Court Opinion

ID: 9895371
Source: CourtListenerOpinion
Date Created: 2023-11-06 21:04:02.763421+00
Date Added: 2024-06-11T09:12:15.198153
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

A & E BAIL BONDS, INC.,                     )
a Delaware corporation,                     )
                                            )
                  Plaintiff,                )
                                            )
            v.                              )     C.A. No. N18C-06-208 SKR
                                            )
EDWARD SUTTON III,                          )
                                            )
                  Defendant.                )

A & E FINANCIAL SERVICES, LLC,              )
a Delaware limited liability company,       )
                                            )
                  Plaintiff,                )
                                            )
            v.                              )     C.A. No. N18C-08-292 SKR
                                            )
EDWARD SUTTON III and SHERRI                )
SUTTON,                                     )
                                            )
                  Defendants.               )

                          DECISION AFTER TRIAL

Sean T. O’Kelly, Esquire, O’KELLY & O’ROURKE, LLC, Wilmington, Delaware, and
E. Calvin Harmon, Jr., Esquire, Wilmington, Delaware, Attorneys for Plaintiffs A &
E Bail Bonds, Inc., and A & E Financial Services, LLC.

Nicholas G. Kondraschow, Esquire, RHODUNDA WILLIAMS & KONDRASCHOW, LLC,
Wilmington, Delaware, Attorney for Defendants Edward Sutton III and Sherri
Sutton.

RENNIE, J
                                      INTRODUCTION

       This decision considers two consolidated actions filed by A & E Bail Bonds,

Inc. (“AEBB”), and A & E Financial Services, LLC (“AEF”), (collectively,

“Plaintiffs”) against Edward Sutton III (“Sutton”). 1                    The underlying civil

commercial actions arose from business loan agreements purportedly made between

borrower Sutton and lending companies AEBB and AEF.2

                                  FACTUAL OVERVIEW

       AEBB, a Delaware corporation, is a licensed bail agent business entity and

bail funder.3 AEBB formed in 2012 but did not become active until 2016.4 AEBB

is run by Edwin J. Swan (“Swan”). 5                  Swan is the sole employee, business

1
  Sutton is an individual doing business as Above & Beyond Bail Bonds. The only involvement
of Sherri Sutton, the other named defendant in this case, is her service as guarantor of an agreement
that was disposed of at the partial summary judgment stage of this litigation. See Defs.’ Resp. to
Pls.’ Mot. Partial Summ. J. Ex. A (D.I. 101) 100-01 (deposition of Edward Sutton III); A & E Bail
Bonds, Inc. v. Sutton, 2023 WL 2906168, at *1 (Del. Super. Apr. 6, 2023). Accordingly, the Court
excludes her from this written decision.
2
  See Pls.’ First Am. Compl. (D.I. 12) [hereinafter “Am. Compl.”]; Def.’s Answers to Am. Compl.
(D.I. 18).
3
  A & E Bail Bonds, Inc. v. Sutton, C.A. No. N18C-06-208 SKR, 19:2-16 (Del. Super. Apr. 24,
2023) (TRANSCRIPT) (D.I. 135) [hereinafter “Apr. 24 Tr.”]; see also Licensee Lookup Summary,
NAT’L ASSOC. INS. COMM’RS, https://sbs.naic.org/solar-external-lookup/lookup/licensee
/summary/1384226?jurisdiction=DE&entityType=BE&licenseType=BBP (listing “A & E BAIL
BONDS INC” as a licensed bail agent business entity).
4
  Apr. 24 Tr. 19:20-22.
5
  Based on the record in this case and after assessing the credibility of the witnesses, the Court is
convinced that Swan was the “Chief Cook and Bottle Washer” at AEBB and AEF as it pertains to
bails and dealings with Sutton. Pls.’ Mot. Partial Summ. J. 5 (D.I. 97) (“All three loan agreements
were offered through Edwin Swan . . . .”); A & E Bail Bonds, Inc. v. Sutton, C.A. No. N18C-06-
208 SKR, 47:15-18 (Del. Super. Apr. 25, 2023) (TRANSCRIPT) (“I am the head administrator.
Yes.”) [hereinafter “Apr. 25 Tr.”]; Apr. 25 Tr. 110:5-111:15 (stating that Sutton dealt only with
Swan, that Sutton’s contract was not with AEBB or AEF, and that Sutton made checks out to
AEBB and AEF at Swan’s direction only).
                                                 2
administrator, and a minority shareholder of AEBB. 6                As AEBB’s business

administrator, Swan manages the company’s internal accounting. He also receives

calls from individuals who need a bail bond and connects them to a licensed bail

agent. 7 AEBB’s bail agents are “subcontractors” of AEBB. 8 Swan performs

background checks on potential new clients to ensure they have the financial means

to serve as bail bond cosigners.9

       AEBB has a total of nine shareholders: Swan, his wife, four of his

grandchildren, his daughter Andrea Swan, his former son-in-law Richard J.

