Court Opinion

ID: 2753454
Source: CourtListenerOpinion
Date Created: 2014-11-20 14:02:07.063069+00
Date Added: 2024-06-11T11:26:44.663191
License: Public Domain

COURT OF CHANCERY
                                   OF THE
 SAM GLASSCOCK III           STATE OF DELAWARE               COURT OF CHANCERY COURTHOUSE
  VICE CHANCELLOR                                                     34 THE CIRCLE
                                                               GEORGETOWN, DELAWARE 19947

                          Date Submitted: October 24, 2014
                          Date Decided: November 19, 2014

Daniel T. Conway, Esquire                    Earl Strong
Atlantic Law Group, LLC                      P.O. Box 471
512 East Market Street                       11 Gooseneck Lane
Georgetown, Delaware 19947                   Smyrna, Delaware 19977

              Re: Wells Fargo Bank, NA v. Earl Strong,
              Civil Action No. 8538-MA

Dear Counsel and Mr. Strong:

      Before me are the Plaintiff Wells Fargo Bank‘s exceptions to the final report

issued by Master Ayvazian on July 15, 2014 (the ―Master‘s Report‖), which

recommends dismissal of the Plaintiff‘s Complaint seeking the imposition of an

equitable lien on real property located at 11 Gooseneck Lane, Smyrna, Delaware

19977 (the ―Property‖).

                            I. BACKGROUND FACTS

       The present dispute between the Plaintiff Wells Fargo Bank and the

Defendant Earl Strong has surfaced in several iterations in the courts of this State

before now landing in the Court of Chancery, and the reader is referred to the
opinions of those courts for a thorough factual and procedural background.1 For

the purposes of this Letter Opinion, the relevant facts are limited to the realm of

the narrow procedural issue in question.

       The Plaintiff alleges that in October of 2004 the Defendant executed a

mortgage on the Property with MIT Lending in exchange for a loan of $205,777, to

be repaid in monthly payments of $1,133.55.2 After the Defendant failed to make

those monthly payments, MIT Lending‘s nominee under the mortgage agreement,

Mortgage Electronic Registration Systems, Inc. (―MERS‖), filed a foreclosure

action in the Superior Court of Kent County, where it received a default judgment

against the Defendant on November 3, 2005. When MERS attempted multiple

times to convert its default judgment into a writ of levari facias on the Property,

however, the Defendant filed three consecutive pro se petitions for bankruptcy

protection, tying the proceedings up in automatic stays over several years. After

MERS was able to obtain relief from the last of these automatic stays in 2010, it

assigned its rights under the mortgage to the Plaintiff and, subsequently on January

1
  See Wells Fargo Bank, NA v. Strong, 2014 WL 3530829 (Del. Ch. July 15, 2014); Strong v.
Wells Fargo Bank, 2013 WL 1228028 (Del. Super. Jan. 3, 2013); Strong v. Wells Fargo Bank,
2012 WL 6961995 (Del. Super. Nov. 30, 2012); Strong v. Wells Fargo Bank, 2012 WL 3549730
(Del. Super. July 20, 2012); Mortg. Elec. Registration Sys., Inc. v. Strong, 2011 WL 5316766
(Del. Super. Oct. 19, 2011). Unless otherwise indicated, the facts found herein were taken from
the Master‘s Report.
2
  The validity of the mortgage agreement has been the focal point of the previous litigation
between the parties. The Defendant denies entering into a mortgage agreement with MERS and
claims any documentation of such an agreement was procured through fraud and forgery. Due to
the limited scope of this Letter Opinion, I do not find it necessary or appropriate to consider
those arguments here.
                                              2
11, 2011, refilled a writ of levari facias in the Plaintiff‘s name in the Superior

Court of Kent County. In that action, Judge Witham directed the attorney for the

Plaintiff ―to submit a memorandum detailing the history of the mortgage and

explaining the significance of the assignment,‖ and informed the Defendant ―that

he could file a motion to vacate default judgment if he wished to contest its

legitimacy.‖3 Although he saw ―little merit in any of [the] Defendant‘s claims,‖

Judge Witham‘s review of the agreements provided in the Plaintiff‘s memorandum

alerted him to a ―much more significant issue‖—the mortgage and note did ―not

appear to be properly sealed.‖4 Noting that ―[a] mortgage must be under seal for it

to be enforced at law,‖ and that the court ―may raise the issue of subject matter

jurisdiction sua sponte,‖ Judge Witham ruled sua sponte that the mortgage was not

properly sealed and ―[t]hus, under Delaware law . . . can only be enforced at

equity.‖5     As a consequence, Judge Witham dismissed the case in the

Memorandum Opinion and Order of October 19, 2011 (the ―Superior Court

Order‖), ―[p]ursuant to Delaware Superior Court Civil Rule 12(h)(3) and 10 Del C.

