Justia.com Opinion Summary: Plaintiffs, David and Barbara Smith, asserted various claims arising out of the construction of their home against Defendants, Donald L. Mattia, Inc. (DLM), Donald Mattia, and Barbara Joseph (Barbara). The Chancery Court (1) granted Defendants' motion for summary judgment on (i) Plaintiffs' breach of contract claim and (ii) Plaintiffs' civil conspiracy claim; (2) denied Defendant's motion for summary judgment on (i) Plaintiffs' claim for misappropriation of Plaintiffs' backfill and money paid to DLM that was not applied to their project and (ii) Plaintiffs' claim that Defendants fraudulently induced Plaintiffs to purchase excess lumber and misappropriated $8,836 in connection with the purchase of excess lumber; (2) granted Plaintiffs' motion for summary judgment, as Defendants did not articulate a viable cause of action in their counterclaim; and (3) denied Barbara's motion for Chan. Ct. R. 11 sanctions where there was no evidence that Plaintiffs' attorney did not have a good faith belief in the legitimacy of the claims asserted against Barbara.
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EFiled: Jan 13 2012 2:22PM EST
Transaction ID 41883429
Case No. 4498-VCN
COURT OF CHANCERY
OF THE
STATE OF DELAWARE
JOHN W. NOBLE
VICE CHANCELLOR
417 SOUTH STATE STREET
DOVER, DELAWARE 19901
TELEPHONE: (302) 739-4397
FACSIMILE: (302) 739-6179
January 13, 2012
Kathryn J. Garrison, Esquire
Schmittinger and Rodriguez, P.A.
414 South State Street
Dover, DE 19901
Re:
Dean A. Campbell, Esquire
The Law Office of Dean A. Campbell, LLC
401 North Bedford Street
Georgetown, DE 19947-0568
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
Date Submitted: November 21, 2011
Dear Counsel:
assert claims arising out of the construction of their home against Donald L.
,
1
The Defendants have moved for summary judgment on those claims. The
1
Nomenclature has been adopted from an earlier decision in this case, Smith v. Mattia
Mattia I
Ch. Feb. 1, 2010). First names were originally used
for simplicity. Now, they are used for consistency. Their use is not meant as a sign of
disrespect.
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 2
Defendants have also asserted a counterclaim against the Plaintiffs, and
Barbara has moved for Rule 11 sanctions. The Plaintiffs have moved for
unterclaim, and oppose the
Rule
udgment, and
I. CONTENTIONS2
The Plaintiffs have clarified that if this case proceeds to trial, they will
assert: (1) a breach of contract claim against DLM and Donald, as trustee for
DLM;3 (2) a claim against DLM and Donald, individually and as trustee for
DLM, for misappropriation
DLM that was not applied to their project; (3) a claim against the Defendants
for fraudulent inducement and the misappropriation of $8,836.87 used to
2
The relevant background facts of this case were laid out in Mattia I. The Court
presumes familiarity with those facts.
3
er was declared forfeit by the State of Maryland. Under
directors become trustees charged with winding up the affairs of the corporation. MD.
CODE ANN., Corporations and Associations, § 3-515 (2011); Hill Constr. v. Sunrise
Beach, LLC, 952 A.2d 357, 363 (Md. Ct. Spec. App. 2008).
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 3
procure excess lumber that was used for purposes other than their project;
(4) a claim of civil conspiracy against Donald and Barbara in connection
with the purchase of excess lumber; and (5) that to the extent damages are
awarded against DLM or Donald, as
should be pierced and the Plaintiffs should be able to recover from Donald.4
The Defendants have moved for summary judgment on the first four
claims.5 The Defendants argue that any claims against DLM are barred by
the construction contract between
contract must be brought within one year from when the cause of action
accrued. The Defendants also argue that a
barred by the statute of limitations. Moreover, Barbara contends that all
claims against her fail as a matter of law because the Plaintiffs have failed to
produce any evidence supporting those claims.
4
-16.
The Defendants ha
pierced involves genuine issues of material fact. See
5
since that inquiry admittedly contains genuine issue[s]
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 4
The Plaintiffs respond that DLM should be estopped from asserting
the Construction Contrac
-year limitations period and that their claims
are not barred by the statute of limitations.
Moreover, with regard to
Barbara, the Plaintiffs point to evidence that she was involved in the
purchase of excess lumber.
