Summary
In Ingram, this Court opined, "Res Judicata is an absolute bar to a second suit in a different court on the same matter by the same parties. The second suit need not be on the identical cause of action.
Summary of this case from Paoli v. Sun CommunitiesOpinion
C.A. No. 99C-09-006 HDR.
Submitted: February 18, 2004.
Decided: March 18, 2004.
Dover Associates Joint Venture `s Motion for Summary Judgment, GRANTED.
William P. and Margaret Ann Ingram, Dover, Delaware, pro se.
George F. Gardner, III, Esq., Parkowski, Guerke Swayze, Dover, Delaware, for Defendant.
OPINION
This case involves disputes over loans secured by real estate. Initially Plaintiffs William P. and Margaret Anne Ingram ("Ingrams") brought lender liability claims which have been resolved. Remaining in this case is the counterclaim of Dover Associates Joint Venture ("Dover Associates") against the Ingrams. Dover Associates has moved for summary judgment on the issues of liability and damages resulting from the Ingrams' default on a series of seven commercial notes and seven mortgages. The Ingrams have alleged a number of matters in opposition but these defenses are either barred from relitigation or insufficient as a matter of law. Accordingly, the Motion for Summary Judgment is GRANTED.
I. BACKGROUND
On June 21, 1996, the Ingrams and their company 1101 Stone Associates, L.L.C. ("Stone"), executed and delivered to Dover Associates, a series of seven commercial notes and seven mortgages as part of the security for a loan commitment of $1,150,000.00. One Mortgage, Security Agreement and Assignment of Rents was secured by lots in a development known as Stoney Creek. This property was previously foreclosed upon giving the Ingrams a $1,000,000.00 credit.This litigation involves a Mortgage, Security Agreement and Assignment of Rents secured by a parcel of land with improvements containing .341 acres referred to as the "DuPont Highway Mortgage" or "1101 DuPont Highway," having an office building on it. Additionally, it involves a Mortgage, Security Agreement and Assignment of Rents secured by an unimproved Lot 6, in Fox Meadows ("Troon Road Property").
The mortgages and the commercial notes have been in default since an interest payment was not made on January 21, 1997. The initial interest rate was 16% with a default interest rate of 24%, and additional 10% late fee. When no payment was received by January 26, 1997, the default interest rate and late charge became applicable. The Ingrams received written notice of default on June 27, 1997. It has now been seven years since the Ingrams defaulted on this loan. There have been five lawsuits in three different courts during this time involving this loan.
The First Lawsuit :
In November 1997, Dover Associates filed suit in the Court of Chancery seeking control of Stone. In November, 1998, Vice Chancellor Lamb entered a Stipulated Judgment Agreement providing that if the Ingrams paid the sum of $1,390,000.00 on or before February 18, 1999, that such payment would be full satisfaction of all claims and the mortgages would be satisfied. Although the Ingrams executed an Agreement of Sale on February 18, 1999 they did not tender full payment as required. Therefore, on February 19, 1999, Vice Chancellor Lamb entered an Order that Dover Associates, not the Ingrams, controlled Stone.
The Second Lawsuit :
On March 10, 1999, Dover Associates filed in the Court of Chancery for a Receiver to collect the rents on the 1101 So. DuPont Highway, Dover, Delaware property. This resulted in a Receiver pendente lite of the property being appointed in an Order signed April 20, 2000 by Vice Chancellor Steele. Per Order, the Receiver was to collect the rents from the property, manage the property, and maintain the property. Amounts collected by the Receiver were to be applied to the cost of managing and maintaining the property, including the payment of taxes and municipal assessments. Any amounts remaining after such expenses were to be maintained in escrow subject to further order of the Court, pending the outcome of this Superior Court litigation. All possession and control of the property was to be turned over to the Receiver.
The Third Lawsuit :
On March 31, 1999, Dover Associates filed a Sci Fa Sur mortgage action in Superior Court which ultimately led to the foreclosure sale of the Stoney Creek Subdivision Property which was security for the loan to the Ingrams and Stone pursuant to the mortgage and underlying commercial notes. A $1,000,000.00 credit was entered against the mortgage for this sale.
