Bryant v. Willison Real Estate Co.

• Decision Date: 20 November 1986
• Docket Number: No. 17124,17124
• Citation: 177 W.Va. 120,350 S.E.2d 748
• Court: West Virginia Supreme Court
• Parties: , 85 A.L.R.4th 221 James L. BRYANT and James E. Bland v. WILLISON REAL ESTATE CO., etc.

Page 748

350 S.E.2d 748

177 W.Va. 120, 85 A.L.R.4th 221

James L. BRYANT and James E. Bland v. WILLISON REAL ESTATE CO., etc.

No. 17124.

Supreme Court of Appeals of

West Virginia.

Nov. 20, 1986.

Syllabus by the Court

1. The doctrine of equitable conversion provides that where an executory contract for the sale of real property does not contain a provision allocating the risk of loss and the property is damaged by fire or some other casualty not due to the fault or neglect of the vendor, the risk of loss is on the purchaser. This assumes the vendor has good title.

2. The parties to a contract of sale for real property may allocate the risk of loss for fire or other casualty occurring before the actual transfer of the legal title. If the contract allocates the risk to the vendor, then the doctrine of equitable conversion is no longer applicable.

3. The general rule is that both parties to an executory contract for the sale of real property have an insurable interest.

4. Where the risk of loss is on the vendor and the casualty damage to the property is not substantial, the purchaser is entitled to sue for specific performance, and the purchase price is abated to the extent the property was damaged.

5. Where the risk of loss is on the vendor and there is substantial damage to the property, the appropriate remedy ordinarily is to terminate the contract and return the down payment to the purchaser.

Stephen A. Wickland, Clarksburg, for appellants.

Boyd L. Warner, Clarksburg, for appellee.

MILLER, Chief Justice:

James L. Bryant and James E. Bland, the plaintiffs who were purchasers under a real estate sales contract, appeal from a judgment of the Circuit Court of Harrison County denying their claim for rescission of the contract and permitting the defendants/vendors to retain their down payment. The trial court also awarded damages against the purchasers for property loss suffered by third parties as a result of water flowing from a broken water line into two adjacent businesses.

This case was heard by the trial court judge without a jury by agreement of the parties. The facts are that on January 4, 1980, the plaintiffs entered into a contract to purchase the O.J. Morrison Building in Clarksburg for $175,000. As required by the sales contract, they paid $10,000 to Willison Real Estate Company, the agent for the vendors, at the time the contract was signed. The balance was to be paid upon delivery of the deed, at which time the purchasers would take possession of the property. No date was set for the closing.

On February 18, 1980, before the delivery of the deed, a water line broke in the sprinkler system, permitting water to run throughout the building and into two adjoining businesses. The purchasers had planned to extensively renovate the building for use as a medical office building. The purchasers were informed by an architect and an engineer who inspected the damage that the remodeling of the Morrison Building could be delayed by as much as four to six weeks because the building had to be properly dried out. The purchasers asked the vendors to correct the water damage or to permit the contract to be rescinded. The vendors declined to repair the damage and sold the building to another purchaser in July of 1980 for $140,000. The purchasers then instituted this action for rescission of the contract and return of their down payment. The trial court ruled that the purchasers must bear the risk of loss both to the Morrison Building and for the water damage to the adjoining property owned by third parties.

The purchasers contend that the trial court placed undue reliance on the doctrine of equitable conversion and rejected language in the sales contract placing the risk of loss on the vendors. ¹ Our law on the doctrine of equitable conversion with regard to real estate sales contracts is rather minimal. The doctrine of equitable conversion ² provides that where an executory contract for the sale of real property does not contain a provision allocating the risk of loss and the property is damaged by fire or some other casualty not due to the fault or neglect of the vendor, ³ the risk of loss is on the purchaser. This assumes the vendor has good title.

Our main case is Maudru v. Humphreys, 83 W.Va. 307, 98 S.E. 259 (1919), where the purchaser was in possession of the property under an executory contract of sale. A fire destroyed a building on the property and this Court found the purchaser to have borne the risk of loss, stating in its single Syllabus:

"Where a vendor, having good title and capacity to perform, makes a valid enforceable contract for the sale of land and, thereafter and before a deed is executed passing the legal title, a fire destroys a building thereon, without his fault or neglect, the loss is sustained by the purchaser. In such case there is no implied warranty that the condition of the property at the time of sale shall continue until after deed is made."

See also Biddle Concrete Co. v. McOlvin, 90 W.Va. 760, 111 S.E. 843 (1922); Taylor v. Russell, 65 W.Va. 632, 64 S.E. 923 (1909).

