Cook v. Deep Hole Creek Associates ( 2021 )


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  • IN THE SUPERIOR COURT OF THE STATE OF
    DELAWARE
    KEVIN COOK & NICHOLE COOK )
    )
    Plaintiffs, )
    )
    Vs. ) C.A. No: $20C-09-002 CAK
    )
    DEEP HOLE CREEK ASSOCIATES, a __)
    Delaware partnership, DEEP HOLE )
    CREEK ASSOCIATES, INC., a Delaware )
    corporation, LAURENCE L. BURKE and _)
    SUZANNE T. WATKINS, Co-Trustees )
    of the LAYTON FAMILY TRUST, )
    )
    Defendants. )
    Submitted: April 9, 2021
    Decided: April 21, 2021
    Defendants’ Motion to Dismiss
    GRANTED
    MEMORANDUM OPINION AND ORDER
    John W. Paradee, Esquire, Stephen A. Spence, Esquire, and Brian V. DeMott, Esquire,
    Baird Mandalas Brockstedt, LLC, 6 South State Street Dover, Delaware 19901 (302)
    677-0061, Attorneys for Defendants.
    John A. Sergovic, Jr., Esquire, Sergovic Carmean Weidman McCartney & Owens,
    P.A., 25 Chestnut Street, P.O. Box 751, Georgetown, Delaware 19947, Attorney for
    Plaintiffs.
    KARSNITZ, J.
    This case illustrates that, with respect to a dispute over title to a parcel of real
    property, the way in which the dispute is framed, and the appropriate forum for the
    resolution of that dispute, are as important as the merits of the dispute. Here, the
    vehicle the Plaintiffs chose — the tort of Slander of Title — is subject to a defense of
    absolute privilege under Delaware law. The other vehicles Plaintiffs chose — an action
    for Ejectment and an action for a Declaratory Judgment to quiet title, both based in
    part on extrinsic evidence — can only be heard in the Court of Chancery, not this Court.
    Similarly, Defendants’ Counterclaim, an action to quiet title based on extrinsic
    evidence, can only be heard in the Court of Chancery. I am therefore granting
    Defendants’ Motion to Dismiss Plaintiffs’ Slander of Title claim under Delaware
    Superior Court Civil Rule 12(b)(6) (failure to state a claim) and I am dismissing
    Plaintiffs’ Ejectment and Declaratory Judgment claims under Delaware
    Superior Court Civil Rule 12(b)(1) (lack of subject matter jurisdiction). I am also
    dismissing Defendants’ Quiet Title Counterclaim under Delaware Superior Court
    Civil Rule 12(b)(1) (lack of subject matter jurisdiction).
    FACTS
    Plaintiffs are the owners of 2851 Bayshore Drive, Milton, Sussex County,
    Delaware 19968 (the “Property”) on which they wish to construct a pier and dock. To
    do this, Plaintiffs were required to submit an application (the “Application”’) to the
    Delaware Department of Natural Resources and Environmental Control
    (“DNREC”).' The Regulations require a property owner seeking to construct a pier
    or dock to obtain approval and a permit from DNREC.? The Regulations require
    the applicant to submit proof of ownership of the property where the pier or dock
    will be installed? On December 10, 2019, Plaintiffs submitted an Application to
    DNREC to build a pier and a dock on a portion of the Property.
    DNREC followed the process by which it considers an Application for a
    construction permit for a pier or dock.‘ It publicized the Application and, for a period
    of 20 days after the advertisement is posted, the public could file written
    objections to the Application. DNREC must hold a public hearing if it receives
    a timely written comment objecting to an application that “exhibits a familiarity with
    the application and a reasoned statement of the proposed project’s probable impact.”°
    On February 5, 2020, Defendants, through their then counsel, submitted a
    letter (the “Letter”) to DNREC objecting to Plaintiffs’ DNREC application. The
    Letter informed DNREC that Defendants opposed Plaintiffs’ pier and dock
    application due to an allegedly false claim of ownership to part of the Property. The
    Letter triggered the requirement that DNREC hold a public hearing.® The Letter
    !7 Del. Reg. §§ 7502-1.0, et seq. (“Regs.”).
    2 Regs. §§ 7502-6.0, 8.0.
    3 Regs. § 8.3.4.4.
    4 Regs. § 11.2.
    > Id.
    ° Id. No public hearing was in fact held; see discussion, post.
