Matthews concur.