UNIVERSITY OF PUGET SOUND LAW REVIEWVolume 1, No.1FALL 1977
Equitable Conversion in Washington: The Doctrine That Dares Not Speak Its Name
George R. Nock,(fn*) John A. Strait,(fn**) and John W. Weaver(fn***)
The desire for individuality is found in states as well as people. The nature of a federal system promises the opportunity for states to make unusual laws, but also provides pressures for legal uniformity among the states. These pressures, in turn, produce counter-pressures for nonconformity on the part of particular states. The result is that a state court or legislature sometimes will adopt a unique rule of law, of no discernible merit, for no apparent purpose other than defiantly to assert state identity.
Since the 1925 decision ofAshford v. Reese,(fn1) Washington has had the distinction of being the only American jurisdiction totally, albeit implicitly, to reject the doctrine of equitable conversion. Ashford was overruled in 1977, in a remarkable opinion(fn2) which simultaneously, and explicitly, rejected the doctrine of equitable conversion, thus maintaining Washington's unique status with respect to that doctrine. But the opinion failed to provide a substitute for either the rule of Ashford or the contrary doctrine of equitable conversion, both of which it emphatically abjured. The result is an unbroken line of Washington cases consistent with only one rule of law-the doctrine of equitable conversion. The effect of the opinion is thus de jure rejection and de facto adoption of equitable conversion. The process by which Washington has managed to achieve substantial conformity with the majority of American jurisdictions, while resolutely maintaining a unique stance, warrants analysis.
Historical Background
Ashford v. Reese is the unavoidable starting point for any discussion of the historical development of Washington law governing the nature of parties' interests under an executory land-sale contract. Ashford entered into a contract with Reese to purchase from the latter a lot and building thereon, payment to be made at a monthly rate over a period of several years, with the buyer being obliged to pay the taxes. When about half the total purchase price had been paid, the building was destroyed without the fault of either party. Ashford sued for rescission of the contract and return of all monies paid thereon. A judgment in her favor was upheld by the Washington Supreme Court. The court relied on a line of cases(fn3) holding that an executory land-sale contract "conveys no title or interest, either legal or equitable', to the vendee,"(fn4) and held that risk of loss is upon the holder of the title-in this case, the vendor.
Although ample precedent supported the language of Ashford,(fn5) it was in no sense compelled by existing law. A lengthy and thoughtful dissent cited several cases which supported recognition of a real estate interest on the part of the vendee. And within two years of Ashford, a commentator had found three Washington cases, "misdigested and lost on the books,"(fn6) which neither the majority nor the separate opinions had considered, recognizing the doctrine of equitable conversion as the law of Washington.(fn7) But despite its want of originality, and its failure to make a conscious choice between two competing lines of authority, Ashford received enough note(fn8) to be considered the leading case defining the nature of a vendee's interest. And it was cited with approval in a 1929 decision.(fn9)
After 1929, however, there ensued a lengthy series of decisions in which Ashford simply was not followed. All of these decisions recognized that, for certain purposes, the vendee's interest must be regarded as one in real estate. Specifically, the vendee was: permitted to homestead the land which was the subject matter of the contract;(fn10) held entitled to specific performance of the contract;(fn11) given standing to seek relief against third party interference with his possession;(fn12) and given the right to maintain a trespass action, without requiring that the vendor do so.(fn13) The vendee's interest was treated as "real property" for purposes of an attachment statute.(fn14) A vendee was allowed to interpose a statute-of-limitations defense to a quiet title action.(fn15) A vendee's will was construed in such a manner as to treat his interest as real estate.(fn16) A vendee was recognized as a necessary party to a condemnation proceeding,(fn17) and as having a mortgageable interest,(fn18) and, the language of Ashford to the contrary notwithstanding, a "valid and subsisting interest" in the land.(fn19) The interest of the vendor also has been treated as personal property. Thus, the vendor was allowed to recover installments out of insurance money only as his interest may appear;(fn20) and for tax purposes, the Washington court has treated a vendor's interest under a partially executory contract as personalty.(fn21) The Washington Supreme Court was duly moved to note, obiter, that Ashford has "been whittled away until nothing remains."(fn22)
The Cascade Case
Ashford remained in this state of innocuous desuetude until the rendition of a certain decision in the Superior Court of Grant County.(fn23) The Cascade Security Bank had obtained a judgment against Frederick and Alvena Butler. On the date of judgment, Alvena Butler was in possession of certain lands in the county in which the judgment was entered, as vendee under an executory contract of sale. Ten days after the judgment was entered, Alvena Butler assigned her interest in the contract to intermediate purchasers who ultimately transferred their interest to W. J. and Helen Ringwood. Some months after entry of the judgment, and while the Ringwoods were in possession of the lands, the bank attempted to levy on the lands in satisfaction of the judgment. The bank's theory was that the interest of Alvena Butler in the lands was "real estate," within the meaning of the Washington judgment lien statutes,(fn24) and that the judgment thus automatically became a lien upon those lands.(fn25) Upon the intervention of the Ringwoods, the superior court entered a judgment and decree enjoining the levy and determining that the entry of the judgment against the Butlers conferred upon the bank no interest whatever in the land or the contract. This decision was based expressly on the proposition that under Ashford, the Butlers had "no interest" in the land which they were purchasing at the time the judgment against them was entered.(fn26)
The bank appealed. Shortly after the filing of the appellant's opening brief in the court of appeals, the Washington Supreme Court transferred the cause to itself for the express purpose of reconsidering Ashford.(fn27) The intolerably uncertain state of the law was illustrated by the trial court's following a decision generally thought dead. The supreme court had, in theory, several options for resolving this uncertainty.
a. Reaffirmation of Ashford
Reaffirmation had some superficial appeal. By upholding a decision the courts have long and cheerfully ignored, the supreme court would strike a blow for stare decisis. The issue is whether the law should characterize a contract vendee's interest as realty or personalty. If the choice is regarded as essentially arbitrary, to be made only in the interests of legal certainty, then it makes sense to dust off a clear, if aged and ignored, rule.(fn28)
But the choice is not arbitrary. It involves jurisprudential considerations which courts ignore at their peril. There is no reason to think that the courts have ignored Ashford through malevolence, rebelliousness, or nescience. Rather, the likely explanation is that they have recognized that its application would in most cases produce undesirable results. A rule denying a contract vendee any "title or interest" in the land he is purchasing is so divorced from the understanding and expectations of the parties to the contract, and those dealing with them, that it cannot ordinarily be employed to work substantial justice in litigation among such persons. This is particularly true when the vendee has gone into possession of the land.
When a person buys land on an executory contract of sale, and goes into possession, he thinks of it and treats it as his own. He is free to, and often does, farm, build upon, or otherwise improve it, or even allow it to deteriorate (so long as he does not jeopardize the seller's security). Under the contract he normally is responsible for assessments against and taxes upon the land, and enjoys the services they finance. He may sell his interest, and when he does, realize the gain or suffer the loss caused by fluctuations in the property's value. In short, he has all the burdens and benefits of ownership. Most importantly, he knows that he has the right, universally honored, to obtain the fullness of ownership represented by legal title in fee simple, upon the occurrence of a condition within his control-full performance by timely payment of the purchase price.
The seller, by contrast, no longer thinks of the land as his. His rights therein are limited to the preservation of his security. He can no longer justly convey the legal title to a third person-even if he has the legal power to do so. And he knows that he will get the land back only upon an event beyond his control-default by the purchaser. In no real sense is the land his; his right is to receive the purchase...
