Opinion
CN15-03650
01-18-2024
S. S. v. E. S.
File No.: CN--------;
K--- S-----, Esquire
J------- H-------, Esquire
LETTER DECISION AND ORDER
FELICE GLENNON KERR, JUDGE
Dear Ms. S----- and Ms. H-------:
Unfortunately, the former Mr. and Mrs. S------- have a history in this Court of being unable to agree on their agreements. The matter before the Court is a Petition for Specific Performance under an Ancillary Order filed by S------ S------- (“Wife”), represented by K--- S-----, Esq. The Petition was filed against E---- S------- (“Husband”) represented by J------- H-------, Esq. The Petition alleges that Husband breached a contract which was formed through email to buy out Wife's share of -------- ------- ----------, LLC (“the LLC”). Paragraph 10 of the Ancillary Order required the parties to list their interest in this LLC for sale within 30 days and split the proceeds. The Order noted that until Husband's interest in the LLC was sold, the income produced by the properties was to be divided 55/45% in Wife's favor. Wife requests that Husband be made to pay $605,000 in exchange for Wife's interest in the LLC per their alleged email contract or, in the alternative, that the Court modify the Ancillary Order requiring Husband to buy Wife's interest in the LLC as the Order is inequitable as it gives Husband control over the amount of the LLC profits since he is now the majority owner. Husband argues that there was a Stipulation and Order Resolving Petition Rule to Show Cause (“RTSC”) in February 2019 whereas the parties agreed that each year Husband would pay Wife 55 percent of the taxable income on his Scheduled K-1 for the LLC and that this Stipulation and Order is the controlling agreement as no subsequent agreement was reached via email. The 2019 Order also states that when Husband's interest in the LLC or the building owned by that LLC is sold Wife will be provided a 55 percent share in the gain on the sale. This agreement became an Order of the Court. In 2022, the parties had an e-mail exchange where Husband discussed buying Wife's portion of the LLC. The main issue is whether through the email exchange Husband and Wife entered into a valid agreement for the sale of Wife's interest in the LLC.
Although the Court would like nothing more than to put an end to this ongoing saga, after reviewing all the evidence presented and the applicable law, the Court finds that the emails did not create an enforceable contract for the reasons set forth herein.
PROCEDURAL HISTORY
Wife filed for custody on or about June 9, 2015. Wife filed for divorce on July 22, 2015 requesting the ancillary matters of property division, alimony and counsel fees. Husband filed an Answer on August 14, 2015 in which he did not contest the divorce and requested that the Court retain jurisdiction over the ancillary matter of property division. On September 1, 2015, a Stipulation and Order was signed by the Court regarding partial agreement on custody. On September 9, 2015, Wife filed a Petition for Protection from Abuse (PFA). Wife voluntarily withdrew the PF A Petition on September 17, 2015. On September 24, 2017, the Court granted the parties' request to bypass mediation of custody and on that same date the Court entered a Temporary Stipulation and Order on Custody. On January 8, 2016, Wife filed a child support petition. On February 22, 2016, Wife filed a Motion for Interim Relief seeking interim alimony and child support. On March 3, 2016, Husband filed a Motion for Independent Mental Exam, Motion to Compel Responses to a Request for Production of Documents and a Response to the Motion for Interim Relief. On March 9, 2016, the Court entered an Order granting Wife $13,600.00 per month in interim alimony, ordering Husband to pay the children's school tuition directly and ordering Husband to pay the beach house mortgage, real estate taxes, homeowners' insurance and civic association fees. On March 11, 2016, the Court granted the parties' request to consolidate child support with the matters ancillary to the divorce. On March 23, 2016, the parties stipulated to obtain vocational evaluations. On March 29, 2016, the Court denied Husband's Motion to Compel as Wife indicated that she had provided the requested documents. On March 29, 2016, the Court granted Husband's Motion for Independent Mental Examination and ordered that Husband pay the costs of this examination.