Kotowski, and an unidentified ninth shareholder.10 No operating agreement governs

the internal affairs of the company. Instead, AEBB operates pursuant to a verbal

agreement among the shareholders.11 AEBB’s licensed bail agent “subcontractors”

include two of its shareholders, Andrea and Kotowski.12 AEBB borrows money

from AEF and other businesses and accounts controlled by Swan to fund bail

bonds.13

6
  Apr. 24 Tr. 8:18-9:1, 20:23-21:3, 24:1-3.
7
  Apr. 24 Tr. 20:9-15.
8
  Apr. 24 Tr. 24:4-8.
9
  Apr. 24 Tr. 20:16-22.
10
   Apr. 24 Tr. 19:11; Apr. 25 Tr. 46:13-47:1. Each shareholder owns 9.99% of the company,
except for Andrea and Kotowski, who jointly own the remaining interest in AEBB, and the
unidentified ninth shareholder. Apr. 25 Tr. 46:13-47:9.
11
   Apr. 25 Tr. 47:10-14.
12
   Apr. 24 Tr. 20:14; Apr. 25 Tr. 48:1-7.
13
   See, e.g., Apr. 25 Tr. 96:8-13; Apr. 25 Tr. 79:7-17, 51:12-52:6 (“I’ve provided [AEBB] with
30,000 from my tax business account to uphold my commitment to ABBB [Above & Beyond Bail
Bonds].”).
                                              3
          AEF, a Delaware limited liability company, is a lending company that

provides commercial loans to small businesses and personal loans to individuals.14

AEF is not licensed as a bail agent business entity.15 Swan and a group of investors

formed the company in 2015.16 Swan is the sole employee, business administrator,

and a minority owner of AEF, which does not work with any independent

contractors.17 As AEF’s business administrator, Swan testified that his “primary job

is from an accounting perspective to monitor the books daily.”18 When requests for

funds arrive, Swan performs a background check on the individual representing the

company that has requested a loan. He then relays that information to the other

14
     Apr. 24 Tr. 14:5-18.
15
     Apr. 25 Tr. 22:16-23:3.

Q. . . . Does A&E Financial, the entity, have a bail bond license?
A. The entity is a financial agency. I don’t think they can get licensed.
Q. That’s not my question. Do they have a license?
A. No.
Q. A bail bond license?
A. No.

Id.; see also Licensee Lookup Search for “A & E”, NAT’L ASSOC. INS. COMM’RS,
https://sbs.naic.org/solar-external-lookup/lookup?jurisdiction=DE&searchType=Licensee&entity
Type=BE&businessName=a%20%26%20e (click “Search”). This Court described AEF as a
licensed bail agent business entity in its April 6, 2023 decision based on erroneous testimony from
Swan. A & E Bail Bonds, Inc. v. Sutton, 2023 WL 2906168, at *1 (Del. Super. Apr. 6, 2023)
(“AEF and AEB . . . were licensed bail agents under the insurance code.”). As the record
developed, the Court learned that AEF has no such license.
16
   Apr. 24 Tr. 14:19-15:1.
17
   Apr. 24 Tr. 8:18-9:1, 15:2-7, 18:20-19:1. However, Swan testified that he directs employees of
his other business, Preferred Business Service Inc (“PBSI”), to keep track of the status of cases for
AEF. According to Swan, PBSI and AEF have a contract by which PBSI employees do accounting
and tax filing work for AEF. Apr. 25 Tr. 33:7-34:22.
18
   Apr. 24 Tr. 15:2-7.
                                                 4
members of AEF and meets with them to “discuss the terms of the deal.”19 Swan

purports to have firsthand knowledge of all dealings between AEF and Sutton.20

       AEF has four members, each of whom owns a twenty-five percent interest in

AEF: Swan, his wife, his daughter Andrea Swan, and his former son-in-law Richard

J. Kotowski.21 No limited liability company agreement governs the internal affairs

of the company. Instead, AEF operates pursuant to a verbal agreement among the

members.22 Kotowski serves as AEF’s managing member.23 Kotowski has signed

loan agreements and accompanying assignments and acknowledgements on behalf

of AEF,24 but Sutton never worked directly with Kotowski throughout his dealings

with AEF.25

       Preferred Financial Services Inc. (“PFS”), another business entity run by

Swan, is not a party to this action.26 Sutton first entered into a loan agreement (the

19
   Apr. 24 Tr. 15:8-16.
20
   Apr. 24 Tr. 9:2-6.
21
   Apr. 24 Tr. 14:3-4; Apr. 25 Tr. 19:11-14, 21:7-12.
22
   Apr. 25 Tr. 19:5-7.
23
   Apr. 24 Tr. 29:14-17.
24
   Apr. 24 Tr. 106:10-15; Pls.’ Mot. Partial Summ. J. Ex. C (D.I. 96).
25
   Apr. 25 Tr. 101:16-20; Defs.’ Mot. Partial Summ. J. Ex. G (D.I. 95) 11:2-5, 9-11 (Kotowski
stating that he only worked with Sutton indirectly).
26
   Swan serves as president of PFS. Pls.’ Mot. Partial Summ. J. Ex. A (D.I. 96) 7 (“Edwin J. Swan,
President, Preferred Financial Services Inc.”). Swan and PFS have a tortured history with this
Court. On January 23, 2019, this Court found that they entered into an agreement with another
bail bondsman, Rodney Burns, to illegally fund bail bonds, which the Court found was void ab
initio and formed for the purpose of circumventing the Delaware bail bonds statute. See Preferred
Fin. Servs., Inc. v. A & R Bail Bonds LLC, 2019 WL 315331 (Del. Super. Jan. 23, 2019), aff’d,
2019 WL 4052324 (Del. Aug. 28, 2019).
                                                5
“2014 Agreement”) with PFS on or around March 10, 2014.27 Sutton entered into a

second loan agreement (the “2015 Agreement”) with AEF sometime between

September 2015 and November 2015.28 Sutton entered into a third loan agreement

(the “AEBB Agreement”) with AEBB sometime before January 2, 2017.29 On or

around August 29, 2018, PFS attempted to assign all of its rights pursuant to the

2014 Agreement to AEF.30

       Sutton failed to repay the total of the amounts he borrowed from PFS, AEF,

and AEBB pursuant to the 2014 Agreement, 2015 Agreement, and AEBB

Agreement, respectively.31 This litigation followed.

