Mergenthaler v. Triumph Mortgage Corp. ( 2019 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
a Delaware Corporation,
LAWRENCE E. MERGENTHALER, )
a resident of the State of Delaware, )
)
Plaintiff, )
)
Vv. ) C.A. No. 09C-09-203 AML
)
TRIUMPH MORTGAGE CORP., )
)
)
)
Defendant.
Submitted: November 13, 2019
Decided: December 20, 2019
DECISION AFTER REMAND
John A. Sergovic, Jr., Esquire, SERGOVIC & CARMEAN, P.A., Georgetown, DE;
Attorney for Plaintiff.
Richard L. Abbott, Esquire, ABBOTT LAW FIRM, Wilmington, Delaware;
Attorney for Defendant.
LeGROW, J.
On October 24, 2019, the Delaware Supreme Court issued its decision
affirming in part, reversing in part, and remanding this Court’s decision denying a
motion to quash a writ of attachment fieri facias. The Supreme Court remanded the
case so this Court could “decide whether [Delaware Acceptance Corp. v.
Schatzman'] should apply retroactively to this case.” After considering the parties’
memoranda of law submitted after remand and the authorities cited by the Supreme
Court and the parties, I conclude the Schatzman decision should apply retroactively.
My reasoning follows.
FACTUAL AND PROCEDURAL BACKGROUND
The complicated and arduous history of this case is summarized fully in earlier
decisions issued by this Court and the Delaware Supreme Court. For the sake of
efficiency and brevity, I will not repeat those facts here. Rather, the following
factual recitation is limited to the facts essential to resolving the retroactivity
question remanded to this Court.
Lawrence Mergenthaler obtained a $207,599.59 default judgment against
Triumph Mortgage Corporation (“Triumph”) on January 15, 2010. On November
29, 2016, Mergenthaler filed a writ of attachment fieri facias (the “2016 Writ”) in
order to seize assets in a brokerage account that was pledged to Triumph. Triumph
12018 WL 526596 (Del. Jan. 23, 2018).
* Triumph Mortg. Corp. v. Mergenthaler, No. 621, 2018, slip op. at 13 (Del. Oct. 24, 2019).
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moved to quash the 2016 Writ because, among other reasons, it was issued more
than five years after the judgment’s entry and Mergenthaler had not first moved to
refresh the judgment.
The parties’ dispute, fairly summarized, involved the interplay of two statutes
and a Court rule. Under 10 Del. C. § 5072, a creditor may execute on a judgment
within five years, but after such time period the creditor must file a motion to renew
the judgment.? Delaware Superior Court Rule 69(a), however, extends from five
years to ten years the time period during which a judgment creditor may execute on
a judgment without moving to renew. And, 10 Del. C. § 561 allows the Superior
Court to adopt rules of procedure and provides that such rules supersede conflicting
state statutes unless the rules abridge, enlarge, or modify any party’s substantive
rights. Therefore, the question raised by Triumph’s motion to quash was whether
the time period for judgment renewal was a procedural rule, in which case Rule 69(a)
controlled, or a substantive right, in which case Section 5072 controlled.
While this Court was considering the motion to quash, a different Superior
Court judge issued his decision in Delaware Acceptance Corp. v. Schatzman
(“Schatzman’).4 In Schatzman, the Court explained the Superior Court
3 Triumph Mortg. Corp., slip op. at 6 (citing Knott v. LVNV Funding, LLC, 95 A.3d 13, 15 (Del.
2014)).
44 Delaware Acceptance Corp. v. Schatzman, S10J-03-032 and Evans v. G-33, Inc., SS08J-03-
068 (Del. Super. June 1, 2017) (LETTER ORDER)
2
Prothonotary’s Office in Sussex County had refused to issue execution writs more
than five years after entry of a judgment. The Schatzman Court held that Rule 69
“alters the ‘rules of decision’ to adjudicate the rights between debtors and creditors,”
and therefore did not supersede Section 5072.° The Schatzman Court therefore held
that a judgment must be renewed every five years, notwithstanding the language in
Rule 69(a).
