Lyon v. DBHI, LLC, C.A. No. U607-12-063 (Del.Gen.Sess. 1/27/2010), C.A. No. U607-12-063.

• Decision Date: 27 January 2010
• Docket Number: C.A. No. U607-12-063.
• Parties: ROBERT LYONS Defendant Below, Appellant, v. DBHI, LLC, KURT T. BRYSON and RHONDA BRYSON Defendants Below, Appellees, v. NUTTLE LUMBER COMPANY Plaintiff Below, Appellee.
• Court: Court of General Sessions of Delaware

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ROBERT LYONS Defendant Below, Appellant, v. DBHI, LLC, KURT T. BRYSON and RHONDA BRYSON Defendants Below, Appellees, v. NUTTLE LUMBER COMPANY Plaintiff Below, Appellee.

C.A. No. U607-12-063.

Court of Common Pleas of Delaware, Sussex County.

Submitted: January 12, 2010.

Decided: January 27, 2010.

James F. Waehler, Esquire, Attorney for Plaintiff.

Donald L. Logan, Esquire, Attorney for Defendant Robert Lyons.

Mark Sisk, Esquire, Attorney for Defendants Kurt T. & Rhonda Bryson.

DBHI, LLC, unrepresented.

DECISION ON MOTION FOR REARGUMENT

Kenneth S. Clark Jr., Judge.

At the end of the trial held in this matter on December 16, 2009, the Court ruled from the bench, finding in favor of the Plaintiff against defendants DBHI, LLC and Kurt and Rhonda Bryson, but in favor of co-defendant Robert Lyons. Plaintiff subsequently filed a motion for reargument, asserting that the Court erred (1) in "sua sponte" raising the issue of consideration at the end of evidence; and (2) in finding for defendant on that issue since it is an affirmative defense and was not raised by defendant in his responsive pleading, as required by this Court's Civil Rule 8 (c).

FACTS

The Court found the following facts from the evidence: Plaintiff, a building supplies company, extended credit to DBHI, LLC, a construction company, for the purchase of materials. It did so based upon, and after receipt of, a credit application filled out by DBHI on April 22, 2005. The Brysons, the principals of DBHI, signed personal guaranties contained on the DBHI credit application, agreeing to be personally liable for the debts of DBHI. Plaintiff performed credit checks on the signators and extended credit to DBHI for materials purchases in consideration of the application and guaranties.

In or about July, 2005, defendants the Brysons agreed to transfer ownership of DBHI to their employee Lyons. However, it appears from the evidence that Lyons never actually became vested in any ownership or equity of DBHI. Nonetheless, without any demand or other requirement made known by Plaintiff to DBHI or Lyons, on July 25, 2005 Lyons signed a copy of the original April, 2005 credit application on a blank guaranty line, which was faxed to Plaintiff. Lyons continued as an employee of DBHI until April, 2006. One or both of the Brysons continued to operate DBHI and do business with Plaintiff for some time thereafter. When DBHI failed to make payment on its account, Plaintiff brought this action against DBHI, and against the Brysons and Lyons as personal guarantors, seeking payment for purchases made after April, 2006.

DISCUSSION

The gravamen of Nuttle's claim against Lyons is that he signed the already-executed and approved credit application agreeing to be personally liable for the payment of charges to the DBHI account. Accordingly, Nuttle claims that Lyons breached that agreement and should be held liable for the remaining account balance, plus any financing charges that accumulated.

In order to prevail upon a breach of contract claim against Lyons, Nuttle was required at trial to establish the existence of a contract, the breach of an obligation imposed by that contract, and resulting damages to Nuttle.¹ To prove the existence of a contract, Nuttle had to establish all of the necessary elements of a contract, including good and valuable consideration, by a preponderance of the evidence.² Sufficient consideration is a prima facie element of Nuttle's claim against Mr. Lyons. Nuttle therefore presumptively knew it had the burden of proof by a preponderance of evidence that the contract sued upon contained good and valuable consideration.

Based on the evidence and testimony presented at trial, the Court found that Lyons was not liable for damages because there was a lack of consideration to establish an enforceable contract. There was a lack of consideration between the parties because there was no proven additional consideration extended by Nuttle as a bargained-for exchange for the additional guaranty of Mr. Lyons. Moreover, the Court held that Lyons' guaranty signature was gratuitous in nature because Nuttle did not request to have the signature added, or otherwise inform the defendants that Lyons' personal guaranty was required to maintain the already-extended DBHI line of credit. There was no proven increase in the credit line, nor did plaintiff prove that it extended further credit to DBHI in consideration of Lyons' personal guaranty. Thus, the Court found there was no consideration whatsoever for Lyons' gratuitous promise.

Although the Court may have used the term "failure of consideration" when rendering its decision from the bench, it is clear from the Court's description of the circumstances surrounding the contract that it ruled there was a "lack of consideration" given as to Mr. Lyons.

There is a distinction between the terms "failure of consideration" and "lack of consideration."³ "Failure of consideration occurs when the bargained-for consideration is not rendered by one of the parties, while lack of consideration refers...