## Facts

- In 1983, Betty Lou Wood sold a house and lot to Steven B. Donohue (and co-purchaser Vicki Schroot) under a land installment contract for $87,900, including a $30,000 down payment and monthly installments; the balance was paid in full in 1990.
- The property was located near the Fernald uranium-processing plant in Crosby Township, Ohio.
- In 1985, a class action was filed against the plant concerning contamination and related harms to surrounding properties.
- Wood, Donohue, and Schroot each filed claims in the class action.
- The settlement compensated class members for the diminution in value of affected property as of December 18, 1984 (after the 1983 land contract was executed).
- In 1993, the Fernald Settlement Fund Trustees issued a settlement check for $9,478 payable to Wood, Donohue, and Schroot.
- Wood filed suit seeking a declaration that she was entitled to 65.41% of the settlement proceeds, based on the portion of the purchase price Donohue had not yet paid as of December 18, 1984.
- After the trustees replaced the check and deposited the funds into an interest-bearing escrow account, Wood dismissed the trustees as parties.
- Following a bench trial, the trial court awarded Wood 65.41% of the settlement proceeds and awarded the remainder to Donohue, using the amount paid by the buyer as of the diminution date to allocate the money.
- Donohue appealed, arguing that under equitable conversion he became the equitable owner when the land contract was executed and therefore was entitled to the full settlement amount.

## Issues

1. Under a land installment contract, does equitable title pass to the purchaser upon execution of the contract, leaving the seller with legal title only as security for payment?
2. If the purchaser holds equitable title from execution, is the purchaser entitled to the entire third-party settlement payment compensating for diminution in value measured after execution but before the purchase price was fully paid?

## Decision

- The court held that under equitable conversion, the purchaser under a land installment contract becomes the equitable owner when the contract is executed.
- The court rejected the trial court’s approach that treated the buyer’s equitable interest as a fraction that increased as payments were made.
- Because Donohue was the equitable owner when the diminution in value occurred (as measured by the settlement date of December 18, 1984), he was entitled to the settlement proceeds tied to the property’s diminished value.
- The appellate court reversed the trial court’s allocation awarding Wood 65.41% of the settlement proceeds (with the case’s disposition described as affirmed in part and reversed in part, with final judgment entered in part).

## Legal Principles

- Under equitable conversion, when a contract for the sale of real property is executed, equitable title passes to the buyer and the seller retains legal title as a form of security.
- In a land installment contract, the seller’s retained title is not an ongoing equitable ownership share in the land; it functions like a security interest to ensure payment.
- The equitable owner bears the risk of loss (including declines in value) and is entitled to benefits that accrue to the property during the executory period.
- The buyer’s equitable ownership is not allocated proportionally based on the amount of the purchase price paid at a given time; equitable title passes at execution, subject to the seller’s security interest.

## Conclusion

The court concluded that Donohue became the equitable owner of the property when the 1983 land installment contract was signed, so he—not Wood—was entitled to the class-action settlement proceeds compensating for the property’s diminution in value as of December 18, 1984; the trial court’s payment-based apportionment awarding Wood 65.41% was therefore improper.


Wood v. Donohue, 736 N.E.2d 556 (1999)