Court Opinion

ID: 9573496
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:56:02.9262+00
Date Added: 2024-06-11T12:41:25.304047
License: Public Domain

WARNER, J.
The plaintiff, Edward William Panushka, is the son of Edward P. Panushka, deceased, by a former marriage. His father died intestate, leaving an estate subject to administration, in Clackamas county, Oregon.
Bess L. Panushka is the widow of the decedent and appears herein both individually and as the ad*148ministratrix of her late husband’s estate. We will refer to her in her personal capacity as the defendant.
The facts are simple and not disputed. The defendant and decedent were married in 1931. In 1944 they purchased on contract a motel in Clackamas county, receiving a deed therefor in 1948. The property was conveyed to them as tenants by the entirety. On April 15, 1952, they entered into an executory contract for the sale of this property to Joseph Less-man and wife. The vendees went into possession on the first of May, 1952, and from thenceforth received all the rents and profits from the property. As of the date of Edward P. Panushka’s death, September 27, 1955, the unpaid balance of the purchase price amounted to approximately $25,361.95.
Mrs. Panushka’s failure to include in the inventory any part of the unpaid balance properly chargeable to the sale of the real property is explained as reflecting her claim to the whole amount due thereunder as being the sole owner as the surviving member of the tenancy by the entirety in the real property.
Plaintiff brought this action for a declaratory judgment to determine the estate’s interest, if any, in the unpaid balance under the contract for the sale of the real property. It is his contention that the interest of his stepmother is that of a tenant in common as to all money payable under the contract as of the date of his father’s death; and as such not entitled to a survivorship interest in the same.
The trial court held Mrs. Panushka, in her personal . capacity, had no survivorship interest therein but held only as a tenant in common and the other half interest was an asset of the decedent’s estate. Prom that decree the widow has appealed.
The defendant’s sole assignment of'error is that *149the court erred in extending the doctrine of equitable conversion so, as she says, to destroy a tenancy by the entirety.
It poses the following questions for resolution in this court: (1) Was the doctrine of equitable conversion properly applied; and (2) Did the vendors intend to create a survivorship interest in the proceeds to be derived from the sale?
We have no decisions passing directly upon the questions here involved, and to our surprise find few in other jurisdictions.
 At the very outset of our consideration of the problems we are presented with two propositions of law in this state, long and well settled. The first concerns our fidelity to the doctrine of equitable conversion as applied to contracts for the purchase and sale of realty. The second is the well-established rule in this state declaring against estates by the entirety in personalty.
Because of its important relation to the instant matter, we deem it in order to restate the doctrine of equitable conversion as it has been recognized and applied in a long line of previous cases. In equity a binding and enforceable contract for the sale and purchase of real estate is recognized for most purposes in this court, as well as in other jurisdictions, as if specifically executed and performed. This concept is derived from the maxim that equity considers as done that which was agreed to be done.
An equitable conversion, therefore, takes place when a contract for the sale of real property becomes binding upon the parties. Thenceforth, the purchaser of the land is deemed the equitable owner thereof, and the seller is considered the owner of the purchase price. Upon the execution of the contract, *150the two contracting parties change positions. The purchaser’s interest is “land”, and the right and interest conferred by the contract upon the vendor is “personal property,” i.e., ownership of the right to receive the purchase money. The naked legal title, which the vendor holds in trust as security for the payment of the purchase money, descends to his heirs to be held by them for the benefit of the purchaser, but the vendor has no interest in the land which is subject to descent. Upon the vendor’s death, his interest in the purchase money passes to his personal representative as