Trident Center v. Connecticut General Life Ins. Co. – Case Brief
Trident Center v. Connecticut General Life Ins. Co., 847 F.2d 564 (9th Cir. 1988).
Facts: An insurance company and two law firms formed a partnership under the name Trident (P) to build an office building. Trident contracted to borrow $56 million at 12.5% interest from Connecticut General Life Insurance Co. The contract provided that the loan could not be paid off within the first twelve years, and provided that D could accelerate the payments and add a prepayment fee if P defaulted within that period.
P attempted to repay the loan in full four years later after interest rates fell and D refused. P brought a declaratory judgment action to obtain the court’s interpretation of the contract. P claimed that the parties had intended to allow prepayment at any time with a penalty imposed if P paid off the loan within twelve years, despite the clear meaning of the contract.
The court ruled that the contract was unambiguous and did not permit P to introduce parol evidence regarding its meaning. The court dismissed the suit and imposed sanctions under Rule 11 against P for filing a frivolous lawsuit and P appealed.
Issue: Is parol evidence admissible to raise an ambiguity in a contract that is unambiguous on its face and by the admission of the parties?
Holding and Rule: Yes. Parol evidence is admissible to raise an ambiguity in a contract that is unambiguous on its face and by the admission of the parties.
The court held that a contractual obligation is based on the intent of the parties and is not defined merely by the words of the contract. Words do not have absolute and constant meanings and parol evidence is permissible where the intent of the parties is at issue.
The court held that the lower court was in error to deny the evidence and that P’s suit was not frivolous.
Disposition: Reversed and remanded; sanctions reversed.
Notes: This rule is an outlier and is the law in California only.