## Facts

- James R. Sanford and Bianchi R. Sanford (plaintiffs) signed a written contract to sell Breidenbach (defendant) a parcel of land in Hudson, Ohio, improved with a house and an outbuilding, for $26,000.
- The contract provided that possession would pass when legal title was transferred at closing, not at the time the contract was signed.
- The agreement required the Sanfords, before transfer of title, to obtain and furnish certain easements/agreements affecting the property, including a septic system easement/agreement and related easements (including for driveway and water line).
- After signing, Breidenbach obtained a $22,000 fire/casualty insurance policy from Northwestern Mutual Insurance Company covering the property.
- Breidenbach deposited $12,000 of the purchase price into escrow pending delivery/recording of the deed.
- The Sanfords had their own $20,000 fire policy on the house with Insurance Company of North America; the insurer’s agent attempted to cancel it without the Sanfords’ permission.
- While closing papers were being prepared and before legal title passed, the house was destroyed by fire.
- After the fire, Breidenbach refused to complete the sale and instructed the escrow holder not to record the deed.
- The Sanfords sued for specific performance of the contract.
- Breidenbach filed a cross-claim seeking to make the Sanfords’ insurer responsible for the fire loss.
- The trial court denied specific performance, found the Sanfords’ policy cancellation ineffective (so both policies were in force), and allocated the loss between the insurers in proportion to policy limits.
- Multiple parties appealed.

## Issues

1. Was the seller entitled to specific performance compelling the buyer to complete the purchase after the house burned before closing?
2. Under equitable conversion, did the buyer bear the risk of loss before closing so that the buyer’s insurer owed coverage, or did the risk remain with the seller and the seller’s insurer?

## Decision

- The appellate court affirmed the denial of specific performance because the sellers had not completed material pre-closing obligations required by the contract (including the septic-system-related agreement/easement), so they were not in a position to compel performance in equity.
- The court held equitable conversion did not shift the risk of loss to the buyer on these facts: the contract was not specifically enforceable by the sellers at the time of the fire, and the contract contemplated transfer of possession with legal title at closing rather than at contract execution.
- Because the risk of loss remained with the sellers at the time of the fire, the trial court’s proportional allocation between insurers was rejected.
- Northwestern Mutual (the buyer’s insurer) was not liable for the fire loss because the buyer did not sustain a covered loss once he was not required to complete the purchase.
- Insurance Company of North America (the sellers’ insurer) was liable under its policy; the attempted unilateral cancellation by the agent was ineffective, so the policy was in force at the time of the fire.

## Legal Principles

- Specific performance is an equitable remedy granted in the court’s discretion and is generally unavailable to a party who has not performed or is not ready and able to perform material contractual conditions.
- The doctrine of equitable conversion can place the risk of casualty loss on a purchaser during the executory period only where the contract is specifically enforceable and the agreement shows an intent that the purchaser’s equitable ownership arise before conveyance.
- If the vendor is in default on conditions that prevent the vendor from obtaining specific performance, the vendor cannot use equitable conversion to shift casualty risk to the purchaser.
- When the risk of loss has not shifted to the purchaser, the purchaser’s property insurance does not respond to the vendor’s loss; the vendor’s own property insurance remains responsible if in force.

## Conclusion

The court refused to force Breidenbach to close after the pre-closing fire because Sanford had not satisfied material pre-closing duties, and equitable conversion therefore did not move the risk of loss to the buyer; the loss stayed with the sellers, making the sellers’ insurer liable and relieving the buyer’s insurer of liability.


Sanford v. Breidenbach, 173 N.E.2d 702 (1960)