Opinion
C.A. No. 1498-K
Date Submitted: September 19, 2002
Date Decided: December 17, 2002
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR KENT COUNTY
Constantine F. Malmberg, III, Esquire of YOUNG MALMBERG, P.A., Dover, Delaware; Attorney for Petitioner.
Brian P. Murphy, Esquire, Middletown, Delaware; Attorney for Respondents.
MEMORANDUM OPINION
Pending is the respondents' motion for summary judgment in this action. The claim of the petitioner, who is the sister of one of the respondents, arises out of the conveyance of land by their parents to the petitioner's sister. The petitioner has brought this action against her sister and brother-in-law for declaratory relief and for a resulting or constructive trust that would vest in the petitioner the unencumbered title to the previously conveyed parcel. For the reasons discussed below, the respondents' motion for summary judgment will be denied.
I. FACTS
The following facts of record are undisputed. Walter C. Ireland, Jr. and Betty Jo Ireland ("the Irelands") owned a one-acre parcel of land located in Smyrna, Kent County, Delaware. Betty Jo has two daughters, Barbara S. Taylor ("Barbara" or "the petitioner") and Kathy G. Jones ("Kathy"), who is one of the respondents. In September of 1983, the Irelands subdivided their one-acre lot into two half-acre lots. Barbara lives on one of those lots at 611 Hawkey Branch Road ("Lot 1"), and Kathy lives on the other lot at 591 Hawkey Branch Road ("Lot 2").
Although Walter Ireland, Jr. is the stepfather of Barbara Taylor and Kathy Jones, the Irelands are referred to as their "parents" for the ease of reference.
On September 30, 1996, the Irelands transferred the title to Lots 1 and 2 to Kathy in a single deed. The deed, which was prepared by an attorney and was duly executed and acknowledged by the Irelands, conveyed the land to Kathy and "her heirs and assigns" in fee simple absolute for the recited consideration of ten dollars. Sometime thereafter, Kathy transferred title to the property jointly to herself and her husband, Willis E. Jones, ("the respondents"). The respondents then proceeded to mortgage the property. Five years later, during the summer of 2001, the respondents gave notice directing Barbara, and her son, John P. Taylor, and his family to vacate the property. Barbara responded by filing this action for equitable relief, seeking a declaration that title to Lot 1 properly belongs to Barbara.
II. THE CONTENTIONS AND GOVERNING LAW
The respondents have moved for summary judgment under Court of Chancery Rule 56. To grant a motion for summary judgment, the Court must determine that there are no genuine issues of material fact and that the moving parties (here, the respondents) are entitled to judgment as a matter of law. The party opposing the motion has the burden of establishing that there are disputed issues of material fact generated by the evidence of record. All inferences will be resolved in favor of the non-moving party, but those inferences must be drawn from evidence, not suppositions.
Williams v. Geier, 671 A.2d 1368, 1375 (Del. 1996).
Ch. Ct. R. 56(e).
Liboff v. Allen, 1975 Del. Ch. LEXIS 255, at *14 (Del.Ch. Jan. 14, 1975).
Barbara's claim of title rests upon an alleged oral agreement entered into by her parents and Kathy for Barbara's benefit. Barbara's claim is that in 1983, the Irelands gave Barbara the property on which she presently lives (Lot 1), but did so without any formal transfer of title. In 1996, Barbara further claims, her parents temporarily deeded the title to Lot 1 to Kathy, to enable Kathy to obtain a mortgage for Lot 2. Despite that transfer, Barbara claims that the parties' true intent was that Kathy would hold Lot 1 in trust for Barbara, but only for the limited period of time needed for Kathy to put her finances in order. Once that occurred, Kathy would formally re-transfer the title to Lot 1 to Barbara. In short, Barbara contends that the written deed, which purports to convey fee simple to Kathy outright, did not constitute the parties' entire understanding and was, in fact and law, but one aspect of a larger, more comprehensive oral agreement.
