Opinion
C.A. No. 18157-NC.
Date Submitted: January 15, 2002.
Date Decided: May 9, 2002.
Richard L. Abbott, Esquire of THE BAYARD FIRM, Wilmington, Delaware; Attorney for Plaintiff.
George H. Seitz, Jr., III, Esquire of SEITZ, VAN OGTROP GREEN, P.A. Wilmington, Delaware; Attorney for Defendants.
MEMORANDUM OPINION
In 1996 the plaintiff, Amstel Associates, L.L.C. ("Amstel"), and the defendant, Brinsfield-Cavall Associates ("BCA"), entered into an Agreement of Sale (the "Sales Agreement") in which BCA agreed to convey to Amstel six properties located in the City of Newark, Delaware. The closing on that Agreement was to take place on January 5, 2001. That closing did not occur, however, because one of the to-be-sold properties listed in the Sales Agreement — 72 Amstel Drive — did not exist.
Amstel brought this action against BCA and its general partners, Jay R. Brinsfield and Gerald M. Cavall, for reformation of the Sales Agreement by substituting "78 Amstel Avenue" for the non-existent "72 Amstel Drive" therein. In addition, Amstel seeks specific performance of the reformed Agreement, plus damages. BCA has counterclaimed for an order rescinding the Sales Agreement on the ground that no enforceable contract was ever formed. BCA also seeks to recover all rents due from Amstel from and after January 1, 2001.
This is the Opinion of the Court, after trial, on the merits of these claims. For the reasons next discussed, I conclude that the Sales Agreement must be reformed, and that an order of specific performance directing the defendants to convey the properties listed in the reformed Agreement must be granted. I further conclude that BCA is liable for restitution damages, measured by the post-January 5, 2001 net profits that BCA realized from wrongfully continuing to hold the properties identified in the (reformed) Sales Agreement.
I. FACTS
What follows is a brief recitation of the facts as found by the Court. Additional facts are included in the Analysis (Part III) where relevant.
A. Background
Between 1975 and the end of 1982, the defendants, Gerald M. Cavall and Jay R. Brinsfield, purchased 51, 53 and 57 Elkton Road, and 78, 82 and 84 Amstel Avenue — properties all located within the City of Newark, Delaware (the "Properties"). The individual defendants owned the Properties indirectly through two distinct, wholly-owned entities: Richard's Dairyland, Inc. ("Richard's"), which owned 57 Elkton Road; and defendant Brinsfield-Cavall Associates ("BCA"), which owned the remaining five Properties (the "BCA Properties"). The five BCA Properties are described in a recorded deed dated December 5, 1989 (the "Deed"), and are currently being used for student rental housing and parking.
In March 1983, Richard's entered into a lease agreement for 57 Elkton Road with Paul J. Thompson and his wife, Karen Thompson. Mr. Thompson, and his son, Timothy Thompson (collectively, the "Thompsons"), have operated a 162-seat restaurant known as "The Trap Seafood" on that parcel since 1983. From the time the restaurant was opened, the Thompsons have operated under a verbal agreement with Mr. Cavall for the Thompsons to use a gravel lot for restaurant employee and customer parking. The gravel lot is a large, interconnected parking area that is located in the rear yards of 78, 82 and 84 Amstel Avenue, and 51 and 53 Elkton Road. That is, the gravel lot is located on the five BCA Properties described in the Deed. The additional parking provided by the gravel lot is critical to the successful operation of the restaurant, because having on-site parking gives the restaurant a competitive edge over other restaurants located in Newark. Moreover, the gravel lot gives the restaurant 70 parking spaces. Without the gravel lot, the restaurant would not be in compliance with the Newark City Code's minimum 66-space parking requirement.
The restaurant was called "The Crab Trap" until 1998.
The Thompsons dealt almost exclusively with Mr. Cavall respecting the restaurant and the sale of the properties. Mr. Brinsfield appears to have been a silent partner in those negotiations.
