Opinion
C.A. No. 20215
Submitted: May 16, 2003
Decided: June 6, 2003
Richard L. Abbott, Esquire, THE BAYARD FIRM, Wilmington, Delaware, Attorneys for Plaintiff.
Scott G. Wilcox, Esquire, NEW CASTLE COUNTY LAW DEPARTMENT, New Castle, Delaware, Attorney for Defendant.
MEMORANDUM OPINION AND ORDER
I.
A developer seeks an injunction against the County government barring the application of the "unclean hands" provision of the County development code based on violations of other chapters of County ordinances. The court concludes that the injunction action must be dismissed both because the complaint does not properly invoke this court's equity jurisdiction and because the plaintiff has failed to exhaust its administrative remedies.
II.
The following facts have been stipulated to by both parties. Christiana Town Center, LLC ("Christiana") is a Delaware limited liability company. Christiana is the owner of approximately seventy acres of land located in White Clay Creek Hundred, New Castle County, at the intersection of Maine Street and Delaware Route 273 near the village of Christiana. The land is zoned Commercial Regional. It is approved for the development of 452,842 square feet of commercial space (the "Shopping Center").
Christiana is owned and operated by Frank E. Acierno. Acierno also owns and operates 395 Associates, LLC ("395") and Estate Homes, Inc. ("EHI"). 395 is a Delaware limited liability company. EHI is a Delaware corporation. 395 and EHI are the respondents in the Home Warranty Decisions referenced hereinafter.
On March 19, 2002, Christiana entered into a lease agreement with Bertucci's Restaurant Corp. to locate a restaurant at the Shopping Center. Christiana received a building permit from the County to construct the Bertucci''s restaurant building shell (the "Building") on November 7, 2002. Christiana completed construction of the shell of the Building by the beginning of March 2003.
On Thursday, March 13, 2003, a Bertucci's representative attempted to apply to the County for a building permit in order to perform finishing work and improvements to the Building (hereinafter, the "Tenant Fit-Out Permit"). The County refused to accept Bertucci's application for the Tenant Fit-Out Permit based on a note in the Christiana file that the provisions of § 40.31.901D of the County's Unified Development Code (the "UDC Clean Hands Provision") prohibited acceptance of the application.
The UDC is Chapter 40 of the New Castle County Code.
Christiana believed that the County may have refused to accept the Tenant Fit-Out Permit application from Bertucci's based on a decision dated January 30, 2003 finding Christiana in violation of the County Drainage Code (Chapter 12 of the New Castle County Code), and a decision dated February 10, 2003 finding Christiana in violation of the County Building Code (Chapter 6 of the New Castle County Code) (collectively, the "Decisions"). The Decisions were appealed to the New Castle County Board of License, Inspection Review in late February and early March 2003.
On March 17, 2003, Christiana's counsel and counsel for the County discussed the County's ability to refuse applications at the Shopping Center site. The parties agreed that the appeal of the Decisions should have stayed any application of the UDC Clean Hands Provision that was predicated on them. Counsel for the County stated that he would discuss the matter with the County and advise it that applications for the Christiana Town Center should not legally be denied.
On March 18, 2003, a representative of Christiana went to the County's offices and attempted to submit an engineering report for the footings and foundation for the Building and requested final inspections for the purpose of ultimately obtaining a Certificate of Occupancy for the building shell. The County refused to accept the submission or provide inspections based on: (1) a January 22, 2003 decision finding that 395 and EHI failed to obtain home warranties for new houses constructed in the subdivision of Farmington in violation of the County Building Code ("Home Warranty Decision I"); and (2) the UDC Clean Hands Provision.
On that same day, counsel for the County advised counsel for Christiana that Home Warranty Decision I had been overlooked during their March 17 discussions. According to the County, the UDC Clean Hands Provision precluded the County from accepting or granting any land use applications, including issuing any permits or certificates of occupancy or performing any inspections, based upon the violations found in Home Warranty Decision I.
On Thursday, March 20, 2003, a representative of Bertucci's once again attempted to make application to the County for the Tenant Fit-Out Permit. The County again refused to accept Bertucci's application. The basis for the County''s refusal was: (1) Home Warranty Decision I; (2) a March 19, 2003 decision finding 395 and EHI in violation of the County Building Code home warranty requirements for new homes ("Home Warranty Decision II"; and collectively with Home Warranty Decision I, the "Home Warranty Decisions"); and (3) the UDC Clean Hands Provision.
