Panushka v. Panushka

• Decision Date: 17 February 1960
• Citation: 349 P.2d 450,221 Or. 145
• Parties: Edward William PANUSHKA, Respondent, v. Bess L. PANUSHKA, a widow, individually and as Administratrix of the Estate of Edward P. Panushka, deceased, Appellant, Joseph Lessman and Leona Lessman, husband and wife, Defendants.
• Court: Oregon Supreme Court

Page 450

349 P.2d 450

221 Or. 145

Edward William PANUSHKA, Respondent, v. Bess L. PANUSHKA, a widow, individually and as Administratrix of the Estate of Edward P Panushka, deceased, Appellant Joseph Lessman and Leona Lessman, husband and wife, Defendants.

Supreme Court of Oregon, Department 2.

Argued and Submitted Sept. 17, 1959.

Decided Feb. 17, 1960.

Allen G. Fletcher, Portland, argued the cause for appellant. With him on the briefs was Dale Jacobs, Oregon City.

Peter A. Schwabe, Portland, argued the cause and filed a brief for respondent.

Before McALLISTER, C. J., and WARNER, SLOAN, O'CONNELL and KING, JJ.

WARNER, Justice.

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 administratrix 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 Lessman 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. From that decree the widow has appealed.

The defendant's sole assignment of error is that the 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, the 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, 45 L.R.A. 642; Collins v. Creason, 55 Or. 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 P.2d 432; Brown v. Security Savings & Trust Co., 140 Or. 615, 620, 14 P.2d 1107; City of Reedsport v. Hubbard, 202 Or. 370, 390, 274 P.2d 248; Reynolds Aluminum Co. v. Multnomah County, 206 Or. 602, 617, 287 P.2d 921, certiorari denied Reynolds Metals Co. v. Multnomah County, 350 U.S. 970, 76 S.Ct. 437, 100 L.Ed. 842. See, also, 1 Jones, Cyclopedia of Real Property Law, 588-9, 598-9, §§ 400, 407; 18 C.J.S. Conversion § 9a, pp. 48-49; 91 C.J.S. Vendor & Purchaser § 106, pp. 1009-1010, 1015; 19 Am.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 C.J.S. Conversion § 12, p. 51, supra.

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 page 137, 12 P. at page 543); Sheehan v. McKinstry, 105 Or. 473, 483, 210 P. 167, 34 A.L.R. 1315; Re Estate of Denning, supra (112 Or. at page 628, 229 P. at page 914); Lea v. Blokland, supra (122 Or. at page 244, 257 P. at page 805). See, also, Collins v. Creason, supra (55 Or. at page 529, 106 P. at page 447); and City of Reedsport v. Hubbard, supra (202 Or. at page 390, 274 P.2d at page 257).

Mr. Pomeroy observes: 'No express declaration in the 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 page 628, 229 P.2d at page 914), 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 C.J.S. Descent & Distribution § 9, p. 538.

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 statement in the case of Stout v. Van Zante, 1923, 109 Or....