Heider v. Dietz

• Decision Date: 10 April 1963
• Parties: Callie B. HEIDER, Appellant, v. George DIETZ, Matie H. Dietz, and Otto W. Heider, Respondets.
• Court: Oregon Supreme Court

Page 619

380 P.2d 619

234 Or. 105

Callie B. HEIDER, Appellant, v. George DIETZ, Matie H. Dietz, and Otto W. Heider, Respondets.

Supreme Court of Oregon, In Banc.

Argued and Submitted March 4, 1963.

Decided April 10, 1963.

Kenneth E. Shetterly, Jr., and Jerome L. Noble, Dallas, argued the cause for appellant; with Noble on the brief were Hayter & Shetterly, Dallas.

Howard E. Parcel, Portland, argued the cause and filed a brief for respondents Dietz.

No appearance for respondent Otto W. Heider.

Before McALLISTER, C. J., and ROSSMAN, PERRY, SLOAN, O'CONNELL, GOODWIN and DENECKE, JJ.

GOODWIN, Justice.

This is an appeal from a decree which denied strict foreclosure of a land sale contract.

The controlling issue is whether the doctrine of equitable conversion applies to the factual situation outlined below.

In 1951, Cecil and Anna Smith sold the land involved in this suit under a title-retaining contract. The original contract purchasers were Albert and Lorraine Valle. Shortly after entering into the contract with the Valles, the Smiths conveyed the same land, by warranty deed, to Otto W. Heider and Callie B. Heider, husband and wife, as tenants by the entirety. The deed does not refer to the interest of the contract purchasers, but the testimony at the trial made it clear that the Heiders took subject thereto. It was not until February 14, 1956, that the Smiths assigned their vendors' interest in the contract. Then they assigned it only to Callie B. Heider. The record contains no explanation for the delay of some five years between the Smiths' deed to the Heiders and their assignment of the contract to Mrs. Heider, nor of the reason for not including Otto W. Heider as an assignee. (He appears on the instrument of assignment as the notary public who acknowledged it.) A fair inference is that an oral assignment had been made contemporaneously with, and was the reason for, the deed to the Heiders. If so, the written assignment in 1956 would be a memorial at least of such an assignment to Mrs. Heider. Upon trial, however, there was no dispute concerning the assignment. Mrs. Heider is conceded to be the owner of the vendor's interest in the contract. In the meantime, the original purchasers sold their equity and assigned their interest in the contract to the present defendants, George and Matie Dietz, husband and wife. The Smiths and the Valles no longer have any interest in the contract, or in these proceedings.

Until June, 1961, all payments were made, pursuant to the contract, to Mrs. Heider. On or about June 8, 1961, a transcript of a judgment against Otto Heider, obtained in another county, was docketed in Washington County, where the land covered by the contract was situated. The judgment creditor, one Gowin, is not a party to this suit. Mr. and Mrs. Dietz, upon advice that Gowin's judgment against Otto Heider might be a cloud on their title, declined to make the payment due in July, 1961, or any further payment to Callie Heider. They have refused to pay until such time as Mrs. Heider can give them an insured title as called for in the contract. It is conceded that Mr. and Mrs. Dietz made and kept open their tender of the balance owed Mrs. Heider upon the condition that she furnish title insurance.

Mrs. Heider would not, or could not, give the purchasers an insured title, and since the purchasers refused to pay further installments of the purchase money without a policy of title insurance, this litigation resulted. The purchasers answered the complaint for strict foreclosure with a prayer for specific performance of the contract to convey 'said premises in fee simple, free and clear of incumbrances * * *.'

Upon trial, a preliminary report by a title insurance company doing business in Washington County was received in evidence. The report revealed that the company would not insure the title so long as the judgment against Otto W. Heider remained outstanding. Mrs. Heider does not dispute the fact that the title company has refused to insure the title.

ORS 18.350 provides as follows:

'(1) From the time of docketing an original or renewed judgment or the transcript thereof, as provided in ORS 18.320, such judgment shall be a lien upon all the real property of the defendant within the county or counties where the same is docketed, or which he may afterwards acquire therein, during the time prescribed in ORS 18.360.

