Art Finance Funding (VIII), LLC v. Investart Management

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
ART FINANCE FUNDING, )
(VIII), LLC )
)
Plaintiff, )
)
v. )
) C.A. No. N24C-11-028 SPL
INVESTART MANAGEMENT, )
LLC and GERALD P. PETERS, )
)
Defendants. )

Submitted: February 19, 2026
Decided: May 29, 2026

MEMORANDUM OPINION

Upon Defendant’s Motion to Compel,
DENIED.

Upon Defendant’s Renewed Motion to Stay,
DENIED.

Upon Defendant’s Motion for Leave
to File an Amended Answer and Counterclaims
DENIED.

Upon Plaintiff’s Renewed Motion for Summary Judgment
GRANTED.

Michael L. Vild, Esq., CROSS & SIMON, LLC, Wilmington, Delaware, Attorney for
the Plaintiff.

Zhao Liu, Esq., THE ROSNER LAW GROUP LLC, Wilmington, Delaware, Daniel A.
Schnapp, Esq., DENTONS US LLP, New York, New York, Attorney’s for Defendant.

LUGG, J.
BACKGROUND
On May 28, 2020, Plaintiff, Art Finance Funding (VIII), LLC (“Art Finance”),

loaned $3,000,000.00 to Defendant, Investart Management, LLC (“Investart”). The

loan is evidenced by a “Loan and Security Agreement” (“Loan”) and a “Secured

Grid Promissory Note” (“Note”) executed the same day.1 On August 27, 2020, the

parties executed an “Amendment to Secured Grid Promissory Note” increasing the

loan to $3,500,000.00.2 Gerald Peters executed the agreements as representative of

Investart and served as a guarantor of the loan.3 As guarantor, Peters assumed

responsibility for “the prompt payment” in the event Investart defaulted on the loan.4

In July 2024, the parties executed a “Second Amendment to Secured Grid

Promissory Note” which designated the Delaware Superior Court as the proper

forum to hear any issues arising from the Note and maintained the $3,500,000.00

loan.5

Under the Loan, non-payment of interest within ten days of the date the

payment is due or nonpayment of the principal balance on the due date constituted a

1
D.I. 1, Ex. A (“Loan”), Ex. B (“Note”).
2
D.I. 1, Ex. C (“Amend. Note”).
3
D.I. 1, Ex. E (“Guarantee”).
4
Guarantee.
5
D.I. 1, Ex. D (“Second Amend. Note”).
1
default.6 In the event of default, Art Finance maintained the right to “declare the

unpaid portion of the indebtedness to be immediately due and payable, without

further notice or demand.”7 And Art Finance, in its sole discretion, may offset or

apply any Investart property in its possession to the debt.8 Investart waived its right

to a jury trial to resolve any disputes under the loan9 and, after a series of

amendments, agreed that any dispute shall be governed by the laws of the State of

Delaware and presented to the Delaware Superior Court.10

Under the terms of the Note, “[u]pon the occurrence of any one or more of the

Events of Default specified in the Loan Agreement, all amounts then remaining

unpaid on the Promissory Note may be declared to be or may automatically become

immediately due and payable as provided in the Loan Agreement.”11 Furthermore,

“[t]he Borrower [and each of them] expressly waive[s] any and every right to impose

any counterclaim, setoff or defense in any action or proceeding brought hereunder,

except for the defense of payment.”12 And, like the Loan, under the Note Investart

6
Loan § 7(a)(i).
7
Loan § 7(b)(i).
8
Loan § 7(b)(ii).
9
Loan § 7(e).
10
Loan § 8(m).
11
Note § 4.
12
Note § 3.
2
waived their right to a jury trial13 and agreed the laws of Delaware governed the

agreement.14

The August 2020 Amendment to Secured Grid Promissory Note increased the

loan from $3,000,000.00 to $3,500,000.0015 and shifted the governing law from

Delaware to New York.16 Then, on July 9, 2024, a Second Amendment to Secured

Grid Promissory Note returned the governing law from New York to Delaware and

designated the Delaware Superior Court as the forum to resolve any disputes.17

“[O]ther financing agreements” included in the Loan, original Note, and amended

note “remain in full force and effect” and “[t]o the extent any conflict between the

terms of this [Second] Amendment and the other financing agreements, the terms of

this [Second] Amendment shall control.”18 And, under the second amended note,

Investart “hereby waive[d] and agree[d] not to assert against [Art Finance] any

defenses to, or setoffs, counterclaims or claims against, the payment and

performance of any of [Investart’s] debts, liabilities and obligations . . . or against

