IN TI-[E SUPREME COURT OF TI~[E STATE OF DELAWARE

CHARLES H. GIFFORD, III, §
§ No. 410, 2016
Defendant Below- §
Appellant, § Court Below: Superior Court
§ of the State of Delaware
v. §
§
601 CI-IRISTIANA INVESTORS, LLC, § C.A. No. N15J-03882
§
Plaintiff Below- §
Appellee. §

Submitted: February 10, 2017
Decided: March 27, 2017

Before HOLLAND, VALIHURA and VAUGHN, Justices.
0 R D E R

On this 27“‘ day of March 2017, it appears to the Court that:

( l) Appellant, Charles Gifford, appeals from a Superior Court Order denying
his Motion for Reconsideration of a Commissioner’s Order finding that the
Appellee, 601 Christiana Investors, LLC (“601 Christiana”) had standing to enter a
judgment by confession against Gifford, and that Gifford knowingly, voluntarily and
intelligently waived his rights to notice and a hearing prior to the entry ofjudgment.
Gifford makes four claims on appeal. I-Ie contends that: (l) he did not know of or
consent to certain final loan modifications, which releases him from his guaranty
and renders the judgment by confession void; (2) 601 Christiana lacks standing to

bring the action because it is not a lender or financial institution Within the meaning

of the loan documents; (3) 601 Christiana lacks standing because the assignment of
the loan documents Was invalid under Delaware Suretyship law; and (4) the Superior
Court erred when it did not require or review findings of facts and conclusions of
law by the Commissioner.

(2) On April 9, 2009 Peninsula Compost Company, LLC (“Peninsula”)
received a $5.5 million term loan and a $1 million line of credit from Wilmington
Savings Fund Society, FSB (“WSFS”) to finance the operation of` a composting
business in Wilmington. The Loan had five co-guarantors: Charles H. Gif`ford, III,
Nelson Widell, Peninsula Compost Group, LLC, and two businesses operated by
Brian DiSabatino and E. Andrew DiSabatino, Jr. - EDiS Development Group V,
LLC and Crystal Holdings, Inc. According to the Term Loan Guaranty, the tenn
loan guarantors each agreed that they werejointly and severally liable for the amount
due under the term loan. The term loan guaranty also provided that it was freely
assignable by WSFS. Throughout the loan process, the law firm of Richards, Layton
& Finger acted as counsel to the borrower and co-guarantors, and rendered opinions
in connection With the term loan and the line of credit from the lender.

(3) During a period from 2011 to 2014, the loan documents were modified

by five separate modification agreements The second modification agreement,

effective July 27, 2011, was the only modification that Was fully executed by all
parties.

(4) On October 20, 2014, the Delaware Department of Natural Resources and
Environmental Control ordered Peninsula “to immediately cease the acceptance of`
any material to the facility and to initiate steps to implement an orderly closure.”'
About eight months later, in June 25, 2015, WSFS sent a letter to Peninsula’s
operating manager and the co-guarantors reminding them of the loan’s maturity date,
June 30, 2015. Peninsula had outstanding obligations of more than $4.8 million
under the loan and more than $900,000 under the line of credit.

(5) Subsequently, on June 29, 2015, WSFS entered into a Loan Sale
Agreement under which 601 Christiana purchased the Term Loan and Line of Credit
for almost $5.8 million. Under the documents executed in connection with the
purchase, WSFS assigned all of WSFS’ rights under the Term Loan to 601
Christiana.

(6) The loan’s maturity date then passed without any payment on the term

note, at which point 601 Christiana2 sent a letter to Peninsula and the guarantors

 

' App. to Appellant’s Opening Br. at 88-93.
2 601 Christiana lnvestors, LLC is a company created by Brian DiSabatino and Andrew
DiSabatino, who are brothers affiliated with two of the co-guarantor companies on the Term Loan
and Line of Credit - EDiS Development Group V, LLC and Crystal Holdings, Inc. Andrew
DiSabatino is the president of Crystal I-Ioldings and the manager of EDiS Development Group.

