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Millcreek Shopping Center, LLC v. Jenner Enterprises, Inc.

Superior Court of Delaware

March 31, 2017

MILLCREEK SHOPPING CENTER, LLC, a Delaware limited liability company, Plaintiff,
v.
JENNER ENTERPRISES, INC., a Delaware corporation, MICHAEL P.LEVITSKY and JANET LEVITSKY, Defendants.

          ORDER AWARDING DAMAGES

          Lynne M. Parker Commissioner.

         Remaining in this case is the award of damages to Plaintiff Millcreek Shopping Center, LLC ("Millcreek").

         Millcreek, the landlord, is entitled to recover damages against the Defendants Michael Levitsky and Janet Levitsky, on their personal guarantees guaranteeing the obligations of Jenner Enterprises, Inc. ("Jenner"), the tenant, as a result of Jenner's breach of a commercial retail lease located in the Millcreek Shopping Center on Kirkwood Highway in Wilmington, Delaware ('the "Rental Unit"). Jenner operated a Fast Signs franchise from the Rental Unit.

         The determination as to the amount of damages to be awarded Millcreek was referred to the undersigned Commissioner and was to be decided by binding arbitration.[1]

         The parties, however, advised the court that they did not believe a binding arbitration was needed in order to determine the amount of damages to be awarded. The parties advised that they believed the damage award could be determined based on written submissions by the parties.

         Briefing was conducted as to damages. Defendants, in response to Millcreek's opening submission, raised two legal issues and several factual issues as to the amount of damages sought by Millcreek. The two legal issues pertained to: 1) whether interest should be awarded at the contract rate of 6.25% or whether 6 Del. C. § 2301 operated to cap the interest rate at 5.75%; and 2) whether 10 Del. C. §3912 was applicable in the subject case thereby requiring that the attorneys' fee award be capped at 20% of the total amount due.

         In Millcreek's reply submission, it addressed the factual issues raised by Defendants and provided additional support for the amount of damages requested.

         After briefing was completed, on February 6, 2017, a teleconference was held. During the teleconference, the court advised the parties that both of the legal issues raised by Defendants were to be resolved in Millcreek's favor. The court advised that: 1) the interest to be awarded in this case was the contract rate of interest of 6.25% and that this case was not governed by 6 Del. C. § 2301, and 2) 10 Del.C. §3912 was not applicable to this case and did not operate to cap the attorneys' fee award to 20% of the total amount due. The court explained the reasons for its rulings on these issues.

         During the teleconference, the court scheduled a hearing/binding arbitration for February 23, 2017 to resolve any and all outstanding factual issues remaining to be resolved.

         The Defendants advised that the hearing/binding arbitration on February 23, 2017 did not need to go forward. The Defendants advised that they were not contesting Millcreek's calculations as to the monies owed nor were they contesting any of the amounts sought on factual grounds. There being no factual dispute remaining to be resolved, the hearing/binding arbitration of February 23, 2017 do not go forward.

         This opinion memorializes the court's decision as to damages.

         DAMAGES

Millcreek's damage claim is comprised of four categories:
1)rent and late fees;
2)interest;
3)common area maintenance charges; and
4)counsel fees.

         1) Rent and Late Fees: $80, 309.19

         The parties do not dispute that rent and late fees are owed to Millcreek nor do they dispute that the amount of those fees total $80, 309.19.

         2) Interest: $16, 768.62, plus post- judgment interest

         The parties do not dispute that the contractual rate of interest is 6.25%.[2] The parties do not dispute that the pre-judgment interest owed to Millcreek calculated at the 6.25% contractual interest rate is $16, 768.92.

         Defendants contend that, as a matter of law, the interest rate should be capped at 5.75% pursuant to 6 Del. C. § 2301(a), and that interest should be awarded at the 5.75% rate rather than the 6.25% contractual rate.

         This case is, however, not governed by 6 Del. C. § 2301.

         6 Del. C. § 2301(a) provides: Any lender may charge and collect from a borrower interest at any rate agreed upon in writing not in excess of 5% over the Federal Reserve discount rate. .. (emphasis added).[3]

         Moreover, the cap on the interest rate as provided by §2301(a), does not even apply to lender/borrower relationships when the money loaned exceeds $100, 000 and is not secured by a mortgage against the principal residence.[4]

         The Delaware Supreme Court has held that 6 Del. C. § 2301(a) was intended to cap interest only in cases of personal loans.[5] When the plaintiff does not seek interest due for the failure to pay a personal loan, the contract rate applies to the accrual of the interest.[6] In a commercial dispute, not involving a personal loan, the contractual rate set forth in the lease applies to interest.[7] The contractual rate of interest applies to both pre-judgment and post-judgment interest.

         6 Del. C. § 2301(a), by its express language, refers to interest charged by a "lender" to a "borrower." The relationship between Millcreek and the Levitskys is not that of lender and borrower. The Levitskys' liability to Millcreek is under their personal guaranty of Jenner's obligations under the commercial retail lease between Jenner and Millcreek. 6 Del. C. § 2301(a) is not applicable here.

         Indeed, Defendants have not cited to any case that held that the contractual rate of interest was unenforceable and superseded by 6 Del. C. § 2301(a) in an action involving a commercial real estate lease. Moreover, Defendants have not cited to any case, not involving a personal loan, in which a contract rate of interest was held to be unenforceable and wholly supplanted by §2301(a).[8]

         Pre-judgment and post-judgment interest is awarded at the contractual rate of 6.25%. Pre-judgment interest is awarded in the amount of $16, 768.62.

         3. Common Area Maintenance Charges $7, 979.01

         The parties do not dispute Jenner was required pay its pro rata share of common area maintenance charges ("CAM"). Defendants requested additional information from Millcreek as to how it derived the CAM charges sought. Millcreek provided the additional information sought.

         If the Defendants wanted to contest Millcreek's calculations following the receipt of the additional information provided by Millcreek or wanted to pursue any other factual dispute as to the amount of CAM charges sought, any such issues were to have been presented and would have been resolved at the hearing/binding arbitration. The Defendants advised that no such ...


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