Court Opinion

ID: 8483634
Source: CourtListenerOpinion
Date Created: 2022-11-14 21:01:29.77182+00
Date Added: 2024-06-11T16:49:47.258436
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

HASTINGS FUNERAL HOME, INC.               )
                                          )
           Plaintiff,                     )
                                          )
     v.                                   )    C.A. No. 2021-0373-PWG
                                          )
CHARLES W. HASTINGS,                      )
                                          )
           Defendant.                     )

                           MASTER’S REPORT

                        Date Submitted:   August 22, 2022
                        Final Report:     November 14, 2022

Scott G. Wilcox, Esquire, MOORE & RUTT, P.A., Wilmington, Delaware,
Attorney for Plaintiff Hastings Funeral Home, Inc.

David C. Hutt, Esquire, Michelle Bounds, Esquire, MORRIS JAMES LLP,
Georgetown, Delaware, Attorneys for Defendant Charles W. Hastings

GRIFFIN, M.
         Pending before me is a dispute about a lease purchase agreement for real

properties used in the operation of a funeral home business in Selbyville,

Delaware. The new owner of a funeral home business sought to exercise the

option to purchase the properties from the former owner under the agreement and

began the process specified in the agreement for establishing the properties’ sale

price. Disputes arose between the parties concerning the process and the sale

price.    In its motion for summary judgment, the new owner seeks specific

performance of the agreement to purchase the properties, damages, and attorneys’

fees. In his cross-motion for summary judgment, the former owner denies the new

owner’s entitlement to specific performance or damages, arguing that the new

owner is in material breach of the agreement, and seeks indemnification for his

attorneys’ fees under the agreement. I find that the evidence shows that the new

owner is entitled to specific performance of the agreement, and recommend that

the Court grant the new owner’s motion for summary judgment, deny the former

owner’s cross-motion for summary judgment, order the sale of the properties and

compensatory damages, and deny any award of attorneys’ fees. This is a final

report.

                                         1
                                      I.    BACKGROUND

A. Factual Background

          On May 4, 2014, William Bryan Bishop, Jr. purchased all the shares and

assets of Plaintiff Hastings Funeral Home, Inc. (“HFH”) from Defendant Charles

W. Hastings (“Hastings”).1 On July 1, 2014, the parties entered into a separate

lease purchase agreement (“Agreement”) for real property owned by Hastings and

located at 19 South Main Street and 24 South Main Street, Selbyville, Delaware

(“Properties”) out of which HFH operates the business.2 The Agreement’s initial

five-year term ended on June 30, 2019, with HFH having the option to renew for

two additional five-year terms.3 During the first and second terms, HFH had the

option to purchase the Properties.4 The Agreement stated that HFH will purchase

the Properties at their “then fair market value” to be agreed upon by HFH and

Hastings.5       If the parties could not agree on the fair market value price, the

Agreement provided a mechanism for determining fair market value (“Pricing

Process”):

1
  Docket Item (“D.I.”) 1, ¶¶ 4-5. HFH was founded in 1896 and purchased by Hastings
around 1980, who operated the funeral home business until May 4, 2014. D.I. 30, at 4.
2
    D.I. 1, ¶ 6; D.I. 30, Ex. A.
3
    D.I. 30, Ex. A, art. 2; id., art. 20.
4
 Id., art. 21(b). At the end of each term, if HFH did not exercise the option to renew
under the Agreement, it was obligated to purchase the Properties. Id., art. 21(a).

                                               2
          [T]he fair market value shall be determined by calculating the average
          fair market value based upon two appraisals commissioned
          independently by [HFH] and [Hastings] and prepared by MAI,
          Delaware Licensed Appraisers, provided that any difference between
          the value does not exceed ten (10%) percent. If such difference is
          greater than ten (10%), then [HFH] and [Hastings] shall instruct those
          MAI, Delaware Licensed Appraisers to appoint a third MAI,
          Delaware Licensed Appraiser to prepare a third appraisal, the cost of
          which shall be born equally by [HFH] and [Hastings]. If the three
          MAI, Delaware Licensed Appraisers cannot agree on the fair market
          value of the [Properties], then [Hastings] and [HFH] shall be bound by
          the appraisal of the mutually chosen third MAI, Delaware Licensed
          Appraiser. In the event that [HFH] exercises the option, [HFH] and
          [Hastings] shall have thirty (30) days after the giving of notice by
          [HFH] of its intention to exercise the option to obtain the appraisals at
          their own expense of their own MAI, Delaware Licensed Appraiser.
          The third appraisal, if necessary, shall be obtained within thirty (30)
          days thereafter.6

If HFH exercised its option to purchase the Properties during one of the renewal

terms, it must notify Hastings in writing and the “purchase of the Propert[ies] shall

then take place ninety (90) days after the exercise of the option (unless the parties

mutually agree to an alternate date).”7

          The Agreement contains a time is of the essence clause.8 It also includes a

default provision requiring that Hastings provide HFH with written notice of, and

the opportunity to cure, any breach of a material term or condition of the

Agreement, with HFH having 30 days to cure any default, unless the period was

5
    Id., art. 21(d).
6
    Id.
7
    Id., art. 21(b).

                                              3
reasonably extended.9       The Agreement contains an indemnification clause

(“Indemnification Clause”) providing that HFH indemnifies Hastings for claims

and expenses, including attorneys’ fees, in defense of claims or causes of action

initiated against Hastings that arise “by, from or through [HFH’s] use, occupancy

and possession of the Propert[ies].”10 It also includes a prevailing party provision

(“Prevailing Party Provision”) requiring that HFH reimburse Hastings for all

expenses, including attorneys’ fees, arising from or in connection with a default by

HFH, if Hastings is the prevailing party in the dispute.11

          On January 10, 2019, prior to the end of the Agreement’s initial term, HFH

exercised its option to renew for another five-year term.12 On May 13, 2019,

Hastings responded regarding the rent increase for the second term, provided

notice that HFH had breached the Agreement by subletting a portion of the

Properties, and asked HFH to pay him the rent collected to cure the default.13 On

September 4, 2019, HFH notified Hastings that it was exercising its option to

8
    Id., art. 26(b), (d).
9
 Id., art. 22. See id., art. 22(d) (providing that the cure period is reasonably extended “if
[HFH] has timely commenced and is diligently pursuing a cure of the default”).
10
     Id., art. 15(e).
11
     Id., art. 23(f).
12
     Id., Ex. B.
13
     Id., Ex. C.

