Court Opinion

ID: 2739470
Source: CourtListenerOpinion
Date Created: 2014-10-02 19:03:21.848653+00
Date Added: 2024-06-11T09:50:48.578473
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
                      IN AND FOR NEW CASTLE COUNTY

MARGOLIS EDELSTEIN,                                  )
                                                     )
       Plaintiff,                                    )
                                                     )
       v.                                            ) C.A. No. N13C-09-161 ALR
                                                     )
ACHAIAN, INC., and WILLIAM HERIOT,                   )
                                                     )
       Defendants.                                   )

                                  DECISION AFTER TRIAL
                                 And ORDER OF JUDGMENT

       This lawsuit was filed on September 18, 2013 by Margolis Edelstein

(“Plainitff”) to recover payment from William Heriot (“Defendant”) 1 for legal

services rendered in connection with two Court of Chancery lawsuits. 2 The parties

presented this case to the Court as fact-finder today, September 26, 2014. The

Court heard the testimony of two witnesses and considered documentary evidence.

       As fact-finder, the Court followed the direction that we regularly give to our

juries when assessing the evidence and the credibility of witness testimony:

       I must judge the believability of each witness and determine the
       weight to be given to all trial testimony. I considered each witness’s
       means of knowledge; strength of memory and opportunity for
       observation; the reasonableness or unreasonableness of the testimony;
       the motives actuating the witness; the fact, if it was a fact, the
       testimony was contradicted; any bias, prejudice or interest, manner of
1
  After Plaintiff sought a default judgment against Achaian Inc. Thereafter, Achaian Inc. filed for
bankruptcy protection. Plainitff filed a notice of partial dismissal of this action against Achaian
Inc on December 31, 2013. Accordingly, trial proceeded against Heriot only.
2
  Achaian Inc. v. Leemon Family, LLC, C.A. No. 6261-CS and Achaian Inc. v. Ira Leemon,
George Stanbury, and Omniglow, LLC, C.A. No. 6428-CS.
                                                1
         demeanor upon the witness stand; and all other facts and
         circumstances shown by the evidence which affect the believability of
         the testimony. After finding some testimony conflicting by reason of
         inconsistencies, I have reconciled the testimony, as reasonably as
         possible, so as to make one harmonious story of it all. To the extent I
         could not do this, I gave credit to that portion of testimony which, in
         my judgment, was most worthy of credit and disregarded any portion
         of the testimony which, in my judgment, was unworthy of credit. 3

         The Court finds that Herbert Mondros, Esquire was a credible witness. Mr.

Mondros was candid and offered concessions even when those concessions were

contrary to Plaintiff’s interests. For example, Mr. Mondros readily conceded that

Defendant was not a party to the contract.

         On the other hand, the Court finds that Mr. Heriot was not a credible

witness. His testimony at trial today was directly contrary to sworn evidence

offered to other courts. For example, today he testified that he filed federal

corporate tax returns on behalf of Achaian, Inc. but he filed a sworn affidavit with

a California bankruptcy court stating that tax returns had not been filed. Also, with

respect to at least two factual statements regarding his involvement with other

business entities, Mr. Heriot’s sworn testimony today was directly contrary to the

sworn testimony he offered in the Court of Chancery. The Court rejects his

testimony as unreliable.

3
    Dionisi v. DeCampli, 1995 WL 398536, at *1 (Del. Ch. June 28, 1995).
    1. Breach of Contract

       The first claim presented by Plaintiff is breach of contract.                 Plaintiff

concedes that the parties to the contract did not include Defendant individually.

Rather, Plaintiff contends that the now-bankrupt Achaian Inc. is a sham

corporation and that Defendant is its alter-ego. However, this Court does not have

jurisdiction to pierce the corporate veil.

       Corporations protect the stockholders and officers against individual

liability. An officer may not be held liable for breach of a corporate contract,

unless the officer has signed the contract in his own capacity and not just as an

agent for the corporation. 4 Consequently, a plaintiff who seeks to sue an officer of

a corporation must pierce the corporate veil to do so. Piercing the corporate veil,

however, is an argument that can be considered only in the Chancery Court.5

       The Court therefore finds that Plaintiff has not established its claim of

breach of contract against Defendant.