In addition to moving for summary judgment, the Defendants have
asserted a counterclaim against the Plaintiffs, arguing that this action was
of harassing Donald . . . and Barbara . . . and
6
int
The Plaintiffs have moved for summary
judgment on that counterclaim, arguing that it does not state a viable cause
of action.
The last motion before the C
sanctions against the Plaintiffs. Barbara argues that the claims asserted
against her lack any evidentiary support, and therefore, that the Plaintiffs
motion.
6
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 5
II. ANALYSIS
mmary Judgment
A.
Summary judgment is granted if the pleadings, depositions, answers
to interrogatories and admissions on file, together with the affidavits, show
that there is no genuine issue as to any material fact and that the moving
party is entitled t
7
moving party
burden shifts to the
defending party to dispute the facts by affidavit or proof of similar
8
1. DLM and Donald, as Trustee for DLM
The Plaintiffs have conceded that their remaining claims against DLM
are for: (1) breach of contract; (2) the misappropriation of backfill; (3) the
misappropriation of $20,123.93 paid to DLM; (4) fraudulent inducement in
7
ship v. Draper, 2007 WL 2744609, at *8 (Del. Ch. Sept. 14, 2007)
(citing Ct. Ch. R. 56(c)) (other citation omitted).
8
ClubCorp, Inc. v. Pinehurst, LLC, 2011 WL 5554944, at *9 (Del. Ch. Nov. 15, 2011)
(quoting Bank of N.Y. Mellon v. Realogy Corp., 979 A.2d 1113, 1119 (Del. Ch. 2008)).
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 6
connection with the purchase of excess lumber; and (5) the misappropriation
of $8,836.87 used to purchase excess lumber.9
With regard to the breach of contract claims, the Construction
he . . . [Construction] Contract by the Owner
against the Contractor must be commenced within one (1) year after the
10
action has accrue
-established in
vision to the
contrary, a statute of limitations does not proscribe the imposition of a
11
The Plaintiffs have not pointed to
any express statutory provision requiring that they have three years to file
their breach of contract claims. Thus, the
-year
limitations period is presumably a valid and enforceable provision. The
9
-16.
conduct have been asserted against DLM; other claims arising out of that conduct have
simplicity, the Court
10
The Construction C
Brief.
11
Mattia I, 2010 WL 412030, at *3 (quoting Rumsey Elec. Co. v. Univ. of Del., 358 A.2d
712, 714 (Del. 1976)) (other citation omitted).
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 7
Plaintiffs do not contend that their contract claims accrued within the year
before they asserted them.12 Therefore, th
for breach of contract fail as a matter of law.
With regard to the backfill claim, the one argument that the
Defendants make in support of their motion for summary judgment on that
claim is that it was not brought within the three year period prescribed by the
statute of limitations that would apply by analogy.13
12
Specifically, the
ril 9, 2009, and the Plaintiffs argue
The
he benefit of any contractual limitations
-
See
applicable at law when it would be inequitable to do so. See Yaw v. Talley, 1994 WL
relief the statute of limitations is not inflexibly applied. . . . [F]iduciaries who benefit
personally from their wrongdoing, especially as a result of fraudulent self-dealing, will
why it would be inequitable to adhere to the contractual limitations period here. The
Plaintiffs d
after
they learned of those actions.
13
See Wittington v. Dragon Group, L.L.C., 991 A.2d 1, 9 (Del. 2009) (
limitations period at law does not automatically bar an action in equity because actions in
equity are time-barred only by the equitable doctrine of laches. Where the plaintiff seeks
equitable relief, however, the Court of Chancery applies the statute of limitations by
itted).
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 8
more than three years before this action was filed.14 The Plaintiffs admit that
the backfill was taken more than three years before this action was filed, but
they contend that they did not learn that the backfill would not be replaced
until later. The Plaintiffs further contend that they filed this action within
the three year period after they learned that their backfill would not be
replaced.15 The Plaintiffs have submitted a letter to the Court from Donald
to Mr. Smith dated June 7, 2006, which suggests that Donald was planning
16
Thus, there are material fact issues as to
whether the claim that Donald misappropriated
be deemed to have been timely filed.
The Plaintiffs have also brought a claim against DLM for the
misappropriation of $23,123.93 paid to DLM. The Defendants have moved
for summary judgment on that claim, arguing that it was not brought within
the three year period prescribed by the statute of limitations that would apply
by analogy. The Plaintiffs, however, contend that the misappropriation did
14
15
Pls Answering Br. at 21.