                                              4
purchase the Properties.14 Hastings responded, on September 12, 2019, that the

purchase could not proceed because HFH had not cured the default nearly four

months after Hastings provided notice of the default, but that, if HFH paid the rent

collected, Hastings “would be glad to discuss the sale of the [Properties].”15 HFH

made the requested payment on September 18, 2019, and indicated that the 30-day

appraisal period should begin on that date.16

           On December 6, 2019, Hastings wrote to HFH, stating that he was “sorry it

took so long,” but he was ready to sell the Properties for $950,000.00.17 HFH

responded, on December 20, 2019, that it did not agree that $950,000.00 was the

fair market value price and that the Pricing Process needed to be followed.18

           HFH had obtained an appraisal on August 26, 2019 from Harold L. Carmean

(“Carmean”), who was a Delaware certified appraiser but not MAI-certified.19

Carmean appraised the Properties at $637,500.00.20 HFH provided the Carmean

appraisal to Hastings on February 27, 2020, and asked to receive a copy of

Hastings’ appraisal “as soon as possible,” given the 30-day period to obtain

14
     Id., Ex. D.
15
     Id., Ex. E.
16
     Id., Ex. F.
17
     Id., Ex. G.
18
     Id., Ex. H.
19
     Id., Ex. I.
20
     Id.

                                            5
appraisals in the Agreement.21 On March 3, 2020, Hastings responded that the

appraiser he hired, William McCain (“McCain”), had completed his appraisal of

the Properties in October 2019 but did not provide a copy of the McCain appraisal

to HFH.22 On March 24, 2020, HFH again asked for a copy of the McCain

appraisal, which Hastings mailed to HFH on March 27, 2020.23 McCain, who was

a MAI and Delaware certified appraiser, appraised the Properties at $925,000.00,

as of October 3, 2019.24 HFH communicated with Hastings by email on May 1,

2020, indicating that, since the difference in the appraisals’ values exceeded ten

percent, the parties’ appraisers had agreed to Georgia Nichols (“Nichols”), a MAI

and Delaware certified appraiser, as the third appraiser, and sought his approval,

and payment of one-half of the cost, to retain the third appraiser.25 Hastings agreed

to retain Nichols and signed the engagement letter on May 15, 2020.26 Nichols

concluded, in her June 16, 2020 appraisal, that the market value of the Properties

was $850,000.00 as of June 5, 2020.27 Hastings sent a June 19, 2020 email to HFH

21
     Id.
22
  Id., Ex. J. Hastings wrote HFH a week later indicating that he knew the appraised
values weren’t “even close,” was asking his appraiser to review the Carmean appraisal,
and would provide a copy of the McCain appraisal after that review. Id., Ex. K.
23
     D.I. 32, at 7; D.I. 30, Ex. O.
24
     D.I. 30, Ex. N.
25
     Id., Ex. R.
26
     Id.; id., Ex. S, Addendum B.
27
     Id., Ex. S, at 65.

                                          6
stating that he will not move forward on the Properties’ sale until the other

appraisers discuss the Nichols appraisal.28

           On July 9, 2020, Hastings wrote HFH stating that it has come to his attention

that Carmean was not a MAI-certified appraiser as required by the Agreement so

HFH was “going to have to start all over and hire an MAI Delaware appraiser to

appraise the [Properties]” but, to avoid “gambling on the outcome of a new

appraisal,” HFH can pay Hastings $900,000.00.29 HFH then hired a new MAI-

certified appraiser, John Crognale (“Crognale”), who valued the properties at

$615,000.00, as of October 19, 2020, in an appraisal dated November 2, 2020.30

On November 9, 2020, HFH sent the Crognale appraisal to Hastings, indicating

that, although HFH believed that Hastings had waived his objection to Carmean’s

lack of MAI certification, it had commissioned the Crognale appraisal and, since

the value difference for the Properties still exceeded ten percent, it asked whether

Hastings would agree to using the Nichols appraisal as the third appraisal or

wanted Crognale and McCain to select a new third appraiser.31

           After HFH followed up with an email on December 28, 2020, Hastings

replied, in a December 29, 2020 email, that he had not seen HFH’s November 9,

28
     Id., Ex. T.
29
     Id., Ex. U.
30
     Id., Ex. V.
31
     Id.

                                             7
2020 letter previously, questioned whether HFH was asking to use the Nichols

appraisal as the third appraisal, and indicated that he would get back to HFH after

consulting with his attorney and appraiser.32 HFH confirmed that it was asking

whether the parties needed to hire a new third appraiser and set a response date of

approximately ten days, to which Hastings responded that he will not make a

decision by that date.33 Later on December 29, 2020, HFH responded that, if

Hastings preferred, they could get the “the three appraisers [to] talk to see if they

can come to a mutually agreed amount.”34         After HFH emailed Hastings on

January 20, 2021 regarding his failure to respond to the December 29, 2020

email,35 Hastings replied, on January 25, 2021, that HFH had breached a material

term or condition in the Agreement because Carmean lacked MAI certification and

the Agreement did not provide for additional appraisals.36 He further stated that he

had “fulfilled [his] obligation” under the Agreement and was “not required to

recognize any redone appraisals or to spend any more money on appraisals,” and

offered alternative price offers.37

32
     Id., Ex. T.
33
     Id.
34
     Id., Ex. W
35
     Id.
36
   Id., Ex. X (“the [Agreement] does not have a provision allowing for an appraisal
redo”).
37
     Id.

