United States District Court for the District of Columbia
February 24, 2004.
INTERNET FINANCIAL SERVICES, LLC, Plaintiff,
THE LAW FIRM OF LARSON-JACKSON, P.C., et. al., Defendants
The opinion of the court was delivered by: ROSEMARY COLLYER, District Judge
Internet Financial Services, LLC ("IFS") has sued the Law Firm of
Larson-Jackson, P.C. ("Law Firm") and Mr. Steven Larson-Jackson for
breach of contract. IPS alleges that the Law Firm has breached the
payment terms of a Secured Promissary Note ("Note"), and that Mr.
Larson-Jackson has breached the terms of a Personal Guaranty of the
Secured Note ("Personal Guaranty"), by failing to make payments of the
amounts due within 15 days of the due date. IFS seeks the outstanding
principal balance of $83,696.54, plus interest, costs and attorney's
Pending before the Court is a Motion for Summary Judgment filed by
IFS, which is opposed by the Law Firm and Mr. Larson-Jackson. Upon
consideration of the brief in support of the motion, Defendants'
opposition, Plaintiff's reply, the underlying pleadings and the
applicable law, the Court finds that there is no genuine issue of
material fact and IPS is entitled to judgment as a matter of law.
On or about September 8, 2000, the Law Firm borrowed $110,000 from
IFS. Through its President, Mr. Larson-Jackson, the Law Firm executed
the Note in the principal amount of $110,000, plus interest at the rate
of 26% per annum, in favor of IFS. Pltf.'s Stmt. of Undisputed Material
Facts ¶ 4; Compl. Exh. 1. As further consideration, Mr. Larson
executed the Personal Guaranty of the loan. Pltf.'s Stmt. of Undisputed
Material Facts ¶ 4; Compl. Exh. 2. IFS contends, and Defendants do
not dispute, that the Law Firm has failed to make payments according to
the terms of the Note. Defendants assert that there are disputes
regarding the amount of principal and interest due IFS under the Note
and the Personal Guaranty. They further argue that the interest rate set
forth in the Note violates the District of Columbia usury laws, D.C.
CODE ANN. § 28-3301 et seq., and that Mr. Larson-Jackson may
personally assert usury even if the defense is unavailable to the Law
Summary judgment is appropriate when the record shows that no genuine
issue exists as to any material fact and the moving party is entitled to
judgment as a matter of law. See Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). Summary judgment is not a
"disfavored legal shortcut[;]" rather, it is a reasoned and careful way
to resolve cases fairly and expeditiously. Celotex Corp. v.
Catrett, 477 U.S. 317, 327 (1986). In determining whether a genuine
issue of material fact exists, the court must view all facts and
reasonable inferences in the light most favorable to the non-moving
party. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio,
475 U.S. 574, 587 (1986); Tao v. Freeh, 27 P.3d 635, 638 (D.C.
Cir. 1994). Any factual dispute must be capable of affecting the
substantive outcome of the case to be "material" and "genuine." See
Anderson, 477 U.S. at 247-48; Laningham v. United States
Navy, 813 F.2d 1236, 1242-43 (D.C. Cir. 1987). A party opposing
summary judgment "may not rest upon the mere allegations or denials of
his pleading, but . . . must set forth specific facts showing that there
is a genuine issue for trial." Anderson, 477 U.S. at 248;
see also FED. R. Civ. P. 56.
Defendants first argue that the contract is unenforceable because the
interest rate contained therein exceeds 24% per annum in violation of
D.C. CODE ANN. § 28-3301. In relevant part, this statute provides
that interest is capped at 24% per annum, and that
any loan, except a loan which is secured directly
or indirectly by . . . a security interest in
stock or a membership certificate issued to a
tenant stockholder or resident member by a
cooperative housing organization, . . . where
the borrower receives the use of an amount in
excess of $1,000 shall not be subject to the
provisions of this chapter and it shall be lawful
to contract for, or receive, any rate of interest
thereon if any of the following conditions are
satisfied: . . . (B) the borrower is an
individual, group of individuals, corporation,
unincorporated association, partnership, or other
entity, and the loan is made for the purpose of
acquiring or carrying on a business, professional,
or commercial activity.
