STEELE, Chief Justice.
Michael Kemp signed a holographic real property sales contract with Lucille Osborn, and made monthly payments while living in her beach house for over 20 years. Osborn's estate asserts that Kemp signed a document for a leasehold interest, and appeals the Vice Chancellor's order to sell the house to him. Because the contract unambiguously expresses a purchase agreement; Kemp was ready, willing, and able to perform; and the balance of the equities tips toward specific performance, we
I. FACTS AND PROCEDURE POSTURE
Osborn lived in Wilmington and had a beach house in Slaughter Beach, Sussex County. Lucille and her husband bought the beach house back in 1968. The beach house had two floors which were divided into two separate apartments. In 1984, Osborn decided to rent out the top floor, but wanted to keep the bottom floor for herself, so she could enjoy the beach from time to time. Osborn found a lessee in Kemp and on November 9, 1984, Kemp began leasing the upper apartment at a rate of $275 a month, plus utilities. Later that year, Kemp's friend, Roxanne Danburg also moved in and both took to living in the upper apartment and have lived there ever since.
From the start Kemp wanted to buy the beach house and on April 16, 1985, Osborn and Kemp entered into an agreement which is the subject of this litigation. That day Osborn allegedly agreed to sell the beach house to Kemp. Kemp drafted the holographic document which provided, in its entirety,
Kemp signed his name on the bottom right of the document and Osborn signed under Kemp's name.
At the bait shop, Joyce M. Macklin, a public notary, notarized the agreement and placed an embossed seal on the document. Macklin signed at the bottom, to the left of the signatures of both Osborn and Kemp. Macklin testified at trial that she remembered signing this document because she did not see many handwritten documents for the sale of real property. Macklin, however, could not recollect who brought her the document or how many people saw her notarize the document. Macklin testified that before she notarized a document, she customarily requested photo identification from the signatories.
After Macklin notarized the document, Osborn left with the original. She later photocopied the document and sent it to Kemp for his records. Soon after, Osborn remarried and signed an antenuptial agreement with her husband. The antenuptial agreement stated that Osborn owned the property in fee simple without mentioning the contract with Kemp.
By the document's express terms, Kemp would pay $275 per month for twenty years. For those next twenty years, Kemp and Danburg lived together in the beach house. Kemp made $11,000 worth of improvements to the house.
Because Osborn and Kemp consummated the deal in April of 1985, the installment payments were set to end in April of 2005. April, 2005 came and passed with little moment and more payments. In July, 2005, Kemp and Danburg sent Osborn a check for past "rent" for the months of May, June, and July. Kemp claims that he realized his error in August 2005 and stopped making payments. Kemp did not inquire about the overpayments because he assumed that Osborn would put them towards his utility bills. Kemp still did not have the deed and testified that sometime in August he spoke with Osborn about the deed transfer, but they did not set a firm date for the transfer.
As of May 2006, Osborn still owned the property of record when tragedy struck. Osborn's neighbors in Wilmington found her unconscious on the floor of her home. Osborn never recovered and began to suffer from dementia. Fortunately for Osborn, her adoring niece, Sharon Gillespie, took care of her needs and soon assumed all of Osborn's affairs under a previously executed power of attorney. While going over Osborn's records, Gillespie noticed that Kemp had stopped making payments on the beach house. Osborn never told Gillespie, nor did Gillespie have any reason to know, about the holographic contract. Gillespie assumed that Kemp merely leased the beach house.
In August 2006, Gillespie traveled to Slaughter Beach to inquire about the missed rent payments. According to Gillespie, Kemp apologized profusely and agreed to pay the back rent. Gillespie claims, and Kemp does not dispute, that Kemp did not mention anything about the contract, nor did Kemp assert any legal ownership interest in the beach house. Gillespie left that day with the understanding that Kemp would resume paying rent.
From that point on Kemp and Gillespie's relationship deteriorated. Kemp did not provide any funds and in January 2007, Gillespie hired a lawyer and served Kemp with a "5-Day Notice" to obtain past due rent and utilities payments. Kemp responded by sending Gillespie a copy of the copy of the installment contract and asserted that he had a property interest in the beach house. Gillespie was taken aback because this was the first time she knew about any claim of right on the property.
On August 17, 2007, Gillespie filed suit on behalf of Osborn seeking a permanent injunction, declaratory judgment, and restitution against Kemp. Kemp answered and on August 8, 2008, Kemp amended his complaint to include a counterclaim for specific performance. The parties went to trial in the Court of Chancery on October 29, 2008. Osborn could not testify at trial because her mental faculties declined. She died on December 15, 2008. At the conclusion of the trial, the Vice Chancellor ordered specific performance and dismissed Osborn's complaint with prejudice.
The Vice Chancellor issued a memorandum opinion in which, first, he found that the photocopy of the holographic installment contract is authentic
The Vice Chancellor set the terms of specific performance as (1) Kemp must pay the Estate of Osborn $50,000 within 90 days, (2) Kemp must pay interest, compounded quarterly, accruing from April 16, 2005,
We review questions of law and interpret contracts de novo.
