§ 927. Ownership of the purchaser in equity. The doctrine has become established in English Courts of Equity that from the formation of the contract, though it is not performable until a future day, the purchaser is the owner in equity, and that the vendor holds the legal title merely as security for the payment of the price. In other words, that the relation is substantially that of mortgagor and mortgagee. Many of the effects of this doctrine do not concern the law of contracts. For instance, whether the heir or executor of a deceased vendor should receive the price for which he had during his life contracted to sell land belonging to him, is rather a question of property than of contracts. But the obligation of the buyer to perform his promise to pay the price in spite of the destruction or deterioration of the premises subsequent to the formation of the contract, involves a fundamental question of contractual liability. § 928. Risk generally thrown upon the purchaser. Since the decision of Paine v. Meller 37 it has not been doubted in England that the purchaser is not excused from fulfilling his promise to purchase by any accidental injury to the property.3 38 It is not surprising that the English law has 77 6 Ves. 349. 28 There are dicta to this effect in Rawlins v. Burgis, 2 Ves. & B. 382, 387; Harford v. Purrier, 1 Mad. 532, 539; Acland v. Gaisford, 2 Mad. 28, 32; Robertson v. Skelton, 12 Beav. 260, 266; Coles v. Bristowe, L. R. 6 Eq. 149, 159, 160. See also Lysaght v. Edwards, 2 Ch. D. 499. In Poole v. Adams, 12 Weekly Rep. 683, Kindersley held, at suit of a cestui que trust, that a purchaser from the plaintiff's trustee was bound to pay the price for an estate though the house had been destroyed, and could not claim the benefit of insurance money collected by the trustee and under agreement with the purchaser allowed as part payment of the price, the trustee having misapplied the insurance money and be come bankrupt. In Rayner v. Preston, 14 Ch. D. 297, it was held that a purchaser of a house who after its destruction by fire before the time fixed for conveyance had paid the price in full, could not recover insurance money collected by the vendor. This decision was affirmed by the Court of Appeal, Brett and Cotton, L. JJ., James, L. J., dissenting. Thereafter in Castellain v. Preston, 8 Q. B. D. 613, 11 Q. B. D. 380, the Court of Appeal, reversing the decision of Chitty, J., unanimously held the insurers entitled to recover back the insurance money paid, on the ground that it was paid in ignorance of the fact that the purchaser had previously paid the price in full. In both cases all the judges recognized the doctrine of Paine v. Meller. had a marked effect upon the decisions in the United States. A majority of the American courts which have dealt with the subject have, either in dicta or decisions, indicated their assent to Lord Eldon's view though not always without qualification. But there is, nevertheless, a strong dissent.40 § 929. Maxims on which the English rule is based. The reason stated in the cases for what may be called the 39 Osborn v. Nicholson, 13 Wall. 654, 660, 20 L. Ed. 689 (but see The Tornado, 108 U. S. 342, 27 L. Ed. 747, where Wells v. Calnan, 107 Mass. 514, was cited with approval); Willis v. Wozencraft, 22 Cal. 607, 618 (but see later California decisions, infra, § 940); Hough v. City Fire Ins. Co., 29 Conn. 10; Lombard v. Chicago Sinai Cong., 64 Ill. 477, 482; Kuhn v. Freeman, 15 Kan. 423; Gammon v. Blaisdell, 45 Kan. 221, 25 Pac. 580; Johnston v. Jones, 12 B. Mon. 326; Calhoon v. Belden, 3 Bush, 674; Marks v. Tichenor, 85 Ky. 536, 4 S. W. 225; Martin v. Carver's Adm'r (Ky.), 1 S. W. 199; Cottingham v. Fireman's Fund Co., 90 Ky. 439, 14 S. W. 417; Brewer v. Herbert, 30 Md. 301, 96 Am. Dec. 582; Skinner v. Houghton, 92 Md. 68, 86, 48 Atl. 85, 84 Am. St. Rep. 485; Blew v. McClelland, 29 Mo. 304, 306; Snyder v. Murdock, 51 Mo. 175, 177; Walker v. Owen, 79 Mo. 563; Manning v. North British, etc., Ins. Co., 123 Mo. App. 456, 99 S. W. 1095; Marion v. Wolcott, 68 N. J. Eq. 20, 59 Atl. 242; Sewell v. Underhill, 197 N. Y. 168, 90 N. E. 430, 27 L. R. A. (N. S.) 233, 134 Am. St. Rep. 863; Gilbert v. Port, 28 Oh. St. 276, 292; Dunn v. Yakish, 10 Okl. 388, 61 Pac. 926; Fouts v. Foudray, 31 Okl. 221, 120 Pac. 960, 38 L. R. A. (N. S.) 251; Richter v. Selin, 8 S. & R. 425, 440; Morgan v. Scott, 26 Pa. 51; Siter's App. 26 Pa. 178, 180; Reed v. Lukens, 44 Pa. 220, 84 Am. Dec. 425; Hill v. Cumberland, etc., Co., 59 Pa. 474, 478; Miller v. Zufall, 113 Pa. 317, 325, 6 Atl. 350; Elliott v. Ashland Mutual Fire Ins. Co., 117 Pa. 548, 554, 12 Atl. 676; Huguenin v. Courtenay, 21 S. C. 403, 405; Brakhage v. Tracy, 13 S. Dak. 343, 83 N. W. 363; Baker v. Rushford, 91 Vt. 495, 101 Atl. 769; Christian v. Cabell, 22 Gratt. 