DiDonato v. Reliance Standard Life Ins. Co

Brief Fact Summary.

Plaintiff sued Defendant contracted for the purchase of Defendant’s property. At the time of contract, the property was zoned for industrial use, however, before closing a zoning amendment restricted the property to residential use. Plaintiff discovered the rezoning when he tried to sell the property and sued Defendant to rescind their contract. The trial court ruled for Defendant. Plaintiff appealed.

Synopsis of Rule of Law.

Absent an agreement to the contrary, the purchaser of real estate bears the risk of loss or injury occurring during the period between execution of the purchase agreement and the closing.

Facts.

On August 4, 1965, DiDonato (Plaintiff) and Reliance Standard Life Insurance Company (Defendant) agreed to the purchase of Defendant’s property, which was zoned for industrial use at the time. The next month, unbeknownst to the parties, a zoning amendment restricted the property to residential use. The parties closed in October, however, the zoning changes were not reflected in the public records until November. In 1967, when he tried to sell the property, Plaintiff discovered the zoning change. Plaintiff sued to rescind the 1965 contract.

Issue.

Whether the purchaser of real estate bears the risk of loss or injury occurring during the period between execution of the purchase agreement and the closing.

Held.

Yes. The lower court’s ruling is affirmed. Absent an agreement to the contrary, the purchaser of real estate bears the risk of loss or injury occurring during the period between execution of the purchase agreement and the closing.

Discussion.

The doctrine of equitable conversion transfers ownership of real property to the purchaser upon the execution of the purchase agreement. Therefore, the purchaser is not entitled to rescission based on a change that occurred before closing, but after execution of the agreement, unless the parties agreed otherwise.