Jack J. Morris Associates v. Mispillion Street Partners, LLC.

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IN THE SUPERIOR COURT OF THE STATE OF DELAWARE IN AND FOR SUSSEX COUNTY JACK J. MORRIS ASSOCIATES, Plaintiff, v. MISPILLION STREET PARTNERS, LLC, Defend ant. ) ) ) ) ) C.A. No. 07C-04-023-RFS ) ) ) ) ) MEMORANDUM OPINION Upon Plaintiff s Motion for Summary Judgment. Denied. Submitted: Decided: May 5, 2008 August 26, 2008 Scott G. Wilcox, Esquire, The Bayard Firm, Wilmington, Delaware, Attorney for Plaintiff. Bonnie M . Benson , Esquire, C amden, D elaware, A ttorney for D efendan t. STOKES, Judge Pending before this Court is a summary judgment motion filed by Plaintiff, Jack J. Morris Assoc iates ( Plaintiff ) against Mispillion Street P artners, LLC ( D efendant ). The suit seeks $115,506.30 in damages alleging breach of contract and on a quantum merit basis. Fo r the follow ing reason s, Plaintiff s M otion for S ummary Ju dgemen t is denied . FACTS Plaintiff, a Virginia corporation, allegedly contracted with Defendant to promote, market, and advertise the sale of residences for a project named FisherHawke Landing on the Misp illion River in M ilford. Def endant, is a lim ited liability compa ny that is composed of two limited liability companies as members. These companies are Mispillion Venture s LLC ( Ventur es ) and D ouble L & S Partners, L LC ( D ouble L ). Ventures is owned by Charles B urton ( B urton ) and Marvin Ingram. E ighty percent o f Doub le L is owned by Donald Lockw ood ( Lo ckwoo d ) and h is son, with th e remainin g twenty percent owned by Eric Sugrue. The members contributed property for the project and obtained funding from Wilmington Trust Company to begin work. However, the market declined, and no building has been done. Before th e down turn, Burton signed a L etter Agree ment ( A greemen t ) with Plaintiff on July 21, 2005. Although Burton was originally named as one of the general managers, Defendant s Operating Agreement was amended on July 19, 2005 to remove 2 him. Before then, Burton had obligated the Defendant in various ways to promote the project w hich wou ld ap pear to fa ll within the scope of a general m anag er s a utho rity. When the Agreement was signed, Plaintiff received six thousand dollars ($6,000) representing a retainer for part of July and August at its rate of four thousand dollars per month ($4,00 0). Plaintiff provided marketing services for FisherHawke Landing, such as creating the marketing logo, conducting marketing analysis to assist in the sale of units, setting up a media center, building displays, drafting brochures, and creating a website. Plaintiff issued invoices for its services on the first of each month beginning in August 2005. Defendant paid for Plaintiff s services for September and October 2005. In December 2005, Burton allegedly advised Plaintiff that a change in Defendant s loan would delay payments of future invo ices. How ever, he assu red Plaintiff that paymen ts would ultimately be made. Thereafter, Defendant failed to pay for Plaintiff s services for November and December 2005. Burton explained that Defendant s members were having differences but again assured Plaintiff that its invoices would be paid. Thereafter, Burton advise d Plain tiff that D efend ant cou ld not p ay its bills. The invoices from November 2005 through August 2006 have not been paid. Allegedly, Defendant owes Plaintiff $115, 506.30. Defendant denied that Burton was authorized to sign the A greemen t. Further, De fendant d enied it wo uld be unju stly enriched if the outstanding balance is not paid. Defendant alleges it does not have 3 knowledge or sufficient information about Plaintiff s services for the FisherHawke Landing. As indicated, initially, Burton was one of the general managers of the Plaintiff along with Lockwood. General managers have the authority to conduct day to day operations.1 Burton sta ted that the op erating agre ement w as amend ed on July 19 , 2005 to facilitate the Wilmington Trust loan. Not only was Burton removed as a general manager but Ven tures own ership interes t was redu ced from fifty-five perce nt (55% ) to fifty percent (50 %) and Double L s was in creased fro m forty-five p ercent (45% ) to fifty perc ent (50% ). Bu rton explaine d the situa tion this w ay: Q: Can you tell me why it was amended? A: [B]ecause I had had a Chancery Court suit that I had filed against previous partnership that I was in volved in, w as not com fortable w ith me bein g on the no te and they wanted the management to be changed in the partnership for there to be oversig ht. . . I . . . initially re fused to be inv olved in the pro ject any m ore. M y partner, Marvin Ingram, brought me back to the table and we negotiated a change in owne rship interest fr om 55/4 5 to 50/50 because I w as not goin g to be bou nd to any of the future larger debts of the project, namely with the banks, the Double L & S par tnership felt th at they should b e given an additional fiv e percent in terest in the project because they would be taking a greater risk and I would not have that 1 Burton D ep.16:1 5-24, Feb ruary 4 ,20 08. 