B. The Thompsons Negotiate With Mr. Cavall To Purchase The Properties
The Thompsons first proposed acquiring the Properties from BCA in the late 1980s, and they reiterated that proposal on various occasions. In all cases Mr. Cavall declined to entertain the Thompsons' purchase offers, but he did tell the Thompsons that they would have a right of first refusal, since the restaurant had been a long-term tenant. During those discussions, the Thompsons repeatedly told Mr. Cavall that they wanted to buy all of the Properties that were owned by Richard's and BCA.
P. Thompson Testimony, Trial Tr. at 194.
In 1993, the Thompsons again approached Mr. Cavall about purchasing the Properties. On this occasion Mr. Cavall showed interest in selling, but was reluctant to do so at that time, because his partner, Mr. Brinsfield, was in poor health and Mr. Cavall personally wanted to wait until he (Cavall) was closer to retirement, at age 65. Accordingly, Mr. Cavall told the Thompsons that the issue would be deferred until the current lease expired in 1996.
In 1996, Messrs. Cavall and Brinsfield were definitely interested in selling the Properties. Accordingly, the Thompsons met with Mr. Cavall to discuss the sale. They decided that the closing would not occur for five years, i.e., until January 5, 2001, when Mr. Cavall would be 65 years old and ready to retire.
As a result of the parties' first meeting in 1996, the Thompsons understood that Mr. Cavall intended to sell all of the Richard's and BCA Properties, including the restaurant, the five houses, and the gravel lot. Paul Thompson took notes at that meeting, and on his notes he listed the addresses of all six Properties. The parties agreed that the Thompsons would have their attorney, Vance Funk, Esquire, prepare a draft of an agreement of sale.
Timothy and Karen Thompson formed Amstel Associates, L.L.C., for the purpose of acquiring the Properties. Because Timothy and Paul Thompson negotiated the transaction with Mr. Cavall individually, the parties are frequently referred to in this Opinion by their personal names, rather than by the entity name.
Timothy Thomspon provided Mr. Funk with the details of the proposed transaction. He also provided Mr. Funk the Paul Thompson/Cavall meeting notes that described the Properties. Because the gravel lot was essential to the successful operation of the restaurant, Mr. Funk agreed to verify that the gravel lot was situated within the legal boundaries of the six Properties. Accordingly, Mr. Funk reviewed the Deed and plotted the boundaries of the six Properties, and also reviewed the New Castle County tax printouts for each of these parcels. In this manner he confirmed that the gravel lot was included among the Properties being sold.
Thereafter, Mr. Funk prepared a draft of the Sales Agreement, and the Thompsons and Mr. Cavall began negotiating the Agreement's language and general terms. All told, Mr. Funk prepared four drafts of the Sales Agreement during the fall of 1996. In each of those drafts Mr. Funk included a reference to the Deed (which described all the BCA Properties) in the section of the Agreement entitled "PROPERTY BEING SOLD." The purpose of that reference was to ensure that all five BCA Properties, including the gravel lot, were being conveyed to Amstel.
After he prepared each draft of the Agreement, Mr. Funk gave the draft either to Timothy Thompson or to Mr. Cavall's attorney, Piet H. Van Ogtrop, Esquire. Mr. Cavall met with Mr. Van Ogtrop on several occasions to discuss changes and additions to the drafts, and to mark up the drafts. During those mark-ups, Messrs. Cavall and Van Ogtrop were both aware that the Agreement included a reference to the Deed, and that the Deed described all of the BCA Properties being conveyed.
Cavall Testimony, Trial Tr. at 312-13; Van Ogtrop Testimony, Trial Tr. at 386-88. In fact, Mr. Van Ogtrop prepared the Deed for BCA in 1989. Id. at 386.
