December Corp. v. Wild Meadows Home Owners Association

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
DECEMBER CORPORATION, )
)
Plaintiff, )
)
v. ) C.A. No. 10635-VCG
)
WILD MEADOWS HOME OWNERS )
ASSOCIATION and DELAWARE )
MANUFACTURED HOME )
RELOCATION AUTHORITY, )
)
Defendants. )
MEMORANDUM OPINION
Date Submitted: September 25, 2015
Date Decided: December 22, 2015
Michael P. Morton, of MICHAEL P. MORTON, P.A., Greenville, DE, Attorney for
the Plaintiff.
James G. McGiffin, Jr., of COMMUNITY LEGAL AID SOCIETY, INC., Dover,
DE, Attorney for Defendant Wild Meadows Home Owners Association.
William A. Denman, of PARKOWSKI, GUERKE & SWAYZE, P.A., Dover, DE,
Attorney for Defendant Delaware Manufactured Home Relocation Authority.
GLASSCOCK, Vice Chancellor
This matter involves the construction of a statute as a matter of first
impression. The statute is 25 Del. C. § 7043(c), a portion of the Rent Justification
Act, which involves “manufactured homes” on leased land in “manufactured home
communities”; it provides a right to arbitration for any home owner, or “the home
owners’ association” acting on behalf of any home owner, to contest certain
ground rent increases. The remaining Defendant here is a home owners’
association (“HOA”) representing tenants in a community covered by the act, and
it purported to demand arbitration on behalf of many home owners in that
community. It is not, however, the sole HOA in the community, and another
HOA, not the Defendant, is registered as the community HOA with a state
authority, the Delaware Manufactured Home Relocation Authority. The Plaintiff,
the community owner, argues that the “registered” HOA is “the home owners’
association” referred to by statute, and seeks a declaratory judgment that the
Defendant lacks standing under the statute and thus that its arbitration demand was
a nullity. The Defendant contends it had standing and properly compelled
arbitration under the statute. The parties have filed cross Motions for Summary
Judgment. For the following reasons, the Defendant’s motion is granted and the
Plaintiff’s is denied.
1
I. BACKGROUND FACTS
A. The Parties
Plaintiff December Corporation (“December Corp.”) is a Pennsylvania
corporation whose principal business is to manage and maintain housing
communities.1 December Corp. manages the Wild Meadows manufactured housing
community (“Wild Meadows”), which is an “active adult manufactured housing
community”2 located in Dover, Delaware.3
Defendant Wild Meadows Home Owners Association (“WMHA”) is an
incorporated association made up of a group of residents of Wild Meadows.4
Defendant Delaware Manufactured Home Relocation Authority (the “Authority”) is
a statutorily created authority of the State of Delaware.5
B. The Rent Justification Act
In 2013, the Delaware General Assembly enacted the Rent Justification Act
1
Compl. ¶ 8.
2
In this Memorandum Opinion, I use the statutory terms “manufactured housing” and
“manufactured housing community” to refer, generally, to what most speakers of American
English would call “house trailers” and “trailer parks.” As a former resident of a trailer park—
Camelot (the Rehoboth-area park, not the once-and-future kingdom)—I see no stigma in using the
vernacular terms, but I use the statutory terms for purposes of clarity. In any event, I note that
Wild Meadows seems to be an upscale park, and that the homes there in no way resemble
traditional house trailers.
3
Compl. ¶ 8.
4
Id. at ¶ 9. WMHA was unincorporated during many of the relevant events described herein.
WMHA incorporated on February 11, 2015 at the direction of an arbitrator’s decision, which said
that WMHA could incorporate to cure a “procedural defect” identified therein. Def. WMHA’s
Supp. Letter 2–3. Nonetheless, WMHA is an incorporated association as of the date of this
Memorandum Opinion.
5
Compl. ¶ 10.
