Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Fannin v. Ivy Tree Meadows, LLC

Court of Chancery of Delaware

April 21, 2017

Elmer Fannin and Sugar Loaf Farms, Inc. Plaintiffs,
v.
Ivy Tree Meadows, LLC, Defendant.

          Date Submitted: August 5, 2016

          Draft Report: November 28, 2016

          MASTER'S REPORT

          Kim E. Ayvazian Master in Chancery

         In October 2013, the owner of a 54-acre farm ("the Property") in Kent County, Delaware executed an agreement to sell the Property for $1, 150, 000 to a limited liability company based in New Jersey. The contract was a cash contract, and the only explicit contingency beyond good title was if there were hazardous substances on the Property. The original closing date was extended to December 19th, but on that date the buyer canceled the contract claiming that it could not develop 153 building lots on the Property due to the presence of wetlands and wetland buffers. After unsuccessfully trying to close the deal, the seller of the Property filed a complaint seeking specific performance of the contract. Pending before me are cross-motions for summary judgment. For the reasons that follow, I recommend that the Court grant summary judgment on the seller's request for specific performance of the contract, but deny summary judgment on the seller's request for attorney's fees and costs.

         Factual Background[1]

         Plaintiff Sugar Loaf Farms, Inc. ("Sugar Loaf") is the owner of three parcels of land in Kent County totaling approximately 54 acres. Plaintiff Elmer Fannin is the president of Sugar Loaf. Although the Property was not listed for sale, during the late summer of 2013, Fannin was contacted by Jeanne Palumbo, a New Jersey real estate agent and broker for Quinrick Realty, LLC, ("Quinrick Realty") who was acting on behalf of a client potentially interested in buying the Property. Palumbo traveled to Kent County, visited the Property, and met with Fannin. Fannin provided Palumbo with a copy of a 2005 sketch plan ("the Sketch Plan") showing a proposed layout of 153 lots, which had been prepared the purpose of applying to the county's sewage disposal district for an allocation of sewer capacity. The Sketch Plan contained contour lines clearly indicating the existence of wetlands, which Fannin brought to Palumbo's attention. Fannin also informed Palumbo that the Sketch Plan had not been approved by Kent County for anything other than an equivalent dwelling unit (EDU) allocation so the Property could be connected to sewer, if and when the Property was approved for development. Fannin gave Palumbo a copy of the Kent County Sewage Disposal District Map ("District Map") showing the Property in a proposed expansion of the county's sewage disposal system. Sewer was approved for 145 proposed lots depicted on the Sketch Plan.

         On September 17th, Palumbo, acting as an agent for Defendant Ivy Tree Meadows, LLC ("Ivy Tree"), sent Fannin a proposed agreement of sale to purchase the Property for $818, 018, subject to a contingency allowing termination in the event any hazardous substances, floodplains or wetlands were discovered on the Property during an inspection. Fannin rejected the offer because the price was too low and because Palumbo was aware there were wetlands on the Property. On September 24th, Fannin sent Palumbo a five-page document by facsimile, identifying "153 paper lots" and listing the improvements to the Property and personalty located thereon. Fannin offered to sell the Property with its improvements for $1, 350, 000 and the personalty for $85, 000. Palumbo countered with offer to purchase the Property with its improvements for $919, 018. Fannin revised the proposed agreement by eliminating the contingency related to floodplains and wetlands and increasing the sales price to $1, 150, 000, and on October 2nd, he signed the revised agreement of sale and sent it to Palumbo. On October 4th, Christine Beikman, managing member of Ivy Tree, signed the revised agreement of sale. Ivy Tree then paid a deposit of $10, 000 to Quinrick Realty, to be held in escrow. Since the contract was a cash contract that did not contain a financing contingency, the closing date stated in the contract was November 19, 2013.

