Opinion
C.A. No. 11C-01-164 RRC.
Submitted: April 20, 2011.
Decided: May 25, 2011.
On Defendant George W. Way, III's Motion to Dismiss Counts II and III of the Complaint. DENIED.
Keith R. Sattesahn, Esquire, Andrew J. Rennick, Esquire, The Stewart Law Firm, Wilmington, Delaware, Attorneys for Plaintiff Paul G. Bryant.
John G. Harris, Esquire, David B. Anthony, Esquire, Berger Harris, Wilmington, Delaware, Attorneys for Defendants George W. Way, III, Gina Way, and Kathryn Way.
Dear Counsel:
INTRODUCTION
Defendant's motion to dismiss is predicated on Delaware Superior Court Rule of Civil Procedure 12(b)(6) and asserts that Plaintiff has failed to state a claim upon which relief can be granted. This case arises from Defendant George W. Way, III's ("Defendant") alleged breach of a contract entered into with Plaintiff Paul G. Bryant ("Plaintiff.") contract. Specifically, Plaintiff contends that a "scrivener's error" in reducing an emailed agreement to a formalized writing inaccurately reflects the parties' intentions to share commissions for transactions completed by June 30, 2010, rather than the June 30, 2011 date indicated in the emailed agreement. Thus, Plaintiff brings the instant action for breach of the emailed agreement. Although Plaintiff's action could also have been brought as an equitable action for reformation of the formalized writing (thereby requiring the equitable jurisdiction of the Court of Chancery), the parties agree that the instant amount in dispute is liquidated; as a result, Plaintiff's claim is one for money damages and is properly before this Court.
Plaintiff's complaint contains contractual, quasi-contractual, and declaratory judgment claims for relief against Defendant and co-defendants; Plaintiff's claims include a breach of employment contract against his former employer and a declaratory judgment action against Defendant, Kathryn Way, and Gina Way establishing that certain funds disbursed to Plaintiff were capital contributions to a jointly owned real estate investment, rather than a personal loan to Plaintiff. However, only Plaintiff's allegations against Defendant for breach of contract and unjust enrichment (Counts II and III of the Complaint, respectively) are at issue in this motion; Defendant has moved to dismiss only these counts.
As relevant to this motion, the disputed agreements set forth the terms upon which Plaintiff and Defendant will cease operating a joint real estate business venture and sharing the commissions earned from completed real estate transactions; the agreements were to define the period for which, after the dissolution, Plaintiff would continue to share in such commissions from certain real estate transactions with the State of Delaware.
Defendant and co-defendants have also filed a motion to sever counts I-III of the Complaint from counts IV-VI. However, the parties have agreed to defer this issue, pending the outcome of scheduled mediation; depending upon the outcome of mediation, the motion to sever may be mooted.
With respect to the motion to dismiss, Defendant argues that the agreement (contained in a thread of emails between Plaintiff and Defendant) upon which Plaintiff has predicated this action is not an enforceable contract, but merely parol evidence to a subsequently executed Memorandum Agreement. Alternatively, Defendant contends, even if the thread of emails did constitute an enforceable contract, the subsequently executed Memorandum Agreement discharges any conflicting obligations contained in the emails. Thus, Defendant moves to dismiss Counts II and III on the basis that the only valid contract herein is the Memorandum Agreement, thereby precluding liability for breach of contract or unjust enrichment under the prior emails.
Plaintiff counters that the email thread contains all the elements of a valid contract. Plaintiff further notes that the operative discrepancy between the emails and the Memorandum Agreement is the end date of the commission sharing period; Plaintiff contends that the disparity in the dates indicated in the email thread and the Memorandum Agreement suggests, at the very least, that the date in the Memorandum Agreement is incorrect due to a scrivener's error. Most importantly, Plaintiff alleges that the emails constitute a binding contract that cannot be vitiated based on the subsequently executed Memorandum Agreement; to the extent Defendant asserts that the Memorandum Agreement superseded and discharged the obligations of the emailed agreements, Plaintiff argues that there was no consideration for any such discharge.
On a motion to dismiss, all reasonable inferences must be viewed in the light most favorable to Plaintiff. Although the foregoing facts may be susceptible to varying interpretations, Plaintiff has established reasonable circumstances and inferences wherein he could recover under the agreement contained in the email thread. Accordingly, Counts II and III of Plaintiff's complaint will not be dismissed at this juncture.
Upon review of the facts, the law, and the parties' submissions, Defendant's Motion to Dismiss is DENIED.
