Opinion
22-20219 CN22-04731
04-05-2023
Y. H. H. B. a/k/a B. f/k/a C., Plaintiff/Counterclaim Defendant, v. K. M. C., Individually and Executrix of The Estate of J. C., K. S., J C., and M. C., Defendants/Counterclaimants.
Dean A. Campbell, Esquire, LAW OFFICE OF DEAN A. CAMPBELL, P.A., 703 Chestnut Street, Milton, DE 19968, Attorney for Plaintiff/Counterclaim Defendant Seth L. Thompson, Esquire, PARKOWSKI, GUERKE &SWAYZE, P.A., 1105 N. Market Street, 19th Floor, Wilmington, DE 19801, Defendant/Counterclaimants K.M. C and J C K S, [redacted], pro se Defendant M C, [redacted], pro se Defendant
Date Submitted: March 28, 2023
Court of Chancery C. A. No. 2021-0227-PWG
Dean A. Campbell, Esquire, LAW OFFICE OF DEAN A. CAMPBELL, P.A., 703 Chestnut Street, Milton, DE 19968, Attorney for Plaintiff/Counterclaim Defendant
Seth L. Thompson, Esquire, PARKOWSKI, GUERKE &SWAYZE, P.A., 1105 N. Market Street, 19th Floor, Wilmington, DE 19801, Defendant/Counterclaimants K.M. C and J C
K S, [redacted], pro se Defendant
M C, [redacted], pro se Defendant
ORDER ON COUNTERCLAIM FOR SPECIFIC PERFORMANCE
MICHAEL W. ARRINGTON JUDGE
This limited action for Specific Performance of a Separation Agreement in connection with divorce comes before the Court by way of transfer by Order of Chancellor Kathaleen St. Jude McCormick in C. A. No. 2021-0227-PWG. This Court has exclusive jurisdiction over disputes involving agreements between future spouses, spouses, and former spouses pursuant to 10 Del.C. § 921(14).
PROCEDURAL HISTORY
On September 23, 2022, Counterclaimants K M. C, individually and as Executrix of the Estate of J C, and J C filed an Election of Transfer of Counterclaim for Enforcement with the Court.
The pleadings indicate that Mr. C died intestate which would make K M. C the Administratrix rather than Executrix. The distinction is not substantive for the counterclaim before the Court.
Dkt. #1.
On November 7, 2022, the Court conducted a Case Management Conference with Counsel for the parties and set a Trial Scheduling Order.
Dkt. #5.
On March 10, 2023, the Counterclaim Defendant, Y B a/k/a H B f/k/a H C ("Ms. B ") filed a Motion for Summary Judgment against K M. C, individually and as Executrix of the Estate of J C, K S, M C, and J C . Ms. B sought summary judgment on the issues of the statute of limitations and the doctrine of laches.
Dkt. #7 ("B' Motion").
On March 10, 2023, K M. C, ("Ms. C "), individually and as Executrix of the Estate of J C, and J C filed a Motion for Summary Judgment against Y B a/k/a/ H B f/k/a H C . The Movants sought summary judgment requiring Ms. B to execute deeds transferring the legal title to the Estate of J C for two parcels of real property assigned to Mr. C in the parties' Separation Agreement.
Dkt. #9 ("C's Motion").
On March 22, 2o23, the Court issued a decision on the Cross-Motions for Summary Judgment. C 's Motion for Summary Judgment was denied as the allegation of an oral modification to the Separation Agreement was a material fact in dispute. B' Motion was denied for the reasons set forth in the Order on Cross-Motions for Summary Judgment.
Dkts. #12-13.
On March 28, 2023, the Court conducted an evidentiary hearing on the Counterclaim for Specific Performance.
TRIAL TESTIMONY
A. Testimony of Y B .
Y B and J C ("Mr. C ") were married in Germany in 1966, and were divorced in Delaware in 1981. The couple had two children, K and M, during the marriage. K was 12 years old, and M was 2 years old when the couple separated in 1980.
Ms. B testified that Mr. C "wanted to be a landlord" so he managed the marital real estate during the marriage. The couple lived in some of the properties before Mr. C would "flip them" for income. According to Ms. B, after Mr. C "walked out," she "felt divorced" and had little direct contact with him.
In 1980, the couple had a Property Settlement Agreement ("Separation Agreement") prepared that details what each of them would receive. Both parties were represented by Counsel. Ms. B retained the marital home which was transferred to her by Mr. C in 1981. Ms. B' attorney who prepared the Separation Agreement also prepared the deed that Mr. C signed. In partial consideration for the transfer, Mr. C retained a farm in Ocean View transferred to him by Ms. B . Mr. C 's attorney prepared the deed that Ms. B executed in 1983. Mr. C used the Ocean View property as collateral on a mortgage. The former marital home and the Ocean View properties are not in dispute.
Ms. B testified that she had no role in preparing or recording the transfer of the marital home. The deed indicates that B' attorney who worked on her behalf for the Separation Agreement also drafted the deed for this transfer. B' testimony on this issue is questionable.
[Redacted]
In addition, there were two "shops," one in Frankford and one in Dagsboro, that the couple agreed that Ms. B would convey to Mr. C . The parties refer to the two shops as the "Subject Properties." Ms. B testified that she had worked in one of the shops raising angelfish. Ms. B was not clear on what happened to the shop in Dagsboro, but agreed on cross-examination that Mr. C had converted it to residences sometime after the divorce.
According to Ms. B, she also signed a second deed when she was signing the Ocean View deed in 1983. Ms. B believed that she had signed the deeds for the Subject Properties, and Mr. C told her to "not worry about it because they would go back to the children." Ms. B testified that this discussion occurred in the attorney's office, but no one heard it and no notes were taken. No one discussed the oral modification with the children. Ms. B believed that "it would be nice if the children would have something from their Father."
