Court Opinion

ID: 9892343
Source: CourtListenerOpinion
Date Created: 2023-10-23 17:05:26.95554+00
Date Added: 2024-06-11T08:04:17.949149
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

CIVIC ASSOCIATION OF SURREY PARK,                   )
                                                    )
                             Petitioner,            )
        v.                                          )     C.A. No. 2019-0961-SEM (MTZ)
                                                    )
                                                    )
ROBERT RIEGEL and ERIN RIEGEL,                      )
                                                    )
                             Respondents.           )

                             ORDER DENYING EXCEPTIONS

             WHEREAS:

             A.   In 2019, petitioner Civic Association of Surrey Park (“CASP”) brought

 this action under 10 Del. C. § 348, alleging respondents Robert Riegel and Erin

 Riegel built a shed without CASP approval and in violation of applicable deed

 restrictions. On January 20, 2020, the Riegels moved to dismiss on the grounds that

 CASP lacked standing, among others.1 The presiding Magistrate in Chancery denied

 that motion, finding it reasonably conceivable that CASP had been assigned the right

 to enforce the declaration of restrictions for Surrey Park (the “Declaration”).2 The

 Riegels then answered the petition and asserted as an affirmative defense that CASP

 lacked standing.3 On January 21, 2021, CASP filed a “Motion Pursuant to 8 Del. C.

 1
     Docket Item (“D.I.”) 7 at Mot. to Dismiss.
 2
   D.I. 21 (draft report, to which no exceptions were taken); D.I. 22 (final report); D.I. 24
 (order confirming the final report).
 3
     D.I. 25 at Ans. ¶ 22.
§ 279 for the Appointment of a Receiver for the Former Crompton Development

Company” to “execut[e] and record[] a formal assignment by Crompton to CASP of

the right to enforce the Declaration” effective July 9, 1975.4             The presiding

Magistrate in Chancery sought further proceedings to establish a factual record as to

the chain of title for the right to enforce the Declaration, and the matter went to trial.5

         B.       After trial, the Magistrate issued a draft report that concluded CASP

had standing to enforce the Declaration’s restrictions.6 The Riegels took exception,

and the Magistrate’s final report concluded CASP did not have standing (the “2022

Final Report”).7 The 2022 Final Report also “address[ed] the parties’ remaining

issues in the interest of judicial economy and efficiency,” and concluded the

Declaration’s restrictions were unenforceable and were arbitrarily applied to the

Riegels’s shed.8 From there, the 2022 Final Report concluded the Riegels were the

prevailing parties and were entitled to fee-shifting under 10 Del. C. § 348.9

4
    D.I. 35 at Mot. 5–6.
5
 Civic Ass’n of Surrey Park v. Riegel, 2021 WL 4059971, at *1–2 (Del. Ch. June 2, 2021).
This final report is also available at D.I. 48.
6
    D.I. 75 at 20–21.
7
 Civic Ass’n of Surrey Park v. Riegel, 2022 WL 1597452, at *9–10 (Del. Ch.
May 19, 2022). The 2022 Final Report is also available at D.I. 91.
8
    Id. at *10, *12–14.
9
    Id. at *14.

                                             2
         C.      Both parties took exception to the 2022 Final Report.10 CASP briefed

exceptions on standing, whether a receiver should be appointed to remediate any

lack of standing, the enforceability of the Declaration’s restrictions, and the

Magistrate’s factual findings on the relative height of the Riegels’s shed. 11 The

Riegels briefed exceptions on standing, ripeness, acquiescence, and the appointment

of a receiver.12 Neither party briefed exceptions to the Magistrate’s conclusion as to

fees.

         D.      My opinion on exception (the “Letter Opinion”) concluded that CASP

never had standing to bring this action, that CASP “cannot continue to prosecute this

action” including to seek to appoint a receiver, and that this action was

“DISMISSED” for lack of subject matter jurisdiction.13 The Letter Opinion did not

address fees, and it did not adopt the 2022 Final Report.

         E.      Fifteen days after the Letter Opinion was issued, the Riegels filed an

Application for Taxing of Fees and Costs (the “Application”) for the Magistrate’s

consideration.14 The Application asserts that because a trial was held in this matter

10
     D.I. 93; D.I. 94; D.I. 95.
11
     D.I. 99 at Br.
12
     D.I. 100 at Op. Br.
13
  Civic Ass’n of Surrey Park v. Riegel, 2022 WL 17336095, at *3, *5 (Del. Ch.
Nov. 30, 2022). This ruling is also available at D.I. 109.
14
     D.I. 110 at Bill of Costs.

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and because the Riegels prevailed over CASP both on standing and the Declaration’s

enforceability, their nearly $80,000 in fees should be shifted to CASP pursuant to 10

Del. C. § 348.15 CASP opposed on the grounds that neither party prevailed at trial

because the matter was dismissed on exception.16 The parties also sparred over

whether the Application was timely.

