Shay v. Penrose
25 Ill.2d 447, 185 N.E.2d 218, 1962 Ill. LEXIS 512 (1962)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under the doctrine of equitable conversion, when a landowner enters into a valid and enforceable contract for the sale of real estate, their interest in the property is immediately converted from realty to personalty. For purposes of inheritance, the seller's interest at death is the right to the purchase money, not the land itself.
Facts:
- Carol M. Shay acquired six parcels of real estate during her lifetime.
- Between 1955 and 1960, Shay entered into contracts for deed to sell four of the parcels to separate purchasers.
- The contracts provided for a down payment, monthly installment payments, and for the buyers to take possession of the properties immediately.
- The contracts stipulated that a warranty deed would be delivered to the buyer only after the final payment was received.
- On July 31, 1960, Carol M. Shay died intestate (without a will), survived by her husband, Arthur R. Shay, and her sister, Grace Penrose.
- At the time of her death, two of the six parcels remained unsold, and the four contracts for deed were still in effect.
Procedural Posture:
- Arthur R. Shay, as administrator of Carol M. Shay's estate, filed a complaint in the city court of Sterling (trial court) for the partition of two unsold parcels of real estate.
- Grace Penrose filed an answer and a counterclaim, asking the court to also partition four additional parcels that the decedent had sold under contracts for deed.
- The trial court granted Shay's motion to strike Penrose's affirmative defenses and dismiss her counterclaim.
- Grace Penrose, as the appellant, appealed the trial court's final order to the Illinois Supreme Court (highest court), with Arthur R. Shay as the appellee.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the doctrine of equitable conversion apply at the moment a valid and enforceable installment contract for the sale of land is executed, thereby converting the seller's real property interest into personal property for inheritance purposes upon the seller's death?
Opinions:
Majority - Mr. Justice House
Yes. The doctrine of equitable conversion applies at the instant a valid and enforceable contract for the sale of land is executed, immediately transforming the seller's real property interest into personal property. The court reasoned that equitable conversion stems from the principle that equity regards as done that which ought to be done. Therefore, once a seller enters a valid contract, they continue to hold legal title merely as a trustee for the buyer, while their beneficial interest becomes the right to receive the purchase money—a form of personal property. The court expressly overruled prior inconsistent cases, such as Chappell v. McKnight, which suggested that conversion only occurs upon full performance by the buyer. The long-term nature of the contracts is irrelevant, as applying a different rule would create uncertainty in land titles. Consequently, upon Carol M. Shay's death, her interest in the four properties under contract was personal property that passed to her personal representative, not real property subject to partition among her heirs.
Analysis:
This decision solidifies the 'immediate conversion' rule in Illinois for land sale contracts, particularly in the context of inheritance and devolution of title. By expressly overruling inconsistent precedent, the court resolved ambiguity and promoted certainty and stability for long-term installment contracts. The ruling clarifies that a seller's interest under a contract for deed is treated as personalty from the moment of execution, which significantly impacts how such assets are distributed from an estate and managed by a personal representative. This precedent reinforces the power of contract to alter the legal character of property for equitable purposes.
