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Windsor I, LLC v. CWCapital Asset Management LLC

Court of Chancery of Delaware

July 31, 2017

Windsor I, LLC
v.
CWCapital Asset Management LLC

          Date Submitted: July 25, 2017

          Michael C. Hochman, Esquire Monzack Mersky McLaughlin and Browder, P.A.

          Daniel A. O'Brien, Esquire Venable LLP.

         Dear Counsel:

         This letter constitutes the Court's decision on the motion of defendant CWCapital Asset Management LLC ("CWCAM") to dismiss the Complaint for Specific Performance, Injunctive, and Other Equitable Relief (the "Complaint") filed by plaintiff Windsor I, LLC ("Windsor"). For the reasons explained below, the motion to dismiss is granted.

         I. Background[1]

         Windsor is the owner of a commercial property located at 2201 Farrand Drive, Wilmington, Delaware (the "Property"). CWCAM is a special servicer that handles the default side of loan servicing for its affiliate, CWCapital LLC.

         On or about December 27, 2006, Windsor and CWCapital entered into a Mortgage and Security Agreement in the principal amount of $7.4 million (the "Loan") to refinance the existing debt on the Property. The maturity date of the Loan was January 1, 2017.

         On July 20, 2015, Windsor sent a letter to CWCapital, requesting that the Loan be transferred to special servicing because "Windsor is currently facing imminent default and will be unable to support its own debt service requirements."[2] Windsor was anticipating a default because the sole tenant for the Property for the past twenty years, a Best Buy store, was expected to leave the Property. On August 31, 2015, Windsor was notified that the Loan had been transferred to CWCAM as special servicer.[3]

         From November 21, 2015, to February 9, 2016, Windsor and CWCAM negotiated the terms of a pre-negotiation agreement, the final version of which is dated February 9, 2016, and which was fully executed by March 23, 2016 (the "Pre-Negotiation Agreement").[4] From March to November 2016, Windsor and CWCAM engaged in a series of email exchanges, during which CWCAM requested certain information from Windsor and Windsor made two offers to purchase the Loan.[5] On November 28, 2016, CWCAM rejected Windsor's most recent offer and made a counter-offer.[6]

         On December 12, 2016, Windsor filed the Complaint asserting two claims. Count I seeks specific performance of the Pre-Negotiation Agreement. Count II seeks injunctive relief to enjoin CWCAM from foreclosing on the Property "until after meaningful, good faith negotiations" occur under the Pre-Negotiation Agreement.[7]

         On February 3, 2017, CWCAM filed a motion to dismiss the Complaint in its entirety under Court of Chancery Rule 12(b)(6) for failure to state a claim for relief. Oral argument was held on July 25, 2017.

         II. Analysis

         The standards governing a motion to dismiss for failure to state a claim for relief are well settled:

(i) all well-pleaded factual allegations are accepted as true; (ii) even vague allegations are "well-pleaded" if they give the opposing party notice of the claim; (iii) the Court must draw all reasonable inferences in favor of the non-moving party; and (iv) dismissal is inappropriate unless the "plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances susceptible of proof.[8]

         The Court is not required, however, to accept mere conclusory allegations as true or make inferences unsupported by well-pleaded factual allegations.[9] The Court also "is not required to accept every strained interpretation of the allegations proposed by the plaintiff."[10]

         The Pre-Negotiation Agreement contains a Maryland choice of law provision.[11] Accordingly, as the parties agree, Maryland law governs the substantive aspects of the claims in this case.[12]

         "Maryland courts follow the law of objective interpretation of contracts, giving effect to the clear terms of the contract regardless of what the parties to the contract may have believed those terms to mean."[13] As the Court of Appeals of Maryland has stated:

A court construing an agreement under [the objective theory] must first determine from the language of the agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated. In addition, when the language of the contract is plain and unambiguous there is no room for construction, and a court must presume that the parties meant what they expressed. In these circumstances, the true test of what is meant is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant.[14]

         Count I fails to state a claim for relief for three separate reasons.

         First, contrary to Windsor's contention, there is no "obligation to negotiate" under the Pre-Negotiation Agreement, and thus no obligation for CWCAM to specifically perform. Windsor identifies the following provision in the Pre-Negotiation ...


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