Smith v. Donald L. Mattia, Inc.
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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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