                                          8
           HFH emailed Hastings on February 8, 2021 and on March 8, 2021, stating

that the sale price was the Nichols appraisal’s value of $850,000.00, as set by the

Pricing Process.38 Hastings responded in a March 9, 2021 email that he didn’t

recall HFH’s “last offer,” and, on March 12, 2021, HFH reiterated the $850,000.00

price.39 On March 21, 2021, Hastings submitted additional price offers, which

HFH rejected.40 Hastings’ March 26, 2021 letter reiterated that that the Agreement

does not provide for a “do-over” since Carmean is not MAI-certified, and

continued to provide alternative offers.41

B. Procedural History

           On April 29, 2021, HFH filed a complaint claiming Hastings breached the

Agreement and seeking specific performance of the Agreement, damages

representing rent paid by HFH during the dispute, and attorneys’ fees.42 Hastings

filed a motion to dismiss on June 4, 2021, arguing that HFH was not entitled to

specific performance or damages.43 HFH responded, on July 17, 2021, that it had

38
   D.I. 32, Ex. O; HFH’s February 8, 2021 email indicated that the Agreement provides
for the use of the third appraiser’s value because the parties’ appraisers will not agree to
using the other’s value. Id.
39
     Id.
40
     Id.
41
     D.I. 30, Ex. Z.
42
     D.I. 1. HFH continues to pay rent under the Agreement. Id., ¶¶ 19, 20.
43
     D.I. 5.

                                              9
met its pleading burden for specific performance and damages.44 In a November

29, 2021 final master’s report (“November 29, 2021 Master’s Report”), I denied

the motion to dismiss.45 Hastings filed an answer and a counterclaim seeking

indemnification under the Agreement for his attorneys’ fees defending this

action.46 Discovery followed and, on June 23, 2022, HFH filed an answer to

Hastings’ counterclaim.47 On July 22, 2022, HFH filed its opening brief in support

of its motion for summary judgment (“Motion”),48 and Hastings filed its motion for

summary judgment and opening brief in support of its motion (“Cross-Motion”).49

On August 22, 2022, HFH and Hastings filed their answering briefs in opposition

to the other party’s motion for summary judgment.50

                         II.    STANDARD OF REVIEW

          Summary judgment is appropriate only where “the moving party

demonstrates the absence of issues of material fact and that it is entitled to

44
     D.I. 9.
45
  D.I. 12 (holding that the Agreement does not lack a sufficiently definite price term for
the Properties; the Pricing Process is not a condition precedent to the obligation to
purchase or sell the Properties under the Agreement; waiver and damages have been
sufficiently pled by HFH; and it is reasonably conceivable that HFH can prove the
balance of equities tips in its favor). The November 29, 2021 Master’s Report was
adopted by the Chancellor on December 14, 2021. D.I. 13.
46
     D.I. 14.
47
     D.I. 27.
48
     D.I. 30.
49
     D.I. 31; D.I. 32.
50
     D.I. 36; D.I. 37.

                                            10
judgment as a matter of law.”51 Evidence must be viewed “in the light most

favorable to the non-moving party.”52             “In evaluating the summary judgment

record, a trial court shall not weigh the evidence or resolve conflicts presented by

pretrial discovery.”53 Summary judgment may not be granted when material issues

of fact exist or if the Court determines that it “seems desirable to inquire more

thoroughly into the facts in order to clarify the application of law to the

circumstances.”54

         When the Court is presented with cross-motions for summary judgment, the

Court may “deem the motions to be the equivalent of a stipulation for decision,”55

but “[t]he existence of cross-motions … does [not] change the standard for

summary judgment.”56 In evaluating cross-motions for summary judgment, the

court examines each motion independently and only grants a motion for summary

51
  Wagamon v. Dolan, 2012 WL 1388847, at *2 (Del. Ch. Apr. 20, 2012); see also
Cincinnati Bell Cellular Sys. Co. v. Ameritech Mobile Phone Serv. of Cincinnati, Inc.,
1996 WL 506906, at *2 (Del. Ch. Sept. 3, 1996), aff’d, 692 A.2d 411 (Del. 1997).
52
  Williams v. Geier, 671 A.2d 1368, 1375-76 (Del. 1996) (citing Bershad v. Curtiss-
Wright Corp., 535 A.2d 840, 844 (Del. 1987)).
53
     AeroGlobal Cap. Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 444 (Del. 2005).
54
   In re Est. of Turner, 2004 WL 74473, at *4 (Del. Ch. Jan. 9, 2004) (quoting Holladay
v. Patten, 1995 WL 54437, at *3 (Del. Ch. Jan. 4, 1993)) (internal quotation marks
omitted); see also Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962).
55
     Ct. Ch. R. 56(h).
56
     Bernstein v. Tact Manager, Inc., 953 A.2d 1003, 1007 (Del. Ch. 2007).

                                             11
judgment to one of the parties when there is no disputed issue of material fact and

that party is entitled to judgment as a matter of law.57

                                 III.   ANALYSIS

         The issues before me on summary judgment are whether HFH is entitled to

specific performance of the Agreement to purchase the Properties, damages

representing rent paid by HFH to Hastings, and an award of attorneys’ fees under

the bad faith exception.      In addition, I consider whether Hastings should be

indemnified for his attorneys’ fees in this action under the Agreement. I address

each issue below.