3

notifying them of the default under the loan documents and demanding payment of
the amounts due under the loans. The term loan guaranty provided that the Lender
was not required to first pursue the borrower following an event of default.
Additionally, the term loan guaranty and the term note both contained a conspicuous
provision in all capital letters that provided for the entry of j udgment by confession
against each and any of the term loan guarantors. Because Gifford and Widell were
not residents of Delaware, they also executed sworn affidavits under oath pursuant
to 10 Del. C. §2306 stating that the “undersigned has been represented by a duly
licensed Delaware attomey, who explained the contents of this confession of
judgment provision to the undersigned.”3

(7) 601 Christiana did not receive payment under the loans and proceeded to
enter judgment by confession against the individual guarantors - Gifford and Widell
- under the term note in the amount of $4,858,238.99. Gifford and Widell
challenged the actions, “contending that 601 Christiana was not a proper assignee
and therefore lacked standing to enforce the guaranty agreement against them.”“ The
court below permitted the parties to conduct discovery relating to the issue of

standing and the issue of Waiver of the right to notice and a hearing prior to entry of

 

3 App. to Appellant’s Opening Br. at 55-56.
4 Appellant’s Opening Br. at 12.

judgment The confession of judgment proceeding against Widell was stayed when
he filed for bankruptcy; however the case against Gifford proceeded.

(8) On February 22, 2016, a Superior Court Commissioner held a hearing to
address the issues of (1) Gifford’s waiver of his rights in connection With the
confession of judgment and (2) whether language in Section 6.6 of the Business
Loan Agreement affected the plaintiffs standing The Commissioner ruled from the
bench on both issues. The Commissioner ruled that Gifford knowingly, intelligently,
and voluntarily waived his rights. He found that Gifford was a lawyer and a

7

“sophisticated businessman,’ who entered into the documents with advice fi'om

counsel, and that Gifford “consulted with a lawyer and had [the] items explained to

”5 The Commissioner further ruled that the documents were clear - the

him.
confession-of-judgment language was bold, highlighted, and clearly spelled out
what would happen upon default. Therefore, there was no ambiguity as to the
language of the agreement Consequently, the Commissioner ruled that the
“standard [had] been met to show that there was a knowing, intelligent, voluntary
waiver of the confession of judgment.”6

(9) Section 6.6 of the Business Loan Agreement contained language

indicating that WSFS could assign the loan documents to any “lenders or financial

 

5 App. to Appellant’s Opening Br. at 344.
6 ]d. at 345.

institutions.”7 As to whether or not this language affected 601 Christiana’s standing
to enterjudgment by confession, the Commissioner ruled that Section 6.6 was not
ambiguous and did not place a limitation on the lender’s right to assign the loan
documents to any successors or assigns Rather, Section 6.6 placed an obligation on
the borrower “to ensure that somebody who finances or buys those documents down
the road, that the borrower . . . will sign them and that’s clear.”8 Furthermore, the
Commissioner found that “the other documents that were signed . . . ma[d]e it
abundantly clear that there’s absolutely no limitation on assigning the loan here on
successors and assigns.”9 The assignment language was clear, unambiguous, and
there was not “a limitation which denies the bank, or which denies 601 Christiana
Investors’ standing to move for the confession of judgment.”10 Therefore, the
Commissioner found that 601 Christiana had standing to bring the action.

(10) Gifford proceeded to file a Motion for Reconsideration of the
Commissioner’s order. Gifford objected to the entry of a case dispositive Order by
the Commissioner pursuant to Superior Court Civil Rule 132(a)(3), arguing that the

order should have been addressed under Rule l32(a)(4)." The Superior Court

 

7 ]d. at 30.

8 ld. at 345.

9 Id.

'° ld. at 346.

" Id. at 350-51.

denied the motion by order dated July 12, 2016. The Superior Court ruled that the
Commissioner had the authority to conduct both case-dispositive and non case-
dispositive hearings according to Superior Court Civil Rule 132. Furthermore, the
court ruled Gifford did “not object to the Commissioner’s factual determination that
Gifford waived his rights regarding the confession of judgment freely, knowingly
and voluntarily, nor does he object to the Commissioner’s legal conclusion that 601
Christiana had standing to bring this action.”'2 The court ruled that regardless of
whether the Commissioner determined “a case-dispositive matter or a non-case
dispositive matter,” Gifford was not entitled to relief.'3 The court went on to treat
the matter as non-case dispositive and applied the standard of review required by
Rule l32(a)(3)(iv) and found that Gifford’s motion failed. The court also reviewed
the matter as case-dispositive, and applied the de novo standard of review, also
finding that Gifford’s motion failed and the Commissioner’s order must be affirmed
This appeal followed.