2
(the “Act”).6 The Act requires the owners of manufactured home communities
(“Community Owners”) to “justify” certain increases in annual rents that
Community Owners charge to manufactured home owners who lease the land.7
Pursuant to the Act, if a Community Owner seeks to increase annual rents by an
amount greater than the three-year average increase in the Consumer Price Index
(the “CPI-U”),8 the Community Owner must justify the increase by meeting one of
eight statutory justifications.9
In order to perfect any increase in rent, the Act requires that Community
Owners follow specific procedures to notify its residents. At least 90 days before
the effective date of a proposed rent increase, the Community Owner must send a
notice to three parties: the affected home owners, the HOA, and the Authority.10 If
the proposed rent increase exceeds the three-year average increase in the CPI-U, the
Community Owner must also schedule a meeting between the parties to “discuss the
reasons for the increase.”11 The meeting must be held within 30 days of sending the
notice of the proposed rent increase.12 Finally, within 30 days of the meeting, any
6
25 Del. C. § 7040.
7
Id. § 7042.
8
Specifically, the Act refers to the “the average annual increase of the Consumer Price Index For
All Urban Consumers in the Philadelphia-Wilmington-Atlantic City area ("CPI-U'') for the most
recently available preceding 36-month period.” Id. § 7402.
9
Id. § 7042.
10
Id. § 7403(a).
11
Id. § 7403(b).
12
Id. § 7403(b).
3
dissenting home owner or the HOA representing any dissenting home owner may
petition the Authority to appoint an arbitrator to conduct nonbinding arbitration
proceedings.13
C. December Corp. Increases Rents in Wild Meadows
In 2014, December Corp. contemplated raising the rents at Wild Meadows by
an amount greater than the three-year average increase in CPI-U. On October 24,
2014, December Corp. sent a letter to each Wild Meadows home owner that included
a notice of the rent increase and set forth an upcoming meeting to discuss its
justification.14 In addition, December Corp. sent a notice to Wild Meadows Land
Owners, Inc.—an entity separate from WMHA—which was the only HOA
registered with the Authority.15
December Corp. held the meeting of home owners on November 10, 2014.16
At the meeting, December Corp. directed home owners to provide information on a
sign-in sheet. The sign-in sheet included a field to indicate whether the home owner
was represented by an HOA, but it did not specify a particular HOA. Approximately
191 participants of the meeting checked the “HOA” column.17
13
Id. § 7403(c).
14
Compl. ¶ 25.
15
Id. at ¶ 25.
16
Id. at ¶ 26.
17
Def. WMHA’s Opening Br., App. A, at 34–49.
4
WMHA, which was not registered with the Authority,18 submitted a petition
for arbitration to the Authority within 30 days of the meeting.19 Thereafter, the
Authority assigned the matter Docket No. 5-2014 and appointed Ciro Poppiti,
Esquire (the “Arbitrator”), to arbitrate the rent increase.20 During an initial telephone
conference between the Arbitrator and the parties, December Corp. objected to the
exercise of jurisdiction because WMHA was not properly registered with the
Authority.21 Following briefing on the issue, the Arbitrator issued a written ruling
on February 6, 2015, in which he concluded that he had jurisdiction to arbitrate the
matter.22 Later that day, the Arbitrator notified the parties that he would proceed
18
According to the Plaintiff, it located the registered HOA for notice purposes on a list that is
publicly available on the Authority’s website, which did not include WMHA. Compl. ¶ 25.
Despite the Plaintiff’s contention, WMHA argues that it was, in fact, registered with the Authority.
To support its argument, WMHA submitted a letter, dated September 24, 2008, which indicated
that WMHA had registered with the Authority around that time. See Def. WMHA’s Opening Br.,
App. A, at 67. WMHA argues that the Authority mistakenly failed to publish WMHA as a
registered HOA on its website. However, WMHA failed to submit the exhibit that it cited in its
answering brief (App. A-11) to support this contention. Moreover, WMHA failed to defend this
argument in its reply brief and at oral argument. Instead, WMHA appeared to concede that it was
not a “registered” HOA. Therefore, I assume for purposes of this decision that WMHA was not
registered at the time it filed its petition with the Authority.
19
Compl. ¶ 28. The petition indicated that it was filed “on behalf of the Board of Directors” of
WMHA. Id.
20
Id. at ¶ 29.
21
Id. at ¶ 32.
22
Id. at ¶ 32. In WMHA’s answering brief to the motion to dismiss before the Arbitrator, it
suggested that any potential procedural defects—such as the fact that WMHA was not registered—
could be cured by joining the registered HOA, or substituting it for WMHA pursuant to “the
principle underlying Superior Court Civil Rule 17.” See Def. WMHA’s Supp. Letter 2–3.