A.       HFH is Entitled to Specific Performance of the Agreement.

         Hastings argues that specific performance of the Agreement cannot be

granted because HFH’s failure to follow the Pricing Process (by not obtaining a

MAI-certified appraiser initially and by not complying with the time periods

specified for the process when the Agreement had a time is of the essence clause)

renders the Properties’ price indefinite, is a material breach of the Agreement, and

the equities tip in Hastings’ favor.58 In contrast, HFH asserts that Hastings waived

the applicable time requirements through his conduct and is equitably estopped

57
  See Empire of Am. Relocation Servs., Inc. v. Commercial Credit Co., 551 A.2d 433,
435 (Del. 1988); Wimbledon Fund LP v. SV Special Situations LP, 2011 WL 378827, at
*7 (Del. Ch. Feb. 4, 2011).
58
     D.I. 32, at 13-26.

                                           12
from enforcing those time periods.59 It claims that Hastings materially breached

the Agreement, and the equities heavily favor it.60

           With regard to the sale of the Properties, the Agreement provides that, after

HFH exercises the option to purchase, the sale price is their fair market value at

that time.61 If HFH and Hastings cannot agree on the fair market value of the

Properties, the Agreement details a process for determining the sale price.62 First,

HFH and Hastings commission independent appraisals of the Properties from

“MAI, Delaware Licensed Appraisers” (“MAI-Certification”).63 They have 30

days after HFH exercises the option to purchase to obtain those appraisals (“First

Appraisals Period”).64 If the difference in those appraisals exceeds ten percent, a

third appraisal is obtained from a MAI, Delaware licensed appraiser selected by the

first two appraisers, within 30 days after that (“Third Appraisal Period”).65 If the

three appraisers cannot agree on the sale price, then the parties are bound by the

third appraisal.66 The Agreement provides that the purchase of the Properties takes

place 90 days after the exercise of the option to purchase “unless the parties

59
     D.I. 36, at 5-13.
60
     Id., at 13-15.
61
     D.I. 30, Ex. A, art. 21(d).
62
     Id.
63
     Id.
64
     Id.
65
     Id.

                                             13
mutually agree to an alternate date” (“Sale Period,” or collectively with the First

Appraisals Period and the Third Appraisal Period, “Time Periods”).67

           A party seeking specific performance must establish, by clear and

convincing evidence, that (1) an enforceable contractual obligation exists; (2) it has

performed (or is ready, willing, and able to perform) its own obligations; and (3)

that the balance of the equities tips in its favor.68 “Specific performance is a

remedy that is particularly suitable for land given its unique characteristics.”69

“The party seeking specific performance has the burden of proving entitlement by

clear and convincing evidence.”70

           1. The Agreement is Valid and Enforceable.

           I first address whether the Agreement is sufficiently definite to be

enforceable. “[S]pecific performance will only be granted when an agreement is

clear and definite and a court does not need to supply essential contract terms.”71

“A contract is sufficiently definite and certain to be enforceable if the court can …

ascertain what the parties have agreed to do.”72 The essential terms of a real estate

66
     Id.
67
     Id., art. 21(b).
68
     Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010).
69
     DeMarie v. Neff, 2005 WL 89403, at *4 (Del. Ch. Jan. 12, 2005).
70
     Peden v. Gray, 886 A.2d 1278 (Del. 2005) (ORDER).
71
     Osborn, 991 A.2d at 1159.
72
     Eagle Force Hldgs., LLC v. EF Invs., LLC, 187 A.3d 1209, 1232 (Del. 2018).

                                             14
contract are the names of the buyer and seller, description of the property to be

sold, sales price or the means of determining the price, the terms and conditions of

the sale, and the signature of the party to be charged.73 Hastings argues that HFH’s

failure to comply with the Time Periods results in non-specific terms that renders

the Properties’ price indefinite.74 I disagree. In the November 29, 2021 Master’s

Report, I concluded that the Agreement did not lack a sufficiently definite price

term for the Properties since it provided a means of determining the price – the fair

market value of the Properties at the time of sale – through the Pricing Process.75 I

further held that “HFH’s failure to comply with all aspects of the [Pricing Process]

in the Agreement does not affect the parties’ intentions in making the Agreement

or whether the Agreement’s terms are definite.”76 As discussed more fully below,

the parties’ actions pertaining to the Agreement do not negate the Court’s ability to

ascertain the Properties’ sale price.

           2. HFH has Proven it is Ready, Willing and Able to Perform under the
              Agreement.

           I consider whether HFH is ready, willing and able to perform its obligations

under the Agreement. First, I consider Hastings’ argument that HFH has failed to

73
  Pulieri v. Boardwalk Properties, LLC, 2015 WL 691449, at *5 (Del. Ch. Feb. 18,
2015).
74
     D.I. 32, at 13-16.
75
     D.I. 12, at 9.
76
     Id.

                                            15
meet its obligations under the Agreement and materially breached the Agreement

by failing to comply with the Time Periods and the time is of the essence clause.77

HFH responds that Hastings waived enforcement of the Time Periods and breached

the Agreement, by delaying, “continually fail[ing] to comply with any of the time

periods,” and “at no time … indicat[ing] or even appear[ing] to recognize the fact

that the sale of the Propert[ies] was time sensitive.”78 As proof of Hastings’

waiver, it points to Hastings’ acceptance of the Carmean appraisal after the First

Appraisals Period had elapsed, his continued price negotiation efforts beyond the

Sale Period, and his July 9, 2020 letter indicating that HFH could seek a new

appraisal from a MAI-certified appraiser.79

          “Specific performance will not be granted to a party who is in default of a

material obligation under the contract, unless that party is excused from

performance of that obligation.”80 “It is fundamental law that a party seeking a

decree for specific performance of a contract must, himself, have performed within

the time specified [for] his own obligations under the contract.”81 However, “[i]t is

well settled in Delaware that contractual requirements or conditions may be

77
     D.I. 32, at 13-24.
78
     D.I. 36, at 6, 9-13.
79
     Id., at 9.
80
     Peden, 886 A.2d at 1278.
81
     Wells v. Lee Builders, Inc., 99 A.2d 620, 621 (1953) (citations omitted).

