Kablaoui v. Gerar Place Condo. Ass'n
| Decision Date | 20 May 2022 |
| Docket Number | C. A. 2021-0700-PWG |
| Parties | EDWARD and NANCY KABLAOUI, Plaintiffs, v. GERAR PLACE CONDOMINIUM ASSOCIATION, and ROGER BINNER, DEBRA SALIM, BRIAN COMROE, KAREN STUCK, and DANNY WATKINS, in their Individual Capacity and Collectively as Members of the Council Defendants. |
| Court | Court of Chancery of Delaware |
Date Submitted: March 11, 2022
Christopher J. Isaac, Esq., Anthony Delcollo, Esq., OFFIT KURMAN, Wilmington, Delaware, Attorneys for Plaintiffs
Brian Thomas McNelis, Esq., YOUNG & McNELIS, Dover, Delaware Attorneys for Defendants
Griffin, M Pending before me is a dispute between a property owner and their condominium's association and its board of directors regarding the board's imposition of a special assessment to pay for major exterior renovations on the condominium building, including the replacement of the windows, among other claims. The property owner seeks declaratory and injunctive relief and damages, contending that the association and board members breached their fiduciary and contractual duties by exceeding the association's authority under its governing documents because the windows were not common elements and board members had a self-serving interest. The association and board members filed a motion to dismiss the complaint, arguing, in part, that the governing documents authorized their actions to replace the windows and the demand requirement under Court of Chancery Rule 23.1 has not been met for the property owner's derivative claims. The property owner contends that they have brought a direct claim against the Association and the entire board is conflicted. I recommend that the Court grant the motion to dismiss, finding that the property owner has failed to state a claim for relief related to the special assessment contract claim since the windows are common elements, and the cost of their replacement is a common expense. I also recommend that the Court dismiss the property owner's derivative claims for failing to meet their burden of showing demand futility under Court of Chancery Rule 23.1. This is a final report.
Plaintiffs Edward and Nancy Kablaoui ("Kablaouis") have an ownership interest in Gerar Place ("Condominium"), which consists of 17 condominium units located at 59 Maryland Avenue, Rehoboth Beach, Delaware.[1] The Kablaouis are members of Defendant Gerar Place Condominium Association ("Association"), which is a Delaware corporation.[2] The Condominium was submitted to the Unit Property Act, 25 Delaware Code § 2201 et seq. ("UPA"), by the Declaration Submitting Real Property to the Provisions of Unit Property Act ("Declaration") dated April 6, 1976.[3] Defendants Roger Binner ("Binner"), Debra Salim ("Salim"), Brian Comroe ("Comroe"), Karen Stuck ("Stuck"), and Danny Watkins ("Watkins") (collectively, "Council" and with the Association, "Defendants") form the Association's Council.[4] In addition to the Declaration, the Condominium and Association is governed by the Code of Regulations ().[5]
At the May of 2017 meeting of the Association, Binner proposed that the Association strike clauses from its Governing Documents prohibiting debris from being swept from balconies and allowing the Association to remove barking dogs from the Condominium.[6] The Complaint alleges that these changes disproportionately benefitted Binner because he sweeps debris from his unit's balcony on the top floor, and has a dog that barks frequently.[7] The Association's Rules were allegedly modified to permit unfettered access to units by the Council.[8]On August 20, 2017, Binner entered the Kablaouis' unit at the Condominium, allegedly for no discernable purpose.[9] Binner said that this was to ensure that the master key worked.[10] Around 2018, the Council agreed, at Binner's request, to pay for the servicing of air conditioning (HVAC) units and for ant infestation treatment in the Condominium.[11] On February 22, 2021, the Kablaouis made a complaint against the Association through the Office of the Common Interest Community Ombudsman, in which they alleged that the Association failed to comply with the Governing Documents.[12] In the summer of 2020, unit 303 in the Condominium allegedly began experiencing water leaking from unit 403, Binner's and Comroe's unit.[13] The Council hired contractors to inspect the Condominium's windows for potential water damage on or about January 26, 2021.[14] On March 27, 2021, during an Association meeting, unit 303's owners complained that unit 403's windows were leaking and damaging their unit.[15] At that meeting, the Council informed the Association members that they had hired an engineer to examine water damage and that the engineering report showed that many of the Condominium's windows, including the Kablaouis' windows, were improperly installed and required replacement.[16]
