Spacht v. Cahall

• Court: Superior Court of Delaware
• Decided: October 27, 2016
• Docket: N14C-07-198 AML
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

DAVID B. SPACHT, ) ) Plaintiff, ) ) C.A. N14C-07-198 AML v. ) ) WILLIAM C. CAHALL, ALICE B. ) CAHALL, STAR BUILDERS, INC., ) TRIAL BY JURY OF LAYAOU LANDSCAPING INC., and ) TWELVE DEMANDED RISING SUN CONTRACTORS, INC., ) ) Defendants, ) ) and ) ) STAR BUILDERS, INC., ) ) Defendant/Third-Party Plaintiff , ) ) v. ) ) MICHAEL LEPORE CONTRACTORS, ) INC., ) ) Third-Party Defendant. )

Submitted: July 25, 2016 Decided: October 27, 2016

ORDER

Plaintiff’s Motion to Enforce Settlement Agreement: GRANTED, in part

1. Four days before trial in this action was scheduled to begin, the parties

reached an agreement intended to settle their disputes. The defendants’ counsel memorialized in an email the agreed-upon terms, after which the plaintiff’s counsel

advised the Court that the case had settled and the trial dates could be removed

from the calendar. The defendants did not dispute that representation. A week

later, the plaintiff sent a draft written agreement to the defendants, at which time

the defendants attempted to introduce a new term permitting payment over three

years, an issue the parties never discussed during their negotiations. The plaintiff

now seeks an order enforcing the parties’ agreement without that new term,

arguing a binding agreement was reached as to all material terms. I agree and

therefore grant the plaintiff’s motion.

FACTUAL BACKGROUND

2. The plaintiff, David Spacht, filed this action alleging negligent

construction, breach of contract, breach of warranties, and related claims in

connection with the construction of his home. According to the allegations in the

complaint, Defendant Star Builders, Inc. (“Star”) and its subcontractors built

Spacht’s home. Spacht also named as defendants Star’s two principals, William C.

and Alice B. Cahall (collectively, the “Cahalls”). The case was scheduled to be

tried on April 11, 2016.

3. The parties mediated the case with the assistance of David White,

Esquire in August 2015. During mediation, the Cahalls discussed with Mr. White

2 their limited financial means to fund a large up-front settlement payment.1 The last

settlement offer Spacht made during the 2015 mediation was for a payment of

$60,000, with half paid immediately and half paid over the next two years. The

Cahalls rejected that offer and the mediation concluded. The parties continued,

however, to discuss settlement over the next several months, both with Mr. White

and among themselves.

4. On April 7, 2016, the parties reached an oral agreement regarding the

amount to be paid in settlement, along with other terms.2 That same day, Victoria

Petrone, Esquire, who represented Star and the Cahalls, sent to C. Scott Reese,

Esquire, who represented Spacht, an email (the “April 7 E-Mail”), memorializing

the “general terms of the settlement agreement reached between Spacht and the

Cahalls and Star Builders.”3 The terms Ms. Petrone identified were:

1. Spacht will be paid $15,000 in exchange [] for a full release of the Cahalls 2. A judgment will be entered against Star Builders in the amount of $130,000 3. Star Builders and/or the Cahalls will assign their rights against Selective related to this claim.4

1 Letter to the Court from Victoria Petrone, Esquire, dated July 15, 2016 (hereinafter “Petrone Letter”), Ex. A, Aff. of David White, Esquire. 2 Petrone Letter at 2. 3 Id. at Ex. B. 4 Id.

3 Further manifesting her client’s intent that this represented a final agreement

resolving the claims, Ms. Petrone concluded the email by stating: “Formal

paperwork will follow.”5

5. Spacht’s counsel then notified the Court that a settlement had been

reached with Star and the Cahalls.6 The trial was cancelled, and the Court did not

rule on the Cahalls’ pending motion for summary judgment. On April 15, 2016,

Spacht’s counsel, Mr. Reese, e-mailed a proposed settlement agreement to Ms.

Petrone, asking: “Does this look ok[?]”7 Ms. Petrone responded four days later

that: “The Cahalls tell me they can pay $5,000/year for the next three years,

payable in June.”8

6. When Mr. Reese indicated he would file a motion to enforce the

settlement if the Cahalls refused to sign the draft agreement, Ms. Petrone

responded that Mr. White, the mediator, “had relayed that your client may be

agreeable to a payment plan and [the Cahalls’] agreement to the settlement figure

was contingent on some arrangement.”9 Ms. Petrone’s email further

acknowledged, however, that “[t]here was no discussion about timing of payment

5 Id. 6 Spacht separately reached settlements with the other defendants. Those agreements are not an issue in this motion. 7 Petrone Letter, Ex. C. 8 Id. at Ex. D. 9 Id. at Ex. E.

