Opinion
C.A. No. 20121.
October 8, 2003.
Francis G. X. Pileggi, Esquire, Sheldon K. Rennie, Esquire, Fox Rothschild O'Brien Frankel, LLP. Wilmington, DE
Robert J. Katzenstein, Esquire, Roger D. Anderson, Esquire, Smith, Katzenstein Furlow LLP. Wilmington, DE
Dear Counsel:
The respondent, Stewart Morse, has moved to dismiss the petition on grounds that the claims asserted therein are barred by laches or by the applicable three-year statute of limitations. The court agrees that the gravamen of the petition is a legal claim for conversion that is subject to the three-year limitations period found in 10 Del. C. § 8106. Because the allegations of fact found in the petition show, on their face, that the petitioners had actual knowledge of the alleged conversion nearly five years before they filed this action, the court will apply that statute to bar the claim.
The relevant facts are quite simple. The petition alleges that the petitioner, Thomas V. Spano, delegated "the bookkeeping, management and operation of his various real estate . . . business[es]" to Morse and another person for a period of time in 1997 and 1998. Evidently, Spano spent that interval in federal custody. The petition also alleges that "[o]n or about March 15, 1998, [Spano] learned that . . . Morse, without authorization, used money that belonged to [Spano] . . . for the purpose of purchasing [certain real property] and without authorization titled that [property]" in the joint names of Morse and the other person. Some time thereafter, Span confronted that other person "with her unauthorized use" of his funds, and she "conveyed her interest in the Property back to" Spano. Spano thereafter conveyed that interest to his son, who is also a petitioner. The deed into Spano is dated in July, 2002. Finally, in order to avoid a foreclosure on the property by the mortgage holder, Spano and his son paid $10,694.30 in arrearages on the mortgage.
On January 16, 2003, Spano and his son filed this lawsuit, which is pleaded in three counts. First is a count for the imposition of a constructive trust. Second is a count for declaratory judgment to the effect that "because [Morse], without authorization, used funds belonging to [Spano] to acquire [Morse's] interest in the Property, [Spano] should be substituted in place of [Morse]" on the deed. Finally, but crucially, the third count is for conversion. The petition then seeks various forms of relief with respect to the claims alleged.
Morse has moved to dismiss the petition, arguing that the statute of limitations on the underlying claim for conversion expired no later than March 15, 2001, or three years after Spano admittedly learned of the alleged conversion. Because the other claims for constructive trust (Count I) and declaratory judgment (Count II) arise out of and depend upon the claim for conversion (Count III), the argument goes, the entire petition must be dismissed. The petitioners respond that the matter is governed by the equitable doctrine of laches and that Morse has not satisfied his burden of proving all of the elements of that defense, including that the delay in filing the petition caused him prejudice.
The court is satisfied that the gravamen of the petition is the legal claim of conversion. The other claims for relief all clearly arise out of and depend upon proof of that claim because, if the petitioners are unable to prove that Morse misappropriated the money, they cannot be entitled to an order imposing a constructive trust on Morse's interest in the Property. In the circumstances, the court should apply, by analogy, the three-year statute of limitations found in 10 Del. C. § 8106. Because the petition, on its face, shows that the petition was filed more than three years after the alleged conversion took place, that limitations period will be applied to bar the claim. Furthermore, the petition, again on its face, shows that Spano had actual knowledge of the alleged misappropriation for nearly five years before he began this action. Thus, there is simply no basis on which the court could consider tolling the limitations period for reasons of equity.
"Donald J. Wolfe Michael A. Pittenger, Corporate and Commercial Practice in the Delaware Court of Chancery § 11-5[c] at 11-45 to 11-47 (2001).
Id.
For all of these reasons, the petition shall be dismissed with prejudice to the claims asserted in Counts I, II and III (except to the extent that paragraph 23 of the petition seeks relief with respect to the $10,694.30 paid on the mortgage). This ruling does not, however, effect whatever claim the petitioners may have with respect to the partition of the property or reimbursement for monies expended by either of them in connection with the mortgage foreclosure proceedings, which claims, to the extent asserted in the petition, will be dismissed without prejudice. Those claims may be reasserted in a petition for partition in proper form pursuant to 25 Del. C. § 721.