Jones, Willis B.

English

University of Montana

Montana Law Review Volume 10 Issue 1 Spring 1949 Article 8 January 1949 Option to Purchase as an Interest in Land Willis B. Jones Follow this and additional works at: https://scholarworks.umt.edu/mlr  Part of the Law Commons Let us know how access to this document benefits you. Recommended Citation Willis B. Jones, Option to Purchase as an Interest in Land, 10 Mont. L. Rev. (1949). Available at: https://scholarworks.umt.edu/mlr/vol10/iss1/8 This Comment is brought to you for free and open access by ScholarWorks at University of Montana. It has been accepted for inclusion in Montana Law Review by an authorized editor of ScholarWorks at University of Montana. For more information, please contact scholarworks@mso.umt.edu. MONTANA LAW REVIEWOPTION TO PURCHASE AS AN INTEREST IN LANDIn order to determine the effect and interest that attachesto the holder of an option for the purchase of land, two specificquestions must be considered. First, what is the nature of anoption to purchase land? Second, should it be termed an equita-ble interest in land?An option for the purchase of land is usually a privilegeor a right which the owner confers on another person to becomeat his own election the purchaser of the property on stated termswithin a stated period of time. Williston, on Contracts, statesthat the word option, "is a term of business usage rather thanthat of strictly legal nomenclature, and has frequently been usedto include indiscriminately both binding conditional contractsand mere unsealed offers without consideration.'1 Legal textsusually define an option to purchase as a contract by which anowner agrees with another person that he shall have the privilegeof buying his property at a fixed price within a certain time?There are apparently two lines of authority as to whetheror not an option for the purchase of land creates an equitableinterest in land. One group of cases holds that before its exer-cise the owner of an option, based on consideration, has anequitable interest in land; the other line of cases holds that theowner of such an option before its exercise has no interest,equitable or otherwise, in the land.The weight of authority in this country is in accord withthe latter rule and typical statement found in the cases is suchas is laid down in an early Montana case, Ide v. Leiser." Thatcase in determining the right or position of an optionee heldthat:"An agreement in writing to give a person the option topurchase lands within a given time at a named price isneither a sale nor an agreement to sell. It is simply a con-tract by which the owner of property agrees with anotherperson that he shall have the right to buy his property ata fixed price within a certain time. He does not sell hisland; he does not then agree to sell it; but he does sellsomething; that is, the right or privilege to buy at theelection or option of the other party. The second party'3 WILLISTON, CONTRACTS. (1st. ed. 1936) sec. 1441, p. 2265.'55 Am. Ju-., Vendor Purcha8er, sec. 27. 27 R.G.L., Vendor Purchaser,sec. 31.'Chapman et al v. Great Western Gypsum Co. et al (1932) 216 Cal. 420,14 P. (2) 758, 85 A.L.R. 917.'(1890) 10 Mont. 5, 24 P. 695, 24 Am. St. Rep. 17.1Jones: Option to Purchase as an Interest in LandPublished by ScholarWorks at University of Montana, 1949NOTE AND COMMENTgets in praesenti, not lands, nor an agreement that heshall have lands, but he does get something of value, thatis the right to call for and receive land if he elects. Theowner parts with his right to sell his lands except to thesecond party, for a limited period. The second party re-ceives this right or rather, from his point of view, he re-ceives the right to elect to buy."In a later Montana case,' it was held that an option to pur-chase was merely an agreement whereby the optionee may, uponcompliance with certain terms and conditions, become the ownerof the property. It is not bilateral in the sense that the optioneemay compel specific performance, although such right is con-ferred on the optionee by virtue of a valid agreement. "It issimply a right conferred by contract upon one party by an-other, to accept or reject a present offer within a limited orreasonable time.'" It is "neither a lease nor a contract tolease. It is simply a contract whereby the owner of the proper-ty agrees with another person that he has the right to exercisecertain privileges with reference to the property in question. "In the most recent Montana case8 the courts again consistentlyhold with their earlier views and say by way of dictum that anoption to purchase real estate eonstitutes no interest in saidreal estate.In accord with Montana and what seems to be the weightof American authority, courts of other jurisdictions lay downthe general rule that an option