The Fourth Lawsuit :
On September 3, 1999, this suit was filed by the Ingrams as a claim for lender liability against Dover Associates. This Motion for Summary Judgment on the issues of liability and damages stems from this suit.
Other aspects of the case have been concluded in the context of a fifth lawsuit in the U.S. Bankruptcy Court which will be explained below.
The Fifth Lawsuit :
On June 16, 2000, the Ingrams filed a Voluntary Petition for Relief under Chapter 7 of Title 11 of the Bankruptcy Code. By Order dated September 18, 2000, the United States Bankruptcy Court for the District of Delaware granted the Ingrams motion that the Chapter 7 action be converted to a Chapter 11 bankruptcy. On December 20, 2000, the Bankruptcy Court approved a Stipulation for Relief from Stay allowing Dover Associates and the Ingrams to proceed with this case. The result of this litigation was that on February 20, 2003 a Stipulation of Settlement between the Trustee and Dover Associates relating to all lender liability claims asserted or which could have been asserted was finalized. This Stipulation and the Amended Order of the Bankruptcy Court dismissed with prejudice all lender liability claims asserted by the Ingrams in this case and preserved the compulsory counterclaim foreclosure action in this case.
Based on the Court of Chancery Stipulation of November 1998 and the Bankruptcy Stipulation of 2003, this Court entered an Order dismissing the Ingrams' Complaint in this case with prejudice and permitting Dover Associates to proceed with its Counterclaim. On September 20, 2003, Bankruptcy Court denied the Ingrams' dischargeability as to any of their indebtedness.
Initially, the amount of the loan was $1,150,000.00. After Dover Associates obtained control of Stone, Stone was sold at a sheriff's sale for $1,000,000.00, giving the Ingrams a credit for this amount. The Ingrams also received a credit for $4,855.35 which was the amount of money left in an escrow account from Stone for unexpended construction funds. The balance owed on the commercial notes was $2,751,284.50 as of December 21, 2003. This amount accounts for a per diem rate of interest of $935.81 per day since December 21, 1999, which continues to date, as well as previous interest charges from the time of default until December 21, 1999 at a default interest rate of 24%and a 10% late charge. To date, no payments have ever been made by the Ingrams to Dover Associates on this commercial loan. The only credits against this loan are the $1,000,000.00 for the Sheriff's sale of the Stoney Creek Property and the $4,855.35 from the unused escrow account. The legal fees for the five law suits are $31,370.32, however, Dover Associates has elected not to pursue the attorney fee claims as they are most likely uncollectable or would spawn a new series of litigation.
Compounding was eliminated on December 22, 1999.
On January 23, 2004, Chief Judge Walrath of The United States Bankruptcy Court made it clear that Dover Associates is free to pursue the counts of its Counterclaim that relate to a personal judgment on the notes as well as in rem judgments on the specific property. The Chief Judge specifically stated that any lender liability claims were dismissed in the Stipulation.
II. PARTY CONTENTIONS
The Ingrams argue a variety of lender liability defenses, notwithstanding the dismissal of all the lender liability claims. The following is a summary of the Ingrams' defenses and the Dover Associates responses to these allegations. Some allegations made by the Ingrams in their Answering Brief do not make sense so they are not included here because they are not material as a matter of law.
The Ingrams argue they have never been in default on the $1,150,000.00 loan. They argue that while the loan was for $1,150,000.00, that only $850,000.00 was actually lent. Dover Associates responds that this is simply not true. The disbursement of the money was $750,000.00 at settlement, $300,000.00 placed in a construction escrow at settlement and subsequently disbursed for the benefit of the Ingrams. Another $100,000.00 was placed in an interest reserve at settlement and subsequently disbursed in monthly interest payments for the benefit of the Ingrams.
