Court Opinion

ID: 4640972
Source: CourtListenerOpinion
Date Created: 2020-12-09 17:02:42.774842+00
Date Added: 2024-06-11T08:00:18.732758
License: Public Domain

COURT OF CHANCERY
                                     OF THE
                               STATE OF DELAWARE
PATRICIA W. GRIFFIN                                                CHANCERY COURTHOUSE
MASTER IN CHANCERY                                                      34 The Circle
                                                                GEORGETOWN, DELAWARE 19947

                      Final Report:     December 9, 2020
                      Date Submitted:   September 23, 2020

Via File & ServeXpress                       Via U.S. Mail
Robert J. Valihura, Jr., Esquire             Sheryl Dickerson
Morton Valihura & Zerbato, LLC               18340 Southampton Drive
3704 Kennett Pike, Suite 200                 Lewes, Delaware 19958
Greenville, Delaware 19807

Re:      Sheryl Dickerson v. The Villages of Five Points Property Owners
         Association, Inc.
         C.A. No. 2020-0420 PWG

Dear Counsel and Ms. Dickerson:

         This case involves a complaint against a homeowner’s association in a

dispute over whether a homeowner violated the association’s deed restrictions in

making improvements to the association’s common area, without the association’s

written approval. Pending before me are two motions. First, the homeowner filed

a motion for default judgment on the grounds that the association failed to answer

by the filing deadline. Second, the association moved to dismiss the complaint

alleging that this Court lacks jurisdiction to hear the case under 10 Del. C. §348

since the homeowner sold the property, leaving only a claim for money damages. I

recommend that the Court deny the motion for default judgment and the motion to

dismiss. This is my final report.
Sheryl Dickerson v. The Villages of Five Points Property Owners Association, Inc.
C.A. No. 2020-0420-PWG
December 9, 2020

I.       Background

         On May 14, 2013, Plaintiff Sheryl Dickerson (“Dickerson”) purchased

property in the Villages of Five Points, located at 16859 North Hunters Run,

Lewes, Delaware (“Property”). 1 As a property owner, Dickerson was a member of

the Defendant Villages of Five Points Property Owners Association, Inc. (“the

Association”), subject to the Declaration of Covenants, Conditions, and

Restrictions for the Villages of Five Points (“the Declaration”). 2 The Declaration

requires that a homeowner obtain written permission from the Association before

altering “in any way any common area.” 3 Dickerson alleges that, intermittently

between 2013 and 2019, she engaged in various improvements on the common

area (“Common Area”) adjacent to the rear of her Property, at her own expense,

mostly       with     the     Association’s         verbal      consent.            Those   improvements

(“Improvements”) included removing dead trees, underbrush, weeds and invasive

growth from the storm water management ditch adjacent to the Common Area, and

planting trees and small plantings and shrubs in the Common Area. 4 Dickerson

1
    Docket Item (“D.I.”) 1, ¶ 4.
2
    Id., ¶¶ 4, 9, Ex. A.
3
    Id., Ex. A, §9.30.
4
  Dickerson makes the following allegations: In the Fall of 2013, Dickerson asked the
Association to remove a large tree that was blocking a pathway at the rear of her
property. Id., ¶¶ 10-11. The Association refused to remove the tree, but its agent gave
Dickerson verbal permission to remove the tree at her own expense. Id., ¶ 12. Dickerson
paid for the tree to be removed. Id., ¶ 13. In November of 2013, Dickerson paid for
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C.A. No. 2020-0420-PWG
December 9, 2020

asserts that all improvements were “clearly visible and readily apparent from any

inspection or visit to the affected common area.”5 She also asserts that the first

time she received any notice that her actions violated the Declaration was verbal

notice by an agent of the Association on September 17, 2019, which was followed

by violation letters sent by the Association on November 12, 2019 and on March

27, 2020, and an email notification on May 11, 2020, demanding she remove the

improvements or cover the costs of returning the Common Area to its original

condition (and pay attorneys’ fees).6                   Dickerson alleges that, after months of