Ms. B recalls that Mr. C told Ms. B that "those two parcels would come back after he gets done renting them to [her] children." Ms. B stated that "there was no timeline as he was renting them." According to Ms. B, Mr. C would be responsible for paying for maintenance, repairs, and taxes on the properties. Similarly, rental income would be Mr. C 's as well. Ms. B later testified that there were three properties in Dagsboro that "would come back to [her] and the children once he was done renting them."
On cross-examination, Ms. B testified that the Frankford property was not part of the oral modification. According to Ms. B, the Dagsboro units were to be returned to the children but not to her. Ms. B disagreed with her answers to interrogatories stating that Mr. C and Ms. B were concerned about what would happen to the properties if Mr. C died. Neither of the former spouses prepared any estate documents to fulfill the alleged intent that the properties would vest in the children.
Ms. B testified that Mr. C did not receive anything in return for the alleged promise other than what he received under the Separation Agreement. Ms. B did not offer anything to Mr. C in exchange for the alleged promise. In response to opposing Counsel's question about whether anything changed under the Separation Agreement based upon the supposed oral modification, Ms. B answered "No."
Ms. B never asked Mr. C about the condition of the Subject Properties. Ms. B stated that "I didn't think it was any of my business because he was running it." Ms. B testified, "It was basically a gift", referring to the alleged promise to return the properties for the benefit of the children.
Ms. B was unaware of Mr. C 's renovations and remodeling of the properties in 2001 and 2003, although at trial she did know that one of the shops had been converted to residential units. Ms. B is not sure of the current rental status of the Subject Properties.
Ms. B stated that Mr. C did nothing that would have been consistent with the purported oral modification of the Separation Agreement. Rather, Ms. B admits that during the forty years from the Separation Agreement until his death, Mr. C 's actions were consistent with his sole ownership of the properties.
Ms. B came to the Family Court in 1988 and 1989, to enforce the Separation Agreement so that she could enroll Michael in a private school. Ms. B filed Petitions for Specific Performance on the issue of payment for the children, and the Court granted the Petitions on both occasions.
Ms. B remarried in 1990. She recalled that Mr. C lived adjacent to Ms. B in Dagsboro for approximately five to seven years. Despite being in close proximity to each other, Ms. B testified that Mr. C never requested that Ms. B pay or contribute to taxes, repairs, or insurance on the Subject Properties. Similarly, Ms. B did not receive any tax bills after Mr. C executed the Separation Agreement. To the best of her knowledge, the bills went to Mr. C and he paid them. After Mr. C died and the Administratrix asked her to sign the deeds, a paralegal at Ms. B' attorney's office told Ms. B that the properties were still in her name. Ms. B paid the taxes once on August 21, 2020, without any request from, or notice to, Mr. C 's Estate. She did not make payments in 2021, 2022, or 2023. Counsel for the Estate offered to reimburse Ms. B for the 2020 payment once Counsel learned of it.
Between June 20, 2020 and August 26, 2020, the attorney for Mr. C 's Estate contacted Ms. B and asked her to sign the Subject Property deeds for the first time. On August 26, 2020, the attorney for Mr. C 's Estate sent deeds to Ms. B for execution. Ms. B refused to sign the documents.
B. Testimony of K C .
J C and K C started dating in 1980 in Toms River, New Jersey. They lived together in 1983 in one of the Dagsboro converted apartments, and were married in 1984. During their thirty-six year marriage, K assisted in managing the Subject Properties. By way of example, K testified that she would have to prime the water pump so that the other tenants could shower before going to work. K assisted J with repair and maintenance for all of the properties. J would receive the rent checks and K, as bookkeeper, would deposit them into the various bank accounts for the properties. K testified that J "continually maintained the properties and renovated" them. Ms. B had no involvement with the properties and did not make contact with the C s.
Originally, the Frankford property was just one building. J expanded the property and built additional living quarters on it. K testified that the tenants had oral leases for the properties. The apartments were damaged by the tenants over the years, and J would have to make repairs. K recalled that there were many periods of time when the units were not rented. The last lease was terminated approximately six months prior to J 's demise.
The Dagsboro property was located within the town limits. There were local taxes and insurance on the property which J solely paid. Ms. B did not pay the local taxes in 2020 when she paid the County taxes. Ms. B made no contributions toward the maintenance, renovations, taxes, or insurance throughout J 's post-divorce lifetime. Similarly, neither K S nor Michael C was involved in any decisions or payments for the Subject Properties.
K testified that they received tax bills indicating that Ms. B was a co-owner. Each year, J would tell K "repeatedly, 'if anything should ever happen to him, everything was written in the property settlement,' and he made sure [K ] knew where the property settlement was."
ANALYSIS
In 1989, the Family Court acquired jurisdiction over "[p]etitions by persons formerly married to each other seeking and interest in or disposition of jointly titled real property, where such property was not disposed of (i) by agreement of the parties, or (ii) by virtue or ancillary proceedings pursuant to § 1513 of Title 13" previously vested in the Court of Chancery. The Court is directed by statute to "apply equitable principles unless there is a written agreement signed by the parties regarding the disposition of said property." In this case there is a written agreement signed by the parties - the Separation Agreement.
10 Del.C. § 921(14). [10] Id.
1. Separation Agreement
On June 22, 1980, the parties entered into a comprehensive Property Settlement Agreement ("Separation Agreement") in anticipation of divorce. Both parties were represented by Counsel. On August 28, 1981, Ms. B filed a Petition for Divorce in the Family Court of the State of Delaware in and for Sussex County.On November 6, 1981, the parties were divorce by a decree of the Court.
C 's Motion at ¶-15; C 's Motion Ex. I ("Separation Agreement").
C 's Motion at ¶-14.
C 's Motion at ¶-24. (Mr. C and Ms. B were married for 15 years prior to divorce).
The Separation Agreement is a written agreement signed by the parties under seal. The parties were married at the time of execution of the Separation Agreement. This action was filed subsequent to July 1, 1989. Family Court has jurisdiction to enforce the Separation Agreement.
Separation Agreement at ¶-21.