FACTS AND PROCEDURAL HISTORY
This case arises from an alleged breach of an agreement contained in an email thread between Plaintiff and Defendant (the "Email Agreement"). Plaintiff and Defendant, both commercial real estate brokers, were formerly partners with a real estate firm; as part of this partnership, Plaintiff and Defendant entered into an informal agreement whereby they shared equally in the commissions earned from real estate listings successfully closed by the partnership. In March 2010, Plaintiff and Defendant decided to end this commission sharing agreement and reach a substitute agreement to divide responsibilities and entitlements to commissions for the jointly assigned real estate listings. Plaintiff asserts that this decision was made because their "personal relationship faltered."
Def.'s Opening Br. at 5.
Id.
Pltf.'s Answ. Br. at 4.
As part of the negotiating process regarding the dissolution of their joint ventures, Plaintiff and Defendant exchanged a chain of emails between March 24 and 25, 2010. On March 24, Defendant emailed Plaintiff a suggested distribution of commissions earned while jointly operating; in turn, Plaintiff responded on March 25 with his proposed revisions. Critically, with respect to the contested real estate transactions with the State of Delaware, Plaintiff's email of March 25 at 3:23 p.m. sets forth the specifics of his position; it reads, in relevant part: "I will not back off my position of of [sic] receiving 50% compensation for State of DE deals (only) executed at UOP on or before 6/30/11."
Complaint Ex. A.
Id. (emphasis added).
On that same date at 3:50 p.m., Defendant replied simply "[t]his is final and agreed to. . . ." Thereafter, Plaintiff responded: "I suggest that a document be prepared by [an employee of Plaintiff and Defendant's former joint Employer] that reflects the same that all parties can attest to and execute. . . ." Defendant replied: "I'll print out the email and sign it. . . ." This chain of emails collectively constitutes the Email Agreement.
Id.
Id.
Id.
The following day, Plaintiff forwarded the Email Agreement to Tia Clifton, an employee of co-defendant Emory Hill, and requested that Ms. Hill prepare a Memorandum Agreement reflecting the terms of the Email Agreement. However, the Memorandum Agreement is at odds with the terms of the Email Agreement. The Memorandum Agreement, executed April 23, 2010, states, in pertinent part: "Below are the deals to be split equally and their respective dates. . .State [of Delaware] Transactions that are signed by 6/30/10." The bracketed portion of this quote represents a handwritten amendment to the Memorandum Agreement, inserted and initialed by Plaintiff. Thus, the Memorandum Agreement purportedly entitles Plaintiff only to commissions from State of Delaware transactions closed by June 30, 2010, while the Email Agreement entitles Plaintiff to commissions from State of Delaware transactions closed by June 30, 2011, a one year discrepancy. While Plaintiff manually inserted the "of Delaware" language into the Memorandum Agreement, he did not at the same time revise this inconsistency in the ending dates; according to Plaintiff, he did not manually revise the dates because he "fail[ed] to catch this change."
Plft.'s Answ. Br. at 6.
Complaint Ex. B (emphasis added).
Plft.'s Answ. Br. at 6.
Plaintiff instituted the instant action to, among other things, recover his alleged share of the commissions earned from June 30, 2010 to June 30, 2011. While such an action would generally be considered one for reformation of the contract, thereby requiring the equitable jurisdiction of the Court of Chancery, at oral argument the parties agreed that all anticipated commissions for this period have been received; there are no further State of Delaware transaction commissions expected prior to June 30, 2011. Thus, the amount sought by Plaintiff is liquidated, and Plaintiff seeks money damages under the Email Agreement, rather than reformation of the Memorandum Agreement.
STANDARD OF REVIEW
When deciding a motion to dismiss pursuant to Superior Court Civil Rule 12(b)(6), "the complaint generally defines the universe of facts that the trial court may consider. . . ." This "universe of facts" also encompasses all matters attached and incorporated by reference to the complaint.All well-pled allegations must be accepted as true. An allegation, even if "vague or lacking in detail, is nevertheless `well-pleaded' if it puts the opposing party on notice of the claim being brought against it."
In re Gen. Motors S'holder Litig., 897 A.2d 162, 168 (Del. 2006).
See Mell v. New Castle County, 835 A.2d 141, 144 (Del. Super. Ct. 2003) ("Delaware courts follow the federal practice when determining whether the presentation of matters outside of the pleadings will convert a motion to dismiss to a motion for summary judgment. The critical questions in the analysis are whether the extraneous matters are integral to and have been incorporated within the complaint and whether they have been offered to the court to establish the truth of their contents.") (citations omitted); Lagrone v. American Mortell Corp., 2008 WL 4152677, *4 (Del. Super. Ct. 2008) ("Matters attached to a complaint, and incorporated by reference, are not `extraneous' for purposes of Rule 12.") (citation omitted).
