Twin Willows, LLC v. Lewis Pritzkur ( 2021 )

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
PATRICIA W. GRIFFIN CHANCERY COURTHOUSE
MASTER IN CHANCERY 34 The Circle
GEORGETOWN, DELAWARE 19947
Date Submitted: July 8, 2021
Final Report: July 27, 2021
Jeffrey M. Weiner, Esquire Peter K. Schaeffer, Jr., Esquire
Law Offices of Jeffrey M. Weiner, P.A. Avenue Law
1332 King Street 1073 South Governors Ave.
Wilmington, Delaware 19801 Dover, Delaware 19904
Robert Penza, Esquire Mark M. Billion, Esquire
Polsinelli PC Billion Law
222 Delaware Avenue, Suite 1101 1073 South Governors Ave.
Wilmington, Delaware 19801 Dover, Delaware 19904
Via U.S. Mail Via U.S. Mail
Patricia E. Gibbs Lewis H. Pritzkur
3431 S. DuPont Blvd. 2405 Brookshire Drive
Smyrna, Delaware 19977 Wilmington, Delaware 19803
RE: Twin Willows, LLC v. Lewis Pritzkur, Trustee for Patricia E. Gibbs, Dawn
R. Ellery, Gwen D. Rinaldi, Patricia E. Gibbs, and Robin Silverman
C.A. No. 2020-0199-PWG
Dear Counsel:
Pending before me is a complaint in which a buyer seeks an extension of
time to complete a land sale agreement and specific performance of that
agreement. At a December 15, 2020 status conference in this matter, I questioned
sua sponte whether the Court of Chancery has subject matter jurisdiction over this
matter and could grant equitable relief, considering the agreement’s time is of the
Twin Willows, LLC v. Lewis Pritzkur, et al.
C.A. No. 2020-0199-PWG
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essence clause and its expiration.1 After oral argument and briefing on the
jurisdictional issue, I find that this Court has subject matter jurisdiction over this
matter. This is a final report.
I. Background
The origins of this matter start with a petition to partition approximately 81.9
acres located at 3431 South Dupont Boulevard, Smyrna, Delaware (“Property”),
which was filed by Dawn Ellery (“Ellery”), Gwen Rinaldi (“Rinaldi”), and Robin
Silverman (“Silverman”), who together own a 50% interest in the Property against
Patricia Gibbs (“Gibbs”), the other 50% owner of the Property, filed in 2007.2 On
February 25, 2008, the Court appointed Lewis Pritzkur (“Trustee”) as trustee over
the property and directed him to list the Property for private sale as a whole and to
seek the Court’s approval of any sale of the property. 3 Eventually, an agreement of
sale for the Property (“Agreement”) between JMW Investments LLC and the
Trustee was signed on September 27, 2016. 4
1
Docket Item (“D.I.”) 25, Tr. 17:4-19:21. Unless otherwise noted, all docket items refer
to Twin Willows, LLC v. Pritzkur, C.A. No. 2020-0199-PWG (Del. Ch.).
2
D.I. 1, ¶¶ 2, 3, 5.
3
Pritzkur v. Ellery, C.A. No. 12820-MG (Del. Ch.), D.I. 1, ¶ 14.
4
D.I. 17, Ex. A. [hereinafter “Agreement”].
2
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The Agreement provided that the Buyer (which is now Twin Willows) had a
120-day due diligence period, which began running on the date of court approval.5
This diligence period required the Buyer to use good faith in not disrupting the
activities of the Property’s occupants, give 72 hours-notice to the occupants of the
Property prior to accessing the Property, and allow the Seller the opportunity to
accompany the Buyer onto the Property. 6 At the end of the diligence period, the
Buyer had a 24-month period for the permitting process to apply for and obtain all
necessary approvals for its intended development of the Property. The Agreement
gave the Buyer the option to extend the permitting period for two additional
periods of six months each, for an extension fee. If, after using good faith efforts,
the Buyer was unable to obtain the requisite permitting, it could either waive the
permitting requirements and proceed to settlement or terminate the Agreement.7
The Agreement also required court approval of the Agreement. 8 Closing was to
occur thirty days following the “outside date” or the earlier of the Buyer’s receipt
of the approvals or the end of the permitting period, with the Buyer delivering the
purchase price at settlement. 9 If the contingencies are not satisfied or waived, the
5
Agreement, ¶ 3(a).
