Bleckley v. Langston

Brief Fact Summary. Plaintiffs entered into a contract for the purchase of land. On the following day, an ice storm destroyed a great deal of the property, reducing the value of the land. Plaintiffs notified Defendants that they had elected to rescind the contract and demanded return of the money. Defendants refused to rescind the contract.

Synopsis of Rule of Law. The prevailing law in is that the risk of loss is normally on the buyer.

Facts. Plaintiffs entered into a contract for the purchase of land, which had pecan trees on it. They paid $10,000.00 earnest money on December 23, 1963, with the balance of the money due on the purchase price to be paid before February 1, 1964. Defendants were to retain possession until then for the purpose of gathering pecans. On the following day, an ice storm reduced the value of the land. Plaintiffs notified Defendants that they had elected to rescind the contract and demanded return of their money. Defendants stated that they were ready, willing, and able to perform their part of the contract, so they refused to rescind the contract. Defendants claim that the value of the property had been reduced by $32,000.00 as the result of the ice storm. The Plaintiffs sued for return of their money. Defendants filed a cross-claim because Plaintiffs’ failure to consummate the deal had resulted in losses, which were equal to the earnest money plus an additional $22,000.00 for the loss of th
e benefit of the bargain. The court found that the loss of value to the property was without fault of either party and that the contract between the parties did not specify which party would bear the risk of loss.

Issue. Which party bears the risk of loss?

Held. Plaintiffs. Judgment reversed.
The prevailing law is that the risk of loss is normally upon the buyer. The rule is based on the logic of equitable conversion, which has been rejected in Massachusetts and in England. In Massachusetts and England, the rule is that the risk of loss is on the seller when there is a failure of consideration.
Though it may reasonably be argued that possession as well as equitable title in the buyer should be necessary to place losses on him, which the party in possession has the power to protect against. This reasoning is not necessarily applicable to losses caused by acts of God. DeFuniak, Handbook of Modern Equity 218 Section: 93. However, the court was unable to find any authority, which deviated from the general rule.
The general rule is that when the purchaser obtains possession under a binding executory contract for the sale of improved realty which the seller is able to convey, but where, before the transfer of legal title is consummated, any loss falls on the purchaser as the owner of the equitable title.
The court found that the parties had entered into a binding contract for the sale of real estate, which the vendor was willing and able to consummate at the time of the destruction of a substantial part of the realty, therefore, the loss falls on the buyer.

Discussion. This case illustrates the need for the contract for sale of real estate to specify the risk of loss. Because it was not specified in the contract, the loss is placed on the buyers, the Plaintiffs. This is an unfortunate result, because Plaintiffs were not in possession of the real estate and had not obtained legal title to the property. Therefore, Plaintiffs will not get the property and they will have to pay the Defendants for the reduction in value of the property.