Court Opinion

ID: 4657134
Source: CourtListenerOpinion
Date Created: 2021-02-03 19:02:37.241689+00
Date Added: 2024-06-11T08:01:11.389231
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

Sarah A. Mullins and
Charles R. Mullins,

Plaintiff,
C.A. No.: N18C-11-078 FJJ
Vv.

Bruce M. Ascetta and
Carla S.M. Ascetta,

Defendants.

Submitted: January 11, 2021
Decided: February 3, 2021

MEMORANDUM OPINION ON PRETRIAL ISSUES

Donald L Gouge, Jr., Esquire, Donald L. Gouge, Jr., LLC, Wilmington, Delaware,
Attorneys for Plaintiff.

Steven Schwartz, Esquire, Schwartz & Schwartz, P.A., Wilmington, Delaware,
Attorneys for Defendant

Jones, J.
A bench trial in the above matter is scheduled for April 5, 2021. The parties
have submitted a number of legal issues for the Court’s consideration before trial.
This is the Court’s decision on those issues.

This case arises out of a sale of a home located at 1059 Windrow Way,
Magnolia, Delaware (the “property.”) In November 2012 the Defendants in this
case, Bruce M. Ascetta and Carla Ascetta (the “Ascettas” or “Sellers”), entered into
an Agreement of Sale with K. Hovnanian (“K.Hov’”) in which K.Hov agreed to build
the Ascettas a home located at 1059 Windrow Way. The purchase price was
$248,575. The contract between the Ascettas and K.Hov provided that the Ascettas
were to receive K.Hov’s standard Home Builder’s Limited Warranty. The Ascettas
closed on the house with the builder on April 16, 2013.

On November 14, 2017 the Ascettas sold the home to the Plaintiffs, Sarah A.
Mullin and Charles R. Mullin (the “Mullins” or “Buyers.”) The contract between
the parties provided that the Seller’s Disclosure of Real Property Condition Report
was an Addendum. The Seller’s Disclosure itself on its first page recited: “This
report, signed by the Buyer and Seller, shall become a part of the agreement of Sale”.
The parties went to settlement on December 15, 2017. More than a year later the
Home Builder’s Limited Warranty was transferred to the Mullins.

The dispute between the parties in this case is an allegation that the Sellers
were aware of certain defects in the property and those defects were not disclosed to

the Buyers. The Buyers have asserted a number of different legal theories for

2
recovery. Count I of the Complaint alleges a breach of contract. Count II of the
Complaint is based on Fraud/Misrepresentation. Count III of the complaint sounds
in Negligent Misrepresentation. Finally, Count IV in the Complaint alleges a breach
of the Implied Covenant of Good Faith and Fair Dealing.

Defendants have moved to dismiss Counts IJ (Fraud/Misrepresentation) and
Count III (Negligent Misrepresentation). Defendant contends that both Counts II
and III are barred by the economic loss doctrine.' In addition, Defendants allege that
this Court lacks jurisdiction over the Negligent Misrepresentation claim in Count
Ill. Plaintiffs have agreed that the economic loss claim bars Counts II and III and
that this Court does not have jurisdiction over the Negligent Misrepresentation claim
in Count III. Having reached an agreement that these claims cannot be pursued, the
parties now dispute whether I should dismiss these claims with or without prejudice.
Plaintiffs want the right to pursue the Negligent Misrepresentation claim in the Court
of Chancery, and the Defendants do not want the Plaintiffs to be able to do so. The
Defendant also maintains that a dismissal with prejudice impacts on the question of
costs and attorney’s fees that will be awarded following the verdict. I am not
convinced that it is proper for me to dismiss this claim on the merits given that the
case has not proceeded to trial. At this point, Counts II and III will be dismissed

without prejudice. By dismissing the claims without prejudice, I am not foreclosing

 

1 CB Lewes, L.L.C. v. Brightfields, Inc., 2020 WL 6364521 (Del. Super).
2 Affy Tapple, LLC v. ShopVisible., LLC and Aptos Inc., 2019 WL 1324500 (Del. Super).

3
an application for costs and attorney’s fees for the two claims at the conclusion of
this matter, depending on the outcome of the trial.

