Phoenix Mut. Life Ins. v. Shady Grove Plaza Ltd., Civ. No. H-89-963.

• Decision Date: 09 April 1990
• Docket Number: Civ. No. H-89-963.
• Citation: 734 F. Supp. 1181
• Parties: PHOENIX MUTUAL LIFE INSURANCE COMPANY, Plaintiff, v. SHADY GROVE PLAZA LIMITED PARTNERSHIP et al., Defendants.
• Court: U.S. District Court — District of Maryland

734 F. Supp. 1181

PHOENIX MUTUAL LIFE INSURANCE COMPANY, Plaintiff, v. SHADY GROVE PLAZA LIMITED PARTNERSHIP et al., Defendants.

Civ. No. H-89-963.

United States District Court, D. Maryland.

April 9, 1990.

Nell B. Strachan, Michael Schatzow and Venable, Baetjer and Howard, Baltimore, Md., for plaintiff.

Robert X. Perry, Jr., J. Carter McKaig and Wilkes, Artis, Hedrick & Lane, Washington, D.C., for defendants.

ALEXANDER HARVEY, II, Chief Judge.

Presently pending before the Court in this consolidated civil action is defendants' motion for summary judgment. The plaintiff is Phoenix Mutual Life Insurance Company (hereinafter "Phoenix Mutual"), a Connecticut life insurance company. Phoenix Mutual has here sued Shady Grove Plaza Limited Partnership (hereinafter "Shady Grove"), a Maryland limited partnership, and its partners or principals. The parties had entered into negotiations relating to the creation of a joint venture for the construction of an office building in Montgomery County, Maryland. When these negotiations failed to result in the execution of a formal agreement, plaintiff filed this suit claiming, inter alia, that a contract between the parties had nonetheless been formed.¹ Diversity jurisdiction exists.

In its original complaint, plaintiff alleged, inter alia, that the parties had during the negotiations entered into certain agreements which had resulted in the formation of a partnership. Before discovery had been completed, defendants filed a motion for judgment on the pleadings pursuant to Rule 12(c), Fed.R.Civ.P., claiming that the parties' negotiations had been expressly non-binding and that, in the absence of a written agreement, no contract, joint venture or partnership was ever formed. Thereafter, leave was granted to plaintiff to file an amended complaint, and the parties subsequently agreed that the Court should not rule on the motion for judgment on the pleadings until discovery was completed.

Following the completion of discovery, defendants filed a motion for summary judgment, relying on memoranda and exhibits filed earlier in support of their motion for judgment on the pleadings. Plaintiff filed a memorandum, transcripts of depositions and exhibits in opposition to the motion for summary judgment, and defendants then replied to the opposition. Oral argument has been heard in open Court. For the following reasons, defendants' motion for summary judgment will be granted.

I Facts

Plaintiff is a major life insurance company with its principal place of business in Hartford, Connecticut. Defendants are a Maryland limited partnership and its partners or principals. In February, 1987, defendants purchased a 7.95 acre parcel of real estate located at the intersection of I-270 and Shady Grove Road in Rockville, Montgomery County, Maryland. The dispute in this case results from efforts undertaken by defendants to secure financing for the construction of a 187,000 square foot office building on the property.

Prior to the purchase of the property, defendants had approached Citicorp Real Estate, Inc., N.A. (hereinafter "Citicorp") and had secured a loan commitment from Citicorp of $23,400,000 for the purchase of the land and the necessary construction. Citicorp had allowed defendants to draw $7,625,000 of this loan for the purchase of the land in February, 1987, but had declined to release further funds until defendants had obtained an equity partner which would contribute capital to the project.

In late 1986, defendants began to look for a partner to participate in ownership of the land and office building. To that end, defendants contacted L.J. Melody Company (hereinafter "Melody"), a mortgage broker in Houston, Texas. After having been approached by Melody, plaintiff proposed a joint venture in which plaintiff would fund one-half of the construction project and would then become a fifty percent general partner with defendants. Specifically, plaintiff offered to purchase from Citicorp an $11.5 million Certificate of Deposit (hereinafter "CD"), having a maturity of one year. Following completion of construction, plaintiff was to contribute the $11.5 million to the partnership and receive a one-half equity interest in the property and the office building.

