Fulton Bank, N.A. v. River Rock, LLC ( 2018 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
Fulton Bank, N.A.,
Plaintiff,
v. C.A. No.: N17C-12-108 SKR
River Rock, LLC, Key Properties
Group, LLC, Country Life Hornes, Inc.,
Elmer G. Fannin, and Mary Ann Fannin,
Defendants.
.\/\/\/\./\/\/\/V\/\_/\/
MEMORANDUM ORDER
This 13th day of August, 2018, upon consideration of Defendants’ Motion for
Reargurnentl, Plaintifl" s Opposition to Defendants’ Motion for Reargumentz, and
exhibits attached thereto, it appears to the Court that:
Procedural Background
l. On December 8, 2017, Plaintiff filed a Cornplaint3 (the “Complaint”)
against Defendants to recover amounts allegedly due on Commercial Loan No.
XXXXX67~9OOl (the “Account”). Defendants filed their Answer4 (the “Answer”) on
l Trans. ID. 62279225.
2 Trans. ID. 62283159.
3 Trans. ID. 61449935.
4 Trans. ID. 61520451.
January 3, 2018. On July 6, 2018, Defendants filed a Motion to Amend Answer5 to
assert Several counterclaims against Plaintiff
2. Specifically, Defendants in their proposed Counterclaim assert that, rather
than the S422,588.72 that is alleged in the Complaint to be owed by River Rock,
River Rock is actually owed $265,015.23 on account of overpayments of principal
and interest.6 Defendants further allege that the overpayments were caused by
Plaintiffs mismanagement of the Account, including misapplying Defendants’
payments to other loan accounts, not applying payments to the Account balance, and
incorrectly reversing payments7 Defendants state that they learned of these facts as
a result of an audit on the Account, completed in June 2018, conducted by their
financial advisor, Gavin Solmonese LLC.8
3. Plaintiff filed its Opposition to Defendants’ Motion to Amend Answer9 on
July 16, 2018. Among other things, Plaintiff argues that the proposed amendment
should be rejected because it contains compulsory counterclaims that Should have
been asserted with the Answer.m Plaintiff contends that Defendants had prior
knowledge of the alleged mismanagement of the Account yet failed to raise the
counterclaims with the Answer. Thus, relying on Superior Court Civil Rules 13(a),
5 TranS. ID. 62206999.
6 Defs.’ Mot. to Amend Answer 11 9.
7 Defs.’ Mot. to Amend Answer, Ex. l, Am. Answer and Countercl. at 15_16.
8 Defs.’ Mot. to Amend Answer 11 9.
9 Trans. iD. 62241404.
10 Pl.’s Opp’n to Mot. to Amend-Answer 111 3-4.
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l3(f), and 15 (“Rule l3(a)/l3(f)/15”), Plaintiff argues that Defendants are precluded
from amending their Answer to now assert compulsory counterclaimsll
4. The Court held a hearing on Defendants’ Motion to Amend Answer on
July l9, 2018. Defendants do not dispute that the proposed counterclaims are
compulsory counterclaims as defined in Rule l3(a). Instead, they argue that the
omission is excusable under Rule l3(f) because they only knew the alleged facts
after Gavin Solmonese completed its audit in June 2018. They also argue that the
amendment should be allowed under Rule 15, which mandates that leave to amend
should be “freely given,” and they assert that Plaintiff would not Suffer any
prejudice
5. Plaintiff challenges Defendants’ assertion that they did not know of the
alleged mismanagement of the Account until June 2018. Specifically, at the hearing,
Plaintiff referenced a February 2017 complaint, Case No. l7C-02-062 (the “062
Complaint”)12, filed by Defendants and their affiliated entities. In the 062
Complaint, Defendants alleged that “Fulton has failed to properly credit accounts
with payments from CLH on the above referenced accounts and has demanded
payments from CLH on accounts that have been paid off.”13 Plaintiff contends that
11 Ia'.
12 Trans. ID. 61061058.
13 There, “CLH” refers to a group of related entities that include Defendants in the instant case,
and the‘ -‘above referenced accounts” include the Account at issue.
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these allegations show that Defendants had knowledge of the alleged
mismanagement of the Account as early as February 2017. The Court agreed with
Plaintiff and denied Defendants’ request to assert counterclaims as untimely.14
6. On July 26, 2018, Defendants filed this Motion for Reargument.
Defendants contend that the Court, when denying their Motion to Amend Answer,
overlooked controlling legal principles Specifically, Defendants argue that the
federal counterpart of Rule 13 does not contain a Rule 13(1) which directly addresses
omission of compulsory counterclaims, and thus Rule 15 , which deals with
amendments as a general matter, should control. Defendants also argue that Plaintiff
is estopped from relying on the 062 Complaint, because Plaintiff successfully moved
to dismiss it for improper service and failure to state a claim.
