IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
HASTINGS FUNERAL HOME, INC. ) ) Plaintiff, ) ) v. ) C.A. No. 2021-0373-PWG ) CHARLES W. HASTINGS, ) ) Defendant. )
MASTER’S REPORT
Date Submitted: August 22, 2022 Final Report: November 14, 2022
Scott G. Wilcox, Esquire, MOORE & RUTT, P.A., Wilmington, Delaware, Attorney for Plaintiff Hastings Funeral Home, Inc.
David C. Hutt, Esquire, Michelle Bounds, Esquire, MORRIS JAMES LLP, Georgetown, Delaware, Attorneys for Defendant Charles W. Hastings
GRIFFIN, M. Pending before me is a dispute about a lease purchase agreement for real
properties used in the operation of a funeral home business in Selbyville,
Delaware. The new owner of a funeral home business sought to exercise the
option to purchase the properties from the former owner under the agreement and
began the process specified in the agreement for establishing the properties’ sale
price. Disputes arose between the parties concerning the process and the sale
price. In its motion for summary judgment, the new owner seeks specific
performance of the agreement to purchase the properties, damages, and attorneys’
fees. In his cross-motion for summary judgment, the former owner denies the new
owner’s entitlement to specific performance or damages, arguing that the new
owner is in material breach of the agreement, and seeks indemnification for his
attorneys’ fees under the agreement. I find that the evidence shows that the new
owner is entitled to specific performance of the agreement, and recommend that
the Court grant the new owner’s motion for summary judgment, deny the former
owner’s cross-motion for summary judgment, order the sale of the properties and
compensatory damages, and deny any award of attorneys’ fees. This is a final
report.
1 I. BACKGROUND
A. Factual Background
On May 4, 2014, William Bryan Bishop, Jr. purchased all the shares and
assets of Plaintiff Hastings Funeral Home, Inc. (“HFH”) from Defendant Charles
W. Hastings (“Hastings”).1 On July 1, 2014, the parties entered into a separate
lease purchase agreement (“Agreement”) for real property owned by Hastings and
located at 19 South Main Street and 24 South Main Street, Selbyville, Delaware
(“Properties”) out of which HFH operates the business.2 The Agreement’s initial
five-year term ended on June 30, 2019, with HFH having the option to renew for
two additional five-year terms.3 During the first and second terms, HFH had the
option to purchase the Properties.4 The Agreement stated that HFH will purchase
the Properties at their “then fair market value” to be agreed upon by HFH and
Hastings.5 If the parties could not agree on the fair market value price, the
Agreement provided a mechanism for determining fair market value (“Pricing
Process”):
1 Docket Item (“D.I.”) 1, ¶¶ 4-5. HFH was founded in 1896 and purchased by Hastings around 1980, who operated the funeral home business until May 4, 2014. D.I. 30, at 4. 2 D.I. 1, ¶ 6; D.I. 30, Ex. A. 3 D.I. 30, Ex. A, art. 2; id., art. 20. 4 Id., art. 21(b). At the end of each term, if HFH did not exercise the option to renew under the Agreement, it was obligated to purchase the Properties. Id., art. 21(a).
2 [T]he fair market value shall be determined by calculating the average fair market value based upon two appraisals commissioned independently by [HFH] and [Hastings] and prepared by MAI, Delaware Licensed Appraisers, provided that any difference between the value does not exceed ten (10%) percent. If such difference is greater than ten (10%), then [HFH] and [Hastings] shall instruct those MAI, Delaware Licensed Appraisers to appoint a third MAI, Delaware Licensed Appraiser to prepare a third appraisal, the cost of which shall be born equally by [HFH] and [Hastings]. If the three MAI, Delaware Licensed Appraisers cannot agree on the fair market value of the [Properties], then [Hastings] and [HFH] shall be bound by the appraisal of the mutually chosen third MAI, Delaware Licensed Appraiser. In the event that [HFH] exercises the option, [HFH] and [Hastings] shall have thirty (30) days after the giving of notice by [HFH] of its intention to exercise the option to obtain the appraisals at their own expense of their own MAI, Delaware Licensed Appraiser. The third appraisal, if necessary, shall be obtained within thirty (30) days thereafter.6
If HFH exercised its option to purchase the Properties during one of the renewal
terms, it must notify Hastings in writing and the “purchase of the Propert[ies] shall
then take place ninety (90) days after the exercise of the option (unless the parties
mutually agree to an alternate date).”7
The Agreement contains a time is of the essence clause.8 It also includes a
default provision requiring that Hastings provide HFH with written notice of, and
the opportunity to cure, any breach of a material term or condition of the
Agreement, with HFH having 30 days to cure any default, unless the period was
5 Id., art. 21(d). 6 Id. 7 Id., art. 21(b).
3 reasonably extended.9 The Agreement contains an indemnification clause
(“Indemnification Clause”) providing that HFH indemnifies Hastings for claims
and expenses, including attorneys’ fees, in defense of claims or causes of action
initiated against Hastings that arise “by, from or through [HFH’s] use, occupancy
and possession of the Propert[ies].”10 It also includes a prevailing party provision
(“Prevailing Party Provision”) requiring that HFH reimburse Hastings for all
expenses, including attorneys’ fees, arising from or in connection with a default by
HFH, if Hastings is the prevailing party in the dispute.11
On January 10, 2019, prior to the end of the Agreement’s initial term, HFH
exercised its option to renew for another five-year term.12 On May 13, 2019,
Hastings responded regarding the rent increase for the second term, provided
notice that HFH had breached the Agreement by subletting a portion of the
Properties, and asked HFH to pay him the rent collected to cure the default.13 On
September 4, 2019, HFH notified Hastings that it was exercising its option to
8 Id., art. 26(b), (d). 9 Id., art. 22. See id., art. 22(d) (providing that the cure period is reasonably extended “if [HFH] has timely commenced and is diligently pursuing a cure of the default”). 10 Id., art. 15(e). 11 Id., art. 23(f). 12 Id., Ex. B. 13 Id., Ex. C.
