## Facts

- Carol M. Shay acquired six parcels of real estate and later entered into installment contracts for deed to sell four parcels to separate buyers.
- Each contract required a down payment and monthly installments with interest; each buyer took possession.
- The contracts required delivery of a warranty deed upon final payment and gave the seller a forfeiture option upon buyer default.
- Carol died intestate, survived by her husband, Arthur R. Shay (also administrator of her estate), and her sister, Grace Penrose.
- Arthur filed a partition action for the two parcels not under contract.
- Grace answered and filed a counterclaim seeking partition of the four parcels under contract, asserting she and Arthur each inherited an undivided one-half real property interest under Illinois intestacy law and the Probate Act.
- The trial court dismissed Grace’s counterclaim and struck related defenses, ruling that equitable conversion made the decedent’s interest in the four contract parcels personal property rather than real estate subject to partition.

## Issues

1. Whether execution of long-term, executory contracts for deed effects an equitable conversion so that, upon the seller’s death, the seller’s remaining interest is personalty (a right to unpaid purchase money) rather than a descendible real property interest subject to partition.

## Decision

- The Illinois Supreme Court affirmed.
- The court held that equitable conversion occurs when a valid and enforceable land sale contract is executed, even if performance will occur over a long period and significant obligations remain unperformed.
- Because the buyers held equitable ownership and were in possession, the decedent’s retained interest was the right to receive unpaid installments, treated as personal property.
- The heirs therefore did not take a real property interest in the four contract parcels and could not seek partition of those parcels as land.

## Legal Principles

- Under equitable conversion, once a valid and specifically enforceable contract for sale of land is executed, the buyer becomes the equitable owner of the land and the seller holds legal title in trust for the buyer.
- At the same time, the purchase money is treated as held for the seller; the seller’s beneficial interest is converted to personalty (the right to the purchase price).
- The doctrine applies upon contract formation, not only after near-complete performance, and is not postponed merely because the contract is long-term and executory.
- In disputes over devolution at the seller’s death, the seller’s successors take the vendor’s contract rights as personal property, not an ownership interest in the land capable of partition.

## Conclusion

The court ruled that enforceable installment land contracts convert the vendor’s interest into personal property at execution, so the seller’s heirs cannot treat the contract parcels as the decedent’s real estate for purposes of partition.


Shay v. Penrose, 25 Ill. 2d 447, 185 N.E.2d 218 (Ill. 1962)