McMahon v. New Castle Associates

• Decision Date: 06 August 1987
• Docket Number: No. 8707,8707
• Citation: 532 A.2d 601
• Parties: Gordon McMAHON, individually and on behalf of all other tenants and former tenants similarly situated, Plaintiff, v. NEW CASTLE ASSOCIATES, Pan American Associates, Richard I. Rubin & Co., Defendants. Civ. A. . Submitted:
• Court: Court of Chancery of Delaware

Page 601

532 A.2d 601

Gordon McMAHON, individually and on behalf of all other tenants and former tenants similarly situated, Plaintiff, v. NEW CASTLE ASSOCIATES, Pan American Associates, Richard I Rubin & Co., Defendants.

Civ. A. No. 8707.

Court of Chancery of Delaware New Castle County.

Submitted: Aug. 6, 1987.

Decided: Aug. 21, 1987.

John E. James, and Robert K. Payson, of Potter Anderson & Corroon, Wilmington, and Michael Malakoff, and Fred S. Longer, of Berger, Kapetan, Malakoff & Meyers, P.C., Pittsburgh, Pa., of counsel, for plaintiff.

Mary M. Johnston, William F. Lynch, II, and Edward M. McNally, of Morris, James, Hitchens & Williams, Wilmington, and Michael S. Silberman, of Silberman & Raslavich, Philadelphia, Pa., of counsel, for defendants.

OPINION

ALLEN, Chancellor.

This class action, in which a tenant seeks the recovery of money from his landlord, is before the Court on defendant's motion to dismiss for lack of equity jurisdiction. 10 Del.C. § 342. For the reasons that follow, I conclude that the complaint alleges essentially a legal claim for damages. That is, it alleges neither a relationship between the parties uniquely recognized in chancery nor facts which, if true, would entitle plaintiff to any remedy uniquely available from this court. Therefore, for the reasons more fully set forth below, I conclude that plaintiff's remedy at law is fully adequate and that, consequently, this court lacks subject matter jurisdiction in this matter.

I.

The relevant facts as they appear from the amended complaint are as follows.

In 1977 plaintiff, Mr. Gordon McMahon, entered into a ten year lease with defendant New Castle Associates for commercial property located within Christiana Mall, in which he intended to and now does operate a retail book store. Under the terms of this lease, the landlord is obligated to supply electricity and, to do so, it has installed transformers and other equipment necessary to transform and deliver the high voltage current it buys from the public utility. Under the lease, plaintiff's rent is calculated through a formula that includes a component designed to compensate the landlord for the provision of electricity (the "Energy Rent Inclusion Component"). Consumption of electricity by the tenant is not metered. Rather, it is estimated by the landlord, with the assistance of an expert, on the basis of the total square footage of the unit occupied and the type of business and equipment operated thereon. The lease provides an arbitration mechanism for resolving disputes concerning the amount of the Energy Rent Inclusion Component.

Plaintiff contends that, from the beginning of his tenancy, defendant's estimates of electricity usage for billing purposes have greatly exceeded the tenant's actual usage. He asserts that this practice violates a provision of the Landlord Tenant Code, which became effective July 9, 1981, governing metering and charges for utility services, see 25 Del.C. § 5114, and, further, that by making a profit on the resale of electricity to the mall tenants, the defendant has violated the anti-resale provision contained in a Public Service Commission tariff. ¹ Defendant's alleged violation of Delaware law, in turn, is said to constitute a breach of a term in the 1977 lease under which, plaintiff argues, the parties agreed to comply with all relevant applicable statutes and rules and regulations.

In addition, in his brief plaintiff characterizes the relationship between tenant and landlord as a fiduciary relationship under the particular circumstances present in this case. Specifically, he claims that defendant is his agent in purchasing electricity for him and that the amount defendant charges is determined by information within the exclusive possession and control of the agent and unavailable to the plaintiff. These considerations are said to convert the normally wholly commercial relationship of landlord-tenant into one of special trust and dependency which ought to be supervised by chancery.

Based on the foregoing allegations, plaintiff asserts liability in two counts. In count I, plaintiff asserts that defendants should be held as constructive trustees for amounts charged for utility service in excess of amounts legally due. The substantive basis of the claim asserted in Count I is simply that the charges for electricity have been "in violation of Delaware law" (p 32). In Count II, plaintiff pays somewhat greater attention to the basis of the right asserted. There it is claimed that the amount charged for electricity violates Section 5114 of TITLE 25 OF THE DELAWARE CODE (p 38)², and that it violates the lease which allegedly incorporates evolving Delaware law (p 39). The same relief is requested on both counts: 1) an accounting for electrical charges collected in excess of those permitted under the Landlord Tenant statute; 2) judgment in the amount of the difference between legally permissible and actual charges; 3) an injunction prohibiting defendants from charging in excess of the actual cost to defendant of electrical utility service; 4) interest; and 5) costs, including attorneys' fees.

