DOMINICK A. PULIERI, as Court Appointed Receiver for SUNVIEW CORPORATION, Plaintiff,
BOARDWALK PROPERTIES, LLC, Defendant.
Submitted: December 12, 2014
Kevin William Gibson of GIBSON & PERKINS P.C., New Castle, Delaware; Attorney for Plaintiff.
Gregory P. Williams, Blake Rohrbacher and Susan M. Hannigan of RICHARDS LAYTON & FINGER, P.A., Wilmington, Delaware; Attorneys for Defendant.
This action involves an alleged oral agreement made over twelve years ago concerning the ownership of real property located at 101 South Boardwalk, Rehoboth Beach, Delaware 19971 (the "Rehoboth Property"). The Rehoboth Property used to be a motel called the Sunview Motel. It is now home to a Greene Turtle restaurant.
The thrust of the oral agreement, which is referred to as the "Friendly Agreement, " is that Sunview Corporation ("Sunview") would transfer the Rehoboth Property to Boardwalk Properties, LLC ("Boardwalk") and then, upon the satisfaction of two conditions discussed below, Boardwalk would retransfer the Rehoboth Property back to Sunview on a "dollar for dollar basis." Sunview transferred the Rehoboth Property to Boardwalk for $3.2 million in 2002, and dissolved four years later in 2006. In 2013, the principal behind Sunview demanded that Boardwalk retransfer the Rehoboth Property for $3.2 million, which Boardwalk refused to do.
In 2014, a Court-appointed receiver for Sunview filed this action asserting two claims against Boardwalk: specific performance for breach of contract (Count I) and unjust enrichment (Count II). Boardwalk moved to dismiss the Complaint under Court of Chancery Rule 12(b)(6) on four separate grounds: (i) laches; (ii) the Statute of Frauds; (iii) the rule against perpetuities; and (iv) the Complaint otherwise fails to state a claim.
In this opinion, I conclude that Sunview has failed to state a claim for specific performance because at least two essential terms of the Friendly Agreement-the conditions to and timing of Boardwalk's obligation to perform-are not sufficiently definite to demonstrate the existence of a valid contract. I also conclude for the reasons explained below that the specific performance claim is legally defective either by application of the rule against perpetuities or the doctrine of laches, depending on whether or not the Friendly Agreement is construed to require Sunview to demand that Boardwalk retransfer the Rehoboth Property before Boardwalk must perform. Finally, I conclude that Sunview's unjust enrichment claim, which is premised on the theory that the Rehoboth Property was transferred to Boardwalk for less than fair value in 2002, must be dismissed on laches grounds. Accordingly, I grant Boardwalk's motion to dismiss the Complaint.
A. The Parties
Plaintiff Dominick A. Pulieri ("Pulieri") is a former director, officer, and stockholder of Sunview Corporation. Pulieri is also a stockholder of non-party Grotto Pizza, Inc. ("Grotto"), a chain of pizzerias well known in Delaware. On June 13, 2014, in a related action in this Court (C.A. No. 9701), the Court appointed Pulieri as the receiver of Sunview Corporation "for the limited purpose of prosecuting an action against Boardwalk Properties, LLC for specific performance of a contract for the transfer of real property located at 101 South Boardwalk, Rehoboth Beach, Delaware 19971." Pulieri is the named plaintiff in this action, but I refer to the plaintiff as "Sunview" because that is the entity on whose behalf Pulieri has asserted the claims in this action.
Sunview Corporation was a Delaware corporation with its principal place of business in Rehoboth Beach, Delaware. On March 6, 2006, Pulieri filed a Certificate of Dissolution for Sunview with the Delaware Secretary of State.
Non-party Joseph Paglianite ("Paglianite"), Pulieri's brother-in-law, is also a former director, officer, and stockholder of Sunview.
Defendant Boardwalk Properties, LLC is a Delaware limited liability company. Boardwalk is the current owner of the Rehoboth Property.
Non-party Joseph J. Farnan, Jr. ("Farnan"), a former federal judge, had the authority to act on behalf of Boardwalk and non-party KidFar Properties, LLC ("KidFar") at all relevant times.
B. The Purported Oral Agreement
From the late 1990s through 2003, Sunview, Grotto, non-party Lido Realty and certain other unspecified Grotto-related entities (collectively, the "Grotto Entities") were experiencing financial hardship. During that period, Farnan offered financial assistance to certain of the Grotto Entities, including by loaning money to them.
"In or around 2002 to 2003, " Farnan and the Grotto Entities allegedly entered into the Friendly Agreement, an oral agreement pursuant to which the Grotto Entities would transfer certain real estate to Farnan-affiliated entities and then, upon the satisfaction of two conditions, the Farnan-affiliated entity would retransfer that real estate back to the respective Grotto Entity on a "dollar for dollar basis." More specifically, as alleged in the Complaint, the Friendly Agreement involved
a series of real estate transactions by which the respective Grotto Entity-owner would transfer certain real property to entities, for which Farnan was acting as the authorized agent . . ., on the condition that the respective Grotto Entity-owner would retain the right to have the real property re-transferred to it on a dollar for dollar basis, upon the happening of two contingencies[, ] the first being the improvement of the financial health of the Grotto Entities and the second contingency being an initiation of a buyout or removal of the interests of Pulieri's brother-in-law, [Paglianite], from all Grotto Entities with the exception of Pizza Systems, Inc.
I refer to the improvement of the financial health of the Grotto Entities as the "Financial Improvement Condition, " to the removal of Paglianite's interests in certain Grotto Entities as the "Paglianite Removal Condition, " and to both together as the "Retransfer Conditions."
Regarding the Paglianite Removal Condition, Sunview alleges that "[f]or many years leading up to the Friendly Agreement, Farnan had advised Pulieri to jettison Paglianite, counseling him to 'get rid of his evil brother-in-law.' " According to Sunview, Farnan sought to remove Paglianite as Pulieri's business partner "so that Farnan, his family, and/or entities controlled by Farnan could take Paglianite's place and thereby exert control and undue influence over Pulieri."
C. The Rehoboth Property
The first alleged transfer pursuant to the Friendly Agreement involved the Rehoboth Property, which Sunview owned at the time.
In December 2002, Sunview needed money to make a balloon payment on the loan it had entered into to purchase the Rehoboth Property. Farnan "counseled" Pulieri and Sunview to transfer the Rehoboth Property to Boardwalk in an arrangement to be governed by the Friendly Agreement-i.e., upon satisfaction of the Retransfer Conditions, Boardwalk would transfer the Rehoboth Property back on a dollar-for-dollar basis.
On December 30, 2002, Pulieri and Sunview transferred the Rehoboth Property to Boardwalk for $3.2 million. Farnan allegedly "failed to advise Sunview and Pulieri that the Statute of Frauds required the transfer of real estate to be in writing." Instead, Farnan purportedly advised Pulieri "that a written agreement was not necessary as the deal was simply a 'friendly transaction, ' part of the Friendly Agreement." Sunview also alleges that the $3.2 million transfer price was "substantially below fair market value, " in part because Pulieri and Sunview "did not list the [Rehoboth Property] for sale on the market nor did Pulieri engage an independent appraisal."
D. The Dewey Beach Property
The second alleged transfer pursuant to the Friendly Agreement involved real estate located in Dewey Beach, Delaware (the "Dewey Beach Property"). At the time, Lido Realty, of which Grotto, Pulieri, and ...