The parties were divorced on April 5, 2016. On April 29, 2016, the Court entered an order clarifying that Wife had visitation on Mother's Day and Father had visitation on Father's Day. On May 25, 2016, the completed Rule 16 (c) financial report was filed with the Court. The Court held a scheduling teleconference on June 21, 2016 at which time the Court scheduled a pretrial conference for November 14, 2016 and an ancillary hearing for December 13 and 14, 2016. On October 18, 2016, the parties settled the custody case by stipulation. The Court held the pretrial conference as scheduled on November 14, 2016 at which time the Pretrial Stipulation was entered. On December 13, 2016, the date of the scheduled ancillary hearing, the parties through counsel requested time in the morning to discuss settlement. The attorneys advised the Court that they had "essentially" settled the case and requested some time to complete the Stipulation. The parties filed a document entitled "Essential Terms of Stipulated Resolution of Ancillary Matters" which contained handwritten markups. Counsel advised the Court that they wanted to clean up the order and that they had to check on some details including tax issues. On that date, the Court entered an order stating that the parties would file a fully executed stipulation and order by December 23, 2016 and that "If the Ancillary Stipulation is not filed by that date, a teleconference will be scheduled to determine if the 'Essential Terms of Ancillary Matters' shall be the final order or if a hearing is required." This Order and the "Essential Terms" made it clear that the "Essential Terms" were not the final word on ancillary matters. When the final Stipulation was not filed by December 23, 2016, the Court scheduled a teleconference for February 6, 2017. On February 7, 2017, the Court rescheduled the ancillary hearing for August 10 and 11, 2017.
On February 27, 2016, Wife filed a Motion to Enforce the Interim Order. On March 8, 2017, Husband filed a Motion to Dismiss the Motion to Enforce. Following a teleconference, the Court entered an order Granting the Motion to Enforce Interim Order in part and denying the Motion to Dismiss. On April 12, 2017, the Court entered an order on Wife's Motion to obtain appraisals which incorporated language from both the Motion and the Response to the Motion. On July 18, 2017, Wife filed a Motion for the Admission of H-----N-----, Esquire ("Mr. N-----") pro hac vice. Husband opposed as Mr. N-----is Wife's brother-in-law. The Court granted the Motion but cautioned Mr. N-----of the pitfalls of representing relatives in divorce actions. On July 28, 2017, Husband filed a Motion in Limine seeking to disallow testimony by J-----R----- who was added as a witness by Wife to the revised pretrial stipulation on July 10, 2017, ten days before the ancillary hearing. The Court allowed Mr. R----- to testify as he was added within the time frame in the April 12, 2017 Order which incorporated the parties' own language regarding updating the 52d. However, he would not be able to introduce a written report as it had not been provided in discovery.
The Court notes that Mr. N------essentially assisted Mr. S------------who did all the questioning and arguing at the hearing and that the Court had no concerns whatsoever regarding Mr. N-----who was completely professional throughout the hearing.
The Court held the ancillary hearing on August 10 and 11, 2017. As part of the Ancillary procedure, the parties submitted "matters in agreement" including an agreement that "the three commercial properties in Seaford, Dover and Smyrna shall be sold." While the parties agreed that the properties would be sold, they did not agree on how to allocate the income from these properties for purposes of alimony and child support. Neither party presented expert testimony regarding the value of the commercial properties. At the conclusion of the hearing, the Court requested written submissions, to include proposals on how to allocate the commercial property income for purposes of alimony and child support. On November 3, 2017, the Court entered an Ancillary Order. Paragraph 10 of the Ancillary Order required the parties to list their interest in the LLC for sale within 30 days and split the proceeds 55/45% in Wife's favor but until that time the income produced by the properties was to be divided 55/45% in Wife's favor. On November 13, 2023, Wife filed a Motion for Reargument. On November 16, 2017, Wife filed a Motion for Attorney's fees. On November 22, 2017, Wife filed an Amended Motion for Reargum ent. On November 27, 2017, November 29, 2017, December 1, 2017, and December 4, 2017 Husband filed Answers to Wife's motions. On December 4, 2017, Wife filed a Motion to File a Reply to the Response to Motion for Attorney's Fees. On December 29, 2017, the Court entered an Order addressing Wife's motions. The Court denied Wife's Motion for Reargument and Wife's Motion to File a Reply to the Response to Motion for Attorney's Fees. The Court granted Wife's Motion for Attorney's fees.
During the ancillary proceedings the properties and names of the LLC's holding the properties were used interchangeably.