16
See Appendix to Pls Answering Br. at A-99.
at 12-13.
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 9
not occur until DLM abandoned the Construction Contract on April 10,
2006, and therefore, that their original complaint filed on April 9, 2009 was
timely. The Defendants can point to some evidence, which suggests that any
misappropriation occurred before April 9, 2006, but that merely shows that
there is an issue of material fact.
The Plaintiffs bring two claims against DLM arising out of the alleged
purchase of excess lumber. The first claim is for fraudulent inducement in
connection with the purchase of excess lumber. The second claim is for
misappropriation of $8,836.87 used to purchase excess lumber. This Court
has already determined that
claim for fraudulent inducement
was not brought within the period prescribed by the statute of limitations
that would apply by analogy.17 Similarly, a claim for misappropriation in
connection with the purchase of excess lumber would seem to have arisen at
the time the lumber was purchased, which was before April 9, 2006. The
Court, however, has
17
Mattia I, 2010 WL 412030, at *5.
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 10
18
For the fraudulent
concealment exception to apply,
ted the plaintiff from
gaining knowledge of material facts or led the plaintiff away from the
19
In the First Amended Complaint
, the
Plaintiffs allege that the Defendants represented that bank draws would be
used for the c
18
Mattia I, 2010 WL 412030, at *5. The Plaintiffs also argue that their lumber claims
-22.
a plaintiff seeks to excuse a late filing by invoking a tolling exception to the statute of
limitations, the plaintiff bears the burden to plead facts demonstrating the applicability of
Certainteed Corp. v. Celotex Corp., 2005 WL 217032, at *6 (Del. Ch.
Jan. 24, 2005).
claimant is blamelessly ignorant of the wrongful act and
Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312,
319 (Del. 2004) (quoting Coleman v. PricewaterhouseCoopers, LLC, 854 A.2d 838, 842
(Del. 2004)). It is not clear that the Plaintiffs pled facts demonstrating the applicability of
the time of discovery rule in the Complaint. Assuming they did, the rule is inapplicable
here.
April 10, 2006, that . . . [Plaintiff
David Smith tallied] the lumber invoices and realize[d] that . . . [lumber] had been overt
simply waits a while.
Mattia I, 2010 WL 412030, at *5 (quoting
Litig., 919 A.2d 563, 585 (Del. Ch. 2007)).
19
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 11
actually intended for that purpose, and that the Plaintiffs relied on those
representations.20
As stated above, the burden on summary judgment is initially on the
moving party. The one argument that the Defendants make in favor of their
motion for summary judgment on the lumber claims
21
Assuming that is true, it might be difficult for the
that they relied on the De
accurate. Therefore, the Defendants are not entitled to summary judgment
on the claims that DLM fraudulently induced the Plaintiffs to purchase
20
21
Compl. ¶¶ 44-46.
in Supp. at 13.
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 12
excess lumber and misappropriated $8,836.87 in connection with the
purchase of excess lumber.
2. Donald in his Individual Capacity
Donald in his individual
capacity are for: (1) the misappropriation
misappropriation of $20,123.93 paid to DLM; (3) the misappropriation of
$8,836.87 used to purchase excess lumber; (4) fraudulent inducement in
connection with the purchase of excess lumber; and (5) conspiring with
Barbara to purchase excess lumber. The Court will address the first four
claims in this subsection, and will address the conspiracy claim in the next
subsection.
ainst Donald is for the conversion of
backfill. Again, the one argument that the Defendants make in support of
their motion for summary judgment on the backfill claim is that it was not
brought within the three year period prescribed by the statute of limitations
that would apply by analogy. As discussed in the subsection above, that
argument fails because the Plaintiffs have raised a material fact issue as to
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 13
whether the limitations period applicable to this claim should be equitably
tolled.
With regard to the claim against Donald for the misappropriation of
$20,123.93
October 2007, and Residential Construction [a company now operated by
Donald] was formed on June 5, 2006. There was therefore ample time for
the Defendants to transfer the funds from DLM to either themselves or
22
The
Defendants contest that that is what occurred, but all they do is raise a
material fact issue.
With regard to the claims arising out of the purchase of excess
lumber, those claims survive for the reasons mentioned in the subsection
above: namely, that the only evidence the Defendants point to in favor of
their motion for summary judgment on these issues is a contested
interpretation of a deposition that was not provided to the Court. Therefore,
the Defendants are not entitled to summary judgment on the claim that
22
Mattia I, 2010 WL 412030, at *5.