personalty, and is distributable among the deceased vendor’s next of kin. In short, as a result of the equitable conversion, the vendor holds an encumbered legal title, charged with the equitable interest of the purchaser, which is subject to be defeated by the purchaser’s performance of the contract but so long as the contract remains executory, no title to the land is conveyed in law to the purchaser. Subsequent holders of the legal title with notice are likewise treated as trustees for the purchaser, as are heirs and devisees. This trust cannot be terminated either by the vendor or by anyone, with notice of the trust, claiming under, by or through the vendor, except for a breach by the purchaser of the conditions of the contract. The purchaser is called, by some courts, the trustee of the purchase money for the vendor. Other courts, adhering in strict theory, do not say “trustee,” but designate the purchaser a contracting party bound by an obligation to pay the vendor or his personal representative money for the land purchased. Burkhart v. Howard (1886), 14 Or 39, 44, 12 P 79; Walker v. Goldsmith, 14 Or 125, 137, 12 P 537; Sayre v. Mohney, 30 Or 238, 242, 47 P 197; Sievers v. Brown, 34 Or 454, 56 P 171; Collins v. Creason, 55 *151Or 524, 529, 106 P 445; Re Estate of Denning, 112 Or 621, 626, 628, 229 P 912; Lea v. Blokland, 122 Or 230, 244, 257 P 801; Harder v. City of Springfield, 192 Or 676, 686, 236 P2d 432; Brown v. Sec. Sav. & Trust Co., 140 Or 615, 620, 14 P2d 1107; City of Reedsport v. Hubbard, 202 Or 370, 390, 274 P2d 248; Reynolds Aluminum Co. v. Multnomah County, 206 Or 602, 617, 287 P2d 921, cert denied 350 US 970, 100 L ed 842, 76 SC 437. See, also, 1 Jones, Cyclopedia of Real Property Law, 588-9, 598-9, §§400, 407; 18 CJS 48-9, Conversion §9a; 91 CJS 1009-10, 1015, Vendor & Purchaser § 106; 19 Ana Jur 15-16, Equitable Conversion § 15; 55 Am Jur 781, 785-6, Vendor and Purchaser §§ 355, 359; 3 Casner, American Law of Property, 69-71, § 11.26; Walsh, Equity 415, § 86.
In the absence of a showing that the parties have manifested an intention that the property should retain its present character, the general rule is that the conversion takes place when the contract is executed by the parties.
19 Am Jur 23, supra, § 28, states the rule as follows: “Where property passes by force of contract, it is generally held that the conversion operates from the execution of the contract.” See, also, 18 CJS 51, supra, § 12.
This rule establishing the timing of the conversion as of the execution of the contract has long been followed in Oregon. Walker v. Goldsmith, supra (14 Or at 137); Sheehan v. McKinstry, 105 Or 473, 483, 210 P 167, 34 ALR 1315; Re Estate of Denning, supra (112 Or at 628); Lea v. Blokland, supra (122 Or at 244). See, also, Collins v. Creason, supra (55 Or at 529); and City of Reedsport v. Hubbard, supra (202 Or at 390).
Mr. Pomeroy observes: “No express declaration in *152the instrument is needed that land shall be treated as money although not sold, or that money shall be deemed land although not actually laid out in the purchase of land. The only essential requisite is an absolute expression of an intention that the land shall be sold and turned into money, or that the money shall be expended in the purchase of land.” 4 Pomeroy Equity Jurisprudence (5th ed) 473-4 § 1159.
A test as to the existence of a conversion under an executory contract is the mutuality of the agreement, the purchaser agreeing to buy and the seller agreeing to sell, thereby vesting either party to such a contract with the right to specific performance. Re Estate of Denning, supra (112 Or at 628), and authorities there cited.
“[A]s a general rule it may be stated that the character of the estate at the death of the intestate, as impressed upon it by his act, determines the course of its descent as real property or of its distribution as personal property. * * *” 26A CJS 538, Descent & Distribution § 9.
There is nothing in the Panushka-Lessman contract to warrant staying the application of equitable conversion. It is in no sense unlike the many other contracts of the same kind and purpose which have subjected the property of the vendors to the effects of its operation. The Panushkas thereby voluntarily impressed their land with the equitable character as personalty for the purposes of distribution. This conclusion does not, however, solve our problem. We have yet to find its effect, if any, upon defendant’s claim of survivorship interest in the unpaid purchase price.