4 purchase the Properties.14 Hastings responded, on September 12, 2019, that the
purchase could not proceed because HFH had not cured the default nearly four
months after Hastings provided notice of the default, but that, if HFH paid the rent
collected, Hastings “would be glad to discuss the sale of the [Properties].”15 HFH
made the requested payment on September 18, 2019, and indicated that the 30-day
appraisal period should begin on that date.16
On December 6, 2019, Hastings wrote to HFH, stating that he was “sorry it
took so long,” but he was ready to sell the Properties for $950,000.00.17 HFH
responded, on December 20, 2019, that it did not agree that $950,000.00 was the
fair market value price and that the Pricing Process needed to be followed.18
HFH had obtained an appraisal on August 26, 2019 from Harold L. Carmean
(“Carmean”), who was a Delaware certified appraiser but not MAI-certified.19
Carmean appraised the Properties at $637,500.00.20 HFH provided the Carmean
appraisal to Hastings on February 27, 2020, and asked to receive a copy of
Hastings’ appraisal “as soon as possible,” given the 30-day period to obtain
14 Id., Ex. D. 15 Id., Ex. E. 16 Id., Ex. F. 17 Id., Ex. G. 18 Id., Ex. H. 19 Id., Ex. I. 20 Id.
5 appraisals in the Agreement.21 On March 3, 2020, Hastings responded that the
appraiser he hired, William McCain (“McCain”), had completed his appraisal of
the Properties in October 2019 but did not provide a copy of the McCain appraisal
to HFH.22 On March 24, 2020, HFH again asked for a copy of the McCain
appraisal, which Hastings mailed to HFH on March 27, 2020.23 McCain, who was
a MAI and Delaware certified appraiser, appraised the Properties at $925,000.00,
as of October 3, 2019.24 HFH communicated with Hastings by email on May 1,
2020, indicating that, since the difference in the appraisals’ values exceeded ten
percent, the parties’ appraisers had agreed to Georgia Nichols (“Nichols”), a MAI
and Delaware certified appraiser, as the third appraiser, and sought his approval,
and payment of one-half of the cost, to retain the third appraiser.25 Hastings agreed
to retain Nichols and signed the engagement letter on May 15, 2020.26 Nichols
concluded, in her June 16, 2020 appraisal, that the market value of the Properties
was $850,000.00 as of June 5, 2020.27 Hastings sent a June 19, 2020 email to HFH
21 Id. 22 Id., Ex. J. Hastings wrote HFH a week later indicating that he knew the appraised values weren’t “even close,” was asking his appraiser to review the Carmean appraisal, and would provide a copy of the McCain appraisal after that review. Id., Ex. K. 23 D.I. 32, at 7; D.I. 30, Ex. O. 24 D.I. 30, Ex. N. 25 Id., Ex. R. 26 Id.; id., Ex. S, Addendum B. 27 Id., Ex. S, at 65.
6 stating that he will not move forward on the Properties’ sale until the other
appraisers discuss the Nichols appraisal.28
On July 9, 2020, Hastings wrote HFH stating that it has come to his attention
that Carmean was not a MAI-certified appraiser as required by the Agreement so
HFH was “going to have to start all over and hire an MAI Delaware appraiser to
appraise the [Properties]” but, to avoid “gambling on the outcome of a new
appraisal,” HFH can pay Hastings $900,000.00.29 HFH then hired a new MAI-
certified appraiser, John Crognale (“Crognale”), who valued the properties at
$615,000.00, as of October 19, 2020, in an appraisal dated November 2, 2020.30
On November 9, 2020, HFH sent the Crognale appraisal to Hastings, indicating
that, although HFH believed that Hastings had waived his objection to Carmean’s
lack of MAI certification, it had commissioned the Crognale appraisal and, since
the value difference for the Properties still exceeded ten percent, it asked whether
Hastings would agree to using the Nichols appraisal as the third appraisal or
wanted Crognale and McCain to select a new third appraiser.31
After HFH followed up with an email on December 28, 2020, Hastings
replied, in a December 29, 2020 email, that he had not seen HFH’s November 9,
28 Id., Ex. T. 29 Id., Ex. U. 30 Id., Ex. V. 31 Id.
7 2020 letter previously, questioned whether HFH was asking to use the Nichols
appraisal as the third appraisal, and indicated that he would get back to HFH after
consulting with his attorney and appraiser.32 HFH confirmed that it was asking
whether the parties needed to hire a new third appraiser and set a response date of
approximately ten days, to which Hastings responded that he will not make a
decision by that date.33 Later on December 29, 2020, HFH responded that, if
Hastings preferred, they could get the “the three appraisers [to] talk to see if they
can come to a mutually agreed amount.”34 After HFH emailed Hastings on
January 20, 2021 regarding his failure to respond to the December 29, 2020
email,35 Hastings replied, on January 25, 2021, that HFH had breached a material
term or condition in the Agreement because Carmean lacked MAI certification and
the Agreement did not provide for additional appraisals.36 He further stated that he
had “fulfilled [his] obligation” under the Agreement and was “not required to
recognize any redone appraisals or to spend any more money on appraisals,” and
offered alternative price offers.37
32 Id., Ex. T. 33 Id. 34 Id., Ex. W 35 Id. 36 Id., Ex. X (“the [Agreement] does not have a provision allowing for an appraisal redo”). 37 Id.