4 in our negotiations.”10 Mr. Reese then filed the pending motion to enforce the

settlement agreement (the “Motion”). The parties argued the Motion on July 7,

2016, and then submitted supplemental letter briefs at my request.

ANALYSIS

7. The issue before the Court is whether the parties reached a binding

settlement agreement on April 7, 2016, as memorialized by the April 7 E-Mail, or

whether the timing of payment was a material term such that the parties’ failure to

agree on that issue renders the settlement unenforceable. Delaware courts

encourage negotiated resolutions to contested cases, and, for that reason, among

many others, settlement agreements are enforceable as contracts.11 As the party

seeking to enforce the purported agreement, Spacht bears the burden of proving the

existence of a contract by a preponderance of the evidence.12 In determining

whether Spacht has met his burden, I must inquire:

whether a reasonable negotiator in the position of one asserting the existence of a contract would have concluded, in that setting, that the agreement reached constituted agreement on all of the terms that the parties themselves regarded as essential and thus that that agreement concluded the negotiations . . . .13

10 Id. 11 Schwartz v. Chase, 2010 WL 2601608, at *4 (Del. Ch. Jun. 29, 2010); Asten, Inc. v. Wangner Sys. Corp., 1999 WL 803965, at *1 (Del. Ch. Sept. 23, 1999). 12 Schwartz, 2010 WL 2601608, at *4. 13 Loppert v. WindsorTech, Inc., 865 A.2d 1282, 1285 (Del. Ch. 2004) (quoting Leeds v. First Allied Conn. Corp., 521 A.2d 1095, 1097 (Del. Ch. 1986)).

5 It is the parties’ overt manifestations of assent, rather than their subjective intent,

that controls the question of whether an agreement was reached on all material

terms.14

8. Spacht contends the Motion should be granted and the parties’

agreement enforced because the parties reached an agreement on April 7, 2016

regarding all material terms of the settlement. The issue regarding the timing of

payment, Spacht argues, and the suggestion that payment would be made over the

course of three years, never was communicated by the Cahalls when the settlement

offer was made and accepted. Spacht contends the timing of payment was not

material and an agreement on that term therefore was not necessary for a binding

agreement to be formed.

9. The Cahalls, on the other hand, contend no enforceable agreement

was reached because (1) they did not manifest their intent to be bound to Spacht’s

settlement offer, and (2) even if an agreement was reached as to some terms of

settlement, there is no enforceable contract because there was no meeting of the

minds on the material term of timing of payment. The Cahalls assert funding a

$15,000 payment within 30 days is impossible in view of their limited financial

means. Although I am sympathetic to their position, the Cahalls’ arguments do not

overcome the clear evidence that the parties reached a binding agreement.

14 United Health All., LLC v. United Med., LLC, 2013 WL 6383026, at *6 (Del. Ch. Nov. 27, 2013).

6 10. As to the question of whether they manifested an intent to be bound

by Spacht’s offer, the Cahalls assert that Spacht offered settlement at $60,000, with

half to be paid upfront and the balance over two years, that the Cahalls

counteroffered settlement at $15,000, that Spacht then requested payment within

30 days, and that the Cahalls counteroffered with payment over three years. Put

differently, the Cahalls argue they did not manifest assent to be bound to Spacht’s

offer, but rather counteroffered for payment to be made over a period of three

years. The factual record does not match the Cahalls’ argument. In order for a

contract to be formed, the parties must have manifested their assent and must have

reached a complete meeting of the minds on all material terms. 15 The Cahalls

rejected the offer made at the August 2015 mediation for a $60,000 settlement

payment to be paid within two years. That offer therefore no longer was “live.”

After continuing negotiations between counsel, the parties agreed the Cahalls

would make a settlement payment of $15,000, judgment in the amount of $130,000

would be entered against Star, and Star and the Cahalls would assign to Spacht

their rights against a third party. The April 7 E-Mail demonstrates, by a

preponderance of the evidence, that there was a meeting of the minds between the

parties regarding the terms of their agreement. That is, Ms. Petrone’s email

manifested her clients’ assent to be bound to the parties’ agreement and

15 PharmAthene, Inc. v. SIGA Techs., Inc., 2011 WL 4390726, at *13 (Del. Ch. Sept. 22, 2011); Ramone v. Lang, 2006 WL 905347, at *10 (Del. Ch. Apr. 3, 2006).

7 memorialized the key terms of that agreement. The Cahalls further manifested that

assent by remaining silent when Spacht represented to the Court that a settlement

agreement had been reached.

11. The Cahalls also contend, however, that even if they manifested an

intent to be bound, the parties did not agree to all terms material to the settlement.

