WINDSOR I, LLC, Plaintiff Below, Appellant, v. CWCAPITAL ASSET MANAGEMENT LLC, and U.S. BANK NATIONAL ASSOCIATION, as TRUSTEE, SUCCESSOR-IN-INTEREST to BANK OF AMERICA, N.A., as TRUSTEE, SUCCESSOR to WELLS FARGO BANK, N.A. as TRUSTEE for the REGISTERED HOLDERS of COBALT CMBS COMMERCIAL MORTGAGE TRUST 2007-C2, COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES, SERIES 2007-C2, Defendants Below, Appellees.
No. 443, 2019
IN THE SUPREME COURT OF THE STATE OF DELAWARE
September 10, 2020
Submitted: August 5, 2020. Court Below: Superior Court of the State of Delaware, C.A. No. N18C-06-115.
Upon appeal from the Superior Court. AFFIRMED.
Melvyn I. Monzack, Esquire, Michael C. Hochman, Esquire (argued), Monzack Mersky McLaughlin and Browder, P.A., Wilmington, Delaware, for Appellant.
VALIHURA, Justice:
This is an appeal of the Superior Court’s September 27, 2019 decision (the “Opinion“)1 granting a motion to dismiss filed by CWCapital Asset Management LLC (“CWCAM“) and U.S. Bank National Association (“U.S. Bank“) (together, the “Defendants“). Plaintiff-below, Appellant Windsor I, LLC (“Windsor“) is a Delaware limited liability company that owned the 48,000 square foot commercial property and building located at 2201 Fairand Drive in Wilmington, Delaware (the “Property“). The Property was encumbered with debt eventually held by U.S. Bank.
In 2015, after learning that the Property’s sole tenant intended to vacate, Windsor sought special servicing to refinance the debt. After nearly two years of negotiation and litigation, CWCAM, the special servicer, offered to sell the loan to Windsor in a proposed transaction for $5,288,000, subject to credit committee approval. The credit committee, however, rejected the transaction, and Defendants filed a foreclosure action against Windsor in 2017. Defendants thereafter held an online auction to sell the loan. A Windsor representative participated in the auction. After the auction, Defendants sold the loan to a third party, WM Capital Partners 66 LLC (“WM Capital“), and Windsor ultimately paid $7.4 million to WM Capital in full satisfaction of the loan.
In its action seeking relief based upon quasi-contractual theories of promissory estoppel and unjust enrichment, Windsor alleged that but for the credit committee’s arbitrary rejection of the proposed transaction, Windsor would have purchased the note and loan nearly a year earlier for over $2,112,000 less than it paid to WM Capital. The Superior Court ultimately held that Windsor failed to state claims for promissory estoppel and unjust enrichment, and that the claims were barred because Windsor’s representative had agreed to a general release as part of an auction bidding process.
On appeal, Windsor asserts that the Superior Court erred in five respects: (1) the general release did not preclude Windsor’s claims, (2) even if the release barred the claims, it did not include the proposed transaction for $5,288,000; (3) the court erred in dismissing the claim for unjust enrichment; (4) the court erred in dismissing the claim for promissory estoppel; and (5) granting the motion to dismiss constituted an inequitable outcome. Windsor maintains that the Superior Court erred because a question of fact exists as to whether Windsor’s representative executed the general release. Defendants argue that the court’s ruling was supported by the record, and that the general release is clear and applies to the claims in this case.
We AFFIRM the judgment of the Superior Court for the reasons explained below.
I. Relevant Facts and Procedural Background2
A. The Underlying Loan and Prior Litigation
On December 27, 2006, Windsor refinanced debt on the Property by entering
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
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.
