In Re Carter’s Claim

134 A.2d 908 (1957)

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Nature of the Case

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Facts

Kardin (P) was interested in purchasing the Schoette Company. A transaction was consummated, and a written agreement was executed with $187,863.60 of the purchase proceeds to be set aside in an escrow fund to indemnify Kardin against the liabilities of sellers by reason of any and all provisions of their agreement. In the agreement the Sellers represent and warranted that there had not been any changes in Company's or its subsidiaries' financial condition, assets, liabilities, or businesses, other than changes in the ordinary course of business, none of which have been materially adverse, and changes required or permitted hereunder; and that the Company and its subsidiaries in the aggregate shall be no less favorable than the financial condition shown on the statements of said corporations dated June 30, 1954, and warranted to be true and complete... Kardin presented a claim against the fund for $69,998.42 as a liability of the seller under the agreement. P's position is that the terms of the deal constituted a 'warranty' on the Sellers' part that the financial condition of the company and its subsidiaries was not less favorable than demonstrated by the financial statement of June 30, 1954. Sellers take the position that the agreement constituted a 'condition' and not a warranty and the buyer had simply the right to refuse a consummation of the sale if the 'condition' was not fulfilled; when the buyer elected to consummate the sale it waived the 'condition.' The matter was submitted to arbitration, and after the hearing, the arbitrator awarded Kardin $3,182.88. Kardin moved the court to correct the arbitrator's award. That was denied. Kardin appealed. Pursuant to the terms of the agreement, Kardin contends that the financial condition on the date of purchase was less favorable than that reflected on the company's financial statement and that therefore he is entitled to reimbursement from the escrow fund for the difference as a warranty was expressed on paragraph 9(a). Seller contends that even if there were a reduction, it would only be reimbursed for occurrences outside the ordinary course of business.