On January 1, 2018, Wife's attorney filed a Motion to Withdraw as Counsel. On January 23, 2018, the Court granted Wife's attorney's Motion. On April 23, 2018, the parties filed a Qualified Domestic Relations Order ("QDRO") and the Court signed the Order. On May 15, 2018, Wife filed a Petition RTSC requesting that Husband calculate Wife's share of rental income on the LLC beginning April 1, 2018 on the cash income less cash expenses of the LLC. On August 13, 2018, Husband filed an Answer to Wife's Petition RTSC. On August 16, 2018, the Court entered an Order requiring Counsel to provide the Court with an update within two weeks. On September 4, 2018, Wife filed a Motion for Consideration of Additional Explanation. Wife also filed a Motion for Admission Pro Hac Vice of H-----N-----, Wife's brother-in-law. On September 12, 2018, Husband filed an Answer to Wife's motion. On September 12, 2018, the Court entered an Order granting Wife's Motion for Admission Pro Hac Vice of H-----N-----. On October 16, 2018, the Court entered an Interim Order on Wife's Petition RTSC citing that the Court expects each party to be responsible for his or her own taxes on the retroactive amounts including both alimony and LLC income. On February 26, 2019, the Court entered a Stipulation and Order Resolving Petition Rule to Show Cause ("RTSC") signed by the parties and counsel wherein the parties agreed that when Husband's interest in -------- ------- ----------, LLC is sold, Wife would be provided 55% in the gain on the sale, and after this 55% share of the gain is distributed to Wife, Husband would be distributed his 45% share of the gain on the sale and Wife will be provided her 55% share in Husband's remaining capital account. The parties also agreed that Husband would pay Wife 55 percent of the taxable income on his Scheduled K-1 for -------- ------- ----------, LLC. The parties also agreed that they shall true up the distributions due on Wife's right to the 55% share in Husband's interest in the LLC based on the taxable income reported on Husband's schedule K-1 for the prior year.
On February 21, 2020, Wife filed another Petition RTSC requesting that Husband pay to Wife the sum of $4,838 in connection with the true-up required by the February 2019 stipulation. On March 16, 2020, Husband filed an Answer denying that there is a basis for Husband to be held in contempt and denying that he failed to pay Wife 55% of the Rental income associated with the LLC. Husband alleged that Wife is attempting to use the language about the true up to receive money over and above the 55% rental income that she is entitled to. On May 22, 2020, the Court entered an Interim Order. On June 1, 2020, Husband filed a Motion for Reargument. On June 1, 2020, Wife filed a Motion for Clarification. On June 15, 2020, Husband filed a Response to Wife's Motion for Reargument. On June 15, Wife filed a Response to Husband's Motion for Clarification. On July 7,2020, the Court entered an Order granting Wife's Motion in part and granting Husband's motion in part. On December 3, 2020, the Court entered a Stipulation and Order resolving the RTSC whereas the parties agreed that Wife would pay for the parties' children's college tuition in the amount of $5,625 per semester and Husband shall pay all remaining reasonable and necessary expenses of the children in satisfaction of all claims raised in the Petition RTSC.
On March 24, 2023, Wife filed a Petition to Enforce Agreement to Sell Interest in Marital Property, and in the Alternative Petition to Modify Ancillary Order. Wife alleged that Husband breached their contract by refusing to honor an e-mail agreement to buy out Wife's share of the LLC. Wife cited that Paragraph 10 of the Ancillary Order required the parties to list their interest in the LLC for sale within 30 days and split the proceeds but until that time the income produced by the properties was to be divided 55/45% in Wife's favor. Wife requested that Husband be made to pay $605,000 in exchange for Wife's interest in the LLC or that the Court modify the Ancillary Order requiring Husband to buy Wife's interest in the LLC. On July 3, 2023, Husband filed an Answer citing that the February 2019 Stipulation and Order Resolving Petition Rule to Show Cause only required Husband to continue to pay Wife 55 percent of the taxable income on his Scheduled K-l for -------- ------- ----------, LLC. On November 14, 2023, the Court held a hearing on Wife's Motion for Specific Performance. During the hearing, Husband's attorney made a Motion in Limine arguing that the Statute of Frauds applied to the e-mail exchange between Husband and Wife. Wife objected arguing that this defense was waived when it was not pled in the Answer. The Court deferred its ruling until after the hearing. The Motion in Limine will be addressed in this Order.
JURISDICTION AND LEGAL STANDARD
Under 13 Del. C. § 507(a), this Court has subject matter jurisdiction over "any issues resulting from the construction, reformation, enforcement or rescission of an agreement," incident to a marriage, separation, or divorce. As the LLC, which is the subject of the alleged contract, was marital property included in the Ancillary Order, subject to the subsequent 2019 Stipulation, this Court has jurisdiction. As the party seeking to enforce the alleged contract, Wife has the burden to prove that the parties agreed to all material terms, that all preconditions were satisfied and that the parties intended to be bound when Wife accepted Husband's proposal by email.
