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Shay v. Penrose

    Brief Fact Summary. Mrs. Shay was in the process of selling four tracts of land under installment contracts when she died intestate and an action for partition was taken. The trial court denied partition based on the doctrine of equitable conversion. An appeal was taken.

    Synopsis of Rule of Law. When the owner of land enters into a valid and enforceable contract for its sale he continues to hold the legal title, but in trust for the buyer. The buyer becomes the equitable owner and holds the purchase money in trust for the seller/ owner.

    Facts. Mrs. Shay was in the process of selling four tracts of land under installment contracts when she died intestate, and her husband and other heirs instituted an action for partition of the parcels based on their succession to Mrs. Shay’s interests. The trial court denied partition based on the doctrine of equitable conversion. An appeal was taken.

    Issue. What interest, if any, do the successors of Mrs. Shay have in the property, which was sold under an installment contract?

    Held. Not an ownership interest. Order affirmed.
    Equitable conversion is the treating of land as personalty and personalty as land under certain circumstances. When the owner of land enters into a valid and enforceable contract for its sale he continues to hold the legal title, but in trust for the buyer. The buyer becomes the equitable owner and holds the purchase money in trust for the seller/owner.
    The conversion takes place at the time of entering into the contract. It stems from basics equitable principles of fairness.
    This court limits its decision to the applicability of the doctrine of equitable conversion in cases involving the devolution of title in event of the death of the seller.
    The court found that the extended length of the contracts did not make the equitable conversion rule inapplicable. The seller is deemed to know the consequences of the deal. Thus, no partition can be had in favor of the successors to Mrs. Shay.

    Discussion. This case provides an excellent description of the equitable conversion doctrine. The doctrine is based on an equitable maxim and it is easy to see how the maxim protects the buyer from inequitable results in case of the death of the seller, especially in cases where the buyer is not in default at the time of death.


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