The second pronouncement of importance in this matter, and earlier alluded to, finds its first state*153ment in the case of Stout v. Van Zante, 109 Or 430, 439, 219 P 804, 220 P 414 (1923). There we are taught in Oregon, estates by the entirety do not exist in personal property. In the intervening years this rule has been consistently followed and is now firmly established. Smith v. Durkee, 121 Or 86, 91, 254 P 207; Ganoe v. Ohmart, 121 Or 116, 125, 254 P 203; McInnis v. Atlantic Inv. Corp., 137 Or 648, 655, 3 P2d 118, 4 P2d 314; Nunner v. Erickson, 151 Or 575, 617, 51 P2d 839; Holman v. Mays, 154 Or 241, 249, 59 P2d 392; Alexander v. Alexander, 154 Or 317, 331, 58 P2d 1265; Erickson v. Erickson, 167 Or 1, 20, 115 P2d 172; Manning v. U. S. Nat. Bank, 174 Or 118, 131, 148 P2d 255 (1944).
Contracts of the kind presently before us are very familiar instruments with frequent employment in the commerce relating to the purchase and sale of realty. No doubt there have been untold transactions using this form wherein tenants by the entireties have engaged themselves to sell their entirety holdings; yet the instant matter brings to the court for the first time the question of a surviving vendor’s interest in the unpaid balances due or to become due thereunder.
At this point, we pause to test the defendant’s position with reference to the foregoing propositions of law and her statement concerning the impact of the doctrine of equitable conversion on the title. We revert to the language of her single assignment of error, which, as she claims, consisted of “extending the doctrine of equitable conversion to destroy a tenancy by the entirety.” We also note her further statement, “the vendor’s interest [in the unpaid balance], after the death of one spouse, lost its survivorship status.” (Emphasis ours.)
It would appear to us from that statement that *154Mrs. Panushka is laboring under a misconception as to the effect of the conversion doctrine when applied. We learn from onr earlier statement concerning the doctrine, as derived from the authorities cited, that such a conversion does not operate upon the legal estate or title to the land. The legal title from the execution of the contract remains as before, but as such is held in trust by the vendors for the benefit of the vendees. Therefore, the entirety title of the vendors, existing as of the date of the contract, remained intact to and until the date of Mr. Panushka’s death, when Mrs. Panushka, as the survivor, took the whole estate at law “not by right of survivorship simply, but by virtue of the grant which vested the entire estate in such grantee.” Stout v. Van Zante, supra (109 Or at 434).
In the instant case, the sales contract did not destroy the legal estate of entirety ownership nor did the doctrine of equitable conversion work such a result. So far as the legal title is concerned, it continued in Mrs. Panushka as her husband’s survivor, and she succeeded upon his death to the entire legal title as trustee, previously held by both of them as co-trustees, for the benefit of the purchasers. This she continues to hold until such time as the Lessmans, or their assigns, complete the vendees’ obligations under the contract. Meanwhile, Mrs. Panushka will hold the title in trust as security for the vendees’ performance. Walsh, Equity 416, § 86.
When defendant says after the death of her spousé the vendors’ interest in the unpaid balance lost its survivorship status, she. is again. mistaken. It is an argument apparently predicated on a belief that once spouses hold land by the entirety, the survivorship characteristic of such estate is' by operation of' law *155impressed upon each succeeding item of property that they may thereafter mutually acquire from the proceeds of the sale of their first holding. This notion is put at rest by the words of Mr. Justice Rand in Stout v. Van Zante, supra, at 439:
tí* * * we can find no case in which it has been held that the transaction of taking a note payable jointly to a husband and wife, secured by a mortgage upon land, creates in them a tenancy by the entirety as to the notes, or which holds that upon the death of either the legal interest of the deceased spouse in the note passes to the survivor. In fact, the rule seems to be directly to the contrary: In re Albrecht, supra; In re Baum, 121 App. Div. 496 (106 N. Y. Supp. 113); In re Berry, 247 Fed. 700; see also note, 8 A. L. R. 1022, subd. 4.”
There is a strong analogy between the position of vendors Panushka under their contract for the purchase and sale of land and mortgagees Stout, who took a mortgage from their purchaser as security for the balance of the purchase price (109 Or, supra, 432). This close parallel between the position of a vendor under a purchase and sale contract and a mortgagee under a purchase price mortgage is recognized in 1 Jones, supra, 590, § 402; 55 Am Jur, supra, 781, § 355, and n 19. In Sievers v. Brown, supra (34 Or at 457), Mr. Justice Moore quotes with approval a statement of Jessel, M. R., made in Lysaght v. Edwards, 2 Ch Div 499, which bespeaks the same similarity, and which reads:
tt t* * * jn wor(js> position of the vendor is something between what has been called a naked or bare trustee, or a mere trustee (that is, a person without beneficial interest), and a mortgagee who is not, in equity (any more than a vendor), the owner of the estate, but is, in certain *156.events, entitled to what the unpaid vendor is, viz., possession of the estate, and a charge upon the estate for his purchase money. Their positions are analogous in another way. The unpaid mortgagee has a right to foreclose; that is to say, he has a right to say to the mortgagor, “Either pay me within a limited time, or you lose your estate,” * * *. So, although there has been a valid contract of sale, the vendor has a similar right in a court of equity. He has a right to say to the purchaser, “Either pay me the purchase money, or lose the estate.” ’ * * *.”
