Leonard Mathias, Sr. and Susan J. Mathias v. Angola Neck Park Property Owners Association, Inc.

• Court: Court of Chancery of Delaware
• Decided: November 20, 2014
• Docket: CA 9124-MA
• Status: Published

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE KIM E. AYVAZIAN CHANCERY COURTHOUSE MASTER IN CHANCERY 34 The Circle GEORGETOWN, DELAWARE 19947 AND NEW CASTLE COUNTY COURTHOUSE 500 NORTH KING STREET, SUITE 11400 WILMINGTON, DELAWARE 19980-3734

November 20, 2014

Via Lexis-Nexis

John A. Sergovic, Jr., Esquire John F. Brady, Esquire Sergovic Carmean & Weidman, P.A. Law Office of Gerry Gray 142 East Market Street 21133 Sterling Ave. Unit 12 PO Box 751 PO Box 549 Georgetown, DE 19947 Georgetown, DE 19947

RE: Leonard Mathias, Sr. and Susan J. Mathias v. Angola Neck Park Property Owners Association, Inc. C.A. No. 9124-MA

Dear Counsel:

Pending before me are exceptions to my draft report filed by Plaintiffs

Leonard Mathias, Sr. and Susan J. Mathias. In my draft report, I recommended

that the Court grant registered agent Judy Mangini’s motion to quash service of

process and, if Plaintiffs wished to proceed with their pending complaint seeking

title by adverse possession over a portion of a paper cul-de-sace adjacent to their

lot in Angola Neck Park, they would have to file a petition to appoint a receiver or

trustee (hereinafter simply “receiver”) for the Defendant Angola Neck Park

Property Owners Association, Inc. (the “Corporation”), which became a void

Page 1 of 4 corporation by order of the Delaware Secretary of State on October 1, 2010. For

the reasons that follow, I recommend dismissal of the Plaintiffs’ exceptions.

On November 27, 2013, Plaintiffs filed a complaint against the Corporation

for declaratory relief in the form of an order establishing Plaintiffs’ title by adverse

possession over a portion of a paper cul-de-sac adjacent to Lot 92 in Angola Neck

Park. The summons and complaint were served on Mangini, the Corporation’s

registered agent, on December 4, 2013. On January 15, 2014, counsel for Mangini

entered an appearance for the limited purpose of filing a motion to quash, which

alleged that the Corporation had become a void corporation by order of the

Delaware Secretary of State on October 1, 2010, after the residential community

failed to continue the operation of its homeowners association. Mangini suggested

that the complaint should be served instead upon the individual homeowners in

Angola Neck Park.

Desirous of avoiding the “inefficiency” and difficulty of naming and serving

each individual homeowner as a defendant and of reviving the Corporation,

Plaintiffs responded to the motion by proposing that this Court order the

Corporation to continue in existence for the purpose of defending the instant

action. However, citing In re Krafft-Murphy Co., Inc., 82 A.3d 696, 710 (Del.

2013), I found that the three year winding-up period of 8 Del. C. § 278 had expired

by the time Plaintiffs filed their complaint on November 27, 2013. Upon the

Page 2 of 4 expiration of the winding up period, the homeowners association had ceased to

exist as a “body corporate” and had lost its authority to manage its unfinished

business. Therefore, I recommended that Mangini’s motion to quash be granted,

and that Plaintiffs should file a petition for the appointment of a receiver because

the only way the Corporation could be re-empowered to defend its interests was

through the appointment of a receiver under 8 Del. C. § 279.

Plaintiffs do not take exception to my recommendation that the Court grant

Mangini’s motion to quash. Instead, they take exception to what they term my

“rationale” that Plaintiffs can petition for the appointment of a receiver when

service has not been perfected on a defunct corporation. Instead, citing In re

Krafft-Murphy Co., Inc., 2011 WL 5420808, at *3 (Del. Ch. Nov. 9, 2011),

Plaintiffs argue that there appears no method of perfecting service on the

Corporation other than under Court of Chancery Rule 4(d)(7).1 Therefore,

Plaintiffs request that I fashion a mode of service under Rule 4(d)(7), so that

service may be perfected on the Corporation through a receiver for it under 8 Del.

C. § 279, in lieu of requiring Plaintiffs to file a separate petition to appoint a

receiver.

1 Court of Chancery Rule 4(d)(7) provides: “An order directing another or an additional mode of service of a summons in a special case may be made by the Court.” Page 3 of 4 I decline to accept Plaintiffs’ suggestion that I appoint sua sponte a receiver

for the Corporation. Instead, I recommend that, upon Plaintiffs’ filing a petition

for the appointment of a receiver, service of process may be perfected on the

Corporation by publishing notice of the original complaint and the petition once a

week for three consecutive weeks in the Delaware State News and by mailing (first

class mail) the same notice to each property owner in Angola Neck Park and to

legal counsel for the Sussex County Council. Therefore, I adopt my draft report, as

modified herein, as my Final Report. A proposed form of Notice shall be

submitted to me for approval no later than 14 days after this Final Report becomes

a final order of the Court.

The parties are referred to Court of Chancery Rule 144 for the process of

taking exception to a Master’s Final Report.

Sincerely,

/s/ Kim E. Ayvazian

Kim E. Ayvazian Master in Chancery

KEA/kekz

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