6
Id.
7
Agreement, ¶ 3(b).
8
Agreement, ¶ 3(d).
9
Agreement, ¶ 4(a).
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Buyer has the option to cancel the Agreement by giving written notice to the Seller
by the outside date. 10 Possession of the Property is delivered at settlement. 11 The
Agreement has a time is of the essence clause. 12 The Buyer’s sole remedies for
default by the Seller under the Agreement is to either sue for specific performance
or terminate the Agreement and receive back the deposit and extension fees.13
The Agreement was approved by the Court on November 14, 2016. 14 The
Agreement was assigned to Twin Willows, LLC (“Twin Willows”) on March 14,
2017, and the assignment was approved by the Trustee on or before May 15,
2017. 15 The permitting period was extended under the Agreement on March 14,
2019 and again on September 14, 2019.16 The time allowed for the permitting
period lapsed on March 14, 2020.17
10
Agreement, ¶ 4(b).
11
Agreement, ¶ 5.
12
Agreement, ¶ 10. The time is of the essence provision is qualified by the statement that
“neither party shall be in default unless and until it has received written notice of any
alleged default and ten (10) days opportunity to cure.” Id.
13
Id.
14
D.I. 17, Ex. B.
15
D.I. 1, ¶ 19.
16
Id., ¶¶ 26, 27.
17
Id., ¶ 28.
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Plaintiff Twin Willows filed a complaint (“Complaint”) on March 13, 2020
seeking specific performance of the Agreement and equitable relief. 18 It asks the
Court to declare that the parties have a current, valid, and binding Agreement, to
extend the time to complete the contingencies in the Agreement by 18 months, to
order Defendants to vacate the Property until the permitting process is complete,
and for damages and attorneys’ fees and costs. 19
II. Analysis
I consider the issue of whether this Court has subject matter jurisdiction over
Twin Willow’s claims regarding the Agreement. “The Court has a duty to
determine whether it has subject matter jurisdiction over a plaintiff’s claims and
can raise the issue sua sponte.”20 “The burden is on the plaintiff to prove subject
matter jurisdiction exists.”21 If Twin Willows has an adequate remedy at law, this
Court does not have subject matter jurisdiction over the case.22
18
Id.
19
Id., at 11.
20
Crown Castle Fiber LLC v. City of Wilmington, 2021 WL 2838425, at *3 (Del. Ch.
July 8, 2021); see also Ct. Ch. R. 12(h)(3); Envo, Inc. v. Walters, 2009 WL 5173807, at
*4 n.10 (Del. Ch. Dec. 30, 2009) (“The issue of subject matter jurisdiction is so crucial
that it may be raised at any time before final judgment and by the court sua sponte.”),
aff’d, 2013 WL 1283533 (Del. Mar. 28, 2013) (TABLE).
21
Sun Life Assurance Co. of Canada - U.S. Operations Holdings, Inc. v. Grp. One
Thousand One, LLC, 206 A.3d 261, 265 (Del. Super. 2019). In this inquiry, the Court
may look beyond the pleadings to determine the nature off the claim. Id.; see Yancey v.
Nat’l Trust Co., 1993 WL 155492, at *6 (Del. Ch. May 7, 1993) (acknowledging the
right of a defendant to challenge a plaintiff’s jurisdictional allegations by material
5
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“As Delaware’s Constitutional court of equity, the Court of Chancery can
acquire subject matter jurisdiction over a cause in only three ways, namely, if: (1)
one or more of the plaintiff’s claims for relief is equitable in character, (2) the
plaintiff requests relief that is equitable in nature, or (3) subject matter jurisdiction
is conferred by statute.” 23 “In deciding whether or not equitable jurisdiction exists,
the Court must look beyond the remedies nominally being sought, and focus upon
the allegations of the complaint in light of what the plaintiff really seeks to gain by
bringing his or her claim.” 24 The analysis requires “a realistic assessment of the
nature of the wrong alleged and the remedy available in order to determine whether
a legal remedy is available and fully adequate.” 25 It “is based upon the allegations
made in the complaint, taken as true; however, a mere allegation that there is no
adequate remedy at law is insufficient to end the inquiry if such allegation is a
extrinsic to the pleadings). Here, I consider the Agreement in my analysis. Although
Twin Willows did not attach the Agreement to the Complaint, the Court of Chancery may
consider it for purposes of considering subject matter jurisdiction.
