BRIZ-LER CORPORATION, a corporation of the State of Delaware, Plaintiff Below, Appellant,
William WEINER, Esther Weiner, Abraham Kristol, Pearl Kristol, United States Fidelity and Guaranty Company, a corporation of the State of Maryland, Agricultural Insurance Company, a corporation of the State of New York, Firemen's Insurance Company, a corporation of the State of New Jersey, Continental American Life Insurance Company, a corporation of the State of Delaware, Defendants Below, Appellees.
[39 Del.Ch. 579] Thomas H. Wingate, Wilmington, for appellant.
Daniel L. Herrmann and Leroy A. Brill, of Herrmann & Duffy, Wilmington, for appellees.
SOUTHERLAND, C. J., and WOLCOTT and BRAMHALL, JJ., sitting.
This is an appeal from a judgment of the Court of Chancery dismissing a complaint seeking recession of a contract, an accounting, and an equitable lien upon real estate or upon the proceeds of insurance. The basic question of the appeal is whether a loss occasioned by a fire should fall upon the seller or the purchaser of real estate under an installment contract.
In October, 1954, the plaintiff and defendants entered into a contract for the purchase by the plaintiff of the Hotel Grande property in Wilmington together with certain fixtures and equipment for a total price of $114,000, of which $80,000 represented the consideration for the real property and $34,000 the consideration for the fixtures and equipment. The plaintiff paid down the sum of $11,500 and agreed to pay the balance of $102,500 plus interest at 6% in monthly installments of $865. In addition, the contract, required the plaintiff to pay the defendants monthly a further sum to be held in escrow out of which all taxes and fire insurance carried on the property were to be paid by the defendants as they became due. Upon payment of the [39 Del.Ch. 580] full amount the defendants were to convey title to the plaintiff free and clear of all liens and encumbrances, and to deliver a bill of sale covering the fixtures and equipment.
Upon execution of the contract, the plaintiff entered into possession of the property. It was required by the contract to pay all water and sewer charges and to keep the premises and equipment in good repair. The contract provided that time was of the essence, and that, upon default of payments, plaintiff forfeited all rights and payments made, subject to a right of redemption of thirty days. The contract prohibited the sale by the plaintiff of the premises or the fixtures and equipment. Plaintiff was required to use the premises as a bar, restaurant, hotel, liquor store, or private or night club, and was prohibited from engaging except at the Hotel Grande in any such business within ten blocks of the location of the property for a period of ten years.
In December, 1957, a fire occurred on the premises causing substantial damage. At this time a substantial balance was still owing on the total purchase price, and plaintiff had substantially complied with the terms of the contract. After the fire plaintiff remained in possession of the premises and operated its first floor bar and
liquor store. The Building Inspector of Wilmington required that the remaining portion of the damaged building be closed as a safety hazard.
After the fire plaintiff commenced negotiations with the insurance company to settle for the loss occasioned by the fire. Difficulties arose with the City Building Inspector concerning the repair and restoration of the building in the condition it had been in prior to the fire. Ultimately, plaintiff settled with the insurance company for a payment of $31,454.78, which sum was insufficient to meet the cost of $107,000 required to restore the entire structure in accordance with the City Building Code.
In August, 1958, a dispute arose between the parties, the defendants claiming that the plaintiff was in default. Shortly thereafter plaintiff abandoned the premises, leaving all the equipment there, and the defendants applied the entire amount of the settlement to repair the [39 Del.Ch. 581] building by reducing it to one level for use as a restaurant, bar and grille, and package liquor store.
Plaintiff claims that it should be repaid all the money paid by it pursuant to the installment contract because defendants cannot now deliver what they contracted to deliver, viz., a four-story hotel structure. In the alternative, plaintiff claims that it is entitled to an equitable lien on the premises, or on the proceeds of insurance, in the full amount paid by it under the contract.
Initially, we note that the plaintiff claims it was unjustly evicted from the premises in August, 1958, when it was not in default, while the defendants claim that the plaintiff was in fact in default and, furthermore, voluntarily abandoned the premises. We have reviewed the record and are of the opinion that the defendants have established the default of the plaintiff, at least in August, 1958. This finding, however, is not decisive of the cause.
The basic question involved in this appeal is whether or not a loss occasioned by fire to premises under an installment contract of sale shall fall upon the seller or the purchaser. Presumably, if the loss as a matter of law falls upon the seller, then plaintiff should be entitled to relief of some nature. If, on the contrary, the loss falls upon the purchaser, the complaint was properly dismissed.
The rule followed in a majority of American jurisdictions is that an executory contract for the sale of lands requiring the seller to execute a deed conveying the legal title upon payment of the full purchase price works an equitable conversion so as to make the purchaser the equitable owner of the land and the seller the equitable owner of the purchase money. The result is that the purchaser, the equitable owner, takes the benefit of all subsequent increase in value and, at the same ...