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 14
Donald fraudulently induced the Plaintiffs to purchase excess lumber and
misappropriated $8,836.87 by purchasing excess lumber.
3. Barbara
The Plaintiffs remaining claims against Barbara are for: (1) the
misappropriation
of
$8,836.87
used
to
purchase
excess
lumber;
(2) fraudulent inducement in connection with the purchase of excess lumber;
and (3) conspiring with Donald to purchase excess lumber. The Defendants
argue that the Plaintiffs have failed to proffer any evidence against Barbara.
admits that the Plaintiffs have no evidence against Barbara. Although, as
Plaintiffs do not dispute that Mr. Smith made the statements that the
Defendants cite. The Plaintiffs, however, argue that Barbar
agent for DLM and participated in the activity that is the basis of the . . .
[misappropriation]
23
In support of that
argument, the Plaintiffs point to the fact that Barbara sometimes ordered
23
Br. at 29.
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 15
lumber for the Smiths home and sometimes sought payment for that
lumber.24 Such ministerial acts do not raise a material fact issue as to
whether Barbara misappropriated money or committed fraud. Therefore, the
misappropriation fail as a
matter of law.
or more persons; (2) an unlawful act done in furtherance of the conspiracy;
25
Again, the ministerial acts that Barbara engaged
in are insufficient to raise a material fact issue as to whether she was
involved in a conspiracy. Because there is no issue of material fact that
Barbara was not involved in misappropriating money or committing fraud,
there is no one for Donald to have conspired with.
Therefore, the
claim.
24
Id. at 28.
N.K.S. Distributors, Inc. v. Tigani, 2010 WL 2178520, at *5 (Del. Ch. May 28, 2010)
(quoting AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 437 n.8
(Del. 2005)) (other citations omitted).
25
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 16
B.
The standard this Court uses in determining whether to grant summary
judgment was set forth above.26 The Plaintiffs have moved for summary
cause of action the Defendants are asserting in their counterclaim.27
Nowhere do the Defendants articulate a specific cause of action. Moreover,
the Defendants have provided no citations
no statutes, no cases, nothing
for the Court to look to, to help it determine what the Defendants are
arguing. No viable cause of action appears on the face of the counterclaim,
and therefore, it fails as a matter of law.
C.
Motion for Rule 11 Sanctions
Barbara argues that the Plaintiffs violated Court of Chancery Rule 11
by asserting claims against her. Rule 11(b) provides, in relevant part:
By presenting to the Court (whether by signing, filing,
submitting, or later advocating) a pleading, written motion, or
other paper, an attorney or unrepresented party is certifying that
to the best of the person's knowledge, information, and belief,
26
27
See supra notes 7-8 and accompanying text.
At oral argument, counsel for the Defendants did not seem to know either.
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 17
formed after an inquiry reasonable under the circumstances:
(1) it is not being presented for any improper purpose . . .
(2) the claims, defenses, and other legal contentions therein are
warranted by existing law . . . [, and] (3) the allegations and
other factual contentions have evidentiary support . . . .
Although Barbara mentions all three of the above requirements under
Rule 11, her only argument seems to be that the Plaintiffs violated
Rule 11(b)(3) because Mr. Smith admitted in his deposition that the
Plaintiffs have no evidence against her.28
admission, Plaintiffs
able to point to some evidence
implicating Barbara.29 That evidence, however, is admittedly weak, and was
found insufficient to withstand summary judgment
sanctions should be reserved for those instances where the Court is
reasonably confident that an attorney does not have an objective good faith
30
Although the evidence
against Barbara is scant, the Court is not persuaded
28
Again,
dispute that Mr. Smith made the statements that the Defendants cite.
29
See supra note 24
ering Br. at A-181,
334, 336-47.
30
Xen Investors, LLC v. Xentex Techs., Inc., 2003 WL 25575770, at *3 (Del. Ch. Dec. 8,
2003).
Smith v. Donald L. Mattia, Inc.
C.A. No. 4498-VCN
January 13, 2012
Page 18
attorney did not have a good faith belief in the legitimacy of the claims
is denied.
III. CONCLUSION
For
judgment is granted in part and denied in part;
summary judgment is granted;
denied. An implementing order will be entered.
Very truly yours,
/s/ John W. Noble
JWN/cap
cc: Register in Chancery-K
or
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