8 HFH emailed Hastings on February 8, 2021 and on March 8, 2021, stating
that the sale price was the Nichols appraisal’s value of $850,000.00, as set by the
Pricing Process.38 Hastings responded in a March 9, 2021 email that he didn’t
recall HFH’s “last offer,” and, on March 12, 2021, HFH reiterated the $850,000.00
price.39 On March 21, 2021, Hastings submitted additional price offers, which
HFH rejected.40 Hastings’ March 26, 2021 letter reiterated that that the Agreement
does not provide for a “do-over” since Carmean is not MAI-certified, and
continued to provide alternative offers.41
B. Procedural History
On April 29, 2021, HFH filed a complaint claiming Hastings breached the
Agreement and seeking specific performance of the Agreement, damages
representing rent paid by HFH during the dispute, and attorneys’ fees.42 Hastings
filed a motion to dismiss on June 4, 2021, arguing that HFH was not entitled to
specific performance or damages.43 HFH responded, on July 17, 2021, that it had
38 D.I. 32, Ex. O; HFH’s February 8, 2021 email indicated that the Agreement provides for the use of the third appraiser’s value because the parties’ appraisers will not agree to using the other’s value. Id. 39 Id. 40 Id. 41 D.I. 30, Ex. Z. 42 D.I. 1. HFH continues to pay rent under the Agreement. Id., ¶¶ 19, 20. 43 D.I. 5.
9 met its pleading burden for specific performance and damages.44 In a November
29, 2021 final master’s report (“November 29, 2021 Master’s Report”), I denied
the motion to dismiss.45 Hastings filed an answer and a counterclaim seeking
indemnification under the Agreement for his attorneys’ fees defending this
action.46 Discovery followed and, on June 23, 2022, HFH filed an answer to
Hastings’ counterclaim.47 On July 22, 2022, HFH filed its opening brief in support
of its motion for summary judgment (“Motion”),48 and Hastings filed its motion for
summary judgment and opening brief in support of its motion (“Cross-Motion”).49
On August 22, 2022, HFH and Hastings filed their answering briefs in opposition
to the other party’s motion for summary judgment.50
II. STANDARD OF REVIEW
Summary judgment is appropriate only where “the moving party
demonstrates the absence of issues of material fact and that it is entitled to
44 D.I. 9. 45 D.I. 12 (holding that the Agreement does not lack a sufficiently definite price term for the Properties; the Pricing Process is not a condition precedent to the obligation to purchase or sell the Properties under the Agreement; waiver and damages have been sufficiently pled by HFH; and it is reasonably conceivable that HFH can prove the balance of equities tips in its favor). The November 29, 2021 Master’s Report was adopted by the Chancellor on December 14, 2021. D.I. 13. 46 D.I. 14. 47 D.I. 27. 48 D.I. 30. 49 D.I. 31; D.I. 32. 50 D.I. 36; D.I. 37.
10 judgment as a matter of law.”51 Evidence must be viewed “in the light most
favorable to the non-moving party.”52 “In evaluating the summary judgment
record, a trial court shall not weigh the evidence or resolve conflicts presented by
pretrial discovery.”53 Summary judgment may not be granted when material issues
of fact exist or if the Court determines that it “seems desirable to inquire more
thoroughly into the facts in order to clarify the application of law to the
circumstances.”54
When the Court is presented with cross-motions for summary judgment, the
Court may “deem the motions to be the equivalent of a stipulation for decision,”55
but “[t]he existence of cross-motions … does [not] change the standard for
summary judgment.”56 In evaluating cross-motions for summary judgment, the
court examines each motion independently and only grants a motion for summary
51 Wagamon v. Dolan, 2012 WL 1388847, at *2 (Del. Ch. Apr. 20, 2012); see also Cincinnati Bell Cellular Sys. Co. v. Ameritech Mobile Phone Serv. of Cincinnati, Inc., 1996 WL 506906, at *2 (Del. Ch. Sept. 3, 1996), aff’d, 692 A.2d 411 (Del. 1997). 52 Williams v. Geier, 671 A.2d 1368, 1375-76 (Del. 1996) (citing Bershad v. Curtiss- Wright Corp., 535 A.2d 840, 844 (Del. 1987)). 53 AeroGlobal Cap. Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 444 (Del. 2005). 54 In re Est. of Turner, 2004 WL 74473, at *4 (Del. Ch. Jan. 9, 2004) (quoting Holladay v. Patten, 1995 WL 54437, at *3 (Del. Ch. Jan. 4, 1993)) (internal quotation marks omitted); see also Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962). 55 Ct. Ch. R. 56(h). 56 Bernstein v. Tact Manager, Inc., 953 A.2d 1003, 1007 (Del. Ch. 2007).
11 judgment to one of the parties when there is no disputed issue of material fact and
that party is entitled to judgment as a matter of law.57
III. ANALYSIS
The issues before me on summary judgment are whether HFH is entitled to
specific performance of the Agreement to purchase the Properties, damages
representing rent paid by HFH to Hastings, and an award of attorneys’ fees under
the bad faith exception. In addition, I consider whether Hastings should be
indemnified for his attorneys’ fees in this action under the Agreement. I address
each issue below.