The parties do not dispute any of the sections of the Separation Agreement. Pertinent sections are listed below:
The Order on Cross Motions for Summary Judgment, Dkts. #12-13 set forth most of the facts in this action. The Order on Cross Motions for Summary Judgment is incorporated and restated herein.
In Paragraph 4 of the Separation Agreement, Ms. B agreed "not to commence any legal action for [ ] support or maintenance so long as this Agreement remains in full force and effect."
Separation Agreement at ¶-4.
In Paragraph 5 of the Separation Agreement, the parties agreed that Ms. B would retain the 1974 Honda and Mr. C would retain the 1978 GMC pickup. Each party assumed full responsibility for their vehicle.
Separation Agreement at ¶-5.
Paragraph 6 of the Separation Agreement provides that Ms. B was "entitled to all personal property located within the marital home."
Separation Agreement at ¶-6.
Paragraph 7 of the Separation Agreement provides that,
The wife is to convey all of here [sic] right, title and interest in the farm in Ocean View and two(2) Shops in Frankford and Dagsboro and the small house in Dagsboro to husband. The said real estate. [sic] The husband in return conveys the marital home to wife. The husband is to be responsible for all mortgage payments, insurance and taxes on said marital property. The husband is to hold the wife harmless and indemnify her for any expenses on said mortgages.
Separation Agreement at ¶-7 (emphasis added).
In Paragraph 8 of the Separation Agreement, Mr. C agreed to keep Ms. B on his medical coverage until they divorced or Ms. B elects to obtain her own insurance.
Separation Agreement at ¶-8
In Paragraph 9, Mr. C agreed to "pay off all bills either made by himself or [Ms. B ] which were incurred during the marriage...".
Separation Agreement at ¶-9.
In Paragraph 10, Mr. C agreed to make Ms. B the "irrevocable beneficiary on his existing life insurance policies, until such as either remarries."
Separation Agreement at ¶-10.
Paragraph 13 of the Separation Agreement provides that,
The parties hereto hereby mutually covenant and agree that from the time of execution of this Agreement, personal indebtedness and all obligations of each of the parties hereto is to be assumed and satisfied by the individual parties and any assets individually owed and possessed by them or hereafter acquired by them in individual ownership, shall be the sole and exclusive property of that party, it being presumed and required that the owner and possessor of such property will pay all debts and obligations related thereto.
Separation Agreement at ¶-13 (emphasis added).
Paragraph 14 of the Separation Agreement provides that,
The parties hereto hereby agree to mutually remise, release, and forever discharge each other from any and all actions, suits, debts, claims, demands and obligations whatsoever, both in law and in equity, which either of them ever had, now has, or may hereafter have against the other upon or by reason of any matter, cause or thing up to the date of the execution of this Agreement, except as outlined and set forth in this Agreement.
Separation Agreement at ¶-14 (emphasis added).
Paragraph 16 of the Separation Agreement provides that,
The party of the first party [Ms. B ] hereby relinquishes and releases to the party of the second part [Mr. C ] all right, title, and interest of dower she may have in any real estate
whereof the party of the second part is or may become seized of any estate of inheritance.
Separation Agreement at ¶-16
Paragraph 18 of the Separation Agreement provides that,
The parties hereto hereby mutually covenant and agree that they will execute any deed, release, or document legally competent and necessary to protect the title and interest of either of them in accordance with the tenor and terms of this Agreement intended to effectuate the individual and unhampered ownership of these parties in their property real and personal.
Separation Agreement at ¶-18
Paragraph 20 of the Separation Agreement provides that,
This Agreement may be offered into evidence in the divorce action, and if acceptable to the Court, shall be incorporated by reference in the decree that may be granted therein. Notwithstanding such incorporation, this Agreement shall not be merged in the decree, but shall survive the same and shall be binding and conclusive on the parties for all time.
Separation Agreement at ¶-20 (emphasis added).
In Paragraph 21, the parties agreed that "this Agreement is to be construed as a Delaware contract and is to take effect as a sealed instrument."
Separation Agreement at ¶-21.
Paragraph 22 of the Separation Agreement provides,
The parties hereto hereby agree that this Agreement is to be binding upon and inure to the benefit of the parties hereto and their respective heirs, devisees, executors, administrators, successors, and/or assigns and may be cancelled[,] modified or further amended only by a written instrument executed by both of the parties hereto.
Separation Agreement at ¶-22 (emphasis added).
Paragraph 23 of the Separation Agreement provides,
The parties hereto hereby mutually covenant and agree that each of them shall, at any time and from time to time hereafter, take any and all steps and execute, acknowledge, and deliver to the other party any and all future instruments and assurances that the other party may reasonably require for the purpose of giving full force and effect to the provisions of this Agreement.
Separation Agreement at ¶-23 (emphasis added).
Paragraph 26 of the Separation Agreement provides,
The parties hereto hereby respectfully acknowledge that each has had independent legal advice by counsel of his or her own selection[], or the opportunity to obtain the same; that each fully understands the facts and has been fully informed as to his or her legal rights and obligations; and that having had such advice, and with such knowledge, each of them is signing the Agreement freely and voluntarily.
Separation Agreement at ¶-26.
The parties are not clear on whether or not the Separation Agreement was filed with the Family Court in connection with their divorce as the Family Court file is archived and only limited information is available. However, on May 31, 1989, Ms. B filed a Petition for Specific Performance of the Separation Agreement. Significantly, jurisdiction over non-Family Court orders was not transferred from the Court of Chancery to the Family Court until July 11, 1989. The filing in the Family Court, the Family Court's acceptance thereof, and the Family Court's action thereon, is evidence supporting the likely filing of the Separation Agreement with the
C 's Motion at ¶-24.
C 's Motion at ¶-25.
Petition for Divorce. On August 10, 1989, the Court entered judgment for Ms. B on the Petition for Specific Performance of the Separation Agreement.
C 's Motion at ¶-26.
a. Subsequent Expressions of Real Property Ownership.