(11) This Court reviews “questions of contract interpretation de novo.”"‘
“Delaware law adheres to the objective theory of contracts, i.e., a contract’s

construction should be that which would be understood by an objective, reasonable

 

'2 Appellants Opening Br., Ex. B at 5.

l3 ]d

“‘ Salamone v. Gorman, 106 A.3d 354, 367 (Del. 2014).
7

third party.”'5 “When interpreting a contract, this Court ‘will give priority to the
parties’ intentions as reflected in the four corners of the agreement,’ construing the
agreement as a whole and giving effect to all its provisions.”'6 Furthei'more, “a court
must determine the intent of the parties from the language of the contract.”l7
(12) Gifford contends that “601 Christiana lacks standing to pursue a

confession of judgment” under the Loan Documents. He contends that “WSFS’
underlying assignment of the Loan Documents to 601 Christiana was void given the
fact that 601 Christiana is not a lender or financial institution” as described in Section
6.6 of the Loan Agreement, and therefore 601 Christiana was “ineligible to be an
assignee under the Loan Documents.”'8 Gifford’s claim lacks merit. The language
of Section 6.6 of the Business Loan Agreement does not limit the right to assign the
loan to 601 Christiana. Section 6.6 states:

6.6 Successors anc_l_ Assigns. The provisions of this

Agreement shall be binding upon and shall inure to the

benefit of the parties hereto and their respective successors

and assigns, except that Borrower may not assign or

otherwise transfer any of its rights under this Agreement

without the prior written consent of the Lender. Lender

may negotiate, assign, pledge or transfer for short-term or

permanent financing, the Note, the Mortgage and all other
Loan Documents to any lenders or financial institutions

 

15 Id. at 357-63.

16 Id. at 368 (quoting GMG Ccipital Inv., LLC. v. Ai‘henian Vemure Parlners !, L.P., 36 A.3d 776,
779 (Dei. 2012).

l'} id

'8 Appellant’s Opening Br. at 26.

and Borrower agrees to execute such documents as may
be necessary to effectuate such assignment, pledge or
transfer. In the case of such assignment, pledge or transfer,
the rights and remedies of Lender in connection with the
interest so assigned shall be enforceable against the
Borrower by such lenders or financial institutions with the
same force and effect and to the same extent as the same
would have been enforceable by Lender but for such
assignment or pledge or transfer.19

(13) The Term Note Guaranty states:

2. Nature of Obligation. This Guaranty is entered into
and upon the following terms and conditions:

(b) The Guarantor expressly agrees that Lender may, in
its sole and absolute discretion, without notice to or fi.irther
assent of the Guarantor and without in any way releasing,
affecting or impairing the obligations and liabilities of
Guarantor hereunder . . . (ii) assign or otherwise transfer
the Note, this Guaranty, any other Loan Document, or any
interest therein or herein . . .

=l¢=|=*

10. Binding Nature. This Guaranty shall be
unconditionally binding upon Guarantor and its successors
and assigns, and shall inure to the benefit of Lender, its
successors and assigns, and any future holder of the
Note.20

 

'9 App. to Appellee’s Answering Br. at 168.
20 Id. ai 141-142, 144 (emphasis added).

(14) Additionally, the language of the Promissory Note specifically allows
for the assignment of WSFS to any entity and does not contain any limiting
language:

26. Assignment; Successors and Assigns. This Note
may be assigned at any time by the Lender, but it shall not
be assigned by the Borrower without the prior written
consent of the Lender, its successors or assigns, which
consent may be withheld for any reason. All of the terms
and conditions herein shall be binding upon any
successors and assigns of the Borrower and inure to the
benefit of the Lender, its successors and assigns.z'

(15) The Commissioner ruled that Section 6.6 was not ambiguous and does
not place a limitation on the lender. He found that “the other documents that were
signed in connection with [the] agreement make it abundantly clear that there’s
absolutely no limitation on assigning the loan here on successors and assigns.”22 The
Commissioner concluded that “when you look at [Section 6.6] in context and when
you read it, it’s not a limitation on the bank’s ability to assign the documents to only
a lender or a financial institution . . . there’s no ambiguity, and it’s not a limitation
which denies the bank, or which denies 601 Christiana Investor’s standing to move

for the confession of judgment.”23 In reviewing Gifford’s motion to vacate the

Commissioner’s order, the Superior Court applied the de novo standard of review

 

