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Triumph Mortgage Corp. v. Glasgow Citgo, Inc.

Superior Court of Delaware

April 19, 2018

TRIUMPH MORTGAGE CORP., a Delaware corporation, Plaintiff,
v.
GLASGOW CITGO, INC., a Delaware corporation, successor by name change to GLASGOW GETTY, INC. Defendant.

          Submitted: January 23, 2018

         Upon Consideration of Plaintiff's Motion to Disqualify Defendant's Counsel & Extend Case Schedule, DENIED.

         Upon Consideration of Plaintiff's Motion for Summary Judgment - Defendant's Lack of Counsel, DENIED.

         Upon Consideration of Plaintiff's Motion for Summary Judgment, DENIED.

          Richard L. Abbott, Esquire of Abbott Law Firm, of Wilmington, Delaware. Attorney for Plaintiff

          William D. Sullivan, Esquire of Sullivan Hazeltine Allinson LLC, of Wilmington, Delaware. Attorney for the Defendant.

          MEMORANDUM OPINION

          VIVIAN L. MEDINILLA, JUDGE.

         INTRODUCTION

         Plaintiff Triumph Mortgage Corp. ("Plaintiff) filed a Sci. Fa. Sur Mortgage complaint after Defendant Glasgow Citgo, Inc. ("Defendant") defaulted on a mortgage created as part of a 2002 refinancing transaction ("Refinancing Transaction") between the parties. Defendant alleges several affirmative defenses to prevent foreclosure on the encumbered property.

         Plaintiff moves to disqualify Defendant's counsel and for summary judgment under Superior Court Civil Rule 56 based on allegations that Defendant does not have the authority to retain counsel, and that Defendant lacks any viable affirmative defenses.[1] After consideration of the parties' briefings and oral arguments, for the reasons stated below, Plaintiff Triumph Mortgage Corp.'s Motion to Disqualify Counsel & Extend Case Schedule and Motion for Summary Judgment - Defendant's Lack of Counsel are DENIED. Additionally, Plaintiffs Motion for Summary Judgment is DENIED.

         FACTUAL AND PROCEDURAL HISTORY

         This is a commercial mortgage foreclosure action, initiated pursuant to the filing of a Sci. Fa. Sur Mortgage Complaint. The mortgage at issue encumbers property located at 2964 Pulaski Highway (the "Property") on which Defendant operated a gas station and convenience store. The mortgage is the product of the Refinancing Transaction between the parties. Plaintiff Triumph is a corporation wholly-owned by Ralph Estep ("Estep"), while Defendant Glasgow Citgo was majority-owned by the late Robert Galvin.[2] Estep was Robert Galvin's accountant and one-time business partner.

         On January 17, 2002, the parties set up the Refinancing Transaction, which Defendant alleges was to pay off two existing loans with the Wilmington Trust Company. However, the terms of the Refinancing Transaction refinanced other unsecured loans that Estep had made to Robert Galvin and resulted in Defendant receiving funds upwards of $100, 000 with which to conduct business.[3] Defendant alleges that the Wilmington Trust Company loans were removed from the transaction on the eve of settlement, based on side negotiations between Estep and the Wilmington Trust Company.[4] Defendant alleges that Estep failed to get adequate consent for the revised transaction.

         Robert Galvin died six months after the Refinancing Transaction closed, in July of 2002. The transaction's obligations were inherited by his wife, Kathy Galvin ("Galvin"). However, in the intervening years, Galvin has not filed an accounting on her husband's estate.[5] Defendant became a void Delaware corporation effective March 1, 2004, for failure to file the necessary annual reports and/or pay taxes.[6]Subsequently, Defendant first defaulted on the mortgage when it failed to timely pay off the remaining principal balance due under the loan by a January 17, 2007 deadline. Thereafter, Defendant was in default on the mortgage for failure to pay the default interest rate and due to cessation of payments in March of 2009.

         In both Motions for Summary Judgment and in seeking to disqualify defense counsel, Plaintiff claims that it exercised its rights under an agreement ("Pledge Agreement") also dated January 17, 2002, which provided additional collateral for the loan at issue.[7] This Pledge Agreement allegedly authorizes Plaintiff to take over Defendant's uncertificated stockholdings by operation of law and to vote the stock. Plaintiff alleges that this corporate takeover of Defendant by Plaintiff/Estep took place on November 22, 2017, and entitles Plaintiff to judgment as a matter of law.

         Plaintiff thus filed (1) the Motion to Disqualify Defendant's Counsel & Extend Case Schedule; (2) the Motion for Summary Judgment - Defendant's Lack of Counsel, and (3) the Motion for Summary Judgment on December 15, 2017. Defendant responded to Plaintiffs Motion to Disqualify Defendant's Counsel & Extend Case Schedule on January 8, 2018. Defendant responded to both Plaintiffs motions on January 12, 2018. A hearing was held on January 18, 2018. Both sides provided supplemental correspondence to the Court interspersed between the briefs and following the hearing between January 19-23, 2018. This Court granted a separate, yet related, filing on Defendant's Motion to Compel additional discovery on April 3, 2018. Having considered all submissions, the matter is now ripe for review.

         PLAINTIFF'S MOTION TO DISQUALIFY COUNSEL & EXTEND CASE SCHEDULE

         Standard of Review

         Motions to disqualify are brought for violations of the Delaware Rules of Professional Conduct ("DRPC") where the challenged conduct allegedly prejudices the proceedings.[8] "[T]he burden of proof must be on the non-client litigant to prove by clear and convincing evidence (1) the existence of a conflict and (2) to demonstrate how the conflict will prejudice the fairness of the proceedings."[9] For all types of conflicts, the Court reviewing the motion "must weigh the effect of any alleged ...


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