           F.    In an April 20, 2023, oral final report (the “2023 Final Report”), the

Magistrate concluded the Application was timely; that the Riegels prevailed at trial

because the trial record informed the Letter Opinion’s conclusion that CASP lacked

standing; that the Riegels’s fees must therefore be shifted; and that CASP had

waived the opportunity to challenge the fees’ reasonableness.17

           G.    On April 28, 2023, CASP filed a Notice of Exceptions (the

“Exceptions”) to the 2023 Final Report.18 The matter was reassigned to me solely

for the purpose of hearing the Exceptions to the Final Report.19 The parties briefed

the Exceptions.20

15
     Id.
16
     D.I. 112 at Resp.
17
     D.I. 123; D.I. 125.
18
     D.I. 124.
19
     D.I. 126.
20
     See D.I. 128 at Op. Br.; D.I. 129 at Ans. Br.; D.I. 131 at Reply Br.

                                                4
         H.     Fee-shifting is the exception, not the rule, in Delaware, and it is

available in Section 348 cases because the General Assembly has said it is.21

         AND NOW, on this 23rd day of October, 2023, the Court finds and orders as

follows:

         1.     A hearing on the exceptions is unnecessary. The Court has considered

de novo the rulings in the 2023 Final Report.22

         2.     The exceptions present the question of whether dismissal of a Section

348 action due to a petitioner’s lack of standing based on the trial record (and this

Court’s resultant lack of subject matter jurisdiction) precludes a respondent from

seeking (and this Court from awarding) attorneys’ fees under Section 348 as the

prevailing party.

         3.     When determining whether a court has jurisdiction to award statutory

attorneys’ fees after a dismissal for lack of subject matter jurisdiction, federal courts

analyze whether the fee-shifting statute provides an independent basis for

jurisdiction.23 On at least one occasion, our Supreme Court embraced a similar

21
  Swann Keys Ass’n v. Shamp, 2008 WL 4698478, at *1 (Del. Ch. Oct. 10, 2008) (“Section
348 is a very unusual and prescriptive statute, which imposes a number of onerous
requirements on parties and this court in deed restriction enforcement cases between
homeowner associations and residents. Among the unusual features is a provision
reversing the ordinary American Rule that parties bear their own costs and attorneys’
fees.”), aff’d sub nom. Swann Keys Civic Ass’n v. Shamp, 971 A.2d 163 (Del. 2009).
22
     See DiGiacobbe v. Sestak, 743 A.2d 180, 184 (Del. 1999).
23
  See, e.g., Fernandez v. 23676-23726 Malibu Rd., LLC, 74 F.4th 1061, 1064 (9th Cir.
2023). Delaware’s standing doctrine is more flexible than the federal doctrine. In re Del.
                                             5
approach.24 Seeing no dispositive authority offering another approach, I conclude

the jurisdictional exceptions depend on whether Section 348 provides an

independent basis for jurisdiction to award attorneys’ fees.

       4.     “When interpreting a statute, ‘the fundamental rule is to ascertain and

give effect to the intent of the legislature.’”25 That inquiry begins “with the statutory

Pub. Sch. Litig., 239 A.3d 451, 510 (Del. Ch. 2020) (“Based on the structure of our
cooperative federal system, state court standing doctrine is appropriately more flexible than
federal standing doctrine, because the state courts play a different and more expansive role
than the federal courts.”). Nevertheless, “[t]he Delaware Supreme Court has noted that the
standards for evaluating standing under federal law ‘are generally the same as the standards
for determining standing to bring a case or controversy within the courts of Delaware.’”
Id. (quoting Dover Hist. Soc. v. City of Dover Plan. Comm’n, 838 A.2d 1103, 1110 (Del.
2003)).
24
   Wheeler v. Wheeler, 636 A.2d 888, 890 (Del. 1993) (reasoning 13 Del. C. § 1515
conferred jurisdiction on the Family Court to award fees notwithstanding that an appeal
had been filed in the case). Our law concerning jurisdiction following appeal is informative
on this point, as perfection of an appeal under Delaware law creates a situation analogous
to that of a federal court that has dismissed a case for lack of standing. Compare Radulski
for Taylor v. Del. State Hosp. for & on Behalf of Div. of Alcoholism, Drug Abuse & Mental
Health, of Dep’t of Health & Soc. Servs., 541 A.2d 562, 567 (Del. 1988) (“With the
exception of interlocutory appeals, the proper perfection of an appeal to this Court
generally divests the trial court of its jurisdiction over the cause of action. We recognize
that in some instances the trial court may exercise its jurisdiction as to collateral or
independent matters.” (citations omitted)), with, e.g., Moore v. Permanente Med. Grp.,
Inc., 981 F.2d 443, 445 (9th Cir. 1992) (“While we have not addressed the specific question
whether a district court retains jurisdiction to award costs and fees pursuant to [28 U.S.C.
§] 1447(c) after remand, it is clear that an award of attorney’s fees is a collateral matter
over which a court normally retains jurisdiction even after being divested of jurisdiction
on the merits.”).
25
  Tesla Inc. v. Del. Div. of Motor Vehicles, 297 A.3d 625, 631 (Del. 2023) (quoting
Delmarsh, LLC v. Env’t Appeals Bd., 277 A.3d 281, 290 (Del. 2022)).

