§ 941. English rule is not based on intention. How little the intention of the parties is regarded by the English rule may be seen by comparing a contract to sell a authorities to the proposition that loss due to the destruction of buildings by fire in a case like this falls upon the vendee. Undoubtedly there is authority in some jurisdictions for such doctrine, most of the cases depending upon Paine v. Meller, 6 Ves. Jr. 349. Typical American cas s upon the matter are Brewer v. Herbert, 30 Md. 301, 96 Am. Dec. 582, and Snyder v. Murdock, 51 Mo. 175. In California, however, this rule has not been followed, at least not in recent years. Smith v. Phoenix Ins. Co., 91 Cal. 323, 330, 27 Pac. 738, 13 L. R. A. 475, 25 Am. St. Rep. 191, cited by appellant, does not support his theory. While it was there stated that a vendee in possession of land may sometimes maintain an equitable title to it under his executory contract as against the vendor's legal title, the Chief Justice delivering the opinion of the court in that case said: "There is a wide distinction between the proposition that the vendee in possession under an executory contract of sale may maintain the possession against the vendor as long as he performs his part of the agreement, and upon full compliance may enforce specific performance of the vendor's contract to convey the legal title, and the proposition here contended for, viz., that the vendor in such a contract, notwithstanding the destruction of the subject of the contract, in whole or in part, before the date stipulated for payment and conveyance, and his consequent inability to make a conveyance of that for which the vendee has bargained, may nevertheless compel the vendee to pay the whole contract price in exchange for a fraction of the property sold.' This language is followed by an analysis of the apparently conflicting decisions on this subject, and the adoption of the rule announced in Wells v. Calnan, 107 Mass. 514, 9 Am. Rep. 65, that the destruction by fire of buildings on property in the vendor's possession prior to the date fixed for the payment of the purchase price and the conveyance of the title, defeats the vendor's right to compel performance on the part of the intending purchaser under the contract. This rule has been followed ever since in this state. In Potts Drug Co. v. Benedict, 156 Cal. 322, 334, 104 Pac. 432, 25 L. R. A. (N. S.) 609, after a discussion of the rule that, where there has been a present, unconditional, fully consummated sale, the risk accompanies the title and any loss falls upon the purchaser, this language was used: 'Where there is a mere agreement to sell, and therefore title has not passed, the loss falls on the vendor for the same reason. In such a case the vendor is excused from the performance of his contract under the rule we have discussed by reason of the destruction of the thing, but he cannot retain money already paid on account of the proposed purchase, or recover moneys remaining unpaid.'Citing Wells v. Calnan, and Smith v. Phoenix Ins. Co., supra, and Gould v. Murch, 70 Me. 288, 35 Am. Rep. 325." In Mackey v. Bowles, 98 Ga. 730, 734, 25 S. E. 834, the court said: "The general rule seems to be that the destruction of a building after the making of a contract for the purchase of the land upon which it is situated, followed by possession on the part of the purchaser, will constitute no defence to an action for the purchase money." See also Phinizy v. Guernsey, 111 Ga. 346, 36 S. E. 796, 50 L. R. A. 680, 78 Am. St. Rep. 207. In Davidson v. The Hawkeye Ins. carriage-horse at the end of the season and a contract to sell a race-horse at the end of the season. Equity would grant specific performance of the latter contract, and hence, while Co., 71 Iowa, 532, 32 N. W. 514, 60 Am. Rep. 818, the court said: "We come, then, to the question as to whether, where one party binds himself unconditionally to pay a certain price for a piece of real estate, and takes possession under the contract, and the other party binds himself to convey the real estate upon the payments being made, and nothing remains to be done but for the party taking possession to make the payments, and for the other to make the deed, such contract constitutes a sale of the real estate, within the meaning of the policy. In answer to this question we have to say that we think it does. Lint was the real owner of the house that was burned. The loss was his loss." "We can suppose a case where the owner of insured property makes a contract for the sale of it, but has not made a conveyance of the property, nor delivery of possession, but has retained control, and, while under his control and care, the property is destroyed by fire, and the seller cannot complete the contract by making such delivery as the contract contemplates; then the loss of the property would fall upon him, notwithstanding his contract, and for the reason that he is not able to carry it out; and it might well be said in such