unsuccessful efforts trying to resolve the dispute, on May 29, 2020, she filed a

complaint against the Association under 10 Del. C. §348. 7

underbrush and invasive weeds to be removed from the Common Area. Id., ¶ 14. In
June of 2014, Dickerson continued the removal of the underbrush and invasive weeds,
removed four dead trees, and reseeded the grass area in the Common Area. Id., ¶¶ 17-18.
Dickerson received the Association’s verbal consent to continue the work at her own
expense. Id., ¶ 18. In July of 2015, Dickerson requested that the Association remove
invasive growth from the storm water management ditch adjacent to the Common Area.
Id., ¶ 22. The Association refused her request, but gave her verbal permission to perform
the work at her own expense. Id., ¶¶ 23-24. In April of 2016, Dickerson had one tree
installed at her expense in the Common Area. Id., ¶ 28. In November of 2017,
Dickerson was granted verbal approval from the Association to remove five dead trees
from the Common Area at her expense and she had the trees removed. Id., ¶¶ 31-33. In
April of 2018, Dickerson had two trees installed at her expense in the Common Area. Id.,
¶ 36. In addition, from the Fall of 2013 until the date the Complaint was filed, Dickerson
planted small plantings in the Common Area at her own expense. Id., ¶ 39.
5
    Id., ¶¶ 15, 20, 26, 29, 34, 37.
6
    Id., ¶¶ 42-45, 49.
7
    Id., ¶¶ 42-49; D.I. 19, at 2-3.

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Sheryl Dickerson v. The Villages of Five Points Property Owners Association, Inc.
C.A. No. 2020-0420-PWG
December 9, 2020

          In her complaint, Dickerson brought three counts. Count I alleges that

enforcement of the Common Area restrictions in the Declaration against her is

barred by the equitable doctrine of laches. 8 Count II asserts the Association is

estopped from enforcing, and from employing self-help to enforce, Declaration

restrictions related to the Improvements. 9 Count III claims the Association will be

unjustly enriched by enforcing the Declaration restrictions because the

Improvements benefitted the Association.10 Dickerson seeks (1) relief enjoining

the Association from enforcing restrictive covenants, self-help, and any fines or

fees related to the Improvements, (2) reimbursement for the cost of the

Improvements to prevent unjust enrichment, and (3) attorneys’ fees and costs.11

          On June 24, 2020, mediation was ordered under 10 Del. C. §348.12

Dickerson sold the Property on July 15, 2020, and filed a motion for default

judgment on July 29, 2020. 13 On August 11, 2020, the Association moved to

dismiss the complaint. 14 Dickerson filed her opposition to the motion to dismiss

on August 17, 2020, and the Association submitted its answering brief to the

8
    D.I. 1, ¶¶ 6-50.
9
    Id., ¶¶ 51-62.
10
     Id., ¶¶ 63-77.
11
     Id., at 20-22.
12
     D.I. 5. There is no evidence that mediation was ever held.
13
     D.I. 19, Aff., Ex. 8; D.I. 8.
14
     D.I. 10.

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C.A. No. 2020-0420-PWG
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motion for default judgment and its reply to the motion to dismiss on September 8,

2020. 15 Dickerson filed her reply response on September 23, 2020.16

II.       Analysis

          A. Is default judgment appropriate in this case?

      Dickerson argues that she is entitled to an entry of default judgment because the

Association failed to file an answer by the filing deadline. 17 The Association

counters that an entry for default judgment became unavailable as soon as it filed

an appearance, despite missing the deadline by several weeks. 18 Both arguments

fail for the reasons set forth below.