                                               16
waived.”82 “Waiver is the voluntary and intentional relinquishment of a known

right.”83 “A contractual requirement or condition may be waived where (1) there is

a requirement or condition to be waived, (2) the waiving party must know of the

requirement or condition, and (3) the waiving party must intend to waive that

requirement or condition.”84 “The standard for demonstrating waiver is ‘quite

exacting;’ because waiver is redolent of forfeiture, ‘the facts relied upon to

demonstrate waiver must be unequivocal.’”85               “Waiver may be shown by

a course of conduct signifying a purpose not to stand on a right and leading, by a

reasonable inference, to the conclusion that the right in question will not be

insisted upon.”86

           Here, the evidence shows that adherence to the Time Periods was waived.

Hastings’ first response after HFH exercised the option to purchase on September

18, 2019 was to offer his position on the sale price on December 6, 2019 – almost

80 days after HFH exercised the option to purchase.87 HFH responded 14 days

later that it did not agree with Hastings’ price, indicating that the appraisal process

82
     In re Coinmint, LLC, 261 A.3d 867, 893 (Del. Ch. 2021) (citations omitted).
83
   AeroGlobal Cap. Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 444 (Del. 2005)
(citations omitted).
84
     Id.
85
  Simon-Mills II, LLC v. Kan Am USA XVI Ltd. P’ship, 2017 WL 1191061, at *34 (Del.
Ch. Mar. 30, 2017) (citations omitted).
86
     28 Am. Jur. 2d Estoppel and Waiver § 194.
87
     See supra note 17 and accompanying text.

                                              17
was triggered.88 From the beginning of the Pricing Process, the Time Periods were

not followed because the parties had not determined they disagreed on the

Properties’ fair market value until long after the First Appraisals Period had ended

on October 18, 2019 (or even after the Third Appraisal Period ended on November

17, 2019). They had obtained the appraisals within the First Appraisals period,89

but did not share their appraisals with each other until February 2020 (HFH) and

March 2020 (Hastings, after repeated requests from HFH).90 The next step in the

Pricing Process – obtaining a third appraiser if the difference between the first two

appraisals exceeded ten percent – was not implicated until that occurred.91 After

HFH sought Hastings’ approval and payment for the third appraiser on May 1,

2020, Hastings agreed to hiring the third appraiser, and signed her engagement

letter, on May 15, 2020.92 The third appraiser completed the Nichols appraisal on

88
     See supra note 18 and accompanying text.
89
  The evidence shows that HFH had obtained the Carmean appraisal on August 26, 2019
and Hastings had obtained the McCain appraisal on October 3, 2019, so they were in
compliance with the plain language related to the First Appraisals Period. See supra notes
19, 24 and accompanying text; D.I. 30, Ex. A, art. 21(d).
90
     See supra notes 21, 23 and accompanying text.
91
   See supra note 65 and accompanying text. Hastings would have known on February
27, 2020 that the difference exceeded ten percent but took no steps towards obtaining a
third appraisal. See supra notes 21, 22, 25 and accompanying text.
92
     See supra note 26 and accompanying text.

                                            18
June 16, 2020, which was far outside of the Third Appraisal Period, or the Sale

Period, which ended on December 17, 2019.93

          The evidence shows that Hastings never expressed any concern that the

Agreement’s time deadlines were not being met; instead he delayed and took

ample time responding to HFH’s communications seeking to move the Pricing

Process forward. By executing the third appraiser’s engagement letter on May 15,

2020, he acknowledged, and approved, in writing that the third appraisal was

occurring outside of the Third Appraisal Period. It appears the first time Hastings

mentioned any concern about the lack of compliance with the Time Periods was in

his motion to dismiss.94

          By executing the Agreement, Hastings knew of the Time Periods and the

time is of the essence clause,95 and was aware of the time passing while the Pricing

Process progressed and that the Time Periods and the time is of the essence clause

were not being followed. His conduct was unequivocal in signifying that the Time

Periods and the time is of the essence clause were waived in this instance.96

93
     See supra note 27 and accompanying text.
94
     See D.I. 5, at 4-7.
95
   See e.g., Sammons v. Andersen, 968 A.2d 492 (Del. 2009) (“It is well settled in
Delaware that a person is bound by the details of a document he signed even if he failed
to inform himself of the details.”).
96
   “Delaware courts will generally give substantial weight to [time is of the essence]
provisions.” Twin Willows, LLC v. Pritzkur, Tr. for Gibbs, 2021 WL 3172828, at *4 (Del.
Ch. July 27, 2021). Courts, however, look to the conduct of the parties to determine
whether time provisions in a contract, including a time is of the essence clause, are
                                            19
Because of that waiver, I do not find that HFH materially breached the Agreement,

or failed to satisfy its obligations related to the Time Periods and the time is of the

essence clause here.

          Next, I consider whether HFH’s initial failure to use a MAI-certified

appraiser prevents HFH’s entitlement to specific performance of the Agreement.