The fact that the parties did not reach an agreement on every term is not dispositive

of the question of whether a binding contract was formed; the parties need only

have reached an agreement as to terms that were “essential.” A settlement

agreement that leaves other matters to future negotiation is enforceable if those

other matters are not “essential” terms.16 When terms are left to future negotiation,

the enforceability of an agreement depends on “the relative importance and

severability of the matter left to the future.”17 That is, this Court must determine

whether the timing of the payment to which the Cahalls agreed was “so essential to

the bargain that to enforce the promise would render enforcement of the rest of the

agreement unfair.”18

16 Loppert, 865 A.2d at 1289. 17 Asten, Inc., 1999 WL 803965, at *2 (internal quotations and citations omitted). 18 Id. The fact that Spacht later sent a proposed formal settlement agreement for review and signature does not support a conclusion that no binding agreement had been reached. Where an agreement has been reached on all essential terms, the mere fact that it was understood that a formal contract later would be drawn up and signed does not render the settlement incomplete or unenforceable, absent a positive agreement that the contract would not be binding until it was memorialized and executed. Universal Prods. Co. v. Emerson, 179 A.2d 387, 394 (Del. 1935). There is no evidence here that the parties agreed their settlement only would become binding when a formal contract was executed.

8 12. The relative importance of a term is by its nature a fact-intensive

inquiry. The absence of an agreement on a particular term has been found to be

immaterial where other terms in the parties’ agreement allow the Court to enforce

the parties’ bargain.19 Where, however, the unresolved terms are material and the

parties’ intent cannot be gleaned from other aspects of the agreement, no

enforceable contract exists.20

13. The Cahalls assert that no complete agreement was reached as to all

material terms, and that the April 7 E-Mail only reflected an agreement as to the

amount of the settlement payment. Although there are cases in which a court has

concluded that the parties only had agreed to some, but not all, material terms, and

that the agreement a movant sought to enforce therefore was not complete and

binding,21 this is not such a case. The Cahalls argue, in an indirect fashion, that the

timing of payment was a material term because they “told the mediator that they

did not have cash readily available to pay toward a settlement,” and because the

last offer made during the August 2015 mediation proposed extending the payment

over a two-year period. Whatever the Cahalls’ subjective intent, however, a

reasonable person would conclude, based on the course and substance of the

19 See, e.g. Asten, Inc., 1999 WL 803965, at *2-3 (concluding unresolved administrative issue as to how to effect division of proceeds paid in kind rather than in cash did not constitute omission of material term); Hendry v. Hendry, 1998 WL 294009, at *2 (Del. Ch. June 3, 1998) (holding exact property line description was not an essential term because other terms of the contract allowed the Court to enforce the parties’ agreement). 20 Schwartz, 2010 WL 2601608, at *10-11. 21 Leeds, 521 A.2d 1095.

9 parties’ negotiations, that the negotiations had concluded and an agreement had

been reached.

14. For example, there is no evidence, and the Cahalls do not argue, that

they advised Spacht that timing of payment was essential or that they would not be

bound by the settlement agreement until the parties resolved the timing issue.

Although the Cahalls assert they told the mediator that timing was important, they

do not assert, and cannot show, that timing ever was discussed with Spacht after

the Cahalls rejected Spacht’s two-year offer in August 2015. Ms. Petrone

conceded to Spacht’s counsel that “there was no discussion about timing of

payment” during negotiations. Although the Cahalls assert that “their agreement to

a settlement figure was contingent on some arrangement” to extend payment over a

period of years, they offer no evidence that they communicated that contingency to

Spacht.22 The absence of discussion, particularly in the critical period leading up

to the parties’ April 7th agreement, strongly indicates the term was not essential.

Other facts support that conclusion, particularly Ms. Petrone’s reference on April

7th to the “settlement agreement reached between [the parties],” even though no

agreement as to timing had been reached at that time.

15. That is not to say, however, that the 30-day payment term proposed by

Spacht’s counsel is part of the parties’ agreement to be enforced by this Court.

22 Petrone Letter, Ex. E.

10 The parties left to future negotiations the resolution of non-material terms,

including the timing of payment. “The Court will not enforce terms of a written

agreement which, although they may be ‘reasonable,’ were not discussed by the

parties.”23 The Motion to Enforce the Settlement Agreement therefore is

GRANTED to the extent it seeks an order enforcing the terms memorialized in the

April 7 E-Mail.

IT IS SO ORDERED.

/s/ Abigail M. LeGrow _ Abigail M. LeGrow, Judge

Original to Prothonotary cc: C. Scott Reese, Esquire Victoria Petrone, Esquire

23 See Corbesco, Inc. v. Local No. 542, 620 F. Supp. 1239, 1244 (D. Del. 1985).