The weedy Darley Green construction site on Philadelphia Pike – once home to the 105-acre McComb Estate that held a mansion, tenant houses and an airpark – has been touted for nearly a decade as the keystone to revitalization in its working-class Claymont neighborhood.

Soon after construction started in 2007, though, the economy staggered, leading to the worst housing slump since the Great Depression. Today, fewer than 50 of the proposed 1,226 town houses and condominiums have been completed and the project’s new development team wants to modify the plans to adapt to changing market conditions.

But a legal fight in Delaware’s Court of Chancery pitting two wealthy Greenville real estate developers against each other has thrown another obstacle in the path of the $300 million project.

The lawsuit, filed by Joseph Setting II against Louis J. Capano III over the purchase of the development’s bank loans, offers a rare inside glimpse into how developers caught in the historic real estate downturn privately maneuver to cut their financial losses and stay involved in projects in order to benefit from any potential upside. According to the filing, the potential profits from the Setting-Capano deal are between $16.59 million and $28.24 million.

Last week, Darley Green Sales Manager Amy Maluski worked the sales office, offering tours and information about the homes.

“The last thing we need is negativity,” she said.

In his lawsuit, Setting, who invested $10.5 million as the cash portion of the 2005 purchase of the 65-acre development site, is alleging Capano deceived him out of his chance to protect his original investment by buying the project’s loans. Capano, through Darleycap LLC, bought the loans in March at the fire-sale price of $8.1 million, effectively giving Capano control of Darley Green, according to the lawsuit. The total amount of the loans owed by Darley Green’s original developer was $39 million, according to a foreclosure action filed by Darleycap in March.

Setting, 46, alleges he worked diligently with Capano for months on a deal for the two men to buy the loans and was instrumental in Darleycap’s winning the bidding process. But when Capano got what he needed out of Setting, including using Setting’s relationship with a rival bidder to improve his chances, Capano secretly bought the loan package alone, Setting alleges.

“Historically, many of the people who made and kept [real estate] deals came from tough backgrounds and often had limited education,” the lawsuit says. “They understood, however, the phrase that ‘a man’s word is his bond’ and generally honored it.”

Capano, an “expensively educated” and “polished” scion of a prominent Delaware real estate family, however, “apparently does not believe his word is his bond,” the lawsuit says.

For his part, Capano, 36, strongly denies the allegations in the lawsuit.

“There was absolutely no fraud against Mr. Setting,” Capano wrote in an email. “The facts are Mr. Setting lost $10 million on the deal over several years. His losses have nothing to do with me and his effort to recover his losses through me by way of a lawsuit is upsetting. However, that is business in America today. Mr. Setting’s lawsuit will not be successful and I will vigorously defend myself.”

Setting, who as a teenager lived in the Naamans Apartments in Claymont, did not return calls to his home on Kennett Pike.

His lawyer declined to comment.

Capano said he is focused on completing Darley Green “for the betterment of the Claymont community and will be moving forward.”

Although Setting declined to comment, details of what led to the dispute are revealed in public records.

Darley Green was most recently the massive Brookview Apartments, a 1952 garden-style complex.

In 2005, Setting put $10.5 million in cash toward the purchase of Brookview, which had been listed for sale at $31 million. The acquisition by Brookview Townhomes Revelopment LLC was also funded by a $24.6 million loan from Wilmington Trust Co. and Manufacturers and Traders Trust Co., according to the lawsuit.

Brookview Townhomes Redevelopment was a joint venture, half owned by Setting and the other half owned by a developer not named in the suit. However, the project was publicly announced as a joint venture by Setting and the Commonwealth Group, headed by Brock J. Vinton.

The ambitious plans unveiled by the Setting-Commonwealth partnership, which included new homes and retail, were hailed as a new beginning for Claymont

According to the suit, “various internal and external factors,” including the 2008 economic downturn, kept the project from progressing as planned. By then, Setting was no longer involved in Brookview Townhomes Redevelopment because of disagreements about how to manage and fund the company, according to the filing.

At the end of October 2007, Setting’s membership interest in Brookview Townhomes was acquired by his partner and the project was refinanced by Bank of America. The total loan package at that time was $54.47 million, the filing says.

Although no longer directly involved, Setting still had an indirect financial interest in the project because recovery of his original $10.5 million investment hinged on the revenue generated by the project and maintenance of the loan package, Setting alleges.