    2
    stated that: (1) Defendants’ rights would be adversely affected if the Application was
    granted and a permit issued; (2) Defendants opposed the Application; (3) Defendants’
    opposition is related to the ownership of the real property subject to the Application;
    and (4) there are several reasons why there is an ownership dispute.
    PROCEDURAL HISTORY
    On September 1, 2020, Plaintiffs filed a Complaint against Defendants asserting
    two claims: Count I, for Slander of Title; and Count II, an alternative claim fora
    Declaratory Judgment to quiet title to the Property. On October 15, 2020, Defendants
    filed their Motion to Dismiss Count I of the Complaint for Failure to State a Claim
    under Delaware Rule of Civil Procedure 12(b)(6) and Count II of the Complaint for
    Lack of Subject Matter Jurisdiction under Delaware Rule of Civil Procedure 12(b)(1)
    (the “Motion to Dismiss”). On November 12, 2020, Plaintiffs filed their Response to
    the Motion to Dismiss and the next day filed a Motion to Amend the Complaint.
    Without opposition from Defendants, on December 10, 2020, Plaintiffs filed their
    Amended Complaint which added Count II for Ejectment under 10 Del. C. §6701. On
    December 18, 2020 | held oral argument on the Motion to Dismiss. I subsequently
    allowed counsel to supplement, in letter form, their arguments on whether DNREC
    review constitutes a “quasi-judicial proceeding” with respect to the Slander of Title
    Count, which counsel filed on January 15, 2021 and January 29, 2021. On March 18,
    2021, I ordered Defendants to file their Answer to Amended Complaint and
    Counterclaim to Quiet Title (the “Answer and Counterclaim”) before I ruled on their
    Motion to Dismiss. On April 9, 2021, Defendants filed their Answer and Counterclaim.
    In the Answer and Counterclaim, Defendants, as Counterclaim Plaintiffs, petitioned me
    to quiet title to the property by entering a declaratory judgment that Defendants are the
    rightful owns of the Property.
    COUNT I-— SLANDER OF TITLE
    Plaintiffs’ Slander of Title claim, Count I, alleges that the Letter contained false
    statements. Plaintiffs allege that the Letter’s description of the chain of title and
    Defendants’ claim of ownership over the disputed property are false. Defendants move
    to dismiss Count I of the Complaint for Failure to State a Claim under Delaware Rule
    of Civil Procedure 12(b)(6).
    Standard of Review
    On a motion to dismiss under Rule 12(b)(6), all well-pled allegations are
    assumed to be true and all inferences are drawn in favor of the nonmovant.’ The Court
    will dismiss the case if the plaintiff cannot prevail on any set of facts that can be
    inferred from the Complaint.* The Court may consider integral documents and those
    incorporated into the complaint.? On a motion to dismiss under Rule 12(b)(1),
    “[s]ubject matter jurisdiction is determined from the face of the complaint..., with all
    ’ Solomon y. Pathe Comme’n Corp., 
    672 A.2d 35
    , 38 (Del. 1996).
    8
    
    Id.
    ? Cont’! Fin. Co., LLC v. T.D. Bank, N.A., 
    2018 WL 565305
    , *1 (Del. Super. Jan. 24, 2018).
    4
    material factual allegations assumed to be true,” and the Court examines the nature of
    the relief sought.!°
    Analysis
    Slander of Title requires a plaintiff “to establish that the defendant maliciously
    published a false matter concerning the title of property which caused the plaintiff
    special damages.”'! “[A|ffirmative defenses to a prima facie case exist for statements
    made in certain contexts where there is a particular public interest in unchilled freedom
    of expression.”!* “One such defense is the absolute privilege,” which “protects from
    actions for defamation statements ... offered in the course of judicial proceedings
    so long as the party claiming the privilege shows that the statements issued as part
    of a judicial proceeding and were relevant to the matter at issue in the case.”!? “The
    privilege is not narrowly confined to intra-courtroom events, but extends to all
    communications appurtenant thereto such as ‘conversations between witnesses and
    counsel, the drafting of pleadings, and the taking of depositions or affidavits ex
    parte.’”'* Delaware law defines “judicial proceeding” as embracing “any hearing
    before a tribunal performing a judicial function.”!* A proceeding before an
    administrative board may qualify for purposes of the absolute privilege if the
    '0 Prestancia Mgmt. v. Va. Heritage Found. LLC, 
    2005 WL 1364616
    , *3 (Del. Ch. May 27, 2005).
