APPEAL from the Circuit Court of Cook County; the Hon. SAMUEL
B. EPSTEIN, Judge, presiding.
MR. JUSTICE DOWNING DELIVERED THE OPINION OF THE COURT:
Pursuant to Supreme Court Rule 307(a)(1) which authorizes interlocutory appeals as a matter of right, *fn1 defendant, Percy Wilson Mortgage & Finance Corporation (Percy Wilson), appeals an order of the circuit court of Cook County granting a preliminary injunction to restrain the cashing of a letter of credit, the details of which follow.*fn1
Plaintiff, Edgewater Construction Co., Inc., filed its verified complaint to enjoin Percy Wilson, State Bank of Clearing (State Bank) and Metropolitan Savings Bank (Metropolitan) from cashing certain letters of credit, and asked for the return of the letters, the return of certain monies held by Percy Wilson, and money damages against Percy Wilson for breach of contract. Percy Wilson filed its verified answer alleging that the complaint failed to state a cause of action; that there was no immediate or irreparable injury to plaintiff; that plaintiff had an adequate remedy at law; and that the complaint failed to allege any legal basis, right, title, or interest on plaintiff's part in or to the letters of credit. Involved in this last defense is the issue that Edgewater Walk Apartments (partnership), a limited partnership, was not a party plaintiff even though the letters of credit clearly state they were issued on behalf of the partnership.
After notice and hearing, the trial court entered an order for a preliminary injunction finding that the equities required that the status quo be preserved during the litigation; that the corporation and partnership, two business entities, would be treated as a single unit; and ordered State Bank to extend the letters of credit during the pendency of the litigation and enjoined it from cashing the letters; and that Metropolitan and Percy Wilson were enjoined from cashing, presenting for cashing, assigning, pledging, hypothecating, or otherwise encumbering the letters of credit. Pending appeal, plaintiff was required to post a bond.
On appeal Percy Wilson claims (1) plaintiff failed to properly plead and prove irreparable injury; (2) plaintiff has an adequate remedy at law for a breach of contract; and (3) the trial court had no legal right under the pleadings and evidence to issue such an injunction. Plaintiff urges that the trial court acted within its discretion in issuing the injunction to preserve the status quo.
Based on the pleadings and the evidence, the pertinent facts follow. Involved in the series of events were the following business organizations or individuals, although not all are named parties in this litigation:
Chicago Title and Trust Company (CT&T) as Trustee under Land Trust:
(a) 59130 the title owner of the real property involved in the instant project; and
(b) 51473 the title owner of certain real property for which Terry Davis (Davis) is the beneficiary. The beneficial interest was assigned to State Bank as part of the security agreement in connection with the subject letters of credit.
Edgewater Walk Apartments, a partnership. In 1972, at the time of most of the original activities involved in this litigation, there were four general partners. Later Davis became the sole general partner with nine limited partners. It owns the Apartments. Bank accounts were maintained at the First National Bank of Chicago and the La Grange State Bank.
Edgewater Construction Co., Inc., an Illinois corporation, the plaintiff, formed in 1972 for the purpose of working as the contractor on the subject project. Davis is the sole stockholder although originally there were three shareholders.
Terry Davis (Davis), the president and sole stockholder of plaintiff, and general partner in the partnership.
Percy Wilson Mortgage & Finance Corporation, a Delaware corporation, with offices in Chicago. It provided the construction financing for the apartment project.
State Bank of Clearing, an Illinois banking corporation, which issued the letters of credit.
Metropolitan Savings Bank, a foreign banking corporation, which was to provide the permanent financing.
On January 24, 1972, the partnership and Percy Wilson entered into an agreement for a $3,358,000 first mortgage loan for the construction of an apartment project. Amongst other provisions the agreement provided that the partnership would make such deposits as might be required for equity requirements with the right for Percy Wilson to accept letters of credit in lieu of cash deposits. The sponsors of the project included Davis and three other individuals who comprised the partnership.
Thereafter, on March 1, 1972, the following agreements were entered into:
A construction contract between the owner of the real estate, CT&T No. 59130, *fn2 and plaintiff to build the apartment project. The agreement, amongst other provisions, specified the apartment would be built according to the drawings and specifications of Federal Housing Administration (FHA) Project No. 071-35130 and would be completed by August 23, 1973, to cost $2,664,840 plus, and required the contractor (plaintiff) to furnish the owner (CT&T No. 59130) a completion assurance agreement in the amount of $333,105 to run to the owner and lender (Percy Wilson).
A construction loan agreement in the amount of $3,358,800 from Percy Wilson to CT&T No. 59130, secured by a mortgage payable December 1, 2013, with interest at 7%, and insured by FHA. It also provided that the apartment project would be completed by September 28, 1973, that CT&T No. 59130 shall furnish Percy Wilson an assurance of completion in such form as provided in FHA regulations.
A completion assurance agreement between plaintiff, CT&T No. 59130 and Percy Wilson. Pursuant to this agreement plaintiff, as contractor, was required to deposit with Percy Wilson, as lender, the amount of $333,105 to secure and indemnify CT&T No. 59130, as owner, and Percy Wilson from loss or damage should plaintiff default in this contract. It was understood that the fund would be under the control of Percy Wilson in the form of an unconditional, irrevocable letter of credit issued to Percy Wilson by a banking institution.
On March 21, 1972, State Bank issued an 18-month letter of credit to Percy Wilson in the amount of $333,105. This was used in lieu of a performance bond. The verified complaint asserts plaintiff deposited this letter of credit with Percy Wilson pursuant to the completion assurance agreement. In its verified answer Percy Wilson alleges this was deposited by the partnership. We find no evidence in the record on this disputed point.
The apartment project was completed in July 1974. In August 1974, Percy Wilson made a demand on the letter of credit. The demand to Davis was made because, first, "a lot of money was owing by Davis to us"; second, "the case was teetering on default"; and third, there was a possibility of having to place a latent defect deposit with the permanent lender, Metropolitan. Thereupon, Percy Wilson sent its letter of credit to State Bank demanding cash. Thereafter, as the result of conversations between Davis and Percy Wilson, the latter received a payment of some $66,000, and Davis brought to Percy Wilson three new letters of credit from State Bank as follows:
Letter of Credit No. 325, issued by State Bank, dated January 2, 1975, payable to Metropolitan in the amount of $120,000 for the account of the partnership. The evidence indicates this was issued to the permanent lender to secure the construction of a clubhouse at the project. *fn3 Its terms were similar to those of No. 326 set forth in detail below.
Letter of Credit No. 326, the subject of the instant litigation, issued by State Bank, reads as follows:
"January 2, 1975 IRREVOCABLE STRAIGHT LETTER OF CREDIT NO. 326 AMOUNT: $79,274.00 TO: Percy Wilson Mortgage & Finance Corporation 221 North La Salle Street Chicago, Illinois 60601 Re: ...