Data Management Internationals, Inc. v. Saraga, C.A. No. 05C-05-108 (Del. Super. 7/25/2007)

• Decision Date: 25 July 2007
• Docket Number: C.A. No. 05C-05-108.
• Parties: DATA MANAGEMENT INTERNATIONALÉ, INC. a corporation of the State of Delaware, Plaintiff, v. EDWARD SARAGA, Individually, Defendant/Third Party Plaintiff, v. ANTHONY M. MEDORI and STOLTZ REALTY COMPANY, Third Party Defendants.
• Court: Delaware Superior Court

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DATA MANAGEMENT INTERNATIONALÉ, INC. a corporation of the State of Delaware, Plaintiff, v. EDWARD SARAGA, Individually, Defendant/Third Party Plaintiff, v. ANTHONY M. MEDORI and STOLTZ REALTY COMPANY, Third Party Defendants.

C.A. No. 05C-05-108.

Superior Court of Delaware, In and for New Castle County.

Submitted: July 17, 2007

Decided: July 25, 2007

UPON DEFENDANT EDWARD SARAGA'S MOTION FOR PARTIAL SUMMARY JUDGMENT DENIED.

James W. Owen, Esquire, JAMES W. OWEN, P.A., Wilmington, Delaware, Attorney for Plaintiff.

Chad J. Toms, Esquire, Bifferato Gentilotti LLC, Wilmington, Delaware, Attorney for Defendant.

Jeffrey M. Weiner, Esquire, Law Offices of Jeffrey M. Weiner, P.A., Wilmington, Delaware, Attorney for Third Party Defendants.

MEMORANDUM OPINION

ABLEMAN, JUDGE

I. Introduction

Plaintiff Data Management Internationale, Inc. ("DMI") filed suit against its former landlord, Defendant Edward Saraga ("Saraga"), for one count of conversion and two counts of breach of contract. DMI alleges that Saraga wrongfully gave away, destroyed, and discarded business records and personal property belonging to DMI with a value of $80,000.00.¹ Saraga has brought this motion for partial summary judgment seeking to exclude DMI from pursuing punitive damages. Because the Court finds that DMI can maintain claims in both tort and contract and that genuine material issues of fact exist, Saraga's motion for partial summary judgment is DENIED.

II. Statement of Facts

Saraga leased property located at 49B Germay Drive in Wilmington ("the Property") to DMI for about a decade. On July 31, 2003, the parties entered into a one-year lease agreement, effective August 1, 2003 ("the Lease"). By its terms, the Lease was to expire on July 31, 2004 without notice by either party.² The Lease contained a peaceable surrender of premises provision ("Paragraph 7"), which stated in relevant part:

On the last day of the lease term as presently written, or on the last day of any renewal or extension thereof . . . [t]enant shall peaceably surrender the premises . . . . Any personal property left upon the premises shall be deemed abandoned by the Tenant.³

The Lease also included a provision allowing for hold-over tenancy ("Paragraph 27"):

Any holding over after the expiration of the term hereof, without the written consent of Owner shall be construed to be a tenancy from month to month at one and one half (1 /12) [sic] times the monthly rent hereinbefore noted, and shall otherwise be on the terms and conditions hereinbefore specified. If Owner's written consent is granted, the rent shall be at the amount being paid at expiration date of this lease.⁴

The final provision of the Lease pertinent to this motion is a liability provision ("exculpatory clause"), which states in relevant part:

Owner in no event shall be liable for any damage or injury to Tenant or any agent or employee of Tenant, or to any person or persons coming upon the said premises in connection with the occupancy by Tenant or otherwise, or to any goods, chattels, or other property of Tenant . . . caused or contributed by water, rain, snow, breakage of pipes, leakage, or by any other cause except the willful negligence of the Owner, its agents or employees.⁵

The Lease called for any notice to the Owner provided for by its terms to be sent via registered mail to Saraga.⁶

Prior to the expiration of the Lease on July 31, 2004, Saraga found a new tenant for the Property. The new tenant was scheduled to begin occupying the Property on August 15, 2004. DMI entered into an agreement with this new tenant to sub-lease a portion of the Property as a "cold storage" facility.⁷

DMI wished to keep some of its possessions on the Property past the express expiration date of the Lease and contacted Anthony M. Medori ("Medori"), an employee of Stoltz Realty Company, which served as Saraga's rental agent for the Property.⁸ According to DMI, both Medori and Stoltz Realty Company acted as Saraga's agents in connection with their rental of the Property, and Medori was the employee at Stoltz Realty Company who handled its lease.⁹ The scope of any agency relationship between Saraga and Medori or Stoltz Realty Company as it relates to this case is disputed.