Notwithstanding that joint tenants, unlike tenants by the entirety, may individually sever and destroy the relationship, we also find a sufficient parallel between these'two kinds of ownership to warrant attention to cases wherein the courts have applied the doctrine of equitable conversion to contracts for the purchase and sale of realty, wherein the vendors were joint tenants, and its effect upon the unpaid balances due from the vendees. In the recent cases of Re Estate of Baker (1956), 247 Iowa 1380, 78 NW2d 863, 64 ALR2d 902, and Buford v. Dahlke (1954), 158 Neb 39, 62 NW2d 252, the highest court of these states had that question before it and resolved it in favor of the applicability of equitable conversion and a resultant ownership in the proceeds of the sale by the vendors as tenants in common. See, also, In re Sprague’s Estate (1953), 244 Iowa 540, 57 NW2d 212, and cases cited in Buford v. Dahlke, supra, at 256.
As a general rule, when an estate by the entire-ties is sold by a husband and wife, in the absence of an agreement directing a contrary division, “the proceeds of a sale of real property acquired by them Under the same conveyance belong one-half to each.” 4 Thompson, Real Property, 356, § 1820. See, also, Stout v. Van Zante, supra; Fogleman v. Shively, 4 *157Ind App 197, 30 NE 909; In re Albrecht, 136 NY 91, 32 NE 632, 633, 18 LRA 329. We have long been in accord with that rule. In Marchand v. Marchand, 137 Or 444, 3 P2d 128, we said, at page 449: “While an estate by the entirety exists the husband and wife have an equal interest and when they voluntarily join in its disposal, the net proceeds should be equally divided.”
Thus we find the law impresses a different character of ownership in the proceeds resulting from the sale of an entirety holding, namely, that of a tenancy in common as between the spouses. If Mr. and Mrs. Panushka had in the lifetimes of both sold their motel for cash, or had received full payment due on the Lessman contract, or had, as the Stouts in Stout v. Van Zante, supra, sold the motel for part cash with notes and mortgage back to secure the balance, notes nevertheless being payable to both of them, such cash and notes would be owned by them as tenants in common, in the absence of an express agreement of survivorship between them. In effect, it would be the identical legal result that Mrs. Panushka seeks to avoid here.
If, as we have said, the owners of an entirety estate take an equal interest in the proceeds of a sale (Marchand v. Marchand, supra), and this is true whether sold on contract or notes are accepted as a part of the purchase price (Stout v. Van Zante, supra), how then can we now consistently say, if the Panushkas own the avails of a sale of their entirety interest as tenants in common during their joint lives, that the surviving spouse takes the whole of any unpaid balance remaining on the death of the other, when there is no clear expression of their intent that such a survivorship shall result? The question attains *158additional pertinency when we remember. In re Estate of Denning,, supra, teaches us that there is no reconversion upon the death of a vendor (112 Or at 629). The defendant supplies us with no persuasive answer. We are satisfied' that in the light of our previous decisions that there is none' justifying the complex legal transmutations that defendant’s thesis would require; that is, first from a tenancy by the entirety in real property to a tenancy in common in personalty, thence to a survivorship interest in the whole of the unpaid purchase price.
The defendant contends, and we agree, that the doctrine of equitable conversion will not be invoked when it is evident that the results would be contrary to the intention of the parties. If the vendor’s intention is not stated, it must be deduced from the whole instrument and an alternative undisclosed intention cannot be substituted. 19. Am Jur 4, 5, Equitable Conversion §§4, 5.