22
See Crown Castle Fiber LLC, 2021 WL 2838425, at *4 (“Equitable relief is
unavailable, and so cannot anchor subject matter jurisdiction, where a ‘sufficient remedy
may be had by common law, or statute, before any other court or jurisdiction of this
State.’”) (citing 10 Del. C. §342).
23
Endowment Rsch. Grp., LLC v. Wildcat Venture Partners, LLC, 2021 WL 841049, at
*6 (Del. Ch. Mar. 5, 2021) (citations omitted).
24
Candlewood Timber Grp., LLC v. Pan Am. Energy, LLC, 859 A.2d 989, 997 (Del.
2004).
25
Id. (citation omitted).
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mere façade.”26 Where the plaintiff has pled an equitable remedy, such as specific
performance, “upon which equity jurisdiction might be predicated, that is true only
if the complaint, objectively viewed, discloses a genuine need for such equitable
relief.”27 “If, after such a practical assessment of the plaintiff’s claims, it appears
that an adequate remedy at law exists, equitable relief is unavailable.” 28
In its Complaint, Twin Willows pleads three claims. Count I seeks equitable
relief, Count II is for specific performance, and Count III claims a breach of
contract. All three counts ask for an 18-month extension of time for Twin Willows
to complete the permitting process under the Agreement.29 Although Counts I and
III claim that Twin Willows has a right to additional time “under the general
26
Athene Life & Annuity Co. v. Am. General Life Ins. Co., 2019 WL 3451376, at *4 (Del.
Ch. Jul. 31, 2019); see also Int’l Bus. Machines Corp. v. Comisco, Inc., 602 A.2d 74, 78
(Del. Ch. 1991) (“[A] judge in equity will take a practical view of the complaint, and will
not permit a suit to be brought in Chancery where a complete legal remedy otherwise
exists but where the plaintiff has prayed for some type of traditional equitable relief as a
kind of formulaic ‘open sesame’ to the Court of Chancery.”).
27
Candlewood Timber Grp., LLC, 859 A.2d at 997.
28
Crown Castle Fiber LLC v. City of Wilmington, 2021 WL 2838425, at *4 (Del. Ch.
July 8, 2021); see generally Athene Life & Annuity, 2019 WL 3451376, *5-6 (analyzing
whether an adequate remedy at law is available related to contract disputes).
29
At the December 15, 2020 hearing, I pointed out that Count I for “Equitable Relief” at
first glance appeared to be a claim for reformation. D.I. 25, Tr. 17:9-18. Reformation is
an equitable remedy, but under Delaware law, it is a limited remedy that arises out of
mutual or unilateral mistake and is used “to reform a contract in order to express the ‘real
agreement’ of the parties involved.” See Cerberus Int’l, Ltd. v. Apollo Mgmt., L.P., 794
A.2d 1141, 1151 (Del. 2002). Twin Willows did not argue at the July 8, 2021 hearing,
nor in its letter brief, that it was entitled to reformation. See D.I. 32. Therefore, I do not
address the availability of reformation as an equitable remedy in this case.
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principles of equity,” those Counts provide no specific basis for the equitable relief
requested. Count II, which seeks specific performance, may implicate the Court’s
equitable jurisdiction under 10 Del. C. §341.
I consider whether the complaint discloses a genuine need and basis for
specific performance which is sufficient to confer subject matter jurisdiction to the
Court of Chancery. Only if the nature of Twin Willows’ claims could merit
specific performance will this Court have jurisdiction.30 If not, then Twin Willows
has an adequate remedy at law in the form of damages if a breach of contract is
proven.
“A party seeking specific performance must establish (1) a valid contract
exists, (2) he is ready, willing, and able to perform, and (3) that the balance of the
equities tips in favor of the party seeking performance.” 31 To receive the remedy
of specific performance, the contract must reveal a right to the relief of specific
performance. 32 “[R]eal property is unique, and often the law cannot adequately
remedy a party’s refusal to honor a real property contract.” 33 The Agreement is for
the sale of land, and the Agreement specifies that the buyer – Twin Willows – may
30
See generally Candlewood Timber Grp., LLC, 859 A.2d at 997; Endowment Rsch.