Legal Analysis
7. A motion for reargument “will be denied unless the Court has overlooked
a controlling precedent or legal principles, or the Court has misapprehended the law
or facts such as would have changed the outcome of the underlying decision.”15 A
motion for reargument “is not intended to rehash the arguments already decided by
the Court.”16
14 Defendants’ request to amend one of their answers in the Answer was not opposed and therefore
granted.
15 Kermea'y v. Invacare Corp., 2006 WL 488590, at *1 (Del. Super. Jan. 31, 2006) (internal citation
omitted).
16 ld.
8. Defendants suggest that, because F ederal Rule 13(f) has been deleted, this
Court should accordingly disregard Delaware Superior Court Civil Rule 13(f) and
look only to Rule 15. That position contravenes bedrock jurisprudence This Court
is required to apply the Delaware Superior Court Rules of Civil Procedure to cases
before it. While Delaware courts often look to the Federal Rules of Civil Procedure
and their annotations to seek guidance, they are not legally binding in this Court.
This is particularly so when there is a specific Superior Court Rule on point that
governs the issue before the Court.
9. Rule 13(f) provides that a pleader may, by leave of court, amend his
pleading to assert a counterclaim if he failed to assert that counterclaim “through
oversight, inadvertence, or excusable neglect,” or “when justice requires.”17 Rule
15(a) provides that leave of court to amend a pleading “shall be freely given when
justice so requires.”18 Defendants assert that the Court, in denying their Motion to
Amend Answer at the hearing, erroneously adopted Plaintiff’s argument that the
standards under Rule l3(f) and Rule 15(a) are different. This assertion is wrong.
The Court never held that Rule 13(f) and Rule 15(a) are inconsistent ln fact, the
Court found that the proposed counterclaims shall not be allowed under either Rule.
17 Super. Ct. Civ. R. 13(1).
18 Super. Ct. Civ. R. 15(a).
10. Based on Defendants’ allegations in the 062 Complaint, it is apparent to
the Court that Defendants knew of Plaintiffs alleged mismanagement of the
Account at least at the time they filed the 062 Complaint in February 2017. Hence,
Defendants’ assertion that they could not have filed the counterclaims with their
Answer, because they were not made aware of the alleged mismanagement, is belied
by the pleadings Therefore, Defendants’ failure to assert counterclaims
simultaneously with their January 2018 Answer was not the result of “oversight,
inadvertence, or excusable neglect.”
ll. Nor can Defendants prevail under the “when justice so requires” clauses
under Rules 13(f) or 15(a). As previously discussed, the pleadings filed by
Defendants in related actions involving Plaintiff demonstrate that they were in
possession of facts sufficient to formulate a timely counterclaim long before they
filed the Answer. Hence, Defendants’ failure to file compulsory counterclaims
under these circumstances can only be seen as dilatory and does not satisfy the
“when justice so requires” standard of either Rule l3(f) or 15(a). Defendants may
not have known the exact damages until June 2018, but they are not required by the
Delaware Rules of Civil Procedure to plead the exact amount of damages to set forth
a viable counterclaim19
19 See Super. Ct. Civ. R. Q(g).
12. Defendants’ argument that Plaintiff is judicially estopped from relying
upon Rule 13(f) is also misplaced. “Judicial estoppel acts to preclude a party from
asserting a position inconsistent with a position previously taken in the same or
earlier legal proceeding.”z° ln its effort to dismiss the 062 Complaint, Plaintiff
highlighted Defendants’ failure to plead the elements of their claims for relief. ln
this proceeding, however, Plaintiff argues that Defendants knew of the claims but
failed to assert them with the Answer as required under Rule 13. These are not
inconsistent positions
Conclusion
13. Rule 13(f) and Rule 15 are the applicable legal authority when this Court
decides whether to allow an amendment to assert compulsory counterclaims
Defendants had prior knowledge of and should have asserted the proposed
counterclaims with the Answer, but they failed to do so. The Court did not overlook
controlling precedents or legal principles, or misapprehend the law or facts, in its
decision denying Defendants’ Motion to Amend Answer.
Therefore, Defendants’ Motion for Reargument is DENIE ’." 1
IT IS SO ORDERED.
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Sheldon Ki``l{§i``iiie, Judge
' ``=2.0 Moturola'lnc. v."'Akar Tech., Inc., 958 A.2d 852, 859 (Del. ’2008). ' ~
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