Sarah Peterson v. Grace Peterson

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
SARAH PETERSON, )
)
Plaintiff, )
)
v. ) C.A. No. 2023-1207-BWD
)
GRACE PETERSON, )
)
Defendant. )
ORDER DENYING MOTION TO DISMISS
WHEREAS: 1
A. Plaintiff Sarah Peterson (“Plaintiff”) owns 8.4 acres of real property in
Laurel, Delaware (the “Property”). Pet. ¶ 1. Defendant Grace Peterson
(“Defendant”) is Plaintiff’s ex-mother-in-law. Defendant “own[s] in trust”
approximately 64.5 acres adjacent to the Property. Id. ¶ 2.
B. In 2002, Defendant and her husband, Ben A. Peterson, gifted the
Property to their son, Allen Peterson, and his then-wife, Plaintiff. Id. ¶ 3. In January
1
The following facts are taken from the Verified Petition for Specific Performance (the
“Petition”) and the documents incorporated by reference therein. Verified Pet. For Specific
Performance [hereinafter, “Pet.”], Dkt. 1. See Freedman v. Adams, 2012 WL 1345638, at
*5 (Del. Ch. Mar. 30, 2012) (“When a plaintiff expressly refers to and heavily relies upon
documents in her complaint, these documents are considered to be incorporated by
reference into the complaint[.]” (citation omitted)).
2019, Plaintiff filed for divorce and Allen 2 “was ordered to vacate the marital home
on the [P]roperty.” Id. ¶ 5.
C. According to the Petition, “[d]uring the course of [the divorce]
proceedings, it was discovered that Allen Peterson, a general contractor, had
constructed a barn and corral on the [P]roperty that encroached into his mother’s
property” (the “Encroachment”). Id. ¶ 6. “As a result of the [E]ncroachment (which
in turn created setback violations), Allen . . . was charged by Sussex County with a
violation of” the Sussex County Code. Id. Allen subsequently “took up residence
for a time in the barn[,]” adding kitchen facilities for which “he received a second
Sussex County citation . . . .” Id. ¶ 7.
D. To resolve her son’s code violations, on August 7, 2020, Defendant
wrote a letter to Sussex County stating that she would “give a portion of land that is
needed to comply with set backs once the trial [in the divorce proceeding] is
completed” (the “Letter”). Pet., Ex. A; see also Pet. ¶ 8.
E. Plaintiff purchased the Property in connection with a January 31, 2022
Family Court Order resolving the divorce proceeding. Pet. ¶ 9. On May 27, 2022,
Allen transferred his interest in the Property to Plaintiff. Id. ¶ 11.
2
For clarity, this Order refers to Allen Peterson by his first name. No familiarity or
disrespect is intended.
2
F. Despite her promise in the Letter, Defendant never transferred the
property needed to resolve the Encroachment (the “Subject Land”). After the
divorce proceeding concluded, Plaintiff and Defendant each engaged attorneys, and
“[o]ver a period of several months, the two attorneys worked to find a way for
Defendant to transfer the property necessary to resolve the [E]ncroachment.” Id. ¶
14. “That included Plaintiff’s agreement to pay Defendant the sum of $10,000.00,
even though that was never mentioned previously.” Id.
G. On October 3, 2022, Plaintiff’s attorney emailed Defendant’s attorney,
attaching a survey of the Subject Land to be transferred (the “Survey”), a “Boundary
Line Agreement,” and an “Access Easement Agreement.” Id. ¶¶ 16-17. In that
email, Plaintiff’s attorney requested that Defendant’s attorney “let [him] know if [the
documents] are acceptable to be signed by our clients,” and “[i]f so, then please have
[Defendant] sign all three documents . . . .” Pet., Ex. D.
H. On October 24, 2022, Defendant’s attorney responded, confirming that
Defendant was “in agreement with the survey as it ha[d] been revised” and would
“review the documents for the Easement and Boundary and get [Plaintiff’s attorney]
[his] edits hopefully next week and [they] c[ould] potentially put this matter to bed
by early November.” Pet. ¶ 20; see also Pet., Ex. E.
I. Nearly seven months later, on May 15, 2023, Plaintiff’s attorney
“followed up with an inquiry as to where things stood[,]” but Defendant’s attorney
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“never provided any proposed edits to either of the two agreements.” Pet. ¶¶ 21, 23.
Instead, on May 24, 2023, Defendant’s attorney informed Plaintiff’s attorney that he
no longer represented Defendant. Id. ¶ 23; see also Pet., Ex. F. Since then, Plaintiff
has “made efforts to contact the Defendant, but to no avail.” Pet. ¶ 24.
J. Plaintiff avers that her “plan has always been to operate the [P]roperty
as a venue for weddings and other functions, in order to take advantage of the scenic
vistas on the [P]roperty.” Id. ¶ 9. “In furtherance of that plan, Plaintiff applied for
a conditional use from Sussex County[,]” but “the County denied the application,
and will not consider entertaining another such . . . application unless and until the
[E]ncroachment is resolved.” Id. ¶¶ 9-10.
