• Delaware Court of Chancery
  • D66281
  • Apr 29 2014 (Date Decided)

DELAWARE COURT OF CHANCERY

Carbaugh v. Wood on Herring Creek Homeowners Ass'n, DeFAX Case No. D66281 (Del. Ch. April 29, 2014) Noble, V.C. (6 pages).

Plaintiffs' action to collect on a debt, filed at least five years after they knew about their claim, was time-barred under the equitable defense of laches since the analogous contract or debt statute of limitations, 10 Del. C. §8106, prescribed a three-year period. Defendants' motion to dismiss granted.

Pursuant to an agreement from 1985, Utility Systems Inc. (USI) provided wastewater disposal services to the Wood on Herring Creek Community. By the late 1990s, USI needed to take corrective measures due to operational problems with their services.

These corrective measures/improvements required additional funding; however, residents of the community were not willing to support USI's efforts. In May 2004, defendant Wood on Herring Creek Homeowners Ass'n took over the wastewater treatment system. Thereafter, USI sued the association but was unsuccessful.

In 2005, Delaware's Public Service Commission found that USI had abandoned the system and, thus, imposed penalties. The association transferred the system to Sussex County in 2008. In 2011, Sussex County incorporated the system into the Angola Neck Sanity Sewer District.

In 2003, plaintiffs H. Clark Carbaugh, president of USI, and Elizabeth Carbaugh loaned USI almost $250,000 to meet the costs of managing and improving the system, but they were not repaid by USI. Plaintiffs filed this action seeking to recover the loaned funds from the association and defendant Sussex County Council under the doctrines of quantum meruit and unjust enrichment.

Here, defendants moved to dismiss plaintiffs' suit. They argued that plaintiffs' claim was time-barred under the equitable defense of laches and/or barred by res judicata. The court first addressed the alleged time bar, noting that the analogous contract or debt statute of limitations, 10 Del. C. §8106, prescribed a three-year period.

Plaintiffs' claims were known, the court observed. They had loaned money, which was not repaid. Moreover, after 2004, it was unlikely that USI would be repaying the loans from any charges collected by the residential community because the association had assumed control of the system. The court noted that the association had moved on without USI and that circumstances had changed significantly.

Whether plaintiffs' claim was viewed as quantum meruit or unjust enrichment, the critical time was when the system was taken over by the association and USI was ousted, the court reasoned. These events occurred in 2004, nine years before plaintiffs filed this action in 2013. Moreover, the system was transferred to the county in 2008, five years before this action was filed.

Under these circumstances, the court determined that it was neither inequitable nor unreasonable to conclude that plaintiffs' action was barred by laches. As such, the court granted defendants' motion to dismiss plaintiff's complaint on the basis that plaintiffs' claims were time-barred under the doctrine of laches.

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