                              PROCEDURAL HISTORY

       On June 28, 2018, AEBB sued Sutton in this Court for (1) breach of contract;

(2) anticipatory breach of contract; (3) unjust enrichment; (4) quantum meruit; (5)

promissory estoppel; and (6) detrimental reliance. 32 AEBB requested money

27
   A & E Bail Bonds, Inc. v. Sutton, 2023 WL 2906168, at *1 (Del. Super. Apr. 6, 2023) (setting
forth the factual history of the case); Pls.’ Mot. Partial Summ. J. Ex. A (D.I. 96).
28
   A & E Bail Bonds, 2023 WL 2906168, at *2; Apr. 24 Tr. 51:14-52:22; Apr. 25 Tr. 14:6-15:6.
The signatures to the written 2015 Agreement document are dated September 1, 2015. Pls.’ Mot.
Partial Summ. J. Ex. C (D.I. 96). However, Sutton claims he never consented to this agreement
and that his signature to the agreement was forged. Apr. 25 Tr. 164:7-165:9, 166:16-167:1.
29
   A & E Bail Bonds, 2023 WL 2906168, at *2; Am. Compl. ¶¶ 5-12.
30
   A & E Bail Bonds, 2023 WL 2906168, at *1; Pls.’ Resp. to Defs.’ Mot. Summ. J. ¶ 4 (“The 2014
Business Loan Agreement and Demand Promissory Note was first executed by PFS, but was
assigned to AEF on August 29, 2018.”).
31
   Apr. 24 Tr. 156:19-22; Apr. 25 Tr. 130:4-16; Am. Compl. ¶¶ 13-14.
32
   AEBB Compl. (D.I. 1) ¶¶ 19-51. The original complaint also included a fraud claim that AEBB
withdrew on September 28, 2018. A & E Bail Bonds, Inc. v. Sutton, C.A. No. N18C-06-208 SKR,
Rennie, J. (Sept. 28, 2018) (ORDER) (granting unopposed motion to amend complaint to withdraw
fraud claim).
                                              6
damages for the breach of contract claims and equitable relief for the other claims.33

       On August 30, 2018, AEF sued Sutton in this Court for (1) breach of contract;

(2) unjust enrichment; and (3) promissory estoppel and/or quasi-contract.34 AEF

requested money damages for amounts Sutton allegedly owes pursuant to the 2014

Agreement and the 2015 Agreement.35

       For approximately two years after AEBB and AEF filed their complaints, the

actions proceeded separately. Then, on June 3, 2020, Plaintiffs filed a motion to

consolidate the AEBB and AEF actions, which the Court granted on June 9, 2020.36

On October 25, 2022, the Court set trial to begin in the consolidated action on April

24, 2023.37

       At the close of discovery, on January 31, 2023, Sutton filed a motion for

partial summary judgment pertaining only to AEF’s claims about the 2014

Agreement.38 That same day, on January 31, 2023, Plaintiffs filed a motion for

partial summary judgment requesting the amounts Sutton allegedly owes pursuant

to the 2014 Agreement, the 2015 Agreement, and the AEBB Agreement. 39 On

33
   AEBB Compl. (D.I. 1) 11.
34
   AEF Compl. (AEF D.I. 1) ¶¶ 21-35.
35
   AEF Compl. (AEF D.I. 1) 6-7.
36
   Pls.’ Mot. to Consolidate Cases (D.I. 37); A & E Bail Bonds, Inc. v. Sutton, C.A. No. N18C-06-
208 SKR, Rennie, J. (June 9, 2020) (ORDER) (granting motion to consolidate cases).
37
   A & E Bail Bonds, Inc. v. Sutton, C.A. No. N18C-06-208 SKR, Rennie, J. (Oct. 25, 2022)
(ORDER) (scheduling trial).
38
   Defs.’ Mot. Partial Summ. J. (D.I. 95).
39
   See Pls.’ Mot. Partial Summ. J. (D.I. 96).
                                               7
March 9, 2023, the Court heard argument on the motions.

      On April 6, 2023, this Court found the 2014 Agreement void ab initio for

violation of 18 Del. C. § 4333(d), which requires an individual to be licensed as a

bail agent before obtaining an interest in the funds used to post a bail bond. The

Court rejected Plaintiffs’ arguments that the illegality of the 2014 Agreement was

cured by PFS’s attempted assignment of its rights in the 2014 Agreement to AEF or

could be cured by AEF’s exercise of a severability clause found in the 2014

Agreement.40

      Plaintiffs argued that Sutton admitted in deposition to entering into the 2015

Agreement and the AEBB Agreement, receiving each loan amount, and failing to

repay the loans. However, the Court denied Plaintiffs’ motion for partial summary

judgment due to “material issues of fact in the record about whether Sutton entered

the Agreements . . . with the subject entities, and whether and how much of the

money provided to Sutton was repaid.”41

      From April 24, 2023, through April 27, 2023, this Court tried the consolidated

action, evaluating Plaintiffs’ remaining claims based on the 2015 Agreement and the