See Schwartz v. Chase, 2010 WL 2601608,*4 (Del. June 29, 2010).
FACTUAL BACKGROUND
The basic facts regarding whether or not a contract was formed are largely uncontested and are contained in the emails exchanged between the parties and later between Husband and Mr. N- ----. Although the parties dispute the intentions behind these communications and the legal implications of such, the fact that these are the emails that were exchanged is not in dispute.
On August 3, 2022, Husband sent Wife an email advising her that he and another partner of -------- ------- ---------- were purchasing another partner's 25% share of “the Building” for $550,000.00, representing 25% of the agreed value of $2.2 million dollars. Husband stated to Wife in this email, "I assume you are not interested in selling your ownership stake in the building and we will keep things the same. If you are interested let me know. Your share would be valued at $605,000.00. I could write a check for this. So let me know your thoughts." On August 5, 2022, Husband followed up this email with a second email reiterating that he was "asking if you would like to sell your shares of the building for a similar price. I can write a personal check for the $605,00 that I can pay to you immediately if interested. Since you often do not respond to my emails, I will assume if you do not respond by August 31, 2022 that you are not interested and we will keep things the way they are." Husband ends this email by stating "This is a fair and reasonable offer and not necessarily what I want to do at my age, but this is a good time to separate ourselves completely. "
On August 24, 2022, Wife responded to Husband's proposal by stating "I will agree to sell my interest in -------- ------- ---------- to you for $605,000. Please let me know how you would like to proceed." The following day on August 25, 2022, Husband advised Wife by email that he spoke to the attorney and "There is really not much to do except for you to sign a release and for me to give you a check." Husband goes on to describe that there was one issue in that he had prepaid her for the net profits per the 2019 Stipulation through April 2023. Husband thus proposed adjusting the $605,000.00 by $18,356.80 for the prepayments through the end of September and settling at the end of September or to just wait until May 2023 without the adjustment. On August 27, 2022, Husband emailed Wife repeating the new offer and asking for a reply by Tuesday after Labor Day. Later that same day, Wife emailed Husband and stated "I accept your calculation and want to do it as of September 30, 2022." At the time of the August 27 email exchange, Husband had made Wife aware that she would need to sign a release. On August 30, 2022, Husband sent Wife an email stating that "we have agreed that I will write you a personal check for $586,643.20 in exchange for a release of all remaining residual interest in -------- ------- ----------.” Husband advised that his divorce attorney would prepare the paperwork for them.
On September 21, 2022 at 10:14 PM Wife emailed Husband that she was waiting for the paperwork from his attorney so that it could be reviewed by her legal advisors. "My counsel will need time to review it. If I don't receive it in enough time that allows for review, the buyout date will have to be pushed back to next month. Please send it to me as soon as possible." Husband replied later that night that "I am not 100% sure I want to do this now the way the real estate market is and the stock market vs. just keeping the cash and putting it in the stock market in the near future. Regardless, I will check with Ms. H-------and forward the paperwork for your review." On September 27, 2022, Husband emails Wife that he is concerned about the risk going forward and that he has "no interest in pursuing the buyout at this time. I would do it for $500,000 cash but nothing less." Two days later Husband sends Wife the "agreement" and states that "all things considered, this is the best way for us to move forward."
On October 3,2022, Wife's brother-in-law, H-----N-----, sent Husband's attorney a revised Stipulation, changing the interest that is being sold from -------- ------- ----------, LLC to the ------- --------- -------- which is the building owned by the LLC. Mr. N-----advised in his email to Husband's attorney that "there should be no inference that she had any interest in the LLC, which could raise issues about her responsibility for any pre-existing debts or liabilities of the LLC." He also proposed a per diem amount to adjust for the prepayments after September 2022. At some point thereafter, a further disagreement took place between Husband and Mr. N-----regarding any tax implications of the transfer. Initially, Mr. N-----indicated that the transaction was taxable to Wife but later changed this position and stated that it was not taxable. This resulted in an inexplicable insult-laden tirade from Husband, whose behavior at this point had completely deteriorated.