82, 105. A decision to the same effect in Australia is Smith v. Hayles, 3 Victorian L. R. Law, 237. See, however, infra, § 940, for qualifications of the English rule in some of the decisions cited above. 40 Cutcliff v. McAnally, 88 Ala. 507, 512, 7 So. 331; Conlin v. Osborn, 161 Col. 659, 120 Pac. 755; Davidson v. Hawkeye Co., 71 Ia. 532, 534, 32 N. W. 514; Gould v. Murch, 70 Me. 288; Thompson v. Gould, 20 Pick. 134; Gould v. Thompson, 4 Met. 224; Wells v. Calnan, 107 Mass. 514, 9 Am. Rep. 65; Hawkes v. Kehoe, 193 Mass. 419, 79 N. E. 766, 10 L. R. A. (N. S.) 125; Bautz v. Kuhworth, 1 Mont. 133,, 25 Am. Rep. 737; Wilson v. Clark, 60 N. H. 352; Powell v. Dayton, etc., R. Co., 12 Or. 488, 8 Pac. 544, (see S. C. 16 Or. 33, 16 Pac. 863, 8 Am. St. Rep. 251); Elmore v. Stephens-Russell Co., 88 Oreg. 509, 171 Pac. 763; Good v. Jarrard, 93 S. C. 229, 76 S. E. 698, 43 L. R. A. (N. S.) 383. See also Potts Drug Co. v. Benedict, 156 Cal. 322, 104 Pac. 432, 25 L. R. A. (N. S.) 609. The question is expressly left open in Wetzler v. Duffy, 78 Wis. 170, 47 N. W. 184, 12 L. R. A. 178. English rule, is variously put. It is sometimes said that equity regards as done what is agreed to be done; sometimes that from the moment of the contract the vendor is trustee for the purchaser; sometimes that from that moment the purchaser is the owner in equity subject of course to a lien for the unpaid price. As many of the decisions are based simply on a repetition of a formula of this sort, it is worth while to consider the validity of the formula as such without reference to its particular applications. It can hardly be denied that present ownership is a different thing from future ownership. However certain it may be that in the future one will become the owner of property, it is a different thing from owning it now. When, therefore, it is said that equity regards one who has a contract right to property in the future as the immediate owner of it, it is in effect said that equity regards two things which are inherently different as the same. Only the hoary age and frequent repetition of the maxim prevents a general recognition of its absurdity. If the statement were made that in equity one who has contracted to buy property has some rights analogous to those of an owner of the property, inquiry would be natural in an individual case whether the particular right or duty of an owner then in question had been acquired by the purchaser; but when it is said broadly that he is the owner in equity, or that he is in effect a mortgagor, further consideration seems precluded, and one who accepts the maxim denies himself the effort of further thought. If our law had definitely adopted such a proposition, there would be perhaps little use in commenting upon it, but this is not the case. It will be evident from the following discussion that the position of the purchaser differs, not only in theory, but under the established law, in essential particulars from either an owner or a mortgagor, and, therefore, since the only reason that can be given for throwing the risk on the purchaser is that he is the beneficial owner, the reason failing, the rule should also fall. § 930. Illustrations of the purchaser's equitable ownership. Professor Keener has marshalled the following rules of equity to show its consistent treatment of the vendee as owner or mortgagor and therefore the inconsistency and impropriety of relieving him from the risk of loss.41 "I. The vendee can call for a conveyance of the property from a donee, or purchaser with notice.42 43 "II. The interest of the vendee can be assigned or devised." "III. In the event of the vendee's death, his heir, not his personal representative, is entitled to a conveyance.14 "IV. Under a devise by the vendee of his real estate, the interest of the vendee passes. 45 "V. In jurisdictions where a wife is given dower in equitable estates, the widow of the vendee is entitled to dower. 46 "VI. The vendee has a right to require husbandlike conduct of the vendor in the management of the estate.47 41 1 Col. L. Rev. 1. 42 Citing Daniels v. Davison, 17 Ves. 433; Lovejoy v. Potter, 60 Mich. 95, 26 N. W. 844; Moyer v. Hinman, 13 N. Y. 180. 