13
Note § 13.
14
Note § 5.
15
Amend. Note § 1.
16
Amend. Note § 6.
17
Second Amend. Note § 6.
18
Second Amend. Note § 4.
3
the enforcement of [Art Finance’s] rights and remedies with respect thereto.”19

Peters signed the second amended note on behalf of Investart and in his personal

capacity.20

By July 2024, the parties agreed that, in the event of a default, Art Finance

could declare the unpaid portion of Investart’s indebtedness to be immediately due

and payable,21 Investart could not assert defenses or counterclaims against Art

Finance,22 and Delaware law, applied in the Delaware Superior Court, governed

disputes under the agreements.23

Investart borrowed the full $3,500,000.00 from Art Finance,24 and in August

of 2024, Defendants defaulted on the loan.25 By letter dated September 10, 2024,

Art Finance notified Defendants of the default and demanded “the immediate

repayment in full of the loan with the current principal amount of US $3,500,000.00

plus all interest, and fees.”26 Investart did not satisfy the loan, and on November 4,

2024, Art Finance filed a complaint in this Court alleging Investart breached the

19
Second Amend. Note § 9.
20
Second Amend. Note p. 4.
21
Loan § 7(b)(i); Note § 4.
22
Amend. Note § 9; Second Amend. Note § 9; Note § 3.
23
Second Amend. Note § 6.
24
Rose Affidavit (Ex. 8 to D.I. 34 (“MSJ”)).
25
D.I. 1, Ex. F (“Demand Letter”).
26
Demand Letter.
4
Note and Peters breached the Guaranty.27 Art Finance included copies of the

instruments supporting its claims – the loan and the notes – as exhibits to its

complaint and demanded Defendants produce an affidavit of defense under 10 Del.

C. § 3901.28 On January 7, 2025, Defendants answered the complaint but failed to

produce an affidavit of defense.29 On January 27, 2025, Investart filed an amended

answer which included an affidavit of defense.30 The affidavit of defense does not

offer a defense to the loan obligation; rather, Defendants seek to sweep this dispute

into another case involving similar – but not identical – parties in New York.

Soon after Defendants’ answer, Art Finance moved for “Judgment on the

Pleadings and/or Summary Judgment”31 which the Court denied without prejudice

on February 18, 2025 to allow the parties to more thoroughly investigate matters

surrounding the loan.32 On May 9, 2025, Art Finance again moved for summary

judgment,33 and, on July 2, 2025, Defendants moved to stay this case pending the

adjudication of what they contend is a related lawsuit in New York.34 The Court

27
D.I. 1 (“Compl.”).
28
See Compl.
29
D.I. 5.
30
D.I. 8.
31
D.I. 6.
32
D.I. 6; D.I. 29.
33
MSJ.
34
D.I. 39.
5
denied Defendants’ request for a stay and deferred ruling on Art Finance’s Motion

for Summary Judgment to permit the parties to engage in additional discovery.35

On December 18, 2025, Art Finance renewed its motion for summary

judgment.36 Defendants responded in opposition on January 20, 2026,37 and on

January 23, 2026, moved to compel additional discovery,38 sought leave to file an

amended answer and counterclaims,39 and renewed their motion to stay based on the

New York litigation.40 The parties fully briefed their respective motions,41 and the

Court heard argument on February 19, 2026.42 This order addresses the outstanding

motions.

ANALYSIS
Art Finance seeks to enforce the terms of the loan it extended to Investart.