Barbara challenges Kathy's actions as a third party beneficiary of the alleged oral agreement. Barbara was not party to the deed or the any oral agreement made between the Irelands and Kathy. A third party donee beneficiary may sue to enforce a contract made for her benefit even though she did not assent to the contract. Farmers Bank of the State of Del. v. Howard, 276 A.2d 744, 745-46 (Del.Ch. 1971). As such, Barbara has standing to challenge the agreement.
The respondents contend that the deed does constitute the parties' entire agreement, because the Irelands intended to — and did — convey Lots 1 and 2 outright to Kathy for having worked in her parents' store for twenty-five years. Barbara, on the other hand, had quit working at the store some years before those lots were conveyed. For reasons that are not clear, at some point Barbara and her mother had a falling out, and for several years did not speak to each other. The respondents claim that they allowed Barbara to live on their property solely as an accommodation to Barbara and their mother, as long as Barbara respected their rules. The respondents explain that they sought to evict Barbara and her family only after their rules were broken, i.e., after Barbara's grandchildren had damaged the property and John had used profanity during an argument with Kathy.
The respondents' position is that the petitioner's claim fails as a matter of law, because any evidence of the oral agreement claimed by Barbara is barred by the parol evidence rule, since such evidence would necessarily contradict or modify the recorded deed conveying the lots to Kathy.
Barbara, as petitioner, rejoins that she is not attempting to contradict or modify the language of the deed, but instead is seeking to enforce a separate oral agreement under which the deeded property was to be held in trust for her benefit. Barbara also contends that even if the Statute of Frauds applies, it cannot bar consideration of the oral agreement, because her case falls under both the "part performance" and the "reliance" exceptions to the Statute.
These contentions generate three issues. The first is whether the petitioner has adduced prima fade evidence of the alleged oral agreement that is sufficient to avoid summary judgment. The second issue is whether even if the record contains such evidence, the parol evidence rule prohibits the Court from considering it. The third issue is whether the Statute of Frauds applies, and if so, whether this case fits within one or more of its common law exceptions. As more fully explained, I conclude that issues of material fact require that the motion for summary judgment be denied.
III. ANALYSIS
A. The Resulting Trust Issue
The first issue — which the parties have nowhere addressed — is whether the evidence of record is sufficient to support Barbara's resulting trust claim, so as to create a triable fact issue on that question. If Barbara has adduced prima fade evidence adequate to support the oral agreement upon which her case rests, that would create a material factual dispute and defeat the summary judgment motion. Only if the record is found to contain such evidence would the Court then be required to address the parol evidence and Statute of Frauds issues.
Rule 56(e) provides that evidence may be presented in the form of affidavits based on personal knowledge, depositions, answers to interrogatories, or admissions on file. At their depositions both respondents testified that (i) the deed represents the entire agreement between Kathy and the Irelands, and that (ii) Barbara was allowed to live on their property only at their sufferance. In support of her claim, Barbara filed a verified petition to which certain exhibits are attached. That verified pleading may be used to support or oppose a motion for summary judgment if it meets the requirements of Rule 56(e), which this verified petition does. The issue then becomes whether the facts alleged in the verified petition establish a claim for a resulting trust.
Rule 56(e) requires that affidavits must (1) be based on personal knowledge, (2) set forth specific admissible evidence, and (3) demonstrate the competence of the party to offer the evidence. A verified pleading can be used as an affidavit if the facts stated therein are true to the party's own knowledge. Bruce E. M v. Dorothea A. M, 455 A.2d 866, 869 (Del. 1983). Verified pleadings must contain an affirmation by the filing party that the information relating to the party's own acts and deeds is true, and that matters relating to the acts and deeds of others is believed by the party to be true. Ch. Ct. R. 3(aa). The portions of the verified petition that are relevant to this case concern the acts of Barbara's and Kathy's parents. Therefore, the verification portion of the petition, which recites that the allegations of the petition are "correct to the best of [Barbara's] knowledge and belief," is valid.