At trial, Wife testified that Husband reneged on the agreement they made through their emails prior to September 21, 2022. Wife explained that the Stipulation of Satisfaction was exchanged on September 29, 2023, and she asked Husband to pay $605,000 in exchange for her interest. Mr. N-----testified that Husband offered to buy Wife out at the same value that was used to buy-- -------out. Mr. N-----said that the closing date was set for September 30, 2023. Mr. N- - believes that Husband was supposed to pay $586,000 which is the $605,000 less the K2 payments offset. Mr. N----- explained that Wife was supposed to sign the Stipulation of Satisfaction at closing. Mr. N-----admits that he changed some language in the Stipulation of Satisfaction but believes it did not change the meaning of the agreement. Mr. N-----testified that Husband refused to close the deal after he returned the Stipulation of Satisfaction because there was not an agreement on the tax implications. Mr. N-----testified that he told Husband that the tax implications did not affect the agreement. Mr. N-----explained that he asked Husband to confirm the agreement and that Husband replied, "Without an agreement on the taxes there is no agreement." Wife's attorney clarified after a question from the Court that they were alleging that Husband repudiated the agreement in his email on September 21, 2022 and not during the later discussions regarding changes to the wording of the Stipulation and tax consequences. They argue that by that time Husband had already made up his mind that he was not going through with the deal. Husband testified that he never paid Wife the money and they never signed the Stipulation and that the tax consequences raised by Mr. N-----were significant and could cost him hundreds of thousands of dollars.
See Respondent's 3.
MOTION IN LIMINE
I. Husband failed to raise his affirmative defense in his responsive pleadings and cannot raise a statute of frauds defense at this stage of the proceedings.
No action shall be brought to charge any person upon any agreement made upon consideration of marriage, or upon any contract or .. .any interest in or concerning them, or upon any agreement that is not to be performed within the space of 1 year from the... unless the contract is reduced to writing, or some memorandum, or notes thereof, are signed by the party to be charged therewith, or some other person thereunto by the party lawfully authorized in writing.
[Nevertheless], in pleading to a preceding pleading, a party shall set forth... statute of frauds and any other matter constituting an avoidance or affirmative defense. Failure to raise an affirmative defense amounts to a waiver. As with an in-limine ruling, which may be subject to change as the case unfolds, the trial judge has discretion "to defer ruling on evidentiary issues until the evidence is actually offered for admission."
DE R FAM CT RCP Rule 8
Knight v. Knight, No. CK93-3241, 1997 WL 878461, at *2 (Del. Fam. Ct. June 9, 1997)
Est. of Rae v. Murphy, 956 A.2d 1266, 1272 (Del. 2008)
The initial matter before this Court is Husband's Motion in Limine. As mentioned above, the Court deferred its decision on the Motion in Limine until after a trial on the merits. During the trial, Husband asserted that the Statute of Frauds applies to the e-mail exchange between him and Wife. Husband believes the exchange between him and Wife is not enforceable because Wife did not sign the release. Wife believes she and Husband reached an agreement before September 21, 2023. Wife argues that the Statute of Fraud was not properly raised as an affirmative defense and is therefore waived. The Court notes that Husband did not raise a statute of frauds defense in his responsive pleadings. Instead, Husband argued that "no stipulation was ever signed by the parties and the parties have continued to divide the rental income pursuant to the Stipulated February 26, 2019, Order." Husband only affirmatively asserted his statute of frauds defense during the trial. Therefore, the Court DENIES Husband's Motion in Limine and deems any information regarding the statute of frauds barred.
See Respondent's 1.
See Answer to Petition to Enforce Agreement to Sell Interest in Marital Property, and in the Alternative Petition to Modify Ancillary Order.
LEGAL ANALYSIS - CONTRACT FORMATION
I. The parties did not have a contract because there was no meeting of the minds.
A contract is formed when there is meeting of the minds that the contract is supported by consideration. In other words, the contract must be a bargain where there is mutual assent and the terms are sufficiently definite.
Eagle Force Holdings, LLC v. Campbell, 187 A.3d 1209, 1212 (Del. 2018)
Id.
A. A contract was not formed because the parties did not include all material terms.
"[A] contract must contain all material terms in order to be enforceable, and specific performance will only be granted when an agreement is clear and definite and a court does not need to supply essential contract terms." What terms are material is determined on a case-by-case basis, depending on the subject matter of the agreement and on the contemporaneous evidence of what terms the parties considered essential.,
Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010)(citing Ramone v. Lang, 2006 WL 905347, at *10 (Del.Ch. Apr. 3, 2006).
Eagle Force Holdings, LLC, 187 A.3d at 1230.
Black Horse Cap., LP v. Xstelos Holdings, Inc., No. CIV.A. 8642-VCP, 2014 WL 5025926, at *20 (Del. Ch. Sept. 30, 2014)(finding that an agreement was too indefinite to be enforceable when the plaintiffs failed to prove that the parties reached an agreement on the definition of the asset to be transferred.)