Preliminary negotiations between the parties pertained to the signing of a letter of intent. Plaintiff initially sent defendants a proposed draft of the letter of intent, but the original draft was revised twice before the final version was signed by the parties in January, 1988. The final letter of intent actually consists of three letters from Phoenix Mutual to Shady Grove: a letter dated June 12, 1987 and two letters revising that draft, dated October 28, 1987 and January 8, 1988. Each subsequent letter incorporated by reference the language of the prior draft and then either added or deleted specific terms. Defendants accepted the final version of the letter of intent on January 26, 1988.²

Although the parties altered the document substantially in the course of these negotiations, a key provision of the June 12, 1987 letter remained unaltered and was thus incorporated in the final letter of intent. This provision, which is of the utmost significance in this litigation, is as follows:

If you are willing to proceed in good faith to attempt to negotiate a mutually acceptable partnership agreement, please indicate such willingness by signing the acceptance block set forth below. Execution of this letter shall not obligate Shady Grove or Phoenix to accept any particular terms for such partnership agreement beyond those provided for herein, it being understood that such partnership agreement must be mutually satisfactory to the parties hereto prior to execution of the same, and neither Shady Grove or Phoenix shall have any obligation to the others beyond the obligation on the part of Shady Grove to pay the costs and legal fees referred to in the preceding paragraph if a mutually acceptable partnership is not executed.

The letter of intent further provided that the parties would undertake to structure the Shady Grove agreement in a manner similar to another joint venture in which they had participated. That other project involved the Antioch Plaza in Merriam, Kansas, which had resulted in a signed partnership agreement between plaintiff and defendants. The parties had spent some time negotiating specific provisions of the Antioch agreement and sought to save time during the Shady Grove negotiations by adopting some of the same provisions. However, the Shady Grove letter of intent specifically adopted only two provisions of the Antioch agreement and stated that the remaining provisions would be "negotiated."

After the final letter of intent was signed on January 26, 1988, defendants sent Citicorp a copy of the document and requested that the remainder of the construction loan be released for defendants' use. Citicorp agreed to do so, and defendants were then able to draw funds from the loan for the construction work. Citicorp, having been provided with a copy of the letter of intent, was fully aware of the non-binding nature of the negotiations between the parties.

Although negotiations between the parties continued after the signing of the letter of intent, various disagreements thereafter arose concerning the terms of the final agreement. Plaintiff Phoenix Mutual was unwilling to commit $11.5 million of its funds at the outset of the project and requested that defendants allow it to simply reserve the funds internally rather than purchase the CD. Defendants accepted this new term only after plaintiff agreed to a revision of the budgetary figures which would reflect the loss of interest that the CD would have earned.

More serious disagreements arose as to cost overruns in the construction budget. Under the letter of intent, defendants were to bear the cost of any such overruns, but defendants indicated that they would not enter into the proposed agreement unless plaintiff would bear some of these costs. In spite of extended discussions and hard bargaining, neither party was willing to compromise on the cost overrun issue. After a final unsuccessful attempt to resolve the issue in October, 1988, the parties broke off negotiations completely. No partnership agreement was ever executed by the parties.

II Summary Judgment Principles

One of the purposes of Rule 56 is to require a plaintiff, in advance of trial and after a motion for summary judgment has been filed and supported, to come forward with some minimal facts to show that a defendant may be liable under the claims alleged. See Rule 56(e). Moreover, "`a mere scintilla of evidence is not enough to create a fact issue; there must be evidence on which a jury might rely.'" Barwick v. Celotex Corp., 736 F.2d 946, 958-59 (4th Cir.1984) (quoting Seago v. North Carolina Theatres, Inc., 42 F.R.D. 627, 640 (E.D.N.C.1966), aff'd, 388 F.2d 987 (4th Cir. 1967)). In the absence of such a minimal showing, a defendant should not be required to undergo the considerable expense of preparing for and participating in a trial. As Judge Winter said in Bland v. Norfolk and Southern Railroad Company, 406 F.2d 863, 866 (4th Cir.1969):

While a day in court may be a constitutional necessity when there are disputed questions of fact, the function of a motion for summary judgment is to smoke out if there is any case, i.e., any genuine dispute as to any material fact, and, if there is no case, to conserve judicial time and energy by avoiding an unnecessary trial and by providing a speedy and efficient summary disposition.

In two cases decided in 1986, the Supreme Court clarified and expanded the principles applicable to a trial court's consideration of a summary judgment motion filed under Rule 56. Anderson v. Liberty Lobby, 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

In Anderson, the Supreme Court held that the...