A. HFH is Entitled to Specific Performance of the Agreement.
Hastings argues that specific performance of the Agreement cannot be
granted because HFH’s failure to follow the Pricing Process (by not obtaining a
MAI-certified appraiser initially and by not complying with the time periods
specified for the process when the Agreement had a time is of the essence clause)
renders the Properties’ price indefinite, is a material breach of the Agreement, and
the equities tip in Hastings’ favor.58 In contrast, HFH asserts that Hastings waived
the applicable time requirements through his conduct and is equitably estopped
57 See Empire of Am. Relocation Servs., Inc. v. Commercial Credit Co., 551 A.2d 433, 435 (Del. 1988); Wimbledon Fund LP v. SV Special Situations LP, 2011 WL 378827, at *7 (Del. Ch. Feb. 4, 2011). 58 D.I. 32, at 13-26.
12 from enforcing those time periods.59 It claims that Hastings materially breached
the Agreement, and the equities heavily favor it.60
With regard to the sale of the Properties, the Agreement provides that, after
HFH exercises the option to purchase, the sale price is their fair market value at
that time.61 If HFH and Hastings cannot agree on the fair market value of the
Properties, the Agreement details a process for determining the sale price.62 First,
HFH and Hastings commission independent appraisals of the Properties from
“MAI, Delaware Licensed Appraisers” (“MAI-Certification”).63 They have 30
days after HFH exercises the option to purchase to obtain those appraisals (“First
Appraisals Period”).64 If the difference in those appraisals exceeds ten percent, a
third appraisal is obtained from a MAI, Delaware licensed appraiser selected by the
first two appraisers, within 30 days after that (“Third Appraisal Period”).65 If the
three appraisers cannot agree on the sale price, then the parties are bound by the
third appraisal.66 The Agreement provides that the purchase of the Properties takes
place 90 days after the exercise of the option to purchase “unless the parties
59 D.I. 36, at 5-13. 60 Id., at 13-15. 61 D.I. 30, Ex. A, art. 21(d). 62 Id. 63 Id. 64 Id. 65 Id.
13 mutually agree to an alternate date” (“Sale Period,” or collectively with the First
Appraisals Period and the Third Appraisal Period, “Time Periods”).67
A party seeking specific performance must establish, by clear and
convincing evidence, that (1) an enforceable contractual obligation exists; (2) it has
performed (or is ready, willing, and able to perform) its own obligations; and (3)
that the balance of the equities tips in its favor.68 “Specific performance is a
remedy that is particularly suitable for land given its unique characteristics.”69
“The party seeking specific performance has the burden of proving entitlement by
clear and convincing evidence.”70
1. The Agreement is Valid and Enforceable.
I first address whether the Agreement is sufficiently definite to be
enforceable. “[S]pecific performance will only be granted when an agreement is
clear and definite and a court does not need to supply essential contract terms.”71
“A contract is sufficiently definite and certain to be enforceable if the court can …
ascertain what the parties have agreed to do.”72 The essential terms of a real estate
66 Id. 67 Id., art. 21(b). 68 Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010). 69 DeMarie v. Neff, 2005 WL 89403, at *4 (Del. Ch. Jan. 12, 2005). 70 Peden v. Gray, 886 A.2d 1278 (Del. 2005) (ORDER). 71 Osborn, 991 A.2d at 1159. 72 Eagle Force Hldgs., LLC v. EF Invs., LLC, 187 A.3d 1209, 1232 (Del. 2018).
14 contract are the names of the buyer and seller, description of the property to be
sold, sales price or the means of determining the price, the terms and conditions of
the sale, and the signature of the party to be charged.73 Hastings argues that HFH’s
failure to comply with the Time Periods results in non-specific terms that renders
the Properties’ price indefinite.74 I disagree. In the November 29, 2021 Master’s
Report, I concluded that the Agreement did not lack a sufficiently definite price
term for the Properties since it provided a means of determining the price – the fair
market value of the Properties at the time of sale – through the Pricing Process.75 I
further held that “HFH’s failure to comply with all aspects of the [Pricing Process]
in the Agreement does not affect the parties’ intentions in making the Agreement
or whether the Agreement’s terms are definite.”76 As discussed more fully below,
the parties’ actions pertaining to the Agreement do not negate the Court’s ability to
ascertain the Properties’ sale price.
2. HFH has Proven it is Ready, Willing and Able to Perform under the Agreement.
I consider whether HFH is ready, willing and able to perform its obligations
under the Agreement. First, I consider Hastings’ argument that HFH has failed to
73 Pulieri v. Boardwalk Properties, LLC, 2015 WL 691449, at *5 (Del. Ch. Feb. 18, 2015). 74 D.I. 32, at 13-16. 75 D.I. 12, at 9. 76 Id.
15 meet its obligations under the Agreement and materially breached the Agreement
by failing to comply with the Time Periods and the time is of the essence clause.77
HFH responds that Hastings waived enforcement of the Time Periods and breached
the Agreement, by delaying, “continually fail[ing] to comply with any of the time
periods,” and “at no time … indicat[ing] or even appear[ing] to recognize the fact
that the sale of the Propert[ies] was time sensitive.”78 As proof of Hastings’
waiver, it points to Hastings’ acceptance of the Carmean appraisal after the First
Appraisals Period had elapsed, his continued price negotiation efforts beyond the
Sale Period, and his July 9, 2020 letter indicating that HFH could seek a new
appraisal from a MAI-certified appraiser.79
“Specific performance will not be granted to a party who is in default of a
material obligation under the contract, unless that party is excused from
performance of that obligation.”80 “It is fundamental law that a party seeking a
decree for specific performance of a contract must, himself, have performed within
the time specified [for] his own obligations under the contract.”81 However, “[i]t is
well settled in Delaware that contractual requirements or conditions may be
77 D.I. 32, at 13-24. 78 D.I. 36, at 6, 9-13. 79 Id., at 9. 80 Peden, 886 A.2d at 1278. 81 Wells v. Lee Builders, Inc., 99 A.2d 620, 621 (1953) (citations omitted).
