Bixby Ranch Co. v. United States

Decision of the U.S. Court of Federal Claims


Issue was who bore the risk of loss of funds held back in escrow to cure title defects at closing of a purchase of easements. Air Force purchased easements from Bixby Ranch governing development of land adjacent to Vandenberg Air Force Base. Before closing, Bixby Ranch discovered two clouds on its title. To avoid a lapse in appropriations at year end, Air Force proposed closing purchase, with a portion of the price held back in escrow to be used to clear title. Air Force offered to hold the funds in a non-interest bearing escrow account under government control, but Bixby insisted on an interest-bearing account and the holdback amount was deposited with an escrow agent. Purchase closed, and title to the easements passed to the Air Force. Escrow agent then embezzled the holdback amount and Air Force had to use separate funds to clear title. Bixby sought payment of the holdback amount plus interest, but the Contracting Officer instead ordered Bixby to pay $150,000 to the Air Force to compensate it for the money it had to spend to clear title. Bixby sued, and the government counterclaimed. Case turned on whether Bixby had the unconditional right to receive the funds at the time of the embezzlement. It argued that the agreement required it to clear both title defects before receiving any of the hold back amount, and since it did not have the absolute right to the funds, the Air Force bore the risk of loss. Air Force responded that title to the entire purchase price including the holdback amount passed to Bixby at closing, and that release of the holdback was a condition subsequent to passage of title to the escrowed funds. Court agreed with the Air Force that title to funds in a "set-aside" escrow passed with title to the property, and granted summary judgment. The court also held that the government's prosecution of escrow agent for theft of government property did not affect the analysis.

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Reference Info:Decision | Federal, Federal Circuit, Claims Court | United States

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