43 Citing Townsend v. Champernowne, 9 Price, 130; Buck v. Buck, 11 Paige, 170. The vendee's interest was held to pass under a devise of the testator's freehold estate. Greenhill v. Greenhill, 2 Vern. 679, Pres. Ch. 320. See also Langford v. Pitt, 2 P. Wms. 629. 44 Citing Langford v. Pitt, 2 P. Wms. 629. See also Seton v. Slade, 7 Ves. 265, 274; Love v. Butler, 129 Ala. 531, 30 So. 735; Musham v. Musham, 87 Ill. 80; Champion v. Brown, 6 Johns. Ch. 398, 10 Am. Dec. 343; Hathaway v. Payne, 34 N. Y. 92, 103; Thomson v. Smith, 63 N. Y. 301, 303. But the personal representative must pay the vendor. Milner v. Mills, Moseley Ch. 123; Garnett v. Acton, 28 Beav. 333; Young v. Young, 45 N. J. Eq. 27, 34, 16 Atl. 27; Brewer v. Vanarsdale's Heirs, 6 Dana, 204; and see 1 Ames Cas. Eq. Jur. 191 n. On the other hand, the vendor's interest is immediately treated as personalty. Curre v. Bowyer, 5 Beav. 6 n. (b); Thomas v. Howell, 34 Ch. D. 166; Moore v. Burrows, 34 Barb. 173; Smith v. Gage, 41 Barb. 60; Keep v. Miller, 42 N. J. Eq. 100, 6 Atl. 495; Thomson v. Smith, 63 N. Y. 301, 303; Kerr v. Day, 14 Pa. St. 112, 114, 53 Am. Dec. 526. And see a valuable note in 42 N. J. Eq. 100, and passes to his executors, his wife not having dower. Lunsford v. Jarrett, 11 Lea, 192, 196. 45 Citing Townsend v. Champernowne, 9 Price, 130; Buck v. Buck, 11 Paige, 337. See also 1 Ames Cas. Eq. Jur. 192. Under the old English law the contract was in equity regarded as a revocation of a prior devise. Cotter v. Layer, 2 P. Wms. 623; Knollys v. Alcock, 5 Ves. 648, 654; Bennett v. Lord Tankerville, 19 Ves. 170, 178; Farrar v. Earl of Winterton, 5 Beav. 1; Re Manchester & Southport Ry. Co., 19 Beav. 365, 1 Ames Eq. Jur. 195, n. 46 Citing Bailey v. Duncan's Representatives, 4 T. B. Mon. 256. See also 1 Ames Eq. Jur. 201-204. 47 Citing Foster v. Deacon, 3 Madd. 394; Phillips v. Silvester, L. R. 8 Ch. App. 173; Clarke v. Ramuz [1891], 2 Q. B. 456. See also Egmont v. Smith, 6 Ch. D. 469; Royal Society v. Bomash, 35 Ch. D. 390; Holmberg v. Johnson, 45 Kan. 197, 25 Pac. 575, 1 Ames' Eq. Jur. 225 n. Compare Hellreigel v. Manning, 97 N. Y. 56; Cloyd v. Steiger, 139 Ill. 41, 28 N. E. 987. "VII. The vendee is chargeable with the costs of improvements made by the vendor under compulsion of law. 48 "VIII. The vendee is chargeable with taxes paid by the vendor beyond the value of the usufruct.49 "IX. An estate which a vendor has contracted to sell will pass under a will to a devisee to whom the vendor has devised the estates held in trust by him.50 "X. A court of equity will not allow a widow to claim, as against the vendee, dower in land which the husband had, before his marriage, contracted to sell.51 "XI. The property is no longer liable for the debts of the vendor." 52 To these illustrations may be added a number of decisions on insurance policies and on statutes relating to mechanics' liens and other matters. These decisions involve questions of whether the purchaser or the vendor is the "owner or the "sole owner" or the "unconditional owner" or whether there has been by the contract a "change of title" within the meaning of a policy or of a statute; 53 and tend to show that at least in some cases where the purchaser has not acquired the legal title, he and not the vendor is regarded as the owner. Finally in a multitude of cases the vendor is called a trustee.54 § 931. Rule in regard to risk is equitable. The development of the law in regard to risk of real property 48 Citing King v. Ruckman, 24 N. J. Eq. 556. 49 Citing King v. Ruckman, 24 N. J. Eq. 556. 50 Citing Lysaght v. Edwards, L. R. 2 Ch. Div. 499; the devisee or heir is compelled to convey to the purchaser, though the price is paid to personal representatives. Watson v. Mahan, 20 Ind. 223; Judd v. Mosely, 30 Ia. 423; Newton v. Swazey, 8 N. H. 9; Moore v. Burrows, 34 Barb. 173; Newport Waterworks v. Sisson, 18 R. I. 411, 28 Atl. 336. 51 Citing Oldham v. Sale, 1 B. Mon. 76. 52 Citing Moyer v. Hinman, 13 N. Y. 180. See also Finch v. Earl of Winchelsea, 1 P. Wms. 277; Jackson v. Snell, 34 Ind. 241; Hampson v. Edelen, 2 Har. & J. 64, 3 Am. Dec. 530; Houston v. Nowland, 7 G. & J. 480; Lane v Ludlow, 6 Paige, 316, n.; Blackmer v. Phillips, 67 N. C. 340; Siter's Appeal, 26 Pa. 178. But generally a judgment creditor of the vendor and a purchaser under an execution sale, though not impairing the vendee's interest acquires the vendor's right. See 1 Ames Cas. Eq. Jur. 213 n. 53 The decisions are collected in 1 Ames Cas. Eq. Jurisdiction, 241, 242. See also infra, § 936. 54 See infra, § 936 ad fin. |