AEBB Agreement. At trial, the Court heard testimony from Sutton and Swan.42

40
   A & E Bail Bonds, Inc. v. Sutton, 2023 WL 2906168, at *4-6 (Del. Super. Apr. 6, 2023).
41
   Id. at *7.
42
   Both lay witnesses were available for direct and cross-examination. No expert witnesses
testified at this trial.
                                            8
After the trial, on July 10, 2023, Plaintiffs and Sutton filed competing post-trial

briefs.43

                                STANDARD OF REVIEW

       The Court is the finder of fact in a bench trial.44 Plaintiffs must prove each

element of a claim by a preponderance of the evidence, meaning that the Court shall

find in favor of the party upon whose side “the greater weight of the evidence is

found.”45 If the evidence is in even balance, the party attempting to prove a claim

by a preponderance of the evidence has failed to prove it.46

                                     LEGAL ANALYSIS

       As the finder of fact, the Court evaluates the credibility of each witness and

43
   See Pls.’ Post-Trial Br. (D.I. 133); Defs.’ Post-Trial Br (D.I. 134). Inexplicably, on May 5,
2023, before briefing was completed, Plaintiffs filed a notice of appeal of this Court’s April 6,
2023 order to the Delaware Supreme Court. They asserted that the notice was not interlocutory
but, rather, was intended to serve as a placeholder. See Notice of Appeal to Supreme Court (D.I.
129). On May 11, 2023, Plaintiffs voluntarily dismissed that appeal. See Notice of Dismissal of
Appeal (D.I. 132).
44
   Balt. Pile Driving & Marine Constr., Inc. v. Wu & Assocs., Inc., 2021 WL 5711454, *2 (Del.
Super. Dec. 1, 2021).
45
   Id. Superior Court Civil Pattern Jury Instruction 4.1 describes this standard of proof as follows:

In a civil case, the burden of proof is a preponderance of the evidence. Proof by a preponderance
of the evidence means that something is more likely than not. It means that certain evidence, when
compared to the evidence opposed to it, has the more convincing force and makes the Court believe
that something is more likely true than not. Preponderance of the evidence does not depend on the
number of witnesses. If the evidence on any particular point is evenly balanced, the party having
the burden of proof has not proved that point by a preponderance of the evidence, and the Court
must find against the party on that point. In deciding whether any fact has been proved by a
preponderance of the evidence, the Court may consider the testimony of all witnesses regardless
of who called them, and all exhibits received into evidence regardless of who produced them.
46
   Preferred Fin. Servs., Inc. v. A & R Bail Bonds LLC, 2018 WL 587023, at *5 (Del. Super. Jan.
26, 2018) (quoting Guthridge v. Pen-Mod, Inc., 239 A.2d 709 (Del. Super. 1967)).
                                                 9
resolves conflicts in testimony. To do so, the Court considers “the reasonableness

or unreasonableness of the testimony, motives of the witnesses, any bias, prejudice

or interest,” and any other circumstances that affect whether testimony is

believable. 47 Here, the reputation for truthfulness of Plaintiffs’ witness Swan is

marred by his pattern of deceptive representations in previous proceedings in this

and other courts, as well as by this Court’s independent assessment of his testimony

in this trial. 48 In contrast, the testimony of Sutton, serving as his own witness,

exhibited specific indicia of reliability: He conceded the wrongfulness of his conduct

47
   Id. (quoting Interim Healthcare, Inc. v. Spherion Corp., 884 A.2d 513, 545-46 (Del. Super.
2005)). When testimony conflicts, “the Court will attempt to make one harmonious story by giving
credit to the points of testimony which are worthy of credit and disregarding any portion that is
not.” Id.
48
   See Preferred Fin. Servs., Inc. v. A & R Bail Bonds LLC, 2018 WL 587023, at *2, 4 n.38 (Del.
Super. Jan. 26, 2018) (“I considered the conflicting testimony of the witnesses [including Swan]
and find that neither witness was entirely credible. . . . Swan has a history of attempting to recover
debts that were not documented as owed to the moving party as well as a history of duplicitous
conduct in the preservation and presentment of evidence.”). Delaware courts have repeatedly
found that Swan attempted to conceal information from them:

The only reason, as far as the Court can see, for the need to convert the Excel data into paper
documents was to filter and hide relevant information—which is also exactly what [Swan’s
company] PISI did. . . . The Court has no doubt that Swan knew why the information was sought
and what information was necessary to identify specific cases—to characterize what PISI did as
an ‘oversight’ is dubious at best. . . . The Court is compelled to impose sanctions on PISI for its
willful, contemptuous and defiant behavior in this matter . . . .

T & H Bail Bonds, Inc. v Preferred Inv. Servs., Inc., 2015 WL 5121124, at *5-6 (Del. Super. Aug.
31, 2015); Preferred Inv. Servs., Inc. v. T & H Bail Bonds, Inc., 2013 WL 3934992, at *16 (Del.
Ch. July 24, 2013) (“More likely than not, Swan was attempting to cover his tracks and hide from
T & H and this Court the fact that money made available by PISI was being loaned to other cash
bail agents.”); Apr. 25 Tr. 5:4-12:17 (cross-examination of Swan on history of dubious
representations in court).
                                                 10
in conformity with documentary evidence.49

         Because this Court, on April 6, 2023, deemed the 2014 Agreement void ab

initio as illegal and against public policy, 50 it confines this analysis to the 2015

Agreement and AEBB Agreement.

         A. The 2015 Agreement

         Plaintiffs and Sutton dispute whether the 2015 Agreement made between AEF

and Sutton was ever formed. Plaintiffs argue that the record shows that Sutton

“accepted loans from AEF pursuant to a contract with AEF,” the 2015 Agreement.51

Sutton, meanwhile, contends that he has “never done business with A&E

Financial.”52

         Swan testified that he negotiated the terms of the 2015 Agreement with Sutton

on behalf of AEF during the last week of August 2015, at which time Swan sent

49
     See Apr. 25 Tr. 180:17-182:14.

Q. As you say, these were all done under the 2014 agreement.
A. Yes.
Q. And each one of these had an illegal bail premium associated with it.
A. Yes.
...
Q. Mr. Sutton, why would you commit 242 illegal acts?
A. Why?
...
Q. I don’t understand that answer. Did you do it or not?
A. I did it. I’m not disputing it.