          The entry of a default judgment under Court of Chancery Rule 55(b) is

permissive, and the Court has discretion to decide whether to enter a default

judgment based on the particular set of facts before it. 19 It is an “extreme remedy,”

requiring the defendant’s “willful or conscious disregard for the rules of the

Court,” or when the defendant “blatantly fails to appear or plead for a prolonged

15
     D.I. 13; D.I. 16. The Association has not yet filed an answer.
16
     D.I. 19.
17
     Id., at 10.
18
   D.I. 16, at 5-6. Although the deadline to file an answer was July 14, 2020, the
Association filed an appearance and motion to dismiss on August 11, 2020. D.I. 10; D.I.
13.
19
   Cf. New Castle Shopping, LLC v. Penn Mart Disc. Liquors, Ltd., 2009 WL 5197189, at
*2 (Del. Ch. Oct. 27, 2009); Greystone Digital Tech., Inc. v. Alvarez, 2007 WL 2088859,
at *2 (Del. Ch. July 20, 2007).

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period of time.” 20 Where “a defendant admits to failing to file a timely answer but

does participate in the proceedings and where the plaintiff has not presented any

prejudice from any delay,” entry of a default judgment may not be warranted in the

“early stages of litigation.” 21

        Dickerson asserts that she is entitled to an automatic entry for default

judgment because the Association failed to respond by the filing deadline. Under

Rule 55(b), an entry for default judgment is discretionary, not mandatory, and

public policy favors resolving a case on the merits. Here, it is undisputed that the

parties engaged in negotiations after Dickerson filed her complaint.22               The

Association alleges it believed that the negotiations would be successful, and relied

on that belief in failing to respond by the July 14, 2020 deadline. 23 It asserts that

there was part performance of the parties’ settlement agreement by Dickerson with

her payment to the Association when she sold the Property on July 16, 2020, and it

responded once it realized that Dickerson was continuing to pursue the action

20
   Tabb v. Bank of New York Mellon, 2017 WL 2570020, at *1 (Del. Ch. June 14, 2017)
(citations omitted); New Castle Shopping, LLC, 2009 WL 5197189, at *2 (citations
omitted).
21
  Tabb v. Bank of New York Mellon, 2017 WL 2570020, at *1 (Del. Ch. June 14, 2017);
see generally Apartment Communities Corp. v. Martinelli, 859 A.2d 67, 69-70 (Del.
2004).
22
  The parties met at least twice in person on June 25, 2020 and July 7, 2020. D.I. 19,
Aff., ¶¶ 4, 5. On July 8, 2020, the Association memorialized what it thought was
“mutually agreeable terms [for] settlement.” D.I. 16, at 1-2. They also engaged in further
“settlement discussions” via email from July 10, 2020 to July 13, 2020. D.I. 17, Ex 1.

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following the sale of the Property. 24                    Dickerson contends that there was no

agreement settling the dispute, and asserts negotiations terminated at an impasse on

July 13, 2020 (one day before the filing deadline) and she paid the Association fees

at closing only in order to complete the sale of the Property. 25

           The parties were in communication regarding settlement around the time of

the filing deadline. There was not a prolonged delay in the Association’s response:

the filing deadline was July 14, 2020, Dickerson filed her motion for default

judgment on July 29, 2020, and the Association entered its appearance, and filed

its motion to dismiss, on August 11, 2020. Even if the Association’s response had

been timely, Dickerson sold the Property shortly thereafter, and no prejudice

resulting from the Association’s 28-day delay in responding to the complaint has

been shown. And, there is no evidence that the Association acted with “willful or

conscious disregard for the rules of the Court.”                          Given the circumstances, I

recommend that the Court deny Dickerson’s motion for default judgment.

           In contrast, the Association argues that an entry for default judgment is

unavailable because it filed an appearance.26 A late filing of appearance does not

23
     D.I. 16, at 6-7.
24
     Id.
25
     D.I. 19, at 13, 16-17.
26
     D.I. 16, at 5-6.

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necessarily exempt a party from an entry of default judgment. 27 The Association’s

reliance on Delaware Sand & Gravel Co. v. Bryson 28 is misplaced. Delaware

Sand & Gravel is distinguishable from the present case because, in that case, “the

defendant . . . entered a stipulation with the [plaintiff] extending the defendant’s

time to answer the complaint.”29 In this case, there was no request or agreement

for an extension. I rely, instead, on the controlling case Pinkett ex rel. Britt v.

