Peters v. Thoning

I respectfully dissent from Division III of the majority opinion. The ultimate findings of the trial court, so far as here material, were (a) that the widow and children had reconverted the gift into real estate, and (b) that the trustee in bankruptcy thereafter sold and conveyed "the 1/6 interest of Matt H. Petersen in and to the real property." Division III of the majority opinion is founded upon its finding in Division II that the widow and children had not reconverted the gift into real estate. Therefore, the case must be considered upon that basis.

Because my conception of the fundamentals of the doctrine of conversion appears to be at variance with the views expressed in the majority opinion, some phases of that doctrine will be first considered. The majority opinion states that conversion is only "an equitable fiction devised to execute the intention of the testator * * *." Conceding the correctness of this statement as an abstract proposition, it should not be interpreted as minimizing the effect of conversion, or changing or limiting the resulting status. As recognized by the majority opinion and as hereinafter noted, it is well established that the conversion of realty into money gives it the status of money as concerns the rights of certain classes of creditors of the persons entitled thereto.

Perhaps it will aid in simplifying the proposition, if it be remembered that had the real estate been sold under contract for deed by the testator during his lifetime, a conversion would have been effected. The resulting status would have been the same as though the testator had ordered it sold after his death.

In Ingraham v. Chandler, 179 Iowa 304, 306, 308, 161 N.W. 434,435, L.R.A. 1917D, 713, we said, in discussing the doctrine of equitable conversion:

"* * * Its real purpose is to give effect to the manifest intent of a testator or vendor, and to treat that as done which by will the testator has directed to be done, or that which, by previous contract with another, both have mutually bound themselves to do. * * * Taking the typical case of equitable conversion by contract, as above stated, we are fully committed to the doctrine that such a contract works an equitable conversion; that, in case of the death of the vendor, his interest in the contract would pass as personalty; * * *."

In Shillinglaw v. Peterson, 184 Iowa 276, 287, 167 N.W. 709,713, we said:

"In other words, the interest passes as personalty, and the legatees have no estate in the land as such."

In re Estate of Miller, 142 Iowa 563, 119 N.W. 977, holds that a devisee of certain land which testatrix had previously sold under contract received nothing by said devise and that the interest of testatrix in the contract passed to certain residuary legatees as personal property. If it be constantly kept in view that the status of that which was to pass to Matt Petersen was the same as though his father had sold the realty under contract and had willed Matt an interest in the proceeds, the solution of the question before us will be greatly aided.

The majority opinion holds that upon Matt Petersen's bankruptcy all his property and assets, including his interest in the estate of his deceased father, passed to his trustee in bankruptcy. With that holding I am in full agreement. But what passed to said trustee in bankruptcy must not be confused with what passed from said trustee under the deed to the real estate. The bankrupt had no interest in the real estate as such, his interest being the same as though he had been willed a share in a contract to sell the real estate. Therefore, the trustee's deed conveyed no interest in the real estate.

As we said in Beaver v. Ross, 140 Iowa 154, 159, 118 N.W. 287,289, 20 L.R.A., N.S., 65, 17 Ann. Cas. 640, quoted in the majority opinion:

"In other words, this interest passes as personalty, and the legatees have no such estate in the land as is subject to a judgment or lien or to an execution for the sale of real estate."

To the same effect are Dever v. Turner, 200 Iowa 926,205 N.W. 755; Krob v. Rothrock, (Iowa), 119 N.W. 131, and other cases. No good reason appears why, in such situation, the rights of the grantee in a deed from a trustee in bankruptcy should be any greater than the rights of a grantee in a sheriff's deed under sale upon general execution. Reference has already been made herein to In re Estate of Miller as holding that nothing passed by a devise of realty which had been equitably converted into money by sale contract.

This same doctrine is enunciated in Chick v. Ives, 2 Neb. (Unofficial) 879, 889, 90 N.W. 751, 754. In that case Emma L. Ives gave plaintiff a mortgage conveying whatever right, title and interest she had in the undivided one seventh of two thirds of her father's real estate, describing it. The court said:

"It follows that the heirs have no interest in the real estate as such; that it cannot be seized on attachment by their creditors, nor is a judgment against them a lien thereon. Bank v. Paulsen, supra [57 Neb. 717, 78 N.W. 303]. We further hold that the defendant Emma L. Ives had no power to sell, convey, or mortgage her share of the estate, as real estate. It follows that the mortgage * * * created no lien upon the real estate described therein or any part thereof. In other words, the plaintiff took no interest in the real estate by his mortgage."

To reiterate, Matt Petersen had no interest in the real estateas such which would pass by a conveyance of said real estate.

But the majority opinion is based in part upon the theory that the trustee's deed in this instance conveyed or purported to convey more than the land itself. I do not think the record fairly susceptible to any such construction.

The application of the trustee was for authority to sell an undivided one-sixth interest in said 320 acres, subject to the life estate of the widow. The order of the referee recited that Petersen owned said one-sixth interest and directed the trustee to sell all of the right, title and interest of said bankrupt in and to said real estate. The notice of the sale referred to the bankrupt's undivided one-sixth interest in and to said real estate, and the appraisers appraised a one-sixth interest in said real estate.

