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Marina View Condominium Association of Unit Owners v. Rehoboth Marina Ventures, LLC

Court of Chancery of Delaware

August 12, 2019

Marina View Condominium Association of Unit Owners
v.
Rehoboth Marina Ventures, LLC

          Date Submitted: May 13, 2019

          Peter K. Schaeffer, Esquire

          R. Eric Hacker, Esquire Morris James, LLP

          PATRICIA W. GRIFFIN, MASTER IN CHANCERY

         Dear Counsel:

         Pending before me is an action by a condominium association against a marina seeking injunctive relief because it alleges the marina breached the lease agreement between the parties by constructing an addition to its marina building for lodging or residential use without the association's permission. The marina argues that the lease allows it to build an addition and use it for lodging as an accessory use of the marina and the association's approval is not necessary. The association filed a motion for summary judgment, and the marina responded with its cross-motion for summary judgment. I find the marina has not violated the lease by constructing the addition, although the lease limits its use of the addition. Accordingly, I recommend that the Court grant both the motion for summary judgment and the cross-motion in part and deny them in part. This is a final report.

         I. Background

         On July 25, 2006, Marina Motel Ventures, LLC ("Motel Ventures"), entered into a marina lease ("Lease") with Rehoboth Marina Ventures, LLC ("Marina"), which was recorded in the Sussex County Recorder of Deeds on July 26, 2006. The Lease concerns a marina business used in conjunction with a subaqueous lease that Marina operates on property then owned by Motel Ventures and covers the marina building, adjacent parking and other designated "marina areas." The Lease's initial term was for 99 years, followed by another term of 99 years, unless Marina provides notice of non-renewal. The Lease provides that the leased property shall be used for conducting a marina, "and no part of the Leased Property shall be used for any other purposes without the prior written consent of Lessor."[1]The Lease also provides that Marina may make changes, modifications, alterations, additions and replacements to existing improvements, or add new improvements (all are hereinafter referred to as "changes to improvements"), within the marina area "as may be necessary or desirable in the conduct of the [marina], and as permitted by the Town of Dewey Beach and without the consent of Lessor."[2] Acts of default and remedies for default are specified in the Lease.[3]

         At or around the time of the Lease's execution, Marina provided marina services out of an improvised structure of two mobile homes in an L-shape, with one home serving as dock master's quarters and the other as a marina bathhouse.[4]In March of 2006 (prior to the Lease's execution), plans ("2006 Plans") were approved by the Town of Dewey Beach ("Town") for a one-story marina building, including retail and storage space, laundry and bathhouse facilities.[5] Elements of the plans reflected an intention to build future second and third floors, but the plans did not indicate any specific use for the proposed floors.[6]

         On or about December of 2016, the Association became aware that Marina was constructing two apartments on the second and third floors of the marina building.[7] The Association requested that Marina cease and desist such activity as not marina-related, and made a formal objection on January 30, 2017.[8] Marina responded to the Association, on February 6, 2017, that it believes the construction is "legally undertaken," and there is no basis for stopping construction under the Lease.[9] Construction continued and Marina obtained a certificate of occupancy for the two apartments from Sussex County on June 16, 2017 and from the Town on August 7, 2017.[10]

         The Association filed this action on March 22, 2017.[11] Count I of the complaint seeks a permanent injunction preventing Marina from the alleged impermissible use of, or the building and maintaining of residences on, the leased property, and requiring Marina to remove all residential-related construction. On April 28, 2017, Marina filed a motion to dismiss the complaint under Court of Chancery Rule 12(b)(7) for failure to join parties under Rule 19, and to dismiss Counts II and III under Court of Chancery Rule 12(b)(6) and Rule 9(b).[12] The Association responded and, after briefing, the Master's Final Report issued on March 6, 2018, and was adopted by the Court on March 20, 2018, denying the motion to dismiss the complaint under Rule 12(b)(7), and granting the motion to dismiss Counts II and Count III under Rule 12(b)(6) and Rule 9(b).[13] Marina filed its answer on April 2, 2018.[14]

