## Facts

- Tom and Madelyn Ashmore owned a corner lot in Joplin, Missouri, with a concrete block building used as a grocery and an additional small structure; the property was leased to a tenant for $150 per month.
- The Ashmores executed a written option/contract giving Skelly Oil Company the right to purchase the property for $20,000 cash upon delivery of a deed; the agreement included the “buildings” and required Skelly to honor the existing lease until it expired.
- Before closing, a fire destroyed a building on the property that had a pre-fire value exceeding $12,000.
- The Ashmores had a $10,000 fire insurance policy covering the destroyed building and collected the $10,000 proceeds after the loss.
- The contract did not allocate the risk of loss between contract execution and closing and did not address entitlement to insurance proceeds.
- Skelly sued for (1) specific performance and (2) an abatement/credit of $10,000 based on the vendors’ insurance recovery.
- The trial court ordered specific performance and applied the $10,000 insurance proceeds to the $20,000 purchase price; the Ashmores appealed.

## Issues

1. When a real estate sale contract includes land and economically significant buildings and is silent on risk allocation, who bears the risk of fire loss occurring after contract formation but before conveyance?
2. If the seller receives insurance proceeds for pre-closing destruction of a building that was part of the bargain, may the buyer obtain specific performance with the proceeds credited against the purchase price?

## Decision

- The Supreme Court of Missouri affirmed.
- The court upheld specific performance of the sale contract.
- The court approved crediting the $10,000 insurance proceeds against the $20,000 purchase price.
- The court placed the pre-closing risk of loss on the seller where the buildings were an important part of the bargain and the contract did not allocate the risk.

## Legal Principles

- When a contract to convey real property includes buildings that are an important part of the consideration and value of the estate, and the contract is silent, the seller bears the risk of loss from destruction of the buildings before closing.
- The court declined to apply a rigid equitable-conversion rule that automatically shifts the risk of loss to the purchaser upon contract execution.
- Equity may treat insurance proceeds collected by the seller for pre-closing destruction of contracted-for improvements as a substitute for the destroyed improvements and apply those proceeds to the contract price to avoid a seller windfall.
- A buyer is not required to pay the full contract price for materially diminished property when the seller has been compensated for the destroyed improvement and the bargain contemplated conveyance of the improvement as part of the sale.

## Conclusion

Missouri enforced the land sale contract but required the sellers to credit their $10,000 insurance recovery against the $20,000 price, holding that where a significant building included in the bargain is destroyed before closing and the contract is silent, the seller bears the loss and the insurance proceeds may be applied to prevent double recovery.


Skelly Oil Co. v. Ashmore, 365 S.W.2d 582 (Mo. 1963)