Sanford v. Breidenbach

Brief Fact Summary. Sanford agreed to sell land and a house to Breidenbach, but prior to the consummation of the transfer of legal title, the house was destroyed by fire.

Synopsis of Rule of Law. The risk of loss should be on the vendor until the time agreed upon for conveyance of the legal title, and thereafter on the purchaser, unless the vendor is then in such default as to be unable specifically to enforce the contract. [4 Pomeroy’s Equity Jurisprudence (5 Ed.), Section 1161a].

Facts. Sanford agreed to sell to Breidenbach a parcel of property along with a home situated thereupon for $26,000. Possession of the property, according to the contract, was to pass when title was transferred. Breidenbach did receive two keys to the house and entered inside to check the heating oil situation. The back of the contract provided that Sanford would provide a septic system easement agreement prior to the transfer of title. While the papers necessary to the transfer were being prepared, the house was destroyed by fire. Breidenbach instructed his bank, which was to loan him the purchase money, not to file the deed of record, which had been placed in escrow with the bank. When Breidenbach executed the contract for purchase, he also secured from Northwestern Mutual Insurance Company a policy of insurance of $22,000 to cover him in the event that the property was destroyed by fire. Sanford had maintained insurance on the property in the sum of $20,000. The policy was cancelle
d without permission from Sanford by the agent of the insurance company. The court found the unilateral cancellation to be ineffective, and that the policy was in full force and effect at the time of the loss. Sanford sued Breidenbach and Northwestern Mutual Insurance Company seeking specific performance of the contract to purchase the lands. Breidenbach cross-petitioned and brought Insurance Company of North America (Sanford’s insurer) into the case. $12,000 had been deposited by Breidenbach into escrow pending the delivery of title. The lower court found that Sanford was not entitled to specific performance, but that Sanford should recover a portion of each insurance policy.

Issue. Two issues are presented:
Is Sanford entitled to specific performance?
Was Breidenbach, under equitable conversion, the owner of the premises at the time of the fire?

Held. No to “a” and No to “b”. Judgments according to the findings of this Court.
A decree for thee specific performance of a contract is not a matter of right, but of grace, granted on equitable principles, and rests in the sound discretion of the court. [37 Ohio Jurisprudence, Specific Performance, Section 20].
In general, the rule under the doctrine of equitable conversion is that a contract to sell real property vests the equitable ownership of the property in the purchaser; and thus, where there is any loss by a destruction of the property through casualty during the pendency of the contract (neither party being guilty of causing the destruction), such loss must be borne by the purchaser. The court, however, declined to rule that possession had been by Breidenbach, the purchaser.
The court ruled that equitable conversion by the purchaser, in a contract to convey real property, does become effective in those cases in which the vendor has fulfilled all conditions and is entitled to enforce specific performance, and the parties, by their contract, intend that title shall pass to the vendee upon the signing of the contract of purchase. The court found that the case here did not meet those requirements.
That the risk of loss should be on the vendor until the time agreed upon for conveyance of the legal title, and thereafter on the purchaser, unless the vendor is then in such default as to be unable specifically to enforce the contract. [4 Pomeroy’s Equity Jurisprudence (5 Ed.), Section 1161a].
The court found that since Sanford could not specifically enforce the contract, there was no basis upon which to find an equitable conversion. Because Breidenbach had no ownership interest, the entire loss must be borne by Sanford’s insurance company, and Breidenbach’s insurance company is not liable.

Discussion. The Court found that the risk of loss was on the vendor. Because the vendor, Sanford, had not been named in Breidenbach’s insurance policy and Breidenbach was not found to have an ownership interest in the property, the logical result was that Sanford, and his insurance company, bore the entire loss. The court was not inclined to specifically enforce the contract to require Breidenbach to purchase the lands and the house for a price greater than the market value.