B. The Auction
Between February 13 and February 15, 2018, CWFS-REDS, LLC, an affiliate of
owner of Windsor, bid in the Auction on behalf of FCS Lending, LLC.8 As a condition of bidding, Defendants assert, and the Superior Court determined, that Stella had executed the “RealINSIGHT Marketplace Auction Sale Terms and Conditions/Bidder Confidentiality” (the “Auction T & C“). The Auction T & C contains the following release (the “General Release“):
EACH BIDDER RELEASES CW REDS, RI AND THEIR EMPLOYEES, AGENTS, AFFLIATES, DIRECTORS, AND SUBSIDIARIES (“REPRESENTATIVES“) FROM ANY CLAIMS, WHETHER CURRENT OR FUTURE, AGAINST CW REDS, RI OR THEIR REPRESENTATIVES. THIS WAIVER IS INCLUSIVE OF ANY AND ALL CLAIMS OF WHICH BIDDER IS CURRENTLY UNAWARE, REGARDLESS OF WHETHER SUCH CLAIMS WOULD AFFECT BIDDER’S RELEASE OF CW REDS AND/OR RI.9
Defendants assert, and the Superior Court determined, that in order to accept the terms and conditions, the bidder must scroll through the terms and conditions.
On March 7, 2018, Defendants sold the Loan to third party WM Capital. Windsor, based on an analytical report, estimated that CWCAM sold the Loan for approximately $4.6 million.10 After the sale of the Loan, Windsor paid $7.4 million to WM Capital in order to pay off the Loan and to avoid paying default interest and other penalties.11
C. The Present Action
On June 15, 2018, Windsor filed a complaint in the Superior Court for breach of contract, alleging that the Defendants breached an agreement when the credit committee refused to consummate the Proposed Transaction. Defendants filed a motion to dismiss, which the court granted without prejudice on December 12, 2018. At the motion to dismiss hearing, the court stated that although Windsor could not sustain its claims for breach of contract, it could pursue quasi-contractual claims.
Windsor thereafter amended its complaint on December 21, 2018, adding quasi-contractual claims (the “Amended Complaint“). In Count I of the Amended Complaint, Windsor asserted a claim for promissory estoppel. Windsor alleged that CWCAM, as an agent for U.S. Bank, promised to sell the Loan to Windsor, Windsor reasonably relied on CWCAM’s promise to sell, and suffered damages as a result of its reliance. More specifically, Windsor alleged that as a result of the wrongful rejection of Defendants’ own offer, Windsor suffered damages of no less than $2,112,000, reflecting the difference between the agreed-to purchase price of $5,288,000 and the payment Windsor made to WM Capital of $7,400,000. In Count II, Windsor asserted a claim for unjust enrichment. Windsor alleged that Defendants were enriched because they accrued ten
Defendants moved to dismiss the Amended Complaint in March 2019. Attaching a copy of the Auction T&C to its opening brief, Defendants argued that Windsor had released all claims against it when Stella participated in the Auction. According to Defendants, all participants in the Auction were required to scroll through and accept the Auction T & C, which included the General Release. In addition to the General Release, the Auction T & C contained several paragraphs that referenced numerous, separate terms and conditions, including: “The submission of a Bid serves as verification that the Bidder accepts and agrees to the terms and conditions posted on the Property’s webpage at the time of the Bid.”12 Another paragraph provided that:
It is the responsibility of each Bidder to review the form of purchase agreement, any addenda related to the purchase agreement and related documents (the “Purchase Agreement“) accessible on each property webpage (each, a “Property Webpage“) prior to placing a Bid. The terms of the Purchase Agreement are non-negotiable and, by placing a Bid on any Property, Bidder agrees to the terms, disclosures, representations, and warranties provided in the Purchase Agreement.13
Although the Amended Complaint did not refer to the Auction T & C (or the General Release), and was thus extrinsic to the complaint, Defendants argued that, it, nevertheless, should be considered with their Rule 12(b)(6) motion.14 Defendants also filed the Affidavit of James P. Shevlin (the “Shevlin Affidavit“) with their opening brief. That affidavit
certified the attached Auction T & C as a true and correct copy, and further stated that, “Mr. Stella registered for the Auction and, as a condition of bidding, executed the [Auction T & C].’”15
In its answering brief in opposition to the motion to dismiss, Windsor addressed Defendants’ argument that “a release executed as a condition of participating in an online auction for the Loan precludes Windsor’s claims.”16 It raised four arguments in response, but it did not assert that its representatives did not actually execute the Auction T & C.17
Defendants filed their reply brief in support of the motion to dismiss in April 2019. The reply brief included an affidavit from
On the afternoon of June 6, 2019, Windsor filed an affidavit from Stella (the “Stella Affidavit“).20 Based on our review of the record, this was the first time the issue of whether Stella had actually executed the Auction T & C was raised. Stella stated that the Gutierrez Affidavit “is inconsistent with my recollection of the process,”21 and that, “[m]y records do not reflect, nor do I recall, ever being presented with the referenced Bidder Registration Certification—or being required to accept the terms and conditions Defendants include in their brief—prior to participating in the Auction.”22 He stated further: “I believe the process employed for my participation in the Auction was different than that of the ‘typical’ prospective bidder as described in the Reply [Brief].”23 Finally, he noted: “I would have expected Defendants to include a copy of my electronically-signed copy of [the Auction T & C] as an exhibit to the Reply, if one existed.”24 Thus, the parties disputed the critical fact of whether Stella had executed the Auction T & C.