While the Court has afforded the parties the opportunity to explore matters which,

at best, lie at the periphery of this agreement, the contours of this transaction remain

35
D.I. 44.
36
D.I. 50 (“Renewed MSJ”).
37
D.I. 56 (“Def. Answer”).
38
D.I. 58 (“Def. Compel”).
39
D.I. 59 (“Def. Amend.”).
40
D.I. 61 (“Def. Stay”).
41
See Renewed MSJ; Def. Answer; D.I. 66; Def. Compel; D.I. 67; Def. Amend.; D.I.
68; Def. Stay; D.I. 69.
42
D.I. 71.
6
unchanged. Art Finance loaned Investart $3,500,000.00, Peters guaranteed

Investart’s obligation, and Defendants defaulted. Defendants do not dispute these

facts; rather, they ask the Court to consider matters which are not germane to the

enforcement of the debt.43 The Court must now end this exercise.44

A. DEFENDANTS’ MOTIONS
Defendants contend a lawsuit, filed against Art Finance’s principal Andrew

Rose, Century Bank v. Art Finance Funding (IX), LLC, Andrew C. Rose, and Ann S.

Copeman, is pertinent to the Court’s consideration of this matter.45 In that case,

Century Bank has sued Rose for default on a $20 million loan.46 Peters, a majority

43
See Def. Compel; Def. Amend; Def. Stay.
44
See Unbound Partners Limited Partnership v. Invoy Holdings, Inc., 251 A.3d
1016, 1025 (Del. Super. Ct. 2021). “The purpose of [Title 10] § 3901’s answer-by-
affidavit requirement ‘is to dispose of legally uncontested matters quickly.’” Id.
(quoting Wilmington Tr. Co. v. Thielemann, 2002 WL 31814046, at *2 n.2 (Del.
Super. Ct. Nov. 27, 2002)). Here, the Court permitted Defendants ample time to
investigate and present evidence contesting the loan and their alleged default. On
the record before the Court, Defendants’ breach of the loan and guarantee are
uncontested.
45
Aff. of Peters in Opposition to Plaintiff’s Renewed Motion for Summary Judgment
¶ 14.
46
Century Bank v. Art Finance Funding (IX), LLC, Andrew C. Rose, and Ann S.
Copeman, 1:24-cv-01027-MLG-JHR.
7
shareholder in Century Bank,47 contends Rose asked him to intercede in that case.48

In Peters’ words:

Mr. Rose’s request to assist with his Century Bank loan created a
regulatory concern and conflict-of-interest because of my role as the
bank’s majority shareholder and would have exposed me to liability.
As a result, I ceased making interest payments to Mr. Rose in part
because I was afraid of potential legal exposure in the event I interceded
with Century Bank as Mr. Rose requested.49

Peters thus acknowledges the existence of Investart’s debt and his guarantee, and

concedes default.

1. Defendants’ Motion to Compel

Defendants ask the Court to order Art Finance to provide documents relating

to: (1) “communications with prospective purchasers of the collateral underlying

the loan at issue in this litigation;” and (2) “how Rose distributed monies obtained

through a twenty million dollar loan from Century Bank (of which Peters is a

majority shareholder).”50 Art Finance asserts that discovery has closed and, in any

47
Aff. of Peters in Opposition to Plaintiff’s Renewed Motion for Summary Judgment
¶ 13.
48
Aff. of Peters in Opposition to Plaintiff’s Renewed Motion for Summary Judgment
¶ 15.
49
Aff. of Peters in Opposition to Plaintiff’s Renewed Motion for Summary Judgment
¶ 16.
50
Def. Compel at 1.
8
event, the information sought by Defendants is not relevant to the issues before the

Court.51

Art Finance correctly asserts that discovery has closed.52 But, more

importantly, the requested discovery is not relevant to the present dispute. “Parties

may obtain discovery regarding any non-privileged matter that is relevant to any

party’s claim or defense and proportional to the needs of the case.” 53 “Information

sought in discovery is considered relevant ‘if there is any possibility that the

information may be relevant to the subject matter of the action.’”54

Art Finance seeks repayment of a $3.5 million loan. The source of Art

Finance’s funding is not relevant to Defendant’s obligation to adhere to the terms of

the loan.55 And Art Finance need not inform Defendants of its efforts to sell

collateral.56 Of course, Art Finance must reveal any diminution of Defendant’s debt

