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This section contains the nature of the case and procedural background.

P and D entered a five-year 'Lease with Renewal Provisions and Option to Purchase' for real property, including a building to be operated by P as a grocery store. Anytime during the last six months of the lease, P could elect to purchase the property at a price equal to the average of the appraisals of an expert designated by each party. Shortly before expiration, P notified D of its desire to purchase the property and begin the process of determining a sale price. The parties were unable to agree on a final price by the time the lease expired. P then vacated the premises, returned all keys to D. P filed suit, alleging that D failed to negotiate the price term in good faith and asking for the appointment of a special master to determine the purchase price. D agreed to the appointment of a special master and counterclaimed, alleging that P negotiated the price term in bad faith and was, therefore, the breaching party. During litigation over the price term, the property was substantially damaged during a hail storm. Neither party carried casualty insurance, and each asserted that the other was liable for the damage. The issue was added to the litigation at a stipulated amount of $60,000. The court accepted an appraised value of $375,000. The court then found that under the doctrine of equitable conversion, P was the equitable owner of the property and bore the risk of loss. It, therefore, declined to abate the purchase price or award damages to P for the loss. P appealed. The court of appeals affirmed. P petitioned for a writ of certiorari to determine the proper allocation of the risk of loss and the appropriate remedy under these circumstances.

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