C. The Final Agreement Of Sale Between Amstel And BCA
On November 26, 1996, Amstel and BCA entered into the final Sales Agreement, which provided that the Properties would be conveyed on January 5, 2001. The disputed portion of the Agreement, which is entitled "PROPERTY BEING SOLD," states the following:
Seller [BCA] agrees to convey to Buyer [Amstel] and Buyer has purchased and agrees to pay for the land with buildings and other improvements theron erected known as 51, 53 and 57 Elkton Road and 72, 82 and 84 Amstel Drive in the City of Newark, State of Delaware, as said land and premises are more particularly bounded and described in a deed from Gerald M. Cavall and Jay R. Brinsfield to the Seller, dated December 5, 1989 and of record in the Office of the Recorder of Deeds in and for New Castle County, Delaware in Deed Book 973, Page 46.
Pretrial Stipulation ¶ 17 (emphasis added).
Unfortunately, the quoted section contains a mistake: it refers to "72 Amstel Drive," but no such property exists. What does exist, however, is "78 Amstel Avenue," which is directly adjacent to 82 Amstel Avenue.
D. The Parties' Conduct After They Executed The Sales Agreement
For over three years after the Sales Agreement was executed, the Thompsons paid rent under a fifty-month lease extension. During that same period, the Thompsons also made $4,000 monthly down payments against the purchase price in anticipation of a January 2001 closing. At no time during the Thompsons' dealings with Mr. Cavall did Mr. Cavall ever suggest that 78 Amstel Avenue was not one of the Properties being sold under the Sales Agreement.
In March 2000, the relationship between the Thompsons and Mr. Cavall abruptly deteriorated, when the restaurant's roof developed a serious leak, and the Thompsons sent letters to Mr. Cavall demanding that he fix the roof. After he received those letters, Mr. Cavall personally visited the restaurant. During that visit his mood was dark — Mr. Cavall disclaimed all responsibility for the roof, and threatened to build a chain-link fence around the gravel lot to put the restaurant out of business. Although Mr. Cavall eventually retracted his comment about the chain-link fence, he did tell the Thompsons that his partner, Mr. Brinsfield, might erect a fence around the gravel lot. Despite those threats, Mr. Cavall replaced the damaged roof five months later, at a cost to BCA of $10,000.
Within weeks after the dispute over the restaurant roof, Mr. Cavall told the Thompsons that 78 Amstel Avenue was not included among the Properties being sold. Cavall pointed out that if the Thompsons had any doubts, they should check the Sales Agreement. Timothy Thompson did just that, and to his surprise, discovered that it referred to "72 Amstel Drive" rather than to "78 Amstel Avenue." To verify that that was indeed a mistake, Paul Thompson walked across the area in front of the house located at 78 Amstel Avenue and confirmed that "78 Amstel" was the correct address of the Property they intended to acquire. Until Mr. Cavall brought this mistake in the Sales Agreement to their attention, the Thompsons were unaware of it.
From the time the Thompsons first learned of the mistake until January 2001 (when the closing on the sale of the Properties should have occurred), the Thompsons continued paying rent on the restaurant and making the $4,000-per-month down payments against the purchase price of the Properties. In December 2000, the Thompsons notified BCA that they were ready to close on the Properties in January 2001. BCA refused to attend the January 2001 settlement, however, and it also' refused to convey any of the Properties in accordance with the Sales Agreement. This lawsuit followed.
II. THE ISSUES AND CONTENTIONS
The issue presented is straightforward: Did BCA intend to sell 78 Amstel Avenue to Amstel, and did Amstel intend to purchase that Property? Amstel claims that the answer to both questions is yes. Unfortunately, the Sales Agreement did not list "78 Amstel Avenue" as one of the Properties being sold. Rather, the Agreement described the disputed Property as "72 Amstel Drive," which all parties agree does not exist. Amstel claims that because the evidence clearly shows that Amstel and BCA intended to include 78 Amstel Avenue — and not 72 Amstel Drive — among the Properties being sold under the Sales Agreement, the Court must reform that contract to reflect the parties' true intent. Amstel further claims that it is entitled to an order of specific performance, directing BCA to transfer the Properties to Amstel. Lastly, Amstel claims that BCA was unjustly enriched in the amount of the post-closing net profits it received from the Properties, for which Amstel seeks an award of restitutionary damages from BCA.
