## Facts

- Sellers agreed in 1973 to sell a single-family home to purchasers for $15,000, payable over 15 years at 5% interest in monthly installments.
- The contract left legal title with the sellers until full payment, while purchasers took possession and assumed responsibility for taxes, assessments, water rates, and insurance.
- The contract included a default/forfeiture clause permitting the sellers, after a 30-day cure period, to either accelerate the balance or terminate the contract, repossess the property, and retain all prior payments as “liquidated” damages characterized as “rent.”
- Purchasers took possession, claimed substantial improvements, and paid $12,099.24 total, including $7,114.75 toward principal (nearly half the purchase price).
- After an injury to one purchaser in 1981, purchasers defaulted; sellers refused an offered cure and filed an ejectment action seeking possession and a declaration of ownership.

## Issues

1. Upon execution of an installment land purchase contract, what property interest does a vendee in possession hold as against the vendor who retains legal title?
2. May the vendor, after the vendee’s default, terminate the vendee’s interest and recover possession through ejectment (treating the vendee as a tenant), or must the vendor proceed through remedies analogous to mortgage foreclosure or an action for the unpaid purchase price?

## Decision

- The Appellate Division reversed the order granting sellers summary judgment in ejectment.
- The court held that execution of a land sale contract gives the vendee an equitable ownership interest; the vendor holds legal title in trust as security for payment.
- Because the vendor’s position resembles that of a mortgagee, the vendor may not enforce rights by ejectment, but must instead foreclose the vendee’s equitable title or sue at law for the purchase price.
- The ejectment remedy, coupled with forfeiture of substantial payments, was inconsistent with the vendee’s equitable ownership and the security-function of the arrangement.

## Legal Principles

- Under equitable conversion, after a land sale contract is executed, the vendee is for practical purposes the owner in equity, and the vendor’s legal title is held as security.
- Installment land contracts are treated functionally like mortgage transactions for remedial purposes when the vendee is in possession and has built substantial equity.
- A vendor cannot use ejectment to extinguish a defaulting vendee’s equitable title and obtain forfeiture of accumulated equity; the vendor must pursue foreclosure-type relief or an action for the unpaid balance.
- Contractual labels describing installment payments as “rent” do not control when the substance of the transaction is a financed purchase with the property serving as security.

## Conclusion

The court rejected ejectment as a vehicle for forfeiture under an installment land contract, holding that the vendee in possession holds equitable title and that the vendor, like a mortgagee, must seek foreclosure-type remedies or a judgment for the unpaid purchase price rather than dispossessing the vendee and retaining substantial prior payments.


Bean v. Walker, 95 A.D.2d 70 (N.Y. App. Div. 4th Dep’t 1983)