December Corp. argues that WMHA failed to formally request to join or substitute a party and
denies that a mechanism exists that would have allowed WMHA to do so in the arbitration. See
Pl.’s Supp. Letter 3. In his written decision, the Arbitrator found that WMHA was the official
HOA and that WMHA could cure “the procedural defect” by incorporating, which it did the same
day. Def. WMHA’s Supp. Letter 2–3. Given my decision here, I need not making any findings
5
with the arbitration on February 12, 2015.23 Two days before the arbitration
proceedings were to commence, December Corp. filed its Complaint here, seeking,
among other things, an injunction to enjoin the parties from proceeding with the
arbitration and a declaration that the rent dispute is not subject to arbitration.24
The arbitration proceeding took place on February 12, 2015.25 On March 30,
2015, the Arbitrator issued his ruling that denied the rent increase for those home
owners who had indicated that they were represented by an HOA at the November
10, 2014 meeting.26 Thereafter, December Corp. filed an appeal of the Arbitrator’s
decision with the Superior Court, and they have since submitted a stipulated request
with that Court to stay the appeal, pending my decision here.27
II. PROCEDURAL HISTORY
The Plaintiff filed its Verified Complaint on February 10, 2015, which
included a Motion for a Temporary Restraining Order. I heard oral argument on that
motion on February 11, 2015—the day before the arbitration was to proceed—and I
denied the motion from the bench.28 The Defendant Authority filed its Verified
as to whether WMHA made an official request in its answering brief, nor do I need to find that a
mechanism existed that would have allowed the registered HOA to be joined or substituted.
23
Compl. ¶ 32.
24
Id. at 20.
25
Pl.’s Opening Br. 19.
26
Id.
27
See December Corp v. Wild Meadows Home Owners Assoc., C.A. No. 10635-VCG (Sept. 23,
2015) (LETTER).
28
December Corp. v. Wild Meadows Home Owners Assoc., C.A. No. 10635-VCG (May 1, 2015)
(TRANSCRIPT).
6
Answer on February 25, 2015.
The Plaintiff filed its Motion for Summary Judgment on April 9, 2015.
Defendant WMHA later filed a Motion to Dismiss or Cross-Motion for Summary
Judgment on May 13, 2015. Following briefing by the parties, I heard oral argument
on the motions on September 21, 2015. At oral argument I dismissed the counts
against the Authority from the bench. Additionally, I asked the remaining parties to
submit supplement briefing.29 The parties simultaneously submitted letter
memoranda on September 25, 2015. This is my Memorandum Opinion.
III. STANDARD OF REVIEW
The Court will grant a motion for summary judgment when the record shows
that “there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.”30 In deciding a motion for summary
judgment, the moving party has the burden of demonstrating that there is no material
issue of fact.31 Furthermore, the Court must view the facts in the light most favorable
to the nonmoving party.32 I note that both of the parties here have moved for
29
Specifically, I asked the parties to supplement the record as to whether WMHA made a timely
application to add or substitute the registered HOA. I have already described the parties’ positions
on this issue and have decided I need not make a determination of this issue in my decision here.
See supra note 22.
30
Ct. Ch. R. 56(c). See e.g., LaPoint v. AmerisourceBergen Corp., 970 A.2d 185, 191 (Del. 2009).
31
See e.g., Bank of New York Mellon v. Realogy Corp., 979 A.2d 1113, 1119 (Del. Ch. 2008).
32
See e.g., LaPoint, 970 A.2d at 191.
7
summary judgment.33
IV. ANALYSIS
A. The Plaintiff’s Allegations
The Plaintiff alleges two counts in its Complaint. In Count I, the Plaintiff
argues that the arbitration proceeding was improper because WMHA did not have
standing to petition the Authority. The Plaintiff seeks injunctive relief to enjoin the
Defendants from proceeding with the arbitration—which was pending at the time of
the Complaint—and a declaratory judgment that WMHA lacked standing to petition
the Authority for arbitration. At this point in the litigation, I am unable to grant the
Plaintiff injunctive relief because the Arbitrator has already issued his decision and
the proceeding has thus concluded.34 However, the declaratory relief that the
Plaintiff seeks remains available, if appropriate.35
In Count II, the Plaintiff alleged that the Authority has wrongfully appointed
arbitrators since the implementation of the Act. The Plaintiff sought positive
33
WMHA has asked that the Court “grant its motion to dismiss Plaintiff’s complaint or, in the
alternative, enter summary judgment” in its favor. Def. WMHA’s Reply Br. 14. For purposes of
this Memorandum Opinion, I will treat WMHA’s motion as a motion for summary judgment.
