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Two Farms, Inc. v. Davis, Bowen & Friedel, Inc.

Superior Court of Delaware, Kent

June 4, 2018

TWO FARMS, INC., Plaintiff,
v.
DAVIS, BOWEN & FRIEDEL, INC., and SILICATO-WOOD PARTNERSHIP, LLC, Defendants.

          Submitted: May 18, 2018

          OPINION

          NOEL EASON PRIMOS JUDGE.

         Before the Court is the motion of Plaintiff Two Farms, Inc. (hereinafter "Two Farms"), to dismiss counterclaims asserted by Defendant Silicato-Wood Partnership, LLC (hereinafter "Silicato"). Silicato's counterclaims seek damages for allegedly libelous accusations included in Plaintiffs complaint, attorneys' fees pursuant to the bad faith exception to the American Rule, and declaratory judgment. For the reasons stated herein, Two Farms's Motion to Dismiss is GRANTED.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         The facts recited here are those as admitted or alleged by Silicato in its answer and counterclaims.[1]

         In 2010, Two Farms and Silicato signed a contract of sale (hereinafter the "Contract") in which Two Farms agreed to purchase a property from Silicato located in Milford, Delaware (hereinafter the "Property") adjacent to Delaware Route 1 (hereinafter "SR 1"). Silicato hired co-defendant Davis, Bowen & Friedel, Inc. (hereinafter "DBF"), to perform work to obtain approval of a five-lot subdivision plan and conditional use approval so that the Property could be used as a convenience store with gas pumps. Silicato submitted a conceptual plan to the City of Milford. Later, Two Farms brought suit against Silicato and DBF alleging that a direct access entrance from SR 1 (hereinafter the "Entrance") was temporary and was being closed by the Delaware Department of Transportation; that DBF failed to indicate that the Entrance was temporary in the final plan, and that Silicato failed to instruct or require DBF to do so; and that the value of the Property was greatly diminished due to the temporary nature of the Entrance. Further, Two Farms alleged that Silicato knew that the Entrance was temporary and concealed that information from Two Farms so as to sell the Property to Two Farms at an unfairly high price.

         In its Counterclaims, Silicato alleges that Two Farms's complaint made three false statements about Silicato, specifically that: (1) Silicato "knew that the SR 1 entrance was temporary;" (2) Silicato "made false and/or misleading statements regarding the temporary nature of the SR 1 entrance;" and (3) Silicato "intended to induce [Two Farms] to purchase the Property in reliance on [the] misrepresentations and/or material omissions regarding the temporary nature of the SR 1 entrance." Silicato contends that because these statements falsely accuse Silicato of fraud and were filed in the public domain, they constitute libel per se against Silicato. Silicato also contends that because the allegations in Two Farms's complaint are unfounded and frivolous, Silicato is entitled to attorneys' fees under the bad faith exception to the American rule. Finally, Silicato petitions the Court to enter declaratory judgment in its favor because the Contract was fully integrated, and Two Farms's fraud claim improperly relies on representations and omissions outside the bounds of the Contract.

         II. DISCUSSION

         On a motion to dismiss, the moving party bears the burden of demonstrating that "there are no material issues of fact and that he is entitled to judgment as a matter of law."[2] Upon this Court's review of a motion to dismiss, "(i) all well-pleaded factual allegations are accepted as true; (ii) even vague allegations are well-pleaded if they give the opposing party notice of the claim; (iii) the Court must draw all reasonable inferences in favor of the non-moving party; and (iv) dismissal is inappropriate unless the plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances susceptible of proof."[3]

         When matters outside the pleadings have been presented along with a motion to dismiss, the Court generally has full discretion either to reject the extraneous submissions, or to convert the motion to a motion for summary judgment and consider the additional submissions.[4] However, there is an exception to this rule: the Court may consider undisputedly authentic documents that are "integral to a plaintiffs claim and [are] incorporated into the complaint by reference."[5] Here, while the Contract was not attached to the initial complaint or the counterclaim as an exhibit, its authenticity is not disputed, and the Court considers the Contract integral to and incorporated by reference into the counterclaim for declaratory judgment, as that claim petitions the Court to determine the rights and relations between the parties to this contract.[6] Therefore, the Court shall consider the Contract for the limited purpose of deciding Two Farms's motion to dismiss the claim for declaratory judgment-but shall not otherwise consider extraneous submissions nor convert the motion to a motion for summary judgment.[7]

         A. Silicato's Libel Counterclaim

         An "absolute privilege" protects the statements of parties to litigation from actions for defamation.[8] A party claiming the privilege must demonstrate that the statements were "issued as part of a judicial proceeding and were relevant to a matter at issue in the case."[9]

         Here, the allegedly defamatory statements were made as part of a judicial proceeding: the statements were written in the complaint. Further, it is evident that they are relevant to a matter at issue in this case, as these allegedly false statements regarding Silicato's knowledge and fraudulent inducement of Two Farms constitute the very allegations on which the claims of misrepresentation and fraud are predicated. Finally, Silicato's argument that the privilege may not be raised in a motion to dismiss is mistaken: Silicato cites a decision holding that a qualified privilege defense should be a matter for trial, not the absolute privilege, as is asserted here.[10] The Court therefore finds that Silicato is not entitled to recover as a matter of law, and dismissal of the libel claim is appropriate.

         B. Silicato's Bad ...


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