51
D.I. 67 ¶¶ 9, 11, 12, 13.
52
D.I. 45. Discovery closed November 26, 2025.
53
Super. Ct. Civ. R. 26(b)(1).
54
Boatright v. State Farm Insurance Co., 2023 WL 8234528, at *2 (Del. Super. Ct.
Nov. 28, 2023) (quoting Burkhart v. Genworth Financial, Inc., 2023 WL 1434059,
at *1 (Del. Ch. Feb. 1, 2023) (quoting In re Appraisal of Dole Food Co., Inc., 114
A.3d 541, 548 (Del. Ch. 2014))).
55
See U.S. Bank National Association v. Stevens, 2025 WL 1139329, *8-10 (Del.
Super. Ct. Apr. 17, 2025) (discussing the lack of relevance of the source of loan
funds).
56
Note § 3.
9
through the sale of collateral and has committed to do so.57 But, to date, there is no

evidence that any of the pledged collateral has been “monetized” to reduce the debt.

The terms of the Note and Loan control.58 Under the Note, Art Finance is not

required to inform Defendants of any action concerning the collateral, nor is it

required to sell any collateral.59 Peters signed the Note in his personal capacity and

on behalf of Investart,60 thereby binding Defendants to its terms. The information

now sought by Defendants is not relevant to the matter before the Court. Defendants’

Motion to Compel is DENIED.

2. Defendants’ Motion for Leave to File an Amended Answer and
Counterclaims

Defendants seek leave to amend their answer and to advance counterclaims

for breach of the implied covenant of good faith and fair dealing, violations of UCC

§ 9-207 for deleterious dealing with the collateral, and for breach of contract for

refusing to apply loan payments to interest, and for reputational injury.61 Art Finance

responds that the deadline for amending pleadings has passed and, under the loan

57
Note § 5.
Brightstar Corp. v. PCS Wireless, LLC, 2019 WL 3714917, at *11 (Del. Super. Ct.
58

Aug. 7, 2019).
59
Note § 3.
60
See Note; see Guarantee.
61
Def. Amend. at 1, 2, 4.
10
contracts, Defendants waived their right to assert counterclaims thereby rendering

any amendments futile.62

Again, Art Finance correctly identifies Defendants’ tardiness in seeking to

amend the complaint; however, the record is clear that Defendants affirmatively

relinquished the opportunity to assert defenses or counterclaims.63 The terms of the

Note and Loan control the parties’ conduct.64 Under the Note, “[t]he Borrower[s] .

. . expressly waive any and every right to impose any counterclaim, setoff or defense

in any action or proceeding brought hereunder, except for the defense of payment.”65

The Amended Note contains a similar provision.66

“It is well settled in Delaware that a party may waive [their] rights.”67 “An

explicit waiver occurs ‘where it is clear from the language used that the party is

intentionally renouncing a right that it is aware of.’”68 “Where the parties have

62
D.I. 68 at 3-4.
63
Amend. Note § 9; Second Amend. Note § 9; Note § 3.
64
Brightstar Corp.LLC, 2019 WL 3714917, at *11.
65
Note § 5.
66
Amend. Note § 9.
67
Bantum v. New Castle County Vo-Tech Educ. Ass’n, 21 A.3d 44, 50 (Del. 2011)
(citing AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 444
(Del. 2005) (citing Pepsi-Cola Bottling Co. v. Pepsico, Inc., 297 A.2d 28, 33 (Del.
1972)).
68
Friddle v. Moehle, 2024 WL 493536, at *6 (Del. Ch. Feb. 8, 2024) (quoting
Dirienzo v. Steel Partners Holdings L.P., 2009 WL 4652944, at *4 (Del. Ch. Dec. 8,
2009)).
11
agreed, in writing, to waive [their right to bring counterclaims], ‘the Court will give

priority to the parties’ intentions as reflected in the four corners of the agreement.’”69

Peters signed the original Note and the Amended Notes on behalf of himself

and Investart.70 The Court presumes that Peters read the documents before signing,

but if he signed the documents without reading them, the Court cannot protect him

from the consequences of that action.71 Defendants waived their right to assert

counterclaims rendering their proposed amendments futile. Defendant’s motion for

Leave to Amend is DENIED.

3. Defendants’ Renewed Motion to Stay this Action Pending Adjudication
of a Related Lawsuit in New York

The Court previously denied Defendant’s request to stay these proceedings.

