## Facts

- Brush Grocery Kart, Inc. leased a grocery store property from Sure Fine Market, Inc. under a five-year lease containing an option to purchase exercisable during the last six months of the lease.
- The option set the purchase price as the average of appraisals obtained by experts selected by each party.
- Brush timely exercised the option and both parties obtained appraisals, but they did not reach agreement on a final price before the lease expired.
- After the lease ended, Brush vacated the premises, returned the keys, and notified Sure Fine it would discontinue casualty insurance previously maintained during the lease.
- Brush sued, alleging Sure Fine failed to negotiate the price term in good faith and seeking appointment of a special master to set the price; Sure Fine counterclaimed that Brush acted in bad faith.
- While litigation over the price continued and after Brush had surrendered possession, a hailstorm caused about $60,000 in damage to the building; no casualty insurance was in place, and the parties disputed who bore the loss.
- A special master set a sale price and assigned the $60,000 casualty loss to Brush.

## Issues

1. In a land-sale contract arising from exercise of an option to purchase, does the risk of casualty loss shift to the buyer upon formation of a specifically enforceable contract even if the buyer is not in possession when the loss occurs?
2. If the buyer is entitled to specific performance, must the purchase price be abated to reflect casualty damage occurring before closing when the buyer lacks possession?

## Decision

- The Colorado Supreme Court reversed the court of appeals and remanded.
- The court held the risk of casualty loss passes to the buyer after the sale contract is formed only if the buyer is in possession of the property at that time.
- Because Brush was not in possession when the hail damage occurred, the risk of loss remained with Sure Fine.
- Brush was entitled to specific performance of the option contract with an abatement of the purchase price equal to the casualty loss.

## Legal Principles

- Equitable conversion does not, by itself, shift casualty risk to a purchaser upon formation of a specifically enforceable land-sale contract.
- In Colorado, casualty risk shifts to the purchaser only when the purchaser has possession (or the right of possession) at the time the sale contract is formed, absent a contrary contractual allocation.
- When the seller bears the risk and casualty damage occurs before closing, a purchaser seeking specific performance may obtain an abatement of the purchase price reflecting the loss.

## Conclusion

Colorado allocates casualty risk in real-property sale contracts based on possession rather than equitable title alone; where a buyer exercising an option lacks possession when casualty occurs, the seller bears the loss and the buyer may enforce the contract with a purchase-price abatement.


Brush Grocery Kart, Inc. v. Sure Fine Market, Inc., 47 P.3d 680 (Colo. 2002)