§ 1902 . . . without prejudice, to be filed within 60 days of this Order in the Court

of Chancery.‖6

3
  Mortg. Elec. Registration Sys., Inc., 2011 WL 5316766, at *1.
4
  Id.
5
  Id. at *2.
6
  Id.
                                               3
       MERS began the process of transferring its case nearly a month later, on

November 17, 2011, by filing a written election to transfer to this Court. The

Superior Court approved that request on November 18, 2011.                  However, the

Plaintiff did not actually file its Complaint in this Court until a year and a half after

the Superior Court Order—on May 8, 2013. In the meantime, on January 9, 2012,

the Defendant and his wife brought a pro se action in Superior Court against the

Plaintiff and its attorney alleging fraud, forgery, perjury, defamation, conspiracy,

malicious prosecution, and deceptive trade practices, all arising out of the

foreclosure action.     In decisions of July 20, and November 30, 2012, Judge

Witham granted a judgment against the Strongs on all counts.7 After

unsuccessfully petitioning Judge Witham to hear reargument, the Strongs appealed

to the Supreme Court on January 29, 2013. The Supreme Court never reached the

merits of the case, though, as the Strongs and the Plaintiff voluntarily filed a

stipulation of dismissal on May 3, 2013, which the Court approved on May 6,

2013. Two days later, on May 8, 2013—more than 18 months after the Superior

Court Order dismissed the original foreclosure action—the Plaintiff filed its

Complaint in this Court.

       In the Chancery Complaint, the Plaintiff, as the assignee of MERS, the

nominee for MIT Lending, seeks an equitable foreclosure against the Defendant in

7
 Strong v. Wells Fargo Bank, 2012 WL 3549730 (Del. Super. July 20, 2012); Strong v. Wells
Fargo Bank, 2012 WL 6961995 (Del. Super. Nov. 30, 2012).
                                             4
the form of a scire facias sur mortgage action. The Defendant moved pro se to

dismiss the Complaint under Court of Chancery Rules 12(b)(1)–(6), arguing,

among other things, that the Plaintiff had failed to transfer the case according to the

Superior Court Order. The Master considered the parties‘ positions and issued a

draft report, adopted with modifications as the final Master‘s Report,

recommending dismissal of the Complaint ―as having been untimely transferred

from the Superior Court under 10 Del. C. § 1902.‖8 In the Master‘s Report, the

Master found that:

         MERS failed to follow the direct order of the Superior Court dated
         October 19, 2011, which mandated it to transfer its case to this Court
         within 60 days. MERS also failed to abide by the plain language of
         Section 1902, which required it to make the ―usual deposit of costs in
         the second court‖ within 60 days.9

The Master noted Section 1902‘s admonition that the statute must be ―liberally

construed to permit and facilitate transfers of proceedings between the courts of

this State in the interests of justice,‖ and acknowledged the Plaintiff‘s argument

that the equitable foreclosure action should be permitted to move forward

notwithstanding the filing delay because ―otherwise Strong would be unjustly

enriched at the expense of the mortgage holder,‖ but the Master ultimately

determined that principles of equity favored upholding the 60-day requirement and

8
    See Wells Fargo Bank, NA v. Strong, 2014 WL 3530829, at *1 (Del. Ch. July 15, 2014).
9
    Id. at *3 (quoting 10 Del. C. § 1902).
                                                5
dismissing the Complaint.10 In particular, the Master highlighted the Defendant‘s

letter withdrawing the Supreme Court appeal of his action against the Plaintiff, in

which the Defendant made clear that a principal reason he had agreed to abandon

the appeal was that the Plaintiff‘s delay had led him to believe the Plaintiff had

also abandoned the foreclosure proceedings. In the Strongs‘ Motion to Withdraw

the Appeal, they stated:

           In Judge Witham October 19, 2011 Decision it stated that Mers
       Attorney had 60 days to file their Supporting Affidavit and statement
       of the facts to Chancery Court this was never executed . . . . [Due to
       Plaintiff‘s] Law firm Refusal to Comply to the Chancery Court Rules
       against Accepted the Transfer and Never Created a Court docket or
       number it has been over two years since, The 60 Days‘ time Allowed
       Have expired for more than two years. This issue is Mute. And Due
       to other prior Chancery court Ruling and the Delaware Attorney
       General Complaint this wouldn‘t stand a Chance in Chancery Court.
       …
           Wherefore Appellants Earl Strong and Lillie Strong ask this
       SUPREME COURT to Withdraw Appellants Appeal, we no longer
       want to pursue this Appeal because Judge Witham is an Honorable
       Respectable Judge, and As was stated Appellants doesn‘t want
       another Piece of the Pie. 11

