A & E Bail Bonds, Inc. v. Sutton
| Decision Date | 06 April 2023 |
| Docket Number | C.A. N18C-06-208 SKR,N18C-08-292 SKR |
| Parties | A & E BAIL BONDS, INC., a Delaware corporation, Plaintiff, v. EDWARD SUTTON III, Defendant. A &E FINANCIAL SERVICES LLC, a Delaware limited liability company, assignee of PREFERRED FINANCIAL SERVICES, INC Plaintiff, v. EDWARD SUTTON III and SHERRI SUTTON, Defendants. |
| Court | Superior Court of Delaware |
1
A & E BAIL BONDS, INC., a Delaware corporation, Plaintiff,
v.
EDWARD SUTTON III, Defendant.
A &E FINANCIAL SERVICES LLC, a Delaware limited liability company, assignee of PREFERRED FINANCIAL SERVICES, INC Plaintiff,
v.
EDWARD SUTTON III and SHERRI SUTTON, Defendants.
C.A. Nos. N18C-06-208 SKR, N18C-08-292 SKR
Superior Court of Delaware
April 6, 2023
Submitted: March 8, 2023
Upon Consideration of Defendants' Motion for Partial Summary Judgment GRANTED.
Upon Consideration of Plaintiffs' Motion for Partial Summary Judgment DENIED.
Sean O'Kelly, Esq., O'Kelly &O'Rourke LLC, Wilmington, Delaware, and E. Calvin Harmon Jr., Esq. Attorneys for Plaintiffs.
Nicholas Kondraschow, Esq., Rhodunda Williams &Kondraschow, Wilmington, Delaware. Attorney for Defendants.
MEMORANDUM OPINION
SHELDON K. RENNIE, JUDGE.
In the consolidated matters of A&E BAIL BONDS, INC. v. EDWARD SUTTON III, and A&E FINANCIAL SERVICES LLC v. EDWARD SUTTON III and SHERRI SUTTON, the Court is presented with cross-motions for partial summary judgment. After consideration of the parties' motions, the factual record in this case, and oral argument, Defendants' Motion for Partial Summary Judgment is hereby GRANTED, while Plaintiffs' Motion is DENIED.
I. FACTUAL AND PROCEDURAL BACKGROUND
These consolidated cases arise out of purported business loan agreements between the plaintiff lending companies, A&E Financial Services, LLC ("AEF") and A&E Bail Bonds, Inc. ("AEB") (collectively, "Plaintiffs") and the defendant borrower, Edward Sutton III ("Sutton" or "Defendant"), an individual doing business as Above and Beyond Bail Bonds. Plaintiffs, AEF and AEB, were operated largely, if not exclusively, by Edwin Swan ("Swan") during the relevant times and transactions underlying Plaintiffs' claims.[1] Both entities were licensed bail agents under the insurance code.[2]
A. 2014 Agreement - Sutton and AEF, as Assignee of PFS
In 2014, Swan was the president of another lending company, Preferred Financial Services, LLC ("PFS").[3] Neither PFS nor Swan were licensed bail agents.[4]On March 10, 2014, PFS and Sutton entered into a lending agreement ("2014 Agreement") in which loan proceeds were to be used "solely to post property bails."[5]The 2014 Agreement was memorialized in two documents: a Business Loan Agreement and a Demand Promissory Note.[6] Pursuant to the 2014 Agreement, Sutton would approach Swan and request an Advance to post cash bail for a criminal defendant.[7] Swan would provide the bail money to Sutton through a bank transfer, check or cash.[8] Sutton would then go to the court, post the bail, and return a copy of the documentation to PFS for its records.[9] PFS monitored all cases and kept track of the status of the bonds.[10] Once a case was resolved, PFS would notify Sutton, and Sutton would pick up the check from the court and return it to PFS.[11] At some point, PFS assigned its rights and obligations under the 2014 Agreement to Plaintiff AEF.[12]
Swan negotiated the terms of the assignment on behalf of PFS and AEF.[13]
B. 2015 Agreement - Sutton and AEF
On September 1, 2015, AEF and Sutton signed a new agreement ("2015 Agreement").[14] The 2015 Agreement mirrors the 2014 Agreement in its language, form, substance, and conduct of the parties.[15] However, they differ because AEF was an original party to the 2015 Agreement and had a bail agent's license, and AEF was not solely owned and operated by Swan.[16]
C. AEB Agreement - Sutton and AEB
At some point prior to January 2, 2017, AEB formed an agreement with Sutton that is not memorialized by any document or writing ("AEB Agreement").[17] The AEB agreement is substantively identical to the 2015 Agreement as described in its Complaint.[18] Like AEF, AEB is at least partly owned and operated by entities other than Swan, but the entities' respective shares and duties are not established in the record.