This Court stayed consideration of the motion to quash while the Schatzman
decision was appealed. After the Delaware Supreme Court affirmed Schatzman,
Mergenthaler filed a motion to renew the judgment against Triumph nunc pro tunc
so that it retroactively would be renewed to January 14, 2015. Mergenthaler argued
the judgment should be renewed retroactively because he diligently had pursued
execution and did not renew the judgment after five years based on the Superior
Court’s practice of not requiring renewal until ten years after a judgment’s entry.
After considering the parties’ arguments, this Court denied the motion to
quash the 2016 Writ and granted Mergenthaler’s motion to renew the judgment nunc
pro tunc. The Court reasoned that before Schatzman was decided, the New Castle
County Prothonotary’s practice was to issue writs for ten years after a judgment was
entered. That is, the Prothonotary’s practice was to follow Rule 69 rather than
Section 5072. On appeal, the Delaware Supreme Court reversed this aspect of the
5 Triumph Mortg. Corp., slip op. at 6
Court’s opinion, explaining that “[a] nunc pro tunc order ‘cannot do more than
supply a record of something that actually was done at the time to which it is
retroactive.””® Giving retroactive effect to a motion to renew which was not filed on
the retroactive date was not a proper application of the nunc pro tunc doctrine, and
the Delaware Supreme Court therefore reversed that portion of this Court’s ruling.
The Supreme Court, however, also remanded the case to this Court to consider
whether Schatzman should apply retroactively, explaining:
The Superior Court found that Mergenthaler relied on the Superior
Court’s pre-Schatzman practices when deciding not to renew the
judgment before seeking attachment. While the ‘presumption is in favor
of giving a decision retroactive effect,’ this Court has adopted a three-
factor test to determine whether to apply a decision retroactively. . . .
Because the Superior Court did not address whether Schatzman should
apply retroactively to this case, and Mergenthaler sought attachment
before we, or the Superior Court, issued the Schatzman decision, we
remand to the Superior Court to decide whether Schatzman applies
retroactively.’
The Supreme Court retained jurisdiction. At this Court’s request, each side filed
simultaneous memoranda of law addressing only the retroactivity issue. As one
might predict, Mergenthaler argues the three-factor test weighs against retroactive
application, while Triumph argues the test weighs in favor of retroactive application.
° Triumph Mortg. Corp., slip op. at 7.
” Id. at 12-13 (internal citations omitted).
ANALYSIS
There is no set principle governing when a new rule of decisional law should
apply retroactively. Although there is a presumption in favor of retroactivity, the
United States Supreme Court has identified a three-factor balancing test that
recognizes that “statutory or even judge-made rules of law are hard facts on which
”9 The Delaware
people must rely in making decisions and in shaping their conduct.
Supreme Court expressly has adopted that balancing test, referred to as the Chevron
test.'° The Chevron test requires a court to weigh whether: (1) the decision at issue
established a new principle of law, either by overruling clear past precedent on which
litigants relied or by deciding an issue of first impression whose resolution was not
clearly foreshadowed; (2) retrospective application will advance or hinder the
operation of the new rule in view of its prior history; and (3) applying the decision
retroactively will produce substantial inequitable results.
The burden of persuasion falls on the party seeking to avoid retroactive
application.'? Unless the weight of the three factors favors prospective application,
the new rule of law will apply retroactively.!°
8 Juzwin y. Asbestos Corp., 900 F.2d 686, 692 (3d Cir. 1990).
* Id. at 692 (quoting Lemon v. Kurtzman, 411 U.S. 192, 199 (1973)); Stoltz Mgmt. Co. v. Consumer
Affairs Bd., 616 A.2d 1205, 1210-11 (Del. 1992).
10 Stoltz, 616 A.2d at 1210.
"| Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07 (1971); Stoltz, 616 A.2d at 1210.