2' ]d. at 135 (emphasis added).
22 Id
23 App. to Appellant’s Opening Br. at 346.
10

and found that “the business loan agreement permitted the original lender to assign
the loan to 601 Christiana, again for the same reasons as the Commissioner did.”24

(16) We agree with the Superior Court that when all the documents are read
in context, WSFS was not restricted to assigning the loan documents only to a lender
or financial institution. The decision of the Commissioner, which was adopted by
the Superior Court, should be affirmed.

(17) Gifford contends that the Superior Court “erred when it did not require
or review findings of facts and conclusions of law by the Commissioner” because
the Commissioner issued a case-dispositive decision.25 This Court reviews a trial
judge’s interpretation of its procedural rules de rtovo.26

(18) Gifford’s claim lacks merit. With either case-dispositive or non case-
dispositive matters decided by a Commissioner, a party may request that a judge
review the matter.27 The Superior Court noted that “[w]hether the Commissioner
determined a case-dispositive matter or non case-dispositive mater is not a question
the Court needs to resolve. In either circumstance, Gifford is not entitled to relief.”28

I-Iowever, the Superior Court still undertook a complete and independent analysis of

 

24 Appellant’s Opening Br., Ex. B at 8.
25 Appellant’s Opening Br. at 40.
26 Valentin v. State, 74 A.3d 645, 648 (Del. 2013).
27 Super. Ct. Civ. R. 132(a)(3)(ii) and (a)(4)(ii).
23 Appellants Opening Br., Ex. B at 5.
l l

the record and reached its own conclusions The Superior Court applied both the
standard of review required by Superior Court Civil Rule 132(a)(4)(iv), for non case-
dispositive matters, and the de novo standard of review, for case-dispositive
matters29 Under both standards of review, the Superior Court ruled that Gifford’s
Motion fa`iled.30

(19) The Superior Court noted that Gifford did not actually object to the
Commissioner’s factual determinations and legal conclusions but instead argued
that the Commissioner should have treated the matter as case-dispositive and filed
proposed findings of fact and recommendations as required under Superior Court
Civil Rule 132(a)(4)(i). The Superior Court ultimately treated Gifford’s Motion to
Reconsider as it would an appeal from the Commissioner’s findings of fact and
recommendations and applied the de novo standard of review to the Commissioner’s
bench ruling The Superior Court noted that there would be no point in “remanding
the matter back to the Commissioner for the purpose of having him recast his
findings of fact and disposition as proposed findings of fact and recommendations

for disposition.”3' Because the Superior Court judge reviewed the Commissioner’s

 

29 Id. at 5, 8.
30101
3' Id. at 7.
ii

ruling under the case-dispositive standard of review, Gifford’s claim fails and the
Superior Court must be affirmed.

(20) Gifford raises two arguments that were not fairly presented to the trial
court. This Court reviews issues that are not fairly presented to the court below,
under the plain error standard of review,32 “Under the plain error standard of review,
the error complained of must be so clearly prejudicial to substantial rights as to
jeopardize the fairness and integrity of the trial process.”33 “Furthermore, the
doctrine of plain error is limited to material defects which are apparent on the face
of the record; which are basic, serious and fundamental iri their character, and which
clearly deprive an accused of a substantial right, or which clearly show manifest
injustice.”"’"

(21) First, Gifford argues that “he did not know of nor consent to the final
loan modifications which releases him from his guaranty and renders the confession

of judgment void.”35 Second, Gifford contends that “601 Christiana lacks standing

because the assignment is invalid under Delaware suretyship law.”36 Neither of

 

32 Wainwright v. State, 504 A.2d 1096, 1100 (Del. 1986).
33 ]d
34 Id
35 Id. at 16.
36 Id. at 33.
13

these arguments were fairly presented to the trial court and are therefore waived on
appeal

NOW, TI-[EREFOR_E, IT IS ORDER.ED that the judgment of the Superior
Court is AFFIRMED. The time for filing a motion for reargument is shortened to

three days.?‘7

BY THE COURT:

iTi/ifi;/Qg/

Jsce

 

37 Supr. Ct. R. 4 and 18.
ii

