Title: Delaware Manufactured Home Owners Association, et al. v. Investors Realty, Inc., et al.

State: delaware

Issuer: Delaware Supreme Court

Document:

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
DELAWARE MANUFACTURED 
HOME OWNERS ASSOCIATION, 
GEORGE MAKDAD, and 
BREANNA WALTZ, 
 
  Plaintiffs Below, 
  Appellants, 
 
v. 
 
INVESTORS REALTY, INC.,  
ST. JONES LANDING, LLC, 
K-4 MANAGEMENT, and 
DELAWARE MANUFACTURED 
HOME RELOCATION 
AUTHORITY, 
 
   Defendants Below,  
   Appellees. 
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No.  408, 2017 
 
Court Below: Court of Chancery 
of the State of Delaware 
 
C.A. No.  2017-0111   
 
 
Submitted: April 11, 2018 
 Decided:  May 31, 2018 
 
Before STRINE, Chief Justice; VALIHURA and VAUGHN, Justices.  
 
O R D E R 
On this 31st day of May 2018, upon consideration of the parties’ briefs and the 
record on appeal, it appears to the Court that: 
(1) 
This case arises from a change in use of a manufactured home 
community.  Prior to the change, each tenant placed a manufactured home which 
the tenant owned upon a lot owned by the landlord and leased to the tenant.  The 
change converted the community into one in which the tenant leased both the lot and 
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the dwelling unit from the landlord.  Appellants, Delaware Manufactured Home 
Owners Association (“the Association”), George Makdad, and Breanna Waltz, 
appeal from a Court of Chancery bench ruling which denied their motion for an 
injunction to prevent the change of use.  Appellants contend the Court of Chancery 
erred by finding that the change was legally permissible; that Appellees’ notice to 
tenants of the change was legally sufficient; and that the Association had no standing 
to pursue claims. 
(2) 
Appellee St. Jones Landing, LLC, (“St. Jones”) is the owner of the land 
which is the subject of this litigation.  As mentioned, it operated as a “land lease 
only” community in which the tenant owned the manufactured home but paid rent 
to St. Jones for the lot on which the home was placed.  Appellee K-4 Management 
(“K-4”) was the property management company which ran the day-to-day operations 
of St. Jones.  Appellee Investors Realty, Inc., is a dealer of manufactured homes but 
had no management or ownership role in St. Jones. 
(3) 
On March 4, 2016, K-4 sent notice letters to the St. Jones tenants 
leasing Lots 1-10 and 62-65 (“First Notice”).  The First Notice advised the tenants 
that St. Jones and K-4 planned to change the use of the St. Jones land upon which 
their manufactured homes were situated.  The tenants were notified that their land 
lease agreements with St. Jones were being terminated effective March 31, 2017.  
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Sent along with the First Notice was a Relocation Plan.  Simultaneously with the 
service of the First Notice on the tenants, K-4 sent a copy of the First Notice and the 
Relocation Plan to the Delaware Manufactured Home Relocation Authority (“the 
Authority”).  This was to be Phase I of the land use change. 
(4) 
On August 22, 2016, K-4 sent notice letters to the St. Jones tenants 
leasing Lots 11-16, 41, and 50-56 (“Second Notice”).  The Second Notice advised 
the tenants of the proposed change in use and notified the tenants that their land lease 
agreements with St. Jones were being terminated effective August 31, 2017.  A 
Relocation Plan accompanied the Second Notice.  As was done with the First 
Notice, K-4 sent a copy of the Second Notice and Relocation Plan to the Authority.  
This was to be Phase II of the land use change. 
(5) 
The lots in Phase I and Phase II were being changed from a land lease 
only arrangement to a full rental arrangement under which St. Jones would own the 
dwelling unit and the lot–both of which would be rented to a tenant.  The First and 
Second Notices informed tenants that St. Jones was changing from a manufactured 
home park to an “apartment style lease project.”1 
(6) 
On February 14, 2017, Appellants filed a Verified Complaint, Motion 
for Expedited Proceedings, and Motion for Preliminary Injunction against 
                                                 
1 App. to Appellant’s Opening Brief at A21 & A36. 
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Appellees.  The injunction request sought to stop the eviction of the Phase I and 
Phase II tenants, stop all relocation payments from the Authority, and stop St. Jones 
from doing any new construction to replace the current manufactured homes with 
new ones.  Appellants sought penalties for Appellees alleged violations of the 
Manufactured Home Owners and Community Owners Act (“Act”).2   
(7) 
The Court of Chancery heard oral argument on the Motion for 
Preliminary Injunction on September 6, 2017.  In its decision on that motion, the 
Court of Chancery found: St. Jones’ intended change of the use of the land was a 
permissible basis for terminating the tenants’ leases under the Act; the First and 
Second Notices complied with the Act; Appellants failed to demonstrate irreparable 
harm; the Association lacked organizational standing; and the injunctive claims were 
moot as all tenants, including Appellants Makdad and Waltz, because they had 
moved or were in the process of voluntarily moving from St. Jones.  The parties 
then submitted, and the Court of Chancery approved, a stipulation for entry of final 
judgment.  This appeal followed.  
(8) 
All tenants in Phase I and Phase II of St. Jones, including Appellants 
Makdad and Waltz, have relocated, with the assistance of relocation funds made 
available by the Authority.  Relocation funds are paid under a statutorily created 
                                                 
