Opinion ID: 4564559
Heading Depth: 2
Heading Rank: 1

Heading: The Underlying Loan and Prior Litigation

Text: On December 27, 2006, Windsor refinanced debt on the Property by entering into a mortgage and security agreement with CWCapital, LLC for the principal amount of $7.4 million (the “Loan”) and executing a promissory note for the benefit of CWCapital, LLC. The note was eventually assigned to U.S. Bank. 2 We take the facts, for the most part, from the Amended Complaint, and the Superior Court’s recitation of the facts in its Opinion. 3 Best Buy, the electronics store, was the sole tenant on the Property for about twenty years. In June 2015, Windsor learned that Best Buy planned to vacate the Property. In response, Windsor requested that its Loan be transferred to special servicing because it faced “imminent default.” The request was granted, and the Loan was transferred to special servicer, CWCAM. On November 21, 2015, Windsor received a draft “pre-negotiation agreement” from David Smith, a Senior Vice President at CWCAM, discussing the terms under which the parties would negotiate. Windsor allegedly made several proposals to CWCAM to purchase the Loan but received no response. On December 12, 2016, Windsor filed a complaint for specific performance, injunctive, and other equitable relief in Court of Chancery (the “Chancery Action”) seeking to require CWCAM to negotiate with Windsor in good faith. CWCAM moved to dismiss the action, and the court granted the motion on July 31, 2017.3 In dismissing the action, the Court of Chancery concluded that the pre-negotiation agreement did not impose an enforceable obligation to negotiate, stating that, “when read as a whole, the Pre-Negotiation Agreement is a document that simply establishes rules to govern any discussions that may take place. It does not obligate any party to negotiate or forbear from exercising remedies otherwise available.”4 3 Windsor I, LLC v. CWCapital Asset Mgmt., LLC, 2017 WL 3499919 (Del. Ch. July 31, 2017). 4 Id. at . Windsor appealed that decision to this Court on August 16, 2017, but the appeal was later dismissed by stipulation of the parties. Windsor I, LLC v. CWCapital Asset Mgmt. LLC, 327, 2017 (Del.); App. to Answering Br. at B12 (Am. Compl. ¶ 40 n.3). 4 On April 26, 2017, CWCAM, via email, offered to sell the Loan to Windsor for $5,288,000. The offer, however, was conditional, as it was “subject to credit committee approval, adequate proof of [Windsor]’s ability to fund, execution of appropriate documentation and closing by May 30.”5 Windsor accepted the offer, via email, then drafted a loan acquisition agreement in connection with this “Proposed Transaction” and coordinated with a lender to borrow funds to purchase the Loan. Three weeks later, CWCAM notified Windsor that the credit committee had rejected the Proposed Transaction. On August 28, 2017, CWCAM, on behalf of U.S. Bank, filed a foreclosure action against Windsor in the Superior Court (the “Foreclosure Action”).6 CWCAM filed a second action in the United States District Court for the District of Delaware against Windsor’s guarantors, Robert Stella, Constantine Michell, and Theodore Michell (the “District Court Action”), for their refusal to furnish a letter of credit deposit.7 On February 15, 2018, the Superior Court stayed the Foreclosure Action and ordered the parties to participate in an alternative dispute resolution process.