34
See In re Digex Inc. S’holder Litig., 789 A.2d 1176, 1215 (Del. Ch. 2000) (noting that an
injunction would be improper where the wrongful conduct has already occurred); see generally
Wolfe and Pittenger, § 10–2(a), 693–94, citing 1 J.L. High, A Treatise On The Law Of Injunctions
(4th ed. 1905) (preliminary injunctive relief has no application where the act complained of has
already occurred).
35
I note that the Plaintiff’s opening brief and reply brief sought only injunctive relief. However,
based on discussion of the Plaintiff’s allegations during oral argument, I find that the application
for declaratory judgment—which was unambiguously included in the Plaintiff’s Complaint—is
subject to the motions for summary judgment here.
8
injunctive relief that would direct the Authority in future cases to determine, in the
first instance, whether a petitioner has standing and whether there is jurisdiction over
the respondent to appoint an arbitrator. At oral argument, I found that these
allegations sought relief for parties that were not before the Court, and that to grant
the Plaintiff relief would require that I inappropriately issue an advisory opinion.36
For this reason, and for the reasons stated from the bench, I granted summary
judgment in favor of the Authority as to Count II and released the Authority as a
party.37
The rest of this Memorandum Opinion addresses the one issue that remains
before me: Did WMHA have standing under the Act to petition the Authority and
thereby arbitrate the justification of December Corp.’s rent increase? In order to
address this issue, I must first determine that I have subject matter jurisdiction to
hear the case.
B. Subject Matter Jurisdiction
WMHA contends that an adequate remedy exists at law, and that this court is
therefore without jurisdiction to entertain the Plaintiff’ claims. The Delaware Court
of Chancery is a court of limited jurisdiction.38 The Court may have subject matter
36
See Stroud v. Milliken Enters. Inc., 552 A.2d 476, 479–80 (Del. 1989).
37
Oral Arg. Tr. 67 (unofficial transcript). I note that oral argument on the Motions for Summary
Judgment was held on September 21, 2015, but none of the parties requested an official copy of
the transcript.
38
See e.g., El Paso Natural Gas Co. v. TransAmerican Natural Gas Corp., 669 A.2d 36, 39 (Del.
1995) (citing DuPont v. DuPont, 85 A.2d 724, 729–30 (Del. 1951)).
9
jurisdiction in one of three circumstances: “(1) the invocation of an equitable right;
(2) a request for an equitable remedy when there is no adequate remedy at law; or
(3) a statutory delegation of subject matter jurisdiction.”39 When the question of
subject matter jurisdiction is raised, the plaintiff bears the burden of establishing this
Court’s jurisdiction.40 Here, the Plaintiff has not alleged that jurisdiction is
conferred by statute. Instead, the Plaintiff argues that jurisdiction attaches because
the Court of Chancery is the only court in which the Plaintiff can seek relief, whether
by injunction (which relief I have already denied) or declaratory judgment. I agree.
Within the Act is a provision that affords affected parties the right to appeal
an arbitrator’s decision to the Superior Court. Specifically, the Act states:
The community owner, the home owners' association, or any affected
home owner may appeal the decision of the arbitrator within 30 days of
the date of issuance of the arbitrator's decision. The appeal shall be to
the Superior Court in the county of the affected community. The appeal
shall be on the record and the Court shall address written and/or oral
arguments of the parties as to whether the record created in the
arbitration is sufficient justification under the Code for the community
owner's proposed rental increase in excess of CPI-U.41
The Plaintiff argues that in Pot-Nets Coveside Homeowners Association v. Tunnell
Compsanies, L.P.,42 the Superior Court defined the scope of appellate review, which
39
Gladney v. City of Wilmington, 2011 WL 6016048, at *3 (Del. Ch. Nov. 30, 2011) (internal
citations omitted).
