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placing constructive trust over funds entrusted to one "regarded as family," and reasonably relied upon who had kept the funds for himself in an unconscientious manner
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Civil Action No. 16364.
Date Submitted: January 4, 2000.
Date Decided: February 23, 2000.
Sotiere S. Kapsalis, Esquire, Wilmington, Delaware, Attorney for Plaintiff.
Richard L. Abbott, Esquire, of The Bayard Firm, Wilmington, Delaware, Attorney for Defendants Gordon G. Hendry and Maryann M. Hendry.
Daniel G. Hendry, Pro Se.
OPINION
In this post-trial opinion, I address the claims brought by plaintiff Susan J. Wagner ("Sue") against her former prospective parents-in-law, defendants Gordon G. Hendry ("Gordon") and his wife Mary Ann Hendry ("Mrs. Hendry"), to whom I will refer collectively as the Hendrys.
For several years, Sue had a relationship with the Hendrys' son, defendant Daniel G. Hendry ("Daniel"), that the parties believed would result in marriage. In contemplation of this blessed event, the Hendrys, through Gordon, facilitated a poorly documented real estate transaction, whereby the Hendrys obtained legal title to a property even though Sue and Daniel (together, the "Couple") paid the seller over $8,000 and assumed almost all of the obligations of an actual buyer. Indeed, Sue and Daniel moved into the property, made $1,000 monthly payments to the Hendrys after the sale, and covered the cost of taxes and other payments attributable to the Property. The reason for handling the transaction this way was the Couple's inability to afford the tax and closing costs necessary to assume title in their own names at that time. Thus the Hendrys and the Couple agreed that title would be transferred when the Couple could handle those costs, at which time the monthly payments would be credited as principal and would be treated in the future as mortgage payments.
Unfortunately, the Couple's love was not enduring, and Sue moved out. She, per an agreement with Gordon, stopped paying her share of the monthly payments.
Then Sue brought this suit seeking, among other things, specific performance of an alleged oral agreement by the Hendrys to transfer title in the property to her when she demanded it or a resulting and/or constructive trust over her share of the $8,000 down payment. In this opinion, I conclude that Sue is not entitled to specific performance but is entitled to a resulting and/or constructive trust over the down payment.
I. Daniel Goes Missing
Daniel is obviously an important player in this drama. After all, he was Sue's romantic partner and played an integral role in the transaction that is the subject of Sue's claim against his parents.
Aside from sporadic correspondence of which I cannot take cognizance in this opinion, however, Daniel has chosen not to grace this court with his presence. In fact, a default judgment was entered for Sue on her claims against Daniel. Thus the factual findings below necessarily fail to reflect Daniel's view of what happened.
II. Findings of Fact A. The Hendrys Acquire The Property From Roman
By the beginning of 1996, Sue and Daniel had been engaged in a serious romantic relationship for some time that the Couple and the Hendrys thought would result in marriage. Early that year, Daniel's father Gordon informed them of the opportunity to buy a house at a reasonable price.
The house, which was located at 29 Whitehall Circle, Wilmington, Delaware (the "Property"), was one with which Gordon and Mary Ann Hendry had a thirty-year relationship. They owned the Property for over a quarter century before selling it to Mary Lucille Roman (then Miller) in 1994. The Hendrys took back a mortgage from Roman for $118,750 and received monthly payments from Roman.
Due to a serious personal problem, Roman asked the Hendrys during the winter of 1995-1996 if she could get out of the mortgage. In March 1996, Gordon agreed and tried to arrange a transaction in which the Couple would buy the property from Roman, with the Hendrys holding a mortgage on the property. The mortgage was to be "for 108 equal payments of $1,000.00 with no cost incurring to the mortgage holder." To that end, Gordon asked his personal attorney, Joseph M. Bernstein, to handle the transaction.
PX 5.
Id.
Gordon took the lead in arranging the transaction, and Mrs. Hendry authorized him to act for her. Meanwhile, Daniel took the lead for the Couple, with Sue having virtually no substantive role. Significantly, Gordon also assumed a position of trust in the eyes of both Daniel and Sue and led them to believe that he was acting as a parent and prospective father-in-law to advance their best interests.