This action was originally filed as a class action on behalf of all similarly situated tenants on November 10, 1986. Defendant New Castle Associates has moved, pursuant to Chancery Court Rule 12(b)(1), to dismiss the action for lack of subject matter jurisdiction in this court.

II.

Chancery jurisdiction is not conferred by the incantation of magic words. Neither the artful use nor the wholesale invocation of familiar chancery terms in a complaint will itself excuse the court, upon a proper motion, from a realistic assessment of the nature of the wrong alleged and the remedy available in order to determine whether a legal remedy is available and fully adequate. If a realistic evaluation leads to the conclusion that an adequate legal remedy is available this court, in conformity with the command of section 342 of title 10 of the Delaware Code will not accept jurisdiction over the matter. Hughes Tool Co. v. Fawcett Publications, Inc., Del.Ch., 297 A.2d 428, 431 (1972) rev'd on other grounds, Del.Supr., 315 A.2d 577 (1974); Chateau Apartments Co. v. City of Wilmington, Del.Supr., 391 A.2d 205 (1978).

In this instance, plaintiff has attempted to assert many of the traditional grounds for equity jurisdiction. He asserts that a fiduciary duty exists between his landlord and himself; that the matters treated by this suit are complex and require an accounting by the landlord; that a constructive trust should be imposed upon the funds that have been collected in excess of rent legally due under the lease; and that an injunction should be entered requiring steps to be taken so that future rent is calculated appropriately. Finally, plaintiff asserts that this class action is necessary in chancery to foreclose a multiplicity of suits that will otherwise be necessary to fully protect plaintiff's rights and the rights of others similarly situated. I conclude that none of the asserted bases for equitable jurisdiction withstand analysis and that the remedy of money damages for any wrong proven will be fully adequate in the circumstances. Therefore, defendants' motion to dismiss will be granted and this action will be dismissed sixty days after an order entered on this motion becomes final unless, prior to that time, plaintiff files a written election of transfer of this matter to the Superior Court. See 10 Del.C. § 1902.

III. The Claim that "Fiduciary" Duties are Involved

Among the most ancient of headings under which chancery's jurisdiction falls is that of fiduciary relationships. The classic example--the accountability of trustees--demonstrates the reason why chancery takes jurisdiction over fiduciaries. The "fiduciary" duty of a trustee to deal with the trust res only for the benefit of the cestui que trust and not for his own benefit is a creation of equity. At law a trustee, as the legal owner, may deal with trust property as his own. The rights of a beneficiary are only recognized in equity. Accordingly, an action predicated upon such rights is properly maintained in a court of equity and only a court of equity. Bogert, Trusts and Trustees § 870 (1982). A similar rationale underlies Chancery's traditional jurisdiction over corporate officers and directors. The duties they owe to shareholders with respect to the exercise of their legal power over corporate property supervene their legal rights, see, e.g., Singer v. The Magnavox Co., Del.Supr., 380 A.2d 969, 975 (1977), are imposed by equity and are recognized and enforced exclusively by a court of equity. Harman v. Masoneilan International, Inc., Del.Supr., 442 A.2d 487, 498 (1982).

Chancery takes jurisdiction over "fiduciary" relationships because equity, not law, is the source of the right asserted. Thus, when this court, for example, said "A fiduciary relationship is a situation where one person reposes special trust in and reliance on the judgment of another or where a special duty exists on the part of one person to protect the interests of another," Cheese Shop International, Inc. v. Steele, Del.Ch., 303 A.2d 689 (1973), rev'd on other grounds, Del.Supr., 311 A.2d 870 (1973), attention must be paid to the word "special" lest the statement be thought to describe too broadly chancery's concerns with relationships where an element of trust, as commonly understood, is present. One may place trust in a workman of any sort and does place trust in one's physician, but it would hardly be contended that such trust would warrant chancery's assuming jurisdiction over a claim that a workman or physician caused injury by want of due care--although a claim of that very type against a trustee will be entertained in a court of equity. Pennsylvania Company v. Wilmington Trust Company, Del.Ch., 186 A.2d 751 (1962), aff'd sub nom Wilmington Trust Company v. Coulter, Del.Supr., 200 A.2d 441 (1964).

I need not now attempt to...