They allege that no balance is owed on the obligation because Dover Associates has failed to dispose of the collateral in conformity with the provisions of the Uniform Commercial Code. Dover Associates argues that disposal of real property is not governed by the Uniform Commercial Code and that the terms and conditions of the mortgages and the underlying commercial notes govern the real property.
The Ingrams argue that the documents signed at settlement were different from the documents agreed upon. The Ingrams claim they are owed $15,000 for the switch. The Ingrams contend that this fact is undisputed and that because the documents were not those agreed upon that the documents are unenforceable. The Ingrams contend that the closing on the loan documents was merely a signing ceremony and that no one actually looked at the documents.
Dover Associates argues that these documents were not different from those agreed upon and that no evidence has been offered to support the Ingrams claims. Additionally, the Ingrams were represented by counsel that rendered an opinion to Dover Associates that the documents constituted the legal, valid and binding obligations of the borrower in accordance with their respective terms and does not violate any Delaware law. Dover Associates points out that there has been no factual or legal basis to support any contention that the documents were changed. In a deposition Mr. Ingram was unable to specify how the documents differed.
Dover Associates further asserts that if the Closing was just a signing ceremony as the Ingrams contend, then it was one that concluded in the distribution of $1,150,000.00 solely for the benefit of the Ingrams and Stone. It is undisputed that the Ingrams certified at closing;
"I have carefully reviewed the HUD settlement statement and, to the best of my knowledge and belief, it is a true and accurate statement of all receipts and disbursements made on my account or by me in this transaction. I further certify that I have received a copy of the HUD-1 settlement statement."
Dover Associates argues Superior Court Rule 8(dd) provides that unless a signature on an instrument is denied by Affidavit served with the Answer, the signature is deemed admitted. Additionally, 10 Del C. § 3917 imposes that same requirement and the counterclaim specifically requires allegations in the Complaint to be answered by affidavit pursuant to 10 Del. C. § 3901. There have been no affidavits denying signature. The full $1,150,000.00 was disbursed to the Ingrams pursuant to the mortgage contract and the commercial notes and the money has not been repaid. All the terms providing for foreclosure are stated clearly in the mortgages.
Dover Associates contends that the Ingrams were notified of the default on June 27, 1997 and had a continuing opportunity to repay the loan until November 1998 when the Stipulated Agreement was signed.
Finally, Dover Associates argues that, any contention as to the validity of these documents was released and waived by the Ingram's Stipulation, approved on November 25, 1998, by Vice Chancellor Lamb. Thus, the Ingrams released any and all claims against Plaintiff including, without limitation, those claims asserted in their counterclaim. This claim was released a second time in the Bankruptcy Stipulation.
The Ingrams allege that the documents signed for the commercial notes were not valid due to an accord and satisfaction in February 2000. Dover Associates responds that there is no evidentiary basis for the conclusory allegation that there was an accord and satisfaction of any of these notes and mortgages in February 2000 as alleged by the Ingrams. An accord and satisfaction is an affirmative defense under Superior Court Civil Rule 8(c) and the failure to assert this timely is a waiver of the ability to do so now.
The Ingrams claim that Dover Associates slandered the name of Stoney Creek to lawyers, banks and appraisers claiming the property was not worth what was owed, in order to keep the Ingrams from being able to obtain a loan to pay off the monies in the Stipulated Settlement Agreement of 1999. Dover Associates denies all allegations as to slander regarding the value of the Stoney Creek property. No evidence has been presented to support this allegation.
The Ingrams contend that they had a buyer for the Stoney Creek property who would pay the Stipulated $1,390,000.00 amount ordered by Vice Chancellor Lamb, but the attorney for Dover Associates, proffered an incorrect Affidavit stating that the time to tender this money had expired and Dover Associates was in control of the property.
Further, the Ingrams allege that on March 31, 1999, Dover Associates commenced a fraudulent foreclosure action in this Court. Then, on August 12, 1999, the sale of the Stoney Creek property was suspicious in that the only bidder was Dover Associates for $1,000,000.00. On December 29, 1999, Stoney Creek was sold to the same buyers that the Ingrams allege they had a contract with for $1,390,000, but now they paid only $1,200,000. The Ingrams claim that Dover Associates intentionally kept potential buyers from the sale to keep the sale price as low as possible. The buyer the Ingrams supposedly had an agreement with was Bay Developers. The Ingrams allege Dover Associates refused to accept this contract. The Ingrams contend that this $1,390,000 should be credited towards the principal and accrued interest on the loans.