to purchase creates no interestin the land. One court framed the rule in a somewhat differentmanner by saying, "It is frequently said that until an optionto purchase is executed by acceptance the option holder has noproperty right but merely a contract right,"' or, "that an optionto purchase land does not before acceptance, vest in the holderof the option an interest in the land.'"sBennett v. Petroleum Co. et al (1930) 87 Mont. 436, 288 P. 1018; Niel-son v. Hendrickson (1922) 63 Mont. 518, 210 P. 905.GSunburst Oil & Gas Co. v. Neville (1927) 79 Mont. 550, 257 P. 1016.7Thomas et al v. Standard Development Co. (1924) 70 Mont. 156, 224P. 870; Libby Lumber Co. v. Pacific States Fire Insurance Co. (1927)79 Mont. 166, 255 P. 340, 60 A.L.R. 1; Snyder v. Yarbrough (1911) 43Mont. 203, 115 P. 411.sHalko v. Anderson (1939) 108 Mont. 588, 93 P. (2d) 956, 959.'Stembridge v. Stembridge (1888) 87 Ky. 91, 7 S.W. 611; Sweezy v.Jones (1884) 65 Iowa 272, 21 N.W. 603."Richardson v. Hardwick (1882) 106 U.S. 252, 27 L.Ed. 145, 1 S.Ct. 213;Gustin v. Union School Dist. (1893) 94 Mich. 502, 54 N.W. 156, 34 Am.St. Rep. 361; Phoenix Insurance Co. v. Kerr (1904) 129 Fed. 723, 64C.C.A. 251, 66 L.R.A. 569.2Montana Law Review, Vol. 10 [1949], Iss. 1, Art. 8https://scholarworks.umt.edu/mlr/vol10/iss1/8MONTANA LAW REVIEWThe leading California case of Ludy v. Zumwalt' clearlylaid down the proposition that "while the optionee of a landpurchase agreement may be entitled to have such agreementspecifically enforced, it is to that extent only that he can claimif he can do so at all, an equity in the property involved inthe agreement." Another California case' said in effect, thatan option to purchase land is not an interest in land itself buta mere right of election to accept or reject a present offer with-in the time fixed.Notwithstanding these general rules and what is apparent-ly the weight of authority, there are other authorities, casesand dicta to the effect that an option to purchase land doescreate an interest therein.' It was held in a North Dakotacase" that, "Such right of the optionee constitute an interestin land enforceable in equity." This case cited as their author-ity a summarization of this subject, which was purely dictum,in the case of Smith v. Baugham." This case held as follows:"It has been said that an option to purchase land doesnot, before acceptance, vest in the holder of the optionan interest in the land. On the other hand there arecases holding that the grant, on a valuable consideration,of an option to purchase constitutes the grantee theequitable owner of an interest in the property. At anyrate the option vests in the grantee the right or privilegeof acquiring an interest in the land and when acceptedentitles him to call for specific performance."One of the reasons laid down for the general rule that anoption is merely a contract right and not an interest in landis that until acceptance there is no equitable conversion.' It issubmitted that this is no reason at all to deny an optionee aninterest in the land.To use the phrase,.'equitable conversion,' in this manneris to confuse the subject. At best it is only a result and not acause. Clark, on Equity," suggests in reference to the reason-"Ludy v. Zumwalt (1927) 85 Cal. 119, 259 P. 52."East Bay Municipal Utility Dist. v. Kieffer et al (1929) 99 Cal. 240,278 P. 376.'House v. Jackson (1893) 24 Oreg. 89, 32 P. 1027; Kerr v. Day (1850)14 Penn. 112, 53 Amer. Dec. 526; Wall v. Minneapolis St. P. & S. S. M.Ry. Co. (1893) 86 Wis. 48, 56 N.W. 367."4Horgan et al v. Russell (1.913) 24 N.D. 490, 140 N.W. 99, 43 L.R.A.(N.S.) 1150."(1909) 156 Cal. 359, 104 P. 689, 28 L.R.A. (N.S.) 522."633 H. L. R. 456, citing obiter in Stembridge v. Stembridge & Sweeneyv. Jones, note 9, supra."CLARK, PWiNCIPLES OF EQurrY (1st. ed. 1919) §112, p. 149.3Jones: Option to Purchase as an Interest in LandPublished by ScholarWorks at University of Montana, 1949NOTE AND COMMENTing of the majority of the courts which say that an option topurchase creates no interest, "that much of the confusion hasbeen caused by considering equitable conversion as a reason fora decision rather than a mere name for the result of a decision.It may be suggested that if it is not feasible to get rid of theterm, we ought at least to distinguish between entire and par-tial equitable conversion; entire equitable conversion wouldexist where the contract is specifically enforceable by both par-ties; partial equitable conversion would exist when the contractis specifically enforceable only by one." Further confusion isfound in the cases from a failure of the courts to realize thatall classes of rights may be specifically enforced whether ornot they are equitable interests or equitable estates.It would therefore seem that the rule laid down by thecourts