In Re Edwards’ Estate, 140 Or 431, 14 P2d 274, where the court was required to construe a joint banking deposit contract entered into between a husband and wife, we said at 446:
“The intent of the depositors being always the controlling factor, we know of no reason why the contract of the parties should not be given full effect. Where no evidence of intent is available except the form of the deposit, that must control. But when the intention is evidenced by a written agreement the question of intention ceases to be an issue and the courts are bound by the agreement. * *
But where a survivorship in the proceeds is intended, it must be “affirmatively created by express words.” Manning v. U. S. National Bank, supra (174 Or at 128); Erickson v. Erickson, supra.
*159We have examined the instant contract with care. All parts of it are free from ambiguity. We find nothing therein, express or implied, to sustain defendant’s contentions as to the vendors’ intent to impress upon the avails from a sale a right of survivor-ship in such funds.
To now find that such a survivorship can be created, other than by express words in the contract of sale or in some related document, and rely only on the original deed to the Panushkas would mark a departure from our previous decisions and the general rule above noticed and followed in Marchand v. Marchand, supra. See, also, Ganoe v. Ohmart, supra. Moreover, to imply that the vendors intended to have an estate of survivorship' impressed upon the proceeds of the sale with no more than the language of the deed as justification for such conclusion might, in the absence of evidence to the contrary, abrogate a subsequently conceived desire by the entirety owners to thereafter hold the proceeds as tenants in common; a conclusion more realistic and probable when viewed in the light of the foregoing rules.
The defendant represents that: “There is not a word in the contract that indicates anything of the kind [a conversion defeating a survivorship right in the proceeds].”
In general, the instant contract is well written and indicates that it was probably drawn by one learned in the law. It follows in form those commonly used in transactions of that kind, except in • one particular, and in that respect, if given weight, militates against defendant’s representations as to the intent of the parties. Its closing clause is the familiar one binding tfcie respective parties “their heirs and assigns” to all the covenants and agreements therein contained. *160(Emphasis, ours) The particular in which it departs from more familiar forms is found in three other places where it refers to the vendors’ heirs and assigns. These we note in the margin below.① Under the circumstances, it cannot well be urged by the defendant widow that it was the intent of herself and husband that the proceeds of the sale were to accrue in their entirety to the surviving spouse. If that were true, there would be no necessity of binding, as they have done, the heirs of the vendors. See Re Baker’s Estate, supra (64 ALR2d at 909). But we find it unnecessary to rely upon the foregoing matter in the contract to support our final conclusions. These we rest upon well established rules of law. We refer to the use of the word “heirs” in the contract merely to indicate that defendant is in error when she speaks of the vendors’ intentions respecting an estate of survivorship in the proceeds of the sale.
There is no inequity or resulting hardship when tenants by the entirety together agree to sell and, by use of the kind of contract they employed, mutually agreed, so to speak, to convert their realty into personalty. This is so especially when, if they had so desired, they could have preserved the grand incident of survivorship by appropriate clauses in the contract expressly indicating such intent, or, indeed, in a collateral instrument made between them. This court has long since pointed the way to the accomplishment of such result by impressing the funds with the character of a joint tenancy therein, thus preserving an estate of survivorship in the vendors. Manning v. *161U. S. National Bank, supra, at 131, attests this possibility. See, also, Erickson v. Erickson, supra; Stout v. Van Zante, supra, at p 438; and Beach v. Holland, 172 Or 396, 415, 142 P2d 990, 149 ALR 866.
Diligence of counsel and our own research has failed to discover but two jurisdictions wherein the courts have spoken to questions like those confronting us here; that is, involving executory contracts for the sale of realty in which the vendors hold titles by the entireties and defining their respective interests in the purchase money after the death of one spouse. In Michigan and New York will be found two cases producing a result contrary to the theory of ownership in common. These cases from the latter two jurisdictions are the source of the defendant’s chief reliance. The Michigan case is Detroit & Security Trust Co. v. Kramer, 247 Mich 468, 226 NW 234 (1929); the one from New York, In re Maguire’s Estate, 296 NYS 528, 251 App Div 337 (1937). Upon examination the inapplicability of these cases as authority here is readily apparent.