         The Association moved for summary judgment on April 25, 2018, seeking a permanent injunction preventing Marina from using the leased property to build and maintain residences on the property.[15] Following extensive and lengthy litigation involving discovery, Marina filed a cross-motion for summary judgment on December 12, 2018.[16] Briefing on the motions for summary judgment was completed on January 14, 2019, but the motions were stayed pending decision on a March 28, 2019 motion by the Association seeking to supplement its complaint under Court of Chancery Rule 15(d), alleging that Marina violated the Lease related to the operation of a commercial oyster business on the leased property.[17]After considering the parties' submissions on the motion to supplement the complaint, I denied that motion on May 13, 2019.[18]

         II. Standard for Review

         Under Court of Chancery Rule 56, the court grants a motion for summary judgment when "the moving party demonstrates the absence of issues of material fact and that it is entitled to a judgment as a matter of law."[19] The moving party bears the burden of demonstrating that no material issues of fact are in dispute and that it is entitled to judgment as a matter of law.[20] Once the moving party has satisfied that burden, it falls on the non-moving party to show that there are factual disputes. Evidence must be viewed "in the light most favorable to the non-moving party."[21] Summary judgment may not be granted when material issues of fact exist or if the Court determines that it "seems desirable to inquire more thoroughly into the facts in order to clarify the application of law to the circumstances."[22]

         When the court is presented with cross-motions for summary judgment, "neither party's motion will be granted unless no genuine issue of material fact exists and one of the parties is entitled to judgment as a matter of law."[23] In evaluating cross-motions for summary judgment, the court examines each motion independently and only grants a motion for summary judgment to one of the parties when there is no disputed issue of material fact and that party is entitled to judgment as a matter of law.[24]

         III. Analysis

         The issue is whether the Lease allows Marina to construct and maintain apartments on the leased property without the Association's consent. The Association asks the Court to grant its motion for summary judgment, and deny Marina's cross-motion, arguing that Marina has breached the Lease, and should be enjoined from building and maintaining residences on the leased property and ordered to remove all residential-related construction. The Association claims that land-based apartment buildings are not marina operations based upon the plain meaning of the language in section 5(a) of the Lease, considering the dictionary definition of "marina," statutory and caselaw descriptions of a marina, and when reading the Lease in its entirety.[25] It alleges the 2006 plans show the proposed use of the building as retail and indicate a one-story building and, since the 2006 plans were submitted prior to the Lease and the Lease is an unambiguous, integrated written agreement, parole evidence bars the introduction of extrinsic evidence.[26]Further, it argues that section 7 of the Lease can be read "in harmony by interpreting the Use Clause [section 5(a)] as a limitation on [Marina's] permitted activities" under section 7.[27]

         Marina responds that it is entitled to summary judgment, and the Association should be denied summary judgment, because it has not breached the Lease. Under the plain language of section 7 of the Lease, which is consistent with section 5(a) of the Lease, Marina asserts it is entitled to make additions to marina improvements for lodging "so long as the Town of Dewey Beach approves," and the Town has approved the addition.[28] It argues that the Lease's reference to "marina" "means a marina as defined in and permitted by the Town Code."[29] And, use of the marina area for lodging for Marina's "on-site property manager or marina customers and guests," is consistent with historical use of the property and the intent of the parties to the Lease.[30]

         The proper construction of a contract, and interpretation of specific contractual language, "is purely a question of law, "[31] and "[t]he principles governing contract interpretation are well settled."[32] Under Delaware caselaw, contracts are read "as a whole," "so as not to render any part of the contract mere surplusage," or to "render a provision or term 'meaningless or illusory.'"[33]Contracts are construed to give priority to the intention of the parties.[34] "The true test is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant."[35]The Court gives clear and unambiguous language its "ordinary and usual meaning" unless a special meaning is intended by the parties.[36] If a contractual term is undefined, "the interpreting court may consult the dictionary, if that is deemed useful, when determining the term's plain meaning."[37] Otherwise, courts "consider extrinsic evidence to interpret the agreement only if there is an ambiguity in the contract."[38] A contract is ambiguous "only when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings."[39] "Ambiguity does not exist where a court can determine the meaning of a contract without any other guide than a knowledge of the simple facts on which, from the nature of language in general, its meaning depends."[40]

         Here, there are no material factual issues, and the issue is the construction and interpretation of the Lease, specifically the language in sections 5(a) and 7 of the Lease, which is a question of law. Section 5(a) provides:

Purposes. Lessee shall use the Leased Property for the purpose of conducting thereon and therefrom a marina, and no part of the Leased Property shall be used for any other purposes without the prior written consent of Lessor.