The Court in Maudru did not make an extensive analysis of the doctrine of equitable conversion, but did state that "[t]here is no warranty or condition in the contract between Mynes and Maudru that the property should be in the same condition when the transaction is completed as it was when the contract was made." 83 W.Va. at 311, 98 S.E. at 261. This appears to be an implied recognition that the parties may allocate the risk of loss in a sales contract and thereby alter the doctrine of equitable conversion.

It is rather universally recognized that the parties to a contract of sale for real property may allocate the risk of loss for fire or other casualty occurring before the actual transfer of the legal title. If the contract allocates the risk to the vendor, then the doctrine of equitable conversion, which places the risk of loss on the purchaser, is no longer applicable. E.g., Rector v. Alcorn, 241 N.W.2d 196 (Iowa 1976); Coolidge & Sickler, Inc. v. Regn, 7 N.J. 93, 80 A.2d 554, 27 A.L.R.2d 437 (1951); Bishop Ryan High School v. Lindberg, 370 N.W.2d 726 (N.D.1985); Utah State Medical Ass'n v. Utah State Employees Credit Union, 655 P.2d 643 (Utah 1982); see also 77 Am.Jur.2d Vendor and Purchaser § 363 (1975); 92 C.J.S. Vendor & Purchaser § 295(b)(2) at 176-77 (1955); Annot., 27 A.L.R.2d 444, 459-60 (1953).

The trial court was of the view that the contract language stating that "the owner is responsible for said property until the Deed has been delivered to said purchaser" was not sufficient to cast the responsibility on the vendors. This conclusion was based, in part, on testimony of the sales agent for the vendor that this language pertained only to vandalism.

We disagree with this conclusion. The contract was on a printed form and the language is free from ambiguity. Cases in other jurisdictions have held language of similar import to place the burden of risk of loss on the vendor. E.g., Rector v. Alcorn, supra; Coolidge & Sickler, Inc. v. Regn, supra; Bishop Ryan High School v. Lindberg, supra.

To permit this language to be restricted to acts of vandalism cuts across the plain meaning of its wording and would be contrary to the general rule that forecloses oral modification of contract language which is free from ambiguity. Warner v. Haught, Inc., 174 W.Va. 722, 329 S.E.2d 88 (1985); Mundy v. Arcuri, 165 W.Va. 128, 267 S.E.2d 454 (1980); Syllabus Point 4, Nettles v. Imperial Distributors, Inc., 152 W.Va. 9, 159 S.E.2d 206 (1968); Wyckoff v. Painter, 145 W.Va. 310, 115 S.E.2d 80 (1960); Camden v. McCoy, 48 W.Va. 377, 37 S.E. 637 (1900).

Apparently, the trial court also relied on language in the sales contract which provided: "Purchaser to carry enough fire insurance to protect Self." We do not believe that this provision can be read to place the risk of loss on the purchasers. This provision is nothing more than an acknowledgment of the general rule that both parties to an executory contract for the sale of real property have an insurable interest. Ambrose v. Harrison Mutual Ins. Ass'n, 206 N.W.2d 683 (Iowa 1973); Gilles v. Sprout, 293 Minn. 53, 196 N.W.2d 612 (1972); Hatcher v. Harleysville Mutual Ins. Co., 266 S.C. 548, 225 S.E.2d 181 (1976); 4 J. Appleman, Insurance Law and Practice § 2181 (1969); 77 Am.Jur.2d Vendor and Purchaser § 370 (1975); cf. Aetna Casualty & Surety Co. v. Cameron Clay Products, Inc., 151 W.Va. 269, 151 S.E.2d 305 (1966); McCutcheon v. Ingraham, 32 W.Va. 378, 9 S.E. 260 (1889).

The trial court also referred to the sentence in the contract that "[t]his contract is also subject to 'As Is' condition" as indicating an intention not to deliver the building in a specific condition. We agree with this conclusion insofar as it would dispel any claim by the purchasers to require the vendors to make any improvements to the building from the condition it was in at the time the contract was signed. There was apparently no dispute that the building had been unoccupied for some period of time and was somewhat deteriorated.

However, we do not agree that this language can be read to remove the risk of loss from the vendors. The purpose of this type of provision is not to shift the risk of loss in the event the building is damaged without fault on the part of either party. Rather the use of an "as is" provision in a real estate sales contract is generally intended to negate the existence of any warranty as to the particular fitness or condition of the property. This type of clause simply means that the purchaser must take the premises covered in the real estate sales contract in its present condition as of the date of the contract. Universal Investment Co. v. Sahara Motor Inn, Inc., 127 Ariz. 213, 619 P.2d 485 (1980); Lenawee County Bd. of Health v. Messerly, 417 Mich. 17, 331 N.W.2d 203 (1982); Approved Properties, Inc. v. City of New York, 52 Misc.2d 956, 277 N.Y.S.2d 236 (...