Nationwide Mut. Ins. Co., 30 which held:

         There is no hard and fast rule that the filing of an entry of appearance
         or an untimely answer renders default judgment ‘unavailable.’ Rule
         55(b)(2) expressly contemplates that a judgment by default may be
         entered against a party who has entered an appearance by the
         requirement that written notice of the application for default judgment
         be given to the party or the party’s representative. An entry of
         appearance alone simply triggers the requirement that the party be
         given notice before a motion for default judgment is presented. An
         answer or an appropriate motion must still be filed within 20 days

27
   Pinkett ex rel. Britt v. Nationwide Mut. Ins. Co., 832 A.2d 747, 750 (Del. Super. 2003)
(“The defendant’s failure to file an answer or appropriate motion within the required time
is a failure to defend which exposes it to default judgment under Rule 55.”); see also
JPMorgan Chase Bank v. Smith, 2014 WL 7466729, at *2 (Del. Super. Dec. 15, 2014)
(“a failure to defend is not cured by the filing of an untimely answer”).
28
     414 A.2d 207 (Del. 1980).
29
     Delaware Sand & Gravel Co., 414 A.2d at 207.
30
  Pinkett ex rel. Britt, 832 A.2d at 750. Although both Delaware Sand & Gravel Co. v.
Bryson and Pinkett ex rel. Britt v. Nationwide Mut. Ins. Co. interpret Superior Court Rule
55(b) rather than Court of Chancery Rule 55(b), both Courts’ Rules 55 address the entry
of judgment when a party “has failed to appear, plead or otherwise defend,” and provide
for service of the motion for default judgment on a defendant who has appeared in an
action prior to the hearing on the motion. See Ct. Ch. R. 55; Ct. Super. R. 55.

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C.A. No. 2020-0420-PWG
December 9, 2020

           after being served with process or entering an appearance, whichever
           first occurs.31

Most crucially, “the filing of an untimely answer after a motion for default

judgment is filed does not cure a default.” 32 Here, although default judgment is

available, I recommend it not be entered for the reasons set forth in this report.

           B. Does the Court of Chancery lack jurisdiction to hear this case?

           The Association argues that this case should be dismissed because the Court

was divested of jurisdiction under 10 Del. C. §348 when Dickerson sold the

property on July 15, 2020. 33 Section 348 mandates that “[a]t least 1 party [must

be] a homeowner or lot owner” in the community with the deed restrictions for that

section to apply. 34 Since Dickerson sold the Property, the Association reasons that

the Court’s jurisdiction under Section 348 was eliminated. 35

           In a motion to dismiss for lack of subject matter jurisdiction, “the burden is

on the plaintiff to prove jurisdiction exists.” 36 The Court of Chancery is a court of

limited jurisdiction and acquires “subject matter jurisdiction over a cause in only

three ways, namely, if: (1) one or more of the plaintiff’s claims for relief is

31
     Pinkett ex rel. Britt, 832 A.2d at 750.
32
     Id.
33
     D.I. 10, ¶¶ 9-10.
34
     10 Del. C. §348(a)(3).
35
     D.I. 10, ¶¶ 9-10.
36
     Appriva S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d 1275 (Del. 2007).

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equitable in character, (2) the plaintiff requests relief that is equitable in nature, or

(3) subject matter jurisdiction is conferred by statute.” 37

           When Dickerson filed her complaint on May 29, 2020, she was the owner of

the Property, so this Court had jurisdiction to hear the case under 10 Del. C.

§348. 38 Section 348 limits its applicability to actions involving homeowners in the

community. 39 Accordingly, the Court’s jurisdiction over the case under Section

348 lapsed when Dickerson sold the property.                            At that point, Section 348’s

provisions for mandatory mediation and expedited resolution of the dispute were

no longer applicable. In the absence of statutory jurisdiction, the Court retains

jurisdiction over the matter only if the claim, or the relief requested, is equitable.