Id.
50
   A & E Bail Bonds, Inc. v. Sutton, 2023 WL 2906168, at *4-6 (Del. Super. Apr. 6, 2023).
51
   Pls.’ Post-Trial Br. (D.I. 133) 9-11.
52
   Apr. 25 Tr. 109:23-110:12.
                                              11
Sutton the written version of the 2015 Agreement to sign. Swan did not see Sutton

sign the 2015 Agreement but testified that a version of the 2015 Agreement signed

by Sutton was returned to AEF’s office in November 2015.53 Swan believes that

Sutton acknowledged the 2015 Agreement by returning documents to AEF that

describe the loan. 54 However, Sutton testified that he did not sign the 2015

Agreement, that his signature was forged, and that the first time he saw the 2015

Agreement was at his deposition in 2020.55

       On cross-examination at trial, Sutton conceded that he had formed loan

agreements with Swan to gain funding for bail bonds and had failed to repay some

of those loans in full, though he was unclear about the precise distinctions between

Swan’s various controlled business entities.56 Sutton admittedly directed repayment

for some of those loan agreements to AEF “quite often.”57 Sutton’s statements about

his agreements with Swan and his payments to AEF sufficiently demonstrate that

53
   Apr. 24 Tr. 51:17-52:22.
54
   Apr. 24 Tr. 86:4-10.
55
   Apr. 25 Tr. 99:21-100:12.
56
   Apr. 25 Tr. 110:5-111:4.

Q. Do you think you owe any amounts to A&E Financial?
A. There may be some . . . .

Q. . . . Did you ever make a payment to A&E Financial or A&E Bail Bonds?
A. Only whenever I was directed to make a payment . . . .

Id. Swan testified that AEF made thirty-one loans to Sutton in 2015, of which five or seven were
not paid back, and sixty-seven loans to Sutton in 2016, of which perhaps thirty-three were not paid
back. Apr. 24 Tr. 64:10-12, 66:2-10, 74:16-19, 75:18-22.
57
   Apr. 25 Tr. 110:19-111:10.
                                                12
AEF and Sutton had entered into some loan agreement, despite the enduring

ambiguity as to which of Swan’s business entities was the proper payee for a specific

given loan.

       Regardless, Sutton argues as an affirmative defense that the 2015 Agreement

is “illegal, unenforceable, against public policy and void for the same reasons [as]

the 2014 Agreement.”58 He contends that, pursuant to 18 Del. C. § 4333, “A&E

Financial, the entity, must be licensed as a bail agent,” but that “[l]ike Mr. Swan and

PFS, it is not.”59 Plaintiffs argue, in contrast, that Sutton failed to establish that the

2015 Agreement is illegal because “AEF contains licensed individuals, which

satisfies the legal requirement under 18 Del. C. § 4333.”60

       In Delaware, “it is against the public policy of this State to permit its courts to

enforce an illegal contract prohibited by law. . . . [W]hen such is the fact, neither

party has a remedy to any extent against the other.”61 Despite the fact that Delaware

is openly contractarian, Delaware courts refuse to enforce illegal contracts.62 The

defendant who raises illegality as an affirmative defense bears the burden to show

58
   Defs.’ Post-Trial Br. (D.I. 134) 3.
59
   Id. 4.
60
   Pls.’ Post-Trial Br. 7, 20-23.
61
   Della Corp. v. Diamond, 210 A.2d 847, 849 (Del. 1965). A court “may never enforce
agreements void ab initio, no matter what the intentions of the parties.” A & E Bail Bonds, 2023
WL 2906168, at *4 (quoting Geronta Funding v. Brighthouse Life Ins. Co., 248 A.3d 47, 61 (Del.
2022)).
62
   In such a case, Delaware courts generally “leave the parties where they find them.” A & E Bail
Bonds, 2023 WL 2906168, at *4.
                                               13
that the contract is illegal.63

       Pursuant to 18 Del. C. § 4333(d)(2), an individual must be licensed as a bail

agent before he or she can act as a bail funder.64 Likewise, 18 Del. C. § 4354(a)

criminalizes unlicensed performance of bail agent functions, listing the following

conduct as a felony:

       [to] act in the capacity of a bail agent, advertise or solicit bail bond
       business, perform any of the functions or duties of a bail agent, collect
       premiums, charge fees or otherwise exercise or attempt to exercise
       powers prescribed for bail agents, unless such person is qualified,
       licensed and appointed as provided in this subchapter.

       Here, AEF is not licensed as a bail agent business entity.65 AEF must be

licensed as a bail agent business entity before it can act as a bail funder. The terms