By way of defense, and in its counterclaim, BCA contends that it never intended to sell 78 Amstel Avenue to the Thompsons. BCA argues that although Amstel might have believed that it was acquiring six Properties in the transaction, including 78 Amstel Avenue, BCA believed that it was only selling five Properties to Amstel. Therefore, BCA argues no meeting of the minds ever occurred, and therefore, no enforceable contract between BCA and Amstel was ever created. Accordingly, BCA claims, at most Amstel is entitled to a refund of the monies it paid against the purchase price of the Properties, less any rents Amstel owes BCA for its use of the Properties from and after January 1, 2001.
In the alternative, Amstel claims that even if BCA did not intend to sell 78 Amstel Avenue, BCA's "knowing silence" regarding Amstel's unilateral mistake as to 78 Amstel Avenue is legally sufficient to justify reformation. Because the Court finds that BCA intended to include 78 Amstel among the Properties being sold, the Court does not need to address that alternate claim.
For the reasons next discussed, the Court finds that BCA and Amstel Associates, in fact, intended to include 78 Amstel Avenue in the transaction, and that "72 Amstel Drive" was mistakenly listed in the Sales Agreement because of a scrivener's error.
III. ANALYSIS
A. Amstel's Claim For Reformation And For Specific Performance Of The Sales Agreement
Amstel's claim, in essence, is that Mr. Cavall, acting on behalf of BCA, intended to sell, and that the Thompsons, acting on behalf of Amstel, intended to buy, 78 Amstel Avenue. The parties' intent to include that Property in the transaction was frustrated, however, because of a typographical error in the Sales Agreement that (mistakenly) recited "72 Amstel Drive" rather than "78 Amstel Avenue." Amstel asks this Court to deploy its equitable powers to reform the Sales Agreement to conform to the parties' original, actual intent at the time they contracted, by including 78 Amstel Avenue among the Properties being sold under that Agreement.
"It is a basic principle of equity that the Court of Chancery has jurisdiction to reform a document to make it conform to the original intent of the parties." Generally:
Waggoner v. Laster, 581 A.2d 1127, 1135 (Del.Supr. 1990) (citations omitted).
Reformation is appropriate . . . when an agreement has been made[,] . . . but in reducing such agreement or transaction to writing, either through the mistake common to both parties, or through the mistake of the plaintiff accompanied by the fraudulent knowledge and procurement of the defendant, the written instrument fails to express the real agreement or transaction. In such a case the instrument may be corrected so that it shall truly represent the agreement or transaction actually made or determined upon according to the real purpose and intention of the parties.
Id. (internal quotations and citations omitted).
Thus, any reformation of a written instrument must be based on a showing of either (i) a mutual mistake, or (ii) a unilateral mistake by the plaintiff, combined with knowing silence by the defendant. In cases involving a mutual mistake, the plaintiff must show that both parties were mistaken about a material term of the written agreement. The party seeking reformation must show by clear and convincing evidence that the parties' actual (oral) agreement was not accurately reflected in their executed written contract. To discharge that burden, the party seeking reformation must persuade the Court of the precise, orally-agreed-to terms that it seeks to have judicially inserted into the contract.
Collins v. Burke, 418 A.2d 999, 1002 (Del.Supr. 1980).
Id.
Clear and convincing evidence is a higher evidentiary standard than a preponderance of the evidence, but is a lesser standard than proof beyond a reasonable doubt. In re Tavel, 661 A.2d 1061, 1070 n. 5 (Del. 1990). The clear and convincing standard requires evidence that would lead a trier of fact to "an abiding conviction that the truth of [the] factual contentions are highly probable." In re Rowe, 566 A.2d 1001, 1006 (Del.Supr.Jud. 1989) (internal quotations and citations omitted).
