Anderson v. Yaworski , 120 Conn. 390 ( 1935 )

The ruling of the court presents this question: Where, after the execution of a contract for the sale of land and prior to the delivery of the deed, the buildings thereon are accidentally destroyed, upon whom should fall the burden of the loss, the vendor or the vendee? The plaintiff says that an implied condition of the contract which the parties must have had in mind when it was entered into was the continued existence of the dwelling-house upon the property, that its destruction has made the contract impossible of performance, and relies on the rule that where a specific thing which is essential to the performance of a contract is destroyed the parties are excused from performance. Straus v. Kazemekas,100 Conn. 581, 592, 124 A. 234; Amer. Law Institute Restatement, Contracts, Vol. 1, § 281. That rule is applicable if, at the time of the destruction of the dwelling, the vendor was its real owner, but not if the contract had been so far executed as to vest the ownership in the vendee. Cases which hold that the buyer is bound to pay in spite of the destruction of the building "are not exceptions to the rule stated in the section [281] since when recovery of the price is allowed, the result is based on the premise that the substantial incidents of ownership had already passed to the buyer before the destruction." Restatement, Contracts, Vol. 1, § 281, Comment c. The authorities all agree that the loss should fall upon the party who is the owner at the time, but differ as to whether the vendor or the purchaser is the owner. 66 C. J. 1052, § 811. The question, therefore, resolves itself into an inquiry as to who was the owner of the house at the time of the fire, and the answer to that inquiry will determine the incidence of the loss.

The legal title, of course, was in the defendant since the deed conveying the property to the plaintiff had not been executed or delivered at the time of the fire. But a binding contract of sale of the property, known with us as a bond for a deed, had been executed, delivered and recorded in the land records. The plaintiff thereby acquired the equitable title to the property.Hough v. City Fire Ins. Co., 29 Conn. 10; Miller Co. v. Grussi, 90 Conn. 555, 557, 98 A. 90; Grippo v.Davis, 92 Conn. 693, 695, 104 A. 165; Rienzo v.Cohen, 112 Conn. 427, 431, 152 A. 394; 27 R. C. L. 464. In Hough v. City Fire Ins. Co., supra, we said (p. 20) that one in possession of real property under a contract of sale had acquired a right of which he could not be deprived against his will, and was the owner of an absolute interest, who must necessarily bear the loss if the property were destroyed, and sustained a charge of the trial court that a perfect legal title was not essential to his recovery upon an insurance policy, and that he might be regarded as the real owner if he had the equitable title. "In some respects, and for some purposes, the contract is executory in equity as well as at law; but so far as the interest or estate in the land of the two parties is concerned, it is regarded as executed, and as operating to transfer the estate from the vendor and to vest it in the vendee. . . . The vendee is looked upon and treated as the owner of the land; an equitable estate has vested in him commensurate with that provided for by the contract, whether in fee, for life, or for years; although the vendor remains owner of the legal estate, he holds it as a trustee for the vendee, to whom all the beneficial interest has passed." 1 Pomeroy, Equity Jurisprudence (4th Ed.) § 368. Under this doctrine of equity the vendor has the bare legal title to the property; all other incidents of ownership are vested in the vendee who has acquired the full equitable estate. It follows that the latter is entitled to all the benefits accruing from such ownership, and at the same time assumes all the burdens incident thereto. "Equity, from the moment the contract is binding, gives the vendee the entire benefit of the rise in value of the land and all subsequent improvements, and any other advantage that may accrue to the estate. If the vendee is the owner in equity so as to receive all increment, he should be considered owner so as to accept the burden of any loss not due to the vendor's fault." 5 Pomeroy, Equity Jurisprudence (4th Ed.) § 2282.

Accordingly, in the early English case of Paine v.Meller, 6 Ves. 349, it was established as a general rule of equity that, when there was a binding contract capable of specific performance, loss by fire or other accident prior to the transfer of the legal title should fall upon the vendee. This would seem to be a necessary corollary of the accepted rule that the entire equitable interest in the property is then vested in the vendee. The great weight of judicial decisions in this country as well as text-writers upon the subject support this rule. 27 R. C. L. 555, § 293; 66 C. J. 1052, § 811; 22 A. L. R. 575; 41 A. L. R. 1272; 46 A. L. R. 1126. Indeed, an eminent authority has said that it is "a long-settled theory of courts of equity . . . sustained by the overwhelming weight of Anglo-American authority." Pound, The Progress of the Law, 33 Harvard Law Review, 828, note. Our own case of Hough v. City Fire Ins. Co., supra, has been widely cited as an authority in support of the majority rule. Thompson v. Gould, 37 Mass. (20 Pick.) 134, announced the contrary doctrine since adhered to in Massachusetts and followed in a few jurisdictions. In that case there was no enforceable contract, the agreement to purchase being by parol. It was there said that the loss must fall on the owner of the property at the time the loss happened, but the court held that the vendor, being the holder of the legal title, was such owner. The opinion recognized that "a different doctrine has been adopted in equity, founded on the fiction that whatever is agreed to be done shall be considered as actually done," and that under that doctrine the purchaser must bear the loss. In the case of an agreement for the sale of personal property, if the property is destroyed before the sale is completed and title passed the loss must ordinarily be borne by the vendor; and it was said in Thompson v. Gould, supra, that there is no reason why the same rule should not apply in the case of real estate. A contract to sell personal property without the transfer of possession gives only a personal right of action against the vendor for damages in case of a breach of the contract. A contract to sell real estate may be specifically enforced against the vendor and against anyone taking title from him with notice and the recording of the contract charges such taker with constructive notice. The vendee thus acquires the full jus disponendi, the substantial equivalent of a legal reversionary interest from the time when performance is due. Williston, 9 Harvard Law Review, 113, 119.

The majority opinion suggests that the vendee has not the entire beneficial interest in the property since, pending the time fixed for the performance of the contract, he has not a right to the possession and enjoyment of the property. Possession is not material with respect to the passing or existence of either legal or equitable title to land, and should not be as to the incidents of equitable title. See Pound, The Progress of the Law, 33 Harvard Law Review, 826, note 68.

The majority opinion apparently assumes that the rule that the vendee must bear the loss depends upon the doctrine of equitable conversion. It is unnecessary to resort to that doctrine to justify the rule; the loss is thrown upon the vendee simply because he is in equity substantially the owner of the property and justice requires that having the benefits he should bear the burden of ownership. Keener, 1 Columbia Law Review, 8.

Since the substantial incidents of ownership have passed to the buyer, equity treats the contract as executed to the extent that the beneficial ownership of the property is vested in him, and the doctrine of impossibility of performance of an executory contract has no application. In my opinion the destruction of the dwelling-house did not relieve either party of the duty to perform on the ground of impossibility of performance of an executory contract, the loss should fall upon the plaintiff as the equitable owner, and he is not entitled to the return of his deposit.

In this opinion HINMAN, J., concurred.