Equitable conversion is not viewed as entitling the purchaser to every significant right of ownership. It is wiser to have the party in possession of the property care for it at his peril, rather than at the peril of another.
Petitioner, Brush Grocery Kart, Inc., petitioned for review of the court of appeals judgment affirming the district court's determination of petitioner's obligation under a contract to purchase a building and land from Sure Fine Market, Inc. The district court found that petitioner was not entitled to a price abatement for damage caused to the building by a hail storm that occurred during the contract's executory period and while possession of the property remained with Sure Fine. The court of appeals affirmed on the grounds that equitable title to the property vested in petitioner at the time the contract was formed, whether or not it had a right possession at that time, and therefore Brush it the risk of any casualty losses from that time forward. The supreme court reversed the judgment of the court of appeals and remanded the case for further proceedings consistent with the opinion.
Did the trial and appellate courts err in finding that the doctrine of equitable conversion required Brush to bear the loss caused by hail damage?
The supreme court held that because petitioner was not an equitable owner in possession at the time of the casualty loss, it was entitled to rescind the contract or go forward with the contract and receive partial specific performance of the portion of the property that could be conveyed and a price abatement of the purchase price equal to the casualty loss. Petitioner was clearly not in possession of the property as the equitable owner. Even if the doctrine of equitable conversion applies to the option contract between the parties and could be said to have converted petitioner's interest to an equitable ownership of the property at the time petitioner exercised its option to purchase, neither party considered the contract for sale to entitle petitioner to possession. Petitioner was, in fact, not in possession of the property, and the record indicates that Sure Fine considered itself to hold the right of use and occupancy and gave notice that it would consider petitioner h a holdover tenant if it continued to occupy the premises other than by continuing to lease the property.