in denying that an option to purchase land is an interestin land is not based on sound reasoning.A suitable comparison would be to compare the optionee'sinterest with that of other common law rights in another's landexempting legal charges' and natural rights.' These commonlaw rights generally include easements,' profits,' and covenantsrunning with the land.' Although these common law rights arenot created separately as a distinct subject of property, theyare incidents of the right of ownership and are treated as ainterest in land.Another example where the courts have declared an inter-est or right in the land exists, although the interest is less thancomplete ownership or less than an estate, is in their treatmentof equitable servitudes. It is elementary today that equitableservitudes are interests in land and are only defeated by abona fide purchaser for value without notice.It would seem than that an option to purchase should alsobe declared an equitable interest in the land for the reason thatit is given the protection of such an interest and yet the courtshave failed to so designate. This point is brought out moreclearly by the following material.It is well settled than an option to purchase land may beenforced against the heirs, devisees, and representatives of awTIF1FANY, RmAL PROPERTY (1st. ed. 1940) §354, p. 363.rIFFANY, REAL PROPEwRTY (1st. ed. 1940) §504, p. 498.'TIFFANY, REAL PROFWRTY (1st. ed. 1940) §520, p. 523."TIFFAxNY, REAL PROPERTY (1st. ed. 1940) §565, p. 574.'TIFFANY, REAL PROPERTY (1st. ed. 1940) §49, 342, 344.4Montana Law Review, Vol. 10 [1949], Iss. 1, Art. 8https://scholarworks.umt.edu/mlr/vol10/iss1/8MONTANA LAW REVIEWdeceased optionor." It was specifically held in a Wisconsin4case that the death of the giver of the option did not impairthe rights of the holder to make his election and enforce per-formance against the heirs. It is generally held, also, that onthe death of the optionee, the right to exercise the optiondescends to his heirs or personal representatives.' The onlyexception to this general rule seems to be those types of optionthat are personal to the original optionee. 'It is a general rule and the overwhelming weight ofauthority that one who purchases land with notice that hisgrantor has given an option to a third period to purchase suchproperty takes subject to the option and the purchaser may becompelled to perform the contract by a subsequent valid exer-cise of the option.' "As between the rights of a person exer-cising an option to purchase and the rights of one purchasingthe property with notice of the option, after the giving of theoption and before it is exercised, the general rule accords prior-ity to the right of the holder of the option."Montana has specifically held that one who purchases landfrom the owner after the recording of an option given by theowner to another person to purchase the same land takes withconstructive notice of the option and cannot claim to be aninnocent purchaser.' However, as against a subsequent bonafide purchaser for value a contract formed by the exercise ofan option given to another will not be enforced.'An analysis of these decisions indicates that an option topurchase is treated exactly as other equitable interests whichare cut off by a bona fide purchaser for value and are not cutoff by a purchaser with notice.Furthermore, it has been held that a tenant who exer-cises an option to purchase, contained in the lease, may enforcespecific performance of the contract against one who purchases'Ross v. Parks (1890) 93 Ala. 153, 8 So. 368, 11 L.R.A. 148.'Mueller v. Nortmann (1903) 116 Wis. 468, 93 N.W. 538, 96 Am. St.Rep. 997."For full discussion of this point see note 43 A.L.R. (N.S.) 115.2'Sutherland v. Parkins (1874) 75 Ill. 338.755 Am. Ju., Specific Performance, §36."Guerin v. Sunburst Oil & Gas Co. (1923) 68 Mont. 365, 218 P. 949 50A.L.R. 1315.2id."Barrett v. McAllister (1890) 33 W. Va. 738, 11 S.E. 220, 28 L.R.A.(N.S.) 523, note.5Jones: Option to Purchase as an Interest in LandPublished by ScholarWorks at University of Montana, 1949NOTE AND COMMENTthe property with notice of the lease and contract to sell, andmay compel a conveyance of the property.'Other cases have held that a deed to an intervening pur-chaser, with notice of an outstanding option, will be annulledand specific performance will be granted to the optioneeagainst his grantor.' It has also been held that an optioneemay obtain an injunction against an intervening purchaser,with notice of the option to purchase timber land, from cuttingthe timber."Other cases revealing the protection with which the courtssurround the optionee, hold that where a land owner stipulatedthat he would give the optionee the first refusal of his land, hewas not free to dispose of the land to an independent purchaserwithout