Opinion
C.A. No. CPU4-16-001002
12-20-2017
PETER PALIYENKO, Plaintiff, v. ERNEST ADDO, Defendant.
John V. Work, Esq. Law Office of John V. Work 800 N. King Street, Ste. 303 Wilmington, DE 19801 Attorney for Plaintiff Ernest Addo 3 Macduff Court Wilmington, DE 19711 Pro se Defendant
MEMORANDUM OPINION & ORDER John V. Work, Esq.
Law Office of John V. Work
800 N. King Street, Ste. 303
Wilmington, DE 19801
Attorney for Plaintiff Ernest Addo
3 Macduff Court
Wilmington, DE 19711
Pro se Defendant WELCH, J.
On April 4, 2016, Peter Paliyenko ("Plaintiff") filed a Complaint alleging that Ernest Addo ("Defendant") failed to repayment Plaintiff for two personal loans. Plaintiff's Complaint asserts alternative claims for breach of contract and/or unjust enrichment against Defendant. On November 13, 2017, trial was convened and the Court reserved its decision. This is the Court's Final Memorandum Opinion and Order after consideration of the oral and documentary evidence submitted at trial, arguments made at trial, and the applicable law. For the reasons discussed below, the Court finds in favor of Plaintiff.
I. FACTS
Based on the testimony and evidence presented at trial, the Court finds the relevant facts to be as follows.
In 2000, Plaintiff and Defendant met at an AstroPower ("Astro") company party. Plaintiff and Defendant were then employees of the former Delaware-based solar energy company, Astro. In 2003, Plaintiff departed from Astro and founded the Delaware corporation Petro International Corporation ("Petro Inc."). In the summer of 2009, Plaintiff contacted Defendant, who had also departed from Astro, and proposed a new business venture. Defendant agreed; they formed PVC Holding Limited Liability Company ("PVCH LLC"). Subsequent to its creation, PVCH LLC entered into a business agreement with Petro Inc. Defendant was then hired by Petro Inc. as a Senior Scientist. By 2010, PVCH had incurred debt to Petro Inc. in excess of $3,000,000 as well as an individual debt to Plaintiff in excess of $120,000. In 2012, Plaintiff testified that because of an "industry downturn," he was required to remove himself from Petro Inc.'s payroll. And, on August 31, 2012, insufficient funds required Plaintiff to lay off Petro Inc.'s remaining two employees, including Defendant.
Plaintiff summarized his business expertise as "international trade logistics and procurement." Plaintiff has a business undergraduate degree and a Master in Business Administration graduate degree. Defendant received a Bachelor of Arts undergraduate degree in chemical engineering from The City College of New York, a Masters in the field of engineering from Columbia University, and a Doctorate of Philosophy in engineering from the University of Delaware.
Petro International Corporation ("Petro Inc.") processed silicon metal and supplied solar companies, semiconductor companies, and metallurgical companies. Petro Inc. was composed of six employees, including Plaintiff and Defendant.
Defendant testified that he was employed with "Cermet Materials" as a Senior Scientist at this time.
Plaintiff and Defendant formed PVC Holding Limited Liability Company ("PVCH LLC") for the sole purpose of retaining intellectual property. Plaintiff testified that Defendant and he were the only members of PVCH LLC.
Petro Inc. would procure, coordinate operations, and develop the intellectual property held by PVCH LLC.
Defendant was hired to develop PVCH LLC's intellectual property.
Plaintiff notes in his Complaint that Petro Inc. was the sole financier of PVCH LLC.
Plaintiff testified that both Petro Inc. and PVCH LLC have been insolvent since 2012.
Plaintiff testified that "out of compassion" he offered Defendant a personal loan equal to one month's salary of $10,000 on September 17, 2012. Plaintiff's agreement with Defendant was documented in a Promissory note on the same day ("Note 1"). Note 1 is signed by Defendant; states that the loan will be paid in installments of at least $450.00 beginning January 1, 2013 and ending on September 17, 2014; notes an interest rate of 5% per annum from the date of the note; has an acceleration clause after ninety days; and allows for the collection of attorney's fees if the lender "prevails in a lawsuit to collect on this note." The parties agree that, prior to April 2015, Defendant made ten installment payments of $500 each towards Loan 1.
Plaintiff testified that this loan was withdrawn from his personal bank account.
Joint Exhibit 2.
See id. Plaintiff testified that Defendant signed Note 1 in Plaintiff's presence.
