Southport Congregational Church-United Church of Christ v. Hadley
320 Conn. 1, 126 A.3d 1032 (2016)
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Rule of Law:
Under the doctrine of equitable conversion, equitable title to real property passes from a seller to a buyer at the moment a specifically enforceable sales contract is executed, even if the contract contains a mortgage contingency clause, provided the clause functions as a condition subsequent for the buyer's benefit and does not negate the seller's immediate duty to convey.
Facts:
- On September 22, 2010, Albert L. Hadley executed a will devising a parcel of real property to the Southport Congregational Church–United Church of Christ (the church).
- On March 6, 2012, Hadley sent a letter to Cheekwood Botanical Garden and Museum of Art (Cheekwood) pledging to donate the proceeds from the future sale of that same property to them.
- On March 21, 2012, Hadley entered into a contract to sell the property to Evelyn Winn.
- The sales contract included a mortgage contingency clause allowing Winn to void the agreement by giving written notice of her inability to obtain a loan on or before April 16, 2012.
- The contract specified that if Winn did not provide such notice by the deadline, the agreement would 'remain in full force and effect.'
- Under the contract's terms, Hadley waived the remedy of specific performance, agreeing to retain Winn's down payment as liquidated damages if she defaulted.
- On March 30, 2012, Hadley died, nine days after signing the contract and before the mortgage contingency period had expired or been acted upon by Winn.
Procedural Posture:
- The coexecutors of Albert Hadley's estate applied to the Fairfield Probate Court for authorization to sell the property.
- The Probate Court granted the application, and Southport Congregational Church appealed to the trial court.
- In a separate action, the coexecutors also applied directly to the trial court for authorization to sell, and Cheekwood intervened.
- The trial court granted the coexecutors’ application, finding that equitable conversion had occurred at the signing of the contract.
- The church appealed the trial court's judgment to the Connecticut Appellate Court.
- The Appellate Court reversed the trial court's judgment, holding that the unfulfilled mortgage contingency clause prevented the application of equitable conversion.
- Cheekwood's petition for certification to appeal to the Supreme Court of Connecticut was granted.
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Issue:
Does the doctrine of equitable conversion apply to transfer equitable title to a buyer upon the signing of a real estate contract when the seller dies before the buyer's mortgage contingency period expires?
Opinions:
Majority - Justice Robinson
Yes, the doctrine of equitable conversion applies to transfer equitable title upon the signing of the contract. For equitable conversion to apply, the contract must create a clear and immediate duty for the seller to convey the property, making it specifically enforceable against the seller. The court determined that the mortgage contingency clause in this contract was a condition subsequent, not a condition precedent to the seller's duty to perform. The clause was for the exclusive benefit of the buyer, Winn, who could waive it at any time and enforce the contract. The contract's language, stating it would 'remain in full force and effect' unless the buyer acted, indicates it was effective immediately upon signing. Because Hadley's duty to convey was unconditional from the moment of execution, equitable title passed to Winn at that time, converting Hadley's interest from real property to personalty (the right to the sale proceeds).
Analysis:
This decision clarifies that a standard, buyer-focused mortgage contingency clause does not typically prevent the immediate application of equitable conversion in Connecticut. The court's distinction between conditions precedent and subsequent is crucial, establishing that as long as the seller's obligation to sell is fixed at signing, equitable title transfers. This precedent solidifies the principle that the enforceability of the contract against the seller is the key factor for equitable conversion. The ruling has significant implications for estate law, as it determines whether a specific devise of real property is adeemed (canceled) by a pre-death sales contract, thereby passing the sale proceeds to the estate or another beneficiary rather than the real property to the devisee.