The trustee's deed recited that the trustee was authorized "to sell the real estate hereinafter described" and described it as "all the right, title and interest of bankrupt in and to" SW 1/4, etc., and all his right, title and interest in and to NW 1/4, etc., "subject to the life estate of Margaretha Petersen under and by the virtue of the will of Nicolaus Petersen, conveying all of the right, title and interest of every kind and nature belonging to the said bankrupt * * * free and clear of all * * * encumbrances except the life estate above referred to." I think this deed covered an interest in the land as such only and that because the bankrupt did not own a share of the land itself, as distinguished from a right to a share in its proceeds when sold, no title or interest passed under the deed of the trustee. If this land be considered as though it had been sold under contract by the testator, it becomes obvious that the interest of one to whom a share in the contract had been willed could not be affected by the deed of his trustee in bankruptcy to the land itself.

However, the majority opinion relies upon certain language in the trustee's deed to wit: "all the right, title and interest of the bankrupt in and to the real estate." There is no magic in the words "all the right, title and interest." Their meaning is well settled. They do not enlarge the estate conveyed. On the contrary, their tendency is restrictive. Trustee's deeds should properly contain such language. See unofficial form 200 of trustee's deed, 9 Remington on Bankruptcy, 5th Ed., 202. It would seem this is because the right of the trustee to convey is limited to the right or interest of the bankrupt in the particular property. See 7 C.J. 230; 8 C.J.S. 1037.

Right, title and interest, as used in a deed conveying the grantor's right, title and interest, have been held to be words of release and quitclaim merely. Gibson v. Chouteau, 39 Mo. 536,75 U.S. 314, 19 L. Ed. 317; Lombardi v. Sinanides, 71 Cal. App. 272,235 P. 455, 456; Baker v. Davie, 211 Mass. 429,97 N.E. 1094, 1097, 37 L.R.A., N.S., 944, holds that the words "right, title and interest" as used in deeds, have acquired a definite meaning, not importing ownership, but conveying whatever title the grantor has and that alone. And the holding in Chick v. Ives, supra, in which the mortgage employed such language, was that it created no lien upon the converted real estate.

In Scofield v. Moore, 31 Iowa 241, 244, which involved the transfer of a judgment, this court interpreted the language as follows, "we do not propose to sell you the judgment, we only offer to transfer to you all our right, title and interest in it, whatever that may be." From authorities cited in Volume 37 of Words and Phrases, permanent edition, at page 682 et seq., this appears to be the general rule.

The majority opinion states "and we hold the words in the conveyance clause of the deed `all of the right, title and interest of the bankrupt in and to the real estate', must be construed as conveying all of the interest of the bankrupt, whether it was real or personal property." Obviously, this holding does not accord with the authorities above cited.

From the foregoing I think it necessarily follows that the bankrupt's interest in the sale price of the land did not pass under the trustee's deed to the real estate. Therefore, the grantee therein and the defendants as his successors in interest acquired no right to the fund. The right to the bankrupt's share in the fund then remained in the trustee in bankruptcy. The trustee's deed was made in 1924, the bankrupt was discharged in 1930, and this suit was instituted after the lapse of so many years that it may be assumed the trustee had long since been discharged. This share of the bankrupt in the money from the sale of the land was not a concealed asset. True, the bankrupt did not list it in his original schedules. Perhaps this was because the bankrupt contended, as his heirs have contended in this case, that his interest in the sale price of the land was contingent only, and, therefore, was not subject to the claims of his creditors. In any event, the trustee learned of the asset through the party who was subsequently the grantee in the trustee's deed and who prior to securing said deed had investigated the records of the estate of the bankrupt's father. Thus, we are not here faced with the question of a concealed asset.

However, it was clearly an asset upon which the trustee in bankruptcy failed to administer. Stipe v. Jefferson, 192 Minn. 504,257 N.W. 99, 111 A.L.R. 831, was an action involving real estate brought by a plaintiff who, without fraud, had failed to schedule the same and was thereafter discharged without the property being disposed of by the trustee in bankruptcy. In sustaining plaintiff's right to prevail the court, after discussing the applicable bankruptcy statutes and various authorities, said, at page 508 of 192 Minn, page 101 of 257 N.W.: "So, if it is not otherwise disposed of, it must necessarily revert to the bankrupt as the original owner from whom in the first instance the trustee got title. Clearly, one person cannot lose title without another getting it. See 50 C.J. 783 (§ 60)."

There is other authority that, at least in the absence of fraud, a bankrupt owner of property not taken over or administered by the trustee, has, after his discharge, sufficient title thereto to recover the same from third persons. 8 C.J.S. 1596 et seq. Blotcky v. Silberman, 225 Iowa 519, 281 N.W. 496, though not directly in point, bears upon this proposition. And see Bank v. Maxson, 168 Iowa 318, 150 N.W. 601.

Under the circumstances of the case at bar I think the bankrupt's interest in the fund reverted to him at least sufficiently to entitle his heirs to prevail as against those claiming the fund under the trustee's deed to the realty. Whether or not said heirs could prevail against a successor trustee in bankruptcy, were one to be appointed, is not before us and need not be considered.