Dover Associates responds that full payment, not an Agreement of Sale, was needed on February 18, 1999 and that there is simply no basis to support a $1,390,000.00 credit to the Ingrams based on an Agreement to Sell. The Ingrams argue that by not allowing them sufficient time to close on the $1,390,000.00 contract, presented the same day the time period to deliver the money expired, that any property disposition thereafter is commercially unreasonable.
Dover Associates contends that the Stipulated Judgment on February 23, 1999 became a final Order in the Court of Chancery making Dover Associates the sole member of Stone holding the title to the title to the Stoney Creek Property and this cannot be relitigated here. It points out that there was no appeal from either the foreclosure or the selling of the property prior to the confirmation of the sale by the Superior Court or after. Therefore, it contends this matter cannot now be relitigated either as to procedure or value. There has been no claim made of tortious interference of contract nor of any evidence indicating a willing buyer prior to the Sheriff's sale. The Ingrams had to tender the purchase price prior to the February 18, 1999 date, not merely enter an Agreement to Sell. Because money was not tendered by the Ingrams the loan remains in default.
The Ingrams allege that Dover Associates realized that the Ingrams had a strong case against them so they secretly attempted to buy off the Ingrams lender liability claims for relatively nothing. Dover Associates responds that there is simply no evidence to support this claim.
The Ingrams argue that Michael Menkowitz, partner with Fox Rothschild, filed a false affidavit with the U.S. Trustee claiming he was not related to any of the Plaintiff's adversaries when he admitted in open court that he was related to Carl Schnee, an adversary to the Plaintiffs. Mr. Menkowitz filed a supplemental affidavit to apprise the court of his relationship to Carl Schnee on September 19, 2003. Apparently, Mr. Schnee is Mr. Menkowitz's mother's first cousin. Mr. Schnee previously represented the Debtors in state court actions. Mr. Menkowitz stated in his supplemental affidavit that he did not believe this relationship would affect his role as Bankruptcy Trustee in this case. Thus, the Bankruptcy Court was aware of these circumstances prior to its ruling on January 23, 2004.
The Ingrams claim that the amounts of money owed as determined by the Hirsch affidavit are not valid. Ronald B. Hirsch is the Managing Agent for Dover Associates on the loan. The Ingrams argue that because the amount of money owed is disputed, there can be no foreclosure on the two properties, 1101 S. DuPont Highway, Dover Associates and Lot 6, Fox Meadows. They claim the 24% default interest rate is void as a penalty. Additionally, the Ingrams argue that nowhere in the documents does it state that once the 24% default rate begins, there will be an additional 10% on top of that rate, and that the default commenced a month too early. The Ingrams also claim they are entitled to a $3,000 credit for unearned interest as well as a credit for at least 30% of the loan origination fee totaling $41,000 because they only benefitted from $700,000 of the loan money. The records show that the full $1,150,000.00 was disbursed solely for the benefit of the Ingrams and Stone.
The Ingrams calculate their interest using the pre-default 16% rate and apply that rate to the Sale Agreement price of $1,390,000 to leave a final balance owed of only $82,165.00, which they claim is the worst case scenario. The Ingrams also claim that the properties could be refinanced by the Ingrams providing enough money to pay off Dover Associates, at this amount. The Ingrams contend that Dover Associates has received all their money back plus substantial profit.
Dover Associates maintains that there is absolutely no basis to apply these calculations or amounts to the loan. Dover Associates points out that the interest rates and late fee are clearly stated in the notes which provide:
"This note shall be due and payable in full on the date on which the 24th monthly payment is due. In the event of a default under this note, the interest rate shall immediately escalate to a default rate of twenty-four per cent (24%) per annum until this note is paid in full."