The Kablaouis alleged that windows had previously been treated as the unit owners' responsibility and several owners had previously replaced their windows, glass sliders or window panes.[17] The Kablaouis retained an independent contractor who determined there was no need to replace their unit's windows.[18]
On June 17, 2021, the Council emailed Association members indicating that replacement of the Condominium's exterior windows and an extensive exterior renovation was necessary and, on July 8, 2021, issued a memorandum explaining the proposed work and the special assessment that would be levied to fund the renovations.[19] On July 24, 2021, the Council held an emergency meeting and agreed to the replacement of the Condominium's windows ("Windows Replacement") and other exterior renovations and to the special assessment to pay for that work ("Special Assessment").[20]
The Kablaouis filed a complaint on August 16, 2021, claiming breaches of contractual and fiduciary duties by the Association and the Council related to the Special Assessment, among other matters.[21] On September 14, 2021, the Kablaouis filed the first amended complaint.[22] On September 30, 2021, Defendants filed a motion to dismiss.[23] On October 13, 2021, the Kablaouis filed a motion for a temporary restraining order ("TRO Motion"), preliminary injunction and for an order permitting expedited discovery.[24] After filing an answering brief to Defendants' motion to dismiss, [25] the Kablaouis filed a motion to amend the complaint on December 17, 2021.[26] Chancellor McCormick heard the TRO Motion on December 20, 2021 and denied the TRO Motion but granted expedition and permitted limited expedited discovery.[27]
On December 23, 2021, at the parties' request, I held an emergency teleconference to discuss implementation of the Chancellor's expedited discovery ruling before the scheduled removal of the Condominium windows ("Windows") on or around January 3, 2022.[28] In addition, I addressed several discovery-related disputes during the week of December 28, 2021.[29]
On January 3, 2022, the Kablaouis filed their second motion to amend the complaint ("Second Motion").[30] Defendants' January 12, 2022 letter indicated that they did not oppose this motion and requested additional time to file a reply brief for Defendants' motion to dismiss.[31] On January 13, 2022, I granted the Second Motion and asked the parties to file a new briefing schedule on the renewed motion to dismiss to be filed by Defendants that would address the soon-to-be-filed third amended complaint.[32] On January 21, 2022, the Kablaouis filed the third amended complaint ("Complaint").[33] Count I of the Complaint alleges that the Council breached its fiduciary duties by imposing the Special Assessment and making other changes to the Governing Documents, including elimination of the prohibition on sweeping of dirt or debris from a unit's balcony and the removal of barking dogs, and allowing Binner unfettered access to all units.[34] Count II asserts that the Association and Council breached their contractual duties by imposing the Special Assessment in violation of the Governing Documents.[35] Count III seeks declaratory and injunctive relief against the Association and Council for breaching its contractual and fiduciary duties, while Count IV seeks injunctive relief against the Association and Council for breach of the UPA.[36] The Kablaouis seek declaratory relief that the Association has violated the Governing Documents, prohibitory and mandatory injunctive relief that the Association will comply with the Governing Documents and not issue special assessments on non-common elements or improper violations in the future, damages, and attorney's fees and costs.[37]
On January 24, 2022, the parties submitted a proposed schedule and requested that the Court resolve a request for a stay of discovery pending a decision on the soon-to-be-filed Defendants' motion to dismiss the third amended complaint ("Motion").[38] On January 28, 2022, I entered a scheduling order and stayed discovery pending a decision on the soon-to-be-filed Motion.[39] Defendants filed the Motion on February 7, 2022 and their opening brief on February 25, 2022, arguing that the Complaint should be dismissed under Rule 12(b)(6) and Rule 23.1, among other grounds.[40] The Kablaouis' March 4, 2022 answering brief argues against dismissal, and Defendants filed a March 11, 2022 reply brief.[41] III. Analysis
A. Standards of Review
For a motion to dismiss under Rule 12(b)(6), "the governing pleading standard in Delaware to survive a motion to dismiss is reasonable 'conceivability.'"[42] When considering a motion to dismiss under Rule 12(b)(6), the court must "accept all well-pleaded factual allegations in the Complaint as true ..., draw all...
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