Here, the agreement did not include all the material terms to be enforceable. Husband proposed buying out Wife's interest in “the building”. Wife responded and agreed to sell her “interest in -- ------ ------- ----------” to Husband via e-mail on August 24, 2022. The parties initially agreed upon a price of $605,000 and Wife asked Husband how he wanted to proceed. Later, Husband responded to Wife's question on how to proceed by advising that he could give her a check and she just need to sign “a release.” Husband also at this time raised the issue of the adjustments for prepaying and Wife agreed to the $605,000.00, less the K2 payments and a September 30, 2022, closing date. However, the parties did not seem to agree on what exactly they were exchanging. Wife's email to Husband accepting his offer to sell the building stated that she agreed to sell her interest in the LLC. While the LLC owns the commercial property, and during the ancillary hearing the asset was sometimes referred to as the ----- ---------- -------- and sometimes as -------- ------- ----------. Mr. N----- specifically altered the Stipulation of Satisfaction regarding the description of the interest that Wife was relinquishing. Mr. N----- crossed out -------- ------- ------- --- several times and replaced it with “the ----- ---------- --------”, to indicate that Wife was not a member of the LLC. Wife argues that this change was not substantive, but if it were not substantive there was no reason to make the change. Mr. N----- explained to Husband that he did the change so that Wife would not have any responsibility for any past liabilities of the LLC. While Wife did not have ownership interest in the LLC she also did not have personal ownership interest in the real estate. Dissimilarly, Husband testified that Wife is a “passive investor” in the LLC. When Mr. N----- acting as Wife's representative raised this new issue regarding past liabilities, it brought into focus that the parties had not reached agreement on all the essential terms. Thus, the parties did not have a clear understanding of what Wife was selling. The parties also did not come to an agreement as to when and how the deal would be closed at the time of Wife's acceptance. Wife asked Husband “how he would like to proceed” demonstrating that the terms of the agreement were open to discussion. The parties also did not discuss the tax implications of the sale which later became a point of contention. The Court finds that the tax implications of the deal are material because the parties considered it essential. Mr. N----- found the tax implications essential as he made a point to mention it to Husband before closing time. Husband found the tax implications important enough to refuse to close the deal without resolving it. Based on the contemporaneous evidence, the e-mail exchange did not form a contract as all the material terms were not included. The proposed contract was not clear or definite.
See Petitioner's 2.
See Petitioner's 10.
See Petitioner's 2.
B. A contract was not formed because the parties did demonstrate a manifestation of assent to the terms.
The formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and consideration. Under Delaware law, 'overt manifestation of assent- not subjective intent-controls the formation of a contract. As such, in applying this objective test for determining whether the parties intended to be bound, the court reviews the evidence that the parties communicated to each other up until the time that the contract was signed-i.e., their words and actions-including the putative contract itself. And, where the putative contract is in the form of a signed writing, that document generally offers the most powerful and persuasive evidence of the parties' intent to be bound. Delaware courts have also said that, in resolving this issue of fact, the court may consider evidence of the parties' prior or contemporaneous agreements and negotiations in evaluating whether the parties intended to be bound by the agreement.
Loppert v. WindsorTech, Inc., 865 A.2d 1282, 1289 (Del. Ch. 2004), aff'd, 867 A.2d 903 (Del. 2005)
Eagle Force Holdings, LLC, 187 A.3d at 1229-30.
Id.
Schwartz v. Chase, No. CIV.A. 4274-VCP, 2010 WL 2601608, at *8 (Del. Ch. June 29, 2010) (finding that the parties did not intend to be bound where one party required that the other sign the document before the contract became binding.)
Id.
Eagle Force Holding, LLC, 187 A.3d at 1230.
Under the applicable contract law, the Court cannot find that the parties intended to be bound by the terms of the e-mail exchange. Husband did not intend to be bound by this agreement because he requested a memorialization be signed before he paid Wife. Husband also changed the terms of his proposal several times and even stated at one point that he was not sure if he wanted to go through with buying Wife's share of the LLC. Not only did Husband not show an overt manifestation of assent, Wife also did not intend to be bound by the e-mail exchange. Wife agreed that there should be a release signed and even responded that she needed time to review the Stipulation of Satisfaction with her attorney. Wife also had Mr. N-----review the memorization and change its terms. Wife could not have intended to be bound by the agreement as it stood on September 21, 2022, if she too wanted a signed memorization that reflected her terms. There is also no persuasive evidence that she intended to be bound by the proposed agreement because she never signed the Stipulation of Satisfaction.