Nonetheless, Defendants advance similar arguments to stay this case pending the

conclusion of a New York case.72 Defendants contend that this case represents “one

isolated piece of a multi-party dispute” occurring in New York and that New York,

not Delaware, is the proper forum to resolve issues of collateral damages and

69
Friddle, 2024 WL 493536, at *6 (quoting GMG Cap. Invs., LLC v. Athenian
Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 2012)).
70
See Note; see Guarantee.
71
Pellaton v. Bank of New York, 592 A.2d 473, 476 (Del. 1991); Harrington
Raceway, Inc. v. Vautrin, 2001 WL 1456873, at *3 (Del. Super. Ct. Aug. 31, 2001)
(“[T]he Court cannot protect business people who decide to sign contracts and
promissory notes without reading them.”).
72
Def. Stay
12
apportionment.73 Defendant’s ask the Court to stay this matter until the New York

Action is resolved.74 Art Finance opposes a stay because, in their view, the New

York case does not relate to the current dispute.75

Shortly before Art Finance initiated this lawsuit, Art Lending, Inc. sued Rose,

in New York.76 As part of that litigation, third-party plaintiff, AF Funding VIII, LLC

sued Investart and Peters for breaches of a secured grid and promissory notes, loan

and security agreements, and guaranties in New York state court.77 Investart and

Peters are the only parties in common in both the Delaware and New York Action.78

While similarly named and comprised of similar representatives, they are separate

entities, Art Finance is not a party to the New York Action.79

On August 15, 2025, the Court, finding the New York and Delaware actions

were separately and capably litigated, denied the Defendants’ Motion to Stay.80 To

the extent the cases pending in both jurisdictions involved similar evidence,

73
Def. Stay at 1-2.
74
Def. Stay at 1-3.
75
D.I. 69 ¶ 6.
76
Art Lending, Inc. v. Andrew Rose, et al., Index No. 653390/2024.
77
Art Lending, Inc. v. Andrew Rose, et al., Index No. 653390/2024, D.I. 212, ¶ 1.
78
See D.I. 1; see also Art Lending, Inc. v. Andrew Rose, et al., Index No.
653390/2024.
79
See D.I. 1; see also Art Lending, Inc. v. Andrew Rose, et al., Index No.
653390/2024.
80
Aug. 15, 2025, Hearing Tr., 37:12-21.
13
discovery in the New York Action was known and readily available for the Delaware

litigation.81

“Delaware courts, in the interests of comity and judicial economy, normally

will stay an after-filed suit in Delaware when a previously filed suit stating similar

claims is pending in a court of another state.”82 The decision to grant or deny a stay

is within the Court’s discretion and will be exercised freely “where there is a prior

action pending elsewhere, in a court capable of doing prompt and complete justice,

involving the same parties and the same issues.”83

Here, the Delaware and New York cases do not arise out of a common nucleus

of operative fact, and they involve different parties. The parties agreed that any

dispute under the loan would be enforced in this Court under Delaware law. There

is simply no basis to stay this matter in favor of the New York litigation. Defendant’s

Motion to Stay is DENIED.

B. PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

In May 2025, Art Finance moved for summary judgment asserting there is no

dispute of fact that Investart contractually borrowed funds from Art Finance, that

81
Aug. 15, 2025, Hearing Tr., 38:10-18.
82
Transamerica Corp. v. Reliance Ins. Co. of Illinois, 1995 WL 1312656, at *3 (Del.
Super. Ct. Aug 30, 1995) (citing McWane Cast Iron Pipe Corp. v. McDowell Wellman
Eng’g Co., 263 A.3d 281, 283 (Del. 1970); Prezant v. DeAngelis, 636 A.2d 915, 918
(Del. Super. Ct. 1994)).
83
Id.
14
Peters guaranteed the loan, and that Investart breached the contract.84 Thus, Art

Finance contends, there is “no reasonable dispute of fact that Investart owes Art

Finance $3.5 million plus interest.”85 Defendants responded that the motion is

premature and that discovery will yield documents evidencing material factual

disputes.86 They “intend to produce proof of payment to [Art Finance] for principal

and interest owed,” and assert that “irrefutable documentary evidence will . . .

conclusively demonstrate that Defendants owe less than the alleged $3.5 million plus

interest and are not in breach of their contractual obligations.”87 The Court deferred

decision on the motion to allow the parties to engage in more fulsome discovery,

adjusted discovery deadlines, and permitted Art Finance to refile their motion after

the close of discovery.

