Date Submitted:
Date Decided:
May 18, 2001
July 30, 2001
Kimberly L. Gattuso, Esquire
Kelly Dunn Gelof, Esquire
Saul, Ewing, LLP
Tunnel & Raysor, P.A.
222 Delaware Avenue, Suite 1200
30 East Pine Street
P.O. Box 1266
P.O. Box 151
Wilmington, DE 19899
Georgetown, DE 19947
RE: Alban Tractor Co., Inc. v. Land Preparation Specialists, Inc.,
C.A. No. 99C-04-004
Dear Counsel:
This case presents a motion to amend a complaint.
Plaintiff, Alban Tractor
(“Plaintiff”), seeks to recover amounts allegedly owed for construction equipment supplied
under a lease agreement (“Agreement”). Plaintiff requests leave to amend its complaint to
include two additional defendants with additional counts. For the following reasons, the
Plaintiff’s Motion to Amend is granted.
Facts and Procedural History
On April 6, 1999, Plaintiff filed a complaint against Land Preparation Specialists, Inc.
(“LPS”). The complaint contained breach of contract and quantum meruit claims against
LPS. Plaintiff seeks damages allegedly suffered from LPS’s failure to pay for construction
equipment supplied under the Agreement dated May 23, 1996. LPS answered Plaintiff’s
complaint, and the matter was arbitrated on June 13, 2000. Defendant timely appealed the
Alban Tractor Co., Inc. v. Land Preparation Specialists, Inc.,
C.A. No. 99C-04-004
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decision of the arbitrator.
In preparation for trial, Plaintiff conducted discovery. Through the discovery process
last March, Plaintiff asserts that it received further information regarding the status,
ownership and operation of LPS. Significantly, Plaintiff learned that Legg was the owner,
operator, and sole shareholder of another corporation, Land Prep, Inc. (“Land Prep”). Land
Prep was incorporated on November 6, 1995, and is engaged in the business of preparing
land for construction, just as LPS was. Given this new information, Plaintiff sought to
amend its complaint to include supplemental claims against two additional defendants: Land
Prep, and an individual, John Legg (“Legg”). Legg is LPS’s registered agent and the sole
shareholder and owner of both LPS and Land Prep. Defendant opposes any amendment.
Discussion
Plaintiff’s proposed amendment includes claims for alter ego liability and quantum
meruit against both Land Prep and Legg. Whether a proposed amendment satisfies the
requirements of Super. Ct. Civ. R. 15 (“Rule 15") is within the sound discretion of the trial
court. Annone v. Kawasaki Motor Corp., Del. Supr., 316 A.2d 209. In the absence of
prejudice to another party, the trial court is required to exercise its discretion in favor of
granting leave to amend. Ikeda v. Mollock, Del. Supr., 603 A.2d 785 (1991). However,
“notwithstanding the general liberal policy toward amendments imparted by Rule 15, a
motion to add or substitute a party after the statute of limitations has run must be denied if
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C.A. No. 99C-04-004
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it fails to satisfy the requirements of Rule 15(c).” Mullen v. Alarmguard, Del. Supr., 625
A.2d 258, 263 (1993). Rule 15 reads in relevant part as follows:
Amended and supplemental pleadings.
(a) Amendments. A party may amend the party’s pleading once
as a matter of course at any time before a responsive pleading is served
or, if the pleading is one to which no responsive pleading is permitted
and the action has not been placed upon the trial calendar, the party
may so amend it at any time within 20 days after it is served.
Otherwise, a party may amend the party’s pleading only by leave of
court or by written consent of the adverse party; and leave shall be
freely given when justice so requires....
(c) Relation back of amendments. An amendment of a pleading
relates back to the date of the original pleading when
(1) relation back is permitted by the law that provides the statute
of limitations applicable to the action, or
(2) the claim or defense asserted in the amended pleading arose out
of the conduct, transaction, or occurrence set forth or attempted to be set
forth in the original pleading, or
(3) the amendment changes the party or the naming of the party
against whom a claim is asserted if the foregoing provision (2) is satisfied
and, within the period provided by statute or these Rules for service of the
summons and complaint, the party to be brought in by amendment (A) has
received such notice of the institution of the action that the party will not
be prejudiced in maintaining a defense on the merits, and (B) knew or
should have known that, but for a mistake concerning the identity of the
proper party, the action would have been brought against the party....
In the case sub judice, it is clear that unless Plaintiff’s quantum meruit claims qualify
for “relation back” under Rule 15(c), they will be barred by the statute of limitations. The
statute of limitations for a quantum meruit claim is three years from the accrual of the cause
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C.A. No. 99C-04-004
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of action. 10 Del. C. §8106.1 Plaintiff alleges that it entered into the Agreement with
Defendant on May 23, 1996. The Agreement requires Defendant to provide payment to
Plaintiff by June 23, 1996. Although an exact date is not alleged, it appears that any claims
for quantum meruit relief accrued by June 23, 1996, when the date for scheduled payment
allegedly passed without the receipt of such payment. Therefore, Plaintiff had, at most, until
June 23, 1999, to file quantum meruit claims against Land Prep and Legg without violating
of the statute of limitations. However, Plaintiff did not attempt to include either Land Prep
or Legg as a party to its suit until April 6, 2001.