of the 2015 Agreement and the course of conduct of Swan and Sutton pursuant to

that agreement indicate that AEF entered into the 2015 Agreement with Sutton to

63
   See, e.g., Tygon Peak Capital Mgmt., LLC v. Mobile Invs. Investco, LLC, 2023 WL 4857281, at
*7 (Del. Ch. July 31, 2023).
64
   The legislature adopted this statute “with the specific intent of curbing abuses in the bail bond
system. Specifically, § 4333(d) . . . was enacted to ‘restrict participation by unlicensed persons in
the bail bond business.’” A & E Bail Bonds, 2023 WL 2906168, at *5 (quoting Preferred Fin.
Servs., Inc. v. A & R Bail Bonds LLC, 2019 WL 315331, at *5 (Del. Super. Jan. 23, 2019)). A bail
funder is anyone “who provides or loans the funds to property bail agents or bail agent business
entities that are used . . . for purposes of furnishing property bail in court proceedings.” 18 Del.
C. § 4332(3). Further, 18 Del. C. § 4333(d)(5) defines a “financial interest” in a bail agent’s
business or in bail bonds as “an interest that could result in directly or indirectly receiving a
pecuniary gain or sustaining a pecuniary loss as a result of an ownership or interest in a business
entity.” For example, an individual who has an ownership interest in a bail agent’s business of
greater than ten percent or is a creditor of the business in an amount of greater or equal to ten
percent of the business’s debt has a “financial interest” in that business. 18 Del. C. § 4333(d)(5)(a)-
(b).
65
   Apr. 25 Tr. 22:16-23:3, 34:7-35:11.
                                                 14
perform the functions of a bail funder without a bail agent license, in direct

contravention of the statute.66 The bail agent licenses of AEF members Andrea

Swan and Richard J. Kotowski do not cure this legal defect.67

       Further, pursuant to 18 Del. C. § 4333(d)(2), an individual must be licensed

as a bail agent before he or she can own a ten percent or greater financial interest in

a bail agent’s business or in bail bonds. Here, AEF operates as a bail funder, a type

of bail agent,68 by loaning individuals the money to post bails. 69 Therefore, any

individual who owns a ten percent or greater financial interest in AEF’s business

must carry a bail agent license. Swan has no bail agent license, so his twenty-five

percent ownership interest in AEF’s business violates the statute.70

       On behalf of AEF, Swan negotiated the 2015 Agreement with Sutton by which

66
  Pl.’s Mot. Partial Summ. J. Ex. C (D.I. 97); Apr. 24 Tr. 27:2-21. The following testimony of
Swan is illustrative:

Q. . . . I’m referring to A&E Financial and Mr. Sutton . . . . Did the parties also agree between
themselves in negotiation what the loans were to be used for?
A. Yes, we did.
Q. What was that?
A. Yeah. They were a business loan made to Mr. Sutton so that he could post bails. . . . Those
moneys were for posting of bails and the posting of bails only.

Apr. 24 Tr. 36:8-37:9.
67
   Further, even if AEF was licensed as a bail agent business entity, AEF member Swan is not
licensed as a bail agent, unlike AEF members Andrea Swan and Richard J. Kotowski. Swan must
be licensed as a bail agent before he can perform bail agent or bail funder functions. He admitted
to conduct that goes beyond the “tasks that are strictly clerical in nature,” supervised by a licensed
bail agent, that are permitted by statute. 18 Del. C. § 4334(a). Swan’s work for AEF constitutes
performance of bail funder functions without a valid bail agent license.
68
   18 Del. C. § 4332(14).
69
   Apr. 24 Tr. 36:21-37:9.
70
   Apr. 25 Tr. 19:11-14, 21:7-12, 23:4-8.
                                                 15
AEF was to operate as an unlicensed bail funder. At that time and thereafter, AEF

lacked the bail agent business entity license it needed to legally serve as a bail funder,

and Swan lacked the bail agent license he needed to legally hold a twenty-five

percent ownership interest in AEF’s business. Hence, the Court finds that Swan,

through AEF, entered into the 2015 Agreement with Sutton with an intent to violate

18 Del. C. § 4333, just as PFS did when it entered into the 2014 Agreement. The

2015 Agreement, therefore, is void ab initio as illegal and against public policy and

is unenforceable in this Court.

       B. The AEBB Agreement

       Plaintiffs and Sutton also dispute whether the AEBB Agreement made

between AEBB and Sutton in 2017 was ever formed. Plaintiffs argue that AEBB

verbally formed a valid contract with Sutton.71 They contend that Sutton knew about

the verbal AEBB Agreement and accepted loan funds pursuant to it.72 However,

Sutton argues that he never formed any contract with AEBB because he had no

written agreement with AEBB and only paid checks to AEBB at Swan’s request.73

       Initially, in Sutton’s answer to AEBB’s first amended complaint, he conceded

that he had entered into loan agreements with AEBB, merely disputing the dollar

71
   Pls.’ Post-Trial Br. (D.I. 133) 8-12.
72
   Id.
73
   Defs.’ Post-Trial Br. (D.I. 134) 2.
                                           16
amounts of specific loans. 74 On cross-examination at trial, Sutton viewed and

acknowledged lines from that answer which state that AEBB and Sutton entered into

loan agreements.75 Further, as Sutton noted, he had made payments to AEBB at

Swan’s request in the course of returning bail moneys.76 Accordingly, AEBB and

Sutton have effectively agreed that they formed some loan agreement, despite

Sutton’s subsequent turnabout on the issue. Thus, the Court finds that through the

dealings of Swan and Sutton, AEBB and Sutton entered a loan agreement.