4 risk.2 Despite the changes, Burton continued to operate as a manager and entered contracts. Further he held himself out as a representative of the partnership. . . to the public a nd to all v endors , supplie rs, and s ubcon tractors f or the p artnersh ip. 3 He stated that all the members of Defendant were aware of his actions and did not question them.4 Burton u sed the follo wing ex ample to sh ow that oth er memb ers never q uestioned h is managerial role: Q. Okay. So were you compensated for doing anything else besides obtaining governmental approvals? A. Well, I submitted invoices to the LLC just like all of our other vendors did on a monthly basis of $7500 a month basically was the way that we had agreed as a partners hip. T hat w ould wor k up to the $135,0 00, a nd for that I ra n all o f the dayto-day activities fo the LLC, whatever was required in order to get approvals for the project and to continue to move forward in releasing the project to the public. Q. Okay. Would those activities have been engaged in after July 19th , 2005? A. Ye s. Q. Okay. Would those invoices that you suggested you submitted to the LLC have 2 Burton Dep. 20-21. 3 Burton Dep. 24. 4 Burton Dep. 24. 5 been viewed by any other members of the LLC? A. Ye s. Q. Okay. Would any of those members had authority to determine whether you should or shouldn t be paid that $7500 a month? A. Abso lutely they would have. If the y had decide d not to pay m e, they could have.5 Burton and Lockwood provided conflicting statements regarding the existence of Burton s authority, and Lockwood s awareness or knowledge of the alleged contract between Plaintiff and Defendant6 . Lockwood stated that he had no knowledge of the Agreem ent and of any comm unications b etween P laintiff and D efendan t.7 He also stated that he was not aware of Plaintiff s involvement in FisherHawke Landing project and any actual or pro posed pa yments to Plain tiff until the law suit. STANDARD OF REVIEW Sum mary judg men t can not b e gra nted whe re materi al iss ues o f fac t exis t; only a jury can resolve them.8 The moving party must establish the lack of such issues.9 Should the movin g party establish th e absence of material f actual issues, th e nonmo ving party 5 Burton Dep.25-26. 6 Burton w as depo sed in his individ ual capac ity. Lockwoo d participa ted in a dep osition in his indiv idual capacity and in his capacity as the representative of Defendant pursuant to Super. C t. Civ R. 30 (b)(6). 7 Lockwood Dep. 35-37. 8 Moore v. Sizem ore, 405 A.2 d 679, 6 80 (De l. 1979). 9 Id. 6 must prov e the presen ce of such issues in ord er to preven t summar y judgment. 10 In consideration of a motion for summary judgment, the evidence is viewed in a light most favo rable to th e nonmo ving party.11 Where the moving party has produced sufficient evidence to support its m otion und er Superio r Court C ivil Rule 56 , the non-m oving par ty may not rely solely upon her pleadings, but must produce evidence showing a genuine issue of a m aterial fact fo r trial.12 Summary judgm ent is not appropriate if the Co urt determines that it does not have sufficient facts to enable it to apply the law.13 DISCUSSION Did Burton have authority to sign the Agreement with Plaintiff? A disclosed or partially disclosed principal is a party to a contract, when executed by an authorized agent. 14 In the ordinary course of business dealings, an agent may be cloaked with three types of au thority: ex pres s, implied and apparen t auth ority. 15 Express authority may be conveyed to the agent, either orally or in writing. Implied authority may be evidenced by conduct of the principal. Apparent authority may be evidenced by the conduct of an agent 10 Id. at 681. 11 Id. at 680. 12 Super. Ct. Div. R. 56(e); Celotex C orp. v. Ca trett, 477 U.S. 317, 322-23 (1986). 13 Ebersole v. Lowengrub, 180 A.2 d 467, 4 70 (De l. 1962)), rev d in part and aff d in part, 208 A.2d 495 (Del. 196 5). 