The Superior Court held a hearing on the motion to dismiss on June 28, 2019. During the hearing, the Court questioned both Windsor and Defendants’ counsel about the “dueling affidavits” and noted the limited utility of the affidavits:25
I don’t have to rely on your client [Windsor], and I don’t have to rely on their client [CWCAM]. I can rely on a tech guy who says what Mr. Stella says is possible, or what Mr. Stella says is impossible . . . . isn’t that really more of
the answer than having Mr. Stella deposed, and somebody from the defense deposed to see, because then I get nowhere. One is going to say he said, and the other is going to say she said again.26
Windsor defended the Stella Affidavit by arguing that “a tech guy” would not have specific knowledge of the access procedures used by Stella, and argued that the affidavits created an issue of fact.27
Nevertheless, on September 27, 2019 the court granted the motion to dismiss without expressly referring to the affidavits, holding that Windsor’s claims were barred by the General Release. Central to its holding were two key “facts” that were not derived from Windsor’s Amended Complaint, but rather, can be found only in the affidavits filed by the Defendants. First, the court determined that, “[a]s a condition of bidding, Mr. Stella executed the [Auction T & C].”28 No citation accompanies this statement. The Shevlin Affidavit, submitted with the Auction T & C together in connection with Defendants’ opening brief, appears to be the source. Paragraph four
Second, the court found that, “[i]n order to accept the terms and conditions, the bidder must scroll through the terms and conditions.”30 Based upon our review of the
record before us and statements by counsel at oral argument,31 the only source we see for this assertion is the Gutierrez Affidavit that Defendants filed with their reply brief. Paragraph seven of that affidavit states that, “a prospective bidder cannot be approved to participate in an auction or place bids unless he or she clicks ‘Accept.’”32
The Stella Affidavit, submitted over a month after Defendants filed their reply brief, attempts to undercut these two key factual assertions. It does so anemically, however, by averring only that Stella’s “records do not reflect, nor [did he] recall, ever being presented with the referenced Bidder Registration Certification—or being required to accept the terms and conditions Defendants include in their brief—prior to participating in the Auction.”33 Stella does not say definitively that he did not execute the Auction T & C.
Premised largely on these two findings, the Superior Court determined that Stella had executed the Auction T & C, and it proceeded to address the substantive challenges to the General Release. Ultimately, the court held that “Windsor’s claims are barred by the release because the release applied to the Proposed Transaction, is clear and unambiguous
and is enforceable.”34 The court then separately addressed the promissory estoppel and unjust enrichment claims and held that those allegations failed to state a claim.
II. Standard of Review
This Court reviews the Superior Court’s decision to grant a motion to dismiss under
III. Analysis
Windsor’s primary contention on appeal is that the Superior Court erred by granting Defendants’ motion to dismiss because the Stella Affidavit presented an issue of fact as to
whether Stella had executed the Auction T & C.40 We see some merit to Windsor’s argument on appeal that the affidavits, filed by both sides, reveal the existence of an issue of a key fact that should have converted the motion to dismiss into one for summary judgment. But adding to the procedural oddity here is that Windsor never objected to the Superior Court’s consideration of the Shevlin or Gutierrez Affidavits.41 Given Windsor’s apparent acquiescence in the court’s consideration of these documents in the proceedings below, the lack of a firm rebuttal of these affidavits by Stella (who merely averred as to an absence of records and recollection), and the colorable suggestion that the Auction T & C
document was integral to the claims asserted in the Amended Complaint, we understand why the Superior Court proceeded to address the substantive General Release issues, and ruled that the General Release barred Windsor’s two claims. Perhaps another factor that may have influenced the Superior Court’s decision was that the parties had been litigating these issues in multiple courts for years and were well familiar with many of the basic facts which appear to be uncontested.