16 waived.”82 “Waiver is the voluntary and intentional relinquishment of a known
right.”83 “A contractual requirement or condition may be waived where (1) there is
a requirement or condition to be waived, (2) the waiving party must know of the
requirement or condition, and (3) the waiving party must intend to waive that
requirement or condition.”84 “The standard for demonstrating waiver is ‘quite
exacting;’ because waiver is redolent of forfeiture, ‘the facts relied upon to
demonstrate waiver must be unequivocal.’”85 “Waiver may be shown by
a course of conduct signifying a purpose not to stand on a right and leading, by a
reasonable inference, to the conclusion that the right in question will not be
insisted upon.”86
Here, the evidence shows that adherence to the Time Periods was waived.
Hastings’ first response after HFH exercised the option to purchase on September
18, 2019 was to offer his position on the sale price on December 6, 2019 – almost
80 days after HFH exercised the option to purchase.87 HFH responded 14 days
later that it did not agree with Hastings’ price, indicating that the appraisal process
82 In re Coinmint, LLC, 261 A.3d 867, 893 (Del. Ch. 2021) (citations omitted). 83 AeroGlobal Cap. Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 444 (Del. 2005) (citations omitted). 84 Id. 85 Simon-Mills II, LLC v. Kan Am USA XVI Ltd. P’ship, 2017 WL 1191061, at *34 (Del. Ch. Mar. 30, 2017) (citations omitted). 86 28 Am. Jur. 2d Estoppel and Waiver § 194. 87 See supra note 17 and accompanying text.
17 was triggered.88 From the beginning of the Pricing Process, the Time Periods were
not followed because the parties had not determined they disagreed on the
Properties’ fair market value until long after the First Appraisals Period had ended
on October 18, 2019 (or even after the Third Appraisal Period ended on November
17, 2019). They had obtained the appraisals within the First Appraisals period,89
but did not share their appraisals with each other until February 2020 (HFH) and
March 2020 (Hastings, after repeated requests from HFH).90 The next step in the
Pricing Process – obtaining a third appraiser if the difference between the first two
appraisals exceeded ten percent – was not implicated until that occurred.91 After
HFH sought Hastings’ approval and payment for the third appraiser on May 1,
2020, Hastings agreed to hiring the third appraiser, and signed her engagement
letter, on May 15, 2020.92 The third appraiser completed the Nichols appraisal on
88 See supra note 18 and accompanying text. 89 The evidence shows that HFH had obtained the Carmean appraisal on August 26, 2019 and Hastings had obtained the McCain appraisal on October 3, 2019, so they were in compliance with the plain language related to the First Appraisals Period. See supra notes 19, 24 and accompanying text; D.I. 30, Ex. A, art. 21(d). 90 See supra notes 21, 23 and accompanying text. 91 See supra note 65 and accompanying text. Hastings would have known on February 27, 2020 that the difference exceeded ten percent but took no steps towards obtaining a third appraisal. See supra notes 21, 22, 25 and accompanying text. 92 See supra note 26 and accompanying text.
18 June 16, 2020, which was far outside of the Third Appraisal Period, or the Sale
Period, which ended on December 17, 2019.93
The evidence shows that Hastings never expressed any concern that the
Agreement’s time deadlines were not being met; instead he delayed and took
ample time responding to HFH’s communications seeking to move the Pricing
Process forward. By executing the third appraiser’s engagement letter on May 15,
2020, he acknowledged, and approved, in writing that the third appraisal was
occurring outside of the Third Appraisal Period. It appears the first time Hastings
mentioned any concern about the lack of compliance with the Time Periods was in
his motion to dismiss.94
By executing the Agreement, Hastings knew of the Time Periods and the
time is of the essence clause,95 and was aware of the time passing while the Pricing
Process progressed and that the Time Periods and the time is of the essence clause
were not being followed. His conduct was unequivocal in signifying that the Time
Periods and the time is of the essence clause were waived in this instance.96
93 See supra note 27 and accompanying text. 94 See D.I. 5, at 4-7. 95 See e.g., Sammons v. Andersen, 968 A.2d 492 (Del. 2009) (“It is well settled in Delaware that a person is bound by the details of a document he signed even if he failed to inform himself of the details.”). 96 “Delaware courts will generally give substantial weight to [time is of the essence] provisions.” Twin Willows, LLC v. Pritzkur, Tr. for Gibbs, 2021 WL 3172828, at *4 (Del. Ch. July 27, 2021). Courts, however, look to the conduct of the parties to determine whether time provisions in a contract, including a time is of the essence clause, are 19 Because of that waiver, I do not find that HFH materially breached the Agreement,
or failed to satisfy its obligations related to the Time Periods and the time is of the
essence clause here.
Next, I consider whether HFH’s initial failure to use a MAI-certified
appraiser prevents HFH’s entitlement to specific performance of the Agreement.