Art Finance renewed its motion on December 18, 2025, and incorporated its

original arguments.88 In response, Defendants now argue that Art Finance: (i) lacks

standing, (ii) breached the implied covenant of good faith and fair dealing, and (iii)

is barred from recovery under the equitable doctrine of unclean hands.89 Art Finance

84
MSJ ¶ 12.
85
Id.
86
D.I. 38 at 4.
87
D.I 38 at 6.
88
Renewed MSJ ¶ 4.
89
Def. Answer at 1.
15
replied that, as the holder of the Note, it has standing to enforce the loan contract.90

And, Art Finance asserts that Defendants claim for breach of the implied covenant

of good faith and fair dealing fails because Defendants received the full fruits of the

contract.91 Finally, Art Finance proffers that the doctrine of unclean hands, an

equitable remedy, is unavailable here.92

1. Summary Judgment Standard

Under Superior Court Civil Rule 56, this Court may grant summary judgment

where “the pleadings, depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any

material fact that the moving party is entitled to a judgment as a matter of law.”93

On a motion for summary judgment, the Court “(i) construes the record in the light

most favorable to the non-moving party; (ii) detects, but does not decide, genuine

issues of material fact; (iii) denies the motion if a material fact is in dispute.”94 The

moving party bears the initial burden of demonstrating that the undisputed facts

90
D.I. 66 (“Renewed MSJ Reply”) ¶ 7.
91
Renewed MSJ Reply ¶ 9.
92
Renewed MSJ Reply ¶ 11.
93
Super. Ct. Civ. R. 56(c).
94
US Dominion, Inc. v. Fox News Network, LLC, 2023 WL 2730567, at *17 (Del.
Super. Ct. Mar. 31, 2023) (quoting CVR Refin., LP v. XL Specialty Ins. Co., 2021 WL
5492671, at *8 (Del. Super. Ct. Nov. 23, 2021) (cleaned up)).
16
support claims or defenses.95 If the motion is properly supported, then the burden

shifts to the non-moving party to demonstrate that there are material issues of fact

for the resolution of the ultimate fact-finder.96

i. Art Finance has standing.

Defendants allege Art Finance lacks standing because another entity,

Knickerbocker Funding LLC, funded the loan.97 They assert, “it is apparent that

Knickerbocker consistently transferred monies to [Art Finance], who in turn

promptly remitted them to Investart in satisfaction of the subject loan.”98 Art

Finance does not dispute these facts, but responds that “[t]he ultimate source of the

funds that Art Finance lent to the Defendants has no bearing on Art Finance’s

standing to enforce the note as its holder.”99

95
Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1970) (citing Ebersole v. Lowengrub,
180 A.2d 467 (Del. Super. Ct. 1962)).
96
See Brzoska v. Olsen, 668 A.2d 1355, 1364 (Del. 1995).
97
Def. Answer at 3.
98
Id.
99
Renewed MSJ Reply ¶¶ 7,8.
17
A plaintiff, of course, must have standing to bring suit.100 It is axiomatic that

the holder of an instrument has standing to enforce the instrument.101 And, of course,

the loan here is a debt instrument,102 and Art Finance, as holder of the instrument,

may enforce the debt. Art Finance has standing to enforce the loan contracts.103

ii. Art Finance did not breach the implied covenant of good faith and
fair dealing.

Defendants allege Art Finance breached the implied covenant of good faith

and fair dealing by preventing Defendants from satisfying their obligations under

the loan.104 Art Finance responds that Defendants fail to offer facts in support of this

allegation.105

“The implied covenant of good faith and fair dealing inheres in all contracts

and exists to fill unanticipated contractual gaps.”106 The principles are invoked “only