40
Pitts v. City of Wilmington, 2009 WL 1204492, at *5 (Del. Ch. Apr. 27, 2009) (citing Yancey v.
Nat'l Trust Co., 1993 WL 155492, at *6 (Del. Ch. May 7, 1993)).
41
25 Del. C. § 7044.
42
2015 WL 3430089 (Del. Super. May 26, 2015).
10
does not encompass the review sought here. In Tunnell, the Superior Court was
asked to determine what constitutes a timely petition for arbitration under the Act.
The court never reached that determination, however, because it held that the issue
fell outside the Superior Court’s jurisdiction as proscribed by the plain language of
the statute.43 The court found that the General Assembly unambiguously limited the
scope of the Superior Court’s appellate review to include only the determination of
“whether the record created in the arbitration is sufficient justification under the
Code for the community owners’ proposed rental increase in excess of the CPI-U,”
and purposefully excluded any other topic.44 Here, the Plaintiff allegedly has been
aggrieved by the Authority’s decision, upon WMHA’s demand, to refer this matter
to arbitration. Accordingly, the Plaintiff has asked this Court to determine whether
WMHA, a non-registered HOA, had standing to seek arbitration pursuant to the Act.
I find that this issue does not fit within the scope of the Superior Court’s appellate
review, as defined in Tunnell. As a result, the Plaintiff does not have an adequate
remedy at law and, therefore, this Court has jurisdiction to craft an equitable
remedy.45
43
Id. at *5.
44
Id. at *6.
45
I note that the Defendants argue that the Plaintiff has an adequate remedy at law because it can
petition the Superior Court to issue an extraordinary remedial writ. However, this argument fails
to recognize the breadth of the decision in Tunnell, which precludes the Superior Court from
hearing “anything other than whether a community owner’s proposed rent increase above the CPI-
U is justified.” Id. at *6 (emphasis added).
11
C. Standing Under the Act
Since I have determined that jurisdiction is proper, I now consider the merits
of the Plaintiff’s argument that WMHA did not have standing to petition the
Authority for arbitration. The Plaintiff asserts that WMHA lacked standing because
the clear, unambiguous language of the Act, and the related regulations promulgated
by the Authority, limit standing to only those HOAs that are registered with the
Authority. Section 7043(c) of the Act states, in part, the following:
After the informal meeting, any affected home owner who has not
already accepted the proposed increase, or the home owners'
association on the behalf of 1 or more affected home owners who have
not already accepted the proposed increase may, within 30 days from
the conclusion of the final meeting, petition the Authority to appoint a
qualified arbitrator to conduct nonbinding arbitration proceedings.46
Therefore, in order to determine whether WMHA has standing to petition the
authority, I must determine the meaning of “the home owners’ association” as used
in Section 7043(c).
Our Supreme Court has held that statutory interpretation is ultimately the
responsibility of the courts.47 In carrying out this responsibility, the plain language
of a statute should control the Court’s interpretation unless the statute is
ambiguous.48 A statute is considered ambiguous if “it is reasonably susceptible of
46
25 Del. C. § 7043(c) (emphasis added).
47
Pub. Water Supply v. DiPasquale, 735 A.2d 378, 382 (Del. 1999).
48
Newtowne Vill. Serv. Corp. v. Newtowne Road Dev. Co., Inc., 772 A.2d 172, 175 (Del. 2001)
(“Only where a statute is ambiguous and its meaning cannot be clearly ascertained does a court
engage in the process of statutory construction and interpretation.”).
12
different conclusions or interpretations” or “if a literal reading of the statute would
lead to an unreasonable or absurd result not contemplated by the legislature.”49 If
an administrative body has given an interpretation of a statute administered by it, the
reviewing court “may accord due weight, but not defer, to an agency interpretation.50
Moreover, “[a] reviewing court will not defer to such an interpretation as correct
merely because it is rational or not clearly erroneous.”51
As a threshold matter, I find that the statute is ambiguous because the term
“the home owners’ association” is unclear in the context here, where two HOA’s
exist for owners in a single park. The term “home owners’ asscociation” is
undefined in the Act and, therefore, I must consider the term’s plain meaning, if any.