case that there was no sale within the meaning of the policy." In Merrill v. Beckwith, 163 Mass. 503, 40 N. E. 855, (a case not involving risk of loss), the court said: "Where the relation between the parties is simply that of contract, namely, where one agrees to sell, and the other to buy, there is, correctly speaking, no trust created, but merely 'a contract of sale and purchase, of which a court of equity will, under certain circumstances, decree a specific performance.' But, where the person agreeing to purchase has been allowed by the owner to enter upon the land and make improvements, there is a trust created in his favor." In Good v. Jarrard, 93 S. Car. 229, 76 S. E. 698, 701, 43 L. R. A. (N. S.) 383, the court said: "In the present case the defendant was not in possession, did not have the right of possession, nor did he have the right to exercise a single right incident to ownership, but simply had the right to specific performance of the contract, upon condition that he complied with the requirements of the contract to be performed by him; while, on the other hand, the plaintiff, as between her and the defendant, had not only the actual possession, but likewise the right of possession, through her tenants, also the legal title, of which she could not be divested before the time mentioned in the contract. "If the vendee had entered into possession, he unquestionably would have had to bear the loss, on the ground that it was his duty to protect the property. It would therefore be inequitable to throw the loss on him, when the property was destroyed during the time the vendor was in possession." See also Elmore v. Stephens Russell Co., 88 Oreg. 509, 171 Pa. 763. In New York until recently, it seemed probable that unless the vendee was in possession the risk would remain with the vendor. Goldman v. Rosenberg, 116 N. Y. 78, 22 N. E. 259; Listman v. Hickey, 65 Hun, 8, aff'd without opinion 143 N. Y. 630, 37 N. E. 827, and though the latest decision, Sewell v. Underhill, 197 N. Y. 168, 90 N. E. 430, 27 L. R. A. (N. S.) 233, accepted in terms the English doctrine, the court adds (p. 172): "It will be perceived that its the seller sends the animal over the country to race for his own benefit, he would, if the English rule were logically followed, do so at the risk of the buyer. The carriage-horse, on the other hand, would remain at the risk of the seller till the end of the season. Surely the intention of the parties as to the time of transfer is the same in both cases. If it be suggested that in both cases the parties contemplate an immediate transfer of ownership, but that in the case of the carriage-horse equity cannot effectuate this intention, in the case of the race-horse it can, the answer is, that if the parties meant a present transfer and lease back during the season they would say so. It would be perfectly easy to express such an intention, and in the case of personalty the intention, if expressed, would be perfectly effectual without any formality. In truth, the argument for throwing the loss upon the purchaser in an executory contract of sale where possession is not given to the purchaser cannot be put more strongly than this. Equity while protecting the vendee far less than a mortgagor, and not treating him consistently as an owner subject to a charge for the price, nevertheless gives him, whatever his intention, assurance far greater than a court of law can give, that the specific subject of the sale will become his, and, if not at the application is justified, not only by the theory upon which a court of equity proceeds, but by the facts, which establish that the contract, itself, had been performed and that the termination of the transaction, through a formal delivery of the instruments, was delayed as a matter of convenience, and not for any matter essential to the passing of the title. The title was accepted and the contract was consummated, prior to the fire, and what was deferred was the matter of placing the deed and the mortgage upon the records; a formality which it was agreed should operate as a delivery, on either side. There is the further feature of this case that the plaintiff, as vendee, went into the possession of the premises upon the execution of the contract, not as a tenant paying rent, but as their equitable owner and entitled to their beneficial enjoyment." 