Grp., LLC, 2021 WL 841049, at *6 (Del. Ch. Mar. 5, 2012).
31
Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010).
32
See Potter v. Potter, 251 A.2d 578, 580 (Del. Ch. 1968).
33
CC Fin. LLC v. Wireless Properties, LLC, 2012 WL 4862337, at *9 (Del. Ch. Oct. 1,
2012).
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seek specific performance as a remedy to the seller’s breach. 34 Preliminarily, these
facts tend to suggest that specific performance may be a possible remedy in this
case.
At the December 15, 2020 hearing, I raised the question whether the Court
has the power to order specific performance because of the time is of the essence
clause and the lapse of the time for performance under the Agreement. 35 Because
of the lapse of contractual provisions without performance, I questioned whether
the remedy was not specific enforcement but money damages.36
Twin Willows filed a letter briefing in which it argues that it was prevented
from completing the permitting process because of Gibbs’ actions frustrating Twin
Willows’ representatives’ access to the Property, and the Trustee’s failure to take
“effective steps to rein Ms. Gibbs in.” 37 In its letter briefing and at oral argument,
Twin Willows relied heavily on Vice Chancellor Laster’s remedies opinion in In re
Oxbow Carbon LLC Unitholder Litig. (“Oxbow”).38 Twin Willows asserts that this
opinion stands for the proposition that once it is determined that equitable relief is
appropriate, equity has the power to fashion an appropriate remedy – such as to
34
Agreement, ¶ 10.
35
D.I. 25, Tr. 19:1-21:12.
36
D.I. 25, Tr. 26:23-27:4.
37
D.I. 32, at 2.
38
2018 WL 3655257 (Del. Ch. Aug. 1, 2018).
9
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extend the Agreement’s deadlines in this instance – “in the absence of explicit
contractual authority to do so.” 39
On June 22, 2021, Ellery, Rinaldi and Silverman responded to Twin
Willows’ letter, alleging that Twin Willows’ claim for equitable relief and specific
performance should be dismissed because the Agreement has expired, Twin
Willows has not shown it is able to perform and close on the Property, the balance
of equities does not tip in Twin Willows’ favor, and Oxbow is inapplicable.40 The
Trustee asserts that time was of the essence and Twin Willows was not ready,
willing and able to close the transaction within the Agreement’s specified time
frames. 41 He cites to the Court’s reliance, in Snow Phipps Group, LLC v. KCake
Acquisition, Inc. (“Snow Phipps”),42 on Osborn v. Kemp, in which the Delaware
39
D.I. 32, at 3-4. Because Vice Chancellor Laster’s Oxbow remedies opinion has been
specifically vacated by the Supreme Court, I decline to solely rely on the Oxbow opinion
in reaching my conclusion in this matter. See Oxbow Carbon & Minerals Holdings, Inc.
v. Crestview-Oxbow Acquisition LLC, 202 A.3d 482, 509 (Del. 2019); see also Glazer v.
Pasternak, 693 A.2d 319, 321 (Del. 1997) (holding that, where a trial court’s decision is
vacated, “it will have no impact on future law”).
40
D.I. 33.
41
D.I. 34.
42
2021 WL 1714202, at *55 (Del. Ch. Apr. 30, 2021). The Trustee refers to Twin
Willows’ argument that their alleged breach by non-performance is excused because
Gibbs’ behavior materially contributed to Twin Willows’ non-performance as the
“prevention doctrine.” D.I. 34, at 5. “The prevention doctrine provides that where a
party’s breach by nonperformance contributes materially to the non-occurrence of a
condition of one of his duties, the non-occurrence is excused.” Snow Phipps, 2021 WL
1714202, at *52 (internal quotation marks and citations omitted); see also Neurvana
Med., LLC v. Balt USA, LLC, 2020 WL 949917, at *19 (Del. Ch. Feb. 27, 2020) (“The
‘prevention doctrine’ provides that a party may not escape contractual liability by
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Supreme Court affirmed the Court of Chancery’s grant of specific performance and
of a reasonable time for the parties to conclude the land transaction, recognizing
that the “contract does not include a ‘time is of the essence’ clause.”43
Here, the Agreement has a time is of the essence clause. 44 Delaware courts
will generally give substantial weight to these provisions.45 “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. It is, however, equally fundamental that a failure of a plaintiff to have
reliance upon the failure of a condition precedent where the party wrongfully prevented
performance of that condition precedent.”) (citations omitted). In Snow Phipps, the
parties stipulated that the seller’s right to specific performance was conditioned upon full
funding of buyer’s debt financing. Snow Phipps, 2021 WL 1714202, at *51. The buyers
argued that, because debt financing was not in place, the condition had not been met and
specific performance was barred. Id. at *52. Applying the prevention doctrine, the Court
“deem[ed] the debt financing condition met because the buyers contributed materially to
lack of debt financing by breaching their reasonable-best-efforts obligation.” Id., at *2.
