Reserves Development LLC v. Crystal Properties LLC, (Del. Supr., Nov. 4, 2009), read opinion here. Although this is an appeal from a Delaware Superior Court decision, prior decisions of the Delaware Supreme Court and Delaware Court of Chancery involving related aspects of this imbroglio, were highlighted on this blog here, here and here.
This Supreme Court decision is one of several decisions from the Delaware Chancery Court, Delaware Superior Court as well as a prior decision from the Delaware Supreme Court involving a real estate development and multiple issues that arose in connection with various aspects of that real estate venture. In this latest iteration of the dispute involving the real estate development and its various parties, the Delaware Supreme Court reversed in part and affirmed in part a decision of the Delaware Superior Court. The appellant sought a reversal of the trial judge’s reduction in damages awarded for breach of contract and misrepresentation because of an alleged error in an offset of damages. The trial judge reduced the damage award based on amounts considered overpaid.
Standard of Review
The Supreme Court reiterated the familiar rule that questions of fact are reviewed on appeal for abuse of discretion and the Supreme Court will accept the trial judge’s factual findings unless they are clearly wrong. By contrast, questions of law are reviewed de novo.
The Court observed that in a breach of contract action, the damages for the plaintiff are determined as if the parties had fully performed the contract. The Court reviewed each of the offsets made by the trial judge for such things as an overpayment that was made by Reserves for non-conforming work.
The Supreme Court also affirmed a finding of personal liability for a misrepresentation claim. After reviewing the elements of a cause of action for misrepresentation, the Court found a sufficient basis for the trial court’s determination and reviewed in detail the e-mail and other evidence that was the basis for the trial court finding that a promise was made, but there was no intent to ever fulfill those promise.
The Court upheld the denial by the trial judge of an award of attorney’s fees. Delaware follows the American Rule that ordinarily requires litigants to pay their own attorney’s fees regardless of the outcome of the lawsuit. The Supreme Court affirmed the reasoning of the trial court despite the fact that the trial court previously awarded attorney’s fees to the defendants. While those rulings may appear inconsistent, the determination of an award of attorney’s fees is within the discretion of the trial judge. The determination of the trial judge that attorney’s fees should not be awarded on remand was not an abuse of discretion.
Judgment Entered against Assignor
The Court upheld a judgment against the assignor in part because there was no evidence, despite an assent to an assignment, that Reserves intended to accept the assignee as the sole source of liability under the contract, thus maintaining the assignor as the party liable under the agreement. The Court noted that although one can assign rights and delegate duties, one cannot assign duties. See Restatement (Second) of Contracts, Sections 318(1) and 318(3), comment (d).