       Sutton argues as an affirmative defense that “[e]ven if Mr. Sutton had an

agreement with A&E Bail Bonds, . . . it is illegal, unenforceable, against public

policy and void . . . for the same reasons [as] the 2014 Agreement.”77 Plaintiffs,

meanwhile, argue that Sutton cannot meet his burden to establish that the AEBB

Agreement is illegal because AEBB is licensed as a bail agent business entity.78

74
   Def.’s Answer to Am. Compl. (D.I. 18) ¶¶ 20, 25 (“Admitted the parties entered into an
agreement; denied as to the remainder”). Sutton claims that his admission in his answer to
Plaintiffs’ first amended complaint that he had validly formed loan agreements with AEBB is
invalid because (1) his attorney who drafted the answer has since withdrawn from the
representation; (2) he did not know why the answer made that admission; and (3) he disputed the
existence of any agreement with AEBB elsewhere in the record. Defs.’ Post-Trial Br. (D.I. 134)
2 n.2; Apr. 25 Tr. 110:13-18 (“I don’t have any agreement with A&E Bail Bonds.”). Such
arguments are unavailing.
75
   Apr. 25 Tr. 160:2-161:11, 188:11-193:4. Counsel for Sutton objected to the line of questioning,
arguing that Sutton was not bound by these lines of his answer because the attorney who drafted
the answer had since withdrawn from representing Sutton. The Court overruled this objection,
stating that the answer was on the record and that the connection of the answers to the complaint
could “be pointed out in post-trial briefing.” Apr. 25 Tr. 161:12-163:1.
76
   Apr. 25 Tr. 110:19-111:15.
77
   Defs.’ Post-Trial Br. (D.I. 134) 3.
78
   Pls.’ Post-Trial Br. (D.I. 133) 7, 19-21. Plaintiffs also argue that the AEBB Agreement does not
violate 18 Del. C. § 4333 because that statute does “not apply to banks and financial institutions
                                                17
Further, they contend that this Court “should be averse to voiding agreements

because of illegality and should prioritize principles supporting the freedom to

contract.”79

        Contractual formalities should not be used as camouflage to facilitate an

illegal course of conduct. In the rare event that contracting parties are found to have

entered into an agreement in order to circumvent the law, i.e., to enable a party to do

indirectly what it was barred from doing directly, and the agreement itself is void ab

initio, this Court will not enforce that agreement.80

supervised and regulated under Title 5” and AEBB qualifies as a “financial institution” pursuant
to Delaware Code Title 5. Id. 20-21. As this Court stated in its April 6, 2023 decision:

Title 5 Del C. § 2202(a) provides a separate licensure scheme that includes persons “desiring to
transact the business of lending money” in Delaware, but specifically excludes any such person
who “is lending money in accordance with and as authorized by any other applicable law of this
State.” There is no evidence of record that Plaintiffs are licensed under Title 5 as banks or financial
institutions, and Plaintiffs themselves assert that they are licensed under the Insurance Code [of
Delaware].

A & E Bail Bonds, Inc. v. Sutton, 2023 WL 2906168, at *3 n.40 (Del. Super. Apr. 6, 2023).
79
   Pls.’ Post-Trial Br. (D.I. 133) 19.
80
   Preferred Fin. Servs., Inc. v. A & R Bail Bonds LLC, 2019 WL 315331, at *6 (Del. Super. Jan.
23, 2019) (refusing to enforce an illegal agreement); AB Stable VIII LLC v. Maps Hotels & Resorts
One LLC, 2020 WL 7024929, at *80 (Del. Ch. Nov. 30, 2020) (“. . . Delaware law does not permit
a court to enforce a contract prohibited by law.”); Lighthouse Behavioral Health Sols., LLC v.
Milestone Addiction Counseling, LLC, 2023 WL 3486671, at *10 (Del. Ch. May 17, 2023) (“. . .
[A] contract is illegal per se if it ‘violates the explicit mandate of a statutory provision . . . .’”);
Della Corp. v. Diamond, 210 A.2d 847, 850 (Del. 1965) (“. . . [T]he agreement in question is
illegal and, such being the case, the courts of this State will aid neither party to enforce rights under
it.”); Restatement (Second) of Contracts § 178(1) (Am. L. Inst. 1981) (“A promise or other term
of an agreement is unenforceable on grounds of public policy if legislation provides that it is
unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a
public policy against the enforcement of such terms.”). This rule is nuanced: “[C]ourts are averse
to voiding agreements on public policy grounds unless their illegality is clear and certain.
Furthermore, courts exercise this authority with caution, and only in cases that are free from
doubt.” Lighthouse Behavioral Health Sols., 2023 WL 3486671, at *10 (outlining multi-factor
                                                  18
       Here, Swan testified that AEBB set out to form a loan agreement with Sutton

in December 2016 because, that month, Sutton had stopped repaying PFS and AEF

on the 2014 Agreement and 2015 Agreement, respectively. 81 At that time, in

response, “A&E Financial Services suspended doing business with Mr. Sutton.”82

Swan, however, offered to continue loaning Sutton money to fund bails through

AEBB, rather than PFS or AEF, on the same terms as the 2015 Agreement.83 Verbal

negotiations between Swan and Sutton on the 2014 Agreement, the 2015 Agreement,

and the AEBB Agreement overlapped: In Swan’s words, he and Sutton were

“negotiating on two tracks at the same time.”84 For instance, after AEF stopped

funding bails for Sutton, Swan told Sutton that they could “continu[e] funding with

A&E Bail Bonds” only if the 2015 Agreement with AEF was “modified to cover

[Sutton’s] outstanding balance” due to AEF.85 Swan likewise conditioned this same

funding from AEBB on Sutton repaying his outstanding balance due to PFS pursuant

test for enforceability of statute-violating agreement); Bunting v. Citizens Fin. Grp., Inc., 2007 WL
2122137, at *6 (Del. Super. June 29, 2007) (“The rule that a contract in violation of a statute is
invalid and unenforceable is not inflexible.”).
81
   Apr. 24 Tr. 149:8-150:6.
82
   Apr. 25 Tr. 76:21-77:16.
83
   Id.; Apr. 24 Tr. 150:4-151:3.
84
   Apr. 24 Tr. 150:12-151:9.
85
   Apr. 24 Tr. 190:21-191:22. The testimonies of Swan and Sutton show that Swan exerts more
control over AEBB than his title as AEBB’s business administrator bespeaks: He is AEBB’s shot
caller, independent negotiator, and Rule 30(b)(6) designee for depositions. Each of Sutton’s
transactions to repay the loans were made in amounts directed by Swan to entities chosen by Swan.
Apr. 25 Tr. 110:19-111:15. Swan was the only representative of AEBB with whom Sutton
interacted related to the loans. Apr. 25 Tr. 115:13-116:3 (“All my dealings were with Mr. Ed Swan
and [his company] PFSI.”).
                                                19
to the 2014 Agreement.86