See, e.g. Spence v. Funk, 396 A.2d 967, 968 (Del. 1978).
Precision Air, Inc. v. Standard Chlorine of Del., Inc., 654 A.2d 403, 406 (Del. 1995)
A plaintiff's complaint may only be dismissed if "it appears to a certainty that the plaintiff could not recover under any reasonably conceivable set of circumstances susceptible of proof." Discovery may "flesh out [the] facts, but the plaintiffs are entitled to the benefit of all reasonable inferences from the complaint." Factual issues cannot be resolved at the motion to dismiss stage; it "cannot be assumed at the pleading stage that the defendant will carry the burden [of establishing a defense to the plaintiff's claim.]"
Klein v. Sunbeam Corp., 47 Del. 536, 538 (Del. 1952).
Krasner v. Moffett, 826 A.2d 277, 284 (Del. 2003).
Id. at 287.
There are three elements for a valid, enforceable contract: "(1) the parties intended that the contract would bind them, (2) the terms of the contract are sufficiently definite, and (3) the parties exchange legal consideration." Put differently, the Court will deny the existence of a contract only if the terms "are so vague that a Court cannot determine the existence of a breach." In evaluating the definiteness of the terms, for purposes a motion to dismiss, the Court must view the facts underlying the contract's formation in the light most favorable to the non-moving party. Finally, it is an offeree's manifestation of intent to be bound to the terms that controls the formation of a contract.
Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010) (citation omitted).
Cont'l. Ins. Co. v. Rutledge Co., Inc., 750 A.2d 1219, 1230 (Del. Ch. Ct. 2000) (citation omitted); see also Gallagher v. E.I. DuPont De Nemours Co., 2010 WL 1854131, *3 (Del. Super. Ct. 2010) (Accord).
See Bren v. Capital Realty Group Senior Hous., Inc., 2004 WL 370214, *7 (Del. Ch. Ct. 2004) (holding that, on a motion to dismiss, "[w]hen viewed in the light most favorable to [the non-moving party], [the facts adduced by the non-moving party were] sufficiently definite to constitute an offer.").
See Industrial Am., Inc. v. Fulton Indus., Inc., 285 A.2d 412, 415 (Del. 1971) ("[T]he `only intent of the parties to a contract which is essential is an intent to say the words or do the acts which constitute their manifestation of assent'; that `the intention to accept is unimportant except as manifested.'") (quoting RESTATEMENT (FIRST) OF CONTRACTS § 20 (1932)).
Once a contract is validly formed, the bare fact that the parties intended to reduce the agreement to a formalized writing does not vitiate the enforceability of the initial agreement. As stated by the Supreme Court of Delaware:
Where all the substantial terms of a contract have been agreed on, and there is nothing left for future settlement, the fact, alone, that it was the understanding that the contract should be formally drawn up and put in writing, did not leave the transaction incomplete and without binding force, in the absence of a positive agreement that it should not be binding until so reduced to writing and formally executed.
Universal Prods. Co. v. Emerson, 36 Del. 553 (Del. 1935) (quoting Disken v. Herter, 77 N.Y.S. 300, 302 (N.Y. App. Div. 1902)).
The inquiry is whether "the parties positively agree that there will be no binding contract until the formal document is executed;" determining the intent of the parties on this issue is "generally a question of fact."
Anchor Motor Freight v. Ciabattoni, 716 A.2d 154, 156 (Del. 1998).
DISCUSSION
Presently, the facts surrounding the Email Agreement and the Memorandum Agreement are in dispute. The operative facts are susceptible to varying interpretations and, when taking all of Plaintiff's allegations as true for purposes of a motion to dismiss, Plaintiff has undoubtedly established reasonable circumstances and inferences wherein he could recover.As noted above, Plaintiff and Defendant entered the Email Agreement prior to executing the Memorandum Agreement. The Email Agreement contains all of the necessary elements for a valid contract: (1) as revealed by the language of the emails, Plaintiff and Defendant intended that the contract would bind them, (2) the terms of the contract are sufficiently definite, and (3) the parties exchange legal consideration. Indeed, with respect to the first element, Defendant stated: "[t]his is final and agreed to. . . ." Likewise, to confirm his intention to be bound to the terms of the Email Agreement, Defendant offered to print and sign the Email Agreement.
See supra note 19.
Complaint Ex. A.
Id.
Similarly, even a cursory review of the Email Agreement reveals that its terms are sufficiently definite; rather than being "so vague that a Court cannot determine the existence of a breach," the Email Agreement contains an itemized listing of the transactions at issue and the distribution of the commissions for each completed transaction.