K. On December 1, 2023, Plaintiff filed the Petition. The Petition asserts
four counts: Count I alleges that Defendant has breached a contract with Plaintiff
by refusing to transfer the Subject Land to resolve the Encroachment; Count II seeks
specific performance of that purported contract; Count III requests damages for
Defendant’s alleged breach of contract; and Count IV asserts a claim for breach of
the implied covenant of good faith and fair dealing.
L. On January 8, 2024, Defendant filed a Motion to Dismiss Plaintiff’s
Claims Pursuant to the Statute of Frauds (the “Motion to Dismiss”). Def. Grace
Peterson’s Mot. To Dismiss Pl.’s Claims Pursuant To The Statute of Frauds
[hereinafter, “OB”], Dkt. 8. On February 2, 2024, Plaintiff filed an answering brief
4
in opposition to the Motion to Dismiss. Pl.’s Ans. Br. In Opp’n To Def.’s Mot. To
Dismiss [hereinafter, “AB”], Dkt. 11. On February 22, 2024, Defendant filed a reply
brief in further support of the Motion to Dismiss. Def. Grace Peterson’s Reply Br.
In Supp. Of Mot. To Dismiss [hereinafter, “RB”], Dkt. 12. Oral argument on the
Motion to Dismiss is unnecessary.
NOW, THEREFORE, IT IS HEREBY ORDERED, this 25th day of March,
2024, as follows:
1. Defendant has moved to dismiss the Petition under Court of Chancery
Rule 12(b)(6). When reviewing a motion to dismiss under Rule 12(b)(6), Delaware
courts “(1) accept all well pleaded factual allegations as true, (2) accept even vague
allegations as ‘well-pleaded’ if they give the opposing party notice of the claim;
[and] (3) draw all reasonable inferences in favor of the non-moving party . . . .” Cent.
Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 535 (Del.
2011). “[T]he governing pleading standard in Delaware to survive a motion to
dismiss is reasonable ‘conceivability.’” Id. at 537.
2. In support of dismissal, Defendant contends that (1) the Petition fails to
allege facts supporting the elements of a contract; and (2) even if the Petition
adequately alleged a contract, Delaware’s Statute of Frauds prevents enforcement
because any such contract was not memorialized in writing.
5
3. Neither the Petition nor the parties’ briefing makes clear what contract
Plaintiff seeks to enforce. Based on the facts alleged, there are two potential
“contracts”: (1) Defendant’s promise, reflected in the Letter, to “give a portion of
land that is needed to comply with set backs”; and (2) Plaintiff’s agreement to
purchase, and Defendant’s agreement to sell, the Subject Land, as contemplated in
emails and drafts exchanged between the parties’ attorneys in 2022 and 2023. See
Pet., Exs. A, D-H.
4. “[A] valid contract exists when (1) the parties intended that the contract
would bind them, (2) the terms of the contract are sufficiently definite, and (3) the
parties exchange legal consideration.” Osborn ex rel. Osborn v. Kemp, 991 A.2d
1153, 1158 (Del. 2010).
5. While the parties debate, among other things, whether the terms of any
purported contract are sufficiently definite to be enforced, 3 “the ‘critical [question]
is whether the parties reached an agreement to be bound with respect to those
material terms.’” Hyetts Corner, LLC v. New Castle Cnty., 2021 WL 4166703, at
*6 (Del. Ch. Sept. 14, 2021) (alteration in original) (quoting VS&A Commc’ns P'rs,
L.P. v. Palmer Broad. Ltd. P’ship, 1992 WL 339377, at *10 (Del. Ch. Nov. 16,
1992)). Under Delaware law,
3
See OB at 5-6; AB at 10; RB at 5.
6
“[T]he formation of a contract requires a bargain in which there is a
manifestation of mutual assent to the exchange and a consideration.”
A valid contract exists only if “the parties have manifested mutual
assent to be bound by that bargain.” “[M]anifestation of mutual assent
is an external or objective standard for interpreting conduct.” A party
“manifests an intention [to be bound] if he believes or has reason to
believe that the promisee will infer that intention from his words or
conduct.” The “relevant inquiry” is 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 agreement concluded the negotiations.
Id. (internal footnotes and quotation marks omitted).
6. The Petition here fails to allege that Plaintiff and Defendant reached a
“complete meeting of the minds” on the terms of a contract to transfer the Subject
Land. Id. at *7 (citation omitted).
7. First, on its face, the Letter does not evidence a contract to sell real
property, but an intention, unsupported by consideration, to “give a portion of land
that is needed to comply with set backs.” Pet., Ex. A. See Pet. ¶ 14 (alleging a
purchase price was “never mentioned” in the Letter); see also Perry v. Neupert, 2019
WL 719000, at *29 (Del. Ch. Feb. 15, 2019) (finding a “transfer of equity . . . lacked
consideration, making it a gift”).