          Accordingly, the content of the negotiations, agreements, and transactions

between Swan and Sutton on the record, as well as their associated timelines,

indicate that AEBB entered into the AEBB Agreement with Sutton to continue the

illegal course of dealings of PFS and AEF with Sutton from the 2014 Agreement

and the 2015 Agreement, circumventing the bail agent licensure requirements of 18

Del. C. § 4333(d).

          It is long established that parties’ conduct pursuant to a contract can be a basis

for finding that contract illegal, and a fictitious contractual form does not cure such

a defect.87 Pursuant to 18 Del. C. § 4334(a), an employee of a bail agent business

entity who is not licensed as a bail agent may only legally “perform tasks that are

strictly clerical in nature . . . under the supervision of a licensed agent who shall be

86
     Apr. 25 Tr. 77:5-16.

“So at the end of December [2016] when we’re talking about when A&E Financial Service
suspended doing business with Mr. Sutton and discussing going back to funding with A&E Bail
Bonds, one of the conditions to do that was to repay the outstanding balance that was still lingering
from Preferred Financial Service through August of 2015. So, we were leveraging the Change in
Terms Agreement in order to get that balance that was still owed to Preferred Financial Service
before we entered into an agreement to continue funding through A&E Bail Bonds.”

Id.
87
   Della Corp. v. Diamond, 210 A.2d 847, 849 (Del. 1965) (finding agreement allowing unlicensed
plaintiff to purchase and sell alcoholic beverages illegal and unenforceable despite guise of
fictitious managerial contract).
                                                20
responsible for any noncompliance” with the statute.88

       Here, Swan describes his position as the business administrator of AEBB, an

accounting-focused role, yet he has firsthand knowledge of each of AEBB’s

transactions, negotiates AEBB’s contracts with bail agents, sets up AEBB’s bank

accounts, vets AEBB’s clients, monitors AEBB’s bails, pays for bails, and holds

meetings with bail agents at the courthouse. 89 This is bail funder work, not

supervised clerical work for a bail agent business entity.90 Swan is not licensed as a

bail agent, and his conduct on behalf of AEBB exceeds the scope of work that 18

Del. C. § 4334(a) permits him to perform for AEBB.91 Moreover, the individual bail

agent licenses of fellow AEBB shareholders Andrea Swan and Richard Kotowski do

not cover Swan himself.

       Upon weighing the credibility of the witnesses’ testimony and considering the

totality of the evidence on the record, the Court finds that the AEBB Agreement is

legally fictitious and was formed with the intent to circumvent Delaware law. AEBB

entered into the AEBB Agreement with Sutton as a guise to circumvent the bail agent

88
   For instance, these “strictly clerical” tasks include “assisting customers to complete applications
and taking payments and providing receipts or other documentation to principal, indemnitors,
customers, or other persons.” 18 Del. C. § 4334(a).
89
   Apr. 24 Tr. 9:2-6, 20:3-21:20; Apr. 25 Tr. 80:16-23, 103:3-105:2.
90
   See Apr. 25 Tr. 102: 8-11. A bail funder “provides or loans the funds to property bail agents or
bail agent business entities that are used or may be used for purposes of furnishing property bail
in court proceedings,” regardless of whether such loans are classified as personal or business loans.
18 Del. C. § 4332(3).
91
   See 18 Del. C. § 4333(d)(2) (“A person must be licensed as a bail agent under this section before
any such person may act as a bail funder . . . .”).
                                                 21
licensure requirements of 18 Del. C. § 4333(a) and (d), in order to continue the same

illegal course of conduct that PFS had pursued with Sutton through the 2014

Agreement. Therefore, the AEBB Agreement is void ab initio as illegal and against

public policy and is unenforceable. Of course, a licensed bail agent business entity

in Delaware can recover debts on bails that it funded pursuant to a legitimate

business relationship when its unlicensed employee merely performs clerical duties

under the supervision of a licensed bail agent.92 However, the Court will not enforce

a contract that facially satisfies formalities when the contracting parties’ intent in

forming the agreement was to violate the law.

                                   CONCLUSION

          The Court finds in favor of Sutton and against AEBB and AEF on all counts.

Accordingly, judgment is entered in favor of Sutton on all counts in this consolidated

action. But Sutton’s knowing participation in this illegal scheme will not receive this

Court’s imprimatur. Thus, the Court hereby refers any underlying criminal matters

implicated in this civil action to the Attorney General for the State of Delaware for

potential criminal prosecution.

          IT IS SO ORDERED, this 6th day of November, 2023.

                                                 Sheldon K. Rennie, Judge

92
     See 18 Del. C. § 4334(a).
                                          22
Original to Prothonotary

cc:   Delaware Attorney General Kathy Jennings, Esquire

      Sean T. O’Kelly, Esquire, O’Kelly & O’Rourke, LLC, Wilmington,
      Delaware

      E. Calvin Harmon, Jr., Esquire, Wilmington, Delaware

      Nicholas G. Kondraschow, Esquire, Rhodunda Williams & Kondraschow,
      Wilmington, Delaware

                                      23