informing the holder of the option and offering theland to him at the sale price." Another case held that a dec-laration of a homestead by the wife of the owner of real prop-erty, with knowledge of an option to purchase given to an-other, was subject to the right of the holder of the option todemand a conveyance in accordance with his contract.'A case in Iowa held that a receiver, in a receivership pro-ceeding, had the right to sell an option to purchase real estatewhich was owned by the debtor and that the purchaser hadthe right to enforce the option in his own behalf. This holdingis important in view of the fact that the Iowa court is com-mitted to the doctrine that a mere option to purchase realestate creates no interest in land."After considering these last few decisions showing the pro-tection with which they surround the optionee, it becomes ob-vious that the optionee's right is more than a contract right asis stated by the majority of the courts. If it is merely a con-tract right these decisions are irreconcilable.It has been suggested that, "the creation of equitableestates is a generally recognized consequence of the right ofspecific performance; it would seem that . ..a springing use,i.e., a contingent equitable interest in the land analogous to an"Lazaru v. Heelman (1882) 11 Abb. N.C. (N.Y.) 93."Chesbrough v. Vazaid Invest. Co. (1913) 156 Ky. 149, 160 S.W. 725.'Pardee v. C. Crane & Co. (1914) 74 W. Va. 359, 82 S.E. 340."Manchester Ship Canal Co. v. Manchester Race Course (1901) 2 Ch.(End.) 37."Smith v. Bangham, note 15 8upra.wA. H. Blank v. Independent Ice Co. et al (1911) 153 Iowa 241, 133 N.W.344, 43 L.R.A. (N.S.) 715."'Sweezy v. Jones, note 9, supra.6Montana Law Review, Vol. 10 [1949], Iss. 1, Art. 8https://scholarworks.umt.edu/mlr/vol10/iss1/8MONTANA LAW REVIEWexecutory devise, arises on the giving of an option."' On thistheory several decisions holding that an option contract maybe enforced against an intervening donee or purchaser withnotice can be explained.' Also, the explanation of the courtsallowing the optionee an injunction or decisions that allow theoptionee to come ahead of a declaration of homestead beforethe exercise of the option are more readily understandable.'In conclusion, since the holder of an option is given pro-tection similar to that given other equitable interests in land,it would be better terminology to call his right an interest inland. This would prevent a court from using the statementthat an "option is in not an interest in land," as a reason fora decision as they did in dictum in Halka v. Anderson.' Thiswould also be in accord with the general principle that equitableconversion is a consequence of the right to specific performancein equity.Willis B. Jones.TEffect of an Optional Contract to Buy Land, 26 HAnv. L. RFv. 747(1912-1913)."Horgan et al v. Russell, note 14, supra.'Pardee v. C. Crane & Co., note 33, supra; Manchester Ship Canal Co.v. Manchester Race Course, note 34, 8upra.'"Note 8, supra.THE PURPOSE OF THE DECLARATION OF MARRIAGEIN MONTANA 1Since the passage of the premarital medical examination"'he form of the declaration as provided for in §5725 which is in gen-eral use is substantially as follows (it, of course is contended that thisis an improper use) :DECLARATION OF MARRIAGEH --------------- and W ....... do hereby jointly make and execute adeclaration of marriage and make the following statements and repre-sentations of facts pursuant to the provisioss of section 5724 RCM 1935.That H ................ is years of age, and resides at ........................... IThat W ................ is. years of age, and resides at ...............................We do hereby declare that we are married and do enter into themarriage relationship at this time and place and at the time of theexecution of this declaration at ........................................ on the ...................day of ...... 19 ....... at ........... AM PM.We hereby certify that this marriage has not been solemnized.In witness whereof, we hereunto set our hands this ............... dayof ........................... , 19 .........Signatures of H and W.Signatures of two witnesses.Notarization.7Jones: Option to Purchase as an Interest in LandPublished by ScholarWorks at University of Montana, 1949

Option to Purchase as an Interest in Land

University of Montana School of Law

Montana Law Review
Volume 10
Issue 1 Spring 1949 Article 8
January 1949
Option to Purchase as an Interest in Land
Willis B. Jones
Follow this and additional works at: https://scholarship.law.umt.edu/mlr
Part of the Law Commons
This Comment is brought to you for free and open access by The Scholarly Forum @ Montana Law. It has been accepted for inclusion in Montana Law
Review by an authorized editor of The Scholarly Forum @ Montana Law.