According to the Plaintiff, the plain meaning of the term must refer to a single and
specific HOA because the General Assembly purposefully used the definite article
“the.” This argument, by itself, is unavailing. This Court has recognized that the
use of the definite article “the” does not always denote a singular interpretation. 52 In
this case, “the home owner’s association” could refer to a single HOA; but it also
could be interpreted to refer to the HOA filing the petition, which may be one among
49
LeVan v. Independence Mall, Inc. 940 A.2d 929, 932–33 (Del. 2007) (citing Newtowne Vill.
Serv. Corp., 772 A.2d at 175).
50
DiPasquale, 735 A.2d at 382.
51
Id.52
Wilmington Savings Fund Soc’y v. Foresight Energy LLC, 2015 WL 7889552, at *8 (Del. Ch.
Dec. 4, 2015) (noting that “a person may be called ‘the owner,’ even if that person is not
necessarily ‘the sole owner.’”).
13
multiple HOAs in the community. Based on the plain language alone, I cannot
determine the meaning intended by the legislature. Therefore, the term is ambiguous
and I must determine the term’s meaning by construing it “in a way that will promote
its apparent purpose and harmonize it with other statutes within the statutory
scheme.”53
When interpreting undefined terms, the Court must assign to them a
“reasonable and sensible meaning in light of their intent and purpose.”54 Section
7040 of the Act provides for its purpose and states, in part, the following:
Through this subchapter, the General Assembly seeks to protect the
substantial investment made by manufactured home owners, and enable
the State to benefit from the availability of affordable housing for
lower-income citizens, without the need for additional state funding.
The General Assembly also recognizes the property and other rights of
manufactured home community owners, and seeks to provide
manufactured home community owners with a fair return on their
investment. Therefore, the purpose of this subchapter is to
accommodate the conflicting interests of protecting manufactured
home owners, residents and tenants from unreasonable and
burdensome space rental increases while simultaneously providing for
the need of manufactured home community owners to receive a just,
reasonable and fair return on their property.55
Based on the purpose provided in the statute itself, the General Assembly expressly
intended to expand protection for manufactured home owners while simultaneously
53
LeVan, 940 A.2d at 933 (citing Eliason v. Englehart, 733 A.2d 944, 946 (Del. 1999)) (quotation
omitted).
54
Angstadt v. Red Clay Consol. School Dist., 4 A3d 382, 390 (Del. 2010) (citing E.I. Du Pont De
Nemours & Co. v. Clark, 88 A.2d 436, 438 (Del.1952)).
55
25 Del. C. § 7040 (emphasis added).
14
preserving the Community Owners right to a fair return on their property. The
statute accomplishes that purpose by allowing rent increases above the inflation rate,
but only where justified by statutory factors. It allows for enforcement of this
mechanism through a low-cost alternative, arbitration. Finally, it broadly conveys
the right to seek such arbitration on “any [dissenting] affected home owner” or on
“the home owners’ association on behalf of 1 or more [dissenting] affected home
owner.” This to me evinces an intent on the part of legislature to broadly provide
access to arbitration to home owners or those representing them. Due to the
expansive purpose of the statute, I find that the General Assembly did not intend to
restrict the availability of arbitration to only a single HOA per park, or to an HOA
that has registered with the Authority; so long as an HOA represents a dissenting
home owner, it may seek arbitration, as could the home owner herself.
In interpreting the statute, I must also consider the General Assembly’s stated
intent to preserve the Community Owner’s interest in a fair return on their property.
It is not clear to me—and the Plaintiff has not attempted to argue—that a requirement
that an HOA register with the Authority would support this intent, or would
otherwise provide any benefit to the Community Owner, other than to establish a
technical requirement that could be exploited in litigation.56 The latter intent on the
56
At first blush, one apparent benefit to a Community Owner of the construction advanced here
by the Plaintiff would be to prevent a vexatious multiplicity of arbitrations arising from a single
rent-increase proposal. This benefit is illusory, for two reasons. First, the statute provides that
15
part of the legislature is highly unlikely. Therefore, a broad interpretation of “the
home owners’ association” complies with the General Assembly’s intent to balance
the interests of home owners and Community Owners, and to provide broad resort
to arbitration with regard to rent increases greater than the cost of living.
