## Facts

- A testator’s will gave Fannie C. Hays all personal property and a life estate in a specified parcel of real property (Parcel 1), and devised the residue of the estate to his children equally.
- Before death, the testator signed a contract to sell essentially all of his real property, including Parcel 1, for $100,000, with settlement scheduled by a stated date.
- Before settlement, the parties executed an addendum extending the contract “until a good and marketable title can be transferred” because a title problem had arisen and a survey was needed.
- The testator died before closing.
- After death, Hays, as personal representative, completed settlement under the pre-death contract.
- In estate administration, Hays treated the sale proceeds as personalty payable to her under the will based on equitable conversion.
- The children objected, arguing the proceeds should be treated as realty (as the substitute for the land) and pass under the residuary clause to them.

## Issues

1. Whether an executory contract to sell real property effects equitable conversion at the vendor’s death when good and marketable title was not shown to be conveyable at that time.
2. Whether, in construing a will, equitable conversion should be applied when doing so would defeat the testator’s apparent allocation of personalty to one beneficiary and the ultimate value of realty to residuary beneficiaries.

## Decision

- The Court of Appeals of Maryland reversed the intermediate appellate court and remanded.
- The court held equitable conversion did not occur at the testator’s death because the contract required conveyance of good and marketable title and the record did not establish that such title could have been conveyed at death.
- The court treated the sale proceeds as the traceable substitute for the real property interest and determined they passed as realty under the residuary clause to the children, not as personalty to Hays.

## Legal Principles

- Equitable conversion in the vendor-vendee context depends on an enforceable executory contract; the vendor is treated as holding an equitable interest in the purchase money and the vendee an equitable interest in the land only if equity would enforce the bargain.
- Where the contract obligation includes delivery of good and marketable title, unresolved questions about marketability at the vendor’s death may prevent equitable conversion from operating at that time.
- In testamentary construction, equitable conversion is not applied mechanically when it would conflict with the testator’s evident distributive plan reflected in the will’s structure.
- When equitable conversion is not found to have occurred at death, proceeds received from a post-death sale under a pre-death contract may be classified as realty for distribution purposes as the substitute for the land interest.

## Conclusion

The court declined to apply equitable conversion because the contract’s enforceability at death was uncertain due to unresolved marketable-title concerns, and it distributed the post-death sale proceeds as realty under the residuary clause to the children rather than as personalty to the life-tenant beneficiary.


Coe v. Hays, 328 Md. 350, 614 A.2d 576 (Md. 1992)