    "! Toelle v. Greenpoint Mortgage Funding, 
    2015 WL 5158276
    , *6 (Del. Super. April 20, 2015).
    '2 Barker v. Huang, 
    610 A.2d 1341
    , 1344 (Del. 1992).
    13 
    Id.
    '4 Nix vy. Sawyer, 
    466 A.2d 407
    , 410 (Del. Super. 1983).
    1S Ig
    5
    proceeding “afford[s] substantive fairness through regular and_ orderly
    procedure....”'° Several factors are used in making this determination,
    including: “formal requirements of hearing and notice; compulsory attendance and
    discovery processes; authority to take sworn testimony and punish perjury; and, review
    through appeal procedures.”"”
    Quasi-Judicial Proceeding
    I asked the parties to address the issue of whether the DNREC proceeding
    applicable in this case constitutes a quasi-judicial proceeding. Plaintiffs argue that it
    does not, for two reasons.
    First, Plaintiffs contend that the power and authority to conduct a judicial or
    quasi-judicial proceeding has never been delegated to the Secretary of DNREC
    (the “Secretary”). In my view, however, the Secretary derives such power and
    authority from two chapters in the Delaware Code: Chapter 80 of Title 29 and
    Chapter 60 of Title 7. Likewise, the Delaware Code empowers the Secretary to
    adopt regulations for procedures to govern the processing of wetland permit
    applications and related hearings under 7 Del. C. §6607(d), which the Secretary
    has done by adopting 7 Del. Admin C. §7502. Under both 7 De/. C.§6006 and 7
    Del. Admin C. §7502, the Secretary has the power to conduct quasi-judicial
    16 See Tatro v. Esham, 
    335 A.2d 623
    , 626 (Del. Super. 1975).
    17 
    Id.
    6
    proceedings.
    Second, after a thorough review of the legislative history of the DNREC
    statutes and regulations, Plaintiffs contend that proceedings before the Secretary
    under 7 Del. C. §6006 are not quasi-judicial because they are not expressly /abeled
    as "quasi- judicial." As support, Plaintiffs cite 7 Del. C. §6007(a) and (b), which
    create the Environmental Appeals Board (“EAB”) and categorize it as a "quasi-
    judicial review board." From this, Plaintiffs draw a negative inference and argue
    that the Secretary, unlike the EAB, cannot be considered to act in a quasi-judicial
    capacity. However, Plaintiffs cite no authority requiring a statutory label of an
    agency's quasi-judicial authority for an agency's proceeding to meet the legal
    analysis of quasi-judicial authority. | find no basis for this twist of statutory
    interpretation. In my view, the issue is not whether the legislature expressly labels a
    public hearing proceeding "quasi- judicial," but rather whether the public hearing
    proceeding created by the legislature in fact satisfies the legal analysis of a quasi-
    judicial proceeding.
    Applying the Delaware legal analysis discussed above for a quasi-judicial
    proceeding, in my view Chapter 60 and the specific wetland regulations set forth a
    detailed permit application process which clearly qualifies as a quasi-judicial
    proceeding. The Regulations establish that the public hearing, and the process leading
    up to it, is quasi-judicial in nature.'* Under the Regulations, the public hearing has
    a notice requirement;'? attendance is mandatory and DNREC hears evidence and
    testimony when considering an application and objection;?? DNREC “administers
    oaths” to take sworn testimony;7! and, an aggrieved party has a right to appeal.”? I find
    that the DNREC proceeding is a quasi-judicial proceeding under Delaware law.
    Absolute Privilege
    Having been presented in a quasi-judicial proceeding, the question remains
    whether the Letter is absolutely privileged. I believe that it is, for two reasons. First,
    the Letter is a “pleading” in the judicial proceeding established by the Regulations
    and is thus protected. The Letter shows that Defendants are familiar with the
    Application and contains a reasoned statement explaining why DNREC, a quasi-
    judicial body, should deny the Application. It is a necessary document to start further
    proceedings before DNREC.”? The Complaint alleges that DNREC did not act on
    the Application because no public hearing was in fact held. Indeed, in the Letter,
    Defendants requested that DNREC not hold a public hearing on the Application due to
    the dispute over ownership of the Property. But whether a public hearing was in fact
    held does not affect the centrality of the Letter to the quasi-judicial proceeding. The
    18 Regs. § 11.4.
    '9 Regs. §§ 11.4.1, 11.4.2.