Between November 2012 and February 2013, Plaintiff loaned Defendant additional monies through approximately four payments, totaling $13,500. On February 28, 2013, a Promissory note for $13,500 ("Note 2") was drafted to document these verbal agreements. The format of Note 2 is identical to Note 1; however, the terms of Note 2 are stricter. Note 2 requires installment payments of at least $3,375 ending on February 28, 2014, a 5% per annum interest rate that accrued "retroactively" from February 28, 2013, and an acceleration clause after fifteen days. Defendant refused to sign Note 2, stating that his wife should not have been included as a co-signer and disagreeing with the 5% per annum interest rate attached to the note. Despite emailing Plaintiff on October 25, 2013 and proposing an alternative repayment plan to cure his deficit on the $23,500 personal debt, Defendant has not made any installment payments towards Note 2.
Plaintiff testified that Defendant requested additional funds in order to provide for his family. Plaintiff further testified that these loans that were verbally agreed to are supported by "emails." However, Plaintiff only submitted an email at trial that was related to an alternative repayment plan proposed by Defendant. See infra.
Joint Exhibit 3.
See id. Plaintiff testified that he shortened the acceleration clause because of Defendant's lack of installment payments during 2013.
Plaintiff's Exhibit 1. Defendant did not object to this exhibit being admitting into evidence. Exhibit 1 is an email Defendant sent to Plaintiff. In its entirety, the email states:
Hello Peter -
I have received your certified letter regarding payment schedules for the 23500 USD you lent to me last year. It was very nice of you and I truly appreciate that - thanks!
I have every intention to pay back what I received and will do so as soon as any refunds are sent for my 2012 taxes. If nothing comes out of it before 12/31/2013, I will pay at least $500/month starting January 2014 until the money I received is taken care of (less any interests). If this is ok, please resend the promissory note and leave out my wife's name as a borrower! Also include where you'd want the checks to be sent to in your letter.
Secondly, I will not renew PVCH email hosting come November 2013.
I tried calling you yesterday and left messages on your voice mail.
Ernest
II. STANDARD OF REVIEW
As trier of fact, the Court is the sole judge of the credibility of each fact witness and any other documents submitted to the Court for consideration. If the Court finds that the evidence presented at trial conflicts, then it is the Court's duty to reconcile these conflicts—if reasonably possible—in order to find congruity. If the Court is unable to harmonize the conflicting testimony, then the Court must determine which portions of the testimony deserve more weight in its final judgment. In ruling, the Court may consider the witnesses' demeanor, the fairness and descriptiveness of their testimony, their ability to personally witness or know the facts about which they testify, and any biases or interests they may have concerning the nature of the case.
See Nat'l Grange Mut. Ins. Co. v. Davis, 2000 WL 33275030, at *4 (Del. Com. Pl. Feb. 9, 2000) (Welch, J.).
See id.
See id.
See State v. Westfall, 2008 WL 2855030, at *3 (Del. Com. Pl. Apr. 22, 2008).
In civil actions, the burden of proof is by a preponderance of the evidence. "The side on which the greater weight of the evidence is found is the side on which the preponderance of the evidence exists."
See Gregory v. Frazer, 2010 WL 4262030, at *1 (Del. Com. Pl. Oct. 8, 2010).
See Reynolds v. Reynolds, 237 A.2d 708, 711 (Del. 1967).
III. DISCUSSION
Preliminarily, the Court notes that Defendant admitted to owing $5,000 under Note 1, 5% interest from the date of the note, and reasonable attorney's fees in his Answer and at trial. Hence, the Court entered an oral stipulation at trial, which will be memorialized in writing at the conclusion of this Opinion. Therefore, the remaining issue before this Court is whether, under an unjust enrichment theory, Plaintiff is entitled to the remaining $13,500 which he loaned to Defendant.
The Defendant's October 25th email to Plaintiff regarding repayment of the $23,500 did not create a new contract or modify the existing verbal agreement, as discussed infra.
Plaintiff asserts that Defendant received the $13,500 loan, understood that it was a loan, and failed to repay said loan. Conversely, Defendant agrees that he received $13,500 from Plaintiff, but argues that Plaintiff presented the monies to him as an attempt to defray costs that Plaintiff owed Defendant under a "Term Sheet" between Petro Inc. and Defendant. Further, Defendant argues that he informed Plaintiff that he would cease making payments until Plaintiff provided evidence of PVCH LLC's dissolution, and profit and loss statements for the period of time that Defendant was an employee of Petro Inc.
Defendant attempted to admit this "Term Sheet" into evidence; however, Plaintiff objected to the document's admission. Plaintiff asserted that the unsigned Term Sheet is based on an agreement between Petro Inc. and Defendant. Since Petro Inc. is not a party to this action, Plaintiff argued that the document was irrelevant to the personal loans at issue in the present case. The Court agreed with Plaintiff and did not allow Defendant's proposed Exhibit 1 to be admitted into evidence.