On July 30, 1981, Mr. C conveyed his interest in the former marital home to Ms. B . On May 18, 1983, Ms. B conveyed her interest in the Ocean View farm to Mr. C . Transfer of the Frankford and Dagsboro properties, referred to by the parties as the "Subject Properties", remain as the sole uncompleted requirement of Paragraph 7 of the Separation Agreement.
C 's Motion at ¶-27.
Id.
C 's Motion at ¶-27.
Mr. C made substantial improvements to convert the former "Dagsboro Shop" to apartments without contribution by Ms. B . Ms. B was unaware of any of the renovations or remodeling performed on the Dagsboro property in 2001 and 2003. Ms. B never asked about the condition of the properties because "[she] didn't think it was any of [her] business."
C 's Motion at ¶-31; C 's Motion at Ex. S.
According to Ms. B, since the execution of the Separation Agreement, Mr. C 's actions were entirely consistent with his sole ownership of the properties. Mr. C paid all taxes, insurance, and other bills associated with the Subject Properties. "Payment of taxes is also ordinarily considered as an act of ownership."
C 's Motion at ¶-31; C 's Motion at Ex. O at #22; C 's Motion at Ex. Q at #17.
In the Matter of 16 Arbutus Avenue, 1997 WL 153827 at *2 (Del.Ch. March 21, 1997).
For forty years Ms. B never made a claim for rent, signed a lease, assisted a tenant, contracted or participated in decisions regarding an improvement or repair, or otherwise assumed any responsibility for the Subject Properties.Similarly, Ms. B made no claim of ownership of the parcels within the 40+ years of her relinquishment of interest in the property so as to disturb possession by Mr. C and his heirs since execution of the Separation Agreement. Similar events have supported claims of adverse possession in other cases in the Court of Chancery.
C 's Motion at ¶-31; C 's Motion at Ex. O at #23; C 's Motion at Ex. Q at #17.
16 Arbutus Avenue, 1997 WL 153827 at *2.
Upon Mr. C 's death on June 10, 2020, Ms. C "immediately demanded" that Ms. B execute the deeds. On August 21, 2020, Ms. B paid, for the first and only time, the Sussex County taxes, but not the local taxes, on the Subject Properties.On August 26, 2020, the Administratrix through Counsel presented Ms. B with a copy of the Separation Agreement and two deeds for execution "per our conversations of a few weeks ago and yesterday". As of March 10, 2023, Ms. B had not executed and delivered the deeds to the Subject Properties to the Administratrix.
B' Responsive Brief at 1.
C 's Motion at ¶-32; C 's Motion at Ex. T.
C 's Motion at ¶-44; C 's Motion at Ex. V.
C 's Motion at ¶-45.
It is abundantly clear that Ms. B executed the Separation Agreement with full knowledge that she was relinquishing all interest in the Subject Properties to Mr. C; that she "is to convey" the Subject Properties to Mr. C; that she was releasing "all claims, demands and obligations [ ] both in law and in equity" to the Subject Properties; that she agreed to "execute any deed, release or document legally competent and necessary to protect the title and interest" of Mr. C in the Subject Properties; and that she would "at any time, and from time to time [ ], take any and all steps to execute, acknowledge, and deliver to [Mr. C ] any and all future instruments for the purpose of giving full force and effect to the provisions of [the Settlement] Agreement." Each of these promises in the agreement dissolving their marital relations and obligations were made with full knowledge of their consequence, and were informed by Counsel of Ms. B' choosing.
2. Was the Separation Agreement Orally Modified?
Ms. B alleged in her response to the counterclaim in the Court of Chancery that the parties had an oral modification of the Separation Agreement. This Court identified the allegation as a material fact in dispute and denied the C 's Motion for Summary Judgment. Specifically, Ms. B alleges that "[s]ubsequent to the execution of the Separation Agreement, B and Mr. C agreed that the Subject Properties would remain in joint names with the intent that the properties would pass to their children upon both of their deaths."
Dkt. #1 at ¶-9.
While the Separation Agreement requires that modifications be in writing, Ms. B asserts that agreements requiring written modifications can, in fact, be orally modified under certain circumstances. Ms. B relies, in chief, on the case of Pepsi-Cola Bottling Co. of Asbury Park v. Pepsico, Inc.
Separation Agreement at ¶-19.
Pepsi-Cola Bottling Co. of Asbury Park v. Pepsico, Inc., 279 A.2d 28 (Del. 1972).
In Pepsi, the Delaware Supreme Court held that "a written agreement between contracting parties, despite its terms, is not necessarily only to be amended by a formal written agreement." The Supreme Court further noted:
Id. at *33.
The prohibition against amendment except by written change may be waived or modified in the same way in which any other provision of a written agreement may be waived or modified, including a change in the provision of the written agreement by the course of conduct of the parties.
Id. (emphasis added)(citing Congress Factors v. Malden Mills, Inc, 332 F.Supp. 1384 (D.N.J. 1971), Taylor v, University National Bank, 282 A.2d 91(1971), and Beatty v. Guggenheim Exploration Co., 122 N.E. 378 (N.Y 1919).
The course of conduct in Pepsi, consisting of 15+ years of acceptance of periodic price changes and acceptance by the plaintiffs of several other changes by Pepsi concerning other provisions of their written contract, showed a relinquishment of the responsibilities under the contract. This Court will be looking toward similar conduct by Mr. C that may support Ms. B' claim of an oral modification.
Id.
a. What was the Alleged Modification?
In her Answers to Interrogatories, Ms. B or her Counsel states:
In or around May 1983, Decedent/J C ("C ") and Plaintiff engaged in conversations about the properties which were discussed in Paragraph 7 of the Settlement Agreement. C expressed concern about what would happen to the subject property if he were to die. C and Plaintiff agreed that the goal was to ensure the Subject Properties, or the equity therefrom, would pass to their children in some fashion. At this time the parties agreed that Plaintiff would convey the 7.3 acre parcel along Rout [sic] 26 to C properties but that the title to the Subject Property would remain jointly in their names in order to ensure the Subject Property would eventually pass to their two (2) children, Michael and K . As further consideration for the agreement, it was agreed that C would retain all rental income from the Subject Property for so long as he rented the Subject Property to third parties. C would also remain responsible for the maintenance, upkeep and carrying costs related to the Subject Properties. Nothing was documented in writing. The parties understood the Settlement Agreement required amendments to be in writing but elected to orally amend the Settlement Agreement, in particular Paragraph 22, in lieu of spending money on attorneys to draft an amendment. There were no witnesses to the conversation or agreement....
