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

Court of Chancery of Delaware

December 2, 2019

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

          Submitted Date: October 17, 2019

          Peter K. Schaeffer, Esquire, R. Eric Hacker, Esquire Morris James, LLP

          Patricia W. Griffin, Master in Chancery

         Pending before me is the plaintiff's request for attorneys' fees and costs based upon the fee-shifting provision in the lease between the parties. The plaintiff's request is denied because the defendant has not been found to have breached the lease so the contractual fee-shifting provision is not implicated. This is a final report.

         I. Background

         On August 12, 2019, I issued a Final Report granting and denying Plaintiff Marina View Condominium Association of Unit Owners (the "Association")'s motion for summary judgment, in part, and granting and denying Defendant Rehoboth Marina Ventures, LLC ("Marina")'s cross-motion for summary judgment, in part. The Final Report was approved by the Court on August 30, 2019. The main issue addressed in the cross-motions was whether the marina lease entered into by Marina Motel Ventures, LLC and Marina on July 25, 2006 ("Lease"), allowed Marina to construct and maintain apartments on leased property without the Association's consent. In the Final Report, I held that Marina's constructing and maintaining apartments was not a "violation of the Lease per se . . . but that those apartments must be used for purposes consistent with the Lease - the conduct of a marina, which includes use by Marina's on-site property manager."[1] I also concluded that "[u]se of the apartments for Marina's customers and guests, or for Marina's owners if they are not acting as the on-site property manager consistent with the Lease, represents a breach of the Lease."[2]

         The Association requested attorneys' fees and costs "pursuant to the terms of the Marina Lease" in its complaint, and filed its supplemental submission in support of contractual attorneys' fees and costs on September 19, 2019.[3] It argues that fee-shifting should occur, because it complied with the requirements for fee- shifting in section 20(b) of the Lease, by filing this action to enjoin Marina's breach of the Lease when Marina failed to cure the breach after receiving notice from the Association that it had 15 days to cure the breach. The Association asserts the Court's granting of injunctive relief preventing the use of the apartments for private or commercial residential uses shows that Marina violated the Lease, and that the relief obtained was "exactly what the Association sought."[4]The Association also reviewed the extensive history in the two and one-half year long proceedings in this case in support of the reasonableness of the attorneys' fee request of $56, 982.00.[5]

         Marina responds that the fee-shifting is not appropriate because the Association did not meet any of the conditions for fee-shifting to occur in the Lease.[6] It argues that the Court did not conclude that the construction by Marina was a breach of the Lease and the parties did not litigate whether "Marina's actual uses of the marina constituted a breach."[7] Marina also argues that, even if the Association has established a basis for fee shifting, it has not established that the fee requested is reasonable, nor has it submitted an affidavit itemizing the fees and expenses sought as required by Court of Chancery Rule 88.[8]

         II. Analysis

         The issue concerning the Association's request for attorneys' fees and costs pursuant to the fee-shifting provision in the Lease remains to be addressed. "Under the American Rule and Delaware law, litigants normally are responsible for paying their own attorneys' fees."[9] "A recognized exception to this rule applies when a contractual agreement exists between the parties regarding payment of attorneys' fees."[10] The agreement "governs an award of costs, and the court looks solely to that document, "[11] interpreting clear and unambiguous contract terms according to their plain meaning.[12]

         Since the Association's request for attorneys' fees is based upon the fee- shifting provision in the Lease, I consider whether section 20(b) of the Lease can be interpreted to entitle the Association to an award of fees in this instance. Section 20(b) of the Lease provides:

(b) Remedy for Other Default. If Lessee breaches any other term, covenant, condition, agreement or other provision of this Lease or otherwise defaults according to the terms stated in paragraph (19) above, and Lessee further fails to cure said breach within fifteen (15) days after written notice to Lessee from Lessor specifying said breach, Lessor may bring any action to compel Lessee's performance, and shall be entitled to recover its costs of litigation, including reasonable attorneys' fees, as determined by the Court;[13]

         I find, under the plain meaning of section 20(b), there are three prerequisites for fee-shifting to occur: (1) a breach of any term, covenant, condition, agreement or provision of the Lease by Marina, (2) written notice from the Association to Marina specifying the breach, and (3) the failure of Marina to cure the breach within the 15-day period following the notice. A default and breach of the Lease is defined in the Lease as the "failure to do, observe, keep and perform any of the other terms, covenants, conditions, agreements and provisions of this Lease required on the part of Lessee other than the payment of a charge or discharge of a lien."[14]

         Here, the key issue is whether a breach of the Lease has occurred. In my August 12, 2019 Final Report, I did not conclude that Marina had breached the Lease through its actions constructing and maintaining apartments. I found that "Marina has not violated the Lease per se by constructing and maintaining apartments," and that it was "not the provision of lodging, in itself, that violates the Lease."[15] Instead, I held that the use of the apartments inconsistent with the purposes in the Lease would represent a breach of the Lease, and provided an example of a breach of the Lease as "use of the ...


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