Trident Center v. Connecticut General Life Insurance Co.

An insurance company and two law firms formed Trident Center (Trident) (plaintiff), a partnership, to construct a California office complex. Trident obtained financing from Connecticut General Life Insurance Company (CGLI) (defendant). The $56 million loan negotiated by the sophisticated parties had a 15-year term and an interest rate of 12.25 percent. The promissory note stated that Trident could not prepay the loan in the first 12 years. The note also provided that, in the event of a default during the first 12 years, CGLI could, at its discretion, accelerate the payment obligation, making the full amount due, and charge a 10 percent prepayment fee. When interest rates dropped a few years later, Trident wanted to refinance, but CGLI insisted that the loan could not be prepaid. Trident sued CGLI, seeking a declaration that Trident could prepay the loan within the first 12 years if it paid the 10 percent prepayment fee mentioned in the default provision. Trident argued that the contract’s terms were ambiguous and sought to introduce extrinsic evidence, meaning evidence from outside the agreement, showing that the parties intended that Trident could prepay subject to the prepayment fee. CGLI moved to dismiss the suit, arguing that the contract unambiguously prevented Trident from prepaying the loan. The district court granted CGLI’s motion and sanctioned Trident for bringing a frivolous lawsuit. Trident appealed.