2 25 Del. C. §§ 7001–7027. 
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program of state financial assistance to tenants who have to relocate due to a change 
in the use of a manufactured home community.  The land–lease only to landlord-
tenant change has been completed. 
(9) 
We review the denial of a motion for a preliminary injunction under the 
abuse of discretion standard.3  However, we review the Court of Chancery’s legal 
conclusions de novo.4  In order for the Court of Chancery to issue a preliminary 
injunction the plaintiff must show: a reasonable probability of success on the merits; 
that irreparable harm will follow should the injunctive relief not be granted; and that 
the equities balance in plaintiff’s favor.5 
(10) In this appeal, Appellant’s first two arguments challenge the Court of 
Chancery’s legal conclusions in interpreting several provisions of the Act.  Issues 
of statutory construction and interpretation are reviewed de novo.6  First, we must 
determine whether the statute is ambiguous.7  If it is not, we assign the statute its 
plain meaning.8  If the statute is susceptible to two reasonable interpretations, then 
we must consider the statutory scheme as a whole and interpret the statute in a 
                                                 
3 Lawson v. Meconi, 897 A.2d 740, 743 (Del. 2006). 
4 Id. (citations omitted). 
5 SI Management L.P. v. Wininger, 707 A.2d 37, 40 (Del. 1998) (citations omitted). 
6 CML V, LLC v. Bax, 28 A.3d 1037, 1040 (Del. 2011). 
7 Id. at 1041. 
8 Id. 
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manner that will “produce a harmonious whole.”9 
(11) Section 7010(a)(1) of the Act regulates termination of rental 
agreements in manufactured home communities and changes in the use of such 
communities.  Specifically, of relevance to this case, it allows a landlord to 
terminate a lot rental agreement in a manufactured home community when the 
landlord intends to make a “change in the use of the land” in good faith.10   
(12) The Appellants first argue that the Court of Chancery erred in finding 
the Appellee’s proposed change in the use of St. Jones Landing to be a “change in 
the use of the land.”11  They argue that a “change in the use of the land” means a 
change in a subdivision plan or a zoning designation, neither of which have occurred 
here.12   
(13) The phrase “change in the use of the land” is not explicitly defined by 
the Act.  The Appellants draw their definition from § 7010(c)(2).  That section 
provides that prima facie evidence exists that the owner did not intend in good faith 
to change the use of the land where the owner resumes lot rentals for manufactured 
homes within seven years of terminating tenants leases and did not make “a material 
                                                 
9 Id. 
10 25 Del. C. § 7010(a)(1). 
11 Id. 
12 § 7010(c)(2). 
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and bonafide effort to change the subdivision plan or zoning designation, or both.”13   
(14) The Court of Chancery rejected the Appellant’s contention that a 
change in the use of the land must include a material and bonafide effort to change 
a subdivision plan or zoning designation.  It reasoned that a change from owner 
occupied manufactured homes on rented lots to landlord ownership of both the lot 
and the dwelling unit resulted in a materially different use of the land.  It also 
reasoned that this conclusion was supported by the fact that the legal relationship 
between St. Jones and the residents would no longer be governed by the Act.  Since 
the relationship between St. Jones and the residents would now be one purely of 
landlord-tenant, the Residential Landlord-Tenant Code in Part III of Title 25 would 
apply, not the Act, which is in Part VI of Title 25.  We find no error in the Court of 
Chancery’s reasoning and agree that the change in use involved here is a change in 
use under the Act.  Title 25 § 7010(c)(2) simply provides a statutory prima facie 
instance where the landowner did not intend in good faith to change the use of the 
land.  It is not applicable to the facts of this case.  
(15) The Appellants next argue that the Court of Chancery erred in finding 
that Appellees’ First and Second Notices complied with the notice requirements in 
the Act.  They argue § 7010(b)(1)’s requirement that the landowner’s notice 
                                                 
13 Id. 
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“inform[] the tenants of the intended change” in the use of the land means that the 
landlord must do so in specific, detailed terms which explain the exact manner in 
which the use of the land will be changing.  They argue that the notices in this case 
failed to meet that standard. 
(16) Section 7010(b)(1) requires a landlord who intends to undertake a 
change in the use of the land to “[p]rovide all tenants affected with at least a 1-year 
termination or nonrenewal notice, which informs the tenants of the intended change 
of use and their need to secure another location for their manufactured homes.”14  In 
this case, the First and Second Notices informed the tenants that the “intended future 
use is an apartment style lease project.”15 
(17) The Court of Chancery ruled that § 7010(b)(1) “merely requires a 
landlord to provide its tenants with a notice that informs the tenants of the intended 
change of use and of their need to secure another location for their manufactured 
homes.  No degree of specificity is either expressed or implied in that provision.”16  
We agree that no degree of specificity is required by the statute.  We need not decide 
whether the notice can simply inform the tenants that a change in use is intended 
without more.  We are satisfied in this case that informing the tenants that the 
                                                 
14 § 7010(b)(1). 
15 App. to Appellant’s Opening Brief at A21 & A36. 
16 Am. Ex. A to Appellant’s Opening Brief at 50. 
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intended use was an apartment style lease project satisfies the notice requirement.  
The Appellants’ contention that the statute requires a more detailed statement is 
rejected. 
(18) Finally, the Association argues the Court of Chancery erred in finding 
it did not have standing to pursue the claims alleged in the verified complaint.  All 
parties seem to agree that the individual Appellants had standing to assert the claims 
brought here.  Given this and our disposition of the Appellants’ first two claims, we 
need not address the Association’s standing issue. 
NOW, THEREFORE, IT IS ORDERED that the judgment of the Court of 
Chancery is AFFIRMED. 
BY THE COURT: 
/s/  James T. Vaughn, Jr.  
Justice