In Detroit & Security Trust Co. v. Kramer, supra, the surviving husband proceeded to receive and retain as his own the payments made by the purchaser after his wife’s death. The plaintiff trust company, as her administrator, brought suit against the husband on the theory that under the doctrine of equitable conversion the vendors were the owners of the unpaid purchase price as tenants in common. On appeal, the Michigan Supreme Court held adversely to the trust company and in favor of the defendant husband.
In Kramer, supra, the court advances the following as the apparent prime reason for holding against applying an equitable conversion to the Kramer sales *162contract, saying: “We think it conclusively appears in this record that Mr. and Mrs. Kramer so arranged their respective properties that in effect it amounted to a contractual undertaking that each should take and hold a right of survivorship in the other’s property.” (Emphasis ours.) (226 NW, supra, at 235). We find ourselves in harmony with the general proposition that the Kramers, or the Panushkas in the case at bar, might have entered into a contract whereby the surviving spouse would have succeeded to complete ownership of the unpaid balance if they had stipulated that each vendor should have a right of survivorship therein. The possibility of this has already been noticed in Manning v. U. S. National Bank, supra, at 131; Erickson v. Erickson, supra, at 20; Beach v. Holland, supra, at 415. The Kramer case is additional authority for the proposition that the parties might have achieved a survivorship interest in personal property by contract (226 NW, supra, at 235). However, the court, in Kramer, supplies us with no reference to evidence which supports the “conclusive” appearance of a “contractual undertaking that each [spouse] should take and hold a right of survivorship in the other’s property.”
The Michigan court also claimed that the doctrine of equitable conversion, if applied to contracts for the sale of lands held by the entireties, would lead to results that “would seriously impair the title to every parcel of real estate which has been thus conveyed.” (226 NW, supra, at 235.) It gives three reasons intended to fortify this conclusion. It is sufficient to say that each reason is contrary to universally accepted concepts of a title by the entireties and the application of any one of them would not have a serious, or any, impact upon titles previously con*163veyed. This is equally true in Oregon where our own-, decisions are contrary to the legal implications predicted by the Michigan court.
In In re Maguire’s Estate, supra, the Maguires, husband and wife, owned a parcel of real property by the entireties. On February 25, 1929, they entered into a contract of sale at which time they received a deposit of $1,000. The balance was to be paid “at the closing, set for April 1, 1929,” (about 35 days later). On March 8, 1929, the wife died intestate, leaving her husband and children surviving. On April 2, 1929, the widower executed and delivered a deed to the purchaser and received and retained as his own the balance of the purchase price. The administratrix of the wife’s estate made claim for one-half of the proceeds.
The court, saying, while it is the general rule that an equitable conversion results from such a contract, “* * * the rule does not obtain under the circumstances disclosed by this record.” The circumstances controlling the court’s judgment are revealed in the following statement:
“The conversion, if any, takes place only when it is the duty of the contracting party to act. In the instant case the act to be done was the execution and delivery of the deed on April 1, 1929.” (296 NTS at 531.)
Laying aside the patent absurdity that the conversion, if any, takes place at the time of delivery of the deed, we find that the New York concept as to the timing of the conversion is contrary to the general rule. See 19 Am Jur, § 28, p 23, supra; 18 CJS, § 12, p 51, supra.
By defendant’s concession that in Oregon an equitable conversion takes place upon the execution of the *164contract, she destroys Maguire as support for her position in this appeal.
We are convinced that the logic and reason of our former decisions sustain our conclusion that the doctrine of equitable conversion was properly applied to the Panushka-Lessman contract as of the time of its execution, resulting in their ownership as tenants in common as to the purchase price; that there is no evidence of a mutual intention on the part of the Panushkas to vest the surviving spouse with a right to claim as sole owner the unpaid portion of the sales price. Mrs. Panushka, under the circumstances, is the owner of an undivided one-half interest therein, and the estate of Mr. Panushka is the owner of the other half.
Affirmed.

 The words “first party” are used to designate both vendors. The phrases referred to, above are: (X) "the party of the first part hereby agree for themseives and their heirs, ** * * to sell * * (2) “The party of the first part, their heirs * * * will upon full payment * * .* make, execute * * and (3) “the party of the first part, their heirs * * * may declare the whole of the unpaid * * * purchase price immediately due * * *.” (Emphasis ours).