During the course of discussions among Gordon, Daniel, Roman, and Bernstein about the transaction, it became clear that it would be difficult for the Couple to buy the Property themselves. Because Daniel and Sue were not married, they would not qualify for a first-time homebuyer exception to the real estate transfer tax. Thus if they purchased the Property, they would owe 3% of the purchase price in taxes. Moreover, other transaction costs were required. The Couple did not have the means to cover all of these costs.
In addition, Bernstein advised Daniel that the transfer tax issue could be disposed of in the following manner after Daniel and Sue got married. If the Hendrys, rather than Daniel and Sue, took title from Roman, there would be no transfer tax due because the Hendrys already had a mortgage on the Property on which Roman was supposedly about to default. If the Hendrys took title, they could then transfer the Property to Daniel and Sue after they married. At that time, the Couple could receive the property from the Hendrys without paying the transfer tax, using an exemption for transfers from parents to a child and the child's spouse.
Roman was current on all payments as of the sale but did not think she could keep up with future payments. Roman Dep. 7-8, 14.
All of the parties therefore agreed to proceed with a transaction whereby legal title would pass from Roman to the Hendrys. But the underlying premise was that the Property would later be transferred to the Couple when they were either married or able to cover the costs of a taxable transfer of the Property. In the meantime, Daniel and Sue were to make monthly payments to the Hendrys, which would be credited to the Couple when the Property was later transferred.
On April 26, 1996, settlement on the transaction occurred. The evidence regarding the settlement is sketchy at best but certain facts are, to my mind, established with certainty. First, legal title to the Property was transferred from Roman to the Hendrys in exchange for nominal consideration of $1 and the Hendrys' release of Roman from her obligations under the mortgage.
Second, the Couple delivered checks to Roman in the amount of approximately $8,000 in connection with the transaction (the "Down Payment"). According to both Sue and Roman, whose testimony I credit, the Down Payment was for Roman's "interest in the" Property. The amount of the Down Payment was set forth in a note that Gordon typed up and gave to Daniel and Sue. In that note, Gordon gave the Couple instructions about their responsibilities in connection with the closing. His fatherly note indicated, "Review carefully what you agreed to. Also why not stop out tonight and review this. Its [sic] much to [sic] important to mess up. If you don't have something done the whole process stops." The note goes on to detail a list of categories for which payments to Roman were owed in connection with the sale of the Property. Thus I find that the Down Payment would have had to be paid by the Hendrys to Roman if it had not been paid by the Couple.
Tr. at 40-41; M. L. Roman Dep. at 17. I am not persuaded by the Hendrys' suggestion that the Down Payment was merely for appliances Roman left in the house.
PX 8. Gordon denies that he wrote this note. His denial is not convincing, in view of, among other things, the fact that his personal address label is on the bottom; the fact that the typeface of the note closely resembles that of other documents authored by Gordon; and the contents and tone of the note, which both make sense only as a communication from Gordon. Similarly, Gordon's suggestion that the note was forged is not credible.
Id.
The Hendrys denied any knowledge of the Down Payment. I find Gordon's denial incredible, and Mrs. Hendry's of little moment because she entrusted Gordon to act as her agent in the transaction and enabled him to handle all of the details.
B. The Post-Closing Payments On The Property
A period of relative quiescence set in after closing. During this period, Daniel and Sue lived at the Property. This was, it seems, a time of hope for the Couple and the Hendrys. On December 12, 1996, Daniel and Sue were engaged. During this time, Gordon was encouraging his son to stay on the right track and to avoid indulging in certain behaviors that were unproductive.In terms of the Property, the arrangements between the Couple and the Hendrys were relatively simple, if not well documented. After closing, Daniel and Wagner paid the Hendrys $1,000 a month by checks drawn from Sue's bank account, which the Couple used to pay their bills. These $1,000 per month payments were identical to the mortgage payments referenced by Gordon in his March 1996 letter. In that letter, Gordon was still contemplating that the Property would be sold by Roman to Daniel and Sue and that the Couple would owe mortgage payments to the Hendrys. On several of the checks, Sue wrote the note "mortgage payment," but she stopped that practice after Daniel asked her to. According to Gordon, he often encouraged Daniel to pay $1,200 a month to soak up income that Daniel might otherwise use for less worthy purposes than building up equity in a home.
