Brief Fact Summary.
The Supreme Court of Appeals of West Virginia ruled that if a contract for sale of real property expressly stipulates that the seller assumes the risk of loss then the doctrine of equitable conversion cannot be used to transfer the risk of loss to the buyer or in short, the doctrine will not apply if the contract for sale expressly allocates the risk of loss to any party.
Synopsis of Rule of Law.
If a contract for sale of real property allocates the risk of loss to the seller and damage occurs, then the doctrine of equitable conversion will not apply because of the expressive language in the contract for sale.
On January 4, 1980, Wilson Real Estate Co. (Defendant) contracted with a buyer named Bryant (Plaintiff) to purchase a building. After signing the contract, Plaintiff made a deposit with the intention to pay the balance in full upon delivery of the deed. Before the deed was properly delivered a waterline in the building burst, which caused a large amount of damage. After a month for the repairs, Plaintiff sought rescission of the contract in an effort to obtain his original deposit. The defendants refused however they sold the building to a new buyer and still failed to return the deposit. Plaintiff then filed suit in an attempt to recover his deposit however the trial court applied the doctrine of equitable conversion. The doctrine of equitable conversion applies when a contract for sale fails to stipulate who bears the burden for assuming the risk of loss and the doctrine automatically places the burden on the buyer. Plaintiff appealed.
If a contract for sale of real property contains specific language which stipulates the seller bears the risk of loss, does the doctrine of equitable conversion shift the burden to the buyer?
No. The Supreme Court of Appeals of West Virginia ruled that the burden does not shift through the doctrine of equitable conversion when language in a contract for sale of real property specifies that the seller possesses the risk of loss. The court further emphasizes that when the contract stipulates the burden of risk of loss is on the seller then the doctrine of equitable servitude in its entirety does not apply.
The court iterates that if the contract fails to specify that the burden of risk of loss is on the seller then courts will presume the risk of loss to be on the buyer through the doctrine of equitable servitude.