Three conditions must be satisfied for an amendment adding a party after the running
of the statute of limitations to relate back to the filing date of the action:
(1) The claim or defense asserted in the amended pleading must arise out of the same
conduct, transaction or occurrence set forth or attempted to be set forth in the original
pleading;
1
10 Del. C. §8106 reads as follows:
Actions subject to 3-year limitation.
...[N]o action based on a promise...shall be brought after the expiration of 3 years from
the accruing of the cause of such action; subject, however, to the provisions of §§ 8108-8110,
8119 and 8127 of this title.
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C.A. No. 99C-04-004
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(2) Within the prescribed limitations period, the party to be brought in by the
amendment must receive such notice of the commencement of the action that the party will
not be prejudiced in maintaining a defense on the merits; and
(3) Within the prescribed limitations period, the party to be brought in by the
amendment must or should understand that but for a mistake concerning the identity of the
party the suit would have been brought against the party. Mullen v. Alarmguard of
Delmarva, Inc., 625 A.2d at 264.
The first two requirements of the above-stated test are easily satisfied. The claims
that Plaintiff seeks to add derive from the same alleged breach of the Agreement that was
charged in the original complaint. The alter ego theory of liability is part of the mix as well,
and the Superior Court has been reversed where a similar amendment was refused. See
Walsh v. Hotel Corporation of America, Del. Supr., 231 A.2d 458 (1967). Furthermore, it
is undisputed that on April 12, 1999, notice of the action was served upon Legg.
Consequently, Legg had actual, personal knowledge of the commencement of the action and,
as the registered agent, owner, and sole shareholder for Land Prep, such knowledge is
imputed to Land Prep. The sole issue to be determined by the Court is whether the parties
sought to be added knew or should have known that, but for Plaintiff’s mistake, they would
have been parties to the original suit.
Plaintiff alleges that Legg and Land Prep should have known that they were exposed
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to suit because they share an “identity of interest” with LPS, and cites Hess v. Carmine, Del.
Super., 396 A.2d 173 (1978) (“Hess”), as authority for this proposition. In Hess, the Court
held that, “[c]orporations with substantially identical officers, shareholders, or directors, and
similar names are said to have an ‘identity of interest’. Although Rule 15(c) cannot be
asserted to frustrate the policy of the limitation act, relief should be granted in cases of
identity of interest.” Id. at 176.
Defendant argues that the relationship between LPS, Land Prep, and Legg was “so
painfully obvious” that Land Prep and Legg could come to no other conclusion than that
Plaintiff voluntarily elected not to name them as defendants. Thus, Land Prep and Legg
assert that when there is an expectation that Plaintiff voluntarily chose not to name certain
defendants, this reasonable expectation should be protected and an amendment should not
relate back. Johnson v. Paul’s Plastering, Inc., Del. Super., C.A. No. 98C-05-088-WTQ,
Quillen, J. at 2 (July 30, 1999) (“Johnson”).
The Johnson case holds that “[w]hen a plaintiff wishes to add a new party, as opposed
to a previously misnamed party, the Court should ‘focus on the new party’s appreciation of
the fact that the failure to include it in the original complaint was an error and not a deliberate
strategy.’” (citations omitted) Johnson at 4. Although the Johnson Court refused to allow the
plaintiff to amend his complaint, this litigation differs significantly from that presented in
Johnson. There, the plaintiff injured himself while working at a hospital, but did not join the
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hospital as a defendant. The hospital was not a hidden defendant undiscoverable or unknown
to the plaintiff. In the instant case, Legg and Land Prep’s possible involvement are not as
easy to detect. Plaintiff claims to have learned of their possible “identity of interest” with
LPS during the discovery phase of litigation, and moved to amend its complaint thereafter
as permitted by the scheduling order.
This case also differs notably from Marro v. Gopez, Del. Super., C.A. No. 92C-01102, DelPesco, J. (March 31, 1993)(“Marro”), and Mancari v. A.C. & S. Co., Inc., Del.
Super., C.A. No. 82C-JL-80, Poppiti, J. (Nov. 1, 1985)(“Mancari”) which are cited in
opposition to the motion. In Marro, there was no determination whether the noticed
defendant was in fact the same entity as the defendant which was sought to be added to the
complaint. The Marro case was decided on the grounds of mistake, not alter ego theory as
is presented here. In Mancari the plaintiff failed to discover that he had possible claims
against other corporate entities. He did not assert that the defendant had multiple identities
as Plaintiff alleges in this case.
Conclusion
The additional counts arose from the same event that precipitated the original action,
and both Land Prep and Legg had notice of the initiation of such action. Land Prep and Legg
may share an identity of interest with LPS.2 Consequently, they satisfy the third criteria of
2
Of course, whether or not LPS, Land Prep, and Legg share an identity interest is an
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Rule 15(c) requiring that they knew or should have known that had Plaintiff been aware of
their existence at the time it filed its complaint, they would have been parties to the action.
There has been no allegation of prejudice to the defendant(s) or inexcusable neglect on the
part of Plaintiff. Furthermore, Delaware courts strongly favor the resolution of issues on
their merits, Draper v. Medical Center of Delaware, Del. Supr., 708 A.2d 630 (1998).
Considering the foregoing, the complaint may be amended to include additional
counts of quantum meruit and alter ego liability against Land Prep and Legg in his individual
capacity.
IT IS SO ORDERED.
Very truly yours,
Richard F. Stokes
cc: Prothonotary
issue that Plaintiff will have to prove by a preponderance of the evidence at trial.