12 Stoltz, 616 A.2d at 1210.
13 Td. at 1210-11.
Mergenthaler argues the first factor weighs against retroactive application and
cites this Court’s previous finding that Mergenthaler relied on the New Castle
County Prothonotary’s practice of following Rule 69(a) rather than Section 5072.4
Mergenthaler’s reasoning falters, however, because the Chevron test’s first factor is
limited to cases in which the new principle of law overruled clear past precedent. In
Stoltz, the Delaware Supreme Court held that the first factor was not met where the
previous authority on which the plaintiff relied was not “established precedent.”!>
According to Stoltz, statements in dicta do not rise to the level of clear past precedent,
and it follows that the unwritten practice of the Prothonotary’s office also cannot
.'© Moreover, although the Prothonotary’s practice was to follow
satisfy that element
Rule 69(a), dicta in decisions predating Schatzman suggested that a judgment
creditor must renew a judgment every five years.'’ Accordingly, the first Chevron
factor does not favor Mergenthaler because the Prothonotary practice on which he
relied was not clear past precedent, and the Schatzman decision was foreshadowed
by other decisions that predated the 2016 Writ.
The second Chevron factor, whether the rule’s operation will be advanced or
impeded by retroactive application, neither favors nor disfavors Mergenthaler’s
14 P],’s Mem. of Law in Supp. of Non-Retroactive Appl. of the Schatzman Decision (“PI.’s Mem.”)
Be
'S Stoltz, 616 A.2d at 1211.
16 Td.
'7 See Knott, 95 A.3d at 18; Delmarva Auto Fin. Servs. v. White, 100 A.3d 1059, 1069-70 (Del.
Super. 2014).
position. The purpose of requiring renewal after five years is to allow a debtor to
object to collection and “lodge substantive objections to the creditor’s continued
collection efforts.”'!® Applying the rule retroactively in Mergenthaler’s case does not
advance that purpose — since Triumph lodged no substantive objections to continued
collection — but it also does not hinder the rule’s purpose in this or other hypothetical
cases,
Mergenthaler, however, argues retroactive application would “cause the New
Castle Superior Court and its judgment creditors to be subject to potentially
countless numbers of debtors moving to open completed executions.”!? This parade
of horribles appears farfetched, however, because Superior Court Civil Rule 60(b)
is unlikely to afford relief to judgment debtors who could have, but did not, move to
quash a writ in a timely manner.”° Put differently, just as Triumph moved to quash
the 2016 Writ on the basis that the judgment had not timely been refreshed, other
judgment debtors could have done the same. In addition, the Court is unaware of
any such floodgates opening in the 23 months since Schatzman was affirmed by the
Delaware Supreme Court, even though there is a presumption in favor of retroactive
application.
'8 Triumph Mortg. Corp., slip op. at 7.
'9 P].’s Mem. at 10.
?° The only apparent argument available for relief in such a case would be excusable neglect under
Rule 60(b)(1) or the catchall extraordinary circumstances under Rule 60(b)(6). Either standard
seems difficult to meet for a judgment debtor who did not seek to quash a writ or immediately
move for relief after Schatzman was decided.
Finally, as to the third Chevron factor, retroactively applying Schatzman
would not produce substantial inequitable results. This factor takes into account
many of the same reliance principles considered in connection with the first factor,
because “it is well established that reliance interests weigh heavily in the shaping of
an appropriate equitable remedy.””! Therefore, if there is no lack of diligence on a
plaintiff's part, and no way for the plaintiff to anticipate the newly announced legal
principle, this factor favors prospective application, particularly when retroactive
application would leave a plaintiff without any remedy altogether.” Here,
Mergenthaler diligently pursued collection efforts, but failed to renew despite the
Knott decision referring to the need for renewal every five years. Although
retroactively applying Schatzman will bar Mergenthaler from seizing the assets held
in the pledge account at issue in this case, the judgment remains valid and
enforceable, and he may pursue other collection efforts.
In summary, none of the Chevron factors weigh in Mergenthaler’s favor, and
he cannot meet his burden of resisting retroactive application. Schatzman therefore
requires that the Court grant Triumph’s motion to quash the 2016 Writ.
21 Juzwin, 900 F.2d at 697 (quoting Lemon, 411 U.S. at 203).
22 See Chevron, 400 U.S. at 108; Juzwin, 900 F.2d at 696.
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