PX 14.
Each month, an amortization schedule was prepared that tracked the Couple's $1,000 monthly payments against a "Loan Principal" balance of $117,665.90. Sue did not see who prepared these schedules but claims that she would come home to the Property and find them on the kitchen table with the note "Dan and Sue" written on them. She testified credibly that Gordon had access to the Property and could have left them there. Gordon denies having prepared these schedules, but I find it probable that he did prepare them. The schedules are consistent with Gordon's acknowledged desire to see his son Daniel get on the right track. The schedules showed Daniel and Sue the progress they were making in accumulating principal in the Property. Moreover, the schedules are similar in typeface to other documents concededly prepared by Gordon and contain a typographical error identical to that on a similar amortization schedule used in connection with Roman's mortgage with the Hendrys. The schedule also sets forth Gordon's social security number.
This figure is of imprecise origin. It is consistent with evidence in the record that suggests that the Couple was to make a $10,000 payment to the Hendrys in connection with the sales transaction. E.g., PX 13. Neither the Hendrys nor Sue contend that any such payment was ever made. Thus I need not explore this mystery.
Compare PX 13, 14 with PX 22; see also Roman Dep. at 6 (testifying that Gordon had given her an amortization schedule like PX 22).
By extra payments to the Hendrys, the Couple also covered the property taxes and water bills owed by the Hendrys on the Property, in addition to the sewer bills the Couple paid directly to the county. And the Couple procured a homeowner's policy designating Sue as the "insured" and the Hendrys as "mortgagee." Sue did this in response to an earlier communication from Gordon. In addition, Daniel and Sue paid the usual bills — electric, cable, heating, and telephone — that any homeowner or renter would pay.
PX 15. Gordon denies writing PX 15. His denial is, again, incredible. The note is addressed to "Mary Lu/Dan/Sue." Thus they did not write it. Given the context, the "I" referenced in the note is clearly Gordon, and the typeface is again consistent with documents Gordon concededly wrote.
Between April 1996 and September 1997, the Couple paid monthly checks to the Hendrys totaling $21,077.
C. Daniel And Sue Break Up
In September 1997, Sue broke off her engagement with Daniel and left the Property. A couple of months later Sue called Gordon to ask him to release her from her financial obligations to the Hendrys. Gordon agreed and acknowledged that agreement by a letter that both he and Sue recall but which neither possess.
Since speaking with Gordon, Sue has made no payments to the Hendrys in connection with the Property. Since that time, Daniel has remained at the Property. The extent to which he pays the Hendrys to do so is totally unclear.
III. Sue's Claims
Sue's complaint and briefs have articulated different theories upon which she seeks to secure relief. The two primary ones are that:
• Sue and Daniel obtained equitable title to the Property through the Transaction pursuant to an oral agreement between the Couple and the Hendrys. Sue seeks specific performance of that agreement through an order retitling the Property in her name and awarding the Couple a half interest or her a quarter (half of the Couple's) interest in the Property.
• A resulting and/or constructive trust in the amount of Sue's share of the Down Payment to Roman and/or the monthly payments to the Hendrys should be imposed on the Property. Because the Hendrys ultimately obtained legal title to the Property, they were unjustly enriched at Sue's expense and it would be inequitable to allow them to obtain an improper benefit at the expense of their former prospective daughter-in-law.
I will now address these claims.
Sue's motion to amend the complaint to add a claim for money judgment is denied. This motion was filed after post-trial briefing was completed and is so untimely as to be clearly prejudicial.
IV. Sue's Specific Performance Claim
Because Sue is seeking to enforce a supposed oral agreement for the transfer of the Property to herself, she must overcome the obstacle of the Statute of Frauds. Clear and convincing evidence of actual part performance can suffice, depending on the circumstances, to meet this burden.Cutting to the chase, Sue has proven by clear and convincing evidence that an oral agreement existed between the Couple and the Hendrys by which the Hendrys gave the Couple the option to have title in the Property transferred to the Couple at such time as Daniel and Sue decided jointly that they could cover the costs associated with the title transfer and informed the Hendrys of their intention to assume the title. Upon the exercise of that option, the Hendrys would take back a mortgage from the Couple and credit them for their monthly payments. Furthermore, the Hendrys and the Couple assumed that this option would not be exercised until the Couple became married and could assume title without an obligation to pay transfer taxes. In so ruling, I also conclude that no contract existed that gave an option to Sue or Daniel individually to require the Hendrys to transfer a half-interest in the Property to either of them alone. Rather, Sue and Daniel had a joint option as a couple. Sue acknowledged as much at trial.