Hastings argues that HFH’s failure to use a MAI-certified appraiser constituted a
material breach since the MAI-certification requirement was specified in the
Agreement and imposed heightened industry standards to ensure the “appraisal
process was legitimate and fair.”97 HFH responds that it commissioned a new
appraisal by a MAI-certified appraiser after Hastings complained about Carmean’s
lack of MAI-certification.98
The Pricing Process specifies that the appraisers be MAI-certified.99
Carmean, who completed HFH’s initial appraisal, was not MAI-certified.100 After
controlling. See HomeOwners Expert Serv., Inc. v. Bobb, 1977 WL 5315, at *2 (Del. Ch. Mar. 15, 1977). Further, the language detailing the Sale Period specifically authorizes flexibility in the Sale Period, by allowing the parties to change the Sale Period if they “mutually agree to an alternate date.” D.I. 30, Ex. A, art. 21(b). 97 D.I. 32, at 15-16, 22. 98 D.I. 30, at 22. 99 Id., Ex. A, art. 21(d). 100 It appears that HFH may have been confused about Carmean’s MAI-Certification. The Carmean Appraisal identifies Carmean as Delaware certified but does not mention MAI-certification. Id., Ex. I. HFH’s December 20, 2019 letter to Hastings identifies Carmean as MAI-certified, although other letters refer to using Delaware licensed appraisers. See id., Exs. H, I.
20 the Nichols appraisal was completed, on July 9, 2020, Hastings wrote HFH
asserting the Carmean appraisal was invalid since Carmean lacked the required
MAI-Certification.101 He stated that “it would seem that [HFH] is going to have to
start all over and hire an MAI Delaware appraiser to appraise the [Properties].”102
I do not find that the MAI-Certification was waived by Hastings – the
evidence does not show that Hastings intentionally relinquished that
requirement.103 Instead, I find the evidence shows that HFH cured any default of
its use of a non-MAI-certified appraiser when it commissioned the Crognale
appraisal after receiving Hastings’ July 9, 2020 letter. In that letter, Hastings
offered HFH the option to obtain an appraisal by a MAI-certified appraiser, which
was, in effect, starting over.104 The Agreement provides that HFH will not be
considered to be in default if it fails to comply with a material term or condition of
the Agreement until Hastings provides written notice of the default and HFH has
30 days to cure, although the cure period is reasonably extended if HFH is
diligently pursuing the cure.105 The approach to curing the default – starting over
and obtaining a new appraisal by a MAI-certified appraiser – was proposed by
101 Id., Ex. U. 102 Id. 103 Hastings asserts that he only discovered Carmean was not MAI-certified immediately before complaining about it in his July 9, 2020 letter. D.I. 32, at 8. 104 See id., Ex. U. 105 See id., Ex. A, art. 22(d).
21 Hastings in his July 9, 2020 letter, and followed by HFH. Accordingly, I find that
HFH cured any default regarding its failure to initially use a MAI-certified
appraiser.106
3. The Equities Favor HFH.
Finally, I consider whether the balance of equities tip in HFH’s favor to
support its specific performance claim. Hastings argues that the equities tip in his
favor because HFH breached the terms of the Agreement.107 HFH responds that
the equities weigh in its favor because it made every effort to complete the
Agreement, in contrast to Hastings’ conduct in contravention of the Agreement.108
In balancing the equities for specific performance, the Court must consider
whether “specific enforcement of a validly formed contract would cause even
greater harm than it would prevent.”109 I find that the equities tip in HFH’s favor
since it has not breached the Agreement, and I recognize that the funeral home
business it purchased from Hastings appears to have operated out of the Properties
since before 1900.110
106 HFH did not provide the new Crognale appraisal to Hastings until November 9, 2020, but Hastings’ previous action regarding defaults (allowing HFH to cure the default four months after notice), and his failure to object to the Crognale appraisal because of timing, indicate that the time for the Crognale appraisal was reasonably extended. See id., Ex. V. 107 D.I. 32, at 25-26. 108 D.I. 30, at 23-25. 109 Walton v. Beale, 2006 WL 265489, at *7 (Del. Ch. Jan. 30, 2006). 110 See supra note 1.
22 In conclusion, I find that that HFH has shown, by clear and convincing
evidence, that it is entitled to specific performance of the Agreement and that the
sale price for the Properties is $850,000.00, which is the fair market value as
determined by the third appraisal and the sale price under the Agreement.111 The
sale of the Properties to HFH shall occur within 45 days after the order
implementing this report is entered.
B. Compensatory Damages for the Delay in the Properties’ Transfer are Due.
HFH seeks the return of rent it paid to Hastings on the Properties beginning
in August 2020 due to Hastings’ breach by preventing closing on the Properties
within the Time Periods.112 Hastings argues that HFH’s rent and specific
performance claims fail for the same reasons, and rent is due until the sale is
completed.113
111 I recognize that my decision allows a gap in the Pricing Process – the step in which the three MAI-certified appraisers determine if they can mutually agree on the Properties’ sale price. Given the duration of this dispute and the large disparity among the MAI- certified appraisers’ valuations of the Properties across a relatively short time period – McCain appraised the Properties at $925,000.00 (as of October 2019), Nichols at $850,000.00 (as of June 2020), and Crognale at $615,000.00 (as of October 2020), I find that requiring the three MAI-certified appraisers to meet to determine if they can mutually agree on the sale would be a useless exercise and do not require that they do so. See, e.g., W. Air Lines, Inc. v. Allegheny Airlines, Inc., 313 A.2d 145, 154 (Del. Ch. 1973). Therefore, the controlling provision in the Pricing Process compels the use the third appraisal to decide the sale price. 112 D.I. 30, at 25; D.I. 36, at 13-14. 113 D.I. 32, at 27; D.I. 37, at 22.
