Eddington v. Turner

• Decision Date: 17 May 1944
• Citation: 38 A.2d 738,27 Del.Ch. 411
• Court: Court of Chancery of Delaware
• Parties: JOHN ROBERT EDDINGTON, Complainant Below, Appellant, v. SALLIE B. TURNER, ARTHUR D. TURNER, and THOMAS H. TURNER, as individuals, and ARTHUR D. TURNER and THOMAS H. TURNER, as Executors of the Estate of Thomas W. Turner, Deceased, Defendant Below, Appellees

38 A.2d 738

27 Del.Ch. 411

JOHN ROBERT EDDINGTON, Complainant Below, Appellant, v. SALLIE B. TURNER, ARTHUR D. TURNER, and THOMAS H. TURNER, as individuals, and ARTHUR D. TURNER and THOMAS H. TURNER, as Executors of the Estate of Thomas W. Turner, Deceased, Defendant Below, Appellees

Court of Chancery of Delaware

May 17, 1944

APPEAL by executors of Thomas W. Turner from decree of Court of Chancery in and for Sussex County in making award to Sallie B. Turner.

Suit in equity by John Robert Eddington against Sallie B. Turner and others, individually, and Arthur D. Turner and another as executors of the estate of Thomas W. Turner, deceased, for specific performance of a contract for sale of land. From a decree, Ch., 26 A.2d 80, ordering payment to first-named defendant of a portion of the purchase money, deposited in court by complainant, defendant executors appeal.

Affirmed.

Supreme Court, February Session, 1944.

Thomas W. Turner, of Sussex County, Delaware, owning certain real estate in said County made his will dated October 17, 1938. By this will he devised certain land to his sister, Sallie B Turner, for life. There was no devise of the lands after the death of Sallie B. Turner, and no residuary clause in the will. The testator left as his only heirs at law, under the intestate law of the State of Delaware, two sons, Arthur D. Turner and Thomas H. Turner, who were also executors of his will.

After making the will, and on October 20, 1938, Thomas W. Turner, for the consideration of $ 100 entered into an agreement giving to one J. Robert Eddington "the exclusive right or option to purchase at any time within 60 days from the date hereof" a large tract of land, including all of the land devised in his will to Sallie B. Turner, together with some additional land. Time was made the essence of the option and it was agreed that if Eddington should not elect "to take, accept and purchase said property at the price and terms aforesaid, at or before the expiration of 60 days from the date hereof then this agreement shall forthwith become null and void and of no effect."

Within the 60 day period, and on December 16, 1938, Thomas W. Turner died, not having changed his will in any respect.

Within the life of the option, and on December 19, 1938, Eddington elected to exercise his option.

Subsequently, Eddington filed his bill for specific performance, and eventually a deed was made to Eddington for the property, and the purchase money deposited in court. Upon petition to draw the money out of court the Chancellor held that Sallie B. Turner was entitled to a life interest in such portion of the proceeds as the land devised to her for life bore to the amount of land conveyed under the option to purchase. This proportion was ascertained by a Special Master appointed for the purpose, and such proportion, less costs, was ordered paid to Sallie B. Turner, upon her entering into a bond conditioned upon the payment of said sum at her death to Arthur D. Turner and Thomas H. Turner. (See 26 Del.Ch. 197, 26 A.2d 90.)

From this decree the present appeal was taken, and the appellants contend that the proceeds of sale received from the exercise of the option constituted personal property, and that they, as executors and distributees, are entitled to the entire fund, and that the devisee of the real estate for life is entitled to nothing.

Decree of the Chancellor affirmed.

Isaac D. Short, 2d, and Daniel J. Layton, Jr., for appellants.

James B. Carey and James M. Tunnell, Jr., for appellee.

LAYTON C. J., and RICHARDS, RODNEY, SPEAKMAN, and TERRY, JJ., sitting.

OPINION

RODNEY, Judge.

The foregoing facts give rise to three questions so intimately blended together that it is difficult to keep them separate, for in some particulars they impinge closely on each other, and yet contain elements of dissimilarity. These questions are:

(1) Does the granting of the option to purchase, made after the execution of the will and the subsequent exercise of the option after the death of the optionor, operate as an equitable conversion of the property relating back to the date of the option, so that the proceeds of sale would pass to the personal representatives rather than to the specific devisee of the land?

(2) Did the granting of the option to purchase, followed by its exercise after the death of the optionor operate as an implied revocation of that portion of the will dealing with that real estate?