Tr. at 238.
For several reasons, I conclude that Sue cannot specifically enforce this oral agreement. First and foremost, the conditions under which the Couple had the option to demand transfer of the title did not come to pass, largely because Sue ended her relationship with Daniel. At no time did the Couple have the wherewithal to assume title and request that title be transferred. While I am sympathetic with Sue's plight, she admittedly entered into an oral understanding premised upon the endurance of her bond with Daniel. Daniel has made it clear, in his inimitably elusive yet unmistakable way, that he does not intend to join Sue in seeking to enforce their joint option to have title to the Property transferred to them as a couple.
Second, to the extent that Sue claims that she was the equitable title owner and therefore owed mortgage payments to the Hendrys, she is faced with the problem that she is in default. Since September 1997, she has failed to pay her share of the supposed "mortgage." The "general rule" is that "`the party first guilty of a material breach of contract cannot complain if the other party subsequently refuses to perform.'" Thus a plaintiff seeking to compel performance must demonstrate "freedom from fault with respect to performance of dependent promises, counterpromises or conditions precedent." Even if Sue were permitted to enforce the agreement, I believe the Hendrys are correct in asserting that her admitted default on the purported mortgage would require offsetting any recovery by back mortgage and any tax payments. Moreover, upon enforcement of the contract, Sue would become liable for the transfer taxes she avoided. Although I impute no bad faith to the Couple or the Hendrys in structuring a "tax free transaction," once that transaction is reconfigured in a taxable form, Sue is not free to ignore her legal obligations.
Eastern Electric and Heating, Inc. v. Pike Creek Professional Center, Inc., Del. Supr., C.A. Nos. 85L-MY-1, 85L-AP-21, 1986 Del. LEXIS 1191, at *8, Herrmann, C.J. (retired) (Aug. 5, 1986) ( quoting Hudson v. D V Mason Contractors, Inc., Del. Super., 252 A.2d 166 (1969)).
Hudson v. D V Mason., 252 A.2d at 170 ( citing 17 AM.JUR.2d, Contracts § 441).
Finally, as the Hendrys contend, the doctrine of accord and satisfaction also appears to preclude Sue's recovery on her specific performance claim. "Accord" is when "one party to an existing contract may agree with the other party to accept from him in the future a stated performance in satisfaction of the subsisting contractual duty," and "the performance of the accord" is "the satisfaction of the claim." As our Supreme Court has stated, "[t]here can be no accord without the making of a new contract." Further, whether or not the parties agreed that a subsequent contract would be accepted in full performance and satisfaction of the preexisting duty such that the old agreement is wholly abrogated and superceded by the new contract is "usually a question of fact, which must be proved by the party alleging it. . . ."
Jefferson Island Salt Mining Co. v. Empire Box Corp., Del. Super., 23 A.2d 106, 108 (1941), aff'd, Empire Box Corp. v. Jefferson Island Salt Mining Co., Del. Supr., 36 A.2d 40 (1944); see also Acierno v. Worthy Brothers Pipeline Corp., Del. Supr., 656 A.2d 1085, 1092 (1995) ("To sustain an accord and satisfaction the party asserting it must show that there was uncertainty regarding the amount of the debt and that the uncertainty was the result of a bona fide dispute based on mutual good faith").
Allied Builders, Inc. v. Heffron, Del. Supr., 397 A.2d 550, 552 (1971) (citation omitted); see also id. ("an accord is an agreement to accept something that is new or different from what a party was originally entitled to") ( citing In Re Trexler Co., Del. Ch., 132 A. 144 (1926)).
Empire Box Corp. v. Jefferson Island Salt Mining Co., 36 A.2d at 43-44 ("if not expressly or impliedly determined by the provisions of the contract, pertinent evidence of surrounding circumstances is often admissible to prove intent") (citations omitted).