See Petitioner's 7.
Finally, there is a history with these parties regarding disagreements over whether or not they agreed or even disagreeing about the interpretation of Stipulated Agreements drafted by their attorneys and approved and signed by them and filed with the Court. The Court can look to the history of the relationship between the parties to provide context. Given this history, it is hard to imagine that either of them would have an expectation to be bound through an email exchange.
II. Signing the memorialization was a condition precedent to the enforcement of the sale.
The Court of Chancery has ruled that: "when parties to a contract have agreed on all substantial terms of a contract and intend to be bound, a contract will be found prior to the signing of a document, "unless the parties pretty clearly show that such signing is a condition precedent to legal obligation." [I]t is the job of this Court to determine whether the parties "positively" agreed to condition the settlement on the execution of a written agreement. ,
Schwartz, 2010 WL 2601608, at *8 (citing Smith v. Onyx Oil & Chem. Co., 218 F.2d 104, 108 (3d Cir.1954)).
Alatus Aerosystems v. Triumph Aerostructures, LLC, No. CVN20C12038EMDCCLD, 2021 WL 6122106, at *10 (Del. Super. Ct. Dec. 27, 2021).
Id. at * 10 (finding that the parties did not have a contract where a party stated in an e-mail that he believes they "are now agreed in principle on all material points" but qualifies the agreement by noting that it is "subject to the parties signing a definitive settlement agreement.").
Even if the parties included all the essential terms and intended to be bound by the contract, signing the release was a condition precedent to the legal obligation to perform under this agreement. After Wife agreed to sell her shares in the LLC, Husband stated "There is not much left to do except for you to sign a release" Husband mentioned the release again and told Wife that Ms. H-------would "prepare the paperwork". Husband makes clear that they must sign a release for a third time when he states "You sign a release at the time of receipt of the check." Wife responds stating that she is "waiting for the paperwork from [his] attorney... so that it can be reviewed by legal advisers". Wife made clear that if it was not signed in time the "buyout date" would have to be pushed back. Husband then forwards the Stipulation of Satisfaction indicating that it is "the best way for [them] to move forward" and "[he] would like to sign the paperwork at Ms. H-------'s office and get it notarized etc." Based on these actions, the Court finds that the parties clearly demonstrated that signing the Stipulation of Satisfaction was a condition precedent to the legal obligation. Neither party planned to move forward with the sale or proceed to close without the "paperwork" being signed. At no time did either party remove this condition or take any action inconsistent with it. Instead, Husband mentioned at least three times that Wife needed to sign the Stipulation of Satisfaction. Wife agreed to sign the satisfaction and even made changes to the document.
See Petitioner's 3.
See Petitioner's 6.
See Petitioner's 6.
See Petitioner's 7.
Id.
See Petitioner's 8.
III. Even if there was a contract and it was repudiated, Wife acquiesced to the repudiation by continuing to negotiate.
Acquiescence is an equitable defense which is assertable against a party who remains inactive for a considerable period of time, or who recognizes the validity of the complained of act or who acts in a manner inconsistent with the subsequent repudiation and thus leads the other party to believe the act has been approved. Application of the standards underlying the defense of acquiescence is fact-intensive, often depending, as here, on an evaluation of the knowledge, intention and motivation of the acquiescing party. In Stallings, the Supreme Court of Delaware found that the husband acquiescence in Wife's repudiation where the parties continued to negotiate and litigate after the wife repudiated the agreement.
Julin v. Julin, 787 A.2d 82, 84 (Del. 2001)(citing Salomon Bros. Inc. v. Interstate Bakeries Corp., Del.Ch., 576 A.2d 650 (1989)).
Id.
Stallings v. Stallings, 303 A.3d 1230 (Del. 2023)
Here, assuming arguendo that there was a valid contract, Wife acquiesced to the repudiation by continuing to negotiate. On September 21, 2022, Husband e-mails Wife stating "I am not 100 percent sure I want to do this with the way the real estate market is... .Regardless, I will check in with Ms. H-------," Husband then forwards the Stipulation of Satisfaction on September 29, 2023. At no point does Wife contest Husband's repudiation. In fact, Wife responded to the Stipulation of Satisfaction by sending a revised version of the agreement. Therefore, Wife acted in a manner consistent with and in approval of the repudiation of the original deal. By way of the modifications Wife made to the release, it appears to the Court that Wife sought a new deal altogether that included terms more favorable to her. This case is likened to Stallings where the parties continued to negotiate after the wife repudiated. Here, even after Husband backs out of the deal, the parties continue to e-mail back and forth and add additional terms to the supposed contract. Wife never contests Husband's repudiation and appears to agree with Husband that the deal as it stood should not be closed on.
