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Washington House Condominium Association of Owners v. Daystar Sills, Inc.

Superior Court of Delaware

November 13, 2018

THE WASHINGTON HOUSE CONDOMINIUM ASSOCIATION OF OWNERS, On Its Own Behalf And On Behalf of Multiple Unit Owners, and WILLIAM E. MONTGOMERY, and TAMARA A. MONTGOMERY, Individually, Plaintiffs,
v.
DAYSTAR SILLS, INC., a Delaware Corporation, DAVID N. SILLS, IV, WASHINGTON HOUSE PARTNERS, LLC, a Delaware Limited Liability Company, ARCHITECTURAL CONCEPTS, P.C., a Pennsylvania Corporation, AVALON ASSOCIATES OF MARYLAND, INC., a Maryland Corporation, and ENVIRONMENTAL STONEWORKS, LLC a Delaware Limited Liability Company, Defendants.

          Submitted: June 29, 2018

         Plaintiffs' Rule 54(B) Motion for Revision of the Court's Interlocutory Order Dismissing Plaintiffs' Complaint Against Defendant Environmental Stoneworks, LLC - GRANTED

         Plaintiffs' Motion for an Award of Attorneys' Fees and Costs Against Defendant Environmental Stoneworks, LLC - DENIED

          Elizabeth Wilburn Joyce, Esquire (Argued); Seton C. Mangine, Esquire; Pinckney, Weidinger, Urban & Joyce LLC, Attorneys for Plaintiffs.

          Gaston Loomis, Esquire; Delany McBride, P.C., The Brandywine Building, Attorney for Defendant, Environmental Materials, LLC d/b/a Environmental Stone Works.

          Andrew J. Connolly, Esquire (Argued); Matthew D. Johnson, Esquire; Post & Schell, P.C., Four Penn Center, Attorneys for Defendant, Environmental Materials, LLC d/b/a Environmental Stone Works.

          MEMORANDUM OPINION

          William C. Carpenter, Judge.

         The Washington House Condominium Association of Unit Owners ("WHCA"), on its own and on behalf of multiple unit owners ("Washington House" or the "Condominium"), William E. Montgomery, and Tamara A. Montgomery (collectively "Plaintiffs") move for a Rule 54(b) Revision of the Court's Interlocutory Order Dismissing Plaintiffs' Complaint against Defendant Environmental Materials, LLC d/b/a Environmental Stone Works ("Defendant" or "ESW"). Plaintiffs also seek an Award of Attorneys' Fees and Costs against ESW.

         As explained further herein, Plaintiffs' Rule 54(b) Motion for Revision of the Court's Interlocutory Order Dismissing Plaintiffs' Complaint Against Defendant ESW is GRANTED, and their Motion for an Award of Attorneys' Fees and Costs against ESW is DENIED.

         FACTUAL & PROCEDURAL BACKGROUND

         This litigation arises from the allegedly defective design and construction of Washington House, located on Main Street in Newark, Delaware.[1] The Condominium contains fifty-four residential units and four commercial units, two of which are owned by the University of Delaware.[2]

          Although construction on the Condominium was completed in 2008, Plaintiffs did not discover the serious structural issues plaguing the building until 2014.[3] On January 14, 2015, Plaintiffs filed a complaint (the "Complaint") against six defendants to recover more than $7 million in repair costs and related expenses arising from design and construction defects at Washington House.[4]

         A. THE ESW-DAYSTAR ACTION

         Daystar Sills, Inc. ("Daystar") served as the developer, builder, and general contractor for the Condominium project, and was one of the six defendants named in Plaintiffs' Complaint.[5] Defendant ESW was hired by Daystar to install the exterior masonry veneer, which is the primary construction issue, [6] at Washington House.

