Leonard Mathias, Sr. and Susan J. Mathias v. Angola Neck Park Property Owners Association, Inc.

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
KIM E. AYVAZIAN CHANCERY COURTHOUSE
MASTER IN CHANCERY 34 The Circle
GEORGETOWN, DELAWARE 19947
AND
NEW CASTLE COUNTY COURTHOUSE
500 NORTH KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19980-3734
November 20, 2014
Via Lexis-Nexis
John A. Sergovic, Jr., Esquire John F. Brady, Esquire
Sergovic Carmean & Weidman, P.A. Law Office of Gerry Gray
142 East Market Street 21133 Sterling Ave. Unit 12
PO Box 751 PO Box 549
Georgetown, DE 19947 Georgetown, DE 19947
RE: Leonard Mathias, Sr. and Susan J. Mathias v. Angola Neck Park
Property Owners Association, Inc.
C.A. No. 9124-MA
Dear Counsel:
Pending before me are exceptions to my draft report filed by Plaintiffs
Leonard Mathias, Sr. and Susan J. Mathias. In my draft report, I recommended
that the Court grant registered agent Judy Mangini’s motion to quash service of
process and, if Plaintiffs wished to proceed with their pending complaint seeking
title by adverse possession over a portion of a paper cul-de-sace adjacent to their
lot in Angola Neck Park, they would have to file a petition to appoint a receiver or
trustee (hereinafter simply “receiver”) for the Defendant Angola Neck Park
Property Owners Association, Inc. (the “Corporation”), which became a void
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corporation by order of the Delaware Secretary of State on October 1, 2010. For
the reasons that follow, I recommend dismissal of the Plaintiffs’ exceptions.
On November 27, 2013, Plaintiffs filed a complaint against the Corporation
for declaratory relief in the form of an order establishing Plaintiffs’ title by adverse
possession over a portion of a paper cul-de-sac adjacent to Lot 92 in Angola Neck
Park. The summons and complaint were served on Mangini, the Corporation’s
registered agent, on December 4, 2013. On January 15, 2014, counsel for Mangini
entered an appearance for the limited purpose of filing a motion to quash, which
alleged that the Corporation had become a void corporation by order of the
Delaware Secretary of State on October 1, 2010, after the residential community
failed to continue the operation of its homeowners association. Mangini suggested
that the complaint should be served instead upon the individual homeowners in
Angola Neck Park.
Desirous of avoiding the “inefficiency” and difficulty of naming and serving
each individual homeowner as a defendant and of reviving the Corporation,
Plaintiffs responded to the motion by proposing that this Court order the
Corporation to continue in existence for the purpose of defending the instant
action. However, citing In re Krafft-Murphy Co., Inc., 82 A.3d 696, 710 (Del.
2013), I found that the three year winding-up period of 8 Del. C. § 278 had expired
by the time Plaintiffs filed their complaint on November 27, 2013. Upon the
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expiration of the winding up period, the homeowners association had ceased to
exist as a “body corporate” and had lost its authority to manage its unfinished
business. Therefore, I recommended that Mangini’s motion to quash be granted,
and that Plaintiffs should file a petition for the appointment of a receiver because
the only way the Corporation could be re-empowered to defend its interests was
through the appointment of a receiver under 8 Del. C. § 279.
Plaintiffs do not take exception to my recommendation that the Court grant
Mangini’s motion to quash. Instead, they take exception to what they term my
“rationale” that Plaintiffs can petition for the appointment of a receiver when
service has not been perfected on a defunct corporation. Instead, citing In re
Krafft-Murphy Co., Inc., 2011 WL 5420808, at *3 (Del. Ch. Nov. 9, 2011),
Plaintiffs argue that there appears no method of perfecting service on the
Corporation other than under Court of Chancery Rule 4(d)(7).1 Therefore,
Plaintiffs request that I fashion a mode of service under Rule 4(d)(7), so that
service may be perfected on the Corporation through a receiver for it under 8 Del.
C. § 279, in lieu of requiring Plaintiffs to file a separate petition to appoint a
receiver.
1
Court of Chancery Rule 4(d)(7) provides: “An order directing another or an
additional mode of service of a summons in a special case may be made by the
Court.”
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I decline to accept Plaintiffs’ suggestion that I appoint sua sponte a receiver
for the Corporation. Instead, I recommend that, upon Plaintiffs’ filing a petition
for the appointment of a receiver, service of process may be perfected on the
Corporation by publishing notice of the original complaint and the petition once a
week for three consecutive weeks in the Delaware State News and by mailing (first
class mail) the same notice to each property owner in Angola Neck Park and to
legal counsel for the Sussex County Council. Therefore, I adopt my draft report, as
modified herein, as my Final Report. A proposed form of Notice shall be
submitted to me for approval no later than 14 days after this Final Report becomes
a final order of the Court.
The parties are referred to Court of Chancery Rule 144 for the process of
taking exception to a Master’s Final Report.
Sincerely,
/s/ Kim E. Ayvazian
Kim E. Ayvazian
Master in Chancery
KEA/kekz
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