Brush Grocery Kart v. Sure Fine Market

• Decision Date: 03 June 2002
• Docket Number: No. 01SC267.,01SC267.
• Citation: 47 P.3d 680
• Parties: BRUSH GROCERY KART, INC., a Colorado corporation, Petitioner, v. SURE FINE MARKET, INC., a Colorado corporation, Respondent.
• Court: Colorado Supreme Court

47 P.3d 680

BRUSH GROCERY KART, INC., a Colorado corporation, Petitioner, v. SURE FINE MARKET, INC., a Colorado corporation, Respondent.

No. 01SC267.

Supreme Court of Colorado, En Banc.

June 3, 2002.

Edward L. Zorn, Fort Morgan, CO, Attorney for Petitioner.

Robert B. Chapin, Brush, CO, Attorney for Respondent.

Justice COATS delivered the Opinion of the Court.

Brush Grocery Kart, Inc. sought review of the court of appeals' judgment affirming the district court's determination of Brush's obligation on an option contract to purchase a building from Sure Fine Market, Inc. Brush Grocery Kart v. Sure Fine Market, 30 P.3d 810 (Colo.App.2001). The district court found that Brush was not entitled to a price abatement for damages caused by a hail storm that occurred during litigation between the parties over the purchase price of the property. The court of appeals affirmed on the grounds that equitable title to the property vested in Brush when it exercised its option to purchase, whether or not it also had a right of possession, and therefore Brush bore the risk of any casualty loss after that time. Because we hold that Brush was entitled to specific performance of the contract with an abatement of the purchase price reflecting the casualty loss, the judgment of the court of appeals is reversed.

I. FACTUAL AND PROCEDURAL HISTORY

In October 1992 Brush Grocery Kart, Inc. and Sure Fine Market, Inc. entered into a five-year "Lease with Renewal Provisions and Option to Purchase" for real property, including a building to be operated by Brush as a grocery store. Under the contract's purchase option provision, any time during the last six months of the lease, Brush could elect to purchase the property at a price equal to the average of the appraisals of an expert designated by each party.

Shortly before expiration of the lease, Brush notified Sure Fine of its desire to purchase the property and begin the process of determining a sale price. Although each party offered an appraisal, the parties were unable to agree on a final price by the time the lease expired. Brush then vacated the premises, returned all keys to Sure Fine, and advised Sure Fine that it would discontinue its casualty insurance covering the property during the lease. Brush also filed suit, alleging that Sure Fine failed to negotiate the price term in good faith and asking for the appointment of a special master to determine the purchase price. Sure Fine agreed to the appointment of a special master and counterclaimed, alleging that Brush negotiated the price term in bad faith and was therefore the breaching party.

During litigation over the price term, the property was substantially damaged during a hail storm. With neither party carrying casualty insurance, each asserted that the other was liable for the damage. The issue was added to the litigation at a stipulated amount of $60,000. The court appointed a special master pursuant to C.R.C.P. 53 and accepted his appraised value of $375,000. The court then found that under the doctrine of equitable conversion, Brush was the equitable owner of the property and bore the risk of loss. It therefore declined to abate the purchase price or award damages to Brush for the loss.

Brush appealed the loss allocation, and the court of appeals affirmed on similar grounds. It considered the prior holdings of this court acknowledging the doctrine of equitable conversion and found that in Wiley v. Lininger, 119 Colo. 497, 204 P.2d 1083 (1949), that doctrine was applied to allocate the risk of casualty loss occurring during the executory period of a contract for the purchase of real property. Relying heavily on language from the opinion purporting to adopt the "majority rule," the court of appeals found that our characterization of the rule as placing the risk of casualty loss on a vendee who "is in possession," id. at 502, 204 P.2d at 1086, reflected merely the facts of that case rather than any intent to limit the rule to vendees who are actually in possession. Noting that allocation of the risk of loss in circumstances where the vendee is not in possession had not previously been addressed by an appellate court in this jurisdiction, the court of appeals went on to conclude that a "bright line rule" allocating the risk of loss to the vendee, without regard to possession, would best inform the parties of their rights and obligations under a contract for the sale of land.