If the General Release were the only ground asserted for dismissal, the better path would have been to convert the motion
A. The General Release and the Dueling Affidavits
Although we rule on alternative grounds, we first address the procedural issue which has been the main focus of this appeal, namely, whether the General Release bars Windsor’s claim because its representative, Stella, averred that he did not recall assenting to the General Release, and that this issue raises a question of fact necessitating reversal. In most cases, when the Superior Court considers a 12(b)(6) motion, it limits analysis to
the “universe of facts” within the complaint and any attached documents.42 This rule protects parties from the harm that may be caused by a lack of notice.43 The court, however, may consider documents outside the pleadings when “the document is integral to a plaintiff’s claim and incorporated into the complaint,” or “when the document is not being relied upon to prove the truth of its contents.”44 Additionally, “[t]he trial court may also take judicial notice of matters that are not subject to reasonable dispute.”45
In this case, Defendants introduced the Auction T & C and the Shevlin Affidavit with its opening brief in support of its motion to dismiss, and they cited Geier v. Mozido for the proposition that “the Court may consider the terms of the release under
instead of objecting to the consideration of the documents, filed
When a trial court considers a document outside the complaint, the motion to dismiss usually is converted into one for summary judgment, which allows the parties to expand the record.48 The Superior Court did not do that here. Although the court questioned both sides about the “dueling affidavits” and questioned the usefulness of the affidavits, the Opinion cites none of them. Notwithstanding a lack of any explicit reference to the affidavits in the Opinion, certain key facts, which form the basis for the court’s holding on the General Release, are only found in the Shevlin and Gutierrez Affidavits. There was no dispute about this at oral argument. Thus, the relevant question presented to this Court is whether the Superior Court’s apparent reliance on facts contained only in the
Defendants’ affidavits, and its apparent decision to not consider the Stella Affidavit (which attempted to rebut them), resulted in a procedural error requiring reversal.49
In In re General Motors (Hughes) Shareholder Litigation, this Court reviewed the Court of Chancery’s dismissal of a complaint based, in part, on a document extrinsic to the complaint.50 We held that the Court of Chancery’s dismissal was proper because, “[w]ithout the ability to consider the document at issue in its entirety, complaints that quoted only selected and misleading portions of such documents could not be dismissed under Rule 12(b)(6) even though they would be doomed to failure.”51 In addition to the complaint’s direct reference to, and characterizations of, the document at issue, the court’s decision turned on both the complaint’s insufficient allegations and numerous facts subject to judicial notice.52
B. Unjust Enrichment
Windsor argues on appeal that the Superior Court erred in concluding that it failed to state a claim for unjust enrichment. The elements of unjust enrichment are: “(1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment and the impoverishment, (4) the absence of justification, and (5) the absence of a remedy provided by law.”54 Windsor believes it has stated a claim in alleging that: it reasonably relied upon Defendants’ promise to sell the Loan if certain conditions were met (including credit
committee approval); Windsor, to its detriment, took action and incurred costs in preparing to purchase the Loan; the credit committee arbitrarily and capriciously rejected the Proposed Transaction in bad faith by selling the Loan to WM Capital ten months after the Proposed Transaction was supposed to close; and, as a result, Defendants unjustly benefitted by collecting ten months of fees on the Loan as well as a 5% auction fee.