96 But a single case seems to have arisen in regard to risk under contracts for the sale of personal property of such a character that the contract would be specifically enforced, but no possible theory can be suggested for distinguishing such a contract in this connection from a contract to sell real estate. In Potts Drug Co. v. Benedict, 156 Cal. 322, 104 Pac. 432, 25 L. R. A. (N. S.) 609, the contract related to the sale of a leasehold. The court called attention to the fact that such an interest was regarded as personalty, and cited decisions regarding ordinary chattel property, not commenting on the fact that specific performance would be granted of such a contract as that under consideration. time fixed by the contract, yet with damages sufficient to pay for the delay. In return for this assurance equity demands as a price in spite of his intention as to ownership that the vendee take the risks of accidental loss. The propriety of such a requirement depends on the answer to three questions: Is it in accordance with natural justice? Is it of practical advantage? Is it in conformity with the principles of law in analogous cases? Views of natural justice vary so much that it is not very profitable to discuss the topic, but certainly in dealing with contracts no general rule can be more just than to aim to follow the intention of the parties, not only as to ownership but as to the incidents of ownership, and therefore to throw the loss on the purchaser if the parties intend a present transfer, on the vendor if they intend a future transfer. It is frequently suggested that, as the vendee gets the benefit of any chance improvement of the property, he should therefore suffer for a chance loss. There are several answers to this. In the first place, it proves too much, for it is as applicable to personal property as to real property. In the second place, there are practically no chance improvements analogous to chance destruction. In the third place, it is not certain that the vendee would get the benefit of an advantageous change in the property of such a character as to alter its nature, whether the subject of the sale were realty or personalty.97 "Good v. Jarrard, 93 S. C. 229, 76 S. E. 698, 702, 43 L. R. A. (N. S.) 383. "It is fallacious to argue that the loss should be borne by the vendee, on the ground that if the value of the land enhances he would receive the benefit thereof, and therefore he should sustain the loss when the land decreased in value. The argument is not sound, for the reason that in one case he gets the specific property for which he bargained, whereas in the other case he does not, on account of the failure of the vendor to carry out his contract, by disregarding, as we have shown, the double duty resting on him to protect the property from destruction by fire." A few analogies suggest themselves. In the case of accession, where the nature of property has been changed by work done upon it, if there has been no wilful conversion, the owner loses his right to the property itself and has only a right to its money value in its original form. Warren's Cases on Property, vol. i, pp. 149-168. It is true that in such cases the increased value is due, not to chance, but to work of the defendant or some one from whom he claims. Nevertheless, the fact remains that the plaintiff had a right to a specific thing against one in possession of it, and lost that right because of the change in its nature and § 942. Practical advantages of leaving risk with the vendor in possession. The practical advantages of leaving the risk with the vendor until transfer of possession are obvious. In the first place, it, is better in a doubtful case to let a loss lie where it falls, and to deny relief which requires litigation. As the vendor in possession will rarely have been paid in advance, to throw the risk on him makes no transfer of money or property necessary to adjust the rights of the parties. More important than this principle is the consideration that it is wiser to have the party in possession of property care for it at his peril, rather than at the peril of another. Of course, if the vendor in possession is negligent, and owing to his negligence the property is injured or destroyed, as matter of law the loss is his on any view, but there may be a great difference between not being so negligent as to be liable, and taking such care as would be induced by a great personal stake in the consequence. Then, too, negligence of a vendor in possession is a very difficult thing to prove, and the burden of proving it under the English rule is upon the vendee. A further consideration is the arrangement of the insurance. If the contract immediately throws the risk on the purchaser, it practically removes it from an But value, and it is this change which is the for a limited period a flock of sheep or cattle of the owner, the increase of the flock during the term belongs to the usufructuary, who is regarded as temporary proprietor. This general principle of law was admitted in Wood v. Ash, Owen, 139, and recognized in Putnam v. Wyley, 8 Johns. 432, 5 Am. Dec. 346." One who agrees to sell at a future day, retaining in the meantime the jus fruendi, should have rights at least equal to a lessee. The case of dividends on shares of stock declared between the day of a contract to sell and the time for delivery or transfer may also be suggested. But dividends are not extraordinary accidental accessions. They are normal incidents, analogous to rents and profits of real estate. To some extent the same may be said of the increase of animals. |