(3) Did the granting of the option, followed by its exercise after the death of the optionor, operate as an ademption of the devise to Sallie B. Turner for life?

These questions must be considered in their order.

Equitable conversion is, of course, a well established principle of equity, arising from consideration of a will or contract. While there is some authority holding that equitable conversion by contract, as distinguished from that arising by will, depends upon the operation of law regardless of the intent of the parties, yet the prevailing view is that it includes a legal fiction based upon the presumed intent of the parties, and embodying the equitable maxim that equity considers that to have been done which should have been done. By the application of the doctrine and upon the entering into a mutually obligatory contract the nature of the property is considered as having been changed. Equity thereafter considers the vendor as holding the land subject to the call of the vendee, and as security for the payment of the purchase price, and considers the vendee as holding the purchase price for the vendor. Either can require the other to specifically perform the contract, and by the doctrine the parties upon the entering upon the contract are deemed to be entitled to that which he will receive when the contract is carried out. The matter has chief application in determining the interests of persons claiming under the vendor or vendee.

Any difficulties surrounding the application of equitable conversion are increased when considered with relation to a mere option to purchase, as contrasted with a mutually binding contract of sale, and these difficulties are again intensified when the option is not exercised until after the death of the person giving the option.

Most of the facts indicated were present in the case of Lawes v. Bennett, Ch., 1 Cox 167, 29 Eng. Rep. 1111, from which case stems all thought that where the option is exercised after the death of the optionor the equitable conversion relates in some way back to the date of the option, and not to the date of its exercise, and consequently the proceeds of sale are treated as personalty, passing to the personal representatives rather than to the specific devisees of the real estate itself. In that case, decided in 1785, there had been a lease for seven years, with option to purchase during the last four years of the lease. The owner then made his will leaving his real estate to J, and his personal estate to J & M. The owner having died, the optionee during the term of the option exercised his right to purchase the property, and the question was whether the purchase money should be considered as part of real or personal estate of the testator. Sir Lloyd Kenyon, Master of the Rolls, said:

"When the party who has the power of making the election has elected, the whole is to be referred back to the original agreement, and the only difference is that the real estate is converted into personal at a future period."

The proceeds of sale were considered as personal property.

Few, if any, English decisions have been as consistently criticized, limited and explained as Lawes v. Bennett, and yet all English courts have given it recognition and expressly refused to overrule it.

Lawes v. Bennett was considered in 1808, in Townley v. Bedwell, 14 Ves. Jr. 591, 33 Eng. Rep. 648. There Lord Eldon remarking that much could be urged against it, yet followed the decision. Lord Eldon had been the unsuccessful counsel in Lawes v. Bennett. Lawes v. Bennett has been followed in Collingswood v. Row, 26 Law J. Ch. 649, 3 Jur. (n.s.) 785, 5 Week Rep. 484; Weeding v. Weeding, 30 Law J. Ch. 680, 4 L.T.R. 616, 9 Week Rep. 431, 70 Eng. Rep. 812; In re Isaacs, [1894] 3 Ch. 506; In re Marlay, [1915] 2 Ch. 264; In re Carrington, [1932] 1 Ch. 1, 79 A. L. R. 259.

Lawes v. Bennett has been limited, explained or not applied in Drant v. Vause, 62 Eng. Rep. 1026; Emuss v. Smith, 2 DeGex & S. 722, 64 Eng. Rep. 323; Adams v. Kensington Vestry, 27 Ch. 394; In re Pyle, [1896] 1 Ch. 724. In Edwards v. West, L.R. 7 Ch. 858, the court while recognizing the rule of Lawes v. Bennett as to questions arising between heirs at law and personal representatives of the optionor, refused to apply the rule of conversion between optionor and optionee where the option is sought to be exercised within its term but after a fire had destroyed the buildings, and the optionee claimed the value of the insurance money.

Many authorities, English and American, have assumed in general terms that Lord Kenyon in Lawes v. Bennett decided that upon the exercise of the option, after the death of the optionor, that the equitable conversion of the property took effect from the date of the option, and not from the date of its exercise. This clearly could not be reconciled with the obvious holding that the heir or devisee is entitled to the rents and profits of the real estate after the death of the optionor and testator, and before the exercise of the option. All of the cases now hold that the property is converted from the date of the exercise of the option, and not from the date of the agreement by which such option was given. In re Isaacs, supra; In re Marly supra; In re Carrington, supra. Since the equitable conversion dates from...