                                             6
text.”26 “If a statute is unambiguous, there is no need for judicial interpretation, and

the plain meaning of the statutory language controls.”27

         5.     Section 348 provides that “[t]he nonprevailing party at a trial held

pursuant to the provisions of this section must pay the prevailing party’s attorney

fees and court costs,” unless the Court determines such an award is inappropriate

under the circumstances.28 Thus, Section 348 permits this Court to award attorneys’

fees where (1) the action brought pursuant to Section 348 was tried, and (2) the party

requesting fees was the “prevailing party” at that trial.

         6.     Section 348 does not define “prevailing party.” In Capano v. Draper

Subdivison Association, this Court determined a plaintiff prevailed within the

meaning of Section 348 because the Court granted “the primary relief he [sought].”29

Flipping the standard for a defendant, a defendant certainly prevails where one or

more of her defenses succeeds in precluding the plaintiff from obtaining any of the

relief sought. A defendant can satisfy this standard by showing the plaintiff lacked

standing to bring the action in the first instance.

26
   Id.; Protech Mins., Inc. v. Dugout Team, LLC, 284 A.3d 369, 375 (Del. 2022) (“The
starting point is the language of the statute.”).
27
     Eliason v. Englehart, 733 A.2d 944, 946 (Del. 1999).
28
     10 Del. C. § 348(e).
29
  Capano v. Draper Subdivision Ass’n, Inc., 2019 WL 3938704, at *14 (Del. Ch.
Aug. 20, 2019).

                                              7
         7.    This conclusion is consistent with Section 348’s policy. This Court has

said the “purpose of § 348 is to subject parties to disputes to the risk that they will

pay both sides’ costs if they turn out to be the loser.”30 Were Section 348 to preclude

relief where a party prevails on a standing argument at trial, the statute would have

little effect on a party facing a meaningful risk that they lack standing.31 And once

it became clear that the case was going to trial, the defendant would be incentivized

to drop the argument that the plaintiff lacked standing in favor of other strategies for

victory that would shift fees; given the importance of standing and subject matter

jurisdiction, that is an undesirable outcome.

         8.    Thus, one may be a prevailing party under Section 348 by

demonstrating the plaintiff lacked jurisdiction to bring the suit. The defendant must

do so at a trial to obtain fees.32 It necessarily follows that the statute grants the Court

jurisdiction to award fees after making such a finding notwithstanding its lack of

subject matter jurisdiction over the merits of the dispute.33

30
     Shamp, 2008 WL 4698478, at *1.
31
    See Curry v. Digitz, C.A. No. 2022-0205-JTL, at 70–72 (Nov. 18, 2022)
(TRANSCRIPT) (explaining that requiring a judgment, court order, or other “judicial
action or judicial imprimatur” for a party to be a “prevailing party” would create perverse
incentives).
32
  McCaulley Ct. Maint. Corp v. Davenport, 2018 WL 4030781, at *1 (Del. Ch.
Aug. 23, 2018).
33
  See Wheeler, 636 A.2d at 890 (reasoning statutory language providing that the “Family
Court is authorized to award attorney’s fees ‘after the entry of judgment’” conferred
jurisdiction on the court to award such fees following appeal (quoting 13 Del. C. § 1515)).
Of course, a court has jurisdiction to consider its own jurisdiction. 21 C.J.S. Courts § 102
                                             8
       9.     This matter proceeded to trial, and the Riegels established that CASP

lacked standing to bring this action. In doing so, the Riegels prevented CASP from

obtaining any of the relief it sought. The Riegels are prevailing parties within the

meaning of Section 348, and are entitled to attorneys’ fees.

       10.    CASP also took exception on the grounds that the Riegels’ Application

was untimely. It was timely under the period set by the 2022 Final Report.

       11.    The exceptions are DISMISSED.

                                                     /s/ Morgan T. Zurn
                                               Vice Chancellor Morgan T. Zurn

(2023) (“A court always has jurisdiction and judicial power to determine the question of
its own jurisdiction, both as to parties and as to subject matter . . . .” (footnotes omitted)).

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