D.C. Code § 28-3301 (emphasis added). In making their argument,
Defendants inappropriately rely on an incomplete excerpt of the
statutory language. See Defs.' Opp at 4-5 ("Thus, the
applicable statute provides that if the lender obtains a security
interest in the stock of the borrower it is unlawful to receive a rate
of interest in excess of 24% per annum."). Contrary to Defendants'
mischaracterization, pursuant to this statutory provision the interest
rate on a loan can exceed 24% except in those cases where the loan is
secured by an interest in stock issued by a cooperative housing
organization, a fact pattern that does not exist in this case.
Therefore, the restrictions set forth in B.C. CODE ANN. § 28-3301
are inapplicable and do not bar Plaintiff's recovery.
Defendants also contend that the Personal Guaranty is unenforceable
because it contains a provision whereby Mr. Larson-Jackson waives his
right to plead usury as a defense, in violation of B.C. CODE ANN. §
28-3312(6). The Personal Guaranty also contains a severability provision
that states "[a]ny invalidity of any provision of this guaranty shall
not affect other lawful provisions and applications hereof." Compl.,
Exh. 2, ¶ 11. Therefore, even if the usury waiver provision is
it can be severed from the other contractual provisions and does
not render the entire contract unenforceable.
Defendants also assert there are genuine issues of material fact with
respect to the amounts due under the terms of the Note. Specifically,
they argue that
approximately eight to ten payments were tendered
by the borrower corporation to the lender. . . .
[Defendant] is uncertain about the exact amount of
the payments because the person who worked as the
law firm's staff accountant recently died and the
hard copy of the payment records are located in an
off site storage facility in Woodbridge, Virginia.
This matter is further complicated by the fact
that some of the initial payments were
automatically subtracted from the borrower's
account via the Ach debit system.
Defs.' Opp. at 6-7. In addition, Defendants assert that "[i]t appears
that the Plaintiffs [sic] failed to deduct the amounts associated with
the origination fee, points, and other closing costs." Id. at
7. They seek to proceed to trial on the merits and offer evidence on
Plaintiff's motion for summary judgment was filed following the close
of a full period of discovery. The motion is supported by the affidavit
of Drew Backstrand, wherein he attests to the amount due IFS under the
terms of the Note. Under Rule 56 of the Federal Rules of Civil
[w]hen a motion for summary judgment is made and
supported as provided in this rule, an adverse
party may not rest upon the mere allegations or
denials of the adverse party's pleading, but the
adverse party's response, by affidavits or as
otherwise provided in this rule, must set forth
specific facts showing that there is a genuine
issue for trial. If the adverse party does not so
respond, summary judgment, if appropriate, shall
be entered against the adverse party.
FED. R. CIV. P. 56(e). In their Opposition, Defendants provide only
speculation, rather than facts and affidavits. Arguments of counsel do
not substitute for evidence that establishes a genuine issue of material
fact. See Celotex Corp. v. Catreet, 477 U.S. at 324. Defendants
had months to locate the offsite documents and to ascertain the amounts
paid and owed under the Note. These belated
assertions of difficulties and uncertainty do not establish an
issue of material fact sufficient to preclude summary judgment.
Because there is no genuine issue of material fact regarding
Defendants' liability under the terms of the Note and the Personal
Guaranty, Plaintiffs Motion for Summary Judgment will be
GRANTED. Plaintiff is entitled to the outstanding principal
due, in the amount of $83,696.54, plus interest at the rate of 26% per
annum until paid, along with attorney's fees and costs. Plaintiff shall,
by March 2, 2004, submit an itemized statement describing and attesting
to a sum certain of the interest, attorney's fees, and costs that it is
due pursuant to the Secured Note and Personal Guaranty. Defendants shall
file their response to this statement, if any, by March 9, 2004. A
separate Order accompanies this Memorandum Opinion.
For the reasons stated in the Memorandum Opinion separately and
contemporaneously issued this 24th day of February, 2003, it is hereby
ORDERED that Plaintiff's Motion for Summary Judgment is
GRANTED; and it is
FURTHER ORDERED that Plaintiff is entitled to the
outstanding principal due, in the amount of $83,696.54, plus interest at
the rate of 26% per annum until paid; attorney's fees; and costs; and it
FURTHER ORDERED that, by March 2, 2004, Plaintiff submit an
itemized statement describing and attesting to a sum certain of the
interest, attorney's fees, and costs it is due pursuant to the Secured
Note and Personal Guaranty; and it is
FURTHER ORDERED that Defendants file their response to this
statement, if any, by March 9, 2004.
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