C 's Motion at Ex. O at #15.
Summarizing the Answer, Ms. B' legal position is that even though the Separation Agreement granted Mr. C all of Ms. B' right, interest, and title in the Subject Properties, Mr. C and Ms. B purportedly agreed that (1) Ms. B would convey the Property (or properties) to Mr. C, but (2) the title would remain in both names to ensure (3) that it eventually went to their two children. In consideration, Ms. B purports to (a) forgo any claim to rent, and (b) Mr. C would pay for the taxes, insurance, and maintenance of the properties, even though they were his responsibility under the Separation Agreement. Ms. B' trial testimony contradicts much of this purported modification. For example, Ms. B mistakenly claims that she signed a deed transferring one of the two Subject Properties to Mr. C while the legal title with the Recorder of Deeds in and for Sussex County for both properties remains in part with Ms. B . Ms. B claims there was a single conversation with Mr. C in the attorney's office while the Answer indicates there were multiple conversations, all at a time when Ms. B and Mr. C were not speaking. Ms. B waivered on whether the change related to both properties (as indicated in her answer to interrogatories) or just the Dagsboro property (as stated in testimony).
Ms. B' testimony actually suggests there was not a contractual modification. Ms. B stated under oath that "it would be nice if the children would have something from their father." Ms. B went to say, "It was basically a gift." The legal standards for a gift and for a contractual modification differ. The Court examines both options.
i. Legal Standards for a Gift
"As a general rule, a gift must be executed (1) by the donor's complete and unconditional delivery of the property that is the subject of the gift and (2) by the donee's acceptance of the gift." "To prove intent in the absence of any contemporaneous documentation, a party generally may offer two types of evidence. First, the parties themselves may testify about (or provide other extrinsic evidence of) their intent at the time of the transaction. Second, the parties' conduct after the transaction, in some cases, may shed light on the parties' contemporaneous understanding of the original agreement."
Hudak v. Procek, 806 A.2d 140, 150 (Del. 2002)
Id. at 148.
Ms. B contention that Mr. C made a "gift" to the children of the marriage fails both factors. First, Mr. C never delivered the property to his two children of their marriage. Rather, Mr. C at all times maintained complete and exclusive control over the properties. Secondly, the children, long adults at this point in time, have never indicated any acceptance of the purported gift.
Ms. B' position relies entirely on her testimony as she offered no extrinsic evidence to support the finding of a gift. Ms. B stated that at the time of the alleged donation, she was not speaking with Mr. C as he had "left them". Ms. B offered no other facts that might support the conclusion of a gift. Absent the donative intent, actual delivery, and actual acceptance, the Court cannot find that Mr. C made a gift either to Ms. B or to their two children.
ii. Legal Standards for a Contractual Modification
If the Court were to accept the suggestion of Ms. B' Counsel that there was an oral modification, the principles of contract formation must apply. "Any amendment to a contract, whether written or oral, relies on the presence of mutual assent and consideration." Delaware courts define consideration as "a benefit to a promisor or a detriment to a promissee pursuant to the promisor's request." The timing of the alleged consideration is relevant as past consideration cannot form the basis for a binding contract. "A party cannot rely on a pre-existing duty as his legal detriment in an attempt to formulate a contract."
Continental Ins. Co. v. Rutledge & Co., Inc., 750 A.2d 1219, 1232 (Del.Ch. 2000).
Id.
McAllister v. Kallop, 1995 WL 462210 at *13-14 (Del.Ch. July 29, 1995).
Analysis begins with mutual assent. "There must be a 'meeting of the minds' that there is a contract supported by consideration." A contract "requires a bargain in which there is a manifestation of mutual assent to the exchange and consideration." In this case, Mr. C died shortly before the action was filed in the Court of Chancery, leaving just Ms. B' recounting of mutual assent. According to Ms. B, Mr. C promised to convey back to Ms. B the Subject Properties for the benefit of their children.
Eagle Force Holdings, LLC v. Campbell, 187 A.3d 1209, 1212 (Del. 2018).
RESTATEMENT (SECOND) OF CONTRACTS § 17 (1981).
Ms. B' version of the promise has problems. Ms. B stated that she signed a deed for one of the Subject Properties to Mr. C (which she did not), but not the second deed. If Mr. C were to transfer the properties back to Ms. B, he would have had to have had sole title to both properties. The intent of the purported contract also has problems. If the parties intended that their children would receive the properties, Ms. B' request that the properties be sold and the proceeds distributed to Ms. B runs afoul of the stated intent. Based on these major discrepancies, the Court cannot find that there was mutual assent to the terms recited by Ms. B .
Consideration is a material element in the formation of a contract. It is long standing Delaware law that "consideration consists in either a benefit to the promisor or a detriment to the promisee."Absent both mutual assent and consideration, no contract - oral or written - can exist.
Affiliated Enterprises v. Waller, 5 A.2d 257, 259 (Del.Super. 1939)(citing Szymanska v. Equitable Life Ins. Co., 183 A.309 (Del. 936)).
In evaluating the alleged consideration for this oral modification, the Court must first look to each party's rights at the time of the alleged modification. Mr. C was awarded sole possession of the Subject Properties in the Separation Agreement. Along with ownership of the two parcels came the responsibility for all expenses associated with the properties.
Separation Agreement at ¶-7.
Id.
Ms. B first claims that she conveyed one of the Subject Properties to Mr. C (which she had not) as consideration for the alleged oral modification. Ms. B was already required to convey both properties to Mr. C . Ms. B "cannot rely on a pre-existing duty as h[er] legal detriment in an attempt to formulate a contract."