Specific performance for the transfer of real property is an extraordinary remedy and we will not award it lightly.
(a) Validity of the Contract
First, a valid contract exists when (1) the parties intended that the contract would bind them, (2) the terms of the contract are sufficiently definite, and (3) the parties exchange legal consideration.
The face of this contract manifests the parties' intent to bind one another contractually. Both parties signed the contract
Gillespie does argue that the contract fails for indefiniteness and, thus, the Vice Chancellor erred by granting specific performance. Gillespie contends that we may reasonably interpret the price term in ways,
The Vice Chancellor held that Kemp must pay $50,000 in order to obtain the property because (1) courts must read the contract in its entirety and give effect to all of its terms and provisions, and (2) the contract was ambiguous and applied the doctrine of contra proferentem to interpret the terms against the drafting party. The Vice Chancellor did not err when he held that he must read the contract in its entirety and give effect to all of its terms and provisions, however, the Vice Chancellor incorrectly found that the contract is ambiguous.
"Delaware adheres to the `objective' theory of contracts, i.e. a contract's construction should be that which would be understood by an objective, reasonable third party."
When the contract is clear and unambiguous, we will give effect to the
If a contract is ambiguous, we will apply the doctrine of contra proferentem against the drafting party and interpret the contract in favor of the non-drafting party.
This contract's only reasonable interpretation creates an installment contract with an option to purchase at the end of the term. The parties do not dispute the import of the $275 per month for twenty years. Under these terms, Kemp agreed to pay Osborn $275 a month for twenty years.
As for the language "purchase of property ... for $50,000", we let the plain-meaning of this term guide us. The contract includes a price term of $50,000 which clearly indicates that Kemp must remit $50,000 in additional proceeds to "purchase" the property. This prototypical condition commonly precedes the offeror's performance. Therefore, the ordinary, plain meaning of this term establishes installment payments with an option to purchase at the end of the term and obtain title.
Alternatively, if we read the $50,000 as the base price and the $16,000 as some arbitrary, unexplained interest or carry, calculated pursuant to a formula not found within the four corners of the contract, we would render the explicit $50,000 purchase term meaningless or mere surplusage. The parties ask us to interpret the contract, contrary to both the plain meaning of the document and logic, and to reach an absurd, unfounded result. It stretches the bounds of reason to conclude that Osborn, a college graduate and professional tax preparer, would sell her property for a mere pittance based on an undefined, unspecified,
We hold that the unambiguous contract states a definite price term.
(b) Ready, Willing, and Able to Perform
We will order specific performance only if a party is ready, willing, and able to perform under the terms of the agreement.
Gillespie argues that Kemp is not ready, willing, and able to perform because he did not have the necessary financing at the time of trial. The Vice Chancellor found that Kemp could put the property up as collateral to obtain the funding and he held that Kemp had 90 days to exercise the option. We find no fault in the Vice Chancellor's reasoning. Kemp may put the property up as collateral and obtain financing. We hold that 90 days is a reasonable time period when a contract does not include a "time is of the essence" clause to exercise an option to buy real property.
(c) Balance of Equities Tips in Favor of Kemp
Lastly, we will only order specific performance where the balance of equities tips in favor of specific performance.
Gillespie argues that, when looking at the "big picture," the balance of the equities tips against Kemp and specific performance. First, Gillespie introduced evidence that a one-story home in Slaughter Beach cost $106,000 in 1986 and that Kemp will only pay $116,000 for a far superior house, twenty years later.
While Gillespie has made a robust argument, the balance of the equities tips in favor of Kemp and specific performance. We recognize that real property is unique and often the law cannot adequately remedy a party's refusal to honor a real property contract.
We do not discount that beach front property has appreciated over the span of twenty years, however, the "mere increase in land values, unaccompanied by other circumstances showing inequity, is not such hardship as justifies a court of equity in denying specific performance."
Finally, and most importantly, Kemp and Danburg lived in this property for twenty years. They made it their home. Equity would not be served by ousting Kemp and Danburg from their long-time residence.
In sum, we affirm the order for specific performance because the parties validly executed a contract; the party seeking specific performance is ready, willing, and able to perform under the contract; and the balance of equities tips in favor of specific performance.
The Doctrine of Laches
Gillespie next contends that the Vice Chancellor erred when he held that the doctrine of laches did not bar Kemp's petition for specific performance. "[L]aches generally requires the establishment of three things: first, knowledge by the claimant; second, unreasonable delay in bringing the claim, and third, resulting prejudice to the defendant."
We hold that Kemp did not unreasonably delay bringing this suit. Under the terms of the agreement, Kemp completed performance on April 16, 2005. Kemp testified that he informed Osborn in August
These facts indicate a continued, albeit lethargic, series of actions taken by Kemp to assert his ownership interest in the property. Kemp twice asserted his ownership interest in the property and eventually furnished a copy of the installment contract. Therefore, Gillespie has failed to show that Kemp unreasonably delayed bringing this action.
For the aforementioned reasons we