8. Second, the Petition fails to adequately allege that the parties reached a
“meeting of the minds” through email exchanges between their attorneys. The
Petition alleges that on October 3, 2022, Plaintiff’s attorney emailed Defendant’s
attorney a copy of the Survey, a draft “Boundary Line Agreement,” and a draft
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“Access Easement Agreement,” asking him to “let [Plaintiff’s attorney] know if [the
documents] [we]re acceptable to be signed by [their] clients,” and if so, to “have
[Defendant] sign all three documents . . . .” Pet. ¶ 16; see also Pet., Ex. D. Three
weeks later, on October 24, 2022, Defendant’s attorney confirmed that Defendant
was “in agreement with the [S]urvey as it ha[d] been revised” and that he would
“review the documents for the Easement and Boundary and get [Plaintiff’s attorney]
[his] edits hopefully next week and [they] c[ould] potentially put this matter to bed
by early November.” Pet. ¶ 20; see also Pet., Ex. E. But nearly seven months later,
on May 15, 2023, Plaintiff’s attorney had to “follow[] up with an inquiry as to where
things stood,” because Plaintiff was still awaiting Defendant’s response. Pet. ¶ 21.
9. A reasonable negotiator could not have believed the above exchanges
“‘concluded the negotiations between the parties.’” Hyetts Corner, LLC, 2021 WL
4166703, at *7 (citation omitted). Rather, the allegations of the Petition and the
documents incorporated by reference therein compel the opposite inference—that
“[n]either side manifested an intent to be bound by the terms” reflected in the emails
and draft agreements exchanged between their attorneys. Id. at *6; see also
Apennine Acq. Co., LLC v. Quill, 2023 WL 3139934, at *5 (Del. Ch. Apr. 28, 2023)
(concluding the plaintiff failed to adequately allege a meeting of the minds where
the parties’ email correspondence invited “questions or concerns” about a draft
8
agreement and the plaintiff later followed up to confirm whether the parties were
“good to proceed”), R. & R. adopted, 2023 WL 3479574 (Del. Ch. 2023).
10. Since the Petition does not adequately allege that the parties entered
into a contract, I do not address Defendant’s arguments that Delaware’s Statute of
Frauds, 6 Del. C. § 2714(a), would prevent enforcement because the purported
contract for the sale of land was not memorialized in writing.
11. Although the Petition fails to allege that the parties entered into a
binding contract, it does allege facts sufficient to state a claim for promissory
estoppel. 4
12. To establish a claim for promissory estoppel,
a plaintiff must show by clear and convincing evidence that: (i) a
promise was made; (ii) it was the reasonable expectation of the
promisor to induce action or forbearance on the part of the promisee;
(iii) the promisee reasonably relied on the promise and took action to
his detriment; and (iv) such promise is binding because injustice can be
avoided only by enforcement of the promise.
McKee v. McKee, 2007 WL 1378349, at *2 (Del. Ch. 2007) (internal quotation
marks omitted) (quoting Lord v. Souder, 748 A.2d 393, 399 (Del. 2000)). 5
4
While the Petition does not include a “count” for promissory estoppel, “[t]he court is not
bound to analyze the case solely through the counts presented in the pleadings.” Bamford
v. Penfold, L.P., 2022 WL 2278867, at *25 (Del. Ch. June 24, 2022).
5
See also Restatement (Second) of Contracts § 90 (Am. L. Inst. 1981), Westlaw (database
updated Oct. 2023)
A promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person and which does
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13. It is reasonably conceivable, based on the facts alleged in the Petition,
that (1) Defendant promised in the Letter to give Plaintiff and Allen the Subject Land
to resolve the Encroachment; 6 (2) Defendant reasonably could have expected that
such promise would induce Plaintiff to take action in reliance on that promise;
(3) Plaintiff did, in fact, rely on that promise to her detriment as she litigated the
divorce proceeding with the expectation that she would be able to use the Property
as a wedding venue after the Encroachment was resolved; 7 and (4) injustice can be
avoided only by enforcement of that promise. 8
14. For the foregoing reasons, the Motion to Dismiss is DENIED.
induce such action or forbearance is binding if injustice can be avoided only
by enforcement of the promise. The remedy granted for breach may be
limited as justice requires.
See also Deene v. Peterman, 2007 WL 2162570, at *6 (Del. Ch. July 12, 2007) (“[T]o the
extent that [defendant] now claims that she offered a mere gift . . . principles of promissory
estoppel would render her promise enforceable because of the [plaintiffs’] extensive
reliance . . . .”).
6
See, e.g., Pet. ¶ 8; Pet., Ex. A.
7
See Pet. ¶¶ 9-10; AB, Ex. A at 10-11, 18-19, 23, 28, 37 (discussing Plaintiff’s intended
use of the Property as a wedding venue in connection with the Family Court’s equitable
division of Plaintiff’s and Allen’s assets).
8
See, e.g., Pet. ¶ 24 (“Other than moving the large 9,698 square foot barn—an expensive,
if not impossible, task—transferring additional property to her son and daughter-in-law
was the only way to eliminate the encroachment and the citation against Allen Peterson.”).
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15. This Order is a final report pursuant to Court of Chancery Rules 143
and 144. Exceptions to this and all other interlocutory reports in this action are
stayed under Court of Chancery Rule 144(f).
/s/ Bonnie W. David
Bonnie W. David
Magistrate in Chancery
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