were unsuccessful, and the Partnership diligently sought alternative financing, also unsuccessfully. The acquisition loan fell due on November 28, 1989, but the Partnership was unable to repay it, having originally expected to repay it in the normal course from permanent financing placed on the property once construction was completed. The Partnership now fears foreclosure.
Plaintiffs filed this lawsuit on March 22, 1990, and the Court granted an expedited discovery schedule. A hearing on the motion for preliminary injunction was held on April 27, 1990.
In ruling on a motion for a preliminary injunction, the Court must consider four factors: (1) whether plaintiffs have made a strong showing that they are likely to prevail on the merits, (2) whether plaintiffs have shown that, absent such relief, irreparable injury will result, (3) whether issuance of the injunction will harm the interests of the other parties, and (4) whether the public interest supports the grant of relief. Washington Metropolitan Area Transit Comm'n v. Holiday Tours, 182 U.S. App. D.C. 220, 559 F.2d 841, 842 (D.C. Cir. 1977); Virginia Petroleum Jobbers Association v. FTC, 104 U.S. App. D.C. 106, 259 F.2d 921, 925 (D.C. Cir. 1958). Furthermore, "the power to issue a preliminary injunction, especially a mandatory one, should be 'sparingly exercised.'" Dorfmann v. Boozer, 134 U.S. App. D.C. 272, 414 F.2d 1168, 1173 (D.C. Cir. 1969); see also Wetzel v. Edwards, 635 F.2d 283, 286 (4th Cir. 1980).
Plaintiffs have not made a strong showing that they had an enforceable loan agreement with defendant, and thus that they are likely to prevail on the merits. For an enforceable contract to exist in the District of Columbia, there must be both agreement as to all material terms and the intention of the parties to be bound. Georgetown Entertainment Corp. v. District of Columbia, 496 A.2d 587, 590 (D.C. 1985) (citing Edmund J. Flynn Co. v. LaVay, 431 A.2d 543, 546-47 (D.C. 1981)). Furthermore, in a breach of contract action, the burden is on the plaintiff to prove all elements of the action. Browzin v. Catholic University of America, 174 U.S. App. D.C. 60, 527 F.2d 843, 849 (D.C. Cir. 1975); Banze v. American International Exports, Inc., 454 A.2d 816, 817 (D.C. 1983).
Plaintiffs argue that at all times during negotiations on the Redwood Center project, the parties understood that plaintiffs were seeking one loan for the acquisition and construction of Redwood Center. They contend that the loan was bifurcated, at Trimble's suggestion, only to accommodate the seller's desired settlement date, but that there was no question in the minds of the parties that the construction funding, merely the second part of a two-part loan, would follow once the plaintiffs secured the alley closing. They claim that they surely would not have obligated themselves to Riggs on the purchase price and the guaranty had they not been assured that Riggs intended to fund the construction loan.
The facts now in the record do not appear to bear out plaintiffs' theory, but rather reveal that the parties engaged in a course of negotiations in contemplation of ultimately reaching an acceptable loan agreement. There is no doubt that defendant, through Trimble, expressed an interest in the project. Unfortunately for plaintiffs, however, interest does not equate with a contractual obligation. Rather, the parties must have the intent to be bound by an agreement, and, in this case, the Court does not believe that plaintiffs will be able to meet their burden of proving the requisite intent.
In his August 16, 1988, letter written to Seaman's, Trimble stated that he was working with Leapley and Armstrong to finance the Redwood Center project, and that once the alley closing was approved, which, as he understood it, would be within 60 to 90 days, he would be in a position to recommend financing to the Loan Committee at Riggs. It is significant that this letter represents a marked change from the draft letter that Armstrong had written hoping that Trimble would sign. The draft letter had stated that "Riggs Bank will finance this project," and set forth several details about specific loan terms, none of which Trimble included in the letter he ultimately sent to Seaman's.
Furthermore, plaintiffs' July 7, 1989, application for construction financing requested an "additional loan," not the second part of a two-part loan.
It also recognized that the application must ultimately proceed to the Loan Committee for approval.
Yet, neither the tone nor the substance of the letter of application suggests that plaintiffs were simply requesting a loan that defendant had previously obligated itself to provide.
Plaintiffs have also failed to make a strong showing that the parties agreed on all material terms for a construction loan, even recognizing that real estate development loans are evolving rather than static in nature. In August 1988, when plaintiffs first applied for a loan for this project, they supplied Riggs with figures from an appraisal based on the bridging concept, even while they were fast moving toward the alley-closing concept. Trimble made clear at that time that plaintiffs were not ready to apply for a construction loan, since the development concept, and thus the amount of the necessary funding, had not yet been finalized. It appears that the defendant did not know the exact amount of the expected loan request until it received the July 7, 1989, letter of application. Furthermore, although plaintiffs several times during the negotiations process referred to basing the loan terms on the terms of a previous loan for Federal Hill Place, they have not made a strong showing that there was a "meeting of the minds" as to the specific terms for this significantly larger construction loan, notwithstanding that there were preliminary negotiations.
Plaintiffs' situation is very unfortunate, and there is little doubt that they will sustain financial, and perhaps reputational, harm. The Court believes that plaintiffs had developed a good working relationship with Trimble and the defendant, and that they probably would have succeeded in reaching a loan agreement had the commercial real estate market not taken a downward turn. After all, Trimble did offer his enthusiastic support for this project. However, the injunctive relief plaintiffs seek would be harmful not only to defendant's interest, but also to the public interest, and a balancing of the equities tilts in defendant's favor.
If the Court were to grant the mandatory injunction, defendant would be compelled to provide in excess of $ 12 million in funding for construction of the Redwood Center, even absent a strong showing by the plaintiff that the parties had reached an enforceable loan agreement. Furthermore, should defendant subsequently succeed on the merits, it inevitably would be left with a security interest in the Redwood Center, since for all practical purposes plaintiffs are unable to post a bond to ensure defendant's return to the status quo.
Obviously, defendant ultimately concluded that it did not want an interest in the Redwood Center, and thus the security interest is not a reasonable substitute for the money itself.
Moreover, the Court agrees with defendant that the Court must refrain from becoming a "Super Loan Officer." Riggs is clearly in the better position to negotiate and approve the terms of a loan with a borrower, and this Court would not serve the defendant's interest or the public interest by ordering a bank to provide a loan on terms the Court provides, absent a clear agreement to the terms by the parties themselves. Furthermore, ordering the loan under these circumstances would have a chilling effect on loan officers' willingness to show preliminary interest in ventures and to work with potential borrowers in the hope of ultimately gaining loan approval from a bank. Finally, banks increasingly are being sued by their shareholders for having made "bad" loans. This Court should not compound the problem by forcing a bank to make a loan in the absence of a strong showing that it obligated itself to do so under an enforceable loan agreement.
An appropriate Order accompanies this Opinion.
ORDER - May 8, 1990, Filed
Upon consideration of plaintiffs' motion for a preliminary injunction, defendant's opposition thereto, and the entire record herein, it hereby is
ORDERED, that plaintiffs' motion is denied, for the reasons set forth in the accompanying Opinion.