In other words, the Court has subject matter jurisdiction where a case involves a

“request for an equitable remedy when there is no adequate remedy at law.” 40 The

Court performs “a realistic assessment of the nature of the wrong alleged and the

37
   Candlewood Timber Grp., LLC v. Pan Am. Energy, LLC, 859 A.2d 989, 997 (Del.
2004); Quarum v. Mitchell Int’l, Inc., 2019 WL 158153, at *2–3 (Del. Ch. Jan. 10, 2019)
(citations omitted); Testa v. Nixon Unif. Serv., Inc., 2008 WL 4958861, at *2 (Del. Ch.
Nov. 21, 2008) (citations omitted).
38
     10 Del. C. §348(a)(3).
39
     Id.
40
  Yu v. GSM Nation, LLC, 2017 WL 2889515, at *2 (Del. Ch. July 7, 2017) (citation
omitted); see also Hughes Tool Co. v. Fawcett Publications, Inc., 315 A.2d 577, 579
(Del. 1974); Glanding v. Indus. Tr. Co., 45 A.2d 553, 557 (Del. 1945); Athene Life &
Annuity Co. v. Am. Gen. Life Ins. Co., 2019 WL 3451376, at *4 (Del. Ch. July 31, 2019);
Heathergreen Commons Condo. Ass’n v. Paul, 503 A. 2d 636, 642 (Del. Ch. 1985).

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Sheryl Dickerson v. The Villages of Five Points Property Owners Association, Inc.
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December 9, 2020

remedy available in order to determine whether a legal remedy is available and

fully adequate.”41

                 To determine whether this Court has jurisdiction over this matter, the

remaining consideration is whether Dickerson has a full, adequate and complete

remedy at law.            If she does, then this Court does not have subject matter

jurisdiction over this case. Dickerson brought three counts in her complaint, with

Counts I and II seeking injunctive relief to bar the Association from enforcing, and

from employing self-help to enforce, restrictions in the Declaration related to the

Improvements made by Dickerson to the Common Area. 42 The Association argues

that, “[w]ithout any property interest, [Dickerson] has no standing to contest, as

she seeks to do in her Complaint, what landscaping stays or is removed on the

Association’s property.” 43

          When she sold the Property, Dickerson transferred her property rights, under

the Declaration, to the Property’s new owner. 44 In order to obtain permanent

41
  Candlewood Timber Grp., LLC, 859 A.2d at 997 (citation omitted); Prestancia Mgmt.
Grp., Inc. v. Virginia Heritage Found., II LLC, 2005 WL 1364616, at *3 (Del. Ch. May
27, 2005) (“In determining whether equitable jurisdiction exists, this Court will look
beyond the language of a complaint and examine the substance and nature of the relief
being sought.”).
42
     Id., ¶¶ 6-62.
43
     D.I. 16, at 13.
44
  Urdan v. WR Capital Partners, LLC, 2019 WL 3891720, at *12 (Del. Ch. Aug. 19,
2019) (“The owner of real property . . . holds a bundle of rights derived from ownership,
but transfers those rights and the ability to enforce them when the property is sold.”).

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December 9, 2020

injunctive relief, a party must show:                     “(1) actual success on the merits, (2)

irreparable harm, and (3) the harm resulting from a failure to issue an injunction

outweighs the harm to the opposing party if the court issues the injunction.”45

Having relinquished her property rights, Dickerson cannot show that the

Association’s enforcement of, or use of self-help to enforce, Declaration

restrictions will cause her irreparable harm, or that the equities balance in her

favor, because the Association’s actions related to the Improvements no longer

affect her. She has no basis for the equitable remedy of injunctive relief.46

          Dickerson’s remaining claim, Count III, seeks reimbursement for the cost of

the Improvements to prevent unjust enrichment to the Association.47                         The