23 “Equity may, when its jurisdiction is invoked to obtain specific performance
of a contract, award damages or pecuniary compensation along with specific
performance when the decree as awarded does not give complete and full relief.”114
In ordering specific performance, the Court will “adjust the equities of the parties
in such a manner as to put them as nearly as possible in the same position as if the
contract had been performed according to its terms.”115
An order of specific performance ... will be so drawn as best to effectuate the purposes for which the contract was made and on such terms as justice so requires. As is the case here, an order of specific performance seldom results in performance within the time the contract requires. To that end, damages for the delay will usually be appropriate.116
“Where the delay is on the part of the [seller], the purchaser is entitled to
the rents and profits from the time when, according to the terms of the contract,
possession should have been delivered, and the [seller] is entitled to a credit for the
interest earned by the purchaser on the unpaid purchase money.”117 “[A] court of
equity may award damages for what the purchasers have lost by reason of the
seller’s delay in conveying the property.”118 And, “equity may require a party to
pay interest on the purchase price as a condition to obtaining specific performance
114 Tri State Mall Assocs. v. A. A. R. Realty Corp., 298 A.2d 368, 371 (Del. Ch. 1972). 115 Id. at 371-72. 116 Snow Phipps Grp., LLC v. Kcake Acquisition, Inc., 2021 WL 1714202, at *55 (Del. Ch. Apr. 30, 2021) (internal quotation marks and citations omitted). 117 Tri State Mall Assocs., 298 A.2d at 371.
24 where one party would otherwise inequitably receive a windfall at the other’s
expense.”119
Here, the evidence shows that Hastings caused delay in the transfer of the
Properties to HFH. After HFH obtained the Crognale appraisal, it shared the
appraisal with Hastings on November 9, 2020, and inquired whether Hastings
agreed to using the Nichols appraisal, or desired to have a new third appraiser
selected.120 Hearing no response from Hastings, HFH offered, on December 29,
2020, to have the three MAI-certified appraisers discuss the sale price.121 Hastings
did not respond to that offer either, but, on January 25, 2021, stated that he
believed HFH had breached the MAI-Certification, he would not recognize “any
redone appraisals,” and he would do “[n]othing more.”122 Between January 25,
2021 and his March 26, 2021 letter, Hastings’ communications with HFH
contained varying sale price offers for the Properties that were not based on the
Pricing Process.123 Throughout that time HFH remained steadfast in its position
that, under the Agreement, the third appraisal set the sale price at $850,000.00.124
118 Romero v. Killy, 1987 WL 13521, at *7 (Del. Ch. July 1, 1987). 119 Vaughan v. Creekside Homes, Inc., 1994 WL 586833, at *3 (Del. Ch. Oct. 7, 1994). 120 D.I. 30, Ex. V. 121 See supra note 34 and accompanying text. 122 See D.I. 30, Ex. X. 123 See supra notes 39-41 and accompanying text. 124 See supra notes 38-40 and accompanying text. 25 When asked about next steps under the Pricing Process, Hastings indicated he
would not do anything else. He had an obligation to complete the Pricing Process
and determine the sale price under the Agreement.
As of January 25, 2021, Hastings refused to move forward to complete the
Pricing Process (although he continued to try to negotiate the sale price after that,
he did so in contravention of the Pricing Process). On that date, the sale price
could have been set at the third appraisal’s value (based on the final method for
determining the sale price in the Agreement), and HFH’s purchase of the
Properties could have occurred, under the Agreement. After the purchase, HFH
would no longer owe rent on the Properties. So, to put the parties in as close as
possible to the positions they would have been in if possession of the Properties
had been delivered as of January 25, 2021, I find that rent paid on the Properties by
HFH after that date should be credited against the sale price of $850,000.00.125 In
addition, if delivery had occurred, Hastings would have received the sale proceeds
from HFH on January 25, 2021, and he is entitled to a credit for interest on the
unpaid purchase money since January 25, 2021. Therefore, the rent paid by HFH
to Hastings since January 25, 2021 should be deducted from the sale price, and
pre-judgment interest at the legal rate on the $850,000.00 sale price should be
added for the same period.
