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Delaware Manufactured Home Owners Association v. Investors Realty, Inc.

Supreme Court of Delaware

May 31, 2018

DELAWARE MANUFACTURED HOME OWNERS ASSOCIATION, GEORGE MAKDAD, and BREANNA WALTZ, Plaintiffs Below, Appellants,
v.
INVESTORS REALTY, INC., ST. JONES LANDING, LLC, K-4 MANAGEMENT, and DELAWARE MANUFACTURED HOME RELOCATION AUTHORITY, Defendants Below, Appellees.

          Submitted: April 11, 2018

          Court Below: Court of Chancery of the State of Delaware C.A. No. 2017-0111

          Before STRINE, Chief Justice; VALIHURA and VAUGHN, Justices.

          ORDER

          JAMES T. VAUGHN, JR. JUSTICE.

         On this 31st day of May 2018, upon consideration of the parties' briefs and the record on appeal, it appears to the Court that:

         (1) This case arises from a change in use of a manufactured home community. Prior to the change, each tenant placed a manufactured home which the tenant owned upon a lot owned by the landlord and leased to the tenant. The change converted the community into one in which the tenant leased both the lot and the dwelling unit from the landlord. Appellants, Delaware Manufactured Home Owners Association ("the Association"), George Makdad, and Breanna Waltz, appeal from a Court of Chancery bench ruling which denied their motion for an injunction to prevent the change of use. Appellants contend the Court of Chancery erred by finding that the change was legally permissible; that Appellees' notice to tenants of the change was legally sufficient; and that the Association had no standing to pursue claims.

         (2) Appellee St. Jones Landing, LLC, ("St. Jones") is the owner of the land which is the subject of this litigation. As mentioned, it operated as a "land lease only" community in which the tenant owned the manufactured home but paid rent to St. Jones for the lot on which the home was placed. Appellee K-4 Management ("K-4") was the property management company which ran the day-to-day operations of St. Jones. Appellee Investors Realty, Inc., is a dealer of manufactured homes but had no management or ownership role in St. Jones.

         (3) On March 4, 2016, K-4 sent notice letters to the St. Jones tenants leasing Lots 1-10 and 62-65 ("First Notice"). The First Notice advised the tenants that St. Jones and K-4 planned to change the use of the St. Jones land upon which their manufactured homes were situated. The tenants were notified that their land lease agreements with St. Jones were being terminated effective March 31, 2017. Sent along with the First Notice was a Relocation Plan. Simultaneously with the service of the First Notice on the tenants, K-4 sent a copy of the First Notice and the Relocation Plan to the Delaware Manufactured Home Relocation Authority ("the Authority"). This was to be Phase I of the land use change.

         (4) On August 22, 2016, K-4 sent notice letters to the St. Jones tenants leasing Lots 11-16, 41, and 50-56 ("Second Notice"). The Second Notice advised the tenants of the proposed change in use and notified the tenants that their land lease agreements with St. Jones were being terminated effective August 31, 2017. A Relocation Plan accompanied the Second Notice. As was done with the First Notice, K-4 sent a copy of the Second Notice and Relocation Plan to the Authority. This was to be Phase II of the land use change.

         (5) The lots in Phase I and Phase II were being changed from a land lease only arrangement to a full rental arrangement under which St. Jones would own the dwelling unit and the lot-both of which would be rented to a tenant. The First and Second Notices informed tenants that St. Jones was changing from a manufactured home park to an "apartment style lease project."[1]

         (6) On February 14, 2017, Appellants filed a Verified Complaint, Motion for Expedited Proceedings, and Motion for Preliminary Injunction against Appellees. The injunction request sought to stop the eviction of the Phase I and Phase II tenants, stop all relocation payments from the Authority, and stop St. Jones from doing any new construction to replace the current manufactured homes with new ones. Appellants sought penalties for Appellees alleged violations of the Manufactured Home Owners and Community Owners Act ("Act").[2]

         (7) The Court of Chancery heard oral argument on the Motion for Preliminary Injunction on September 6, 2017. In its decision on that motion, the Court of Chancery found: St. Jones' intended change of the use of the land was a permissible basis for terminating the tenants' leases under the Act; the First and Second Notices complied with the Act; Appellants failed to demonstrate irreparable harm; the Association lacked organizational standing; and the injunctive claims were moot as all tenants, including Appellants Makdad and Waltz, because they had moved or were in the process of voluntarily moving from St. Jones. The parties then submitted, and the Court of Chancery approved, a stipulation for entry of final judgment. This appeal followed.

         (8) All tenants in Phase I and Phase II of St. Jones, including Appellants Makdad and Waltz, have relocated, with the assistance of relocation funds made available by the Authority. Relocation funds are paid under a statutorily created program of state financial assistance to tenants who have to relocate due to a change in the use of a manufactured home community. The land-lease only to landlord-tenant change has been completed.

         (9) We review the denial of a motion for a preliminary injunction under the abuse of discretion standard.[3] However, we review the Court of Chancery's legal conclusions de novo.[4] In order for the Court of Chancery to issue a preliminary injunction the plaintiff must show: a reasonable probability of success on the merits; that irreparable harm will follow ...


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