Thus, the Master concluded in the Final Report:

          It appears from these excerpts that after years of litigation between
       the parties, Strong voluntarily withdrew his Supreme Court appeal
       because he believed that Wells Fargo had abandoned its efforts to
       foreclose on his home. By withdrawing his appeal, Strong gave up
       the possibility—no matter how remote—of obtaining monetary
10
   Id. at *3–4.
11
   Appellant‘s Response to Wells Fargo Answering Br. and Appellant‘s Mot. to Withdraw the
Appeal at 4–5, 7, Strong v. Wells Fargo Bank, No. 37,2013 (Del.) (No. 15), quoted in Wells
Fargo Bank, NA v. Strong, 2014 WL 3530829, at *4. This excerpt from the Defendant‘s pro se
filing appears in its unedited form.
                                             6
         damages from Wells Fargo and Barnett for what he contended were
         their fraudulent practices, among other claims of alleged misconduct.
         Thus, even if I were to ignore the plain language of 10 Del. C. § 1902
         requiring the transfer of a case to another court to occur within 60
         days from the date of the order denying the jurisdiction of the first
         court, I would have to conclude that it would be contrary to the
         general equitable principles of right and justice to allow Wells Fargo‘s
         complaint to proceed after Strong voluntarily dismissed his appeal in
         the Supreme Court.12

         Following the release of the Master‘s Report, the Plaintiff, pursuant to Court

of Chancery Rule 144, filed the exceptions that are before me now. Specifically,

the Plaintiff raises one issue for review: Does the Plaintiff‘s failure to comply with

Judge Witham‘s October 19, 2011 Order, as well as Section 1902, which required

this action be filed within 60 days of the order, bar further litigation here? I

conducted a hearing on these exceptions in court on October 24, 2014.

                              II. STANDARD OF REVIEW

         This Court reviews the legal and factual findings of a Master‘s report de

novo.13

                                      III. ANALYSIS

         In this action, the Plaintiff seeks to pursue an action to enforce an equitable

mortgage filed in Superior Court, pursuant to the transfer statute, 10 Del. C. §

1902.      Delaware, nearly uniquely among the states, preserves the distinction

12
     Wells Fargo Bank, NA v. Strong, 2014 WL 3530829, at *4.
13
     DiGiacobbe v. Sestak, 743 A.2d 180, 184 (Del. 1999).
                                               7
between law and equity.14            The Court of Chancery‘s jurisdiction is limited,

generally speaking, to those situations where an adequate remedy is unavailable at

law;15 conversely, again speaking generally, the Superior Court is without

jurisdiction to entertain equitable actions or provide equitable remedies.16 The law

of this case, as found by the Superior Court, is that the Plaintiff‘s attempt to

proceed in Superior Court was in fact an attempt to enforce an equitable mortgage,

because the mortgage document on which it attempted to rely was unsealed and

thus legally insufficient. Therefore, the Superior Court dismissed the matter as

outside its jurisdiction, subject to transfer under Section 1902.

        At common law, the Plaintiff, having chosen to bring suit on the wrong side

of the law/equity divide, would have been without remedy. This harsh effect has

been mitigated by statute. Title 10, Section 1902 of the Delaware Code provides

that:

