## Facts

- Bumstead agreed to sell Ross an agricultural property (“Arizona Orchard”), including land, improvements, water and ditch rights, and specified personal property, for \$75,000.
- The payment terms included \$5,000 at contract execution, \$20,000 upon delivery of title papers (including a title insurance policy, deed, and mortgage), and the balance in installments.
- The contract provided that possession would be delivered when the title papers and deed were delivered, but that for allocating charges and income, possession/beneficial ownership would relate back to the contract date.
- The agreement contemplated an inventory as of the contract date, proration of taxes, water assessments, and insurance premiums as of that date, and up to ninety days for the seller to satisfy title insurer requirements.
- Eight days after execution, a fire destroyed the packing plant and warehouse and their contents, before deed delivery and formal transfer of possession.
- Ross demanded a price reduction; Bumstead refused. Ross stopped payment on the \$5,000 check and refused to complete the purchase.
- Bumstead later sold the property to a third party for less than the contract price and sued Ross for damages based on the difference.

## Issues

1. Whether the parties’ agreement was a conditional contract (so that the buyer’s duty to perform depended on contingencies) or an unconditional, binding executory contract.
2. Under an unconditional contract for the sale of real property, who bears the risk of loss when improvements are destroyed by fire after contract execution but before delivery of deed and possession.
3. Whether the fire constituted a partial failure of consideration excusing the buyer’s performance and defeating the seller’s damages claim.

## Decision

- The Arizona Supreme Court affirmed the judgment for Bumstead.
- The court held the agreement was an unconditional, binding executory contract, not a conditional contract dependent on a contingency for its validity.
- The court adopted the common-law equitable conversion rule allocating the risk of accidental loss to the vendee after execution of an unconditional land sale contract.
- Because the risk of loss was on Ross, the fire did not excuse performance; Ross’s refusal to proceed was a breach supporting damages measured by the difference between contract price and resale price.

## Legal Principles

- A contract is “conditional” only when its existence or binding force depends on a contingency; an executory contract requiring future performance steps (including title curative work) can still be unconditional and binding.
- Under equitable conversion, once an unconditional contract for sale of land is formed, the purchaser becomes the equitable owner and bears the risk of accidental loss before deed and possession transfer, absent contrary agreement.
- Contract provisions treating benefits and burdens (income and charges) as relating back to the contract date support treating the purchaser as the beneficial owner as of that date.
- Destruction of improvements by fire during the executory period, without shifting terms in the contract, is not a partial failure of consideration that excuses the purchaser’s duty to perform.

## Conclusion

The court held that the parties formed an unconditional land sale contract and that, under equitable conversion, the buyer bore the risk of fire loss occurring after execution but before deed and possession, making the buyer liable for breach damages when he refused to complete the purchase.


Ross v. Bumstead, 65 Ariz. 61, 173 P.2d 765 (Ariz. 1946)