On the basis of the undisputed evidence that the reciprocal contractual obligations of the Hendrys and the Couple were uncertain, that Sue asked to be released from her "financial obligations," that Gordon acquiesced to that request, that the Hendrys did in fact release her from any mortgage or rental payments owed, and that Sue made no further payments to the Hendrys after November 1997, the Hendrys have persuaded me that the requisite mutual assent, consideration, and performance on a substituted agreement of limited scope are present. That is, I conclude that Sue agreed to give up any claim to seek recovery of any of her previous monthly payments or to enforce the Hendrys' alleged agreement to transfer title to her upon request. I reach this conclusion because it is unfathomable that Gordon would have agreed to forego future payments if he thought that Sue could still sue him to recover her share of the past payments or to demand a transfer of a half interest to the Couple or a quarter interest in the Property to herself.
The Hendrys could, but did not, argue that Sue gave them a release. Starr v. Nationwide Mutual Ins. Co. Del. Ch. 548 A.2d 22, 25 (1988), aff'd, Del. Supr., 575 A.2d 1083 (1990). Under either an "accord" or "release" approach, the court is to enforce only those terms the party relying upon the accord or release proves were in fact agreed upon by the parties. Because there is no reliable writing in this case, that requirement is especially important lest injustice result.
The scope of this new accord, however, cannot be extended any further. There is no evidence that Gordon and Sue focused on or discussed whether the Hendrys would have to return to Sue her share of the Down Payment. Given the vagueness of the discussions between Sue and Gordon and the fact that the Hendrys bear the burden of proof on this issue, I cannot conclude that Sue forewent her right to challenge the Hendrys' decision to retain the benefits of the Down Payment for themselves, without recompense to Sue.
This is a conclusion that is not free from doubt, however. A reasonable mind could conclude that Sue's request to be released from making further payments and Gordon's acceptance should give rise to an implied contract on Sue's part to relinquish any claims she might have had against the Hendrys with respect to the Property. But the Hendrys have the burden of proof on this issue and have not convinced me that any such far-reaching accord was in fact reached. And as a matter of equity, I am disinclined to find that Sue agreed to a complete release of all her claims against the Hendrys because there is no evidence that either of the parties believed that such a broad release had been granted; because Gordon was considerably more sophisticated than Sue; and because Gordon had theretofore acted in a quasi-parental role toward Sue with respect to the Property. Indeed, because the Hendrys have adamantly denied having anything other than a month-to-month lease arrangement with the Couple, they are hardly in a just position to claim that they relinquished valuable rights in exchange for a full release as to all aspects of the transaction, including the Down Payment.
V. Sue's Resulting And Constructive Trust Claims
Sue also seeks to place a resulting and/or constructive trust on (1) her share of the Down Payment and (2) her share of the monthly payments. Sue has convinced me that she personally contributed at least fifty percent of the funds used to make these payments.
The Hendrys' claim that Roman is an indispensable party is without merit. Sue has asserted no claim against Roman because Sue believes that Roman properly received the Down Payment. Given these circumstances, I fail to see the basis for joining Roman as a party. Moreover, Roman's testimony, though deposition, was available and used by both parties, and thus there is no evidentiary prejudice resulting from her non-party status.
A. Sue's Claim For A Resulting Trust Over The Down Payment
A resulting trust is one "imposed by a court of equity to give effect to the presumed intentions of the parties." Equity presumes, "`absent contrary evidence, that the person supplying the purchase money for property intends that its purchase will inure to his benefit, and the fact that title is in the name of another is for some incidental reason.'" Thus where one person pays consideration for real estate but another person takes title, a resulting trust, or purchase money resulting trust, arises in favor of the person paying the purchase money. In other words, the person who pays the valuable consideration becomes entitled to the beneficial ownership of the property.
Hudak v. Procek, Del. Supr., 727 A.2d 841, 843 (1999) ( citing Adams v. Jankouskas, Del. Supr., 452 A.2d 148 (1982)).
Hudak, 727 A.2d at 843 ( quoting Adams, 452 A.2d at 152); Greenly v. Greenly, Del. Ch., 49 A.2d 126, 129 (1946) (notion of a resulting trust "rests on the natural presumption that, in the absence of evidence to the contrary, the person who supplies the purchase price intends that the property shall inure to her own benefit, and that a conveyance in the name of another is for some mere incidental reason") (citation omitted).
