## Facts

- Reliance Standard Life Insurance Company agreed on August 4, 1965 to sell Philadelphia property to Anthony and Viola DiDonato for \$16,000.
- At contract formation, the property was understood to permit industrial use.
- A zoning ordinance adopted September 22, 1965 reclassified the property from industrial to residential.
- Settlement occurred October 7, 1965, after the ordinance’s adoption but before the change appeared in public records.
- At settlement, an incorrect zoning certification indicated the property remained industrial; both parties relied on it.
- In 1967, when the DiDonatos attempted to resell, they learned the property was zoned residential.
- The DiDonatos filed an equity action seeking rescission, alleging misrepresentation and/or mistake regarding zoning.

## Issues

1. Whether, absent an express contractual term, the purchaser or the vendor bears the risk of a zoning change occurring after execution of a land sale contract but before settlement.
2. Whether an incorrect zoning certification and the parties’ shared misunderstanding about zoning at settlement supports rescission for misrepresentation or mutual mistake.

## Decision

- The Supreme Court of Pennsylvania affirmed the decree denying rescission and entered judgment for the seller.
- The court held the purchaser bears the risk of rezoning occurring between contract execution and settlement unless the contract provides otherwise.
- The court rejected rescission based on the incorrect zoning certification where both parties relied on it and the seller did not intentionally misstate zoning status.

## Legal Principles

- Under equitable conversion, a valid, enforceable land sale contract transfers equitable ownership to the purchaser at contract execution; the seller retains legal title as security for payment.
- Absent an agreement reallocating risk, the purchaser bears losses or detriments affecting the property between contract and closing, including changes in legal permissibility of use.
- A shared mistake tied to a risk allocated to the purchaser by default doctrine does not, without more, justify rescission against a non-culpable seller.
- Parties may shift the risk of regulatory or zoning changes by express contract terms; otherwise the default allocation governs.

## Conclusion

The court denied equitable rescission and held that, because equitable conversion makes the buyer the equitable owner at contract execution, the buyer bears the risk of a zoning change occurring before settlement when the contract does not expressly place that risk on the seller, even if both parties relied on an erroneous zoning certificate.


DiDonato v. Reliance Standard Life Ins. Co., 433 Pa. 221, 249 A.2d 327 (Pa. 1969)