14
   See, e.g., Monroe Park v. Metropolitan Life Ins. Co., 457 A.2d 734, 738 (Del. 1983) (―[I]n
Delaware there remains an historic and constitutional separation of law and equity. Indeed under
article IV, section 7 of the Delaware Constitution, the Superior Court‘s jurisdiction relates to all
civil causes at ‗common law‘ while article IV, section 10 and 10 Del. C. § 341, make clear the
Court of Chancery‘s jurisdiction to hear and determine all matters and causes in equity.‖).
15
   See 10 Del. C. § 342 (―The Court of Chancery shall not have jurisdiction to determine any
matter wherein sufficient remedy may be had by common law, or statute, before any other court
or jurisdiction of this State.‖).
16
   Compare Del. Const. art. IV, § 7 (―The Superior Court shall have jurisdiction of all causes of a
civil nature, real, personal and mixed, at common law and all the other jurisdiction and powers
vested by the laws of this State in the formerly existing Superior Court . . . .‖), and 10 Del. C. §
541 (―The Superior Court shall have such jurisdiction as the Constitution and laws of this State
confer upon it.‖), with Del. Const. art. IV, § 10 (―This [Court of Chancery] shall have all the
jurisdiction and powers vested by the laws of this State in the Court of Chancery.‖), and 10 Del.
C. § 341 (―The Court of Chancery shall have jurisdiction to hear and determine all matters and
causes in equity.‖).
                                                 8
           No civil action . . . brought in any court in this State shall be
       dismissed solely on the ground that such court is without jurisdiction
       of the subject matter . . . . Such proceeding may be transferred to an
       appropriate court for hearing and determination, provided that the
       party otherwise adversely affected, within 60 days after the order
       denying the jurisdiction of the first court has become final, files in that
       court a written election of transfer, discharges all costs accrued in the
       first court, and makes the usual deposit for costs in the second court.17

Under the statute, actions transferred relate back to the filing in the first court.18

       The Plaintiff did file a timely election of transfer. It now seeks to proceed

on the Superior Court action, transferred to this Court. Because the Plaintiff failed

to comply with the language in italics above, however—that is, because it failed to

file its Complaint along with the required filing fee within 60 days—the Master

found that transfer under the statute had not been effected, and that this action must

be dismissed.

       I concur with the Master‘s findings of fact and conclusions of law in this

regard. While the statute provides that it must be ―liberally construed . . . in the

interests of justice,‖19 the Plaintiff does not suggest a construction of the statute

with which it has complied. Instead, it makes a plea for equity, suggesting that the

time limitation of the statute should be relaxed to prevent unjust enrichment on the

part of the Defendant. Here, the Plaintiff missed the 60-day requirement for filing

17
   10 Del. C. § 1902 (emphasis added).
18
   See id. (―For the purpose of laches or of any statute of limitations, the time of bringing the
proceeding shall be deemed to be the time when it was brought in the first court.‖).
19
   Id.
                                                  9
in this Court by over 16 months. Counsel‘s explanation of this fact is only that his

predecessor misunderstood the requirements of the statute and perhaps was

distracted by the ongoing litigation in the Superior Court.20 This does not strike

me as excusable neglect; in any event, the ―construction‖ the Plaintiff seeks would,

effectively, write the 60-day transfer requirement completely out of Section 1902.

Moreover, the Defendant dismissed his Supreme Court appeal of the related fraud

action in reliance on the Plaintiff‘s failure to pursue its mortgage claim in this

Court, so I am unable to say that the delay has worked no prejudice. Therefore, the

Plaintiff is not entitled to a transfer under Section 1902, and this action is a nullity.

          The effect of this finding on the Plaintiff‘s claim is dependent on the

interpretation of the Superior Court Order. That Order, consistent with Section

1902, required the Plaintiff to file in Chancery within 60 days—a directive with

which the Plaintiff, as described above, failed to comply.             Specifically, the

Superior Court Order provides that ―this Court hereby dismisses this case, without

prejudice, to be filed within 60 days of this Order in the Court of Chancery.‖ If the

Superior Court Order is read as an unconditional dismissal without prejudice, then

nothing in Section 1902 prevents the Plaintiff from re-filing this matter in

Chancery as a new complaint, albeit without the benefit of the filing date relating

20
     Oral Arg. Tr. 9:8–10:5.
                                           10
back to the original Superior Court complaint.21 On the other hand, if the Superior

Court Order is read as providing for a dismissal without prejudice conditioned

upon compliance with the requirement to file in Chancery within 60 days, the

matter may be considered dismissed with prejudice. Obviously, any decision on

my part upon this issue in this Letter Opinion would be advisory. I would suggest

that, should the Plaintiff find it appropriate to file a new action seeking

enforcement of an equitable mortgage against the Defendant, the Plaintiff seek

clarification of, or relief from, the Superior Court Order in that Court.

                                   IV. CONCLUSION

       After a de novo review of the facts and law, I find that the Plaintiff‘s attempt

to transfer this action from Superior Court was untimely.                Consequently, the

Exception to the Master‘s Report is denied, and this action must be dismissed

without prejudice. To the extent the foregoing requires an Order to take effect, IT

IS SO ORDERED.

                                                  Sincerely,

                                                  /s/ Sam Glasscock III

                                                  Sam Glasscock III

21
  I make no decision on whether such an action would be time-barred under the doctrine of
laches or by analogy to the statute of limitation.
                                             11