covenant.45 In other words, the restriction was held to be appurtenant to the business. But if we think of it in this way, what is the servient property in such a case as Francisco v. Smith or Sickles v. Lauman? Certainly we cannot talk about a restriction on the covenantor's general substance as the French would say, upon his patrimony. Servitudes exist only in specific things. Nor can we think of such restrictions as imposing a servitude upon the name considered as property. Obviously in such a case as Sickles v. Lauman covenantor would not be allowed to compete in the same locality under another name. What we really have here is an application of the doctrines of equity that the incident will pass with the principal thing without any formal assignment. Hence the right to enforce the personal promise made by the vendor for the benefit of and to protect the business and good will passes to the assignee of the business without requiring any assignment of the covenant. There is no more than a personal claim against covenantor, but that claim is an incident of the business and will pass therewith because its purpose and intent can only be carried out in that way and equity looks to that as the substance, and not to its form. It is significant that continental commercial law has reached the same result.46

In connection with equitable servitudes attention should also be called to Barker v. Stickney,47 involving the question of restrictions upon chattels, which was fully discussed in a prior issue of this REVIEW.48

10. CONVERSION

An old question came up in a new form in Re Boshart's Estate.49 There vendor in North Dakota contracted to sell lands in New

45 To the same effect, Didlake v. Roden Grocery Co., 160 Ala. 484, 49 So. 384 (1909); Fairfield v. Lowry, 207 Mass. 352, 93 N. E. 598 (1911); Gompers v. Rochester, 56 Pa. St. 194 (1867); Public Opinion Pub. Co. v. Ransom, 34 S. D. 381, 148 N. W. 838 (1914); Palmer v. Toms, 96 Wis. 367, 71 N. W. 654 (1897); Parnell v. Dean, 31 Ont. 517 (1899).

46 "The obligation of the first seller has an intimate relation to the business; it contributes to augment its value. One would naturally suppose that in reselling it the first buyer intended to guarantee the sub-purchaser against the acts of the first seller and to assign to the sub-purchaser his right to proceed against the vendor." 3 LYON CAEN ET Renault, TraiTÉ DE DROIT COMMERCIEL, 4 ed., § 249 ter. 47 [1918] 2 K. B. 356. 32 HARV. L. REV. 278.

49

48

107 Misc. 697, 177 N. Y. Supp. 567 (1919), aff'd 188 App. Div. 788, 177 N. Y. Supp. 574 (1919).

York to a purchaser, the latter to take possession and pay in installments and conveyance to be made when all was paid. At vendor's death, purchaser was in default. The question was whether the land was subject to a "transfer tax" in New York as being "tangible property" left by the deceased vendor. Both courts. held rightly that it was not; that the deceased left a claim against purchaser for the purchase money which was "intangible property.' Although purchaser was in default, vendor could have made him take and the chose in action upon the contract went to his representative, who could assert that the legal title was held as security therefor. Moreover, although time was expressly made of the essence, the contract provided only for termination at the option of vendor in case of default and this option had not been exercised at the time of his death. As this condition subsequent had not operated to terminate the vendor-purchaser relation, in any view a court of equity must have held that vendor left a chose in action, not land, and that the tax did not attach thereto.

In Miedema v. Wormhoudt 50 a contract by purchaser to sell to a third person, while purchaser's contract with vendor was still executory, was treated as a conveyance of purchaser's equitable ownership, the same as an assignment. In that view, in such a case as Bird v. Hall,51 it would have made no difference whether purchaser in the original contract assigned his contract to the second purchaser or made a new contract with the latter to sell him the land. This ought to be the law. Such a view is also significant for cases where cestui que trust declares himself trustee for a second cestui and thereafter assigns to another.52 If second cestui became equitable owner, there was no interest to give to the assignee and, as the right of first cestui was equitable only, assignee got no legal power. On the other hand, we are told in Bishop v. Barndt 53 that purchaser by contracting to convey to a third person could not "create a privity of contract" between subpurchaser and vendor, and that without an assignment subpurchaser could not

50 288 Ill. 537, 123 N. E. 596 (1919).

51 30 Mich. 374 (1874).

J.

52 See Phillips v. Phillips, 4 De G. F. & J. 208 (1861); Cave v. Mackenzie, 46 L. Ch. 564 (1877); Cave v. Cave, 15 Ch. D. 639 (1880); Hill v. Peters [1918] 2 Ch. 273. But compare Dean Ames's view, "Purchase for Value without Notice," I HARV. L REV. 1, 8-12.

63 29 Cal. App. Dec. 747, 184 Pac. 901 (1919).

object to a decree of strict foreclosure as entailing a forfeiture. In that case time was expressly made of the essence and under the decisions in California timely performance was a condition precedent.54 Hence, there was no equitable ownership to convey to subpurchaser. Conversion by condemnation proceedings was involved in New York R. Co. v. Cottle.55 Land was in course of condemnation for a railroad. The owner died after accepting the report of the commissioners and confirmation of the report on his motion. Afterwards the damages awarded were claimed by creditors on the one hand and by the state on the other hand as having succeeded to the legal title of which the landowner had not been actually divested at the time of his death. The court held properly that after confirmation of the report the landowner had only a claim against the railroad company for money, that the latter was then equitable owner of the land and that the money should go to the creditors.