D. Course of the Litigation
In June 2018, AEB brought suit against Sutton to recover amounts that were allegedly owed to AEB as repayment of loans and interest due, pursuant to the AEB Agreement.[19] In August 2018, AEF brought suit against Sutton and his wife, Sherri Sutton, seeking similar recovery, pursuant to the 2014 and 2015 Agreements.[20] Over the following two years, the cases were litigated separately, with each involving motions for judgments on the pleadings, motions to compel and for protective orders, motions for sanctions against opposing counsel, and multiple motions to withdraw as counsel at different junctures on both sides. On February 28, 2019, the Court issued the original trial scheduling order in AEB v. Sutton, Civil Action Number N18C-06-208, setting a 3-day trial for October 5, 2020.
On June 3, 2020, Plaintiffs moved to consolidate the two actions,[21] and on June 9, 2020, the Court granted the motion.[22] Several motions and responses were filed by both parties regarding discovery. In 2022, the parties filed a joint motion to extend the trial date. On October 25, 2022, the Court issued a new trial scheduling order, setting a 3-day trial to begin on April 24, 2023.
E. Motions Presently Before the Court
At the close of discovery, the parties filed competing motions for partial summary judgment. Defendants filed a Motion for Summary Judgment ("Defendants' Motion") that narrowly addressed only AEF and the 2014 Agreement.[23] Plaintiffs filed a Motion for Partial Summary Judgment ("Plaintiffs' Motion") and addressed all parties and all three Agreements.[24]
On March 9, 2023, at a hearing on the Motions, Defendants made clear that their motion for partial summary judgment addresses only the 2014 Agreement.[25]Accordingly, for purposes of deciding Defendants' Motion, the Court will only consider the appropriateness of summary judgment in Defendants' favor on AEF's claims arising from the 2014 Agreement. However, the Court must also address whether Plaintiff is entitled to partial summary judgment under all three Agreements as requested in Plaintiffs' Motions.
II. STANDARD OF REVIEW
Delaware Superior Court Civil Rule 56 ("Rule 56") mandates that summary judgment be granted where the moving party demonstrates that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a
matter of law."[26] "Once the movant meets its burden, then the burden shifts to the non-movant to demonstrate sufficiently an existence of one or more genuine issues of material fact."[27] Summary judgment will not be granted if there is a material fact in dispute or if it "seems desirable to inquire thoroughly into [the facts] in order to clarify the application of the law to the circumstances."[28] In considering the motion, "[a]ll facts and reasonable inferences must be considered in a light most favorable to the non-moving party."[29] However, the Court shall not "indulge in speculation and conjecture; a motion for summary judgment is decided on the record presented and not on evidence potentially possible."[30]
III. PARTIES' CONTENTIONS
Defendants seek judgment in their favor on AEF's claims arising from the 2014 Agreement. Defendants contend that the 2014 Agreement is illegal as a matter of law, which precludes Plaintiffs from seeking any remedy at law or in equity.[31]Defendants argue that the 2014 Agreement is in direct violation of 18 Del.C. § 4333(d), and against the public policy of Delaware's statutes governing the bail bond
industry.[32] Defendants rely on this Court's ruling in Burns, which was affirmed by the Delaware Supreme Court, finding virtually the same conduct involved here illegal and void as against public policy.[33]
In their Response, Plaintiffs argue that Defendants have failed to show that the 2014 Agreement is clearly illegal because Defendants rely on the Burns decision, which does not sufficiently account for the different factual circumstances of this case.[34] Plaintiffs assert that in order to find a contract unenforceable on grounds of illegality, the illegality must be "clear on its face and free from doubt."[35] They point to the assignment of the 2014 Agreement from PFS to AEF, which Plaintiffs posit, presents a distinguishing issue that was not considered by the Court in Burns.[36] The assignment is material, Plaintiffs argue, because Burns involved unlicensed lenders, PFS and Swan, whereas here, AEF was a licensed bail agent,[37] which raises a question as to whether the 2014 Agreement remains illegal post-assignment. [38]Plaintiffs cite a decision from an Illinois Court, Heller Equity Capital Corp. v. Clem Environmental Corp., 596 N.E.2d 1275, 1279 (Ill. App. 1992), for the proposition
that an illegal contract may be enforceable by an assignee if the assignment effectively cured the illegal result of the original contract. In the same vein, Plaintiffs point to the...
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