At this juncture, I do not need to decide whether the prevention doctrine applies in this
case. I note, however, that the Agreement does not condition specific performance on
obtaining all necessary approvals; if approvals are not obtained, the Agreement provides
that the buyer has the choice of waiving the approvals and proceeding to settlement or
terminating the Agreement. See Agreement, ¶¶ 3(b), 10.
43
Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1161 (Del. 2010).
44
Agreement, ¶ 10.
45
See Penden v. Gray, 886 A.2d 1278, 2005 WL 2622746, at *3 (Del. Oct. 14, 2005)
(TABLE) (enforcing a time is of the essence provision to decline specific performance of
a contract for the purchase of real estate); HIFN, Inc. v. Intel Corp., 2007 WL 1309376,
at *9 (Del. Ch. May 2, 2007) (“When time is of the essence in a contract, a failure to
perform by the time stated is a material breach of the contract.”).
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performed his own obligation will be excused if he was prevented by the other
party from performing his obligation.”46
Twin Willows alleges that Defendants’ misconduct prevented it from
performing its obligations under the contract. Accordingly, it posits a possible
equitable remedy of specific performance, despite the time is of the essence
clause.47 To obtain specific performance, however, Twin Willows will have to
prove Defendants’ misconduct, that their actions prevented Twin Willows from
performing under the contract, and that it could have performed under the
Agreement on a timely basis if the alleged misconduct had not occurred. At this
46
Wells v. Lee Builders, Inc., 99 A.2d 620, 621 (Del. 1953); see also Thompson v. Burke,
1985 WL 165736, at *3 (Del. Ch. June 7, 1985) (“[generally,] the plaintiff must have
performed those obligations within the specified time, unless prevented from doing so by
the defendant”); Walton v. Beale, 2006 WL 4763946, at *6 (Del. Ch. Jan. 30, 2006) (“If
[time is of the essence and] the defendants’ actions cause the plaintiff to fail to meet the
contractual settlement date, the plaintiff will not be held liable for the breach induced by
the defendants”); Marvel v. Conte, 1978 WL 8409, at *3 (Del. Ch. Oct. 24, 1978);
Charamella v. Barley Mill Rd. Homes, Inc., 142 A.2d 515, 517 (Del. Ch. 1958); Morgan
v. Wells, 80 A.2d 504, 506 (Del. Ch. 1951) (“It is fundamental that where the time of
performance is expressly made of the essence of a contract, a plaintiff must have
performed his part of the contract within the specified time if he is to be entitled to
specific performance. The requirement of performance on the part of a plaintiff as a
condition precedent to the granting of specific performance is modified, however, . . .
when the defendant has prevented the plaintiff from performing his obligations.”).
47
I do not consider this matter based upon the standards that apply for summary
judgment or similar motions, or at trial where the Court considers evidence on the merits.
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juncture, it is not evident whether specific performance will, ultimately, be
warranted in this case. 48
III. Conclusion
For the reasons set forth above, I find that this Court has subject matter
jurisdiction over Twin Willows’ claims and allow this case to proceed. This is a
final Master’s report and exceptions may be taken under Court of Chancery Rule
144. I ask counsel to submit, within 10 days after this report has become final, a
proposed scheduling order that will allow this dispute to be resolved as
expeditiously as possible.
Sincerely,
/s/ Patricia W. Griffin
Patricia W. Griffin,
Master in Chancery
48
In addition, specific performance is the “enforcement of the contract as nearly as may
be to accomplish its purpose.” Tri State Mall Assocs. v. A. A. R. Realty Corp., 298 A.2d
368, 372 (Del. Ch. 1972). If specific performance is granted, Twin Willows may be
entitled to the benefit of its bargain.
13