Elbert Smalls v. Network Contracting Inc.

IN THE COURT OF COMMON PLEAS OF THE STATE OF DELAWARE
IN AND FOR SUSSEX COUNTY

ELBERT SMALLS,
Appellant/ Defendant-Below,
C.A. No. CPU6~16-000664

V.

NETWORK CONTRACTING, INC.,
A Maryland Corporation

Appellee/ Plaintiff-Below.

\_/\./\./\/\/\_/\./\./\./V\./

Submitted February 22, 2017
Decided February 28, 2017

Elbert Smalls, pro se, for Appellant/ Defendant-Below
Chad Lingenfelder, Esq., Attorneyfor Appellee/ Plaintz`jj‘-Below

DECISION ON MOTION TO DISMISS

On February 22, 2017, the Court held a hearing prior to trial on tWo motions, (l) a
motion to amend the pleadings filed by Appellee/ Plaintiff-Below, and (2) a motion to
dismiss filed by Appellant/ Defendant-Below. The Court granted the motion to amend
to allow Appellee/ Plaintiff-Below to correct its name from NetWorl< Electrical
Contracting, Inc. to NetWork Contracting, Inc. In response to information presented
during the motion to dismiss hearing, the Court declined to proceed to trial and entered
judgment on the record against Appellee/ Plaintiff-Below for failure to plead on appeal,

pursuant to Ct. Com. Pl. Civ. R. 55(bb2). Given the unusual nature of this case, the

Court informed the parties it Would prepare a Written decision. This is the Court's
decision.
PROCEDURAL HISTORY AND FACTS

On ]uly 12, 2016, the ]P Court entered judgment against Appellant/Defendant-
BeloW Elbert Smalls ("Smalls”) arising from Smalls’ failure to pay for horne electrical
Wiring services rendered by Appellee/Plaintiff-Below Networl< Contracting, Inc
(”NCI”). Smalls filed a timely appeal de novo to this Court on ]uly 27, 2016. The parties
filed pleadings and various motions. On ]anuary 25, 2017, Smalls filed an amended
motion to dismiss. In this motion, Smalls argued the Court should dismiss the action
and vacate the ruling below because NCI Was forfeited by the State of Maryland on
October l, 2013, and therefore could not have contracted With him. Upon hearing the
relief requested by Smalls, a pro se litigant, the Court interpreted the filing as a motion
for entry of judgment. During the hearing, Smalls entered into evidence a signed
document under seal, dated ]anuary 13, 2017, from the State of Maryland Department
of Assessments and 'l`a)<ation.1 According to that document, NCI Was forfeited on
October 1, 2013. Counsel for NCI verified that NCI's corporate charter Was forfeited and
has not been revived. Neither party disputed that the Court should apply Maryland law
to determine the effect of corporate charter forfeiture.2

DISCUSSION

1 Appellant/ Defendant-Below’s Exhibit 1.

2 The Superior Court applied Maryland law in a case requiring similar analysis See generally Hitch U.
Cassz'dy, 1994 WL 380492 (Del. Super. ]uly 8, 1994) (”Everyone agrees that this Court must look to
Maryland law to determine What effect the forfeiture of Delmarva's charter had on the issue at hand since
Delmarva is a Maryland corporation.”)

According to Ct. Com. Pl. Civ. R. 55(bb2), ”when an appellee having the duty of
serving the complaint or other first pleading fails to do so as required by Rule 72.3(a),
judgment shall be entered against appellee for failure to plead." Pursuant to Maryland
law, when a corporation is forfeited, its charter is ”repealed, annulled, and forfeited,
and the powers conferred by law on the corporation[] are inoperative, null, and void as
of the date of the proclamationlig Maryland's highest court has held that except for the
limited purposes of l'winding up,'l an un-revived forfeited corporation has no authority
to sue or be sued because the entity does not exist.4 Complaints filed by forfeited
corporations are deemed l’nullities.”i" Because NCI’s charter was forfeited in 2013, it is a
nonentity that does not exist. Furthermore, this suit cannot be part of a corporate wind
up because forfeiture occurred well before the contract at issue was formed. NCI had
no legal ability to sue in ]P Court or to appear before this Court, and the complaint on
appeal is a ”nullity.” Therefore, NCI failed to plead, and judgment must be entered for
Smalls.

Though not raised, the Court considered the potential application of the mirror
image rule, which strips this Court of jurisdiction to hear appeals de novo that fail to join
identical parties and raise identical issues to those in the court below.6 When deciding

whether identical issues have been raised, the Court looks to what has been ”heard and

3 MD. CODE ANN., Corp. & Ass’ns § 3-503.

4 Atlantic Mill & Lumber Realty Co. z). Keefer, 20 A.Zd 178 (Md. 1941) (holding corporation that forfeited its
charter could not file mechanics’ lien, enforce the lien nor petition for authority to file an amended
complaint because the petitioning corporation did not exist),' Stez'n 7). Smith, 751 A.Zd 504 (Md. 2000)
(holding corporation that forfeited its charter was a l’nonentity” and the complaint filed by it was a
”nullity"); See also Dual Inc. z). Lockheed Martin Corp., 857 A.Zd 1095 (Md. 2003).

5 Stein, 751 A.2d at 506,' Dual Inc., 857 A.2d at 1101.

6 Ct. Com. Pl. Civ. R. 72.3(f).

decided” below.7 In this case, given the date of the forfeiture notice and the contents of
the ]P Court decision,8 it is unlikely the ]P Court heard and decided the forfeiture issue.
However, the mirror image rule would not apply in this situation because NCI’s nullity
is not going toward a substantive issue, but rather is being used to determine whether
the lawsuit at issue is fatally defective. Even if the mirror image rule did apply, ”almost
no rule is absolute, and the paramount requirement is to see that justice is done."9 It
would be improper and unjust to allow a nonexistent ”ghost” party to avail itself of
Delaware courts.

Finally, though the parties proffered arguments about the substantive question
of whether a Maryland corporation with a forfeited charter can enter into a contract, the
Court concluded it need not reach that issue as this case must fail for the procedural
reasons discussed above.

CONCLUSION

For these reasons, the Court entered judgment in favor of Appellant/ Defendant-

Below Elbert Smalls.

IT IS SO ORDERED this g day of February, 2017.

7 Silverz)z`ew Farm, Inc. 1). Laushey, 2006 WL 1112911 (Del. Corn. Pl. Apr. 26, 2006).

8 There is no answer in the docket below for the Court to consider, and the complaint does not shed light
on the issue as forfeiture Would have been raised by the Defendant-Below.

9 Morgan 7). Swain, 2009 WL 3309173 (Del. Super. Sept. 17, 2009).