Kemspki v. Lesczynksi, Del. Ch., 157 A. 201 (1931) (citation omitted); Everett v. Lanouette, Del. Ch., C.A. No. 11481, 1994 Del. Ch. LEXIS 223, Steele, V.C. (Nov. 10, 1994) (resulting trusts are appropriate "when a legal estate is purchased with surrounding facts and circumstances giving rise to the inference the beneficial interest is separate from the legal title") ( citing Subt v. Subt, Del. Ch., C.A. No. 1233, Chandler, V.C. (Feb. 16, 1990)).
McCafferty v. Flinn, Del. Ch., 125 A. 675, 677 (1924).
The primary factors a court must consider when determining whether or not to impose a resulting trust are "[t]he payment of the consideration" and "the real intent of the person who paid it[.]" "[A]ctual payment of the purchase price or liability incurred for it is crucial." Furthermore, "the payment made or liability incurred must be part of the original transaction of purchase and not pursuant to any subsequent agreement between the parties." Although the plaintiff is entitled to the initial presumption of intent to secure the benefit of her payment, she nevertheless retains the burden of proof on that issue and must establish her entitlement to relief by clear and convincing evidence.
Greenly v. Greenly, 49 A.2d at 129 (citation omitted).
Wells. v. Boardley, Del. Ch., C.A. No. 5885, 1983 Del. Ch. LEXIS 480, at *5, Longobardi, V.C. (Sept. 12, 1983) ( citing Harvey v. Pennypacker, 4 Del. 455 (1872)).
Id.
Greenly v. Greenly, 49 A.2d at 129 (citation omitted).
With respect to the first element — payment of the consideration — Sue has established by clear and convincing evidence that she and Daniel paid the Down Payment to Roman. As to the second element — the Couple's real intent in making the payment to Roman — the Hendrys have failed to adequately rebut the presumption that the Couple intended (1) that the benefit of the Down Payment to Roman would inure to themselves rather than to the Hendrys as equity in the Property and (2) that the placement of title in the Hendrys' name would merely serve the incidental purpose of delaying the Couple's obligation to pay certain closing costs until they had the wherewithal to make the necessary payments. By contrast, Sue has presented clear and convincing evidence that she intended the Down Payment to function as purchase money for the Property.
At best, the Hendrys have shown that neither they nor the Couple thought about what would happen to the Down Payment if the Couple never got married and exercised their option to demand transfer of title. The parties' failure to focus on this eventuality is, in fact, consistent with their belief that the Down Payment would redound to the Couple's ultimate benefit, not the Hendrys'.
B. Sue's Claim For A Constructive Trust Over The Down Payment
Sue has also proven her entitlement to the placement of a constructive trust on her share of the Down Payment. A constructive trust may be imposed when a defendant's fraudulent, unfair or unconscionable conduct causes him to be unjustly enriched at the expense of another to whom he owed some duty. The remedy of constructive trust is available in equity "`for the purpose of working out right and justice[.]'" The remedy will provide relief when a defendant obtains legal title to property "`in any unconscientious manner, so that he cannot equitably retain the property which really belongs to another . . . by impressing a constructive trust upon the property in favor of the one who is in good conscience entitled to it, and who is considered in equity as the beneficial owner.'" Moreover, the constructive trust remedy is one of "great flexibility and generality. . . ."
Adams v. Jankouskas, 452 A.2d at 152 (citations omitted).
Adams, 452 A.2d at 152 n. 4 ( quoting 1 POMEROY'S EQUITY JURISDICTION § 166, at 210-11 (5th ed. 1941)).
Id.
Hogg v. Walker, Del. Supr., 622 A.2d 648, 652 (1993) (citation omitted).
I conclude that the imposition of a constructive trust is appropriate here for several reasons. First, although it is clear to me that neither the Hendrys nor the Couple focused on the Down Payment because they all anticipated that the Couple would get married and take title to the Property, it is also clear that, absent the Couple's payment of the Down Payment, the Hendrys understood that they would have had to spend $8,000 of their own money to acquire the Property. I therefore conclude that they will be unjustly enriched at Sue's expense if a trust or lien against the Property for half that amount is not imposed in her favor.