Association argues that this count seeks only money damages and does not confer

45
  Copi of Delaware, Inc. v. Kelly, 1996 WL 633302, at *4 (Del. Ch. Oct. 25, 1996), aff’d
sub nom. Smart Bus. Sys., Inc. v. Copi of Delaware, Inc., 707 A.2d 767 (Del. 1998); see
also BE & K Eng’g Co., LLC v. RockTenn CP, LLC, 2014 WL 186835, at *23 (Del. Ch.
Jan. 15, 2014), aff’d, 103 A.3d 512 (Del. 2014).
46
   However, what remains of Counts I and II is Dickerson’s claim for the $4,356.00 in
Association fees charged against her for the alleged violations associated with the
Improvements, which she paid when she sold the Property. See D.I. 19, Aff., Ex. 8.
Since, as discussed below, this Court has jurisdiction over Dickerson’s unjust enrichment
claim, it retains discretion, under the clean up doctrine, to resolve an ancillary legal
question (involving the same controversy) like this one. See, e.g., In re Morrow Park
Holding LLC, 2018 WL 2123280, at *2 (Del. Ch. Mar. 28, 2018); Kraft v. WisdomTree
Investments, Inc., 145 A.3d 969, 974 (Del. Ch. 2016); De Adler v. Upper New York Inv.
Co. LLC, 2013 WL 5874645, at *9 (Del. Ch. Oct. 31, 2013).
47
     D.I. 1, at 21.

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subject matter jurisdiction on the Court. 48 Unjust enrichment is defined as “the

unjust retention . . . of money or property of another against the fundamental

principles of justice or equity and good conscience.” 49 The Court of Chancery has

the “power to adjudicate claims of unjust enrichment that require restitution when

one person is unjustly enriched at the expense of another.” 50 An unjustly enriched

defendant is required to disgorge any unjustly received benefit.                    However,

“[d]epending on the circumstances, unjust enrichment can be thought of as either a

legal or an equitable claim.” 51 The Court looks beyond the remedies being sought

to focus on the allegations in the complaint to determine what the plaintiff really

seeks to gain.52 For example, if the unjust enrichment serves “as an alternate

theory of recovery for a contract claim,” and money damages will make the

plaintiff whole, it is a legal claim. 53

48
     D.I. 16, at 11.
49
  Pepsi-Cola Bot. Co. of Salisbury, Md. v. Handy, 2000 WL 364199, at *6 (Del. Ch.
Mar. 15, 2000) (citing Fleer Corp. v. Topps Chewing Gum, Inc., 539 A.2d 1060, 1062
(Del. 1988)).
50
     Id.
51
  B.A.S.S. Grp., LLC v. Coastal Supply Co., 2009 WL 1743730, at *6, n. 61 (Del. Ch.
June 19, 2009).
52
  JCM Innovation Corp. v. FL Acquisition Holdings, Inc., 2016 WL 5793192, at *4 (Del.
Super. Sept. 30, 2016).
53
  B.A.S.S. Grp., LLC, 2009 WL 1743730, at *6, n. 61; see also Crosse v. BCBSD, Inc.,
836 A.2d 492, 496-97 (Del. 2003) (“off-the-contract theories of recovery are legal, not
equitable claims”); Yu v. GSM Nation, LLC, 2017 WL 2889515, at *4 (Del. Ch. July 7,
2017).

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        Here, Dickerson’s allegation of unjust enrichment is equitable – she seeks

disgorgement for the benefit she asserts the Association unjustly received from her

actions. Even though she seeks compensation, or monetary damages, for that

benefit, her claim retains its equitable character (it is not an alternative to a contract

claim), and I find that she does not have an adequate remedy at law. It remains to

be seen if Dickerson can prove her unjust enrichment claim, but that claim

provides a sufficient basis to invoke this Court’s jurisdiction. Accordingly, I

recommend the Court deny the Association’s motion to dismiss.

III.    Conclusion

        Based upon the reasons set forth above, I recommend denial of Dickerson’s

motion for default judgment.                    I also recommend that the Court deny the

Association’s motion to dismiss. This is a final report and exceptions may be

taken under Court of Chancery Rule 144.

                                                             Respectfully,

                                                             /s/ Patricia W. Griffin

                                                             Patricia W. Griffin
                                                             Master in Chancery

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