    2. Conversion

       The second claim on which Plaintiff seeks relief is conversion, which is the

“act of dominion wrongfully exerted over the property of another, in denial of his

4
  See Wallace ex rel. Cencom Cable Income Partners II, Inc., L.P. v. Wood, 752 A.2d 1175, 1180
(Del. Ch. 1999) (“Delaware law clearly holds that officers of a corporation are not liable on
corporate contracts as long as they do not purport to bind themselves individually.” (citations
omitted)).
5
  Sonne v. Sacks, 314 A.2d 194, 197 (Del. 1973).
right, or inconsistent with it.”6 A claim of conversion is proper if the plaintiff can

establish that it made a demand for the property and the defendant refused to

deliver.7

       Plaintiff presented evidence at trial that it made a demand for payment from

Defendant for the legal fees it claimed were due and owing. There is no question

that Defendant refused the demand.             However, no evidence was presented

sufficient for the Court to make a finding that Defendant exerted dominion over

Plaintiff’s property. The Court therefore finds that Plaintiff has not established its

claim of conversion against Defendant.

    3. Unjust Enrichment

       The third claim on which Plaintiff seeks relief is unjust enrichment, which

involves “the unjust retention of a benefit to the loss of another, or the retention of

money or property of another against the fundamental principles of justice or

equity and good conscience.”8 A claim of unjust enrichment is appropriate in the

absence of a governing contract.9 To award a remedy for unjust enrichment, this

Court looks for proof of (1) an enrichment, (2) an impoverishment, (3) a relation

6
  Triton Const. Co. v. E. Shore Elec. Servs., Inc., 2009 WL 1387115, at *24 (Del. Ch. May 18,
2009) aff'd, 988 A.2d 938 (Del. 2010) (citations omitted).
7
  Id. See also CIT Comm. Finance Corp. v. Level 3 Comm., LLC, 2008 WL 2586694, at *2
(Del. Super. June 6, 2008); Drug, Inc. v Hunt, 168 A. 87, 94 (Del. 1933).
8
  Triton Const. Co., 2009 WL 1387115, at *24 (quoting Schock v. Nash, 732 A.2d 217, 232 (Del.
1999)).
9
  See Tolliver v. Christina School Dist., 564 F. Supp. 2d 312, 316 (D. Del. 2008).
between the enrichment and impoverishment, (4) the absence of justification, and

(5) the absence of a remedy provided by law. 10

       The record evidence established that Defendant received the benefit of legal

services provided by Plaintiff acting on behalf of Defendant, as set forth by

example in the August 30, 2012 letter presented at trial (Defendant’s Ex. 3).

Defendant signed the Settlement Agreement and Release on his own behalf

(Plaintiff’s Ex. 16). This is especially significant given the timing of the resolution

of the dispute vis-à-vis the presentation of Mr. Heriot’s testimony in the Court of

Chancery. Specifically, the lawsuits were resolved during the evening recess when

Mr. Heriot was still on the witness stand subject to cross-examination.                His

testimony was not going well. Given the Court of Chancery’s assessment of Mr.

Heriot’s credibility as set forth in the transcript offered as a evidence (Plaintiff’s

Ex. 26), it was clearly in Mr. Heriot’s personal best interest to settle the cases.

      In the case before the Court, Plaintiff presented substantial record evidence

of the legal services provided and has demonstrated that Defendant personally

benefitted by that legal representation. Defendant testified that he was personally

invested in the dispute with the opposing parties in both Court of Chancery

lawsuits. There is no legal justification for Plaintiff to fund the Court of Chancery

10
   Triton Const. Co., 2009 WL 1387115, at *24 (citing Fitzgerald v. Cantor, 1998 WL 326686,
at *5 (Del. Ch. June 16, 1998)).
litigation on behalf of Defendant. As noted, Plaintiff has no adequate remedy at

law since Defendant was not a party to the contract. Plaintiff established that it is

owed $62,057.37 for legal services provided.

      Finally, Plaintiff has reserved the right to file a motion seeking an award of

fees and costs. That motion will be addressed if and when it is presented.

      NOW, THEREFORE, JUDGMENT SHALL ENTER in favor of

Plaintiff Margolis Edelstein and against Defendant William Heriot in the

amount of $62,057.37 with pre-judgment and post-judgment interest at the

legal rate until paid in full. Each party shall bear its own costs, fees, and

expenses.

      IT IS SO ORDERED this 26th day of September 2014.

                                Andrea L. Roanelli
                                __________________________________
                                Hon. Andrea L. Rocanelli