         A week before the settlement date, Fannin's attorney sent a letter to Ivy Tree's attorney regarding settlement matters. In response, on November 15, 2013, the attorney informed Fannin's attorney that Ivy Tree would not be able to complete closing on November 19th because it had decided to obtain financing of a portion of the purchase price. Although Fannin was ready, willing and able to complete settlement on November 19th, based on Ivy Tree's representation that the delay in closing would only be two weeks, Fannin agreed to extend the closing date from November 19 to December 19, 2013, without modifying any other contract terms.

         In mid-December, Ivy Tree or Palumbo contacted Fannin directly to request a second extension of the closing date from December 19 to January 30, 2014, and offered to make partial payment of the purchase price in the amount of $200, 000 if Fannin would agree to this extension request. Fannin agreed to extend the closing date a second time in exchange for the partial payment of $200, 000, and signed a second Contract Addendum extending the closing date to January 30th. Although Fannin was verbally informed that Ivy Tree was going to sign the second addendum and wire the $200, 000 to Fannin's attorney on December 19th, Ivy Tree sent a letter to its realtor on December 19th, stating that it was cancelling the contract based on the belief it could not develop the Property into 153 building lots due to wetlands and wetlands buffers. On December 20th, Fannin's attorney sent Ivy Tree's realtor a letter directing her not to refund the $10, 000 deposit to Ivy Tree, and informing the realtor of her obligation to pay the deposit to Fannin based on Ivy Tree's default and breach of contract. Despite Fannin's attempt to resolve this matter by granting an extension until February 21, 2014, for Ivy Tree to complete its purchase of the Property, Ivy Tree never completed the purchase of the Property or expressed any intent to do so.

         Procedural Background

         On February 28, 2014, Plaintiff[2] filed a complaint in this Court seeking specific performance of the contract and damages. The complaint was amended on April 14, 2014, and on May 7th, Ivy Tree filed its answer to the amended complaint. After some discovery issues were resolved, the case stalled for nearly a year, prompting the Court to threaten dismissal under Court of Chancery Rule 41(e). Shortly thereafter, on May 16, 2016, Plaintiff filed a motion for summary judgment, and on June 20th, Ivy Tree filed its cross motion for summary judgment. Both motions now have been fully briefed.

         Issues

         Plaintiff argues that it is undisputed the parties had a valid enforceable contract to purchase the Property. After engaging in several rounds of negotiations, Ivy Tree accepted Plaintiff's offer to sell the Property for $1, 150, 000, and signed the revised agreement of sale. Ivy Tree's deposit of $10, 000 was further proof that it intended to be bound by the contract. According to Plaintiff, the terms of the written agreement were sufficiently definite, and did not contain any contingencies related to the number of lots, financing, or the existence of wetlands or wetland buffers. Ivy Tree's subsequent notice of intent to cancel was an anticipatory breach or repudiation of the contract, and Ivy Tree's subsequent refusal to perform the contract resulted in a breach. The reason for repudiating the contract, i.e., Ivy Tree's inability to develop 153 lots due to the existence of wetlands and wetland buffers, was not a valid reason for repudiating the contract. At all times Ivy Tree had been aware that the "153 paper lots" listed on the Sketch Plan meant proposed lots, and not lots applied for or approved by any governmental entity. Most significantly, the agreement of sale did not contain any contingencies related to wetlands or wetland buffers, or the number of lots that could be developed. Plaintiff argues that Ivy Tree's unjustified repudiation of the contract constitutes bad faith entitling Plaintiff to attorney's fees and costs. Finally, Plaintiff argues that it was ready, willing and able to perform under the contract at all times.