Recommended Citation
Willis B. Jones, Option to Purchase as an Interest in Land, 10 Mont. L. Rev. (1949).
Available at: https://scholarship.law.umt.edu/mlr/vol10/iss1/8
MONTANA LAW REVIEW
OPTION TO PURCHASE AS AN INTEREST IN LAND
In order to determine the effect and interest that attaches
to the holder of an option for the purchase of land, two specific
questions must be considered. First, what is the nature of an
option to purchase land? Second, should it be termed an equita-
ble interest in land?
An option for the purchase of land is usually a privilege
or a right which the owner confers on another person to become
at his own election the purchaser of the property on stated terms
within a stated period of time. Williston, on Contracts, states
that the word option, "is a term of business usage rather than
that of strictly legal nomenclature, and has frequently been used
to include indiscriminately both binding conditional contracts
and mere unsealed offers without consideration.'1 Legal texts
usually define an option to purchase as a contract by which an
owner agrees with another person that he shall have the privilege
of buying his property at a fixed price within a certain time?
There are apparently two lines of authority as to whether
or not an option for the purchase of land creates an equitable
interest in land. One group of cases holds that before its exer-
cise the owner of an option, based on consideration, has an
equitable interest in land; the other line of cases holds that the
owner of such an option before its exercise has no interest,
equitable or otherwise, in the land.
The weight of authority in this country is in accord with
the latter rule and typical statement found in the cases is such
as is laid down in an early Montana case, Ide v. Leiser." That
case in determining the right or position of an optionee held
that:
"An agreement in writing to give a person the option to
purchase lands within a given time at a named price is
neither a sale nor an agreement to sell. It is simply a con-
tract by which the owner of property agrees with another
person that he shall have the right to buy his property at
a fixed price within a certain time. He does not sell his
land; he does not then agree to sell it; but he does sell
something; that is, the right or privilege to buy at the
election or option of the other party. The second party
'3 WILLISTON, CONTRACTS. (1st. ed. 1936) sec. 1441, p. 2265.
'55 Am. Ju-., Vendor Purcha8er, sec. 27. 27 R.G.L., Vendor Purchaser,
sec. 31.
'Chapman et al v. Great Western Gypsum Co. et al (1932) 216 Cal. 420,
14 P. (2) 758, 85 A.L.R. 917.
'(1890) 10 Mont. 5, 24 P. 695, 24 Am. St. Rep. 17.
1
Jones: Option to Purchase as an Interest in Land
Published by The Scholarly Forum @ Montana Law, 1949
NOTE AND COMMENT
gets in praesenti, not lands, nor an agreement that he
shall have lands, but he does get something of value, that
is the right to call for and receive land if he elects. The
owner parts with his right to sell his lands except to the
second party, for a limited period. The second party re-
ceives this right or rather, from his point of view, he re-
ceives the right to elect to buy."
In a later Montana case,' it was held that an option to pur-
chase was merely an agreement whereby the optionee may, upon
compliance with certain terms and conditions, become the owner
of the property. It is not bilateral in the sense that the optionee
may compel specific performance, although such right is con-
ferred on the optionee by virtue of a valid agreement. "It is
simply a right conferred by contract upon one party by an-
other, to accept or reject a present offer within a limited or
reasonable time.'" It is "neither a lease nor a contract to
lease. It is simply a contract whereby the owner of the proper-
ty agrees with another person that he has the right to exercise
certain privileges with reference to the property in question. "
In the most recent Montana case8 the courts again consistently
hold with their earlier views and say by way of dictum that an
option to purchase real estate eonstitutes no interest in said
real estate.
