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Fernstrom v. Trunzo

Court of Chancery of Delaware

December 5, 2017

John R. Fernstrom
v.
Victor Trunzo, Gary Owens, Eugene Castellucci, James Dautenhahn, Peter Deangelis, David J. Weidman, Individually and Ellis Point Condominium Association, Inc.

          Date Submitted: September 5, 2017

          David J. Weidman, Esquire Sergovic Carmean Weidman McCartney & Owens, P.A.

         Dear Counsel and Mr. Fernstrom:

         Plaintiff John Fernstrom (hereinafter "Fernstrom") is a unit owner in the Ellis Point Condominium Association, Inc. (hereinafter "HOA"). Respondents Victor Trunzo, Eugene Castellucci, James Dautenhahn, Peter DeAngelis, and Gary Owens serve on the HOA's Board of Directors (hereinafter "Board"). Respondent David Weidman (hereinafter "Weidman") provides legal representation to the HOA. Plaintiff filed this action claiming Respondents, which also includes the HOA, breached their duty of loyalty to Fernstrom. He seeks a declaratory judgment, permanent injunctive relief, and damages related to Respondents' actions assessing parking fines against Fernstrom, pursuant to the Declaration of Condominium for Ellis Point (hereinafter "Declaration"), HOA's Code of Regulations, Penalty Policy and Schedule of Fines. Respondents filed motions to dismiss the complaint and the persons named individually pursuant to Court of Chancery Rule 12(b)(6), arguing that Fernstrom's cause of action is not ripe, individual Respondents did not act outside of their official capacities as Board members or attorney to the Board, there is no duty of loyalty owed by HOA Board members to unit owners, and no breach of the duty of loyalty has been asserted, and requesting costs. I recommend that the Court dismiss the action without prejudice because the cause of action is not ripe for judicial review, decline to award costs to Respondents, and dismiss all other pending motions, including the motions for Rule 11 sanctions and for default judgment, as moot.

         BACKGROUND

         Fernstrom filed the complaint on July 18, 2017, seeking relief against Respondents related to $5, 950 in parking fines assessed against Fernstrom for 3 - 4 vehicles they assert have been "stored" in his driveway in violation of the HOA's Code of Regulations procedures.[1] He claims that the Respondents have breached a duty of loyalty to him and seeks $150, 000 in exemplary damages. On July 18th, Fernstrom also filed motions to expedite and for a temporary restraining order, which were heard by Vice Chancellor Glasscock and denied the same day. Fernstrom filed an amended complaint on July 28, 2107, adding another claim against Weidman individually, alleging that Weidman aided and abetted the Board in breaching their duty of loyalty to Fernstrom, and seeking $30, 000 in exemplary damages against Weidman.

         Respondents filed a motion to dismiss the complaint, and the persons named individually, pursuant to Court of Chancery Rule 12(b)(6) on July 21, 2017. Subsequent to the filing of the amended complaint, a revised motion to dismiss was submitted on August 11, 2017, along with another motion to dismiss the complaint against Weidman individually under Rule 12(b)(6). Respondents filed a motion for Rule 11 sanctions against Fernstrom on September 18, 2017, alleging ghostwriting and deliberate misrepresentations in his pleadings, followed by Fernstrom's filing of a motion for Rule 11 sanctions against Weidman for misrepresentations in the pleadings on the following day. Fernstrom filed a motion for default judgment against the HOA on October 27, 2017. The parties have briefed the motions. This is my final report.

         STANDARD OF REVIEW FOR FAILURE TO STATE A CLAIM UNDER RULE 12(b)(6)

         The Court may dismiss parties' claims for failure to state a claim under Court of Chancery Rule 12(b)(6). The facts for purposes of the motion to dismiss under Rule 12(b)(6) are drawn from the complaint and the documents the complaint incorporates by reference. In ruling on a motion to dismiss for failure to state a claim, the well-pled allegations of a complaint are assumed to be true and the plaintiff receives the benefit of all reasonable inferences.[2] Conclusions in the complaint are not accepted as true without allegations of facts to support them.[3] But vagueness or lack of detail are not sufficient grounds alone to dismiss for failure to state a claim so long as the complaint provides the defendant with notice of the claim.[4] "Failure to plead an element of a claim precludes entitlement to relief and, therefore, is grounds to dismiss that claim."[5] A broad brush must be used in determining sufficiency of claims - whether a plaintiff may recover under any reasonably conceivable set of circumstances susceptible of proof.[6]

         ANALYSIS

         Respondents argue that Fernstrom's claim for declaratory judgment should be dismissed as unripe since he failed to comply with the pre-litigation mediation provision contained in the Declaration. A plaintiff seeking a declaratory judgment has failed to state a claim upon which relief can be granted if no actual controversy exists.[7] An actual controversy requires that the issue involved in the controversy be ripe for judicial determination.[8] If the action requires the occurrence of some future event before the action's factual predicate is complete, the controversy is not ripe.[9] Fernstrom's claim for declaratory judgment is not ripe for adjudication.

         Paragraph 20 of the Declaration provides that all persons subject to the Declaration agree not to file suit in a court "unless and until" they had first submitted a claim to the alternative dispute resolution procedures in this paragraph. This restriction applies to disputes or claims arising out of the "interpretation, application, or enforcement of the Condominium Instruments, " or the rights, obligations and duties of persons subject to the Declaration, but exclude certain claims, such as a "suit in which any indispensable party is not a [person subject to the Declaration]."[10] The alternative dispute process detailed in Paragraph 20 requires that the claimant provide written notice to the HOA Board and all involved in the claim concerning the nature of the claim and other information, and request a meeting to discuss resolution. If the claim is not resolved through good faith negotiations or within 30 days of the date of the claim notice, then the claimant must submit it to mediation within another 30 days, with an entity designated by the HOA or an independent dispute resolution agency.[11] If the claim is not settled within 30 days after submission to mediation, or other reasonable time as determined by the mediator, mediation shall be terminated and the claimant is thereafter "entitled to file suit."[12]

         Contract interpretation requires that where contractual language is clear and unambiguous, the parties are bound by "its plain meaning."[13] Under the Declaration, it is clear that persons subject to the Declaration are required to follow the alternative dispute resolution process as a prerequisite to litigation if Paragraph 20(b)'s criteria are met. If issues are resolved through mediation, they can be handled more expeditiously and often with more satisfying results for the parties involved, causing benefits to the parties as well as the saving of scarce court resources.[14] Given the future benefits that may result from mediation and the unambiguous language in the Declaration concerning the alternative dispute resolution process, I find that, when the conditions for its applicability are met, the Declaration's pre-litigation mediation process constitutes an enforceable condition precedent to litigation.[15]

         Paragraph 20 governs Fernstrom's claims. His claims concern the interpretation, application, or enforcement of the Condominium Instruments (Declaration and the Code of Regulations of the Ellis Point Condominium Association, Inc.) and documents arising out of those Instruments, as well ...


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