Collins, 418 A.2d at 1002. Delaware does not follow a per se rule for reformation of a contract based upon a scrivener's error. That is, in Delaware, a scrivener's error without more is not a sufficient basis for the Court to reform a contract. Some jurisdictions hold to the contrary. See, e.g., Dilling v. Dilling, 734 So.2d 327, 335 (Miss.Ct.App. 1999) (holding that a mistake in drafting a contract will justify a reformation). Rather, the party seeking to reform the contract must present clear and convincing evidence that the written agreement as executed does not reflect the parties' true intent. Collins, 418 A.2d at 1002. Evidence of a scrivener's error is, however, an important evidentiary component of that showing.
Collins, 418 A.2d at 1002.
I find here that the Thompsons have demonstrated by clear and convincing evidence that they and Mr. Cavall intended to include 78 Amstel Avenue among the Properties being sold, and that that Property was misdescribed in the Sales Agreement because of a typographical error. The evidence which leads me to that conclusion is overwhelming and comes from two sources: (i) the Sales Agreement itself and what must have been Mr. Cavall's actual knowledge of its terms, and (ii) the credibility of the Thompsons' testimony about the relevant events, which contrasts markedly with Mr. Cavall's lack of credibility on those same subjects.
That Mr. Cavall denies that the exclusion of 78 Amstel Avenue from the Agreement was a mistake does not preclude the Court from finding that a mutual mistake in fact occurred. In re McCall, 398 A.2d 1210, 1216 (Del.Ch. 1978).
1. The Evidence Contained In The Sales Agreement
The Sales Agreement, standing alone, cannot provide the requisite clear and convincing evidence of the parties' intent. But, when combined with the other persuasive evidence, that Agreement makes it more probable than not that due to a scrivener's error "72 Amstel Drive," rather than "78 Amstel Avenue," was mistakenly listed as one of the Properties being sold. The Sales Agreement, and what I find was Mr. Cavall's knowledge of its terms, persuasively refute two of Mr. Cavall's arguments that the parties lacked the requisite "meeting of the minds" to form a contract. The two arguments are that: (i) Mr. Cavall intended to convey only five Properties to the Thompsons ( i.e., all the Properties except 78 Amstel Avenue), even though the Thompsons thought they were buying six Properties; and (ii) Mr. Cavall was not aware that the Thompsons intended to buy 78 Amstel Avenue.
The Court previously denied Amstel's motion for summary judgment on that issue, holding that the Sales Agreement, without more, does not constitute the clear and convincing evidence needed to reform the contract. June 11, 2001 Ruling, Tr. at 3.
a. The Sales Agreement Lists Six Properties Being Sold To Amstel
In evaluating the parties' contentions, it must be kept in mind that the Sales Agreement lists six Properties, including the Property on which the restaurant sits, that the defendants contracted to sell to the Thompsons. Mr. Cavall had to have known that the Agreement called for six Properties to be sold. He and his attorney actively participated in negotiating and marking up the various drafts of that Agreement. The Thompsons' attorney, Mr. Funk, prepared four drafts of the Agreement, each of which was marked up by Mr. Cavall and/or his attorney and then returned to Mr. Funk. Mr. Cavall and his attorney even corrected a misspelling of Mr. Cavall's name only a few lines below the clause where the six Properties were identified. For that reason, and because Mr. Cavall lacks credibility as a witness, it is difficult to believe that neither he nor his attorney ever noticed that (as Cavall now contends) the Sales Agreement listed one Property too many. Mr. Cavall's professed unawareness of that fact is inconsistent (and at certain points at war with) his deposition testimony. I find implausible the proffered scenario that at no point during the negotiations and the several mark-ups of the Sales Agreement, did Mr. Cavall or his counsel ever notice that the Agreement called for him to convey six, rather than five, Properties to Amstel.
