Legal Question in Real Estate Law in California

At common law, the doctrine of equitable conversion stated that once a contract is signed and each party is entitled to specific performance, equity deemed the buyer to be the owner of the real property. The seller's interest, consisting of proceeds of the sale, was deemed to be personal property. Legal title remaining in the seller is held in trust for the buyer as security for the debt owed by the buyer. The seller, however, is entitled to posession until closing.

That harsh doctrine has pretty much been supplanted in California by adoption of the Uniform vendor and purchase risk act.

To answer your question, you must look at your purchase and sale contract. If the contract between you and the seller did not specify who was to bear the risk of damage or loss to the premises during the time between the execution of the contract and the transfer of title, (pendency of escrow) then your situation is governed by the Uniform Vendor and Purchaser Risk Act. (Civ. Code, � 1662.) Under this statute, assuming you were not at fault for the damage, the risk of loss or damage to the real property is carried by the seller until the buyer receives either title or possession.

If all or a material part of the premises are damaged before title or possession is given to the buyer, you can cancel the contract and recover any portion of the purchase price paid. After the buyer has taken possession or has received title,the buyer bears the risk of loss or damage to the premises (assuming no fault on the part of the seller). Therefore, if the premises are damaged, the buyer must still complete the contract and pay the balance of the purchase price.

If your purchase contract does contain a risk of loss provision, that provision will govern to the extent it is different from or more specific than the Uniform Vendor and Purchaser Risk Act. (Civ. Code, � 1662).

Escrow closed, you own the problem now. You can sue everybody involved if you want. Who wins will be determined by all the facts and law, but since you are the innocent party, you have the right to recover your damages. First explore insurance and settlement with the driver, and then with the seller and related parties, before spending a ton of money in litigation fees. If serious about getting counsel to help, feel free to contact me.

The full text of Civil Code section 1662 reads as follows:

"Any contract hereafter made in this State for the purchase and sale of real property shall be interpreted as including an agreement that the parties shall have the following rights and duties, unless the contract expressly provides otherwise:

"(a) If, when neither the legal title nor the possession of the subject matter of the contract has been transferred, all or a material part thereof is destroyed without fault of the purchaser or is taken by eminent domain, the vendor cannot enforce the contract, and the purchaser is entitled to recover any portion of the price that he has paid;

"(b) If, when either the legal title or the possession of the subject matter of the contract has been transferred, all or any part thereof is destroyed without fault of the vendor or is taken by eminent domain, the purchaser is not thereby relieved from a duty to pay the price, nor is he entitled to recover any portion thereof that he has paid.

"This section shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states which enact it.

"This section may be cited as the Uniform Vendor and Purchaser Risk Act."

Three issues (at least!) will arise if you try to invoke the UVPRA. The first is whether it applies to your purchase, or does not because the contract has a contrary provision.

The second issue will be whether the UVPRA applies because "all or a material part" of the property was destroyed. Although $40,000 damage is truly serious stuff, the other party can be expected to contend that damage is not destruction, etc. etc. Only someone familiar with the entire property and with the exact nature of the damage can decide whether the damage here brings the matter within the provisions of the UVPRA.

The third issue you should anticipate if you decide to rely upon the UVPRA is whether title had passed (or you had possession?) at the time of the incident. The facts you've given us with respect to the sequence and timing of events seeminly leaves open a possibility that legal title (as well as equitable title) had passed before the accident. When did the seller sign the deed and give it to the escrow agent for recording? Presumably the business day before the 8 a.m. recording. There is an argument that's when title passed. Was it before or after the accident?

Title passes when escrow closes.