100
Employers Insurance Company of Wausau v. First State Orthopedics, P.A., 312
A.3d 597, 607-08 (Del. 2024) (citing Steel Co. v. Citizens for a Better Env’t, 523
U.S. 83, 103-04 (1998) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560
(1992))).
101
6 Del. C. § 3-301
102
See Caspian Select Credit Master Fund Ltd. v. Gohl, 2015 WL 5718592, at *5
(Del. Ch. Sept. 28, 2015).
103
Deutsche Bank National Trust Co. v. Moss, 2016 WL 355017, at *2 (Del. Super.
Ct. Jan. 26, 2016).
104
Def. Answer at 2.
105
Renewed MSJ Reply ¶ 9.
106
Buck v. Viking Holding Mgmt. Co. LLC, 2021 WL 673459, at *5 (Del. Super. Feb.
22, 2021) (citing Dieckman v. Regency GP LP, 155 A.3d 358, 367 (Del. 2017)).
18
when a contract truly is silent on the disputed issue.”107 “[B]ecause the implied

covenant is, by definition, implied, and because it protects the spirit of the agreement

rather than the form, it cannot be invoked where the contract itself expressly covers

the subject at issue.”108 “To state a claim for breach of the implied covenant, a

claimant must allege: (1) a specific implied contractual obligation, (2) a breach of

that obligation, and (3) resulting damage.”109 A claimant must demonstrate a party

engaged in “unreasonable conduct that prevents its counterparty from ‘receiving the

fruits of the bargain.’”110 The fruits of the bargain are the actual benefits of the

agreement.111

Defendants allege that Art Finance double-pledged collateral, misled

prospective purchasers of the collateral, and misallocated loan payments.112 These

alleged breaches do not arise from any express provisions within the Loan and Note.

107
Buck, 2021 WL 673459, at *5 (internal citations omitted).
108
Himawan v. Cephalon, Inc., 2018 WL 6822708, at *8 (Del. Ch. Dec. 28, 2018)
(quoting Allen v. El Paso Pipeline GP Co., L.L.C., 2014 WL 2819005, at *10 (Del.
Ch. June 20, 2014) (quoting Fisk Ventures, LLC v. Segal, 2008 WL 1961156, at *10
(Del. Ch. May 7, 2008))).
109
Buck, 2021 WL 673459, at *5 (citing Brightstar Corp. v. PCS Wireless, LLC,
2019 WL 3714917, at *11 (Del. Super. Ct. Aug. 7, 2019)).
110
See Trust Robin, Inc. v. Tissue Analytics, Inc., 2022 WL 17423728, at *7 (Del.
Ch. Dec. 2, 2022) (quoting Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 888
(Del. Ch. 2009).
111
Nemec v. Shrader, 991 A.2d 1120, 1128 (Del. 2010).
112
Def. Answer at 4-5.
19
Defendants assert they exist within implied contractual obligations. Beyond

argument, Defendants fail to offer facts upon which any proffered, undocumented

terms may be implied. “It is a rare complaint that pleads a cognizable claim based

on the implied covenant.”113 This is not one of those rare cases. Peters alleges that

he has proof of repayment for the Loan.114 The Court twice denied Art Finance’s

efforts to summarily end this dispute and did so to allow Defendants to offer facts

evidencing repayment. Defendants have not done so.

A party who “is not denied the full benefits of its bargain, but rather, is

receiving what was bargained for, [ ] cannot now use the implied covenant of good

faith and fair dealing to rewrite a contract that it believes to be a ‘bad deal.’”115

Investart contracted with Art Finance to borrow $3.5 million and received the full

benefit of that bargain – $3.5 million. There is no evidence of a breach of the implied

covenant of good faith and fair dealing.

iii. The defense of unclean hands does not apply.

Defendants allege that Rose’s attempt to obtain Peters assistance with Rose’s

Century Bank loan prohibits Art Finance’s recovery under the doctrine of unclean

113
Trust Robin at *7.
114
Aff. of Peters in Opposition of Motion for Summary Judgment ¶ 15.
115
Westlake Pipe & Fittings Corporation v. Geon Performance Solutions, LLC.,
2024 WL 3386136, at *4 (Del. Super. Ct. July 12, 2024).
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hands.116 Defendants assert that Peters “determined that issuing payment to any

