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WILLIAMS v. CENTRAL MONEY CO.

July 17, 1997

BRAD WILLIAMS, Plaintiff,
v.
CENTRAL MONEY CO., et al., Defendants.


JAMES ROBERTSON, United States District Judge


The opinion of the court was delivered by: ROBERTSON

This memorandum records the reasons for an interlocutory order issued in this case [# 46] (1) granting in part and denying in part the joint motion for summary judgment of defendants Central Money Mortgage Co. ("CMM") and Charles Hardesty and (2) denying the motions for summary judgment of defendant First Government Mortgage and Investors Corporation ("First Government") and defendant Industry Mortgage Co. *fn1"

 I. FACTS

 Plaintiff Brad Williams, a resident of the District of Columbia, sued defendants in connection with various loans they made to him. In 1991, Mr. Williams' home was damaged by fire. In March 1992, he asked CMM for a loan to finance repairs. The chronology of the subsequent events is undisputed: 1) a one-year interest only balloon-payment loan for $ 26,000 at 18% annual interest was arranged by Brian Holman, president of CMM, and executed on April 1, 1992 (the "first loan"); 2) six weeks later Mr. Williams signed a modification of the first loan arranged by Mr. Holman that increased his total debt to $ 38,000 (the "modification"); 3) on June 10, 1992, the modified first loan was paid off from the proceeds of a 15-year amortizing loan for $ 43,000 made by CMM to Mr. Williams (the "second loan"); 4) on January 13, 1995, Mr. Williams refinanced the second loan by entering into a 30-year loan with First Government for $ 58,300 (the "third loan"); 5) First Government sold the third loan to Industry Mortgage soon after its issuance; 6) Mr. Williams defaulted on the third loan, and, on August 1, 1996, Industry Mortgage sent Mr. Williams a foreclosure notice.

 Mr. Williams asserted that these loans were all unconscionable and that defendants induced his consent to them by misrepresenting their terms and benefits. Defendants responded that Mr. Williams understood the terms of the loans and entered into them voluntarily and knowingly.

 Three causes of action were alleged against all four defendants: 1) violation of the D.C. Consumer Protection Procedures Act ("CPPA"), D.C. Code § 28-3901 et seq. ; 2) common law fraud; and 3) unconscionable contract in violation of D.C. Code § 28:2-302. Two additional causes of action were stated only against First Government and Industry Mortgage: 1) violation of the D.C. Usury Statute, D.C. Code § 28-3301 et seq. and 2) a claim for declaratory relief of a valid rescission under the Truth in Lending Act, 15 U.S.C. § 1635. The relief demanded was injunction against the foreclosure, rescission of the loan agreements, refund of monies paid by the lenders to others on plaintiff's behalf, treble damages, punitive damages, and attorney's fees.

 II. COMMON ISSUES OF LAW

 A. Choice of Law

 In this diversity action, the District of Columbia's choice of law principles were applied. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). The parties agreed that D.C. law applied to matters of procedure, such as the statute of limitations. The parties disagreed about what substantive law applied, however; the plaintiff argued that D.C. law applied while defendants argued that Maryland law applied.

 In deciding which jurisdiction's substantive law applies, the District of Columbia employs a "governmental interest analysis," which requires the court "to evaluate the governmental policies underlying the applicable conflicting laws and to determine which jurisdiction's policy would be most advanced by having its law applied to the facts of the case under review." Bledsoe v. Crowley, 270 U.S. App. D.C. 308, 849 F.2d 639, 641 (D.C. Cir. 1988) (internal citations omitted); see also Perkins v. Marriott International, Inc., 945 F. Supp. 282, 284 (D.D.C. 1996). In making a determination as to which jurisdiction's governmental interests take precedent, the courts may consider which jurisdiction has the "most significant relationship" to each issue in dispute. *fn2" Long v. Sears Roebuck & Co., 877 F. Supp. 8, 11 (D.D.C. 1995). Analysis of the contacts is undertaken to help the courts determine which jurisdiction's policy would be most advanced by the application of its law. See id. at 11 n.1. The contacts are thus relevant, but not dispositive, in determining which law applies under the governmental interest analysis.

 In this case, District of Columbia law was applied, for two reasons. First, the contacts between the parties, the District of Columbia, and the disputed issues were significant. Mr. Williams is a D.C. resident who obtained a loan by using his D.C. home as collateral. None of the defendant corporations was incorporated in the District of Columbia, but all had significant business dealings here, as evidenced by their numerous recent foreclosures on homes in the city. In addition, the notes and deeds for all the loans stated that federal law and D.C. law were to govern any disputes regarding the documents. *fn3" Second, and more importantly, the District of Columbia has a well-established and substantial interest in protecting its citizens from fraudulent or predatory loan practices, and that interest is promoted by the application of D.C. law in this case.

 B. Statute of Limitations

 CMM and Charles Hardesty asserted that the claims brought under the CPPA, common law fraud and unconscionability were barred by the statute of limitations. Plaintiff responded that the statute of limitations for all those claims should be equitably tolled.

 Courts in the District of Columbia apply the "discovery rule" to determine when a cause of action accrues, absent equitable tolling. "Under this rule, a cause of action accrues when the plaintiff has knowledge of (or by the exercise of reasonable diligence should have knowledge of) (1) the existence of the injury, (2) its cause in fact, and (3) some evidence of wrongdoing." Goldman v. Bequai, 305 U.S. App. D.C. 227, 19 F.3d 666, 671-72 (D.C. Cir. 1994) (internal citations omitted). Summary judgment is "not appropriate in a case applying the discovery rule if there is a genuine issue of material fact as to when, through the exercise of ...


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