Hastings argues that HFH’s failure to use a MAI-certified appraiser constituted a

material breach since the MAI-certification requirement was specified in the

Agreement and imposed heightened industry standards to ensure the “appraisal

process was legitimate and fair.”97 HFH responds that it commissioned a new

appraisal by a MAI-certified appraiser after Hastings complained about Carmean’s

lack of MAI-certification.98

          The Pricing Process specifies that the appraisers be MAI-certified.99

Carmean, who completed HFH’s initial appraisal, was not MAI-certified.100 After

controlling. See HomeOwners Expert Serv., Inc. v. Bobb, 1977 WL 5315, at *2 (Del. Ch.
Mar. 15, 1977). Further, the language detailing the Sale Period specifically authorizes
flexibility in the Sale Period, by allowing the parties to change the Sale Period if they
“mutually agree to an alternate date.” D.I. 30, Ex. A, art. 21(b).
97
     D.I. 32, at 15-16, 22.
98
     D.I. 30, at 22.
99
     Id., Ex. A, art. 21(d).
100
   It appears that HFH may have been confused about Carmean’s MAI-Certification.
The Carmean Appraisal identifies Carmean as Delaware certified but does not mention
MAI-certification. Id., Ex. I. HFH’s December 20, 2019 letter to Hastings identifies
Carmean as MAI-certified, although other letters refer to using Delaware licensed
appraisers. See id., Exs. H, I.

                                           20
the Nichols appraisal was completed, on July 9, 2020, Hastings wrote HFH

asserting the Carmean appraisal was invalid since Carmean lacked the required

MAI-Certification.101 He stated that “it would seem that [HFH] is going to have to

start all over and hire an MAI Delaware appraiser to appraise the [Properties].”102

            I do not find that the MAI-Certification was waived by Hastings – the

evidence        does    not   show   that   Hastings   intentionally   relinquished   that

requirement.103 Instead, I find the evidence shows that HFH cured any default of

its use of a non-MAI-certified appraiser when it commissioned the Crognale

appraisal after receiving Hastings’ July 9, 2020 letter. In that letter, Hastings

offered HFH the option to obtain an appraisal by a MAI-certified appraiser, which

was, in effect, starting over.104 The Agreement provides that HFH will not be

considered to be in default if it fails to comply with a material term or condition of

the Agreement until Hastings provides written notice of the default and HFH has

30 days to cure, although the cure period is reasonably extended if HFH is

diligently pursuing the cure.105 The approach to curing the default – starting over

and obtaining a new appraisal by a MAI-certified appraiser – was proposed by

101
      Id., Ex. U.
102
      Id.
103
   Hastings asserts that he only discovered Carmean was not MAI-certified immediately
before complaining about it in his July 9, 2020 letter. D.I. 32, at 8.
104
      See id., Ex. U.
105
      See id., Ex. A, art. 22(d).

                                              21
Hastings in his July 9, 2020 letter, and followed by HFH. Accordingly, I find that

HFH cured any default regarding its failure to initially use a MAI-certified

appraiser.106

          3. The Equities Favor HFH.

          Finally, I consider whether the balance of equities tip in HFH’s favor to

support its specific performance claim. Hastings argues that the equities tip in his

favor because HFH breached the terms of the Agreement.107 HFH responds that

the equities weigh in its favor because it made every effort to complete the

Agreement, in contrast to Hastings’ conduct in contravention of the Agreement.108

In balancing the equities for specific performance, the Court must consider

whether “specific enforcement of a validly formed contract would cause even

greater harm than it would prevent.”109 I find that the equities tip in HFH’s favor

since it has not breached the Agreement, and I recognize that the funeral home

business it purchased from Hastings appears to have operated out of the Properties

since before 1900.110

106
   HFH did not provide the new Crognale appraisal to Hastings until November 9, 2020,
but Hastings’ previous action regarding defaults (allowing HFH to cure the default four
months after notice), and his failure to object to the Crognale appraisal because of timing,
indicate that the time for the Crognale appraisal was reasonably extended. See id., Ex. V.
107
      D.I. 32, at 25-26.
108
      D.I. 30, at 23-25.
109
      Walton v. Beale, 2006 WL 265489, at *7 (Del. Ch. Jan. 30, 2006).
110
      See supra note 1.

                                             22
          In conclusion, I find that that HFH has shown, by clear and convincing

evidence, that it is entitled to specific performance of the Agreement and that the

sale price for the Properties is $850,000.00, which is the fair market value as

determined by the third appraisal and the sale price under the Agreement.111 The

sale of the Properties to HFH shall occur within 45 days after the order

implementing this report is entered.

B. Compensatory Damages for the Delay in the Properties’ Transfer are Due.

          HFH seeks the return of rent it paid to Hastings on the Properties beginning

in August 2020 due to Hastings’ breach by preventing closing on the Properties

within the Time Periods.112                Hastings argues that HFH’s rent and specific

performance claims fail for the same reasons, and rent is due until the sale is

completed.113

111
    I recognize that my decision allows a gap in the Pricing Process – the step in which
the three MAI-certified appraisers determine if they can mutually agree on the Properties’
sale price. Given the duration of this dispute and the large disparity among the MAI-
certified appraisers’ valuations of the Properties across a relatively short time period –
McCain appraised the Properties at $925,000.00 (as of October 2019), Nichols at
$850,000.00 (as of June 2020), and Crognale at $615,000.00 (as of October 2020), I find
that requiring the three MAI-certified appraisers to meet to determine if they can
mutually agree on the sale would be a useless exercise and do not require that they do so.
See, e.g., W. Air Lines, Inc. v. Allegheny Airlines, Inc., 313 A.2d 145, 154 (Del. Ch.
1973). Therefore, the controlling provision in the Pricing Process compels the use the
third appraisal to decide the sale price.
112
      D.I. 30, at 25; D.I. 36, at 13-14.
113
      D.I. 32, at 27; D.I. 37, at 22.

