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The Delaware Court of Chancery has dismissed a lawsuit begun 13 years ago by a real estate developer against New Castle County over sewer construction in a residential neighborhood after the parties filed competing motions to abandon or rescind a settlement reached seven years ago but never entered into the court record.

In dismissing the case with prejudice, Delaware Court of Chancery Vice Chancellor Sam Glasscock III concluded the parties were bound by a 2007 settlement agreement that the plaintiff contended was rescinded in 2010 by oral contract. He held that any litigation over the settlement must be initiated as a new lawsuit.

“The plaintiff, having effectively settled this matter in 2007, is not entitled to its revivification on the grounds that market conditions now make that settlement unpalatable, or that the defendant was willing to negotiate, unsuccessfully as it turns out, to set aside the 2007 settlement agreement and replace it with another proposed plan of development,” said Glasscock in Carter Farm v. New Castle County. “The parties are bound by their contract settling this matter in 2007. Of course, if either party believes the other has breached its obligations under the 2007 settlement agreement, it is free to pursue a breach of contract claim in a separate action as it finds appropriate.”

Carter Farm LLC, a real estate developer, filed a 2005 lawsuit seeking to enjoin New Castle County from deciding that the developer’s 2001 plan to build 400 single-family residents in a southwestern portion of the county had expired. Under the 2001 plan, the residential community’s proposed sewer system would be connected to the county system roughly five miles outside the development. New Castle County decided in 2005 to scale back its plans for the county sewer system, rendering Carter Farm’s proposed sewer line untenable, according to court documents.

The case meandered through the state court system and both parties agreed to a settlement in 2007. Under the settlement, New Castle County would construct a new sewer system and Carter Farm would pay the government $24 million to offset costs. However, neither party ever executed the final settlement documents and Carter Farm never executed a stipulation of dismissal, according to court documents.

The parties operated under the 2007 agreement through 2010, according to the court’s opinion. At that time, New Castle County alleged that Carter Farm determined the settlement agreement’s terms were no longer economically feasible. Both parties attempted to negotiate a new settlement for four years, but an agreement never materialized.

Carter Farm alleged that on Aug. 11, 2010, the parties orally agreed to rescind the 2007 settlement and reached a new oral contract Aug. 10, 2012.

In 2013, county administration changed and New Castle County informed the developer that it was unaware of the new oral contract and viewed the parties as being bound by the 2007 agreement. In February of this year, the county filed a Chancery Court motion to enforce the 2007 settlement agreement. Carter Farm countered with a motion to enforce the alleged 2012 oral settlement and asked the court to declare that the 2007 settlement was abandoned.

New Castle County, referred to as the defendant in this case because it is the party sued in the 2005 litigation, asserted claims based on promissory estoppel and alleged a breach of the covenant of good faith and fair dealing.

Glasscock held that Carter Farm did not demonstrate the existence of a genuine issue of material fact proving the 2007 settlement agreement was no longer enforceable.

“Because counsel would not proffer any evidence—including his own testimony—that would call into question the contemporaneous positions of the parties just days after entering the alleged oral agreement to rescind the 2007 settlement agreement, I find that no genuine issue of material fact exists as to whether the parties entered an agreement to rescind on that date,” the vice chancellor said. “Rather, I find that the defendant had demonstrated that the parties did not enter into such agreement on Aug. 11, 2010.”

Although the 2007 settlement was never entered into the court record, Glasscock concluded it constituted a binding contract.

“The parties to the 2007 settlement agreement contractually agreed to extinguish their respective rights to litigate the underlying action in exchange for the rights and obligations set forth in that agreement,” he said. “In other words, giving up the right to adjudication of Counts I, II and III was part of the consideration for the settlement agreement. As a result, because I have found that the parties are bound by the 2007 settlement agreement, I also find that the plaintiff is not entitled to relief it seeks under Counts I, II and III.”

Samuel J. Frabizzio represented Carter Farm.

Bernard Pepukayi and Mary Jacobson of the New Castle County Office of Law represented the county. 

Jeff Mordock can be contacted at 215-557-2485 or jmordock@alm.com. Follow him on Twitter @JeffMordockTLI.