Opinion ID: 2424191
Heading Depth: 1
Heading Rank: 2

Heading: The Trial Court's Findings on Liability and Remedy

Text: On April 3, 2003, after a six-day bench trial, Judge Braman completed the liability phase of the trial by issuing a fifty-nine page order making findings of fact and conclusions of law. Judge Braman rejected Stanford's contention that Potomac Creek was bound by the Definitive Agreement Lui had signed on behalf of Stanford. Judge Braman concluded that the parties did not intend to depart from the practice customarily followed in the purchase and sale of a valuable commercial realty, and, therefore, that Potomac Creek was not bound to sell the Hotel by the provisions of the Definitive Agreement which had been signed only by Stanford. Judge Braman came to a different conclusion with respect to the Preliminary Agreement. He found that the Preliminary Agreement was a binding contract, and was operative from its inception on October 30, 1997, and extended through September 18, 1998, when Potomac [Creek] closed on its refinancing with Credit Suisse. The Preliminary Agreement's express covenant of good faith persisted, as a consequence, throughout this period, as did the implied obligation of good faith implicit in every contract, citing Hais v. Smith, 547 A.2d 986, 987 (D.C.1988). Judge Braman noted that Potomac Creek conceded that it had an obligation to deal exclusively with Stanford for the sale of the Hotel; Rutishauser testified this meant that there was an obligation not to negotiate the sale of the Hotel with any other parties while the Preliminary Agreement was in force. Evaluating Potomac Creek's actions against these obligations of good faith and exclusive dealing, Judge Braman found that Potomac Creek had breached the Preliminary Agreement by abandoning the negotiations with Stanford in favor of the unsuccessful Westbrook buyout in late 1997 and early 1998, and that it broke faith with Potomac [Creek's] conceded obligation of exclusivity by negotiating for the sale of the entire Plaza property (including the Hotel) to Mannix and Gwin. In addition to finding that Potomac Creek had failed its obligation to negotiate in good faith, Judge Braman found that Potomac Creek had affirmatively acted in bad faith, noting that the reactivation of negotiations for sale of the Hotel on March 26 was conceived in bad faith and that Potomac Creek's negotiations with Stanford were subverted when Sarakreek signed the Credit Suisse term sheet for the refinancing of the Plaza property on July 16, 1998. In concluding that Potomac Creek was liable for breach of the Preliminary Agreement, Judge Braman focused on the language of Paragraph 5 that obligated both parties to negotiate in good faith with a view to signing a Definitive Agreement, which, the court interpreted, implicitly obligated each party to sign the Definitive Agreement once its terms were agreed upon. Notably, Judge Braman found that Potomac Creek's failure to execute the Definitive Agreement for the Hotel Sale and closing on Credit Suisse's refinancing were ... acts of bad faith. Judge Braman noted that despite pressing Stanford for its signature on the Definitive Agreement, Potomac Creek delayed its own acceptance of the agreement, invent[ing] pretexts, so as to wait for the Credit Suisse financing to jell. Judge Braman concluded that: But for the refinancing, the sale of the Hotel would have been consummated, as the unresolved issues were comparatively minor, were not at [an] impasse, and were not deal breakers as Stanford was prepared to concede if necessary. The few open issues that remained were not resolved because Potomac [Creek] abandoned the negotiations for the sake of refinancing the Hotel and the rest of the Plaza property.... Potomac [Creek] is, therefore, chargeable with the circumstances of those issues being resolved and cannot seek advantage from its own breach. (citations to the record omitted). Therefore, the court ruled, Potomac Creek's refusal to sign the Definitive Agreement was a breach of the Preliminary Agreement. Following Judge Braman's determination of liability, the trial proceeded to Phase II for a determination of remedy. Stanford had abandoned all claims for damages and asked only for specific performance. [7] Presiding over Phase II, on April 2, 2007, Judge Hedge granted summary judgment to Potomac Creek, after concluding that Stanford's request for an order of specific performance requiring Potomac [Creek] to convey the Hotel to Stanford was not legally available for Potomac Creek's breach of its obligation under the Preliminary Agreement, because it was not a contract for the sale of the Hotel. On April 10, 2007, Stanford filed a notice of lis pendens. Stanford filed a notice of appeal on April 30, challenging Judge Hedge's grant of summary judgment to Potomac Creek at the conclusion of Phase II of the trial; Potomac Creek has not cross-appealed Judge Braman's determination of liability in Phase I of the trial.