In addition, if the General Assembly had intended to add a registration
requirement for those HOAs entitled to seek arbitration on behalf of home owners,
or to limit the right to arbitration to a single HOA per community, an examination
of the statutory scheme reveals that it knew how to do so. In Section 7026(b), the
General Assembly expanded the rights of home owners by imposing a statutory
obligation on community owners intending to sell all or part of the community to
make a first offer to the HOA. The statute provides that the first offer must be made
to the HOA that has registered with the Authority for that community.57 Because
each home owner may file a separate arbitration demand; regardless of how “the home owners’
association” is construed, there are potentially as many petitioners as there are home owners in the
park. Second, and more fundamentally, the evil of multiple arbitrations arising from a single rent
increase is addressed in the Authority’s regulations. In 1 Del. Admin. C. §202(7.7), the Authority
requires a single arbitration fee for multiple leaseholders affected by the same proposed rent
increase. Additionally, Subsection (7.6) gives the Arbitrator authorization to consolidate cases
when a proposed rent increase will affect leaseholders at different time periods. These Subsections
provide a mechanism to consolidate multiple petitions, while also maintaining the broad access
that the General Assembly intended. Therefore, the registration requirement advocated by the
Plaintiff here would be unnecessary and ineffective to address any multiplicity of arbitrations.
57
25 Del. C. § 7026(b)(2)(a) requires that the HOA must be registered in order to participate:
There can be only 1 home owner association per community eligible to participate
in the process of this section. That home owner association must register with the
Delaware Manufactured Home Relocation Authority as prescribed by the
Authority. The first association to register in compliance with the requirements of
this section will be the official home owner association eligible to participate in the
process. (emphasis added).
16
that provision imposes a duty on the community owner, it makes sense to have only
one entity for the community owner to deal with, a consideration not present with
respect to the statute under consideration here, which involves a provision that
broadly assigns a right to relief for home owners. The provision in Section 7026 is
noteworthy for our purposes, however, as it demonstrates that if the General
Assembly had intended to include similar restrictions in Section 7043, it likely
would have indicated its intention in the statute.
The Plaintiff argues that the meaning of “the home owner’s association” in
the Act should be interpreted by using the definition purportedly assigned to the term
in the Authority’s regulations in 1 Del. Admin C. § 202 (the “Regulations”), which
applies to demands for rent-increase arbitration. Section 2 therein defines certain
terms for purposes of the Regulations.58 Within this section, the term “HOA” is
defined as “a home owners association registered with the Authority pursuant to 25
Del. Code Section 7026(b).”59 This definition embodies the requirement that, to be
an “HOA”, the association in question must be registered with the Authority.
Courts generally defer to regulatory decisions within an agency’s area of
expertise. However, it is inappropriate for this Court to interpret a statute solely by
reference to a definition in a set of regulations. Instead, I must accord the
58
1 Del. Admin. C. § 202(2).
59
Id.
17
administrative body’s interpretation due weight to the extent it serves the ultimate
goal of statutory construction, which is “to determine and give effect to legislative
intent.”60 I note that the definition of “the home owners’ association” or “HOA” as
used in a statute is a matter of construction, and does not invoke the technical
expertise of the Authority. Finally, I note that the Authority was a party to this action
and has argued that the Regulations should not be interpreted so as to deny standing
here,61 and that the Regulations themselves recognize that the definitions apply only
so long as “the meaning set forth [is not] inconsistent with the Act or the manifest
intention of the Act.”62 Therefore, I am hesitant to assign great weight to the
Authority’s definition in my determination of the meaning of “the home owners’
association” in Section 7043(c).
The Plaintiff’s argument based on the Regulations is unavailing for a more
fundamental reason, however: The Regulations do not purport to assign their own
limited definition of “HOA” to the standing question. When the Regulation provides
for standing to seek arbitration, it states only that arbitration is triggered “[u]pon
receipt of a petition to appoint a qualified arbitrator pursuant to [Section] 7043(c),”63
and, as we have seen, that Section is silent as to any registration requirement. In
60
LeVan, 940 A.2d at 932 (citing Eliason, 733 A.2d at 946).
61
Def. Authority’s Answering Br. 13–14.
62
1 Del. Admin. C. § 202(2).
63
1 Del. Admin. C. § 202(7.1).
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other words, the Regulations themselves are silent as to the crucial issue of
standing.64
For all the reasons above, I do not find the definition of “HOA” in the
Regulations controlling for standing purposes.
