A holding in the recent Oklahoma Court of Civil Appeals decision in Butterfield v. Trustee of McCoy Revocable Trust concerns a contract for deed: “In Oklahoma, a contract to convey at a future time – once the purchaser performs certain acts – does not transfer any title until the purchaser performs all acts necessary to entitle him to a deed.”[1] As explained in this article, such holding appears to be contrary to applicable Oklahoma statutes and case law.

Mr. Butterfield held a contract for deed as the buyer from Ms. Carter, the seller, and was in possession of the real property. This contract was not recorded until after Ms. Carter conveyed the same real property to a third party, the McCoy Revocable Living Trust, by warranty deed and until after such McCoy deed was recorded. After the deed to the McCoy Trust was recorded, Ms. Carter gave Mr. Butterfield a warranty deed because he had completed all required payments. This deed to Mr. Butterfield was not recorded. The McCoy Trust sued Mr. Butterfield to quiet title. The McCoy Trust claimed that it did not have any notice of Mr. Butterfield’s claim, other than Mr. Butterfield’s possession. The Oklahoma Court of Civil Appeals affirmed the trial court’s summary judgment in favor of the McCoy Trust, finding that the McCoy Trust was “a bona fide purchaser for value”[2] because 1) Mr. Butterfield “had not yet performed all obligations under the contract at the time the McCoy Trust obtained its interest through filing its deed of record,” but more significantly, 2) Mr. Butterfield “had no equitable or legal interest in the property [under the contract for deed].”[3]

Such position was then cited and followed in a later unreported Oklahoma Court of Civil Appeals decision, Long v. Ly.[4] Ms. Ly’s LLC conveyed the subject real property to Mr. Towner. This deed was apparently recorded. Mr. Towner (as the seller) and Ms. Ly (individually,as the buyer) executed and delivered a contract for deed, which was not recorded, but Ms. Ly continued in possession. The Longs (plaintiffs) took a deed to the real property from Mr. Towner; although, at that time, Ms. Ly was still in possession. The Longs assumed Ms. Ly was only a renter, but they apparently did not contact and question her. The Longs sued to quiet title against Ms. Ly as a bona fide purchaser and asserted, “There was an absence of notice, actual or constructive, of outstanding rights of others.”[5] The trial court granted the Longs’ motion for summary judgment. The Oklahoma Court of Civil Appeals affirmed the trial court’s summary judgment, relying on the earlier holding in Butterfield by repeating its holding: “In Oklahoma, a contract to convey at a future time – once the purchaser performs certain acts – does not transfer any title until the purchaser performs all acts necessary to entitle him to a deed.”[6] Butterfield and Long are collectively referred to herein as the “Oklahoma Court of Civil Appeals opinions.”

Such Oklahoma Court of Civil Appeals opinions may have been correct when they stated that a contract for deed fails to convey “legal” title (as opposed to “equitable” title) until all promised payments are made.[7] However, a contract for deed, defined under 16 O.S. §11A, has two natures: part immediate conveyance of “equitable” title to the buyer and part immediate granting of a mortgage lien to the seller, “guaranteeing payment under the contract” (as between the parties and third parties with notice).[8]

The operative statute, 16 O.S. §11A, provides:

All contracts for deed for purchase and sale of real property made for the purpose or with the intention of receiving the payment of money and made for the purpose of establishing an immediate and continuing right of possession of the described real property, whether such instruments be from the debtor to the creditor or from the debtor to some third person in trust for the creditor, shall to that extent be deemed and held mortgages, and shall be subject to the same rules of foreclosure and to the same regulations, restraints and forms as are prescribed in relation to mortgages. No foreclosure shall be initiated, nor shall the court allow such proceedings, unless the documents have been filed of record in the county clerk's office, and mortgage tax paid thereon, in the amount required for regular mortgage transactions. Provided, however, mutual help and occupancy agreements executed by an Indian housing authority created pursuant to Section 1057 of Title 63 of the Oklahoma Statutes shall not be considered to be mortgages or contracts for deed under the provisions of this section.

When interpreting this statute, the Oklahoma Supreme Court in McGinnity (2015) made it clear that such a contract for deed immediately conveys equitable title:

The Kirks appealed a judgment foreclosing a mortgage. By 16 O.S.2011 § 11A, contracts for deed “made for the purpose of establishing an immediate and continuing right of possession ... shall to that extent be deemed and held mortgages ... and shall be subject to the same rules of foreclosure and to the same regulations, restraints and forms as are prescribed in relation to mortgages.” When the contract for deed was properly executed, equitable title to the real property passed to the Kirks as buyers, the Neeces as sellers retained only the bare legal title, and the interest retained by the Neeces was equivalent to a mortgage for the purpose of guaranteeing payment due under the contract. The effect of the assignment of the contract for deed to the McGinnitys was an assignment of a mortgage for the purpose of foreclosure proceedings.[9]

The Kirks (the buyer) bought a house from the Neeces (the seller) under a contract for deed. The Neeces then sold the land to the McGinnitys, and the Neeces assigned the contract for deed to the McGinnitys. The McGinnitys sued the Kirks to foreclose the contract for deed due to alleged multiple nonmonetary breaches. The trial court’s foreclosure judgment was affirmed by the Court of Civil Appeals and the Oklahoma Supreme Court. In its analysis, the Supreme Court stated, “When the contract for deed was properly executed, equitable title to the real property passed to the Kirks as buyers, the Neeces as sellers retained only the bare legal title, and the interest retained by the Neeces was equivalent to a mortgage for the purpose of guaranteeing pay due under the contract.”[10]^{, [11]}

The Court of Civil Appeals in Butterfield, ¶¶18-19, acknowledges:

Whether Butterfield’s possession was sufficient to put the McCoy Trust on notice of his claim is material only to the extent Butterfield actually has a legal interest in the property because possession does not create a legal interest. Butterfield’s possession serves only to provide notice of such interest as he actually has.