See supra note 20.
With respect to the third element, the parties exchanged legal consideration. Consideration for a contract "can consist of either a benefit to the promiser or a detriment to the promise;" consideration must be "bargained for" between the parties. In this case, both Plaintiff and Defendant bargained over whether, and to what extent, each would receive commissions for a defined class of transactions. Herein, Plaintiff and Defendant ultimately "bargain[ed] for" the benefit of receiving certain commission percentages, and, simultaneously, the detriment of conceding certain commission percentages to the other party. Therefore, all necessary elements have been satisfied, and an enforceable contract was formed when Defendant manifested his assent to the terms offered by Plaintiff.
First Mortgage Co. of Pa. v. Fed. Leasing Corp., 456 A.2d 794, 795-96 (Del. 1982) (citation omitted).
See Barnard v. Dep't. of Corr., 642 A.2d 808, 818 (Del. Super. Ct. 1992) (citing RESTATEMENT (SECOND) OF CONTRACTS § 71 (1981)).
See supra note 23. The Court's determination that the Email Agreement constituted a valid contract forecloses Defendant's contention that no consideration was required to modify the Email Agreement via the Memorandum Agreement. See Def.'s Reply Br. at 7 ("While consideration is required to modify a common law contract, in order for there to be any modification, there must be an existing contract to be modified in the first instance. . .the [Email Agreement did] not form an enforceable contract. Accordingly, no additional consideration was required to execute the Memorandum Agreement.") (citations omitted).
At this point, the Memorandum Agreement cannot be deemed to have rendered the Email Agreement a nullity. Although the parties did endeavor to memorialize the Email Agreement into a formalized writing, and, somewhat ironically, it was Plaintiff himself who suggested reducing the agreement to a formalized wring, there is nothing in the terms of the Email Agreement that otherwise requires the execution of a formal document as a condition precedent to its enforceability. Moreover, even if there was evidence of such intent, this is a factual determination; thus, Plaintiff would be entitled to have all relevant facts and inferences on this issue viewed in the light most favorable to him.
Complaint Ex. A (Plaintiff's email of March 25, 2010 at 4:48 p.m. states: "I suggest that a document be prepared by Tia that reflects the same that all parties can attest to and execute. . . .").
See supra notes 23-24. Defendant relies upon Schwartz v. Chase, 2010 WL 2601608 (Del. Ch. Ct. 2010) for the proposition that, in at least some cases, the Court of Chancery will hold that, if at least one of the parties expresses that he will not be bound until a formalized writing is executed, then no contract exists unless and until such writing is executed. However, this reliance is misplaced; in Schwartz, the Court of Chancery reasoned that its determination on this issue was consistent with the general requirement that the parties to a contract agree on all material terms and intend to be bound by such terms, given that a party's express statement that he or she will not be bound until a formal writing is executed is a material term that speaks directly of the issue of intent to be bound. Id. at *8. In the instant case, neither party expressly required, as a condition precedent to being bound, that the Email Agreement be reduced to a formalized writing. See Complaint Ex. A. Rather, Plaintiff suggested that the terms be memorialized in a formalized writing. Id. Thus, there is no indication that either party required, as a condition to being bound to the terms of the Email Agreement, the execution of a formalized writing.
See supra note 24.
Likewise, with respect to Defendant's contention that Plaintiff's handwritten corrections to one phrase in the Memorandum Agreement vis-à-vis his failure to similarly correct the scrivener's error now alleged by Plaintiff defeats the instant claim, this is a factual issue that may not be resolved on a motion to dismiss. Defendant is of course free to raise this defense at a later time, but for purposes of a motion to dismiss, it "cannot be assumed at the pleading stage that the defendant will carry the burden [of establishing a defense to the plaintiff's claim.]"
Krasner, 826 A.2d at 287.
Given that the Email Agreement constitutes a valid, enforceable contract, it necessarily follows that there is a "reasonably conceivable set of circumstances susceptible of proof" under which Plaintiff can recover, thereby rendering dismissal inappropriate. When viewing all of Plaintiff's allegations and "all reasonable inferences from the complaint" in the light most favorable to Plaintiff, it is certainly conceivable that Plaintiff may recover for breach of contract based on the terms of the Email Agreement. While it may be the case that Defendant will successfully defend against Plaintiff's claims based on the various defenses set forth in Defendant's moving papers, at this stage, Defendant's success cannot be assumed.
Klein, 47 Del. at 538.
Krasner, 826 A.2d at 284.
See id. at 287.
Accordingly, for all the reasons stated above, Defendant's motion to dismiss is DENIED.
IT IS SO ORDERED.