Summary of Bean v. Walker, NY Supreme Court, Appellate Division (1983)
Parties: PL – Held legal title, and sold equitable title and possession for monthly $
DF – Walker- Purchased the Property, defaulted on monthly installments
Cause of action/remedy sought: The following is an action sounding in ejectment (legal action) seeking that they be adjudged the owner in fee and be granted possession of the property. The remedy was declaratory judgment.
Procedural History: Special Term (Appellate division of the Supreme court) granted SJ for PL finding that the vendee (buyer) had no rights. Unclear who appeals here, but is likely DF. App court reversed the lower court’s decision. DF/vendee/buyer wins, case remanded to Supreme Court.
Facts: In 1/73 PL agreed to sell and DF agreed to buy a home in Syracuse for $15 K via a signed contract for deed. The sum would be paid through monthly installments over 15 years + interest. PL retained legal title (until DF paid in full according to the terms of the K), and the DF got equitable title, possession, and all obligations.
Contract stipulated that if DF defaulted and failed to cure the default in thirty days, PL could collect the outstanding balance in full or terminate the contract and repossess the property. If PL’s repossessed, a forfeiture clause came into play and the $ paid under the K as liquidated damages and would be considered as “rent”- not lost as a penalty.
DF’s went into possession of the property in Jan 1973 and made improvements upon the property. DF paid from 1/73 through 8/81. They defaulted in August 1981 when Carl Walker suffered an injury. During the years they occupied the property, they had paid almost half the principle price. When 30 day period in which to fix the default passed, PL’s filed an action in ejectment seeking to be adjudged the owners in fee of the property & granting them possession.
Issue(s): Under NY property law, can a vendor (seller)-vendee (buyer) relationship by contract bring into existence an interest in real property which superseded the terms of the contract, such that a vendor would have to institute a foreclosure to recover.
**Does a vendor have to foreclose in order to recover for a vendee’s default?
Holding: Yes. A vendee-vendor contract relationship is analogous to a mortgagor-mortgage relationship, hence a lien against the conveyance is created, and not an equitable vs. legal title situation. Thus, P must foreclose to recover $ or possession. Court reversed lower court judgment for P, denying the motion for summary judgment, and remitted for further proceedings in accordance with this position.
Court’s Rationale/Reasoning: Vendee is considered in practical purposes as the owner with all the rights of an owner subject only to the terms of the K. In the K, the vendee bears the risk of loss and is the recipient of all the appreciation of value.
Where a sale of property is evidenced by contract only, the parties occupy substantial the position of mortgagor and mortgagee at common law. In NY a mortgage creates a lien rather than conveying title to the lender.
Because the purchaser possessed equitable title and vendees occupy the same position as the mortgagor at common law, they should be treated as such. Therefore the purchasers interest in land, specifically his equity of redemption, had to first be extinguished. This could be done by an action to foreclose on the vendee’s equitable title, or by action at law to recover the purchase price. P sought neither of these remedies.
Further, it would be inequitable for P to recover the property from D along with substantial improvements that D made, + increased property value. The interest in the property here can only be determined by a sale of the property after foreclosure with provisions for disposing of the surplus, or a deficiency judgment.
Rule: In NY it is settled law that the owner of real estate upon executing a K for its sale is treated as owner of the purchase money and the purchaser of land is treated as the equitable owner. NY law says the vendor holds the legal title in trust for the vendee and has an equitable lien for the payment of the purchase price.
Possible effects?: Executes a vendor vendee land contract into a conveyance and a lien.
Dicta: Not all breaches of land contract are barred from forfeiture. Abandonment of the property, or if vendor is stuck with heavy costs for taxes, etc., equity would not intervene on behalf of the vendee.