According to Setting’s lawsuit, Bank of America granted Brookview Townhomes a series of forbearances on the loans rather than foreclose. But by 2011 it was generally known in the real estate community that the mortgage was not being serviced and the bank wanted to sell the loans.

In December, Setting began talking to an investor about making an offer to Bank of America for the loan package, the lawsuit says. About the time he learned that the bank was willing to take just $8 million for it, he also heard that Capano was interested.

The two men had known each other for more than 25 years, and Capano had shown earlier interest in Darley Green, the lawsuit says.

“… Over the past several years [Capano] has been attempting to find significant properties to develop on his own without a material amount of assistance from his prominent developer father, Louis J. Capano Jr.,” the filing alleges.

In January, Setting and Capano met for two hours at a Greenville restaurant and plans to acquire the Darley Green loans were set in motion.

Eventually, a deal was struck. A company called Darleycap, of which Setting would be a member and co-manager, would be formed for the acquisition, the lawsuit says. That would be followed by a “consensual foreclosure.” Setting would receive a third of the proceeds from the project after certain capital repayments had occurred, the filing alleges.

“All involved knew that they were operating on an expedited schedule that did not allow time for detailed drafting of formalized agreements because Bank of America was expecting offers on the loan package to be submitted by the close of business on January 30,” the lawsuit says.

Setting says in the filing there were some back-and-forth discussions with Capano, including whether to include Commonwealth. But either way, both men had decided to move forward together, Setting alleges.

They were aware of another bidder who was willing to make Bank of America a $12 million or $13 million offer for the loan package, the lawsuit alleges. Because Setting had a “personal relationship with the family” behind the rival bid, Capano asked Setting to “trade on his personal relationship” to improve their odds of winning the loan package. Setting was to tell the other bidder he already had more than $10 million at risk in Darley Green, the lawsuit alleges.

According to the lawsuit, Setting reached out to the other bidder, who “expressed willingness to help out under the circumstances.” The other bidder submitted a bid of $8 million, the lawsuit says. Knowing that, Darleycap put in a bid of $8.1 million, Setting alleges.

It was the rival bidder who on Feb. 16 called Setting to tell him Darleycap had won the loan package. After hearing that news, Setting says, he began working toward a March settlement.

Within days of winning the bid, there were signs of trouble. Capano said he was “unsure” how Setting would be part of the deal if Commonwealth’s participation in the transaction had not been resolved, Setting alleges.

At that point, Setting reminded Capano that he was holding in abeyance a petition for involuntary bankruptcy against Brookview Townhomes, the lawsuit says. If a bankruptcy were filed before the settlement with Bank of America, the closing could be put “on an indefinite hold.”

Capano didn’t contest any of those facts, but by the end of February Capano was distancing himself, the filing says

“For the last time, you and I do not have an agreement,” Capano wrote in a February email, the lawsuit says.

Before long, Setting learned that Capano had closed on a loan purchase on March 1. A few days later, Capano, through Darleycap, foreclosed on Brookview Townhomes.

According to Maluski, the sales manager, Commonwealth is currently construction manager on the project and Capano holds the loan.

She said sales have been strong for the town homes.

“We’re fortunate to have this location,” said Maluski, who said she is employed by Commonwealth.

Setting alleges Capano wanted to increase his profits in the the deal and “used knowing silence and deceptive phrasing to gain invaluable support” from Setting.

Setting is asking the court to force Capano to keep his promises or award Setting damages or create a trust in which money and property obtained are for the benefit of Setting.

Capano has continued to move forward with work on Darley Green.

He gave a presentation Wednesday of proposed modifications to the original Darley Green design at a meeting of the Claymont Design Review Advisory Committee.

The Claymont DRAC approved the modifications to allow Capano to put about 297 apartments in seven buildings off Philadelphia Pike, said Brett Saddler, executive director of the Claymont Renaissance Development Corp. The plan also calls for 18,000 square feet of retail along Philadelphia Pike.

Executive apartments would be built above the shops, Saddler said.

John De Costanza, chairman of the Claymont DRAC, said Capano’s new plan must go before New Castle County Council.

“These apartments are going to lease for more than $1,000 a month,” Di Costanza said. “There’s no fear this is going to turn into a Brookview. The Capanos are about ownership of their properties.”

Saddler said he has been “very happy” with the Capano’s understanding the importance of Darley Green to the future of Claymont.

“I’m not privy to the details of the lawsuit, but regardless, the Darley Green project and Claymont’s revitalization will move ahead.”