A Wilmington-based real estate development company has filed a lawsuit against White Bucks LLC and its principal owners Rick Quill, Joe Johnson and Karla Johnson, claiming the defendants agreed to sell a prominent Lewes Beach lot before pursuing a higher sale price from the city.
Apennine Acquisition Co. LLC says it was introduced to the trio by real estate broker Joseph Latina in November 2021 about developing the property at the corner of Savannah Road and Cape Henlopen Drive across from the Dairy Queen. According to the June 9 filing, the parties verbally agreed to form a joint venture, which would be signed and notarized once terms were finalized. The lawsuit says an agreement of sale was prepared in December 2021, with a purchase price of $1.8 million. On Feb. 2, the lawsuit says, Joe Johnson initialed, signed and transferred the terms to Apennine Acquisition from a fax machine at Blue Water House, a bed and breakfast owned by Quill.
Apennine Acquisition alleges it committed significant resources, including adhering to Quill’s specific request to approve the site engineer and provide detailed comments on developmental plans. Believed to be part of a joint business venture, Apennine Acquisition also prepared financing pro formas, conducted a marketing analysis, allocated cash, negotiated with banks, and performed financing appraisals for the project’s development costs. Apennine Acquisition claims it has been damaged by a loss of substantial income that it came to reasonably expect from the joint venture project.
Final terms of the joint venture agreement were allegedly verbally agreed upon when Quill met with the developers Feb. 16 and shook hands, the lawsuit says. The Johnsons’ stake in White Bucks was to be bought out as part of the deal, the lawsuit says. A week later, Apennine Acquisition emailed Quill and Latina, detailing the Johnsons’ cash out and reorganization of the new business partnership. White Bucks would pay the Johnsons $400,000 for their 50% interest, giving Quill 100% of the LLC. Then in exchange for $200,000 from Apennine Acquisition, Quill would assign 10% of the company to Latina and 45% to to Apennine, creating an ownership split of 45%/45%/10%. The White Bucks operating agreement would be amended to give Apennine Acquisition management control, except for actions requiring unanimous consent. While Quill would still be invested in the property, he said he believes these terms were not part of the initial verbal agreement.
Quill said his agreement with the developers was always a verbal one. In the lawsuit, Apennine Acquisition confirms the joint venture agreement was never put in writing, but cites precedent in Delaware for honoring verbal agreements and outlines the criteria it must satisfy to prove one took place. Supporting evidence shows the fax Joe Johnson sent from Blue Water House established a closing date no later than May 15. The real estate developers are seeking a judgment against White Bucks along with attorney fees and other relief the court deems appropriate.
In addition to breach of verbal contract, Apennine Acquisition is also seeking damages from White Bucks for breach of implied covenant of good faith and fair dealing, promissory estoppel, equitable estoppel, interference with prospective economic advantage, unjust enrichment, and constructive trust. Representing the plaintiff are William R. Firth III and Emily A. Letcher of the law firm Cohen Seglias Pallas Greenhall & Furman, P.C.
The lawsuit claims Apennine was alerted May 25 to White Bucks’ intentions to sell the property to the City of Lewes. On May 23, Lewes Mayor and City Council scheduled a public hearing to be held June 6 regarding the city’s consideration of purchasing the property.
During the public comment period at council’s July 11 meeting, Quill, for the second month in a row, aired his grievances with elected officials. He said he was not only disgusted, but felt enormous disdain for the process that led to the city declining to pay $2.5 million for the parcel. While the city passed at the opportunity to own the parcel, it approved Quill’s site plans for 12 carriage houses on the property, as well as 12 others on a nearby parcel also owned by White Bucks LLC.
Quill asked City Solicitor Glenn Mandalas if a referendum had been required for the city to purchase the property. Mandalas replied that a referendum was not required. According to Mandalas, the city would be borrowing money under Chapter 32 of city code, which does not require a referendum, but does require the city to pay off the loan within 10 fiscal years. A referendum is required under Chapter 20, which would pertain to larger quantities of money.
Pointing out the positive comments received during the public hearing, and believing the purchase never had the votes to be approved from the beginning, Quill said officials wasted people’s time. As he discussed the comprehensive plan, Quill referenced incentivizing commercial property owners on the beach side of town. He said he feels no one from the city is reaching out to those property owners.
Councilwoman Carolyn Jones asked Quill for the purpose of his comments, to which he replied that he was angry. Jones cited financial responsibility during the June 13 meeting as her reason for voting to deny the purchase. Quill and his associates had set the price at $2.5 million for the city despite verbally agreeing to sell the property for $1.8 million to Apennine Acquisition and an appraisal finding the value to be $2.1 million. Quill said he was not ripping off the city by asking for $2.5 million, and in fact his initial price was $3 million. The Blue Water House owner said he believes he will be able to make more profit by developing the property. Lewes officials believed it was not prudent to take on such a purchase and cited other financial obligations when voting against the purchase.
Quill and the Johnsons filed a motion to dismiss the Apennine lawsuit July 15, believing the Court of Chancery does not have jurisdiction over the matter and that the plaintiff failed to state a claim for which relief can be granted. Richard E. Berl Jr. is representing the defendants, but did not file a brief to support their dismissal motion. Quill said he believes the lawsuit has no merit and will not be working with the Wilmington-based development group on the property in the future.