14 Capital Broa dcasting Corp . v. Dover Do wns. Ins., 1976 W L 1777 84, at *3 (D el. Com. P l. Jan. 11, 1976). 15 Liberty M ut. Ins. Co. V . Enjay C hemica l Co. (Now Exxon -Corp.) , 316 A.2 d 219, 2 22 (De l. Super. 1974). 7 who holds himself out as possessing authority with the apparent consent or knowledge of the p rincipal. In these c ircumsta nces , the p rincipal c annot de ny the agen t s au thority. Exp ress and implied a utho rity is a lso k now n as a ctua l auth ority. 16 In Wilson v. Active Crane Rentals, Inc., the Court observed that an agency relation ship m ay be crea ted by the act of th e parties or by ope ration o f law. 17 The fac ts must be examined to assess whether Burton had express or implied authority to act as Defendant s agent. Defendant argues that Burton did not have actual authority to enter into the Agreement with Plaintiff and that Defendant was not aware of Burton s action entering into a contract with Plaintiff. Lockwood testified that Burton was out of the picture after the amendment to the operating agreement. However, he acknowledged that Burton was p ractically still the m anger. 18 In contrast, B urton testified that Defe ndant w as aware of Plaintiff s involvem ent in the project and his actions concerning the Agreement. There is no record of Defendant conveying express autho rity to Burton either orally or written on July 21, 2005. Ho wever, actual authority can still exist when the principal implicitly grants such authority to an agent. 19 16 Billops v. Magress Const. Co., 391 A.2 d 196, 1 97 (De l. 1978). 17 Wilson v. Active Crane Rentals, Inc., 2004 W L 1732 275 at *1 (Del. Sup er. July 8, 20 04). 18 Lockwo od Dep .28:22-2 4, January 1 6 ,2008 . 19 Wilson, 2004 WL 1732275 at * 2. 8 In this regard : The de termination of implied authority depe nds on the relationship between the principal and agent, not what a third party believes about the relationship. That is, imp lied authority is auth ority that the agen t reasonably be lieves he ha s as a result of the p rincipal s action s. 20 The Re statement o f Agen cy states that an ag ent s belief is reasonab le if it accord s with the p rincipal s ma nifestations a nd the infe rences that a reasonable person in the agent s position would draw from the circumstances creating the agenc y. 21 Whether Burton reasonably believed that he had Defendant s authority to enter into a contra ct with Plain tiff based o n his relations hip with D efendan t is for the jury to decide.22 Burton had authority to act before the operating agreement was amended. Howe ver, Burton testified that he continued to act as if there was no a mendm ent with Defendant s knowledge. This position is contrary to the amendment that was executed forty eight hours before the A greement. Lock wood asserts a D elaware real estate firm was engaged to perform advertising and marketing services. Even if B urton did n ot have ac tual authority, the f acts wou ld then be e valuated to determine whether Burton had apparent authority to act as Defendant s agent. A principal is bound by an agent s apparent authority which he knowingly permits the agent to assum e of w hich he holds th e agen t out as p ossessin g. 23 The determination of apparent 20 Id. 21 Restateme nt (Third) o f Agency § 2 .02 (200 6). 22 Id. 23 Liberty Mut. Ins. Co., 316 A.2 d at 223 . 9 authority would involve an examination of the intera ctions among B urton, Defendan t s members, and Plaintiff. This is a factually based inquiry which must consider whether Defendant made representations to Plaintiff indicating that Burton was its agent, whether Plaintiff relied on them, and whether that reliance was reasonable.24 Whethe r an agenc y relationship ex ists is normally a q uestion of f act. 25 In the instant case, there is a factual dispute as to whether an agency relationship existed between Burton an d Defen dant and B urton s auth ority to enter into an agreeme nt with Plaintiff on behalf of Defendant on July 21, 2005. Credibility questions about Burton, Lock wood , and oth er intere sted pe rsons a re the us ual grist o f the jur y mill. CONCLUSION Considering the foregoing, Plaintiff s Motion for Summary Judgment is denied. IT IS SO ORDERED. 24 Wilson, 2004 WL 1732275 at * 1. 25 Montgomery v. Achenbach, 2007 WL 3 105812 at * 3 (Del. Super. July 26, 2007) ( citing Fish er v. Townsends, Inc., 695 A.2 d 53, 61 (Del. Sup er. 1997 )). 10

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