Brush petitioned for a writ of certiorari to determine the proper allocation of the risk of loss and the appropriate remedy under these circumstances.¹

II. SECTION 38-30-167, 10 C.R.S. (2001)

The General Assembly in this jurisdiction has often codified or altered various aspects of common law doctrines concerning interests in real property. See, e.g., title 38, art. 30, 10 C.R.S. (2001) ("Interests in Land: Titles and Interests"). Although the legislature has not expressly addressed the allocation of casualty loss risk in the context of a sale of real property, in 1979 it added to the revised statutes a provision concerning the remedies available to a vendee upon a failure of the vendor to fully comply due to impossibility:

If it is possible for a vendor of real property to convey a portion of the real property he contracted to convey, the vendee has a right to obtain a conveyance of that portion which it is possible to convey and a right to obtain damages or other equitable relief concerning the portion which it is impossible to convey.

See § 38-30-167, 10 C.R.S. (2001). Brush asserts that this provision implicitly allocates the risk of casualty loss during the executory period of the contract to the vendor.

While this language of the statute could be understood, in its most literal sense, to mean that the vendee is always entitled to damages or other equitable relief for that portion of real property that a vendor has agreed, but is unable, to convey, such a broad reading would lead to absurd results and is clearly not the only permissible understanding of the operative language. The section is entitled, "Right of purchaser to obtain partial specific performance," and its central provision insures a purchaser's right to the conveyance of a portion of the contract property, even if the vendor is no longer capable of conveying all of it. By conjoining the right of partial specific performance and a right to damages or other equitable relief, the statute simply makes clear that the remedy of partial specific performance is an additional remedy rather than a substitute for any relief to which the purchaser would be entitled for the vendor's inability to fully comply with the terms of the contract.

The fact that the statute provides a different type of remedy for each "portion" of the property need not mean, however, that the legislature intended to assign liability for casualty loss to the vendor in every case. Such an implication would be contrary to accepted defenses, and would, on its face, entitle a vendee to damages even if he were at fault. Nor is it even clear from the language of the statute itself that casualty loss to improvements on the property materially changing their condition from the time of the contract would make it impossible to convey a portion of the real property as contemplated by the statute.

If the language of a statute is not clear, various aids to construction, including consideration of any relevant legislative history, may assist in resolving the ambiguity. Reg'l Transp. Dist. v. Outdoor Sys., Inc., 34 P.3d 408, 414 (Colo.2001). While the testimony of the bill's sponsor in committee hearings suggests that he did not necessarily consider casualty loss to improvements to be outside the scope of the statute, it also makes clear that the legislation was specifically crafted to entitle a vendee to force a conveyance of any conveyable portion of the property rather than merely settle for damages for breach of the contract. See Hearing on Senate Bill 470, Before the Senate Judiciary Committee, 52d General Assembly, 1st Regular Session (hearing tape, Mar. 13, 1979); Hearing on Senate Bill 470, Before the House Judiciary Committee, 52d General Assembly, 1st Regular Session (hearing tape, April 10, 1979). The bill was expressly characterized as an attempt to overrule the holding of this court in Atchison v. City of Englewood, 193 Colo. 367, 568 P.2d 13 (1977), which the sponsor understood to eliminate the remedy of partial specific performance, and was apparently never intended to create a separate right of vendees to obtain damages or other equitable relief for any unconveyable portion of the property, without regard to other considerations. See Hearings on Senate Bill 470.

In light of this clear legislative history, section 38-30-167 can be reasonably understood only as providing a remedy to vendees of partial specific performance in addition to any right to which they would otherwise be entitled to damages or other equitable relief concerning the portion of the property that could not be conveyed. The legislature has simply failed to assign the risk of casualty loss during the executory period of a contract for the sale of real property in this or apparently any other statute. Where no statute controls, interests in real property must be determined by reference to the common law. ALH Holding Co. v. Bank of Telluride, 18 P.3d 742, 745 (Colo.2000).

III. THE RISK OF CASUALTY LOSS IN THE ABSENCE OF STATUTORY AUTHORITY

In the absence of statutory authority, the rights, powers, duties, and liabilities arising out of a contract for the sale of land have frequently been derived by reference to the theory of equitable conversion. People v. Alexander, 663 P.2d 1024, 1030 n. 6 (Colo.1983)(quoting III American Law of Property § 11.22, at 62-63 (A. Casner ed.1974)). This theory or doctrine, which has been described as a legal fiction, see Chain O'Mines v. Williamson, 101 Colo. 231, 234, 72 P.2d 265, 266 (1937), is based on...