In accord with Montana and what seems to be the weight
of American authority, courts of other jurisdictions lay down
the general rule that an option to purchase creates no interest
in the land. One court framed the rule in a somewhat different
manner by saying, "It is frequently said that until an option
to purchase is executed by acceptance the option holder has no
property right but merely a contract right,"' or, "that an option
to purchase land does not before acceptance, vest in the holder
of the option an interest in the land.'"
sBennett v. Petroleum Co. et al (1930) 87 Mont. 436, 288 P. 1018; Niel-
son v. Hendrickson (1922) 63 Mont. 518, 210 P. 905.GSunburst Oil & Gas Co. v. Neville (1927) 79 Mont. 550, 257 P. 1016.7Thomas et al v. Standard Development Co. (1924) 70 Mont. 156, 224
P. 870; Libby Lumber Co. v. Pacific States Fire Insurance Co. (1927)
79 Mont. 166, 255 P. 340, 60 A.L.R. 1; Snyder v. Yarbrough (1911) 43
Mont. 203, 115 P. 411.
sHalko v. Anderson (1939) 108 Mont. 588, 93 P. (2d) 956, 959.
'Stembridge v. Stembridge (1888) 87 Ky. 91, 7 S.W. 611; Sweezy v.
Jones (1884) 65 Iowa 272, 21 N.W. 603.
"Richardson v. Hardwick (1882) 106 U.S. 252, 27 L.Ed. 145, 1 S.Ct. 213;
Gustin v. Union School Dist. (1893) 94 Mich. 502, 54 N.W. 156, 34 Am.
St. Rep. 361; Phoenix Insurance Co. v. Kerr (1904) 129 Fed. 723, 64
C.C.A. 251, 66 L.R.A. 569.
2
Montana Law Review, Vol. 10 [1949], Iss. 1, Art. 8
https://scholarship.law.umt.edu/mlr/vol10/iss1/8
MONTANA LAW REVIEW
The leading California case of Ludy v. Zumwalt' clearly
laid down the proposition that "while the optionee of a land
purchase agreement may be entitled to have such agreement
specifically enforced, it is to that extent only that he can claim
if he can do so at all, an equity in the property involved in
the agreement." Another California case' said in effect, that
an option to purchase land is not an interest in land itself but
a mere right of election to accept or reject a present offer with-
in the time fixed.
Notwithstanding these general rules and what is apparent-
ly the weight of authority, there are other authorities, cases
and dicta to the effect that an option to purchase land does
create an interest therein.' It was held in a North Dakota
case" that, "Such right of the optionee constitute an interest
in land enforceable in equity." This case cited as their author-
ity a summarization of this subject, which was purely dictum,
in the case of Smith v. Baugham." This case held as follows:
"It has been said that an option to purchase land does
not, before acceptance, vest in the holder of the option
an interest in the land. On the other hand there are
cases holding that the grant, on a valuable consideration,
of an option to purchase constitutes the grantee the
equitable owner of an interest in the property. At any
rate the option vests in the grantee the right or privilege
of acquiring an interest in the land and when accepted
entitles him to call for specific performance."
One of the reasons laid down for the general rule that an
option is merely a contract right and not an interest in land
is that until acceptance there is no equitable conversion.' It is
submitted that this is no reason at all to deny an optionee an
interest in the land.
To use the phrase,.'equitable conversion,' in this manner
is to confuse the subject. At best it is only a result and not a
cause. Clark, on Equity," suggests in reference to the reason-
"Ludy v. Zumwalt (1927) 85 Cal. 119, 259 P. 52.
"East Bay Municipal Utility Dist. v. Kieffer et al (1929) 99 Cal. 240,
278 P. 376.
'House v. Jackson (1893) 24 Oreg. 89, 32 P. 1027; Kerr v. Day (1850)
14 Penn. 112, 53 Amer. Dec. 526; Wall v. Minneapolis St. P. & S. S. M.
Ry. Co. (1893) 86 Wis. 48, 56 N.W. 367.
"
4Horgan et al v. Russell (1.913) 24 N.D. 490, 140 N.W. 99, 43 L.R.A.
(N.S.) 1150.
"(1909) 156 Cal. 359, 104 P. 689, 28 L.R.A. (N.S.) 522.
"633 H. L. R. 456, citing obiter in Stembridge v. Stembridge & Sweeney
v. Jones, note 9, supra.
"CLARK, PWiNCIPLES OF EQurrY (1st. ed. 1919) §112, p. 149.
3
Jones: Option to Purchase as an Interest in Land
Published by The Scholarly Forum @ Montana Law, 1949
NOTE AND COMMENT
ing of the majority of the courts which say that an option to
purchase creates no interest, "that much of the confusion has
been caused by considering equitable conversion as a reason for
a decision rather than a mere name for the result of a decision.
