Duffield Associates, Inc.
Lockwood Brothers, LLC et al.,
Submitted: June 13, 2017
Victoria K. Petrone, Esquire George T. Lees III, Esquire
Logan & Petrone, LLC.
J. O'Brien, Esquire The Law Offices of Sean M. Lynn, P.A.
letter opinion addresses plaintiff Duffield Associates,
Inc.'s ("Duffield") motion for summary judgment
and motion for rule to show cause. For the reasons stated
below, the motion for summary judgment is granted in part,
and the motion for rule to show cause is moot.
following facts are provided in Duffield's briefs and
attached documents. Except as identified below, the facts are
undisputed. In 2005, John L. Stanton executed an exclusive
listing agreement with Rehoboth Bay Realty Co.
("Rehoboth") and a contract to sell certain
property in Sussex County, Delaware (the
"Property") to Michael Pouls. Windmill Estates, LLC
("Windmill") was formed to develop the Property.
Windmill is managed and owned by Darin A. Lockwood, Don
Lockwood, John, and Pamala Stanton (Pamala,
collectively, with Don and John, the "Defendants").
The Limited Liability Company Agreement for Windmill
identifies Don, Darin, and John as the members. Darin
responded to interrogatories in the Superior Court litigation
discussed below, however, by stating that Pamala jointly
owned one-third of Windmill with John, and certain tax
records show Pamala Stanton as an owner of
2006, Duffield, a Delaware corporation that engages in
geotechnical consulting and engineering services, was
contacted by Meridian Architects & Engineers
("Meridian"), a company owned by Darin, to assist
in the design of a proposed wastewater treatment system on
the Property. Duffield provided the proposal for the
Property, which was accepted by Darin and Meridian. By the
fall of 2007, issues arose between Meridian and Duffield
regarding payment for Duffield's already-completed work,
and Duffield refused to continue work on the project. As a
result, in April 2008, Darin and John executed a Bi-Lateral
Corporate Guarantee (the "Guarantee") binding
Meridian and Windmill to pay Duffield for its work.
2008, Pouls filed suit to avoid his purchase of the Property
and recover his $500, 000 deposit. Windmill and Meridian
directed Duffield to continue its work despite the Pouls
litigation. By September 2009, Duffield was owed $82, 153.17
plus interest. Between late 2009 and early 2010,
Windmill's bank lender for the property, County Bank,
commissioned a valuation of the Property and determined that
there was a valuation shortfall of $250, 000 on the
property. A representative for County Bank, Barry A.
Breeding, stated in his deposition that the loan to Windmill
matured on August 29, 2010 and, thus, was due to be paid in
full or refinanced by that date. Don then sent a letter to
the bank on August 19, 2010, requesting an 18-month extension
and to pay the interest out of pocket.
March 3, 2010, Duffield filed suit against Meridian,
Windmill, John, and Darin in Delaware Superior Court for
breach of contract. On June 10, 2010, the Pouls litigation
was resolved in favor of Windmill, awarding it the $500, 000
deposit from Pouls. Pouls and Windmill later came to an
agreement wherein Pouls would pay Windmill an additional $20,
000 in attorney's fees and waive any continuing claims.
In June 2010, Richard Berl, Windmill's attorney, received
two checks from Rehoboth totaling $437, 362.69. This money
was transferred to a money market account on July 14, 2010
and remained there until August 2, 2010.
August 2, 2010, Darin wrote to Berl indicating that John
wanted to secure a check from Rehoboth funds and that John
could not do this without his or Don's agreement. That
same day, Darin wrote to Roy Frick, Windmill's
accountant, directing the funds not be disbursed until an
agreement by the members was reached. After back and forth
regarding how to handle the money, John W. Paradee, Meridian
and Darin's lawyer, wrote that he "strongly
recommend[ed] that Darin and Don agree to satisfy
Duffield's claim ASAP, while we still have a chance to do
so. I'm not sure what other claims to the money there may
be." On August 2, 2010, Berl issued a check
from his escrow account, payable to Windmill in the amount of
deposition, Don testified that John "came to [Don] and
said, 'We have excess money, we're going to clear the
account out.'" Don admitted that he and John were
aware of "a deficiency of a million-some dollars with
the bank" at the time. Don signed the check
distributing the money to John. Don also testified that
there was never a vote among the Windmill members regarding
the distribution of the funds. On August 3, 2010, John and
Don opened two new bank accounts on behalf of Windmill at The
First National Bank of Wyoming. The same day, John and Don
signed three checks for $80, 000 each to Don, Darin, and
John, disbursing $240, 000 of the Pouls litigation
testified in his deposition that Don's capital
contributions to Windmill were $73, 866.67; his capital
account was worth $59, 000 prior to the deposit of the money
from the Pouls litigation; and his total distribution after
the August 3, 2010 disbursement was $114, 770. Similarly,
Frick testified that John received a total of $150, 000 in
cash and loan forgiveness. Darin's capital
contributions were $61, 866.65, and he received $82, 500
after August 3, 2010.
February 5, 2013, the Superior Court granted Duffield's
motion for summary judgment against Windmill and Meridian for
breach of the Guarantee, and on August 7, 2013, the Superior
Court entered judgment in the amount of $82, 153.17 plus pre-
and post-judgment interest against Windmill. That judgment
has not been paid.
offer the following counter facts: Pamala is not in fact a
member of Windmill; there are no judgments against Don or
John; and there is no "actual intent" on the part
of Don, John, or Pamala to defraud Duffield. Defendants did
not raise any material dispute as to any other facts.
November 7, 2013, Duffield filed this action. On July 11,
2016, I entered default judgment against Darin. On January
20, 2017, I entered default judgment against Lockwood
Brothers, LLC and granted the dismissal of claims against
Rehoboth. Duffield filed its motion for rule to show cause on
January 30, 2017, and its motion for summary judgment on
March 9, 2017. On May 4, 2017, this Court held oral argument
on these motions. On June 13, 2017, Duffield submitted a
letter to the Court, in which it conceded it is not a proper
plaintiff to assert Counts II and III for breach of fiduciary
duty and breach of the Delaware Limited Liability Company
complaint alleges three counts. Duffield later conceded that
it is not a proper plaintiff to assert Counts II and III of
the complaint. Therefore, I only address Count I-the claim
for fraudulent conveyance.
judgment will be "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 to
a judgment as a matter of law." When considering a motion
for summary judgment, the evidence and the inferences drawn
from the evidence are to be viewed in the light most
favorable to the nonmoving party.
Court of Chancery Rule 9(b), "[i]n all averments of
fraud or mistake, the circumstances constituting fraud or
mistake shall be stated with particularity. Malice, intent,
knowledge and other condition of mind of a person may be
averred generally." "In an action to set aside a
fraudulent conveyance the burden is on the creditor to prove
that the conveyance was fraudulent." Under Section
1304 of the Delaware Uniform Fraudulent Transfer Act
a) A transfer made or obligation incurred by a debtor is
fraudulent as to a creditor, whether the creditor's claim
arose before or after the transfer was made or the obligation
was incurred, if the ...