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In Re Estate of Mcdonough

SEPTEMBER 17, 1969.

IN THE MATTER OF THE ESTATE OF GRACE S. MCDONOUGH, DECEASED. LOUISE MCDONOUGH, RESPONDENT-APPELLANT,

v.

LLOYD N. SCHERTZ, INDIVIDUALLY AND AS EXECUTOR OF THE ESTATE OF GRACE S. MCDONOUGH, DECEASED, PETITIONER-APPELLEE, AND EUNICE S. HOWELL, RESPONDENT-APPELLEE.



Appeal from the Circuit Court of McDonough County, Ninth Judicial Circuit; the Hon. EDWIN BECKER, Judge, presiding. Affirmed.

RYAN, J.

On July 1, 1966, Grace S. McDonough and others entered into a contract to sell certain lots to the City of Macomb. The contract provided for a down payment, a payment on July 1, 1967, and the payment of the balance on July 1, 1968. Warranty Deeds were executed and placed in escrow. The down payment was made and the payment due July 1, 1967, was likewise made when due.

On March 3, 1967, Grace S. McDonough executed her will, paragraph 4 of which provided:

"I give and devise to my sister-in-law, Louise McDonough, all of the real estate that I have received through my husband, Robert E. McDonough, by Will or deed, located in McDonough County, Illinois, and owned by me at the time of my death, excepting my dwelling house located at 823 East Calhoun Street in Macomb, Illinois."

The interest which Grace S. McDonough owned in the City lots which were the subject matter of the above contract was acquired by her through the will of her husband, Robert E. McDonough, who had died testate on July 2, 1957. In addition to the acquisition of the interest in the City lots involved in this contract, Grace S. McDonough also acquired under the will of her late husband other real estate located in McDonough County valued at approximately $20,000.

Grace S. McDonough died on December 8, 1967, prior to the final payment under the contract by the City of Macomb. Her will was admitted to probate on January 25, 1968. On July 17, 1968, the City made the final payment under the contract. The sum of $4,732 represents the decedent's share in this final payment. Lloyd N. Schertz individually and as executor of the estate of the decedent filed a petition asking the court whether said sum should be distributed as real property under paragraph 4 of the decedent's will above set forth or whether said sum should be distributed as personal property under the residuary clause of the will.

The trial court held that the sum of $4,732 was personal property and directed the executor to distribute the same to the residuary legatees under the will. We are of the opinion that the trial court was correct.

The question has been raised as to whether or not the doctrine of equitable conversion applied so as to change the nature of the interest of the decedent in the property conveyed to the City from real estate to personalty so that the proceeds from the sale would pass under the will as personal property. We do not believe that the answer to this question alone is determinative of the issues in this case. Neither do we believe that we are confronted with the problem of applying or not applying this equitable doctrine. Rather we are of the opinion that there are two questions presented for the court's determination. The first relates to the question of equitable conversion. Did the contract by this equitable doctrine work a conversion of the decedent's interest in the real estate in question from realty to personalty? The second question relates to the intention of the testator expressed in the will. If the contract did effect a conversion from real property to personalty, who did the testator intend should receive the proceeds of the sale under the terms of her will? Both of these questions must be answered because we feel that if the intent was so indicated in the will, the devisee of the real estate would be entitled to receive the balance due on the contract even though a conversion had been effected.

The doctrine of equitable conversion has been defined to be that change in the nature of property by which, for certain purposes, real estate is considered as personal, and personal estate as real. It is the application of the maxim that equity regards as done that which ought to be done. Rehbein v. Norene, 2 Ill.2d 363, 118 N.E.2d 287; Young v. Sinsabaugh, 342 Ill. 82, 173 N.E. 784. "Nothing is better established than this principle, that money directed to be employed in the purchase of land, and land directed to be sold and turned into money, are to be considered as that species of property into which they are directed to be converted; and this, in whatever manner the direction is given, whether by will or by way of contract, marriage articles, settlements or otherwise. . . ." Horner Probate Practice and Estates, § 2260, 1961, Revised Volume 3A, page 410.