26 C. Attorneys’ Fees Should not be Awarded to Either Party.
First, I consider Hastings’ counterclaim that he is entitled to indemnification
for his attorneys’ fees to defend this action under the Agreement.126 HFH refutes
that the Indemnification Clause covers Hastings’ defense in this case.127 The
Indemnification Clause provides that HFH will indemnify Hastings for attorneys’
fees incurred “in defense” of actions initiated against him.128 The Agreement also
contains the Prevailing Party Provision, which requires HFH to reimburse Hastings
for expenses, including attorneys’ fees, when Hastings is the prevailing party in an
action related to HFH’s default under the Agreement.129
“Delaware follows the ‘American Rule,’ which provides that each party is
generally expected to pay its own attorneys’ fees regardless of the outcome of the
litigation.”130 “One of the exceptions to the American Rule, however, is that
parties may agree to shift fees contractually,” through using indemnification
provisions.131 Indemnification clauses, however, “are presumed not to require
125 HFH states that it has paid Hastings rent of $6,468.00 per month throughout this litigation. D.I. 30, at 16. 126 D.I. 32, at 28. 127 D.I. 30, at 32. 128 Id., Ex. A, art. 15(e). 129 Id., art. 23(f). 130 Shawe v. Elting, 157 A.3d 142, 149 (Del. 2017) (citation omitted); see also ATP Tour, Inc. v. Deutscher Tennis Bund, 91 A.3d 554, 558 (Del. 2014). 131 Paul Elton, LLC v. Rommel Delaware, LLC, 2022 WL 793126, at *1 (Del. Ch. Mar. 16, 2022); see also Dittrick v. Chalfant, 2007 WL 1378346, at *1 (Del. Ch. May 8, 2007). 27 reimbursement for attorneys’ fees incurred as a result of substantive litigation
between the parties to the agreement absent a clear and unequivocal articulation of
that intent.”132 “[P]urely contractual indemnification provisions only shift first-
party claims if the contract explicitly so provides.”133 “When a contract contains
both an indemnification provision and a ‘prevailing party’ provision elsewhere in
the contract, the courts of this state will not construe the indemnification provision
to allow first-party fee-shifting.”134 Here, the Agreement contains both the
Prevailing Party Provision and the Indemnification Clause, which does not
explicitly provide for first-party fee-shifting. As a result, I do not construe the
Indemnification Clause as allowing for first-party fee-shifting, so Hastings’
indemnification claim fails, and I recommend that the Court deny Hastings’ claim
for attorneys’ fees.135
132 Paul Elton, LLC, 2022 WL 793126, at *1 (internal quotation marks and citation omitted); see also Deere & Co. v. Exelon Generation Acquisitions, LLC, 2016 WL 6879525, at *1 (Del. Super. Nov. 22, 2016) (“Standard indemnity clauses are not presumed to apply to first-party claims.”). 133 Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 2020 WL 7861336, at *5 (Del. Ch. Dec. 31, 2020), aff’d sub nom. Herzog v. Great Hill Equity Partners IV, LP, 269 A.3d 983 (Del. 2021). 134 Paul Elton, LLC, 2022 WL 793126, at *2. 135 Assuming arguendo that the Indemnification Clause would control and allow first- party fee-shifting, the Indemnification Clause provides for indemnification of “reasonably incurred attorneys fees,” I would not shift fees since reasonable attorneys’ fees are “related to the result achieved in the litigation” and HFH effectively prevails on all claims in this litigation. Great Hill Equity Partners IV, LP, 2020 WL 7861336, at *6.
28 Next, I consider HFH’s claim for attorneys’ fees under the bad faith
exception to the American Rule. It argues that Hastings’ conduct in delaying his
responses to HFH’s communications and taking baseless positions related to this
matter before and during the litigation justifies an attorneys’ fee award.136
Hastings refutes HFH’s claim that the bad faith exception applies.137
The bad faith exception to the American Rule applies only in “extraordinary
cases” where the “losing party has ‘acted in bad faith, vexatiously, wantonly, or for
oppressive reasons.’”138 To apply the bad faith exception to pre-litigation conduct,
courts determine whether “the pre-litigation conduct of the losing party was so
egregious as to justify an award of attorneys’ fees as an element of damages.”139
Courts have found bad faith for the conduct of litigation “where parties have
unnecessarily prolonged or delayed litigation, falsified records or knowingly
asserted frivolous claims.”140 To find bad faith, a party must have acted in
136 D.I. 30, at 28-31. 137 D.I. 37, at 25-29. 138 Brice v. State, Dep’t of Correction, 704 A.2d 1176, 1179 (Del. 1998) (citations omitted). 139 Hardy v. Hardy, 2014 WL 3736331, at *18 (Del. Ch. July 29, 2014). 140 Kaung v. Cole Nat. Corp., 884 A.2d 500, 506 (Del. 2005) (quoting Johnston v. Arbitrium (Cayman Islands) Handels AG, 720 A.2d 542, 546 (Del. 1998)) (internal quotation marks omitted); see also RBC Capital Markets, LLC v. Jervis, 129 A.3d 816, 877 (Del. 2015) (citation omitted).
29 subjective bad faith, which “involves a higher or more stringent standard of
proof, i.e., ‘clear evidence.’”141
It is evident that Hastings feels strongly about the sale of the Properties,142
but the evidence does not show that his actions prior to litigation were so egregious
as to justify awarding attorneys’ fees as damages,143 or that he acted for oppressive
reasons, unnecessarily delayed the litigation, or knowingly asserted frivolous
contentions, during litigation. Thus, I conclude that the high standard for awarding
attorneys’ fees for bad faith has not been met here and recommend that the Court
decline to award attorneys’ fees to HFH in this matter.
IV. CONCLUSION
For the reasons stated above, I recommend that the Court grant Plaintiff
Hastings Funeral Home, Inc.’s motion for summary judgment and deny Defendant
Charles W. Hastings’ cross-motion for summary judgment, and direct that
Defendant sell the Properties located at 19 South Main Street and 24 South Main
Street, Selbyville, Delaware to Plaintiff. I recommend that the Court conclude that
the sale price for the Properties is $850,000.00 and that, beginning as of January
25, 2021, prejudgment interest at the legal rate should be added to the sale price,
141 Arbitrium (Cayman Islands) Handels AG v. Johnston, 705 A.2d 225, 232 (Del. Ch. 1997), aff’d, 720 A.2d 542 (Del. 1998) (citations omitted). 142 See D.I. 30, Ex. J. 143 Hastings states that he was proceeding pro se prior to litigation. D.I. 37, at 28.
30 and the rent paid by HFH to Hastings on the Properties should be subtracted, to
determine the final amount of sale proceeds to be exchanged for the transfer of the
Properties between the parties. I further recommend that the Court decline to
award attorneys’ fees to either party. This is a final report, and exceptions may be
taken under Court of Chancery Rule 144. The parties shall submit an
implementing order (reflecting reductions for rent and additions for interest) within
15 days of this report becoming final, and the sale of the Properties shall take place
within 45 days after the implementing order is entered.
/s/ Patricia W. Griffin Master Patricia W. Griffin