A group of recent cases present different aspects of the effect of conditions precedent to the vendor-purchaser relation. In Pickens v. Campbell 56 the purchase money was to be paid in installments and, in accordance with prior decisions in that jurisdiction, time was of the essence, although no words of that import were expressly used. Accordingly the court held payment of each installment at the time fixed a condition precedent, so that there was no vendorpurchaser relation at vendor's death when installments remained unpaid and hence the contract was not part of the vendor's personal estate. Assuming that there was really a condition precedent and not a condition subsequent working a forfeiture,57 the case would be similar to an option contract and the result would be right. In Vigars v. Hewins 58 purchaser in an option contract borrowed of assignee the money with which to exercise the option by making the required payment and (1) delivered the written contract to assignee, (2) agreed with assignee to execute a written assignment to him. Three months later purchaser executed a written assignment accordingly, but in the meantime a creditor had obtained a judgment against purchaser which by statute was a lien

54 Glock v. Howard & Wilson Co., 123 Cal. 1, 55 Pac. 713 (1898).

55 187 App. Div. 131, 175 N. Y. Supp. 178 (1919).

57 The position of the Kansas courts on this point will be considered later. 58 169 N. W. (Ia.) 119 (1918).

on his equitable interest in lands. The court held rightly that the unexercised option did not give rise to any equitable ownership upon which the judgment would be a lien; 59 that delivery of the instrument created no equitable lien upon the contract nor upon the equitable interest in the land acquired by exercise of the option, but that the agreement to execute a written assignment did create such a lien because the agreement was specifically enforceable in equity. Delivery of the written contract would not create such a lien, at least as against third persons, because possession of the instrument would not control assertion of the contract in court or exercise of the option. The contract could be proved by any note or memorandum signed by the vendor. Hence the case is not like those where a policy of life insurance or a savings bank book or, perhaps, a letter of credit 60 is delivered to the creditor or assignee, but is rather like those in which, in American jurisdictions where recording acts prevail, title deeds are so delivered.61 Possession of the paper did not give a practical control over the claim. But the contract to assign, specifically enforceable against purchaser, created an equitable lien when the option was exercised, just as a contract to procure title to Blackacre and convey to purchaser will make the purchaser equitable owner when title to Blackacre is procured.62 Such cases might also be put on the ground of constructive trust. If, after exercise of the option, purchaser were to keep both the equitable estate and the money paid him to enable

59 There are dicta that the holder of an unexercised option is equitable ownerthat there is a conversion subject to reconversion if the option is not exercised. Keep v. Miller, 42 N. J. Eq. 100, 107, 6 Atl. 495 (1886); House v. Jackson, 24 Ore. 89, 99, 32 Pac. 1027 (1893); Kerr v. Day, 14 Pa. St. 112, 114 (1850); McKay v. Carrington, 1 McLean (U. S.) 50, 54 (1829). If this were so, an option contract would create a present equitable ownership and hence an indefinite option could not be held to infringe the rule against perpetuities. But it cannot be so. "It is well settled that where there is a contract between the owner of land and another person, that if such person shall do a specified act, then he (the owner) will convey the land to him in fee; the relation of vendor and purchaser does not exist between the parties unless and until the act has been done as specified." Kindersley, V. C., in Ranelagh v. Melton, 2 Drew. & Sm. 278, 281–282 (1864). The dicta first cited all rest mediately or immediately on Lawes v. Bennett, 1 Cox Ch. 167 (1785), which is now held not to mean that the option contract works a conversion at once. In re Marlay, [1915] 2 Ch 264.

60 See Hershey, "Letters of Credit," 32 HARV. L. REV. 1, 29-30.

him to exercise it and in consideration of his agreement to assign, he would be enriched unjustly at the expense of the assignee. Hence equity may well treat him as constructive trustee of the estate. 63 In either event the right of assignee attached to the equitable estate at its very inception, while the statutory judgment lien could only take effect upon it after it had come into existence burdened with the equity or as assignee's property.64

Another form of the same question is presented by cases as to the risk of loss. In Amundson v. Severson 65 the contract was made in October, 1909. Purchaser went into possession in March, 1910. Payments were made in March, 1911. Most of the land was washed away by the Missouri River in 1913. Thereafter vendor procured a good title. As a condition precedent to the vendor-purchaser relation had not been fulfilled at the date of the loss 66 and purchaser could not have been compelled to take as things then stood, the risk was on vendor, although purchaser was in possession, and the court so held. This is a good case to bring out that possession is not a material consideration in determining upon whom the risk of loss rests in a court of equity. The converse situation arose in Maudru v. Humphreys 67 where, all conditions precedent having been fulfilled, upon review of the authorities the risk of loss by fire was held to be upon purchaser although not in possession.68 Pur63 It is submitted that this is the reason of the doctrine discussed in 3 POMEROY, EQUITY JURISPRUDENCE, § 1288.

66 Green v. Smith, 1 Atk. 572 (1738); Broome v. Monck, 10 Ves. 597, 612-613 (1805); Savage v. Carroll, 1 Ball & B. 265, 281 (1810); Newton v. Newton, 11 R. I. 390, 394 (1876).

67 98 S. E. (W. Va.) 259 (1919).

68 Possession at the time of the loss as a criterion is argued by Professor Williston, "The Risk of Loss After an Executory Contract of Sale in the Common Law," 9 HARV. L. REV. 106. There is practically no authority for this view. A dictum in Good v. Jarrard, 93 S. C. 229, 76 S. E. 698 (1912) (contract not enforceable in equity) and an overruled decision of an inferior court in New York, Wicks v. Bowman, 5 Daly, 225 (1874) are most in point. It is suggested by and argued on the analogy of the law as to sales of chattels. But three important distinctions have to be noted. (1) A contract for the sale of a chattel gives rise to no real right; such a right arises only upon transfer of the legal title. In equity, on the other hand, a contract for the sale of lands gives rise to a real right from the time when the contract is in the class of specifically enforceable undertakings. Indeed to-day, when in most jurisdictions the purchaser can record his contract and thus charge every one with constructive notice of his rights, he is often better protected in his equitable ownership than cestui que Brust. (2) In case of a chattel, it is expedient to cast the risk of loss on the one in