RESTATEMENT (SECOND) OF CONTRACTS § 17 (1981).
Ms. B secondly claims that Mr. C 's agreement to be responsible for the taxes, insurance, and maintenance of the Subject Properties constitutes consideration for the alleged oral modification. However, Mr. C 's assumption of such costs, already assigned to him in the Settlement Agreement, is not a detriment to Ms. B and cannot serve as consideration for a contract.
Ms. B finally claims that agreeing to allow Mr. C to retain rents constitutes a benefit to Mr. C as the promisor. However, Mr. C already was owner and possessor of the property, and was entitled to rents from leases associated with his properties. Ms. B made no concessions at all with respect to this oral modification which is more consistent with her claim that it was "basically a gift" even though the claim of a gift fails. There was no consideration for the alleged oral modification. Consequently, the Court cannot find that there was an oral modification of the written agreement.
b. Alleged Modification is Distinguishable from Pepsi
Even if there was adequate consideration for an oral modification, the facts in this case are not similar to those in Pepsi and its progeny. In Pepsi, there was a course of conduct over years by both parties. The Delaware Supreme Court noted both mutual assent and consideration as evidenced by a course of conduct, stating:
The effect of the course of conduct engaged in for a period in excess of 15 years by Pepsi and the plaintiffs indicates clearly that to all intents and purposes the provisions of Paragraphs 10 of the appointments of the plaintiffs were emasculated and the pricefixing policy now followed by Pepsi was agreed to by the plaintiffs.
Pepsi, 297 A.2d at 33.
The facts in this case differ significantly. There was no conduct at all by Mr. C indicating that he had agreed to the terms of the alleged oral modification. Ms. B testified that during the forty years from the Separation Agreement until his death, Mr. C 's actions were consistent with his sole ownership of the properties.
Rather, this case is more similar to Faill v. Faill which was distinguished from Pepsi by the Superior Court of Delaware. In Faill, the Superior Court provided a succinct summary of the Pepsi case and the reason for distinguishing it:
Faill v. Faill, 303 A.2d 679 (Del.Super. 1973).
Pepsico [ ] involved a course of conduct over an 18 year period subsequent to the execution of franchising contracts. Each contract provided for supplying soft drink ingredients at specified prices. It further provided for an increase in prices to the extent of the increase in costs of 'materials, labor and freight'. The prices specified in the agreements were based upon 1,200 cases. Initially, there were price changes based upon 1,200 cases. Thereafter, the prices were based upon 1,800 cases, and subsequently based on 2,000 cases. Prices were changed a total of nine (9) times. Over the years the local bottlers regularly ordered soft drink ingredients and tendered payments according to the terms which the supplier established and changed from time to time, without reference to the prices and quantities provided in the contract. This course of action by both parties, the Court held, substituted an oral agreement for the price provisions of the written contract and constituted a relinquishment of the written provision.
It is clear that the bilateral business relationship involved in Pepsico [ ] sets it apart from the instant case. Here it is a simple, unilateral, continuing obligation in which plaintiff s part is merely that of recipient of periodic payments. There was no communication by either this defendant or this plaintiff signifying a change in the terms of the contract. The holding in Pepsico [ ] is not applicable to this case. This Court holds that the actions of these parties have not modified the contract.
Id. at 681.
According to Ms. B, the oral modification would have had Mr. C solely agreeing to change the Separation Agreement to his own detriment. While Ms. B claims that Mr. C waived his rights under the Separation Agreement, she cannot point to any action supporting her claim. "Mere silence will not amount to a waiver of performance where one is not bound to speak." Mr. C took no actions inconsistent with the terms of the Separation Agreement.
Id. at 682.
Ms. B purported oral modification fails for lack of mutual assent, lack of consideration, and lack of a course of conduct adequate to modify the terms of the written agreement.
3. B' Defenses to Enforcement of Separation Agreement.
The Court previously ruled on the inapplicability of the defense in the Order on Cross Motions for Summary Judgment. The Order on Cross Motions for Summary Judgment is incorporated and restated herein.
Ms. B asserts that the counterclaim must be evaluated under contract law pursuant to Rockwell v. Rockwell, and is barred by the statute of limitations. Alternatively, as the counterclaim seeks the equitable relief of specific performance, Ms. B asserts that the counterclaim is barred by the doctrine of laches.
Rockwell v. Rockwell, 681 A.2d 1017, 1021 (Del. 1996).
a. Statute of Limitations.
Ms. B argues that Mr. C 's request to execute the deeds is barred by the statute of limitations under 10 Del.C. §§ 7901 and 7902. Section 7901 states "No person shall make an entry into any lands, tenements, or hereditaments, but within 20 years next after the person's right or title to the same first descended or accrued."Ms. B views the statute as dispositive.
10 Del.C. § 7901.
Ms. C asserts that Mr. C had equitable title to the Subject Properties as of June 22, 1980, and exercised all of the duties and responsibilities associated with the properties since the date of the Separation Agreement. Ms. C further notes that the Separation Agreement anticipates future action by the parties to accomplish the intent of their agreement. Ms. C, as Administratrix, first presented the request to execute the deeds within two months of Mr. C 's passing on June 10, 2020. Ms. C suggests that the breach occurred when Ms. B refused to sign the deeds. Ms. C suggests that the claim accrued at the time of the breach, and the counterclaim is not barred by the statute of limitations.
"Statutes of limitations 'establish jurisdictional prerequisites for initiating or maintaining a suit.' Although they are, 'by their nature, harsh,' they attempt to balance a plaintiff's right to seek a remedy with a defendant's right to avoid defending stale claims." The triggering of the statute of limitations is the accrual date. There are differing dates of accrual for courts across the country, but Delaware is an "occurrence rule" jurisdiction, "meaning a cause of action accrues 'at the time of the wrongful act, even if the plaintiff is ignorant of the cause of action.' "
ISN Software Corporation v. Richards, Layton & Finger, P.A., 226 A.3d 727, 732 (Del. 2020)(internal citations omitted).
