Brush Grocery Kart, Inc. v. Sure Fine Market, Inc.

Brief Fact Summary.

Plaintiff and Defendant executed a lease. The parties were unable to come to an agreement about the purchase price, so the sale was not completed. Plaintiff left possession of the premises and brought suit. During the trial, a hailstorm damaged the property, resulting in $60,000 damage. Both parties asserted that they were not liable for the damages. The lower court held that Plaintiff was liable for the damages. Plaintiff appealed.

Synopsis of Rule of Law.

The risk of loss, of the sale of real property, passes to the vendee after signing the sales contract only if the vendee is in possession of the real property the moment the contract is executed. 

Facts.

Plaintiff, Brush Grocery Kart, Inc., executed a five-year lease with Sure Fine Market, Inc., Defendant. Defendant was going to operate a grocery store on the premises. The lease contained a clause that indicated the real property was to be sold at the end of the lease and the price was to be based on an average of the appraisals received by both parties. At the end of the lease, Plaintiff tried to purchase the property, but the parties were unable to come to an agreement about the purchase price. Thus, Plaintiff canceled the insurance policy on the property and left possession of the real property. Subsequently, Plaintiff brought suit against Defendant’s on the grounds that the offer was executed in bad faith and that Defendant breached the leasing contract. A special master was appointed to determine a purchase price for the real property. Once the trial began, a hailstorm damaged the property, causing $60,000 of damages. Neither party had insurance on the property, and both parties alleged the other party was liable for the damages. The special master came to the conclusion that the property was worth $375,000, and Plaintiff was responsible for the $60,000 damages. Plaintiff appealed on the grounds that Defendant had the risk of loss. Further, Plaintiff petitioned for certiorari to the Supreme Court of Colorado.

Issue.

Whether a vendee has the risk of loss, after the contract for the sale of real property as been executed, if the vendee if not in possession of the real property.

Held.

No, a vendee does not have the risk of loss, after the contract for the sale of real property as been executed, if the vendee if not in possession of the real property.

Discussion.

Plaintiff is not liable for the $60,000 damages because Plaintiff was not in possession of the real property when the damage occurred. The risk of loss, of the sale of real property, passes to the vendee after signing the sales contract only if the vendee is in possession of the real property the moment the contract is executed. The court noted that it would be unjust to remove the vendor’s liability in a real property prior to the transfer of the sale because the vendee is not in the position to prevent against the loss. The record indicates that Plaintiff was not in possession of the real property when the damage occurred and, at that moment, Defendant is considered to have regained possession of the land. Therefore, the purchase price, which the special master determined, should be reduced by the amount of damages caused by the storm, $60,000. The Supreme Court of Colorado reversed and remanded the case to the trial court.