'* * *.'

Mrs. Heider took the position that a judgment against her husband was not a lien upon the real property being purchased by Mr. and Mrs. Dietz, even though the Heiders as tenants by the entirety were the record owners of the land. Mrs. Heider contends that the purchasers therefore had no right to withhold payments, even though a title company had refused to insure the title. Mrs. Heider arrives at this conclusion by claiming that the title company is simply wrong. The cloud on the title, she says, is imaginary. She contends that there is no defect in the title because equitable conversion applies to the transaction in question. Under equitable conversion the vendor's security interest in the land is treated as personal property (not reached by the docketing of a judgment under ORS 18.350), and the vendee's equitable interest in the land is treated as real property. In other words, Mrs. Heider contends that the doctrine of equitable conversion must be applied, and that when it is applied there remains no real property in this case upon which the judgment lien can attach. She concludes that the purchasers therefore have no right to refuse payment. The then unjustified refusal to pay, she insists, is ground for strict foreclosure.

The purchasers take the position that equitable conversion should not apply in the case at bar, because its application would clearly defeat the purposes equity is called upon to serve. They have proved that at least one title insurance company has refused to insure the title because of the lien of a judgment against Otto W. Heider. They say that Mrs. Heider therefore has the burden of proving that she can give an insured title. The purchasers agree with the title company that the title is defective. Whether the title insurance company is right or wrong in its interpretation of the law, however, the purchasers say they have no duty to continue making payments to Mrs. Heider until they can be assured of receiving an insured title as called for in their contract. The trial court agreed with the purchasers. The purchasers were given a decree for specific performance, i.e., an insured title as a condition precedent to the payment of the tendered purchase money to Mrs. Heider.

We could affirm the trial court's decree upon the theory that Mrs. Heider failed to prove that she was entitled to a decree of strict foreclosure under the particular contract before us. The uncontradicted evidence proved the title to be uninsurable. Since the parties to the original contract had called for title insurance, they had, in effect, elected to treat title insurance as their standard of marketability of title. We could, therefore, under the contract, hold that the availability of title insurance, whether rightly or wrongly withheld, was a condition precedent to the duty of the purchasers to pay the balance of the purchase price.

The parties have, however, argued the case upon an important question concerning the doctrine of equitable conversion. The briefs and argument were centered upon the apparent conflict between May v. Emerson, 52 Or. 262, 96 P. 454, 96 P. 1065 (1908), and the recent case of Panushka v. Panushka, 221 Or. 145, 349 P.2d 450 (1960).

In May v. Emerson, we have a square holding that equitable conversion does not apply where the judgment creditor has levied upon the vendor's interest. There, a judgment creditor liquidated his lien. He levied upon and sold the debtor-vendor's interest in lands previously sold by the debtor under contract. The judgment creditor thus acquired whatever interest the debtor-vendor had, subject to the equities of the purchaser and subject to the purchaser's right to the performance (conveyance) called for in the contract upon payment by the purchaser of the balance of the purchase money. The effect of the holding in May v. Emerson is to keep the doctrine of equitable conversion from operating automatically to extinguish the lien of the judgment creditor insofar as lands previously sold under contract by the judgment debtor may be concerned. The title company in the case at bar evidently relied upon May v. Emerson.

The majority opinion in the Panushka case contains rather sweeping language to the effect that equitable conversion invariably applies whenever real property is sold under a title-retaining contract. 221 Or. at 149-150, 349 P.2d at 452-453. We may assume, for the purposes of the case at bar, that the Panushka case was correctly decided, and that the case was a proper one in which to apply the doctrine of equitable conversion. Cf. the dissenting opinion, 221 Or. at 164, 349 P.2d at 459. (The case involved devolution of property upon death.)

As noted in the Panushka dissent, however, neither this court nor other courts actually apply the doctrine of equitable conversion automatically. Equitable conversion is not invoked unless it appears necessary to invoke it in a particular case in order to accomplish equity according to established rules of equity jurisprudence.

Clearly, not every contract for the sale of land creates an equitable conversion as a matter of law, even in a class of cases where equitable conversion might normally be the expected...