DMI informed Medori that it would be sub-leasing the cold storage facility and that it would need "some additional time" past the July 31, 2004 expiration of the lease to remove all of its possessions from the Property. DMI alleges that it arranged with Medori to extend the Lease through August 9, 2004, and that it contacted Medori on multiple occasions to inform him that it would be removing its personal property on that day.¹⁰ Neither Medori nor Saraga notified DMI of any objection to these arrangements, and DMI did not send written notice to Saraga.

On the morning of August 9, 2004, Saraga entered the Property with a crew from CCI, Inc. ("CCI"), a general contracting firm. DMI alleges that when its President arrived to begin overseeing removal of its possessions at 10:00 a.m. that morning, Saraga and the contractors had already removed three truck-loads of business records, equipment, and other items to a landfill. DMI also claims that Saraga informed some of the CCI employees that they could take DMI's personal property, including computers. According to DMI, Saraga persisted in removing items from the Property despite the demands of its President. DMI alleges that Saraga removed, gave away, and/or destroyed personal possessions worth more than $80,000, as well as business records.¹¹

DMI sued Saraga for conversion, breach of contract, and breach of the covenant of good faith and fair dealing. In its complaint, DMI seeks both compensatory and punitive damages.¹² Saraga filed the instant motion for summary judgment on the issue of punitive damages. Following oral argument, the Court ordered additional briefing by the parties.

III. Parties' Contentions

In his motion for summary judgment, Saraga argued that punitive damages are unavailable in breach of contract claims between commercial landlords and tenants without addressing the effect of DMI's conversion claim.¹³ DMI concedes that it would not be entitled to punitive damages for either count of breach of contract contained in its complaint, but contends that it could recover punitive damages on the conversion claim.¹⁴

During oral argument and in his supplemental brief, Saraga modified his position to argue that punitive damages are inappropriate in this particular case because DMI "abandoned any potential recovery in tort" by arguing that the Lease was still in effect on August 9, 2004.¹⁵ Saraga contends that DMI's conversion claim is not independent of its breach of contract claims, because DMI "would have had no right to possession of the [Property] and therefore no legal means to locate its personal property" there but for the Lease.¹⁶ Additionally, Saraga claims that the Lease's exculpatory clause would bar liability for acts of conversion. Saraga further maintains that punitive damages would be inappropriate even if DMI can assert a conversion claim, because his conduct was not marked by recklessness, wrongful intent, or any other aggravating factor which would entitle DMI to punitive damageS.¹⁷

In response, DMI argues that its conversion claim is viable under Delaware law as a separate and distinct cause of action from its breach of contract claims.¹⁸ DMI asserts that the Lease's exculpatory clause is inapplicable, either because it only addresses negligent discharge of the landlord's maintenance duties or because it is ambiguous and must be construed against Saraga as the drafter. Finally, DMI claims that Saraga knew the Lease had been extended through August 9, 2004, and that his conduct "exhibit[ed] at best an 'I don't care' attitude [towards DMI's rights] and at worst a deliberate attempt to harass," rendering punitive damages appropriate.¹⁹

IV. Standard of Review

In considering a motion for summary judgment, the Court's function is to examine the record to ascertain whether genuine issues of material fact exist and to determine whether the moving party is entitled to judgment as a matter of law. The court will view the record in the light most favorable to the non-moving party and will draw all rational inferences in favor of the non-movant based upon the undisputed facts and the non-movant's version of any disputed facts. If the Court finds that material facts are in dispute or that judgment as a matter of law is not appropriate, summary judgment will be denied. However, if no material facts are in dispute and the moving party is entitled to judgment as a matter of law, summary judgment will be granted.²⁰

V. Discussion

A. Conversion Claim

Under Delaware law, a plaintiff bringing a claim based entirely upon a breach of the terms of a contract generally must sue in contract, and not in tort.²¹ In preventing gratuitous "bootstrapping" of contract claims into tort claims,²² courts recognize that a breach of contract will not generally constitute a tort.²³ Even an intentional, knowing, wanton, or malicious action by the defendant will not support a tort claim if the plaintiff cannot assert wrongful conduct beyond the breach of contract itself.²⁴ Rather, a tort usually involves violation of a duty which arises "by operation of law and not by the mere agreement of the parties."²⁵ However, the same circumstances may give rise to both breach of contract and tort claims if the plaintiff asserts that the alleged contractual breach was accompanied by the breach of an independent duty imposed by law.²⁶

Conversion is generally defined as "any distinct act of dominion wrongfully exerted over the property of another, in denial of his right, or inconsistent with it."²⁷ Because conversion is an intentional tort,²⁸ there is a general duty grounded in tort law to refrain from converting another's property.²⁹ A conversion claim may be asserted alongside a contract claim where the...