Id. (citing Kaufman v. C.L. McCabe & Sons, Inc., 603 A.2d 831, 834 (Del. 1992).
The key to invoking the statute of limitations is not the date of execution of an agreement but the date of breach of the agreement. Once there is a breach, no matter how minimal, the cause of action will accrue. In debt actions, the date of accrual is relatively easy to ascertain. There is an obligation to make payment by a due date and the payment is not made. The statute of limitations accrues as of the due date. Even under these simple facts, however, there are circumstances that can toll the statute. If a plaintiff has an expectation of repayment and it never occurs, an actual harm has occurred and the statute of limitations will run from that date.
Divorce-related agreements are unique and require a more informed analysis than is given to, say, debt and credit agreements. Divorce-related agreements are comprehensive in nature and can address in the same document assets, debts, real property, automobiles, child support and custody (both subject to modification), stock options, retirement funds, post-graduate educational expense payments, and other numerous areas. It is not uncommon for agreements to establish rights between the parties at the time of execution with steps to be taken in the future far beyond twenty years. For instance, a divorce agreement can provide that one party will receive a share of the other party's pension when the pension participant is still working. The participant may not retire for another thirty years. Or, the parties can agree that one parent will pay the post-graduate education expenses for the parties' child who will not graduate for another twenty -five years.
Just as marriages are intended to last for "life," so too are agreements dissolving those marriages. The parties rely on their agreements and perform on them throughout their post-divorce years. They are "continuing contracts" of a unique nature that can toll an otherwise applicable statute of limitations. Blindly adhering to a three or twenty year statute of limitations would negate the parties' intent in their agreements. If all divorce-related agreements were viewed under Ms. B' strict approach, there could be no enforcement of the alimony provision, post-graduate expense payment, or pension allocations in a divorce-related agreement at the time that the parties anticipated they would occur.
In this case, the parties agreed on numerous issues and had performed on all but one by the time that Mr. C passed away. This is understandable, and not a "ridiculous argument" as alleged by Ms. B, as Mr. C retained the property, paid the county and local taxes, paid all of the expenses to convert the properties to apartments, and indemnified Ms. B for any losses therefrom - all as required in the Separation Agreement. Similarly, Ms. B received the former marital home and all of the personal property therein, Mr. C paid all of the expenses for the former marital home, and Mr. C made Ms. B an irrevocable beneficiary on his life insurance policy - all as required in the Separation Agreement. Mr. C had equitable title to the Subject Properties throughout the forty years and had a reasonable expectation that Ms. B would perform when asked.
See B' Opening Br. at 5.
The Separation Agreement language supports this approach. Paragraph 7 notes that "wife is to convey"husband in return conveys"husband is to be responsible," and "husband is to hold the wife harmless". The use of the terms "wife is to convey," "husband is to be responsible," and "husband is to hold the wife harmless" all suggest a future and continuing performance. This contrasts with "in return conveys" which implies an immediate performance by Mr. C .
Separation Agreement at ¶-7.
Cf., "husband is to be responsible" and "husband is to hold the wife harmless," both suggesting immediate and continuing obligations.
Paragraph 13 makes the parties responsible for property "hereafter acquired by them." Paragraph 20 is clear that the Separation Agreement "shall survive the same and shall be binding and conclusive on the parties for all time." Paragraph 22 makes the Agreement binding and "inure[s] to the benefit of the parties hereto and their respective heirs, devisees, executors, administrators, successors and/or assigns." Paragraph 23 contains a mutual covenant that the parties "shall, at any time and from time to time hereafter, take any and all steps and execute, acknowledge, and deliver to the other party any and all future instruments ... for the purpose of giving full force and effect to the provisions of this Agreement. " The preclusive effect of the statute of limitations as suggested by Ms. B would render each of these agreed provisions meaningless.
Separation Agreement at ¶-13.
Separation Agreement at ¶-20 (emphasis added).
Separation Agreement at ¶-22 (emphasis added)(indicating a future right that may extend beyond twenty years).
Separation Agreement at ¶-23 (emphasis added).
When Mr. C died on June 10, 2020, and Ms. C began to work on the intestate estate, Ms. B was presented with deeds to conclude her responsibilities. Ms. B refused to execute the deeds necessary to merge legal and equitable title. Breach did not occur, and the cause did not accrue, until June 10, 2020 at the earliest, and the counterclaim is well within the time for enforcement under either a statute of limitations or laches argument.
Courts have recognized the special nature of these divorce-related agreements and have provided appropriate relief in a variety of areas. In Mitchell v. DiAngelo, 787 A.2d 715 (Del.Ch. 2001), the Court of Chancery noted,
At least in situations involving divorce and remarriage, modern Delaware cases have also applied principles of equitable estoppel to avoid a rigid or uncritical enforcement of a strict legal right to inherit property that would result in unfairness to another party... Similarly, courts in other jurisdictions also have relied on principles of estoppel or preclusion to prevent persons claiming the statute of a "surviving spouse" from denying the validity of void or voidable divorce decrees obtained by them.
Mitchell v. DiAngelo, 787 A.2d 715, 719 (Del.Ch. 2001).
In Denaro v. Denaro, the Supreme Court, Second Department, New York, held that the statute of limitations did not bar issuance of a qualified domestic relations order. In Miller v. Miller, and Crispo v. Crispo, the Superior Court of Pennsylvania held that an equitable distribution agreement was a continuing contract.
Denaro v. Denaro, 84 A.3d 1148 (N.Y.Supr. 2011).
Miller v. Miller, 983 A.2d 736 (Pa.Super.Ct. 2009).
Crispo v. Crispo, 909 A.2d 308, 313 (Pa.Super.Ct. 2006).