Rose Entity would be inappropriate because, inter alia, he was concerned that Rose

would divert payments from him to paying off the Century Bank loan.”117 Art

Finance responds that the doctrine of unclean hands, an equitable remedy, is

inapplicable here, where nothing more than money damages are sought.118

Unclean hands is an equitable defense that “applies the maxim of equity that

‘[h]e who comes into equity must come with clean hands.’”119 “The question raised

by a plea of unclean hands is whether the plaintiff’s conduct is so offensive to the

integrity of the court that his claims should be denied, regardless of their merit.”120

“[A]t bottom, the unclean hands doctrine is a ‘rule of public policy.’”121 Because the

doctrine of unclean hands is a rule of public policy, it is generally unavailable where

legal remedies are sought.122 The doctrine “does not operate as a free-floating, bad

116
Def. Answer at 5.
117
Def. Answer at 6.
118
Renewed MSJ Reply ¶ 11.
119
American Healthcare Administrative Services, Inc. v. Aizen, 285 A.3d 461, 484
(Del. Ch. 2022) (quoting 1 John Norton Pomeroy, Equity Jurisprudence § 397 at 737
(4th ed. 1918)).
120
Aizen, 285 A.3d at 484 (quoting Gallagher v. Holcomb & Salter, 1991 WL
158969, at *4 (Del. Ch. Aug. 16, 1991).
121
Aizen, 285 A.3d at 491 (quoting Morente v. Morente, 2000 WL 264329, at *3
(Del. Ch. Feb. 29, 2000) (citations omitted); Korotki v. Hiller & Arban, LLC, 2017
WL 2303522, at *11 (Del. Super. Ct. May 23, 2017).
122
See Korotki v. Hiller & Arban, LLC, 2017 WL 2303522, at *11 n 78 (Del. Super.
Ct. May 23, 2017) (citing cases limiting the doctrine of unclean hands to equitable
21
person defense based on conduct wholly unconnected to the facts of the case.”123

And, in any event, the doctrine does not survive in the absence of logical proof.124

Defendants’ factual offering here does “not cohere into any rationally explicable

economic scenario involving inequitable or illegal conduct by the Lender.”125

Art Finance is seeking money damages—the amount in default on the loan.126

Contract claims for money damages sound in law, not equity.127 And, to the extent

there are limited exceptions to that rule, no exception applies here.128 Moreover,

Defendants assertion of the doctrine of unclean hands is unconnected to the facts of

this case. Investart borrowed $3.5 million from Art Finance, and Peters guaranteed

the loan. Defendants have failed to establish how Rose’s Century Bank loan

precluded the repayment of the Art Finance loan.

claims); see also Manufacturers and Trade Trust Co., Wilmington Savings Fund
Soc., FSB v. Washington House Partners, LLC, 2012 WL 1416003, at *4 (Del. Super.
Ct. Mar. 22, 2012) (permitting the Superior Court to consider the unclean hands
defense in limited circumstances).
123
Aizen, 285 A.3d 461 at 484.
124
See Milford Power Co., LLC v. PDC Milford Power, LLC, 866 A.2d 738, 746
(Del. Ch. 2004).
125
Id. (cleaned up).
126
D.I. 1.
Testa v. Nixon Uniform Service, Inc., 2008 WL 4958861, at *3 (Del. Ch. Nov. 21,
127

2008) (money damages is a legal claim, not an equitable one.).
128
Equitable relief may be invoked where funds are held by a third party (such as an
escrow agent) or where the transfer of property is involved. Agahi v. Kelly, 2024
WL 1134048, at *5-6 (Del. Super. Ct. Mar. 15, 2024).
22
iv. Summary Judgment is granted.

In the end, this case ends where it began. Art Finance loaned a sum to

Investart, and Peters guaranteed the loan. Defendants do not dispute the loan.

Investart’s nonpayment constituted a default of the loan which Peters, as guarantor,

failed to cure. Again, Defendants do not dispute the default. Rather, Defendants

offer a series of arguments unrelated to the matter before the Court. To the extent

evidence might exist to create a material factual dispute, the Court afforded

Defendants time to engage in discovery. No evidence has been offered to refute the

terms of the loan or Defendants’ breach. No evidence has been offered revealing a

material dispute of fact. Art Finance’s Motion for Summary Judgment is

GRANTED.

The parties shall, by June 30, 2026, prepare and submit a form of final order

of judgment consistent with this decision.

IT IS SO ORDERED.

Sean P. Lugg, Judge

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