Fisher v. Safe Harbor Realty Co.

• Decision Date: 01 April 1959
• Citation: Fisher v. Safe Harbor Realty Co., 38 Del.Ch. 297, 150 A.2d 617 (Del. 1959)
• Parties: Harry A. FISHER, Plaintiff Below, Appellant, v. SAFE HARBOR REALTY COMPANY, a Delaware corporation, et al., Defendants Below, Appellee.
• Court: Supreme Court of Delaware

Page 617

150 A.2d 617

38 Del.Ch. 297

Harry A. FISHER, Plaintiff Below, Appellant, v. SAFE HARBOR REALTY COMPANY, a Delaware corporation, et al Defendants Below, Appellee.

Supreme Court of Delaware.

April 1, 1959.

G. A. Peterson, Wilmington, for appellant.

Clyde M. England, Jr., Wilmington, for appellee Harry E. Patton.

Howard M. Berg, Wilmington, for appellee Edward H. Richardson Associates, Inc.

SOUTHERLAND, C. J., and WOLCOTT and BRAMHALL, JJ., sitting.

WOLCOTT, Justice.

Harry A. Fisher, the plaintiff below and appellant here, and his associates (hereafter Fisher), on August 5, 1955, were the owners of all of the outstanding stock of Safe Harbor Realty Co. (hereafter Safe Harbor), one of the defendants below and appellees here. The only asset of Safe Harbor was a tract of 312 acres of land located in Kent County and divided into 1500 building lots.

Prior to August 5, 1955, Joseph Scafetta and O. C. Westfield, defendants below and appellees here, negotiated with Fisher for the purchase of all of the stock of Safe Harbor, and on August 5, 1955 Scafetta received from Fisher an executed contract for the sale of Fisher's Safe Harbor stock.

Fisher, however, demanded more security for the payment of the purchase price and did not deliver the certificates of Safe Harbor stock. Accordingly, on August 23, 1955, Scafetta and Westfield delivered to Fisher an agreement executed by Safe Harbor which in effect guaranteed payment of the purchase price and performance of the conditions of the contract of August 5, 1955. Upon the receipt of Safe Harbor's guaranty, Fisher delivered the stock certificates of Safe Harbor to Scafetta and Westfield.

On December 12, 1955 Fisher caused the contract of sale and Safe Harbor's guaranty to be recorded in the office of the Recorder of Deeds at Dover as one instrument.

The contract of sale of August 5, 1955 was entered into between Fisher and his associates, designated as sellers, and O. C. Westfield, designated as purchaser. By the terms of this agreement Fisher agreed to sell 100% of Safe Harbor stock to Westfield, reciting the fact that Safe Harbor was the legal owner of the tract of land which, at that time, was unencumbered.

The stock was agreed to be sold for the total sum of $46,300 to be paid as follows: $500 paid previously as a deposit; $3000 on the signing of the contract; the delivery by Westfield to Fisher of his note in the amount of $1,500 payable 60 days from date; the construction upon other land of Fisher of a house described as a 'Bryn Mawr House' within 30 days of the date of contract; the construction and sale of a 'Wayne or Mainliner House' to net Fisher $9,500 by September 30, 1955; the construction and sale of one 'Radnor, Cynwyd or Devon House' to net Fisher $8,500 by October 30, 1955; the construction and sale of one 'Wayne or Mainliner House' to net Fisher $9,500 by November 30, 1955: and the construction and sale of one 'Radnor, Cynwyd or Devon House' to net Fisher $8,500 by December 30, 1955.

The contract of sale contained a covenant by Westfield to bind himself, his associates and Safe Harbor 'that the land owned by the company shall not be encumbered with or by mortgage so long as there are any amounts due' Fisher.

The other terms of the contract of sale are not pertinent to the questions before us.

Pursuant to the demand of Fisher for more security, the guaranty dated October 23, 1955 of Safe Harbor guaranteed 'performance of O. C. Westfield of the conditions and obligations as set forth in contract of August 5, 1955', but made one change in the contract of sale, viz., the provision requiring the construction on other land of Fisher of one 'Bryn Mawr House'. This was changed to provide for the payment to Fisher in cash of the sum of $5,500 on the due date of the $1,500 Westfield note, upon the condition that at the time of payment Fisher would convey that additional land to Safe Harbor.

While the recited negotiations between Fisher, Scafetta and Westfield were going on, Scafetta and Westfield, representing themselves to be officers of Safe Harbor, on August 5, 1955 contracted with Edward H. Richardson Associates, Inc. for certain surveying work to be performed upon the tract of land owned by Safe Harbor. In addition, on August 5, 1955, Scafetta and Westfield, still representing themselves as officers of Safe Harbor, borrowed $3000 from Harry E. Patton, which sum was paid by his check made payable to Safe Harbor. On August 12, 1955 Scafetta and Westfield delivered to Patton Safe Harbor's note in the amount of $3300. Subsequently, on April 26, 1956, Patton caused judgment to be entered on Safe Harbor's note.

By other proceedings commenced in the Superior Court of Kent County, Edward H. Richardson Associates, Inc. obtained a judgment against Safe Harbor in the amount of $2,821.70, representing moneys due for the surveying work performed on the land of Safe Harbor.

On September 17, 1956, Fisher commenced this action in the Court of Chancery of New Castle County, praying for cancellation of the contract dated August 5, 1955. On April 9, 1957, Safe Harbor, the sole defendant in the action at that time, agreeing thereto, an order was entered imposing an equitable lien on the land owned by Safe Harbor in favor of Fisher in the total amount of $42,800 effective as of December 12, 1955, the recording date of the instruments.

Patton caused execution against the property of Safe Harbor to be issued on his judgment resulting in the sale of the Safe Harbor land for the sum of $25,000. Ultimately, the proceeds of the execution sale were deposited with the Register of the Court of Chancery of New Castle County.

Patton and Richardson appeared in this cause and claimed a portion of the $25,000 deposit to pay off the judgments obtained by them against Safe Harbor.

By order of the Vice-Chancellor, $17,000 of said sum was paid to Fisher and the balance of $6,921.86 was ultimately ordered to be paid in satisfaction of the Patton and Richardson judgments on the ground that those...