Count I of the Complaint is a breach of contract claim that is based in part on
the Delaware Buyer Protection Act of 6 Del. C. §2572. In Delaware, “a seller
transferring residential real property shall disclose, in writing, to the buyer all
material defects of that property that are known at the time the property is offered
for sale or that are known prior to the time of the final settlement.”? It is important
to note that oral disclosures, while undoubtedly helpful, do not relieve the seller of
residential real estate from their statutory duty to disclose all known material defects
to the buyer in writing.* Moreover, the seller has a continuing duty to update the
disclosure form to reflect any material changes up to the date of final settlement.°
The required seller’s disclosure is intended to be a good faith effort by the seller to
disclose known defects, and is not a substitute for warranties or inspections.° This
requirement was further intended to eliminate the doctrine of “caveat emptor”, or
“let the buyer beware” from resident real estate sales in Delaware.’ Once the seller’s
disclosure form is signed by both the seller and buyer, the form becomes part of the
residential real estate sale contract. As such, a seller’s failure to disclose any known

material defects qualifies as a breach of the real estate contract by the seller.

 

36 Del.C. §2572(a)).
4 Shaun D. McCoy v. William Dana Cox and Joanna L. Cox, 2007 WL 1677536, 4 (Del. Super., June 4, 2007).
56 Del. C. §2572(b).
° 6 Del C. §2574
’ Michael Iacono v. Rosemary Barici, et al., 2006 WL 3844298, at *4 (Del. Super., Dec 29, 2006).
8 McCoy v. Cox, 2007 WL 1677536 (Del. Super. June 4, 2007)
9 Id.
4
In a civil action for breach of contract, the burden of proof is on the plaintiff
to prove the claim by a preponderance of the evidence. To prove a claim for breach
of contract the plaintiff must establish: (1) the existence of a contract; (2) the
defendant breached an obligation imposed by the contract; and (3) resulting damages
to the plaintiff. As a default rule, damages are based on the reasonable expectation
of the parties at the time they entered into their contract. Expectation damages are
measured by the amount of money that would place the non-breaching party in the
same position as if the breaching party had fully performed the contract.'! Moreover,
a party has a duty to mitigate his/her damages.”

The pretrial issue as to the breach of contract claim relates to the homeowners’
limited warranty. When the Defendants purchased the home from the builder, they
received a 10 year limited home warranty. While the contract documents between
the Ascettas and the builder did not specify a price for the warranty, it was clearly
part of the home “package” that they bought and paid for. The home warranty was
eventually transferred to the Mullins. Certain of Plaintiffs’ damages are apparently
covered under the homeowners warranty. The Ascettas have requested that the
Plaintiffs not be permitted to recover any damages for those items covered by the

warranty in the event that the Defendants are found liable. According to the

 

10 Id.
"| Richard G. Frunzi v. Paoli Services, Inc., 2012 WL2691164 (Del. Super. 2012).

12 John Petroleum, Inc. v. Charles G. Parks, Jr., 2010 WL 3103391 (Del. Super. 2010).

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Defendants this would constitute a double recovery. The Plaintiffs oppose this
request.

To permit the plaintiffs to recover damages for items that are covered by the
warranty would violate the reasonable expectations doctrine and would put Plaintiffs
in a better position than they would be if the Ascettas had fully performed the
contract. Plaintiffs’ argument is also inconsistent with the duty to mitigate doctrine.
As such, the Court agrees that Plaintiffs may not recover damages that are covered
by the homeowners warranty.!?

Next, Defendants have moved to dismiss Count IV of the Plaintiffs’
Complaint which alleges a breach of the Implied Covenant of Good Faith and Fair
Dealing. In Delaware, the implied covenant of good faith and fair dealing requires
parties to a contract “to refrain from arbitrary or unreasonable conduct” which
deprives a party “from receiving the fruits of a bargain”. To state a claim for breach
of the implied covenant, a plaintiff must allege: (1) a specific implied contractual
obligation: (2) a breach of that obligation: (3) resulting damages. Importantly, the
covenant “seeks to enforce the parties contractual bargain by implying only those
terms that the parties would have agreed to during their original negotiations if they

had thought to address them.'* In other words, the covenant is “invoked only ‘when