A resulting trust may be imposed in circumstances where it is intended that one party will hold legal title to property for the benefit of another party who has equitable or beneficial ownership of that property. The basis for the remedy is the presumed intent of the parties and the circumstances of the transaction. I conclude that the facts alleged in the verified petition are sufficient to establish a prima facie claim for a resulting trust.
Subt. v. Subt., 1990 Del. Ch. LEXIS 26, *13 (Del.Ch. Feb. 16, 1990).
Coughlin v. Hall, 1995 Del. Ch. LEXIS 58, at *9 (Del.Ch. May 16, 1995) (citing Adams v. Jankousas, 452 A.2d 148, 152 (Del. 1982)).
In her verified petition, Barbara states that in 1983, it was her parents' intent to gift to each daughter the lot on which she lived. In 1996, however, the parents temporarily deeded Lot 1 to Kathy to help her obtain financing for Lot 2, but always with the intent that Lot 2 would be held in trust for, and then re-conveyed to Barbara. In addition, an unsworn letter from Mrs. Ireland, which is attached as Exhibit D to the verified petition, also supports the alleged oral agreement upon which Barbara relies. Although that letter is not in proper evidentiary form (it arguably is hearsay) its contents could be made admissible if the mother were called to testify at trial. Accordingly, Barbara has adduced prima fade evidence of an oral agreement that creates an issue of material fact sufficient to avoid summary judgment.
Pet. ¶ 7
Pet. ¶ 8
Celotex Corp. v. Catrett, 477 U.S. 317, 324 (U.S. 1986).
That does not conclude the analysis, however, because the Court must next decide whether the parol evidence rule, or the Statute of Frauds, or both, preclude the Court from considering the above-described evidence.
B. The Parol Evidence Issue
The parol evidence rule is a principle of substantive law that prevents the use of extrinsic evidence of an oral agreement to vary a fully integrated agreement that the parties have reduced to writing. Where a written agreement is meant to be final and complete, it is a totally integrated contract. If a written agreement is final and incomplete, it is a partially integrated contract. A contract is completely integrated if on its face it is clear that the parties intended the writing to be a final and total expression of their agreement. The parol evidence rule prevents the consideration of oral evidence that would contradict either total or partial integrated agreements. That rule does not, however, prohibit the supplementation of partially integrated contracts by evidence of an oral agreement that is consistent with, and does not contradict, the writing.
McGrew v. Vanguard Corp., 1979 Del. Ch. LEXIS 423, at *9 (Del. Ch. Sept. 25, 1979); 11 Richard A. Lord, Williston on Contracts § 33:1, at 541 550 (4th ed. 1999).
McGrew, 1979 Del. Ch. LEXIS 423, at *9.
Id.
Id.
Because she claims that the written deed is only one component of a more comprehensive agreement, Barbara is in essence contending that the deed is a partially integrated contract. Kathy, on the other hand, contends that the written deed is a totally integrated agreement and that as a result, she and her husband are the lawful owners of Lot 1.
In determining whether a writing proposed as a contract is totally integrated, several factors are considered. These factors include whether the writing was carefully and formally drafted, whether the writing addresses the questions that would naturally arise out of the subject matter, and whether it expresses the final intentions of the parties. In this case, the deed was formally drafted, executed, and acknowledged by the Irelands as grantors. On its face, the deed conveys fee simple absolute to Kathy and is not subject to any conditions or limitations. But, whether the deed expresses the parties' final agreement is warmly disputed. As discussed, Barbara has adduced evidence that her parents intended for the conveyance of title to Lot 1 to Kathy to be temporary and for Barbara to have beneficial title until such time as Kathy conveyed legal title to her. That evidence places in issue whether the deed is a totally integrated agreement. As a result, the Court may consider conflicting extrinsic evidence, even though on its face, the writing appears complete.
Scott-Douglas Corp. v. Greyhound Corp., 304 A.2d 309, 316 (Del. Ch. 1973) (quoting Brady v. Central Excavators, 25 N.W.2d 630 (Mich. 1947)).
Id.