Returning to the purpose of a statute of limitations, and specifically to "a defendant's right to avoid defending stale claims," there is no prejudice to Ms. B by tolling the statute of limitations. Ms. B long ago received the full benefit of her bargain as set forth in the Separation Agreement. The sole issue remaining is signing of the deeds to merge legal title with the equitable title that Mr. C had for forty years. Whether by equitable estoppel or by continuing contract, a strict application of the statute of limitations would not be applicable to the facts presented in this case. B "right to avoid defending stale claims" is not at issue in this case as she has at all times been required to sign deeds when presented. Essential justice is accomplished by the tolling of the statute of limitations. The statute of limitations does not bar enforcement in this case.
ISN, 226 A.3d at 732.
b. Doctrine of Laches.
Although statutes of limitations always operate as a time-bar to actions at law, they are not controlling in equity. As the Delaware Supreme Court expressed in Reid v. Spazio,
Whittington v. Dragon Group, L.L.C., 991 A.2d 1, 8 (Del. 2009).
A court of equity moves upon considerations of conscience, good faith, and reasonable diligence. Thus, although a statute of limitations defense is premised solely on the passage of time, the lapse of time between the challenged conduct and the filing of a suit to prevent or correct the wrong is not, in itself, determinative of laches. Instead, the laches inquiry is principally whether it is inequitable to permit a claim to be enforced, the touchstone of which is inexcusable delay leading to an adverse change in the condition or relations of the property or the parties. Under ordinary circumstances, a suit in equity will not be stayed for laches before, and will be stayed after, the time fixed by the analogous statute of limitations at law; but, if unusual conditions or extraordinary circumstances make it inequitable to allow the prosecution of a suit after a briefer, or to forbid its maintenance after a longer period than that fixed by the statute, the [court] will not be bound by the statute, but will determine the extraordinary case in accordance with the equities which condition it.
Reid v. Spazio, 970 A.2d 176, 183 (Del. 2009)(emphasis added).
It is important to note that "mere lapse of time, without any change in position making the action of a Court unfair and inequitable, seldom constitutes laches, barring the relief sought."The issues on which a court must focus are (1) whether the alleged delayer had knowledge of the alleged claim; (2) whether the delay was unreasonable under the circumstances; and (3) whether the delay has a detrimental effect on another party. All three elements must be satisfied to succeed with a laches defense. "Where no one has been misled to h[er] harm in any legal sense by the delay, and the situation has not materially changed, the delay is not fatal."
Levin v. Fisk Rubber Corp., 33 A.2d 546, 548 (Del.Ch. 1943).
O'Grady v. Seefeldt, 1996 WL 258385 at *4 (Del.Fam.Ct. Feb. 29, 1996).
Robert O. v. Ecmel A., 460 A.2d 1321, 1325 (Del. 1983)(overruled on other grounds).
In this case, it is uncontested that Mr. C has equitable title to the Subject Properties as Ms. B agreed in the Separation Agreement. In consideration of Ms. B' promise to convey legal title, Mr. C agreed, among requirements, to transfer to Ms. B his interest in the former marital residence, to pay the mortgage for the former marital residence being transferred to Ms. B, to pay for all taxes and insurance on the former marital residence, to hold Ms. B harmless and indemnify her for any expenses on the mortgages, to pay for medical insurance for Ms. B, and to make Ms. B the irrevocable beneficiary of his life insurance until either party remarried.
Mr. C fully performed each of his obligations which benefitted Ms. B . The status quo from the date of execution of the Separation Agreement to June 10, 2020, has Mr. C as the equitable owner of the Subject Properties. This status enabled Mr. C to renovate the Subject Properties at his own expense and to collect rents on his properties. Along with this right came the obligation to pay all mortgages, taxes, and maintenance for the Subject Properties which he also fulfilled.
All that Ms. B had left to do was to transfer the legal title when a deed was presented. She never made a claim against the property from the date of execution of the Separation Agreement until sometime after June 10, 2020. Ms. B fully enjoyed the benefit of her bargain in the Separation Agreement.
Turning to the elements of laches, Mr. C did not knowledge of an alleged claim as Ms. B never asserted one during Mr. C 's life. Ms. B' laches argument fails the first element. On the second element, Ms. B' position is that Mr. C 's delay in presenting a deed was unreasonable under the circumstances. It was not until after the Administratrix had sent copies of the deeds to B for execution that B consulted with an attorney and learned from a paralegal that she could assert ownership based upon the recorder of deeds records. Ms. B' laches argument fails the second element.
The third element, "whether the delay has a detrimental effect on another party," is conclusive on this issue. Ms. B' only interest in this case was her continuing legal title which she waived in the Separation Agreement by agreeing that she "is to convey" the property to Mr. C . Setting aside the alleged oral modification that the Court has found deficient, there is no harm that Ms. B has incurred as a result of the delay. She stands in the same position as she has for forty years. Ms. B has not satisfied the third element.
As in O'Grady, "there being no prejudice to the Respondent, [her] argument that defense of laches should apply is unavailing." Consequently, laches does not apply under the facts of this case.
O'Grady, 1996 WL 258385 at *4
4. Specific Performance of Separation Agreement
Having found that neither defense applies to this case, the Court must enforce the Separation Agreement under the specific terms of the written document. There remains a single uncompleted item for specific performance. Ms. B has enjoyed the benefits of her bargain for more than forty years. Mr. C has enjoyed equitable title to the Subject Properties. The only issue remaining is execution of the deeds to merge the legal title of the deed with the equitable title granted to Mr. C in the Separation Agreement.
The Court will Order that Ms. B execute the deeds and all necessary affidavits to have her name removed from apparent ownership of the Subject Properties. In light of the fact that this Order may be appealed, Ms. B shall be permitted thirty days from the date of this Order to sign and return the deeds to the attorney for the intestate Estate of J C . The parties shall bear their own costs for counsel.
ORDER
IT IS HEREBY ORDERED THAT the Petition for Specific Performance is GRANTED.
IT IS FURTHER ORDERED that Ms. B shall sign and return the deeds and all necessary affidavits to the attorney for the intestate Estate of J C with thirty days of the date of this Order.
IT IS SO ORDERED.