"If the note holder has not received any payment due under the note, monthly installment or any part of any such payment by the end of the fifth (5th) calendar day after it is due, Borrower shall be in default and, in addition to the other remedies available to note holder herein, Borrower immediately shall pay to Note holder a late charge equal to ten per cent (10%) of the delinquent payment. Such late charge shall apply to each and every event of late payment, including the payment of principal due at maturity or upon acceleration of the note."
Dover Associates agrees that any monies from the rents over and above the expenses of taxes, insurance and maintenance are to be treated as a credit. However, pursuant to the Order of Vice Chancellor Steele, this accounting will be applied to any judgment at the end of the Superior Court proceedings.
Dover Associates maintains that the Ingrams' claims of usury as to the interest rate are barred by the waiver and release in the Stipulation approved by Vice Chancellor Lamb. Additionally, 6 Del. C. § 2301 provides that there is no limitation on the rate of interest that may be charged for the loan or use of money that exceeds $100,000 where repayment is not secured by a mortgage against the principal residence of any borrower. Thus, it argues that the defense of usury is not available in this case.
Dover Associates asserts that the Ingrams fail to acknowledge that the running of interest, spread out over the seven years the loan has been in default, is a direct result of their contesting Dover Associates to the fullest on each and every issue in five separate litigations in three courts. The Ingrams have proposed a variety of alternative interest calculations that have no basis in the documents. Dover Associates relies on the calculations of Mr. Hirsch that are spelled out in his affidavit and which are based on his sworn affidavit testimony and business records using the loan documents.
The Ingrams contend that interest payments were waived because it was Mr. Hirsch's fault that the FHA refused to insure the loan on existing buildings and that this admission was a waiver of any default.
Dover Associates denies that there was ever any waiver of interest payments. Instead Dover Associates argues that they tried to work with the Ingrams following the issuance of the default letter by deferring the collection of interest payments and declining to call the loan in default while they worked with the Ingrams to try to get FHA approval. Dover Associates also argues that they posted a maintenance bond for the roads with the City and guaranteed completion of certain other items with the City, all so that certificates of occupancies could be obtained and sales accomplished. Dover Associates maintains that the Ingrams had a continuing opportunity to repay the loan up until the Stipulated Judgment of November of 1998.
Also alleged in the Ingrams' Answer is that Dover Associates and the Ingrams are joint venturers. Dover Associates denies this allegation claiming there is no communication written or oral to infer the existence of a co-venture relationship and the loan documents are very clear in defining the relationship as one of creditor and debtor or mortgagee and mortgagor. Dover Associates argues that the Ingram's claim is barred by both the Court of Chancery and Bankruptcy Stipulations as to all lender liability claims.
III. STANDARD OF REVIEW
Under Superior Court Civil Rule 56(c), summary judgment should be granted when the Court's review of the record, in the light most favorable to the non-moving party, shows that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law. It is the Court's role to identify disputed factual issues whose resolution is necessary to decide the case, but not to decide such issues. Summary Judgment may not be granted where the record indicates that there is a material fact in dispute or further inquiry into the facts is necessary to clarify the application of law. The moving party carries the initial burden of showing that a genuine issue of material fact does not exist. Once this has been proven, the burden shifts to the non-moving party to prove material issues of fact exist. "To carry its burden, the non-movant must produce specific facts which would sustain a verdict in its favor. The non-movant cannot create a genuine issue for trial through bare assertions or conclusory allegations."
Board of Education of Caesar Rodney School District v. New Castle Roofing Waterproofing, Inc., 2001 WL 1456870, at *2 (Del.Super.Ct. 2001).
Id.
Id.
Id. at *6.
Id.
Id.