It may be suggested that if it is not feasible to get rid of the
term, we ought at least to distinguish between entire and par-
tial equitable conversion; entire equitable conversion would
exist where the contract is specifically enforceable by both par-
ties; partial equitable conversion would exist when the contract
is specifically enforceable only by one." Further confusion is
found in the cases from a failure of the courts to realize that
all classes of rights may be specifically enforced whether or
not they are equitable interests or equitable estates.
It would therefore seem that the rule laid down by the
courts in denying that an option to purchase land is an interest
in land is not based on sound reasoning.
A suitable comparison would be to compare the optionee's
interest with that of other common law rights in another's land
exempting legal charges' and natural rights.' These common
law rights generally include easements,' profits,' and covenants
running with the land.' Although these common law rights are
not created separately as a distinct subject of property, they
are incidents of the right of ownership and are treated as a
interest in land.
Another example where the courts have declared an inter-
est or right in the land exists, although the interest is less than
complete ownership or less than an estate, is in their treatment
of equitable servitudes. It is elementary today that equitable
servitudes are interests in land and are only defeated by a
bona fide purchaser for value without notice.
It would seem than that an option to purchase should also
be declared an equitable interest in the land for the reason that
it is given the protection of such an interest and yet the courts
have failed to so designate. This point is brought out more
clearly by the following material.
It is well settled than an option to purchase land may be
enforced against the heirs, devisees, and representatives of a
wTIF1FANY, RmAL PROPERTY (1st. ed. 1940) §354, p. 363.
rIFFANY, REAL PROPEwRTY (1st. ed. 1940) §504, p. 498.
'TIFFANY, REAL PROFWRTY (1st. ed. 1940) §520, p. 523.
"TIFFAxNY, REAL PROPERTY (1st. ed. 1940) §565, p. 574.
'TIFFANY, REAL PROPERTY (1st. ed. 1940) §49, 342, 344.
4
Montana Law Review, Vol. 10 [1949], Iss. 1, Art. 8
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MONTANA LAW REVIEW
deceased optionor." It was specifically held in a Wisconsin4
case that the death of the giver of the option did not impair
the rights of the holder to make his election and enforce per-
formance against the heirs. It is generally held, also, that on
the death of the optionee, the right to exercise the option
descends to his heirs or personal representatives.' The only
exception to this general rule seems to be those types of option
that are personal to the original optionee. '
It is a general rule and the overwhelming weight of
authority that one who purchases land with notice that his
grantor has given an option to a third period to purchase such
property takes subject to the option and the purchaser may be
compelled to perform the contract by a subsequent valid exer-
cise of the option.' "As between the rights of a person exer-
cising an option to purchase and the rights of one purchasing
the property with notice of the option, after the giving of the
option and before it is exercised, the general rule accords prior-
ity to the right of the holder of the option."
Montana has specifically held that one who purchases land
from the owner after the recording of an option given by the
owner to another person to purchase the same land takes with
constructive notice of the option and cannot claim to be an
innocent purchaser.' However, as against a subsequent bona
fide purchaser for value a contract formed by the exercise of
an option given to another will not be enforced.'
An analysis of these decisions indicates that an option to
purchase is treated exactly as other equitable interests which
are cut off by a bona fide purchaser for value and are not cut
off by a purchaser with notice.
Furthermore, it has been held that a tenant who exer-
cises an option to purchase, contained in the lease, may enforce
specific performance of the contract against one who purchases
'Ross v. Parks (1890) 93 Ala. 153, 8 So. 368, 11 L.R.A. 148.
'Mueller v. Nortmann (1903) 116 Wis. 468, 93 N.W. 538, 96 Am. St.
Rep. 997.
"For full discussion of this point see note 43 A.L.R. (N.S.) 115.
2'Sutherland v. Parkins (1874) 75 Ill. 338.
755 Am. Ju., Specific Performance, §36.
"Guerin v. Sunburst Oil & Gas Co. (1923) 68 Mont. 365, 218 P. 949 50
A.L.R. 1315.
2id.
"Barrett v. McAllister (1890) 33 W. Va. 738, 11 S.E. 220, 28 L.R.A.
(N.S.) 523, note.
5
Jones: Option to Purchase as an Interest in Land
Published by The Scholarly Forum @ Montana Law, 1949
NOTE AND COMMENT
the property with notice of the lease and contract to sell, and
may compel a conveyance of the property.'
Other cases have held that a deed to an intervening pur-
chaser, with notice of an outstanding option, will be annulled
and specific performance will be granted to the optionee
against his grantor.' It has also been held that an optionee
may obtain an injunction against an intervening purchaser,
with notice of the option to purchase timber land, from cutting
the timber."