Accordingly, the dispositive issues in this case are whether Butterfield has a legal interest in the property, and assuming he has an interest, whether that interest is superior to the McCoy Trust’s interest.[12]

Therefore, the Butterfield court admitted that any prospective third-party buyer will – due to the possession of the buyer under the contract for deed – have “notice of such interest as he [the occupier] actually has.” But then the court in Butterfield ignores the holding in McGinnity and goes in the wrong direction by failing to recognize that there are two types of enforceable title: legal and equitable. The buyer under the contract for deed was admittedly in possession in Butterfield; therefore, any prospective third-party buyer from the seller must make reasonable inquiry of the party in possession as to the occupant’s claim of interest, and – to be acting in good faith – cannot rely on self-serving representations by the seller.

Again, as explained in McGinnity, the seller under a contract for deed only retains “bare legal title,” and therefore, any “assignment of the contract for deed [by the seller] ... was an assignment of a mortgage for the purpose of foreclosure proceedings.”[13]

The buyer under a contract for deed has the enforceable right to compel the seller to convey legal title to the buyer upon such buyer’s full payment of the agreed-upon purchase price. If a buyer under a contract for deed defaults on making such timely payments of the contract, then the seller cannot extinguish the equitable title of the buyer without conducting a formal mortgage foreclosure proceeding, providing the buyer with all the due process protections held by a mortgagor. It is perhaps possible that in lieu of a foreclosure action, the seller might be permitted to secure a judgment for money damages for a breach of contract – other than for missed purchase payments.

Another recent Court of Civil Appeals opinion was issued that properly acknowledged the immediate equitable rights held by the buyer under a signed and delivered contract for deed: Hartless v. Cline.[14]

In the Hartless case, the seller signed the contract for deed, but the buyer did not. That court concluded:

In contrast, Hartless [the buyer] reasoned that the Contract comprises two agreements – a contract for sale of property and a mortgage agreement. While Hartless [the buyer] concedes the written mortgage on the property would not be valid because she did not sign it, she contends that the contract for sale of property by contract for deed is valid because Cline, as the grantor or seller signed it. She then contends that a mortgage arises therefrom by operation of law under 16 O.S.2021, §11A.

Hartless’ [the buyer’s] argument is more persuasive. Though section 11A establishes a constructive mortgage in the case of a contract for deed and requires it to be treated so, it does not require that the contract for deed contain language pertaining to or granting a mortgage, which must in turn be executed to be enforceable. Cline cites no Oklahoma Supreme Court authority holding that [16 O.S.] section 4 applies to a contract for deed in the manner suggested, i.e., to negate a contract for sale of the property because the purchaser who will be deemed to have granted the constructive mortgage through that agreement has not executed it.[15]

In conclusion, the holding of Butterfield and its progeny, Long, that a buyer under a contract for deed has no interest either legal or equitable in the subject real property appears to be an erroneous statement of the law in Oklahoma.

---

ABOUT THE AUTHOR

Kraettli Q. Epperson is of counsel with Nash, Cohenour & Giessmann PC in Oklahoma City. He received his J.D. from the OCU School of Law in 1978 and focuses on mineral and surface title litigation and expert representation. Mr. Epperson chaired the OBA Title Examination Standards Committee from 1988 to 2020 and taught "Oklahoma Land Titles" at the OCU School of Law from 1982 to 2018. He edits and co-authors West/Epperson: Oklahoma Real Estate Forms.

 

 

---

ENDNOTES

[1] Butterfield v. Trustee of McCoy Revocable Trust, 2024 OK CIV APP 2, ¶22, 542 P.3d 877, 881.

[2] Id. ¶27.

[3] Id. ¶24.

[4] Long v. Ly, Case No. 122,277, March 13, 2025.

[5] Id. ¶8.

[6] Id. ¶22.

[7] According to Black’s Law Dictionary, Second Pocket Edition: 1) Legal title – A title that evidences apparent ownership but does not necessarily signify full and complete title or a beneficial interest. Cf. equitable title. 2) Equitable title – A title that indicates a beneficial interest in property and that gives the holder the right to acquire formal legal title. Cf. legal title. For a discussion of “equitable title,” see Faust Corporation v. Harris, 2020 OK CIV APP 20, ¶¶33-34, 467 P.3d 710, 719-720.

[8] McGinnity v. Kirk, 2015 OK 73, ¶7, 362 P. 3d 186, 189-190.

[9] Emphasis added. McGinnity, ¶7.

[10] The footnote for this quote is: “Lucas v. Bishop, 1998 OK 16, ¶ 4, 956 P.2d 871, 873 (parties agreed that 16 O.S. §11A required a contract for deed to be treated as a mortgage for the purpose of foreclosure); Smith v. Frontier Federal Savings & Loan Ass’n 1982 OK 90, 649 P.2d 536, 538 (for the purpose of applying 16 O.S. §11A and a due-on-sale clause in a prior mortgage, a contract for deed in this case was not a subordinate mortgage, but a purchase money mortgage where buyer obtained equitable title and sellers retained title pending full payment on the contract for deed).” See also, Hartless v. Clarke, 2023 OK CIV APP 30, ¶¶19-20, 538 P. 3d 187, 191.

[11] Id. ¶7.

[12] Emphasis added.

[13] McGinnity, ¶7.

[14] Hartless v. Cline, 2023 OK CIV APP 30, 538 P. 3d 187.

[15] Id. ¶¶19-20.