Gordon himself instructed the Couple that this payment to Roman was necessary if the sale was to go through. His arguments as to why the Down Payment was not central to the sales transaction were wholly unconvincing and implausible.
Critical to this conclusion is Gordon's in loco parentis role on behalf of his son and daughter-in-law concerning the sale. Gordon was clearly the driving force behind the transaction, engineering it with the aid of his personal lawyer. Sue reasonably placed faith in Gordon and regarded him as family. She therefore entered into a transaction with few of the normal protections in reliance on Gordon's good will and faith. Although it is not Gordon's fault that the Couple broke up, that does not, it seems to me, authorize him to increase his personal wealth at the expense of his former prospective daughter-in-law, who so clearly paid Roman the Down Payment in the belief that this sum would redound to her and Daniel's benefit.
The parties have not directly addressed the question, but an equitable lien theory would appear to result in a similar conclusion. See Branca v. Branca, Del. Supr., 443 A.2d 929, 931 (1982) ("While in the usual case an equitable lien is impressed to reflect an express agreement that the property to be liened was intended to be held as security for the obligation of the promisor, a lien may also be impressed out of recognition of general equitable principles of right and justice.") (citations omitted); Hayden v. Hayden, Del. Ch., C.A. No. 1112-K, mem. op., 1993 Del. Ch. LEXIS 164, at *6, Berger, V.C. (Aug. 18, 1993) ("under Branca v. Branca, an equitable lien may be impressed on real property to prevent unjust enrichment") (citation omitted); see also Scotfoam Corp. v. Peddrick, Del. Ch., C.A. No. 9172, mem. op., 1989 Del. Ch. LEXIS 172, at *10-11 (Dec. 13, 1989) (explaining that this court typically will only impress an equitable lien based on unjust enrichment, absent an agreement, where the parties are "unsophisticated and related").
Indeed, Gordon has advanced no defense of his right to retain the benefit of Sue's share of the Down Payment. He avoids this issue by implausibly denying any knowledge that the Down Payment was made — even though he identified the size of the payment for the Couple — or by claiming that the Payment was somehow not an integral part of the transaction. This speaks volumes about the legitimacy of his claim to retain the benefits of that payment for himself and his wife. Because Mrs. Hendry relied upon Gordon as her agent and has benefited fully from his acts, she is also justly responsible.
Branca, 443 A.2d at 931.
C. Sue's Claims For A Resulting And/Or Constructive Trust Over The Monthly Payments
I reject Sue's claims that the resulting and/or constructive trust should extend to her share of the monthly payments to the Hendrys. One reason for rejecting these claims is that Sue effectively relinquished them when she asked Gordon to release her from any further obligations to make monthly payments. Although I do not believe that the reasonable scope of the substituted agreement between Gordon and Sue can be said to encompass the Down Payment, it is absurd to think that Gordon agreed to forego future monthly payments while leaving Sue free to sue for the return of all previous monthly payments. In these circumstances, Sue is not entitled to the aid of equity.Putting aside that important factor, Sue has simply failed to demonstrate her entitlement to relief under a resulting trust theory. The monthly payments are quite different from the Down Payment. The Couple would have had to live somewhere if they did not live at the house on the Property. The only evidence on the point suggests that Sue's share of the monthly payments was not any greater than she would have had to pay to rent a similar property, even when the tax payments and other incidentals are included. Thus Sue received consideration from the Hendrys — use of the Property — in exchange for these payments.
Furthermore, Sue could not have reasonably thought that the Hendrys would — or had sub silentio agreed to — give back her share of the monthly payments in the event that the Couple broke up and the Property was not to be transferred to them. Even though the oral agreement appears to have contemplated that all of the $1,000 per month payments would be credited toward principal upon transfer to the Couple, I have no basis for concluding that Sue reasonably believed that a similar approach would govern a breakup scenario and require the Hendrys to disgorge every dollar of monthly payments made by her. Thus I do not believe that a resulting trust is appropriate.
Greenly, 49 A.2d at 129 (the appropriateness of a resulting trust depends on "the real intent" of the payor) (citation omitted).