In the case now before the court, if a conversion was effected, it was brought about by virtue of the contract dated July 1, 1966, and the conversion would have taken place as of the date of the contract. Shay v. Penrose, 25 Ill.2d 447, 185 N.E.2d 218. The conversion would have been accomplished on July 1, 1966, the date of the contract prior to the execution of the will on March 3, 1967.

[4-6] By the doctrine of equitable conversion, equity has sought to give effect to the intention of the parties involved and not to defeat their intention. The trial judge correctly made this observation in rendering his opinion. If a contrary intention appears, a contrary result must be achieved and equity will not decree a conversion if a contrary intention is evident. Leesman, Resulting Trusts — Equitable Conversion as Applied to Intallment Contracts for the Sale of Real Estate (1934) 29 ILR 97. Whether there was a conversion of land into personalty depends upon the contract. An equitable conversion is implied only when the intent is unequivocal and the implication leaves no substantial doubt. In order to work a conversion the contract must be such that a court of equity can specifically enforce it against an unwilling purchaser. Masters v. Masters, 325 Ill. 429, 156 N.E. 481.

The contract with the City of Macomb, in addition to providing for the down payment and the payment of the balance of the purchase price in two installments, also provided that the buyer was entitled to immediate possession of the real estate subject to existing leases. It provided that the buyer was entitled to collect all rents which thereafter became due from the tenants, that the buyer could remove any buildings of the sellers which were not under lease and that it could make improvements on the property at any time thereafter, all without the consent of the sellers. The buyer agreed to pay all special assessments levied against the property after the date of the contract. In addition, the sellers had executed deeds and deposited them in escrow. This contract is clearly one that can be specifically enforced against an unwilling purchaser which is a requirement for conversion as announced by the Masters case, supra. The contract expresses the intent to transfer the incidents of ownership of the real estate from the sellers to the buyer as of the date of the instrument. This contract appears to be the typical situation for the application of the doctrine of equitable conversion and the application of this doctrine appears to conform to the intent of the parties as manifested in the contract. We hold that on July 1, 1966, an equitable conversion of the decedent's interest in the real estate involved in the contract was effected.

In determining who under the decedent's will is to receive the balance due under the contract, we are not concerned with applying the equitable doctrine or not applying it. As indicated above, the conversion was effected by the contract which was executed prior to the decedent's death and prior to the execution of her will. We are rather now concerned with the decedent's intent as to who should receive the balance due on this contract and this intent must be ascertained from the will. Even though there may have been a conversion of the real estate to personalty, if the will indicates that the testator intended that the devisee of real estate should receive the balance due under the contract to sell real estate, this end can be accomplished without holding that the doctrine of equitable conversion will not be applied.

The appellant, Louise McDonough, has cited Heirs of Wright v. Minshall, 72 Ill. 584, and Covey v. Dinsmoor, 226 Ill. 438, 80 NE 998, in support of her position that the doctrine of equitable conversion does not apply in this case. Both of these cases involve specific devises of real estate for which a contract for sale had previously been executed prior to the execution of the will. The Wright case involved a devise of "all his real estate, land and appurtenances in Clay County." The Covey case involved a devise of a tract of land specifically described, however, it was stated in the will that the devise was "subject to my contract of sale. . . ." The court in Rhodes v. Meredith, 260 Ill. 138, 102 NE 1063, explained the holding in these two cases by saying at page 144: "The doctrine of equitable conversion was not allowed to interfere with the clearly expressed intention of the testators." It should be noted that in neither the Wright case nor the Covey case did the devise convey only that real estate which the decedent owned at death. Since the contracts were made prior to the execution of the will in both cases and since a determination in each of these cases that the property would pass as personalty would totally defeat the devise in the ...


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