See Petitioner's 7.
See Petitioner's 8.
See Petitioner's 10.
IV. Alternatively, the Court cannot modify the Ancillary Order because this is a consent judgment without mistake or circumstances justifying opening the judgment.
The Ancillary Order included both matters that were agreed upon by the parties and matters decided by the Court. Regarding the LLC, the Court only decided how the profits would be considered for alimony and child support purposes. The parties later came to an agreement filed as a Stipulation as to how this would occur. Most significantly, at the tie of the Ancillary Hearing, the parties chose not to place a value on the LLC but instead chose to list it for sale. Under 13 Del. C. § 1519(a), a decree or separate order may be modified or terminated only as follows: (1) Support for a child, only as provided in Chapter 5 of this title, or otherwise; (2) Custody and/or visitation of a child, only as provided in Chapter 7 of this title, or otherwise; or (3) Property disposition, only upon a showing of circumstances that would justify the opening or vacation of a judgment under the Rules of the Superior Court of this State. The Court notes that Family Court Rule 60(b) and Superior Court Rule 60(b) are comparable. Wife appears to be alleging the parties were mistaken as they anticipated the building would sell more quickly. When the case involves a consent judgment, relief is only available when the mistake is mutual between the parties. Likewise the Court does not find that there was evidence of "extraordinary circumstances" warranting Rule 60(b) relief in the interest of justice. The Court cannot modify where the party "had [their] day in Court" but is unhappy with the settlement. There must be an end to litigation. Both parties had the opportunity to finalize the distribution of this asset at the ancillary hearing.
D.J.C. v. C.B.F., No. CN02-09113, 2006 WL 2389276, at *4 (Del. Fam. Ct. Feb. 14, 2006)
See Keith v. Melvin L. Joseph Constr. Co., 451 A.2d 842 (Del. Super. 1982).
Id.
Bachtle v. Bachtle, 494 A.2d 1253, 1256 (Del. 1985)(citing Jewell v. Division of Social Services, Del.Supr., 401 A.2d 88, 90 (1979)).
Contrary to the implication in Wife's Petition, the commercial property could have been appraised at the time of the ancillary hearing and they could have presented testimony of the appraiser so that the Court could set a value and determine Wife's share of the property. The parties were both aware that Husband and the other tenants were the owners of the LLC which owned the building at the time of the ancillary hearing. Instead of valuing the property, they agreed to sell it, knowing there could be ongoing entanglements. The concerns with Husband being a tenant were known at the time of the trial and as noted in the Ancillary Order on Page 6, no evidence was presented as to whether or not the properties were more or less likely to sell if Husband continued to occupy the property warranting requiring Husband's practice's tenancy to end. There was no mutual mistake.
In the present matter, Wife has not demonstrated circumstances justifying the opening of the judgment pursuant to Rule 60(b). Wife is not alleging a mutual mistake between the parties that caused them to reach this agreement. This matter was resolved and entered as a final Order of this Court. The Court cannot now modify the original order because Wife is unhappy with the outcome.
CONCLUSION
The Court finds that the e-mail exchange is not a contract that can be enforced by the Court. The parties did not include the material terms in the agreement and frankly did not intend to be bound by the agreement until the "Stipulation of Satisfaction" was signed. The Court notes that both parties changed their minds, at least about the terms of the deal, at least once, indicating that the e-mail exchange was not a completed agreement. The parties also both made clear that the Stipulation of Satisfaction was to be signed before or at the time of closing making it a condition precedent to the contract. Even assuming arguendo that there was a contract, the Court finds that Wife acquiesced to Husband's repudiation by continuing to negotiate. Finally, the Court cannot modify the Order of this Court under 13 Del. C. § 1519. While the Court would be thrilled to sever the financial ties between Husband and Wife in this decision, the law does not support that result.
IT IS SO ORDERED this_day of JANUARY, 2024 that
1. Wife's Petition for Specific Performance and Alternate Request to Modify the Ancillary Order is DENIED.
SO ORDERED.