Defendant asserted his intent in his Answer and at trial. Defendant testified that he demanded Plaintiff dissolve PVCH LLC in writing, per a contractual agreement that existed between Plaintiff and Defendant. When Plaintiff did not submit this written intent to dissolve, Defendant stated that he informed Plaintiff that he would withhold his due loan payments.
Based on the following analysis, the Court finds in Plaintiff's favor. According to the Delaware Supreme Court, unjust enrichment concerns the " 'unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience.' " Unjust enrichment is comprised of the following prongs: "(1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and impoverishment, (4) the absence of justification[,] and (5) the absence of a remedy provided by law."
Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010) (quoting Fleer Corp. v. Topps Chewing Gum, Inc., 539 A.2d 1060, 1062 (Del. 1988)).
Jackson Nat'l Life Ins. Co. v. Kennedy, 741 A.2d 377, 393-94 (Del. Ch. 1999).
Plaintiff's claim in this case represents a textbook example of unjust enrichment. Defendant has admitted at trial, and in his Answer, that he received the remaining $13,500 in approximately four installments. Defendant simply disputes the circumstances surrounding the $13,500 enrichment.
See Uppal v. Waters, 2016 WL 4211774, at *3 (Del. Super. Aug. 9, 2016) ("Unjust enrichment is an alternative theory under contract law for when a party is unjustly enriched and there is no contract that can be enforced as a remedy.").
Regarding the second and third prongs of unjust enrichment, Plaintiff personally loaned Defendant the $13,500. Further, Plaintiff testified that he is unable to pay his property taxes or upcoming mortgage payments because of Defendant's failure to repay him. Regarding the fourth prong, Defendant asserts that he stopped making payments in order to retain leverage over Plaintiff, forcing Plaintiff's hand to dissolve PVCH LLC, and reimburse Defendant for a $44,000 salary bonus deficiency that Defendant alleges Plaintiff owed him under a Term Sheet Agreement between Defendant and Petro Inc. Because Petro Inc. is not a party to this suit, this agreement is not relevant to the analysis. Thus, Defendant cannot claim a valid justification for the enrichment.
Finally, under the fifth prong, the law fails to provide a remedy through a secondary claim. In the case sub judice, the facts prevent this Court from finding a breach of contract. First, while the verbal agreement between Plaintiff and Defendant could have been performed within one year, the terms of that agreement are not clear from the testimony. In fact, the parties disagree as to the terms of that verbal agreement. Second, a meeting of the minds did not occur as to Note 2 because Defendant did not agree to the note's terms. Third, Plaintiff testified that he could not recall whether the new terms contained within Defendant's October 25th email, which attempted to modify the original agreements, were satisfactory to him when he received the email in 2013.
See Sheets v. Quality Assured, Inc., 2014 WL 4941983, at *2 (Del. Super. Sept. 30, 2014) ("Under Delaware law, contract formation is a question of fact.").
See id. ("Unless it falls within the ambit of the Statute of Frauds, an oral agreement is perfectly enforceable so long as these elements are proven by a preponderance of the evidence." (emphasis added)); Naylor v. Tumey, 2013 WL 3946113, at *2 (Del. Com. Pl. July 30, 2013) ("The Statute of Frauds applies only if the parties cannot possibly perform the agreement within one year.").
See Gleason v. Ney, 1981 WL 88231, at *1 (Del. Ch. Aug. 25, 1981) ("In order for there to be an agreement, the parties must have a distinct intention common to both and without doubt or difference. Until all understand alike there can be no assent and therefore no contract. Both parties must assent to the same thing, in the same sense and at the same time.").
See Josloff v. Falbourn, 125 A. 349, 349 (Del. 1924) ("To abrogate or modify a prior contract, it is necessary that the minds of the parties to the original contract should meet by offer and acceptance upon the terms of the new agreement. Mere negotiations, consisting of unaccepted offers, cannot affect a prior contract."); accord De Cecchis v. Evers, 174 A.2d 463, 464 (Del. Super. 1961) ("A contract having been made, no modification of it could be brought about without the consent of both parties and without consideration.").
The Court finds Plaintiff's testimony credible regarding the factual circumstances surrounding the $13,500 loan. Based on a preponderance of evidence, the Court finds that Plaintiff has proven he suffered a detriment because of Defendant's failure to pay. Therefore, the Court finds in Plaintiff's favor regarding the $13,500 loan.