As to Sue's request for a constructive trust, it must be remembered that the Hendrys gave up the opportunity to take the Property back from Roman, sell it to someone else, and reap the economic rewards of that sale. Their decision to engage in a transaction with a primary focus on helping their son and prospective daughter-in-law did not mean that they agreed to place themselves completely at Sue's mercy. It is unreasonable for Sue to claim the right to live in the property rent-free for nearly two years. Because I cannot conclude that the Hendrys acted unfairly or were unjustly enriched by the monthly payments, I see no equitable basis for the imposition of a constructive trust.
Nor am I able to discern any principled basis for concluding that any portion of the payments ought to be the subject of a resulting or constructive trust in favor of Sue. She presented no evidence that would support such an allocation, and it is her burden to prove that such an allocation ought to be made.
VI. Conclusion
For the foregoing reasons, I grant judgment for Sue on her claim for a resulting and constructive trust over her share of the Down Payment. I grant judgment against Sue and for the Hendrys on all of Sue's other claims.The parties shall present me with an agreed-upon final order within ten days of this opinion. That order shall identify the precise form the resulting and constructive trust should take. In this regard, I urge the parties to exercise common sense. While I am fully prepared to impose a trust directly on the Property and to force a sale if necessary to accurately determine the proportionate value in the Property which is attributable to Sue's Down Payment, I am confident that with a little common sense the parties can reach agreement about a form of order better suited to meet their mutual needs. The final order shall also address Gordon's obligation to pay certain discovery costs under a previous order of this court, an order which he has as yet apparently failed to satisfy. To the extent that the parties cannot agree, they shall each submit a proposed form of order and letter explaining the basis for that position.
Well after the complaint was filed and as the case was going to trial, the Hendrys asserted that Sue has failed to state a claim in equity and that this case should therefore be dismissed subject to Sue's right to transfer to the Superior Court. I again reject this argument, which has been reasserted in the post-trial briefs. The complaint is hardly a model of clarity. But it pleads claims in equity. First, it pleads a claim seeking specifically to enforce Sue's right to equitable title of the Property. This is presumptively a claim in equity, and the Hendrys did not convince me in a motion addressed to that pleading that it would be practicable for the court to award a money damages remedy that would redress the claimed breach of contract with any precision. DONALD J. WOLFE, JR. MICHAEL A. PITTENGER, CORPORATE COMMERCIAL PRACTICE IN THE DELAWARE COURT OF CHANCERY § 12-3, at 818 (1998); see also Karlton v. Arbern Wilmington, Inc., Del. Ch., C.A No. 6875, 1983 Del. Ch. LEXIS 543, at *5, Brown, C. (Nov. 2, 1983) ("equity almost as a matter of course will take jurisdiction to enforce the specific performance of contracts concerning real property") (citation omitted). In this regard, I note that equitable jurisdiction is determined on the basis of the complaint, and is not affected by post-complaint events. Azurix Corp. v. Synagro Technologies, Inc., Del. Ch., C.A. No. 17509, Steele, V.C. (Feb. 3, 2000) ("When deciding whether equity had jurisdiction, the Court looks at the face of the complaint, as of the time of filing, with all material factual allegations taken to be true. Therefore, events occurring after the complaint is filed are generally irrelevant to this determination.") ( citing Diebold Computer Leasing, Inc. v. Commercial Credit Corp., Del. Supr., 267 A.2d 586, 588 (1970)). The fact that Sue has sought to file a post-trial pleading seeking money damages does not divest this court of jurisdiction.
Second, read in the light most favorable to the plaintiff, the complaint states a claim for a constructive trust, a resulting trust, and an equitable lien. These are all traditional forms of relief only available in equity. WOLFE PITTENGER § 12-7, at 850 (1998) (constructive and resulting trusts); Branca, 443 A.2d at 931 (equitable lien).
Finally, I recognize that this court has the discretion to decline to continue to exercise jurisdiction over a case if it determines that, as a result of developments in the litigation, the equitable claims have dropped out of the litigation and that only legal claims are left. Here, I do not think that has occurred. But if it has, it would be inequitable to exercise that discretion to dismiss the case and send it to Superior Court after the Hendrys' failure to handle the litigation responsibly resulted in considerable delay to Sue in obtaining a trial.