Opinion
Civil Action No. S09M-07-020 THG.
February 22, 2010.
Richard E. Berl, Jr., Esquire, Smith, O'Donnell, Feinberg Berl, LLP, Lewes, DE.
Edward M. McNally, Esquire, Jody Barillare, Esquire, Morris, James LLP, Wilmington, DE.
MEMORANDUM OPINIONDear Counsel:
I am the third judicial officer at the trial level to be involved in this war. Vice Chancellor Donald F. Parsons, Jr. has ruled. Judge Richard F. Stokes has entered two rulings. Fortunately for me, their decisions have resolved 99.9% of the disputes.
Before me is a Petition for Rule to Show Cause filed by William Esham, III ("Esham") seeking an order requiring Defendants ("Reserves") to satisfy a judgment entered personally against Esham.
The battles in this war are summarized as follows:
(a) Reserves sued Esham, Bella Via, LLC, and its other three (3) members in Superior Court concerning a real estate development deal that went south.
(b) Reserves sued the same parties in a related case in Chancery Court seeking an order requiring the release of construction trust funds on equitable grounds. The construction trust held funds on behalf of Bella Via.
(c) On November 9, 2007, Vice Chancellor Parsons issued a detailed decision granting equitable relief on behalf of the Reserves in the amount of $316,941.87. Chancery Court's Order required that money held in the construction trust on behalf of Bella Via be paid to Reserves for Bella Via's portion of a joint development project between Bella Via and Reserves. Relevant to the present petition, Bella Via was found to be responsible for $71,466.83 which was for a letter of credit and bond fees, as well as $80,967.71 for the Obrecht-Phoenix contract deposit.
(d) The trial before Judge Stokes took place in August, 2007, with a decision entered on January 3, 2008. Specifically, Judge Stokes did not find any personal liability as to any of the four members of Bella Via, including Esham.
(e) In April, 2008, the Chancery Court decision was complied with when the judgment amount was transferred from the construction trust of Bella Via, LLC to the Reserves.
(f) In January, 2009, the Supreme Court issued a remand to the Superior Court case as to the question of the individual liability of the managers of Bella Via.
(g) Following briefing on remand, Judge Stokes entered a detailed judgment on May 18, 2009, against Esham and Eyah Elboim. This was an in personam judgment in which Esham and Elboim were jointly and severally responsible for $152,434.54 due to their fraudulent misrepresentations to the Reserves. The judgment was based upon false promises to pay, or contribute, $71,466.83 for the letters of credit and $80,967.71 for the Obrecht-Phoenix deposit. Reserves relied on the false promises. Judge Stokes found Esham responsible not for a breach of contract, which would have been Bella Via's responsibility, but for specifically making a fraudulent misrepresentation, a tortuous act.
In the present petition, Esham seeks an order requiring the satisfaction of the personal judgment against him because the aforementioned judgment of $71,466.83 and $80,967.71 were paid by Bella Via, LLC in April, 2008, when the Chancery judgment was paid.
Reserves argues that this petition comes too late. Reserves argues that Esham's claim that the April payment was a "full and final satisfaction" was never raised as a defense in the proceedings leading up to the Esham judgment. Reserves argues that res judicata prevents the Court from granting relief on grounds that should have been put before Judge Stokes.
Esham argues that he is not trying to re-litigate the judgment below. He argues that Reserves cannot collect twice on the same debt.
I decline to base this decision on res judicata based on the history of the case as set forth above. When Judge Stokes rendered his first decision in January 2008, the April 2008 payment had obviously not been made. The appeal and the remand was based on the evidence and theories presented to Judge Stokes in the August, 2007, trial.
Yes, it would have been prudent for Esham to have raised this when the matter was remanded. But the remand involved all four of the Bella Via members and it involved allegations seeking in personam responsibility far, far in excess of the judgment amounts of $71,466.83 and $80,967.61.
Reserves further argues that Esham cannot get the advantage of the Bella Via payment because the in personam judgment is based in tort.
Reserves argues that the collateral source rule bars this Court from considering the payments made by Bella Via, LLC, as to the contract dispute.
Esham acknowledges the applicability of the collateral source rule, but argues the in personam judgment lies in contract not tort. This is incorrect, as Judge Stokes clearly found Esham committed fraud.
The collateral source rule provides that if the Reserves received compensation for its damages from a source wholly independent of the tortfeasor (Esham), such payment shall not be a credit against the tortfeasor's liability. Restatement Second Torts 920A.
Per Judge Stokes' remand decision, Esham and the other three members created Bella Via to facilitate the real estate development project in which Bella Via partnered with the Reserves. A loan was obtained from Severn Savings Bank ("Severn") for $4,680,000.00 to acquire and construct the real estate project. Esham and the three other Bella Via members each personally guaranteed the Severn loan. A part of this loan was placed into the aforementioned construction trust on behalf of Bella Via with draws presumably to be made as work progressed. It is from this construction trust that the Reserves received the Chancery award which included the $71,466.83 for the letter of credit and $80,967.71 for the Obrecht-Phoenix deposit.
The tort committed in this case was done by Esham as a member of Bella Via. The money ultimately paid out of Bella Via's construction trust was money Esham had personally guaranteed would be repaid to Severn.
Therefore, it is my conclusion that the collateral source rule is not applicable because Bella Via, LLC cannot be deemed to be wholly independent of Esham. Esham is a part of and member of Bella Via.
Esham's Petition to have the in personam judgment satisfied is granted.
IT IS SO ORDERED.