Other cases revealing the protection with which the courts
surround the optionee, hold that where a land owner stipulated
that he would give the optionee the first refusal of his land, he
was not free to dispose of the land to an independent purchaser
without informing the holder of the option and offering the
land to him at the sale price." Another case held that a dec-
laration of a homestead by the wife of the owner of real prop-
erty, with knowledge of an option to purchase given to an-
other, was subject to the right of the holder of the option to
demand a conveyance in accordance with his contract.'
A case in Iowa held that a receiver, in a receivership pro-
ceeding, had the right to sell an option to purchase real estate
which was owned by the debtor and that the purchaser had
the right to enforce the option in his own behalf. This holding
is important in view of the fact that the Iowa court is com-
mitted to the doctrine that a mere option to purchase real
estate creates no interest in land."
After considering these last few decisions showing the pro-
tection with which they surround the optionee, it becomes ob-
vious that the optionee's right is more than a contract right as
is stated by the majority of the courts. If it is merely a con-
tract right these decisions are irreconcilable.
It has been suggested that, "the creation of equitable
estates is a generally recognized consequence of the right of
specific performance; it would seem that . ..a springing use,
i.e., a contingent equitable interest in the land analogous to an
"Lazaru v. Heelman (1882) 11 Abb. N.C. (N.Y.) 93.
"Chesbrough v. Vazaid Invest. Co. (1913) 156 Ky. 149, 160 S.W. 725.
'Pardee v. C. Crane & Co. (1914) 74 W. Va. 359, 82 S.E. 340.
"Manchester Ship Canal Co. v. Manchester Race Course (1901) 2 Ch.
(End.) 37.
"Smith v. Bangham, note 15 8upra.
wA. H. Blank v. Independent Ice Co. et al (1911) 153 Iowa 241, 133 N.W.
344, 43 L.R.A. (N.S.) 715.
"'Sweezy v. Jones, note 9, supra.
6
Montana Law Review, Vol. 10 [1949], Iss. 1, Art. 8
https://scholarship.law.umt.edu/mlr/vol10/iss1/8
MONTANA LAW REVIEW
executory devise, arises on the giving of an option."' On this
theory several decisions holding that an option contract may
be enforced against an intervening donee or purchaser with
notice can be explained.' Also, the explanation of the courts
allowing the optionee an injunction or decisions that allow the
optionee to come ahead of a declaration of homestead before
the exercise of the option are more readily understandable.'
In conclusion, since the holder of an option is given pro-
tection similar to that given other equitable interests in land,
it would be better terminology to call his right an interest in
land. This would prevent a court from using the statement
that an "option is in not an interest in land," as a reason for
a decision as they did in dictum in Halka v. Anderson.' This
would also be in accord with the general principle that equitable
conversion is a consequence of the right to specific performance
in equity.
Willis B. Jones.
TEffect of an Optional Contract to Buy Land, 26 HAnv. L. RFv. 747
(1912-1913).
"Horgan et al v. Russell, note 14, supra.
'Pardee v. C. Crane & Co., note 33, supra; Manchester Ship Canal Co.
v. Manchester Race Course, note 34, 8upra.
'"Note 8, supra.
THE PURPOSE OF THE DECLARATION OF MARRIAGE
IN MONTANA 1
Since the passage of the premarital medical examination
"'he form of the declaration as provided for in §5725 which is in gen-
eral use is substantially as follows (it, of course is contended that this
is an improper use) :
DECLARATION OF MARRIAGE
H --------------- and W ....... do hereby jointly make and execute a
declaration of marriage and make the following statements and repre-
sentations of facts pursuant to the provisioss of section 5724 RCM 1935.
That H ................ is years of age, and resides at ........................... I
That W ................ is. years of age, and resides at ...............................
We do hereby declare that we are married and do enter into the
marriage relationship at this time and place and at the time of the
execution of this declaration at ........................................ on the ...................
day of ...... 19 ....... at ........... AM PM.
We hereby certify that this marriage has not been solemnized.
In witness whereof, we hereunto set our hands this ............... day
of ........................... , 19 .........
Signatures of H and W.
Signatures of two witnesses.
Notarization.
7
Jones: Option to Purchase as an Interest in Land
Published by The Scholarly Forum @ Montana Law, 1949


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Option to Purchase as an Interest in Land

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