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Rivera v. Schlick

December 1, 2005

ANTHONY RIVERA, APPELLANT
v.
JOHN SCHLICK, APPELLEE



Appeal from the Superior Court of the District of Columbia CA-2420-00. Hon. Anna Blackburne-Rigsby, Trial Judge.

The opinion of the court was delivered by: Terry, Associate Judge

Submitted January 26, 2005

Before TERRY, Associate Judge, and FERREN and STEADMAN, Senior Judges.

This is a breach of contract case involving three promissory notes. Appellant Rivera appeals from an order denying his post-trial motion for judgment notwithstanding the verdict. He maintains that the trial court erred when it ruled that the loans at issue did not violate District of Columbia usury laws and upheld the jury verdict, and asks this court to overturn that verdict and reverse the subsequent order denying his motion. We affirm.

I.

John Schlick filed a breach of contract claim against Anthony Rivera. After a two-day trial, the jury returned a verdict awarding Mr. Schlick damages in the amount of $42,910.26. Counsel for Mr. Rivera immediately made an oral motion for judgment notwithstanding the verdict, which the court denied.*fn1

Mr. Schlick, a part-time real estate developer, lent money to Mr. Rivera and his business partners so that they could complete renovations of a house on First Street, N.W.*fn2 The loan was memorialized in a series of three separate promissory notes. Eventually, Mr. Schlick also assumed payment of certain costs associated with the renovation of the property. Mr. Rivera and Mr. Schlick had previously worked together as real estate agents before venturing independently into real estate development in the District of Columbia. They had known each other for approximately seven years prior to this transaction.

Mr. Rivera purchased the First Street property in February 1998. On January 21, 1999, he executed a promissory note to Mr. Schlick in which he promised to repay $20,500 for a $15,000 loan. Reading from the note while testifying, Mr. Rivera said that the first paragraph of the note referred to "the principal sum of $20,500, including interest," which he understood to mean that the note included both interest and principal.*fn3 In his testimony, Mr. Schlick conceded that the first note assessed approximately $5,000 in interest (which was included in the repayment sum) and an additional 12% interest levied against the repayment sum of $20,500 if it was not repaid within a certain period of time.*fn4

About six months later, on July 31, 1999, Mr. Rivera executed a second promissory note to Mr. Schlick for $24,400 without interest. Then, on September 1, 1999, Mr. Rivera executed a third promissory note to Mr. Schlick, in which Rivera promised to pay "FOR VALUE RECEIVED . . . the sum of $34,500.00 without interest" (capital letters in original).*fn5 The note indicates, and the parties agree, that it was intended to supplant the second promissory note entirely. The text of the third note reads in part:

Borrowers understand and agree that this promissory note is the third of three promissory notes executed by borrowers for the benefit of the Noteholder. By executing this note, the Noteholder hereby cancels the second promissory note executed on or about July 31, 1999, in the amount of $24,500.00.*fn6 The parties understand and agree that the first promissory note, for $20,500.00 remains in full force and effect and that each note is a separate instrument and obligation. Borrowers understand and agree that their total indebtedness on the two notes ("the combined notes") to the Noteholder is fifty-five thousand dollars ($55,000.00).

While the first note remained payable and unchanged, the principal sum stated in the third note was greater than in the second note, which it replaced.

Mr. Schlick testified that "after the $24,000 note had been written and signed, I found out that Anthony [Rivera] and his partner had not been paying the first trust and that the house was in foreclosure." Thus the difference of approximately $10,000 in principal between the second and third notes reflected the amount that Mr. Schlick paid to Fleet Mortgage Company in order to cancel the foreclosure proceeding.*fn7 The total due to Mr. Schlick on the combined first and third notes therefore amounted to $55,000.*fn8 The third note would become due on September 27, 1999, a date chosen to coincide with the anticipated settlement of a contract of sale for the First Street property. In the event that Mr. Rivera failed to pay the debt on time, a 12% annual interest rate would apply thereafter to any unpaid portion. Furthermore, if the profit from the sale of the house was insufficient to satisfy the debt, Mr. Schlick could place a lien on Mr. Rivera's brokerage fees. The third note also granted Mr. Schlick a security interest in the First Street property by means of a deed of trust.

The purpose of these loans was to allow Mr. Rivera and his partners to complete the rehabilitation of their joint investment property, the house on First Street. The contract for the sale of that house, however, did not go to settlement in September because the work was still unfinished. Because Mr. Schlick was no longer willing to advance lump sums of money, he began issuing checks (fifteen in all) or paying cash to individual contractors and other workers to complete the renovations. These additional costs amounted to slightly more than $15,000, bringing the money owed to Mr. Schlick to a total of $71,745.22.

Early in February 2000, Mr. Rivera and his partners finally sold the First Street property. Mr. Rivera waived his brokerage fee, and the profits from the sale, amounting to $38,270.94, were paid to Mr. Schlick. Shortly thereafter, Mr. Schlick brought this action seeking the balance still ...


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