3 Corbin on Contracts §§ 579 582 (Matthew Bender Co. LEXIS ed. 2001).
Because the record contains evidence that the deed is not a totally integrated contract, that creates an issue of material fact. The issue is whether the deed is a totally integrated contract (in which case Kathy would be the fee simple owner of both lots) or whether it is a partially integrated agreement (in which case Barbara, assuming she prevails on the merits, would be declared the fee simple owner of Lot 1). The Court must, therefore, deny summary judgment on this ground.
Although it is not commonplace in modern conveyancing practice, it is legally possible for a deed to be a fully integrated contract. Often it is the case that when land is transferred there is both a deed and a sales contract. The "merger rule, " however, provides that a deed could execute the sale and thus constitute the sales contract. Reed v. Hassell, 340 A.2d 157, 160 (Del.Super. 1975).
C. The Statute of Frauds Issue
The second ground for the respondents' motion is the Statute of Frauds, which requires that a contract for the sale of land be in writing. There are two exceptions to the requirement of a writing: (i) where the agreement has been partially performed and (ii) where a party has been induced to act by reliance on a promise. In this case, the first exception presents a triable issue of fact; the second exception does not.
6 Del. C. § 27 14(a) provides that "[n]o action shall be brought to charge any person upon any contract or sale of lands.. .unless the contract is reduced to writing.
1. The Part Performance Exception
Part performance by a party is regarded as substantial evidence that a contract was in fact made, thereby rendering the policy underlying the Statute of Frauds inapplicable. For the part performance exception to apply, however, the performance must be attributed solely to the oral agreement. For example, where a purchaser of land under an oral purchase agreement makes partial payment, makes improvements to the land, or takes possession of the land, that conduct may constitute partial performance of the contract and remove it from the Statute of Frauds.
Quillen v. Sayers, 482 A.2d 744, 747 (Del. 1984).
Marta v. Mut. Life Ins. Co. of NY, 887 F. Supp. 722, 726 (D. Del. 1995); Durand v. Snedeker, 177 A.2d 649, 653 (Del.Ch. 1962).
Heckman v. Nero, 2000 Del. Ch. LEXIS 106, at *3-*4 (Del.Ch. July 20, 2000).
Id.
Todd v. Diamond State Iron Co., 13 Del. 372, 388 (Del. 1889); Shepherd v. Niles, 125 A. 669, 670 (Del.Ch. 1924).
The record contains evidence that the deed is but one element of a larger oral agreement between Kathy and her parents. It is undisputed that Barbara took possession of Lot 1 after that parcel was deeded to Kathy. Although Barbara's continued possession of Lot 1 is consistent with Kathy's position that Barbara was allowed to live there solely at Kathy's sufferance, that same fact is also consistent with Barbara's contention that her continuing to live on Lot 1 constituted part performance by Kathy of the oral agreement at issue here. Because the record contains evidence of part performance, it creates a triable issue of material fact that precludes the entry of summary judgment on Statute of Frauds grounds.
2. The Promissory Estoppel Exception
The second exception to the Statute arises where there is conduct that amounts to a promissory estoppel. Where a party makes an oral promise that could reasonably be expected to induce detrimental reliance on the part of a party or a third person, and where the promise does in fact induce reliance, it is enforceable despite the absence of a writing, if "injustice can be avoided only by enforcement of the promise."
Huntington Homeowners Ass'n v. 706 Investments, 1999 Del. Ch. LEXIS 119, at *12 (Del.Ch. May 28, 1999); Restatement (Second) of Contracts § 139(1).
The record in this case does not support that exception. Even if there was an oral agreement between Kathy and her parents to hold Lot 1 in trust for Barbara's benefit, the record contains no evidence that Barbara relied on that agreement to her detriment. Indeed, Barbara arguably received a benefit from the transfer of Lot 1 to Kathy, because it enabled Barbara to live on the property even after Kathy obtained title. Because Barbara has not demonstrated detrimental reliance on the claimed oral agreement, this exception to the Statute of Frauds is unavailable.
IV. CONCLUSION
For the above reasons, the respondents' motion for summary judgment is denied. IT IS SO ORDERED.