Mr. Cavall's testimony regarding his knowledge of whether the Deed described all of the five BCA Properties was evasive. On cross-examination he had to be reminded of his deposition testimony to elicit a straight answer. Cavall Testimony, Trial Tr. at 312. Mr. Cavall gave a similar evasive response and again had to reminded of his deposition testimony when asked whether he had asked Mr. Van Ogtrop, his attorney, to make certain changes to the Sales Agreement. Cavall Testimony, Trial Tr. at 315-17.
b. The Reference To The Deed In The Sales Agreement
Even if (contrary to the above finding) Mr. Cavall did not know that he was selling six (and not five) Properties to the Thompsons, he did know that the Sales Agreement included a reference to the Deed that identified the six Properties being sold. The Agreement contains a provision entitled "PROPERTIES BEING SOLD," which states that the actual Properties being conveyed were "more particularly bounded and described in [the Deed]." The Deed is the recorded description of the five Properties that Messrs. Cavall and Brinsfield owned through BCA. Specifically identified as one of those Properties in that Deed is 78 Amstel Avenue.
Cavall Testimony, Trial Tr. at 312.
This important reference to the Deed in the Sales Agreement persuades me that in fact, Mr. Cavall intended to convey all the Properties described in the Deed when he retired at age 65. That scenario is far more reasonable and likely than the one Mr. Cavall urges the Court to find, which is that: (i) Mr. Cavall was unsure of what Properties he was selling to the Thompsons, (ii) Mr. Cavall never discussed with the Thompsons which of the Properties he was selling, (iii) neither Mr. Cavall nor his attorney ever bothered to read the Sales Agreement (even though they had made corrections to it), and (iv) therefore, Mr. Cavall and the Thompsons never had a "meeting of the minds" concerning what Properties were being sold. The implausibility of that scenario, coupled with Mr. Cavall's overall lack of credibility as a witness, prompts me to give little or no weight to his claimed ignorance of the details of the transaction, including the contents of the Deed that described the specific Properties being sold.
That finding is further discussed in Part III (B) infra.
2. The Thompsons' Testimony And The Circumstances Surrounding The Transaction
Although the Sales Agreement, standing alone and without more, does not satisfy the "clear and convincing" standard for contract reformation, what does satisfy that standard is the Thompsons' highly credible testimony and the evidence that corroborates it. That evidence includes the factual circumstances that surround the transaction.
See note 16, supra.
Preliminarily, I find that Mr. Cavall's testimony was inconsistent and on many points not credible. Mr. Cavall professed ignorance of the specific Properties described in the Deed, and of whether he personally insisted on making changes to drafts of the Sales Agreement. Mr. Cavall's claim of ignorance contradicted his deposition testimony on those subjects, and his testimony about when he first learned of the error in the Sales Agreement contradicted his written interrogatory response. Finally, three days before the trial Mr. Cavall produced a hand-drawn map, which he offered to show that in 1996 he (Cavall) told his accountant that he did not intend to sell 78 Amstel Avenue to the Thompsons. That map does not support Mr. Cavall's trial testimony, however, because it depicts all of Mr. Cavall's Properties, including 78 Amstel Avenue.
Cavall Testimony, Trial Tr. at 312, Cavall Dep. at 38 (Mr. Cavall's knowledge of the properties in the Deed); Cavall Testimony, Trial Tr. at 315-18, Cavall Dep. at 54 (whether Mr. Cavall had suggested changes to the Sales Agreement).
Cavall Testimony, Trial Tr. at 328-29.
Mr. Cavall's testimony concerning this 1996 meeting and the map was at best inconsistent, and at worst an outright fabrication. Three days before trial, and after repeated discovery requests by Amstel, BCA produced documents that it claimed were obtained from the file of BCA's accountant, Donald Greenberg. Amstel moved to strike those documents, and Mr. Greenberg's testimony relating to the documents, from the record. The testimony at issue relates to (i) a map supposedly drawn by Mr. Cavall, indicating what properties were to be sold to Amstel, and (ii) a depreciation schedule prepared by Mr. Greenberg that supposedly sorted out the tax consequences of the transaction on a preliminary basis. BCA claims that those documents, prepared when Mr. Cavall was negotiating the Sales Agreement, show that Mr. Cavall did not intend to sell 78 Amstel Avenue because the documents do not reference those properties. I find Mr. Greenberg's testimony on this issue to be unreliable. See, e.g., Greenberg Testimony, Trial Tr. at 132 (testifying that he was unsure when the map drawn by Mr. Cavall was actually prepared); id. at 144 (testifying that the map was prepared by Mr. Cavall in his office at their initial meeting to discuss the transaction); id. at 147-48 (testifying that he placed an "R" next to 78 Amstel Avenue on a map, in Mr. Cavall's presence, indicating that the property was zoned "residential"); id. at 148 (testifying that there was no discussion at all with Mr. Cavall as to whether 78 Amstel Avenue was zoned "residential"). Moreover, the map and the depreciation schedule do not support Mr. Cavall's assertion that at their initial meeting to discuss the transaction, he told Mr. Greenberg that he did not want to sell 78 Amstel Avenue.
