Equitable Conversion

General rule

—holder of title treated as owning property, subject to another’s equitable interest

1. Possessor of equitable interest can pursue specific performance (or another equitable remedy) to compel title holder to transfer legal title

Seller’s and buyer’s rights

—after sales contract is executed, seller holds legal title to property; buyer holds equitable title

Equitable liens

—seller has equitable lien against property to secure payment of purchase price; buyer who has partially paid has lien to ensure repayment in event of seller’s breach

Compelled transfer to buyer

—when seller refuses to transfer legal title, buyer can seek specific performance to compel seller to convey property to buyer

Judgment creditor

—because sales contract converts seller’s interest in real property to equitable interest in sale proceeds, judgments obtained against seller after execution of sales contract are not enforceable against real property

Risk of loss

—placed on buyer; seller can compel buyer to purchase damaged or destroyed property if loss was not seller’s fault

Insurance

—seller does not have duty to carry casualty insurance (unless required by contract); if seller does have insurance, seller is generally required to give buyer credit against purchase price in amount of insurance proceeds

Effect of Party’s death - Seller’s death

Seller’s death—sale proceeds treated as personal property that passes to devisee of seller-decedent’s personal property (devise of real property adeemed)

Option contract

—equitable conversion does not apply until option is exercised and duty to convey arises; devise of real property is not adeemed by extinction when option is exercised after seller-decedent’s death

Effect of Party’s death - Buyer’s death

—interest treated as real property interest; devisee of buyer-decedent’s real property can compel transfer of property