In light of the foregoing, I interpret the term “the home owners’ association”
in Section 7043(c) to include any HOA that files a petition with the Authority on
behalf of one or more dissenting home owners. The WMHA meets this definition.
The WMHA was a functioning home owners’ association that had represented
residents in the Wild Meadows community since at least 2003. Moreover, the
Plaintiff had frequently recognized and dealt with WMHA as a home owners’
association prior to this lawsuit, including sending WMHA a notice of a rent increase
pursuant to the Act in 2013. The Plaintiff has not disputed these facts, arguing only
that WMHA’s historical function is immaterial to the Court’s decision. Therefore,
I find that WMHA fits within the meaning of “the home owners’ association” in
Section 7043 and had standing to petition the Authority in this case.
I note that if my decision were different, I would have to consider equitable
64
Furthermore, I note that the Regulations themselves do not once use the defined term “HOA” in
regard to arbitration procedures. Instead, Section 7 of the Regulations—dealing with arbitration—
exclusively uses the term “the Home Owners Association,” which is itself undefined and closely
matches the statutory term I analyze here. The parties did not comment on this distinction in their
briefing or at oral argument. However, it seems clear to me that if the Authority intended to limit
standing to arbitrate by utilizing its defined term “HOA,” it would have, at the very least, used that
term in the section that governs arbitration.
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issues of acquiescence or estoppel here. The Plaintiff, at the statutorily-prescribed
meeting that led to the WMHA’s exercise of arbitration rights, asked home owners
to register and to indicate if they were represented by an HOA, without
differentiating between WMHA and Wild Meadows Land Owners, Inc. Nearly 200
home owners indicated they were represented by an HOA, and presumably many
expected that their rights were being enforced by WMHA in the arbitration. To the
extent there is confusion, it was partly the result of the Plaintiff’s ambiguous
registration sheet. Any home owner individually could have sought arbitration, and
to extinguish those rights based on a technical defect would require equitable
examination of the factors referenced above.
Lastly, the Plaintiff raises what it contends is another procedural defect with
respect to the arbitration; it asserts that WMHA lacks standing to petition the
Authority because it improperly purported to bring its petition “on behalf of the
Board of Directors” of WMHA.65 The Plaintiff argues that the Act does not give the
Board of Directors standing to petition the Authority, pointing to 25 Del. C. §
7043(c), which provides that the HOA may petition the Authority “on behalf of 1 or
more affected home owners.” I find that argument unpersuasive.
The Plaintiff does not argue that WMHA did not intend to represent one or
more affected home owners through its petition. Instead, the Plaintiff argues that by
65
Compl. Ex. G.
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using the phrase “[o]n behalf of the Board of Directors” in its petition, WMHA has
failed to comply with the statutory provision to petition on behalf of a home owner
or owners. However, the statute does not specify the wording an HOA must use in
its petition. Consistent with the discussion above, if the plain meaning of the statute
does not specify such a requirement, it would frustrate the broadly-remedial intent
of the General Assembly to add one here. WMHA was a functioning HOA that
represented many of the residents in Wild Meadows. Although its petition—which
was in the form of a letter—indicated that it was brought on behalf of the Board of
Directors, it is clear to me that the arbitration was sought at the direction of the Board
of Directors, who were themselves home owners, while the intent of WMHA was to
represent its members. Indeed, WMHA’s arbitration petition itself discloses that,
after the Plaintiff’s presentation to the home owners at the rent-increase meeting,
WMHA notified an attorney for the Plaintiff that it would petition to seek arbitration,
which it did two days later. I find that WMHA’s petition was intended to be, and in
fact was, brought on behalf of its members and complied with the statute.
V. CONCLUSION
In sum, I find that WMHA complied with the statutory requirements and had
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standing to petition the Authority for arbitration.66 Based on the foregoing, I grant
the Motion for Summary Judgment in favor of WMHA, and deny the Motion of the
Plaintiff. The parties should provide an appropriate form of order.
66
Although the Arbitrator decided that WMHA had standing and that the matter was therefore
properly before him, no party has argued that arbitrability, in this statutory scheme, was a matter
for the Arbitrator, and therefore I have not considered that issue or the Arbitrator’s decision on
arbitrability here.
22