On Friday, March 21, 2003, a representative of Christiana and its counsel went to the County's offices and again sought to submit an engineering report for the footings and foundation for the Building and requested inspections necessary to ultimately obtain a Certificate of Occupancy. At that time, counsel for the County refused to accept the application or conduct any inspections. The County's counsel stated that the basis for his refusal was the Home Warranty Decisions and the UDC Clean Hands Provision. Christiana filed suit on March 28, 2003.
III.
Christiana seeks a preliminary and permanent injunction prohibiting the County from applying the UDC Clean Hands provision against it in situations where the UDC has not been violated (as, for example, in the case of Building Code violations) and where violations do not involve Christiana (but some other entity affiliated with Acierno). The standard for granting a permanent injunction requires Christiana to demonstrate that: (1) it has proven actual success on the merits of the claims; (2) irreparable harm will be suffered if injunctive relief is not granted; and (3) the harm that will result if an injunction is not entered outweighs the harm that would befall the County if an injunction is granted. Before reaching any of these questions, however, the court must determine that it has subject matter jurisdiction to hear a dispute. Here, the court finds that it lacks subject matter jurisdiction, and, therefore, Christiana's motion for permanent injunctive relief will be denied.
The standard for preliminary injunction requires a reasonable probability of success on the merits. See Next Level Communications, Inc. v. Motorola, Inc., 2003 WL 549083, at *13 (Del.Ch. Feb. 26, 2003).
Draper Communications, Inc. v. Delaware Valley Broadcasters LP, 505 A.2d 1282, 1288 (Del.Ch. 1985) (citations omitted).
IV.
A. Subject Matter Jurisdiction May Be Raised Sua Sponte By The Court And May Not Be Waived By The Parties
Some states, while recognizing the traditional common law limitations on equitable jurisdiction, nonetheless permit their courts of equity to decide causes of action even where a full and sufficient remedy exists at law so long as no jurisdictional objection is raised by either party. "In other words, such an objection may be waived, and equitable subject matter jurisdiction in effect may be conferred upon a court of equity by explicit, implicit or constructive agreement of the parties." This is not the rule in Delaware. Rather, "it is clear that, unlike many jurisdictions, judges in the Delaware Court of Chancery are obligated to decide whether a matter comes within the equitable jurisdiction of this Court regardless of whether the issue has been raised by the parties."
See, e.g., Moore v. McAllister, 141 A.2d 176 (Md. 1958); Kornstein v. Almac's, Inc., 201 A.2d 645 (R.I. 1964).
Donald J. Wolfe, Jr, Michael A. Pittenger, Corporate and Commercial Practice in the Delaware Court of Chancery, § 2-3[a] (2001 ed.) (hereinafter, "Wolf Pittenger").
IBM Corp. v. Comdisco, Inc., 602 A.2d 74, 77 n. 5 (Del.Ch. 1991) (citing DuPont v. DuPont, 85 A.2d 724 (Del. 1951); Wife v. Husband, 285 A.2d 824 (Del.Ch. 1974); Timmons v. Cropper, 172 A.2d 757 (Del.Ch. 1961)). But see Clark v. Teeven Holding Co., Inc., 625 A.2d 869, 877 (Del.Ch. 1992) ("[A] decision by the Court of Chancery that it will assume "equity jurisdiction' over a particular controversy because there is no adequate remedy at law is not void if wrong and is subject only to direct attack. An objection to the exercise of equity jurisdiction may therefore be waived") (citations omitted).
When the issue of subject matter jurisdiction is raised, by the court or the parties, the plaintiff bears the burden of establishing such jurisdiction. In this connection, the court must review the allegations of the complaint as a whole to determine the true nature of the claim. As Chancellor Allen once observed:
See Wilmington Fraternal Order of Police Lodge No. 1 v. Bostrom, 1999 WL 39546, at *4 (Del.Ch. Jan. 22, 1999) ("The burden of establishing the Court's subject matter jurisdiction rests with the plaintiff') (citing Scattered Corp. v. Chicago Stock Exchange, 671 A.2d 874, 877 (Del.Ch. 1994); Yancey v, Nat'l Trust Co., 1993 WL 155492, at *6 (Del.Ch. May 7, 1993), aff'd, 633 A.2d 372 (Del. 1993)).
See Diebold Computer Leasing. Inc. v. Commercial Credit Corp., 267 A.2d 586, 590 (Del. 1970); Western Airlines, Inc. v Allegheny Airlines, Inc., 313 A.2d 145, 149 (Del. 1973).
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 excuse the court . . . 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 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.