For these and other reasons, I reject Mr. Cavall's testimony that he never intended to convey 78 Amstel Avenue to the Thompsons. For years Mr. Cavall knew that the Thompsons wanted to buy the restaurant and all the Properties that surround it. At all times, he and the Thompsons treated the rear areas of the Properties as part of the restaurant. Indeed, Mr. Cavall provided the restaurant's employees with parking stickers for that lot and permitted the placement of a parking sign for the restaurant on 78 Amstel Avenue.
Because Mr. Cavall had always treated the back area of 78 Amstel Avenue as essential parking space for the restaurant, I find entirely credible the Thompsons' testimony that when Mr. Cavall began negotiating to sell the Properties to the Thompsons in 1996, he intended to dispose of all of the BCA Properties — including 78 Amstel Avenue — when he retired. Indeed, Mr. Cavall pushed back the closing date of the transaction from 1996 to 2001, to coincide with his plan to retire at age 65. There is no objective evidence which suggests that Mr. Cavall had any intent other than to sell all six Properties, including 78 Amstel Avenue, to relieve himself of the burdens of managing those Properties after he retired.
I am further persuaded by the Thompsons' testimony that they specifically discussed with Mr. Cavall their proposal to buy all of the Properties that made up the gravel lot. Paul Thompson produced the notes that he took at his first meeting with Mr. Cavall. Those notes show that the parties discussed including 78 Amstel Avenue in the sale transaction. It was from those notes that the Thompsons' attorney, Mr. Funk, prepared an early draft of the Sales Agreement. That draft included the misdescription of Amstel Avenue as "Amstel Drive," probably because that street had been so mislabeled in Paul Thompson's notes. Unfortunately, a second error was also introduced into the Sales Agreement, namely, the mistaken reference to "72 Amstel Drive."
T. Thompson Testimony, Trial Tr. at 29-30.
JX 7.
Id.
The Thompsons maintain, and I find, that they explicitly told Mr. Funk that they wanted to purchase all of the Properties that comprised the gravel lot — that is, all five BCA Properties. To ensure that the transaction would include the gravel lot and all five BCA Properties, Mr. Funk made reference to the Deed in the Sales Agreement. Mr. Cavall knew that the Deed referenced in the Agreement described all five BCA Properties.
T. Thompson Testimony, Trial Tr. at 163; Funk Testimony, Trial Tr. at 120-21.
Cavall Testimony, Trial Tr. at 312-13. In this connection, I also credit Timothy Thompson's testimony that he and Mr. Cavall "walked the lot" in order to review the boundaries of the properties, that Mr. Cavall explained the boundaries of the lots, and that he specifically pointed to the fence running along 78 Amstel Avenue, thereby indicating that that property was included in the transaction. T. Thompson Testimony, Trial Tr. at 35-37.