         Section 7 states, in pertinent part:

Alterations, Changes, Additions.
Lessee may make changes, modifications, alterations, additions and replacements to any improvements located in the Marina Area, or add new improvements within the Marina Area, all as may be necessary or desirable in the conduct of the Rehoboth Marina, and as permitted by the Town of Dewey Beach and without the consent of Lessor.

         My purpose is to determine what a reasonable person in the position of the parties would have thought the language in those sections meant, not necessarily what the parties intended it to mean. I must read those sections together, giving effect to each provision if reasonably possible.[41] If the language is unambiguous, I rely on simple facts, and dictionary definitions, from which the language's "ordinary and usual meaning," can be discerned, and not on extrinsic evidence to interpret it.

         Reading the Lease as a whole, I do not find that sections 5(a) and 7 conflict. Section 5(a) addresses the overall purpose of the Lease, while section 7 speaks to the specific topic of Marina's ability to make changes to improvements on the leased property. The conduct of a marina is the only allowable purpose for Marina's use of the leased property, under both sections 5(a) and 7. Section 5(a) requires the Association's approval if Marina wishes to use the leased property for a purpose other than to conduct a marina. Section 7 is consistent - it provides that Marina can make changes to improvements located on the leased property without the Association's approval if two conditions are met: (1) the changes are "necessary or desirable" in the conduct of the marina, and (2) as permitted by the Town. So, section 7 allows Marina to make changes to improvements, without the Association's approval, if the change is necessary or desirable to conducting a marina, which is the overall purpose of the Lease under section 5(a), and if Marina has obtained the necessary permits for making those changes from the Town.

         My focus now turns to whether the pertinent language contained in sections 5(a) and 7 is ambiguous, or reasonably susceptible of different interpretations. The critical issue is what is meant in the Lease by the language to "conduct" a "marina." The parties assert different interpretations of the plain meaning of that language. The Association argues that the meaning of "operation of a marina" depends upon the meaning of "marina," and that the plain meaning of "marina" does not include the building or maintenance of land-based apartment buildings, since the dictionary definitions of "marina" focus on a marina as a dock or basin with moorings and supplies for yachts and small boats.[42] Marina alleges that "marina," as stated in the Lease, must be understood to include all uses allowable under the Town Code for this, or similar, marinas, and the Town Code provides clearer evidence of the parties' objective intent than a dictionary definition.[43] It also points to the dictionary definition of "marina" as "a dock or basin providing secure moorings for pleasure boats and often offering supply, repair, and other facilities."[44] And, it claims the addition of apartments to the marina building is consistent with the historical use of the leased property and the intent of the parties to the Lease, since there were dock master quarters on the leased property prior to the Lease and building plans, that both parties to the Lease were aware of, showing future plans for adding second and third floors to the existing marina building.

         I do not find ambiguity in the meaning of "conduct[ing]" a "marina" in the Lease.[45] I consult the dictionary definitions of both words, considering that information as helpful in determining the ordinary and usual meaning of those words. Together, the words mean "to direct or take part in the operation or management of" "a dock or basin providing secure moorings for pleasure boats and often offering supply, repair, and other facilities."[46] Marina's reliance on the Town Code to support its provision of lodging for, not only its on-site property manager, but also for its "customers and guests," is misplaced. I do not interpret section 7 of the Lease as combining the conditions in that section (that the changes are "necessary or desirable" in the conduct of the marina, and are permitted by the Town) to mean that the definition of allowable activities for a marina under the Town ...


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