IV. CONCLUSION
Based on the parties' stipulation at trial regarding Note 1, the Court hereby enters judgment for Plaintiff in the amount of $5,000, plus interest at the contractual rate of 5% per annum from September 17, 2012, and reasonable attorney's fees. Plaintiff's counsel has requested leave to file a petition for attorney's fees. Mr. Work shall file his petition within fifteen (15) days from the date this Opinion is rendered, and Defendant shall have fifteen (15) days to respond. The Court shall thereafter issue a separate opinion.
Regarding the second loan totaling $13,500, the Court hereby enters judgment for Plaintiff in the amount of $13,500, plus pre- and post-judgment interest at the legal interest rate according to 6 Del. C. § 2301, et seq. The Court declines to grant Plaintiff's request for attorney's fees on his unjust enrichment claim. Customarily, the "American Rule" governs the awarding of attorney's fees in Delaware. That is, the prevailing party in a lawsuit is not entitled to an award of attorney's fees. Despite this custom, there is a "bad faith" exception to the rule. Generally, under this exception, a court of law is not entitled to award attorney's fees based on bad faith, unless there is a statutory or contractual provision allowing such an award. However, the Delaware Supreme Court has stated that courts of law are allowed to award attorney's fees based on bad faith if the "underlying claim" is "sufficiently equitable in nature." Here, there is no contractual or statutory authority, but the underlying claim—unjust enrichment—has been categorized an "equitable remedy." Thus, the Court is satisfied that a bad faith analysis is appropriate.
See Kaung v. Cole Nat'l Corp., 884 A.2d 500, 506 (Del. 2005).
See id.
Dover Historical Soc'y, Inc. v. City of Dover Planning Comm'n, 902 A.2d 1084, 1090 (Del. 2006).
Id. at 1091.
JCM Innovation Corp. v. FL Acquisition Holdings, Inc., 2016 WL 5793192, at *4 (Del. Super. Sept. 30, 2016).
The Court's decision accords with cases that engage in a "bad faith" analysis with, arguably, less-equitable claims. See Affordable Autos, Inc. v. Dietert, 2016 WL 1169244, at *8-9 (Del. Super. Mar. 24, 2016) (underlying claim of conversion); Citizens Bank v. Design-A-Drape, Inc., 2008 WL 3413329, at *2 (Del. Super. July 30, 2008) (attorney fees entered under the bad faith doctrine when an attorney filed a default judgment against an inappropriate party), aff'd 966 A.2d 347 (Del. 2009); Ciappa Constr., Inc. v. Innovative Property Res., LLC, 2006 WL 2979372, at *3 (Del. Super. Oct. 19, 2006) (underlying claims regarding a mechanics lien and breach of contract), aff'd on reh'g, 2007 WL 914640, at *2 (Del. Super. Mar. 2, 2007); Maple Hill Homeowners Ass'n v. Newton, 2015 WL 1205283, at *1 (Del. Com. Pl. Mar. 10, 2015) (claims surrounding the proper payment of Homeowner's Association fees and refusal of payments).
This Court has previously stated: "[t]he bad faith exception to the American Rule only applies 'in extraordinary circumstances as a tool to deter abusive litigation and to protect the integrity of the judicial process.' A party must have acted 'vexatiously, wantonly, or for oppressive reasons' in order for the Court to award attorney's fees." Determining bad faith is a fact-intensive inquiry. Bad faith has been found when a litigant: "unnecessarily prolonged litigation, falsified records, knowingly asserted frivolous claims, altered testimony, or misled the court." Conversely, the Delaware Superior Court has specifically admonished that the basis of bad faith cannot simply be that the "defendant's actions or inactions prompted plaintiff to file the suit," as every plaintiff would then have a bad faith claim for attorney's fees. Plaintiff's request strikes the Court as indicative of this admonishment. The Court finds Defendant's statements regarding leverage and his asserted defenses in this action insufficient to meet the exacting standard of "bad faith."
Roman v. Fantasy Lane Thoroughbred, Racing Stable LLC, 2014 WL 12684304, at *6 (Del. Com. Pl. Oct. 10, 2014) (footnote omitted) (quoting P.J. Bale, Inc. v. Rapuano, 2005 WL 3091885, at *1 (Del. Nov. 17, 2005); Kaung v. Cole Nat'l Corp., 884 A.2d 500, 506 (Del. 2005)).
See Acierno v. Goldstein, 2005 WL 3111993, at *2 (Del. Ch. Nov. 16, 2005).
Affordable Autos, Inc., 2016 WL 1169244, at *8.
Id. at *8. --------
IT IS SO ORDERED this 20th day of December, 2017.
/s/_________
John K. Welch, Judge cc: Ms. Tamu White, Chief Civil Clerk
See id. (emphasis added). Plaintiff testified that he could not recall whether these new terms were agreeable to him when he read Defendant's email on October 25, 2013.