    20 Regs. §§ 11.4.3, 11.4.4.
    21 Regs. § 11.4.3.
    2 Regs. §§ 16.1, 16.2.
    3 Regs. §§ 11.2, 11.4.
    Letter is akin to a civil complaint filed with this Court, in that it must be submitted
    to start the quasi-judicial proceeding and is the vehicle by which Defendants lodged
    their objections to Plaintiffs’ request. By analogy, statements made in a complaint
    filed with this Court are protected regardless of whether a trial in fact occurs.
    Second, the alleged defamatory statements were relevant to the matter at issue in
    the Application because the Letter directly addresses Plaintiffs’ right to construct
    the pier and dock and disputes Plaintiffs’ ownership of the Property.”
    Therefore, Defendants’ allegedly defamatory statements in the Letter are protected
    as privileged, and as a result it is appropriate to grant Defendants’ Motion to Dismiss
    Plaintiffs’ Count I for Slander of Title claim under Delaware Superior Court Civil
    Rule 12(b)(6) (failure to state a claim).
    COUNT I - EJECTMENT
    In their Response to the Motion to Dismiss, Plaintiffs argued that ejectment is
    an action at law over which I have subject matter jurisdiction under Delaware Rule of
    Civil Procedure 12(b)(1): “[b]y claiming ownership of the property at issue,
    Defendants have alleged title and possession ousting the Plaintiffs from the ability to
    enjoy the use of their own property.”*> Plaintiffs subsequently amended their
    Complaint to add Count II, an Ejectment claim sounding in law. Defendants did not
    object to Plaintiffs’ Motion to Amend the Complaint and conceded that their Motion
    24 Regs. § 8.3.4.4.
    sal Response at 918, citing Nelson v. Russo, 
    844 A.2d 301
    , 302 (Del. 2004).
    9
    to Dismiss had been impacted by the Amended Complaint, since Ejectment is a legal
    claim over which I have jurisdiction.” However, Defendants gave me early warning
    that, following my ruling on their Motion to Dismiss, they would file an Answer and
    Counterclaim against Plaintiffs. When | required Defendants to file their Answer and
    Counterclaim before I ruled on the Motion to Dismiss, they did so. In their Answer
    and Counterclaim, Defendants, as Counterclaim Plaintiffs, petitioned me to quiet title
    to the Property by entering a declaratory judgment that Defendants are the rightful
    owners of the Property. In the Answer and Counterclaim, Defendants alleged facts
    which would require me to review facts and other matters outside the deed to the
    Property and the property records. Defendants argue, therefore, that I lack subject
    matter jurisdiction over Count II of the Amended Complaint (Ejectment) and the
    Counterclaim.?’
    I agree. Because the examination of extrinsic evidence is necessary to
    determine both Plaintiffs’ and Defendants’ claims of ownership, the Court of
    Chancery has exclusive jurisdiction over Plaintiffs’ Count II for Ejectment and
    Defendants’ Counterclaim to quiet title (see discussion of Count III, below). As a
    result, I lack subject matter jurisdiction under Delaware Rule of Civil Procedure
    12(b)(1) over Plaintiffs’ Count II and Defendants’ Counterclaim, and I dismiss both.
    26 Nelson v. Russo, 
    844 A.2d 301
    , 302 (Del. 2004).
    a7 Heathergreen Commons Condominium Ass’n v. Paul, 
    503 A.2d 636
    , 643-44 (Del. Ch. 1985).
    10
    COUNT II —- DECLARATORY JUDGMENT
    Plaintiffs’ Count III] asks me to issue a Declaratory Judgment determining
    the title to the Property under 10 Del. C. §6501, which provides:
    Except where the Constitution of this State provides otherwise,
    courts of record within their respective jurisdictions shall have
    power to declare rights, status or other legal relations whether or
    not further relief is or could be claimed. No action or proceeding
    shall be open to objection on the ground that a Declaratory
    Judgment or decree is prayed for. The declaration may be either
    affirmative or negative in form and effect, and such declaration
    shall have the force and effect of a final judgment or decree
    In their Response to Defendants’ Motion to Dismiss, Plaintiffs argue that, if I hear the
    Slander of Title allegation under Count I and the Ejectment allegation under Count II,
    then I may assume subject matter jurisdiction over Count III in order to avoid a
    multiplicity of suits and make a determination as to ownership to the Property.”®
    Defendants counter that I lack subject matter jurisdiction under Delaware
    Rule of Civil Procedure 12(b)(1) and must dismiss Count III. I agree. “It is settled .
