Wood v. Donohue
736 N.E.2d 560, 1999 Ohio App. LEXIS 6222, 136 Ohio App.3d 336 (1999)
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Rule of Law:
Under the doctrine of equitable conversion, when a land installment contract is executed, the buyer becomes the equitable owner of the property and is entitled to all benefits that accrue to the property, including settlement awards for diminution in value, while the seller's interest is limited to the unpaid purchase price secured by legal title.
Facts:
- In 1983, Steven B. Donohue and Vicki Schroot entered into a land installment contract with Betty Lou Wood to purchase a house for $87,900.
- The property was located near the Fernald uranium processing plant.
- In 1985, after the contract was signed, a class-action lawsuit was initiated against the plant for diminishing property values in the area.
- The lawsuit was settled, resulting in a $9,478 award to compensate for the diminution in the property's value as of December 18, 1984.
- Donohue paid the balance of the purchase price to Wood in full in 1990.
- In 1993, a check for the settlement award was issued jointly to Donohue, Schroot, and Wood, leading to a dispute over its ownership.
Procedural Posture:
- Betty Lou Wood filed a complaint in the trial court against Steven B. Donohue and Vicki Schroot, seeking a declaration that she was entitled to 65.41% of a class-action settlement check.
- Vicki Schroot surrendered any interest she had in the award before trial.
- After a bench trial, the trial court entered judgment for Wood, awarding her 65.41% of the settlement funds and Donohue the remainder.
- Donohue (appellant) appealed the trial court's judgment to the intermediate court of appeals, arguing he was entitled to the full amount.
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Issue:
Does the doctrine of equitable conversion entitle the buyer under a land installment contract, who is the equitable owner of the property, to the full amount of a settlement award for the diminution in the property's value that occurred after the contract was executed?
Opinions:
Majority - Painter, Judge
Yes. The doctrine of equitable conversion entitles the buyer under a land installment contract to the full amount of a settlement award for the diminution in the property's value. From the moment the land contract is executed, equity treats the buyer as the true owner of the property, who bears all risks of loss but is also entitled to all benefits that may accrue. The seller, Wood, merely retains legal title as security for the payment of the purchase price, an interest analogous to a mortgage. Because the settlement award for diminution in value is a benefit accruing to the property, it belongs to the equitable owner, Donohue. Since Donohue had already paid the purchase price in full, Wood's security interest was extinguished, and she had no claim to the funds. Awarding the proceeds to Wood would result in an unfair enrichment, as she would receive both the full agreed-upon purchase price and damages for a loss she did not suffer.
Analysis:
This decision solidifies the application of the equitable conversion doctrine to land installment contracts in Ohio, treating the buyer as the true owner for purposes of both risk and reward. It clarifies that benefits accruing to the property after the contract is signed, such as settlement awards for environmental damage, belong exclusively to the equitable owner-buyer. This precedent prevents sellers from receiving a windfall by collecting both the full contract price and damages for a decrease in property value that occurred after they effectively transferred equitable ownership.
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