Ridgewood Manor II, Inc. v. The Delaware Manufactured Home Relocation Authority ( 2015 )

EFiled: Aug 31 2015 01:32PM EDT
Transaction ID 57792074
Case No. 8528-VCN
COURT OF CHANCERY
OF THE
STATE OF DELAWARE
JOHN W. NOBLE 417 SOUTH STATE STREET
VICE CHANCELLOR DOVER, DELAWARE 19901
TELEPHONE: (302) 739-4397
FACSIMILE: (302) 739-6179
August 31, 2015
John W. Paradee, Esquire Joseph C. Handlon, Esquire
Baird Mandalas & Brockstedt, LLC Scott W. Perkins, Esquire
6 South State Street Department of Justice
Dover, DE 19901 820 North French Street
Wilmington, DE 19801
Re: Ridgewood Manor II, Inc. v. The Delaware Manufactured
Home Relocation Authority
C.A. No. 8528-VCN
Date Submitted: May 14, 2015
Dear Counsel:
This action challenges the monthly assessments collected by Defendant
Delaware Manufactured Home Relocation Authority (the “Authority”) under the
Manufactured Home Owners and Community Owners Act (the “Act”). 1 The Act
directed the Authority to set a three dollar monthly assessment on landlords and
tenants of manufactured home communities, which its board did in February
2004. The board was required to “adjust, eliminate or reinstate the
1
25 Del. C. ch. 70, subch. I.
Ridgewood Manor II, Inc. v. The Delaware Manufactured
Home Relocation Authority
C.A. No. 8528-VCN
August 31, 2015
Page 2
assessment.” 2 More specifically, the Act provided that “if the board does not
adopt and adjust the assessment on or before January 31, 2006, the board shall
eliminate the fee in its entirety.” 3 Legislative action in April 2014 eliminated the
consequences of the Authority’s failure to revise the assessment. The Plaintiffs
allege that the board was required to eliminate the assessment as of January 2006
because it had not “adjusted, eliminated or reinstated” it by then. Based on this
understanding, Plaintiffs brought this action seeking relief from the assessment
and reimbursement of the assessments which had been collected because the
Authority did not act to eliminate the assessment following January 2006. 4
The parties filed cross-motions for summary judgment, and the Court
concluded that the statutory immunity of 25 Del. C. § 7011(b)(3) protected the
Authority (and its board) from civil liability, at least until the filing of this
action, because the “act or omission complained of was [not] done in bad faith or
2
25 Del. C. § 7012(f)(1) (prior to its amendment in April of 2014).
3
Id.
4
The funds to be reimbursed are not sought from the members of the board.
Instead, the monetary relief would come from accumulated assessments held by
the Defendant Division of Revenue. Apparently, those funds are sufficient to
satisfy Plaintiffs’ claims. The Division of Revenue is only a defendant because it
holds the assessments that have been collected. It has no contentions regarding the
pending issues that are not fully represented by the Authority.
Ridgewood Manor II, Inc. v. The Delaware Manufactured
Home Relocation Authority
C.A. No. 8528-VCN
August 31, 2015
Page 3
with gross or wanton negligence.” 5 That left the question of whether the notice
of the board’s failure to comply with the Act and Delaware’s Freedom of
Information Act provided by the Complaint in this action leads to the conclusion
that the continued collection of the assessment is the product of bad faith (or of
gross or wanton negligent) conduct. 6
The Authority argued that conduct after the filing of this litigation should
not be considered because it was not (nor could it have been) alleged in the
Complaint. Putting aside questions regarding the reasons (if any) for requiring
Plaintiffs to refile their action seeking prospective relief, there is no doubt about
the content of the Complaint. The issue—of the Authority’s immunity—impacts
a review of its conduct both before and after filing of the Complaint.
Before addressing the particular consequences for the immunity defense
posed by service of the Complaint, the Court must consider whether the conduct
(or non-conduct) in early 2006 determines the immunity question on an ongoing
basis or whether subsequent conduct merits analysis. The Court has concluded
5
Ridgewood Manor II, Inc. v. The Del. Manufactured Home Relocation Auth.,
2014 WL 7453275 (Del. Ch. Dec. 31, 2014).
6
Because of the legislative action, the claim for relief from further collections
became moot with the elimination of any duty to “adopt an adjustment
assessment.”
Ridgewood Manor II, Inc. v. The Delaware Manufactured
Home Relocation Authority
C.A. No. 8528-VCN
August 31, 2015
Page 4
that the Authority’s board was not acting in bad faith in early 2006 when it
believed its actions had avoided the problems posed by the January 2006 trigger
date. If that conduct is protected, why should subsequent inaction be treated
differently? The Authority’s immunity defense is premised upon the board’s lack
of knowledge that it had not properly revisited the amount of the assessment. In
general, with immunity that depends on lack of knowledge, if the act (collection
of the $3 assessment) continues after receipt of knowledge (as provided by the
Complaint), the receipt of knowledge may circumvent the qualified immunity. 7
Continuing to collect the assessment without having taken the steps
statutorily mandated to continue collecting such funds may be analogized to a
continuing tort. Each time the assessment was collected, purportedly as a
requirement of law, a new statutory breach occurred. 8 Thus, the immunity
defense must be tested in the context of post-complaint collection of the
assessment.
That brings the Court to the question of whether the Authority’s conduct
after its board received the Complaint can be viewed, on the undisputed facts, as
7
See, e.g., DiStiso v. Cook, 791 F.3d 226, 238 (2d Cir. 2012); Jones v. Carroll,
628 F. Supp. 2d 551, 561 (D. Del. 2009).
8
See, e.g., Cowell v. Palmer Twp., 263 F.3d 286, 293 (3d Cir. 2001).
Ridgewood Manor II, Inc. v. The Delaware Manufactured
Home Relocation Authority
C.A. No. 8528-VCN
August 31, 2015
Page 5
not having been in bad faith (or the product of gross or wanton negligence). The
Court holds in the affirmative and accordingly concludes that the Authority
retains its immunity defense under 25 Del. C. § 7011(b)(3). First, simply
because the Complaint makes allegations, it does not necessarily follow that the
allegations of law and fact are correct. Second, the defenses raised by the
Authority to the Complaint were in good faith and significantly surpassed a
frivolous or meritless standard. These included defenses not only on the merits,
but also in the nature of a time-bar.
Accordingly, for the foregoing reasons and the reasons set forth in the
Court’s Letter Opinion of December 31, 2014, Defendants are entitled to
summary judgment in their favor.
IT IS SO ORDERED.
Very truly yours,
/s/ John W. Noble
JWN/cap
cc: Register in Chancery-K