However, we agree with the Superior Court that Windsor’s claim for unjust enrichment fails. “Unjust enrichment is the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience.”55 The Superior Court explained that Windsor did not plead a scenario
Any enrichment that the Defendants received was a result of a sale of a commercial note (and at a discount from face value) that the Defendants’ validly held in the first instance. The only damages that Windsor suffered were the costs to obtain a loan in order to consummate the Proposed Transaction. But, the Defendant’s conduct in selling the Loan to another buyer did not cause Windsor’s damages. This is because the Defendants’ sale of the Loan to another buyer did not cause Windsor to spend money to obtain a loan or otherwise enrich the Defendants. Instead, Windsor spent money of its own volition in order to prepare to purchase the Loan and had to pay costs/fees already associated with the original terms and conditions of the Loan.56
We find no error in the trial court’s ruling. Here, Defendants suffered a loss when they sold the $7.4 million Loan to WM Capital for less than $6 million. Windsor, on the other hand, paid $7.4 million to WM Capital in order to pay off the principal of the loan and to avoid paying default interest and other penalties. In other words, Windsor repaid what it had borrowed. Moreover, Windsor, as an unsuccessful bidder in the auction, did not pay the auction fees.57 Consequently, the auction fees do not properly factor into Windsor’s claim. As to the ten months of fees accrued and paid to Defendants, Windsor was required to pay those sums under the original terms and conditions of the Loan. Further, we agree that the costs Windsor incurred in connection with preparing to purchase the Loan were paid on its own volition to entities other than Defendants. Accordingly, we hold that the Superior Court correctly dismissed Windsor’s claim for unjust enrichment.
C. Promissory Estoppel
Windsor also appeals the Superior Court’s dismissal of its promissory estoppel claim. Like the unjust enrichment claim, the crux of this claim is that Defendants arbitrarily and capriciously rejected the Proposed Transaction in bad faith. Windsor argues that because it reasonably relied on Defendants’ offer to sell the loan contingent on credit committee approval, it is entitled to no less than $2,118,000 in damages, representing the
difference between the $7.4 million paid to WM Capital and the $5,288,000 it would have paid had the Proposed Transaction been consummated.
To state a claim for promissory estoppel, a plaintiff must prove by clear and convincing evidence that: “(i) a promise was made; (ii) it was the reasonable expectation of the promisor to induce action or forbearance on the part of the promisee; (iii) the promisee reasonably relied on the promise and took action to his detriment; and (iv) such promise is binding because injustice can be avoided only by enforcement of the promise.”58
The Superior Court observed that Windsor did not argue that it met the elements of promissory estoppel, but instead, Windsor, citing Grunstein v. Silva,59 argued that that “the only way to avoid injustice is for the Court to allow Windsor to recover” under this theory.60 The court found that Grunstein “does not state that a court will
that the offer and acceptance were subject to the credit committee’s approval, and it did not show that the court would create injustice by preventing it to recover.62
We agree with the Superior Court that Windsor’s Amended Complaint fails to state a claim for promissory estoppel. Windsor relies on 1 Oak Private Equity Venture Capital Ltd. v. Twitter, Inc.,63 a case we find to be distinguishable. There, plaintiffs, a group of related funds, were working on a pre-IPO share purchase transaction with Twitter before Twitter allegedly terminated plaintiffs’ “approved buyer” status, cut plaintiffs out of the transaction, and worked directly with one of plaintiffs’ investors to complete the share purchase transaction. Plaintiffs sued on several grounds, including promissory estoppel. As to that claim, the court found adequate plaintiffs’ allegation that the defendant promised that plaintiff was an approved buyer for pre-IPO shares, and orally encouraged plaintiffs to continue working on the transaction.64 Windsor, however, does not allege such a definite and certain promise. Defendants’ offer to move forward with the Proposed Transaction, Windsor pleaded, was conditioned on credit committee approval.65 Although Windsor states that “such approval initially appeared to be a formality,”66 no allegation suggests that Defendants promised or otherwise led Windsor to believe that would actually be the case.
In fact, Windsor also pleaded that it expected the “review by the credit committee would be substantive and analytical,” which undermines its assertion that such approval was a foregone conclusion.67 As the trial court stated, “Windsor has not shown, with more than conclusory statements, that the Defendants promised to affirm Windsor’s acceptance to buy the Loan for $5.3M without rigorous review from the creditors’ committee or that the creditors’ committee’s approval was implicit.”68 Thus, we agree with the trial court that Windsor failed to state a claim for promissory estoppel.
IV. Conclusion
For the foregoing reasons, we AFFIRM the judgment of the Superior Court.