McMahon v. New Castle Assocs., 532 A.2d 601, 603 (Del.Ch. 1987) (citation omitted); see also Zeneca, Inc. v. Monsanto Co., 1996 WL 104254, at *4 ("this Court must examine the pleadings to determine the true substance of the relief [plaintiff] actually seeks, and will not be bound by the form of relief as describe [by plaintiff]"); New Castle County Vocational Technical Sch. Dist. v. Bd. of Educ., 451 A.2d 1156, 1164 (Del.Ch. 1982) (noting that "if there is an adequate remedy existing at law, it is at best unlikely that this court has jurisdiction over this matter").
"Equity jurisdiction can arise in two ways: (1) from the invocation of an equitable right, or (2) from the request for an equitable remedy when there is no adequate remedy at law." Equitable rights are rights that have traditionally not been recognized at common law. The most common example of equitable rights in this court are fiduciary rights and duties that arise in the context of trusts, corporations, other forms of business organizations, guardianships, and the administration of estates. Equitable remedies, by contrast, may be applied even where the right sued on "is essentially legal in nature, but with respect to which the available remedy at law is not fully sufficient to protect or redress the resulting injury under the circumstances." In the current case, Christiana seeks the equitable remedy of an injunction to enforce the legal rights related to its (and Bertucci's) construction of a restaurant.
Azurix Corp. v. Synagro Technologies, Inc., 2000 WL 193117, at *2 (Del.Ch. Feb. 3, 2000), appeal denied, 748 A.2d 406 (Del. 2000) (TABLE).
See Wolf Pittenger, § 2-3[b].
See id.
Id.
If the court is asked to exercise its equitable jurisdiction to remedy a legal wrong, the critical jurisdictional question is whether an adequate remedy at law exists. If a litigant can seek a remedy in a law court, or other adequate venue, that would provide full, fair, and practical relief, the Court of Chancery is without subject matter jurisdiction to hear the matter. In this regard, the Court of Chancery will not exercise subject matter jurisdiction "where a complete remedy otherwise exists but where plaintiff has prayed for some type of traditional equitable relief as a kind of formulaic "open sesame' to the Court of Chancery."
See Comdisco, 602 A.2d at 78.
See 10 Del. C. § 342; Comdisco, 602 A.2d at 78; In re Real Property of Wife, K, 297 A.2d 424, 425-26 (Del.Ch. 1972); Hughes Tool Co. v. Fawcett Publications, Inc., 315 A.2d 577, 579 (Del. 1974).
Comdisco, 602 A.2d at 78; see also City of Wilmington v. Delaware Coach Co., 230 A.2d 762, 766-67 (Del.Ch. 1967).
B. An Adequate Remedy At Law Exists
Turning to Christiana's complaint, a plain reading shows that all Christiana realistically seeks is a declaratory judgment as to the meaning and scope of the UDC Clean Hands Provision. Generally speaking, an adequate remedy at law exists under the Declaratory Judgment Act for Christiana to obtain such a determination in the Superior Court. Armed with a declaration that the UDC Clean Hands Provision is not triggered by the Home Warranty Decisions, Christiana should have no need for an injunction from this court. Christiana suggests that even if a court of law were to issue a declaratory judgment in its favor, the County would disregard such a judgment and continue to act with hostility towards Christiana. Thus, the argument goes, a coercive remedy in the form of an injunction will be required to enforce any declaratory judgment. This argument cannot succeed, as the court must presume that the County will respect any decision rendered by any competent court of this State.
Verified Comp. at ¶ 17.
10 Del. C. § 6501 et seq.
See Delaware Coach, 230 A.2d at 767 ("It follows that the prospective possibility that injunctive relief may be required is not the basis for equity jurisdiction in this action for a declaration of rights under a contract"). But see Diebold, 267 A.2d at 591 (holding that a declaratory judgment action to determine the rights of the parties under a contract could be brought in equity because, in that case, a declaratory judgment rendered by the Superior Court might well require a return to the Court of Chancery for enforcement, and "ultimate coercive relief would be injunctive"). The concerns of the Supreme Court in Diebold are not present here. It would be anathema to our form of government to believe, as a baseline principle, that after a court renders a declaratory judgment another governmental agency would not follow that decision. It may actually be the case that a particular agency does not follow such a judgment, but a party should only seek injunctive relief if that agency actually refuses to comply with the judicial declaration.
C. Christiana Failed to Exhaust Its Administrative Remedies
Moreover, Christiana has, or had, administrative avenues of redress that it may have failed to exhaust. The County's denial of Christiana's application was appealable to the New Castle County Planning Board (the "Planning Board"). Further, any decision of the Planning Board can also be appealed by writ of certiorari to the Superior Court.