 

‘3 The parties spent some effort in the briefing discussing the collateral source doctrine and its applicability to this
case. The parties ultimately agreed that the collateral source doctrine does not apply in a contract action. As this
case is now an action based on a contract claim (and no tort claims), the collateral source doctrine does not apply.
4 Collab9 LLC v. En Pointe Techs, Sales LLC, 2019 WL 4454412 (Del Super., 2019); John MARKOW, Paul Nee,
and Carol Lahiff, individually and on behalf of others similarly situated v. Synageva Biophama Corp. 2016 WL
1613419 (Del Super., March 3, 2016).

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the contract is truly silent with respect to the matter at hand, and ... when ... the
expectations of the parties were so fundamental that it is clear that did not feel a need
to negotiate about them.”!° This Court has characterized the covenant “as a judicial
tool used to imply terms in a contract that protect the reasonable expectation of the

9916

parties. If applicable, the Court must engage in a fact-intensive inquiry on

fairness.!’

In McCoy v. Cox,'® this Court applied the covenant to an alleged breach of the
implied covenant based on alleged omissions in a seller’s disclosure form. McCoy
held that the covenant applied to a seller’s disclosure form because the covenant
“arises in relation to the enforcement of contractual conditions when one party has
the sole discretion to determine the scope or occurrence of a condition”.!? Given
this clear line of authority, I will not dismiss Plaintiff's implied covenant claim at
this point. I will await trial and will decide whether Count IV has any place in this
case after hearing the evidence.

The Court instructed the parties to brief the 6 legal issues outlined by the
Defendants in the pretrial stipulation. The briefing did not cover the following issues

raised by Defendants in the pretrial stipulation:

1. whether the transaction at issue is covered by 6 Del. C.
§2577 in that a trust was involved:

 

'5 Hasan Krushaim v. Tullow, Inc. d/b/a Appostrophic, Appostrophic LLC, Outreach Global, Ltd., and Nathan
Gibson, 2016 WL 3594752, at 4 (Del Super., June 27, 2016).

16 The Chemours Co. TT, LLC v. ATI Titanium LLC, 2016 WL 4054936 (Del. Super. July 27, 2016).

” Krushaim, 2016 WL 3594752, at 4.

'8 2007 WL 1677536 (Del Super. June 11, 2007; see also Kenneth & Clasina Dreisbach v. Robert T. & Martina L.
Walton, 2014 WL 4352100 (Del. Super. Aug 29, 2014)

19 Id.
2. whether the Defendants in their individual capacities
have a duty under Section 2572 and 2573 of the
Delaware Buyer Protection Act; and

3. whether the breach of contract claimed is barred by the
doctrine of merger by deed and 6 Del. C. §2574.

Defendants did not brief any of these issues. Plaintiffs contend that by failing
to brief the issues Defendants have abandoned and/or waived these arguments. In
their reply brief, the Defendants have advised the Court that they will not raise items
(1) and (2) above as defenses. The Court therefore considers these two issues
waived.

Is the breach of contract claim barred by the doctrine of merger by deed and
6 Del. C. §2574? The merger doctrine is only applicable to questions of title,
quantity and land use.”° It does not apply to claims under the Builders Protection
Act nor breaches of contract claims like the instant one.”! To reach a contrary result
would render 6 Del. C. §2572 meaningless as no claims would ever survive the final
date of the real estate settlement. Therefore, the Court finds that the breach of
contract claim is not barred by 6 Del. C. §2574 and/or the doctrine of merger and
deed.

IT IS SO ORDERED.

L227

Francis J. Jones, Judg

 
  

cc: File&ServeXpress

 

20 John Ellixson and Gretchen Ellixson v. Gary O’Shea and Lynn O’Shea, 2003 22931339 (Del. Ct. Cm. Pleas,
November 20, 2003 citing Victor B. Clarke v. Barbara L. Quist and Q-C, Inc., 560 A.2d 489 (table (Del. 1989)
citing Allied Builders, Inc. v. A. R. Heffron, Jr., and Loretta F. Heffron, 397 A.2d 550, 5520553 (Del 1979).

21 ld.

8