                                                 23
         “Equity may, when its jurisdiction is invoked to obtain specific performance

of a contract, award damages or pecuniary compensation along with specific

performance when the decree as awarded does not give complete and full relief.”114

In ordering specific performance, the Court will “adjust the equities of the parties

in such a manner as to put them as nearly as possible in the same position as if the

contract had been performed according to its terms.”115

         An order of specific performance ... will be so drawn as best to
         effectuate the purposes for which the contract was made and on such
         terms as justice so requires. As is the case here, an order of specific
         performance seldom results in performance within the time the
         contract requires. To that end, damages for the delay will usually be
         appropriate.116

“Where the delay is on the part of the [seller], the purchaser is entitled to

the rents and profits from the time when, according to the terms of the contract,

possession should have been delivered, and the [seller] is entitled to a credit for the

interest earned by the purchaser on the unpaid purchase money.”117 “[A] court of

equity may award damages for what the purchasers have lost by reason of the

seller’s delay in conveying the property.”118 And, “equity may require a party to

pay interest on the purchase price as a condition to obtaining specific performance

114
      Tri State Mall Assocs. v. A. A. R. Realty Corp., 298 A.2d 368, 371 (Del. Ch. 1972).
115
      Id. at 371-72.
116
   Snow Phipps Grp., LLC v. Kcake Acquisition, Inc., 2021 WL 1714202, at *55 (Del.
Ch. Apr. 30, 2021) (internal quotation marks and citations omitted).
117
      Tri State Mall Assocs., 298 A.2d at 371.

                                                 24
where one party would otherwise inequitably receive a windfall at the other’s

expense.”119

         Here, the evidence shows that Hastings caused delay in the transfer of the

Properties to HFH. After HFH obtained the Crognale appraisal, it shared the

appraisal with Hastings on November 9, 2020, and inquired whether Hastings

agreed to using the Nichols appraisal, or desired to have a new third appraiser

selected.120 Hearing no response from Hastings, HFH offered, on December 29,

2020, to have the three MAI-certified appraisers discuss the sale price.121 Hastings

did not respond to that offer either, but, on January 25, 2021, stated that he

believed HFH had breached the MAI-Certification, he would not recognize “any

redone appraisals,” and he would do “[n]othing more.”122 Between January 25,

2021 and his March 26, 2021 letter, Hastings’ communications with HFH

contained varying sale price offers for the Properties that were not based on the

Pricing Process.123 Throughout that time HFH remained steadfast in its position

that, under the Agreement, the third appraisal set the sale price at $850,000.00.124

118
      Romero v. Killy, 1987 WL 13521, at *7 (Del. Ch. July 1, 1987).
119
      Vaughan v. Creekside Homes, Inc., 1994 WL 586833, at *3 (Del. Ch. Oct. 7, 1994).
120
      D.I. 30, Ex. V.
121
      See supra note 34 and accompanying text.
122
      See D.I. 30, Ex. X.
123
      See supra notes 39-41 and accompanying text.
124
      See supra notes 38-40 and accompanying text.
                                             25
When asked about next steps under the Pricing Process, Hastings indicated he

would not do anything else. He had an obligation to complete the Pricing Process

and determine the sale price under the Agreement.

      As of January 25, 2021, Hastings refused to move forward to complete the

Pricing Process (although he continued to try to negotiate the sale price after that,

he did so in contravention of the Pricing Process). On that date, the sale price

could have been set at the third appraisal’s value (based on the final method for

determining the sale price in the Agreement), and HFH’s purchase of the

Properties could have occurred, under the Agreement. After the purchase, HFH

would no longer owe rent on the Properties. So, to put the parties in as close as

possible to the positions they would have been in if possession of the Properties

had been delivered as of January 25, 2021, I find that rent paid on the Properties by

HFH after that date should be credited against the sale price of $850,000.00.125 In

addition, if delivery had occurred, Hastings would have received the sale proceeds

from HFH on January 25, 2021, and he is entitled to a credit for interest on the

unpaid purchase money since January 25, 2021. Therefore, the rent paid by HFH

to Hastings since January 25, 2021 should be deducted from the sale price, and

pre-judgment interest at the legal rate on the $850,000.00 sale price should be

added for the same period.

                                         26
C. Attorneys’ Fees Should not be Awarded to Either Party.

          First, I consider Hastings’ counterclaim that he is entitled to indemnification

for his attorneys’ fees to defend this action under the Agreement.126 HFH refutes

that the Indemnification Clause covers Hastings’ defense in this case.127 The

Indemnification Clause provides that HFH will indemnify Hastings for attorneys’

fees incurred “in defense” of actions initiated against him.128 The Agreement also

contains the Prevailing Party Provision, which requires HFH to reimburse Hastings

for expenses, including attorneys’ fees, when Hastings is the prevailing party in an

action related to HFH’s default under the Agreement.129

          “Delaware follows the ‘American Rule,’ which provides that each party is

generally expected to pay its own attorneys’ fees regardless of the outcome of the

litigation.”130 “One of the exceptions to the American Rule, however, is that

parties may agree to shift fees contractually,” through using indemnification

provisions.131           Indemnification clauses, however, “are presumed not to require

125
     HFH states that it has paid Hastings rent of $6,468.00 per month throughout this
litigation. D.I. 30, at 16.
126
      D.I. 32, at 28.
127
      D.I. 30, at 32.
128
      Id., Ex. A, art. 15(e).
129
      Id., art. 23(f).
130
   Shawe v. Elting, 157 A.3d 142, 149 (Del. 2017) (citation omitted); see also ATP Tour,
Inc. v. Deutscher Tennis Bund, 91 A.3d 554, 558 (Del. 2014).
131
   Paul Elton, LLC v. Rommel Delaware, LLC, 2022 WL 793126, at *1 (Del. Ch. Mar.
16, 2022); see also Dittrick v. Chalfant, 2007 WL 1378346, at *1 (Del. Ch. May 8, 2007).
                                               27
reimbursement for attorneys’ fees incurred as a result of substantive litigation

between the parties to the agreement absent a clear and unequivocal articulation of

that intent.”132 “[P]urely contractual indemnification provisions only shift first-

party claims if the contract explicitly so provides.”133 “When a contract contains

both an indemnification provision and a ‘prevailing party’ provision elsewhere in

the contract, the courts of this state will not construe the indemnification provision

to allow first-party fee-shifting.”134      Here, the Agreement contains both the