         On January 30, 2009, ESW instituted a mechanics' lien action against Daystar because it had not been paid for its exterior work on the Condominium.[7] Daystar filed a counterclaim against ESW in response, alleging breach of contract, breach of express and implied warranties, and negligence.[8]

         The parties entered into arbitration to resolve their dispute, agreeing that it would serve as a final adjudication on the matter.[9] On January 6, 2012, the arbitrator entered a final order, which required ESW to pay $400, 000 to Daystar.[10] The $400, 000 judgment against ESW was satisfied on March 2, 2012.[11]

         B. INSTANT LITIGATION

         Plaintiffs filed their Complaint against six defendants on January 14, 2015, seeking to recover more than $7 million in damages for repair costs and related expenses "arising from design and construction defects - notably, the systemic failure of exterior brick and stone veneer ..."[12]

         This Court dismissed Plaintiffs' Complaint against Defendant ESW on the basis of res judicata in its October 28, 2015 Opinion.[13] Now, Plaintiffs argue that new evidence, which was not available to the Court at the time of its October 2015 decision, refutes a finding of privity between Plaintiffs and Daystar for res judicata purposes. On this basis, Plaintiffs have moved for the Court to reconsider its interlocutory order and deny the dismissal of Plaintiffs' Complaint against ESW.

         Plaintiffs have now settled their claims against five of the defendants: Daystar, David N. Sills, IV ("Sills"), Washington House Partners, LLC ("WHP"), Architectural Concepts, P.C. ("AC"), and Avalon Associates of Maryland, Inc. ("Avalon") (collectively, the "Settling Defendants").[14] All of Plaintiffs' claims against the Settling Defendants have been voluntarily dismissed with prejudice, in accordance with the settlement agreements, and with the Court's approval.[15]

         The Settling Defendants all previously filed cross-claims for contribution and indemnity against ESW.[16] This Court denied ESW's motion to dismiss the cross-claims in its August 2017 Opinion.[17] At the pretrial conference on October 27, 2017, the Court severed the indemnity cross-claims against ESW for separate disposition.[18]Pursuant to the settlements, the Settling Defendants have assigned their indemnity claims to WHCA, and Plaintiffs are now the real parties in interest on the assigned claims.[19]

         The indemnity claims against ESW are based in part on the Subcontract between Daystar and ESW ("ESW Subcontract" or "Subcontract"), which contained an indemnification provision that included attorneys' fees.[20] Based on the assignments of the Settling Defendants' indemnity claims to WHCA, Plaintiffs now seek to recover those defense costs and attorneys' fees from ESW.[21]

         This is the Court's decision on Plaintiffs' Motions.

          DISCUSSION

         I. MOTION FOR REVISION OF THE COURT'S INTERLOCUTORY ORDER DISMISSING PLAINTIFFS' COMPLAINT AGAINST DEFENDANT ENVIRONMENTAL STONEWORKS, LLC

         Under Delaware Superior Court Civil Rule 54(b), "any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties ... is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties."[22]

         Revision of a decision under Rule 54(b) is "permitted in very limited circumstances."[23] As this Court has previously stated:

The motion to reconsider would be appropriate where, for example, the Court has patently misunderstood a party, or has made a decision outside the adversarial issues presented to the Court by the parties, or has made an error not of reasoning but of apprehension. A further basis for a motion to reconsider would be a controlling or significant change in the law or facts since the submission of the issue to the Court. Such problems rarely arise and the motion to reconsider should be equally rare.[24]

         Furthermore, a Rule 54(b) revision "should occur only where the court is convinced it is clearly wrong .. ."[25]

          Plaintiffs argue that evidence obtained in discovery shows "Daystar's interests and Plaintiffs' interests were not identical or closely aligned, and Plaintiffs were not actively and adequately represented in the ESW-Daystar Action" to support a finding of privity between the parties.[26] Plaintiffs primarily suggest that Daystar was unable to adequately represent their interests in the ESW-Daystar Action because it had to defend against its own contributory negligence, of which Plaintiffs now have "substantial evidence."[27] For this reason, according to Plaintiffs, the privity element of res judicata is no longer satisfied and ESW's Motion to Dismiss Plaintiffs' Complaint should now be denied.[28] Additionally, Plaintiffs contend that revision of the Court's Order granting ESW's Motion to Dismiss is necessary to prevent manifest injustice.[29]

         In response, Defendant ESW argues that the allegedly new evidence offered by Plaintiffs is not actually new and does not constitute a significant change in the facts to warrant revision of the Court's Order.[30] ESW also claims that Plaintiffs waived their prevention of manifest injustice argument by failing to raise it in earlier pleadings.[31]

          Under Delaware law, the doctrine of res judicata bars a subsequent action when the ...


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