    . . that the Court of Chancery has subject matter jurisdiction over those quiet title
    actions where the alleged cloud [upon title] may be cleared only by the examination
    of extrinsic evidence.”*? Put differently, when the deed to the disputed property is
    valid on its face, the Court of Chancery has exclusive jurisdiction to question its
    28 Response at §]17.
    2° Cedar Lane Farms, Inc. v. Taylor, 
    1992 WL 111210
    , *2 (Del. Ch. May 18, 1992). “A cloud
    upon title has been defined as a title or encumbrance, apparently valid on its face, but which is in
    fact invalid. It is something which, nothing else being shown, constitutes an encumbrance upon or
    a defect in title.” State v. Williams, 
    1981 WL 96487
    , *1 (Del. Ch. June 8, 1981).
    11
    conclusiveness.°°
    Plaintiffs trace the chain of title to the Property by reference to several recorded
    deeds.*’ Critically, however, the Complaint also discusses or attaches extrinsic
    evidence outside the chain of title that casts doubt on whether Plaintiffs own the
    disputed property, such as the Letter, a report from a “Ms. Maurmeyer,” and a
    conversation between one of the Defendants and Plaintiffs about the boundary lines
    of their properties. Moreover, as discussed above, in their Answer and
    Counterclaim, Defendants allege a plethora of facts which would require me to
    review matters outside the deed to the Property and the property records. Because the
    examination of extrinsic evidence is necessary to determine both Plaintiffs’ and
    Defendants’ claims of ownership, the Court of Chancery has exclusive jurisdiction
    over both Plaintiffs’ Count II for Declaratory Judgment seeking to quiet title and
    Defendants’ Counterclaim. As a result, I lack subject matter jurisdiction under
    Delaware Rule of Civil Procedure 12(b)(1) over Count III of the Complaint and
    Defendants’ Counterclaim, and I dismiss both.
    Defendants request that I either transfer this entire matter to the Court of
    Chancery or that I be cross-designated as a Vice-Chancellor*’ to consider Plaintiffs’
    equitable Claims and Defendants’ equitable Counterclaim. I decline such cross-
    3° Williams, 
    1981 WL 96487
     at *1; Wilkes v. State, 
    265 A.2d 421
    , 423-24 (Del. 1970).
    31 Compl. §4]9-13.
    32 Id. 418.
    33 Pursuant to Del. Const., Art. IV, §13.
    12
    designation.
    Therefore, for the reasons stated above:
    I GRANT Defendants’ Motion to Dismiss Plaintiffs’ Count I, Slander of Title, for
    failure to state a claim, with prejudice under Superior Court Civil Rule 12(b)(6); and,
    I DISMISS Plaintiffs’ Count II, request to issue an Order of Ejectment pursuant to 10
    Del. C. §6701 for lack of subject matter jurisdiction, without prejudice under Superior
    Court Civil Rule 12(b)(1), unless Plaintiffs elect to transfer that claim to the Court of
    Chancery within sixty (60) days after this Order pursuant to 10 Del. Code §1902;
    I GRANT Defendants’ Motion to Dismiss Plaintiffs’ Count HI, request for a
    Declaratory Judgment pursuant to 10 Del. C. §6501, for lack of subject matter
    jurisdiction, without prejudice under Superior Court Civil Rule 12(b)(1), unless
    Plaintiffs elect to transfer that claim to the Court of Chancery within sixty (60) days
    after this Order pursuant to 10 Del. Code §1902; and,
    I DISMISS Defendants’ Counterclaim to quiet title to the Property by entering a
    declaratory judgment that Defendants are the rightful owners of the Property, for lack
    of subject matter jurisdiction, without prejudice under Superior Court Civil Rule
    12(b)(1), unless Defendants elect to transfer that claim to the Court of Chancery within
    sixty (60) days after this Order pursuant to 10 Del. Code §1902.
    13
    IT ISSO ORDERED.
    /s/ Craig A. Karsnitz
    cc: Prothonotary
    14