Prevailing Party Provision and the Indemnification Clause, which does not

explicitly provide for first-party fee-shifting. As a result, I do not construe the

Indemnification Clause as allowing for first-party fee-shifting, so Hastings’

indemnification claim fails, and I recommend that the Court deny Hastings’ claim

for attorneys’ fees.135

132
    Paul Elton, LLC, 2022 WL 793126, at *1 (internal quotation marks and citation
omitted); see also Deere & Co. v. Exelon Generation Acquisitions, LLC, 2016 WL
6879525, at *1 (Del. Super. Nov. 22, 2016) (“Standard indemnity clauses are not
presumed to apply to first-party claims.”).
133
   Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 2020 WL
7861336, at *5 (Del. Ch. Dec. 31, 2020), aff’d sub nom. Herzog v. Great Hill Equity
Partners IV, LP, 269 A.3d 983 (Del. 2021).
134
      Paul Elton, LLC, 2022 WL 793126, at *2.
135
    Assuming arguendo that the Indemnification Clause would control and allow first-
party fee-shifting, the Indemnification Clause provides for indemnification of
“reasonably incurred attorneys fees,” I would not shift fees since reasonable attorneys’
fees are “related to the result achieved in the litigation” and HFH effectively prevails on
all claims in this litigation. Great Hill Equity Partners IV, LP, 2020 WL 7861336, at *6.

                                            28
          Next, I consider HFH’s claim for attorneys’ fees under the bad faith

exception to the American Rule. It argues that Hastings’ conduct in delaying his

responses to HFH’s communications and taking baseless positions related to this

matter before and during the litigation justifies an attorneys’ fee award.136

Hastings refutes HFH’s claim that the bad faith exception applies.137

          The bad faith exception to the American Rule applies only in “extraordinary

cases” where the “losing party has ‘acted in bad faith, vexatiously, wantonly, or for

oppressive reasons.’”138 To apply the bad faith exception to pre-litigation conduct,

courts determine whether “the pre-litigation conduct of the losing party was so

egregious as to justify an award of attorneys’ fees as an element of damages.”139

Courts have found bad faith for the conduct of litigation “where parties have

unnecessarily prolonged or delayed litigation, falsified records or knowingly

asserted frivolous claims.”140      To find bad faith, a party must have acted in

136
      D.I. 30, at 28-31.
137
      D.I. 37, at 25-29.
138
   Brice v. State, Dep’t of Correction, 704 A.2d 1176, 1179 (Del. 1998) (citations
omitted).
139
      Hardy v. Hardy, 2014 WL 3736331, at *18 (Del. Ch. July 29, 2014).
140
   Kaung v. Cole Nat. Corp., 884 A.2d 500, 506 (Del. 2005) (quoting Johnston v.
Arbitrium (Cayman Islands) Handels AG, 720 A.2d 542, 546 (Del. 1998)) (internal
quotation marks omitted); see also RBC Capital Markets, LLC v. Jervis, 129 A.3d 816,
877 (Del. 2015) (citation omitted).

                                            29
subjective bad faith, which “involves a higher or more stringent standard of

proof, i.e., ‘clear evidence.’”141

          It is evident that Hastings feels strongly about the sale of the Properties,142

but the evidence does not show that his actions prior to litigation were so egregious

as to justify awarding attorneys’ fees as damages,143 or that he acted for oppressive

reasons, unnecessarily delayed the litigation, or knowingly asserted frivolous

contentions, during litigation. Thus, I conclude that the high standard for awarding

attorneys’ fees for bad faith has not been met here and recommend that the Court

decline to award attorneys’ fees to HFH in this matter.

                                    IV.     CONCLUSION

          For the reasons stated above, I recommend that the Court grant Plaintiff

Hastings Funeral Home, Inc.’s motion for summary judgment and deny Defendant

Charles W. Hastings’ cross-motion for summary judgment, and direct that

Defendant sell the Properties located at 19 South Main Street and 24 South Main

Street, Selbyville, Delaware to Plaintiff. I recommend that the Court conclude that

the sale price for the Properties is $850,000.00 and that, beginning as of January

25, 2021, prejudgment interest at the legal rate should be added to the sale price,

141
   Arbitrium (Cayman Islands) Handels AG v. Johnston, 705 A.2d 225, 232 (Del. Ch.
1997), aff’d, 720 A.2d 542 (Del. 1998) (citations omitted).
142
      See D.I. 30, Ex. J.
143
      Hastings states that he was proceeding pro se prior to litigation. D.I. 37, at 28.

                                                30
and the rent paid by HFH to Hastings on the Properties should be subtracted, to

determine the final amount of sale proceeds to be exchanged for the transfer of the

Properties between the parties. I further recommend that the Court decline to

award attorneys’ fees to either party. This is a final report, and exceptions may be

taken under Court of Chancery Rule 144.              The parties shall submit an

implementing order (reflecting reductions for rent and additions for interest) within

15 days of this report becoming final, and the sale of the Properties shall take place

within 45 days after the implementing order is entered.

                                               /s/ Patricia W. Griffin
                                               Master Patricia W. Griffin

                                          31