IV. DISCUSSION
In Teeven v. Kearns, the defendant consistently denied that he was in default on the subject note and mortgage and argued in his brief that his denial was sufficient to overcome a motion for judgment on the pleadings. This Court in Teeven ruled that an unsupported denial does not by itself raise a genuine issue of fact for the purposes of a motion for judgment on the pleadings or summary judgment. Additionally, the Court added that this did not set forth a legally meritorious defense to the claim or assert facts that would create a dispute of fact.A motion for a default judgment in a Scire Facias Sur mortgage should be granted when there are no legally meritorious defenses to the claim and the Defendant has failed to assert facts that create a dispute of material fact. The determination of a default comes from the record which is the mortgage itself. A commercial note represents the debt owed while the mortgage represents a conveyance of property by way of pledge for the security of this debt. "In general, only those claims or counterclaims arising under the mortgage may be raised in a scire facias sur mortgage foreclosure action."
Id. at *2.
Id.
Harmon v. Wilmington Trust Company, 1995 WL 379214, at **2 (Del.Super.Ct. 1995).
Id.
Collateral Estoppel and Res Judicata are an absolute Bar to the Ingrams' lender liability claims.
Collateral Estoppel and res judicata serve to bar further litigation on the lender liability issues raised by the Ingrams. Basically, Collateral Estoppel bars a party from relitigating a factual issue previously litigated while res judicata bars a suit involving the same parties based on the same cause of action after a judgment has been entered. In order for collateral estoppel to apply the following criteria must be present: (1) the issue previously decided is identical to the issue at bar; (2) the prior issue was finally adjudicated on the merits; (3) the party against whom the doctrine is invoked was a party or in privity with a party to the prior adjudication; and (4) the party against whom the doctrine is raised had a full and fair opportunity to litigate the issue in a prior action. Collateral estoppel will not apply if the precluded party did not have a full and fair opportunity to litigate the issue or if its application causes an injustice to the precluded party.Res Judicata is an absolute bar to a second suit in a different court on the same matter by the same parties. The second suit need not be on the identical cause of action. Issues of fact that are raised by the pleadings which are essential to the second action fall under res judicata. Res Judicata is applied by a five part test: (1) the original court must have jurisdiction over the subject matter and the parties; (2) the parties to the original action must be the same as those parties, or in privity, in the case at bar; (3) the original cause of action or the issues decided must be the same as the case at bar; (4) the issues in the prior action must have been decided adversely to the Plaintiff in the case at bar; (5) the decree in the prior action was a final decree.
Thomas N. Scott v. Edwin Bey and Limen House Inc., 1986 WL 5865, at *3 (Del.Super.Ct. 1986).
Id.
Id.
Id., citations omitted.
The issues involving all lender liability claims have been litigated and dismissed per Stipulated Judgment Agreement of the Bankruptcy Court and the Court of Chancery. This Court has already dismissed the Ingrams' Complaint for lender liability. The parties in all prior litigations are identical and the issues alleged as defenses to the counterclaim are the same as the issues alleged in the Complaint regarding lender liability. The result of all prior litigation was adverse to the Ingrams as it dismissed all their claims. According to Superior Court Civil Rule 41(b), the involuntary dismissal of actions by any order of the court operates as an adjudication on the merits. The Bankruptcy Court, the Court of Chancery and Superior Court all have jurisdiction over all the parties. Therefore, res judicata and collateral estoppel apply as an absolute bar to relitigation on these issues. None of the objections raised by the Ingrams to summary judgment have merit.
V. CONCLUSION
In conclusion, the Ingrams have not raised any genuine issues of material fact that would preclude the Court grant of summary judgment. The issues of lender liability dismissed by this Court and Stipulated Judgment Agreements by the Bankruptcy Court and Court of Chancery are barred from relitigation under the doctrines of collateral estoppel and res judicata. No evidence has been proffered by the Ingrams to indicate any payment of the loan. All the evidence shows a default which entitles Dover Associates to a judgment in personam on its notes and a judgment in rem on the secured properties. Accordingly, Dover Associates' Motion for Summary Judgment on the issues of liability and damages is GRANTED.
Judgment in rem and in personam is rendered in favor of Dover Associates and against the Ingrams in the amount of $2,751,284.50 as of December 21, 2003 with a per diem thereafter of $935.81 plus costs.