In short, I find wholly implausible the suggestion that upon retiring Mr. Cavall was willing to sell all of his Properties except for 78 Amstel Avenue, particularly since Mr. Cavall had made no plans to renovate or sell that Property and in the past had consistently considered the portion(s) of the Properties that comprised the gravel lot as part of the restaurant that was to be sold. Equally unbelievable is Mr. Cavall's assertion that he never intended to convey 78 Amstel Avenue to the Thompsons — a position that never surfaced until years after the Sales Agreement was executed, and coincidentally only after the parties had a dispute over Mr. Cavall's responsibility to repair the restaurant's leaky roof. The truth of the matter (as I view it) is that Mr. Cavall became upset at being forced to repair the restaurant roof only nine months before the restaurant was to be sold to the Thompsons. Only at that time did Mr. Cavall advance the position that he never intended to include 78 Amstel Avenue among the Properties being sold.
Cavall Testimony, Trial Tr. at 333.
The overwhelming weight of the evidence clearly and convincingly shows that the contracting parties intended to include 78 Amstel Avenue as one of the Properties being transferred under the Sales Agreement. The only contrary evidence is the mistaken reference to the non-existent 72 Amstel Drive. Other than that obvious typographical error in the contract, there is no — zero — credible evidence to support the claim that Mr. Cavall never intended to include 78 Amstel Avenue in the Sales Agreement.
Because all the requirements for reformation have been satisfied, the Sales Agreement will be reformed. And, because the Sales Agreement clearly requires BCA to convey the Properties to Amstel, specific performance of that reformed Agreement will be ordered.
BCA claims that Amstel should bear the risk of loss arising from any mistake in the Agreement, because Amstel's attorney prepared the document. Although Delaware courts have conducted such a "risk of mistake" analysis in contract rescission claims, they have not done so in reformation cases. Compare Collins v. Burke, 418 A.2d 999, 1002 (Del. 1980) (not considering risk of mistake in a contract reformation claim), and Waggoner v. Laster, 581 A.2d 1127, 1135 (Del.Supr. 1990) (same), with Darnell v. Myers, 1998 WL 294012, at *7 (Del.Ch.) (conducting a risk of mistake analysis in a rescission case). The Court, therefore, need not consider BCA's "risk of mistake" argument.
B. Amstel's Claim For Restitution Of Lost Profits
Because the Court has found that the parties intended to include 78 Amstel Avenue as one of the Properties being sold, and because BCA has refused to convey the Properties to Amstel as the Sales Agreement requires, it further follows that BCA was unjustly enriched and that the plaintiff is entitled to restitution.
For the Court to order restitution it must find that the defendant was unjustly enriched at the plaintiff's expense. Unjust enrichment has been defined as the "unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience."
Fleer Corp. v. Topps Chewing Gum, Inc. 539 A.2d 1060, 1062 (Del. 1988) (internal quotations and citations omitted).
Here, BCA was enriched at Amstel's expense. BCA unjustly retained a bundle of rights in the Properties, including the rights to possess and control, to use and enjoy, and to receive the profits generated from the use of, the Properties. BCA's enrichment was unjust, because BCA had no legal right to withhold 78 Amstel Avenue from the Properties being sold, and seized upon a typographical error in the Sales Agreement as a pretext to rescind the transaction.
See id. at 1062-63 ("An owner of property is entitled to the free exercise of a number of incidental rights in the property including possession and control, use and enjoyment, products and profits generated through its use, and the sale or transfer of the property.").
The measure of BCA's unjust enrichment is the net cash flow it derived from the rent from the apartments on the Properties, plus the cash flow it enjoyed from the monthly parking fees. Therefore, the Court will award Amstel restitution for all net profits received by BCA as a result of its continued (and improper) retention of the Properties from January 5, 2001 until the date the Properties are transferred to Amstel.
IV. CONCLUSION
For the reasons set forth above, judgment will be entered for the plaintiff ordering the Sales Agreement to be reformed, by substituting "78 Amstel Avenue" for "72 Amstel Drive." The defendants will be ordered to convey all of the Properties to the plaintiff in accordance with the terms of the Sales Agreement as reformed. The plaintiff will also be awarded restitution damages equal to the net profits derived from the Properties since January 5, 2001. Lastly, the defendants' counterclaim will be dismissed.
Counsel shall confer and submit an appropriate form of implementing order.