The Latest Installment

            As a dealer in capital assets, when S.Crow Collateral Corp. enters into an installment agreement with a seller for an installment sale, S.Crow Collateral Corp. contracts for legal title but does not itself take legal title. Instead, as provided in the installment agreement, the installment seller conveys or transfers legal title, on S.Crow Collateral Corp.’s behalf, to the person or entity who or which purchases the asset from S.Crow Collateral Corp.

            So, if it’s real estate, the deed passes directly from S.Crow Collateral Corp.’s installment seller to S.Crow Collateral Corp.’s buyer.  If it’s an asset other than real estate; the assignment or other instrument of transfer is signed by S.Crow Collateral Corp.’s seller and is delivered, again on S.Crow Collateral Corp.’s behalf, to whoever buys the asset from S.Crow Collateral Corp.

            Indeed, that process is typical of dealers generally, in regard to assets for which the state has a title system.  When a car dealer receives a used car in trade for a new car, the car dealer is not usually issued a title for the used car.  When a car dealer receives a new car from the manufacturer, the car dealer is not usually issued a title for the new car.  In regard to assets for which the state has a title system, the title instrument is evidence of ownership, but it is not ownership itself.  Ownership arises from having lawfully purchased the rights of ownership.  A title instrument is evidence to that effect, but if the person who has the title instrument did not lawfully purchase the rights of ownership, the title instrument can be overcome and can be declared void.

            The same is true for shares of stock in a corporation.  The person who purchased the rights of ownership for the shares is the owner, even if someone else holds the certificates.

            So when S.Crow Collateral Corp. enters into an installment agreement to purchase an asset, what does S.Crow Collateral Corp. actually acquire? 

            First, at the time the agreement is signed, S.Crow Collateral Corp. acquires the right to control the deed or other instrument of transfer:  S.Crow Collateral Corp. and the seller agree that the seller will convey or transfer the title or ownership instrument to the buyer from S.Crow Collateral Corp., and the seller agrees to indemnify S.Crow Collateral Corp. from any failure by the seller to do so as agreed.

            Second, and more broadly, at the time when the installment agreement is signed by S.Crow Collateral Corp. and the seller, S.Crow Collateral Corp., as the buyer, receives enforceable equitable title to the asset.  An example of this principle is stated in Article 8, Section 240, of The Laws of New York, in subsections 2 and 4, as follows:

            “2.  The term ‘conveyance,’ as used in this article, includes every instrument, in writing, except a will, by which any estate or interest in real property is created, transferred, assigned or surrendered. . . .

            “4.  The terms ‘estate’ and ‘interest in real property’ include every such estate and interest, freehold or chattel, legal or equitable, present or future, vested or contingent.” 

            So, under New York law, an installment agreement which gives S.Crow Collateral Corp. a “legal or equitable, present or future, vested or contingent” interest is itself a “conveyance” of that interest in real property.

            California does this, too.  California Civil Code Section 1091 says, “An estate in real property. . . can be transferred . . . by an instrument in writing, subscribed by the party disposing of the same.”  It doesn’t have to be a deed; it need only be “an instrument in writing,” such as an installment agreement is.

            California Civil Code Section 1215, much like New York’s provision, says, “The term “conveyance” . . . embraces every instrument in writing by which any estate or interest in real property is created, aliened, mortgaged, or incumbered, or by which the title to any real property may be affected . . .”

            So, in California as in New York, an installment agreement which gives S.Crow Collateral Corp. a right or interest in real property is itself a “conveyance”.

            California Civil Code Section 1217 completes the picture, by declaring, “An unrecorded instrument is valid as between the parties thereto and those who have notice thereof.”

            Illinois law is similar.  Section 1 of the Illinois Conveyances Act declares that “every deed, mortgage or other conveyance in writing . . . and signed by the party making the same . . .  shall be sufficient . . . for the giving, granting, selling, mortgaging, leasing or otherwise conveying or transferring any lands, tenements or hereditaments in this state, so as, to all intents and purposes, absolutely and fully to vest in every donee, grantee, bargainee, mortgagee, lessee or purchaser, all such estate or estates as shall be specified in any such deed, mortgage, lease or other conveyance.”  In short, a sale by installment agreement is sufficient to transfer the property, whether or not a deed is recorded.

            Illustrative is the case of Wood v. Donohue, No. C-990127 (Court of Appeals of Ohio, 1999), where, about a real estate installment contract, the court declared that regardless “whether the money is actually deposited or only covenanted to be paid, whether the land is actually conveyed or only agreed to be conveyed,” “the seller, in equity, becomes the owner of the purchase money, and the purchaser becomes the owner of the property.”

            Black’s Law Dictionary says the same:  “Equitable title” is “the beneficial interest of one person whom equity regards as the real owner, although the legal title is vested in another.”

            One could go on and on, but this much is clear:  The installment agreement itself transfers an equitable ownership interest from the seller to S.Crow Collateral Corp., which obtains, by the contract, such basic ownership rights as the right to control who has possession, the right to exclude others, and the right of disposition.