         Ivy Tree argues that Plaintiff is not entitled to summary judgment in its favor because Plaintiff misrepresented to Ivy Tree the number of lots that were available for development. Plaintiff gave Ivy Tree's agent, Palumbo, a plan showing a total of 153 lots available for development, and the contract between the parties referred specifically to a sketch plan showing "Sugar Loaf Farms" consisting of the 153 lots. According to Ivy Tree, Plaintiff's misrepresentation concerning the number of lots materially altered the contract so that Ivy Tree's notice of its intent to cancel was not an anticipatory breach or repudiation of the contract. Ivy Tree could not perform under the contract because there were significantly fewer lots to develop; thus, a material term of the contract had changed. Since Plaintiff concedes that the existence of wetlands and wetland buffers could affect the number of lots that could be developed, Ivy Tree argues that Plaintiff appears to concede that there was a material mistake of fact that may be grounds for rescission of the contract. Furthermore, Plaintiff was not ready, willing and able to perform because it could not deliver a property that would yield 153 lots for development.

         In its cross-motion for summary judgment, Ivy Tree argues that Plaintiff's misstatements or misrepresentations concerning the number of lots available to be developed are grounds for rescission of the contract. According to Ivy Tree, its decision to purchase the Property was based, in part, on what appeared to be 153 lots available for development. Now, it appears that the number of lots will be fewer than 153 due to the existence of wetlands and wetland buffers. If this discrepancy is not a material misrepresentation by Plaintiff, then it is evidence of a mutual mistake of fact by the parties. Furthermore, Ivy Tree did not assume the risk of a mistake because the contract was silent as to the risk of mistake.

         In response, Plaintiff argues that there was no misrepresentation or mistake because Ivy Tree was at all times aware that the "153 paper lots" listed on the Sketch Plan meant only proposed lots, and the Sketch Plan clearly identified the wetlands information. Ivy Tree was in possession of this document prior to signing the contracts of sale and, therefore, had notice of the existence of wetlands and wetland buffers and their potential impact on the number of developable lots that may ultimately be realized on the Property. Plaintiff argues that there was never an assumption that the land would be approved for 153 lots, and Ivy Tree knew it had limited knowledge with respect to the number of developable lots. Since Ivy Tree did not request any further information from Plaintiff and did not seek any survey or delineation report regarding the wetlands and/or wetland buffers and the number of developable lots, the risk of mistake should be allocated to Ivy Tree.

         Standard of Review

         The Court shall grant a motion for summary judgment when, "after reviewing the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, " the record shows that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.[3] Where cross motions for summary judgment are pending, and "the parties have not argued that there is an issue of fact material to the disposition of either motion, " then they are deemed by the Court to be the equivalent of a stipulation for decision on the merits based on the record submitted with the motions.[4]

         Analysis

         In support of its motion for summary judgment, Plaintiff submitted the following documents: (a) the agreement of sale dated October 4, 2013; (b) Ivy Tree's proposed agreement of sale dated September 17, 2013; (c) several emails from or to Palumbo; (d) Ivy Tree's Exclusive Buyer Agency Agreement with Palumbo; (e) excerpts from Palumbo's deposition transcript; (f) portions of the Sketch Plan and the District Map; (g) letters from the parties' counsel; (h) addendum to the agreement of sale dated November 19, 2013; and (i) excerpts from Ivy Tree's responses to interrogatories. Plaintiff also supported its motion for summary judgment with Fannin's four-page affidavit. Ivy Tree supported its motion for summary judgment with Palumbo's affidavit. Plaintiff contends that it is entitled to summary judgment on its request for specific enforcement of the contract while Ivy Tree contends that it is entitled to summary judgment on its request for rescission of the contract.

         The parties do not dispute that a valid contract was created. Nevertheless, Ivy Tree is seeking rescission of the contract. A party is entitled to rescission of a contract for the sale of real property on the basis of fraud, misrepresentation, or mistake.[5] Here, Ivy Tree claims that Plaintiff misrepresented the number of lots that were developable on the Property and, because of the existence of wetlands, 153 lots cannot be developed on the Property. However, there is no evidence of any misrepresentation by Plaintiff. Before the agreement of sale was executed, Ivy Tree's agent was informed of the existence of wetlands on the Property, and the agent knew that the 153 lots shown on the Sketch Plan were only proposed or paper lots laid out for the sole purpose of ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.