Edward L. FELDMAN and Sidney D. Bernstein, Plaintiffs Below, Appellants,
John G. FOULKE and Helga I. Foulke, his wife, Defendants Below, Appellees.
Joseph P. Hurley, of Michlin & Hurley, Wilmington, for appellants.
Thomas H. Wingate, Wilmington, for appellees.
[54 Del. 317] SOUTHERLAND, C. J., and WOLCOTT, J., and MARVEL, V. C., sitting.
[54 Del. 318] SOUTHERLAND, Chief Justice.
Appellants Feldman and Bernstein, plaintiffs below, brought suit against appellees, the Foulkes, seeking to recover $4900 claimed to be due on a contract of sale of personal property. The Foulkes denied liability, alleged rescission, and counterclaimed for damages. The case was heard by a judge without a jury. He filed an opinion sustaining the contentions of the Foulkes, dismissed the plaintiffs' claim, and then gave judgment on the counterclaim against them for $2361.53. They appeal.
The facts are these:
Prior to June 29, 1959, a certain Harry Brown owned and operated a lunch room business at 1300 Washington Street in the City of Wilmington. On that date the property and equipment in the store were sold by the Sheriff on execution sale and bought by Feldman and Bernstein.
Feldman and Bernstein negotiated with John G. Foulke for the sale to him of this property. Terms were agreed on. On August 1, 1959, Foulke took a five-year lease on the store at $165 a month. On August 12 a formal contract of sale was executed by the parties. The purchase price was $5,000. According to the contract it was payable $2500 in cash and the balance in installments. This balance was to be evidenced by judgment bond and secured by chattel mortgage. In fact, Foulke paid down only $100, because it was contemplated from the first that he would borrow the rest of the down payment from another source. The contract contained a clause [54 Del. 319] whereby the sellers warranted that there was no outstanding judgment or liens of any kind against the property sold.
Foulke entered into possession early in August, and at once applied to Foremost Dairies, Inc. for the loan that he required, to be secured by a mortgage on the equipment he had bought. Mr. Clement C. Wood, that company's counsel, said that no loan could be made until the sheriff's sale had been confirmed. The parties then executed a supplemental agreement (not dated) conditioning the consummation of the August 12th sales contract upon the confirmation of the sheriff's sale.
Mr. Wood proceeded to have a search made for liens against the equipment. He reported to his client that Feldman and Bernstein had not acquired title to the equipment sold to Foulke free of liens, because the property was sold subject to any liens of record. He found outstanding against the property a federal tax lien and three conditional sale contracts. He further reported that several items that the sheriff had purported to sell had never been levied on, and that as to these items the sale was invalid. He therefore refused to approve Foulke's application for the loan.
From September until the middle of November the parties attempted to have the liens satisfied. Apparently two of the items were actually paid in full by the sellers but were not satisfied of record until months later. The third claim appears to have been compromised. Nothing was done about the federal tax lien or with respect to the lack of title to the equipment not levied on.
While Foulke was in possession he sold one piece of equipment for the sum of $400. This money he reinvested in the business.
Efforts to clear the title having failed, Foulke some time in November elected to rescind the contract and so advised the sellers. They refused to take back the property and demanded[54 Del. 320] payment. No further payment was made, and in December 1959, the lunch room was closed. Some months later the key to the premises was delivered to the sellers' attorney. The suit followed.
The trial judge held:
1. Because of the liens against the property sold, sellers were in default of their contract from the outset. It was their duty to ...