See County Code §§ 40.31.510 and 4O.30.110. Section 40.31.510 provides:
An applicant pursuing approval of a land use application who is aggrieved by a finding, decision, or interpretation of a decision maker made in response to a review of such application may appeal such action to the jurisdictionally approved agency pursuant to Table 40.30.110 [which in this case is the Planning Board]. Appeals may only be taken based upon a final decision, not the recommendation of an agency. All appeals from the final decision of an administrative body or the [New Castle County Department of Land Use] shall be filed with the [New Castle County Department of Land Use] within twenty (20) days of the date the written decision is issued by the body or [the New Castle County Department of Land Use] . . . . Unless otherwise provided by law, any appeal to a court of law or equity shall be made within twenty (20) days of the issuance of a written final decision. Unless otherwise provided by law, no appeal to a court of law or equity may be taken until all remedies made available by this Chapter have been exhausted.
See 10 Del. C. § 562.
Delaware law strongly favors the exhaustion of administrative remedies before resorting to judicial intervention. Pursuant to this doctrine, "where a remedy before an administrative agency is provided, relief must be sought by exhausting this remedy before the courts will either review any action by the agency or provide an independent remedy." The purpose of the exhaustion-of-remedies requirement is to prevent judicial interference in the administrative process and to allow the administrative agency to apply its expertise and discretion, and possibly resolve the conflict without judicial intervention.
Levinson v. Delaware Compensation Rating Bureau, 616 A.2d 1182, 1186 (Del. 1992); Hundley v. O'Donnell, 1998 WL 842293, at *2-*5 (Del. Ch. Dec. 1, 1998) (Finding that where, pursuant to the New Castle County Code, plaintiff had an effective administrative remedy available pursuant to the New Castle Department of Land Use's denial of a subdivision plan, the court denied injunctive relief and granted defendant's motion to dismiss); Smith v. Christiana Sch. Dist., 1996 WL 757282, at *2 (Del. Ch. Jan. 2, 1997) ("judicial review cannot be had until the aggrieved party has first resorted to the appropriate administrative bodies and procedures designed to address his claims").
Levinson, 616 A.2d at 1186.
Id. at 1187.
The administrative remedy available to Christiana with respect to the denial of its application is an appeal to the Planning Board. Applicants who are aggrieved by a finding, decision, or interpretation of a decision-maker made in response to review of land use application can appeal such decision to the appropriate administrative agency. The County concedes that the proper body from which to seek appeal in this instance is the Planning Board. As such, appeals to a court of law cannot occur until after the Planning Board has rendered a decision. Therefore, a statutory remedy at law exists by which Christiana can appeal the County's decision to deny its application to the Planning Board, and thereafter, to a court of law.
See County Code §§ 40.31.510 and 40.30.110.
County Code § 40.31.510.
Id.
Christiana claims that it "could not have pursued an administrative appeal pursuant to County Code § 40.31.510 because the County refused to accept the land use application and never provided a `written decision,' therefore no appealable `final decision' or `written decision' on a `land use application' was ever rendered by the County." It may be true that the County refused to accept Christiana's land use application, but Christiana did receive a written decision on its application from which it could have sought an appeal. On April 2, 2003, counsel for Christiana received a letter from the New Castle County Department of Land Use stating the basis for the County's refusal to accept Christiana' s application. In particular, the letter provides:
Pl. Reply Br. at 20-21.
[T]he Department refused to accept [Christiana's and Bertucci's applications] based upon prohibitions contained in the clean hands provisions of the UDC. Section 40.31.901(D) of the UDC states that "no land use application shall be granted by any board, Department, or Council if the applicant is not in good standing with New Castle County. Not in good standing means that at the time of the request, the applicant is . . . in violation of the Code." Your client is currently in violation of Chapters 6 and 12 of the New Castle County Code. Therefore, the Department is precluded from granting the land use applications.
Appendix To Pl. Op. Br. at Tab 10.
This letter satisfies the County's obligation to provide a final written decision, and likewise permits Christiana to appeal such decision to the Planning Board.
It should be noted that Section 40.31.510 provides: "[a]ll appeals from the final decision of an administrative body or the Department shall be filed with the Department within twenty (20) days of the dare the written decision is issued by the body or Department." This is a small hurdle for Christiana to overcome, however. Even if the filing of this complaint did not toll the running of that 20-day period, Christiana could simply resubmit its applications and then appeal that written decision within 20 days.