United States District Court, District of Columbia
MEMORANDUM OPINION GRANTING PLAINTIFF'S MOTION
FOR PARTIAL SUMMARY JUDGMENT; GRANTING PLAINTIFF'S MOTION
TO STRIKE JURY DEMAND
RUDOLPH CONTRERAS, United States District Judge
suit arises from a fraught lending relationship between
Plaintiff & Counter-Defendant Presidential Bank, FSB
(“Presidential”) and Defendants &
Counter-Claimants Kevin Green and six LLC that he owns
(“Defendants”). Between 2006 and 2010,
Presidential made a series of loans to Defendants secured
with real property that Defendants owned. Beginning in 2014,
Defendants struggled to make payments in compliance with
their agreements with Presidential, and ultimately defaulted
on their loans. The parties entered into several
modifications to the lending agreements. One such
modification was a forbearance agreement, whereby
Presidential agreed not to collect the money Defendants owed
it until April 2017 in exchange for, among other things,
receiving significant control over Defendants' rental
income. When Defendants defaulted again, Presidential
demanded that Defendants pay all of the money they owed under
the Forbearance Agreement.
pursued two avenues of relief against Defendants: first, it
filed a claim for a confessed judgment in Maryland state
court, and second, it filed suit in D.C. Superior Court for
conversion of the funds it should have had access to pursuant
to a lockbox agreement contained in the Forbearance
Agreement. The D.C. suit also sought the appointment of a
receiver to operate, manage, and control Defendants'
properties. Defendants subsequently removed the case to this
Court. Defendants responded to Presidential's claims with
twelve affirmative defenses and nine counterclaims against
Presidential. Since then, the Circuit Court of Montgomery
County, Maryland has entered a confessed judgment against
Defendants, and the Maryland Court of Special Appeals has
denied Defendants' motion to vacate it for lack of
personal jurisdiction. Based on the Court of Special
Appeals's ruling, Presidential has moved to strike the
jury demand contained in Defendants' Answer and
Counterclaim, and for partial summary judgment on eleven of
Defendants' twelve affirmative defenses and on its first
claim for relief in its counterclaim. For the reasons set
forth below, the Court grants both of Presidential's
FACTUAL AND PROCEDURAL BACKGROUND
in this suit are six District of Columbia limited liability
companies and Kevin Green, the sole management-member of the
six LLCs. See Defs.' Affirmative Defenses,
Answers & Counter-Claims (“Answer”) at 19-20,
ECF No. 12. Between 2006 and 2010, Plaintiff Presidential
Bank made several loans to each of the LLCs, secured by deeds
of trust and with each Defendant-LLC-owned apartment building
serving as collateral on the loans. Compl. ¶¶
24-34, ECF No. 1-1; see also Compl. ¶ 5. When
Defendants defaulted on the loans in 2014, they entered into
a “Global Loan Modification Agreement.” Answer at
23; see also Compl. ¶ 9. However, in June 2015,
Defendants again defaulted on the Global Loan Modification
Agreement when they failed to make each of their loans
current by January 15, 2015. Compl. ¶ 11; Answer at 23.
To cure this default, Defendants and Presidential entered
into a forbearance agreement in August 2015. Defs.'
Answer at 25; see also Compl. ¶ 12; Forbearance
Agreement, ECF No. 17- 2. Under the terms of the Forbearance
Agreement, Presidential agreed to delay collecting the amount
due under the loans until April 1, 2017, see
Forbearance Agreement at 5, and in exchange, Defendants
entered into a contract that contained a confessed judgment
provision, a lockbox agreement, and a waiver of the right to
a jury trial in any dispute arising out of the Forbearance
Agreement or the underlying loans. Answer at 24; Forbearance
Agreement at 5, 9. The confessed judgment provision allowed
Presidential's attorneys, upon any subsequent default by
Defendants, to obtain a judgment in Presidential's favor
from the Circuit Court in Montgomery County, Maryland for
“the amount of the unpaid principal balance of the
notes together with any accrued and unpaid interest, late
charges and attorneys' fees and costs incurred by the
lender, together with all other costs and expenses incurred
or accrued and unpaid under this agreement.”
Forbearance Agreement at 9. Under the lockbox agreement,
Defendants agreed to “continue to deposit all deposits
in their possession, including but not limited to rents,
relating to the Collateral Properties directly into”
operating accounts controlled by Presidential. Id.
at 5. The lockbox agreement also set the priorities for how
those funds would be spent. Id. at 5-6; Answer at
2016, Defendants defaulted on the Forbearance Agreement.
Compl. ¶ 13; Answer at 28-29. Defendants were given
until June 6, 2016, to cure their default. Compl. ¶ 14.
When Defendants did not cure their default, Presidential
declared all of Defendants' debt from the Forbearance
Agreement, notes, guaranty, and deeds of trust due.
Id. ¶ 15. Around that time, Defendants stopped
depositing money into the operating accounts in alleged
violation of the lockbox agreement. Compl. ¶ 21.
this deterioration in the lending relationship, Presidential
sought the confessed judgment specified in the Forbearance
Agreement, and was awarded $3, 314, 295.63 by the Montgomery
County Circuit Court on June 27, 2016. See Confessed
Judgment, ECF No. 48-3. It also filed suit in D.C. Superior
Court on July 18, 2016, seeking damages for conversion of the
money it believed Defendants should have still been
depositing in the operating account pursuant to the lockbox
agreement, as well as the appointment of a receiver. See
generally Compl. In December 2016, Defendants removed
the case to this Court based on the diversity of citizenship.
See Notice of Removal, ECF No. 1. Once the case had
been removed, Defendants filed an emergency motion to stay
the impending foreclosure sale of its properties or, in the
alternative, for a temporary restraining order. See
Defs.' Emergency Mot. Stay, ECF No. 8. The Court denied
Defendants' motion. See Order, ECF No. 11.
Defendants subsequently answered Presidential's complaint
with twelve affirmative defenses and nine counterclaims.
See generally Answer. Defendants' Answer also
requested that the Court “[f]ind the Forbearance
Agreement referenced herein unconscionable and void ab
initio.” Answer at 47. Defendants informed the
Court that following its denial of Defendants' motion to
stay, Defendants' properties were sold on January 26,
2017. Id. at 29 These two suits-one in Maryland
state court and one in D.C. federal court-proceeded
concurrently for more than a year. Following the entry of the
confessed judgment, Defendants moved to vacate it, arguing
“primarily that judgments by confession are disfavored
in Maryland, and [that] the circuit court lacked personal
jurisdiction over them because neither Mr. Green nor any of
the LLCs had sufficient ties to Montgomery County.”
Mot. Strike Ex. 14 (“Md. Op.”) at 3, ECF No.
47-16. The circuit court judge was unpersuaded, given that
the confessed judgment provision in the Forbearance Agreement
included a forum-selection clause, and declined to vacate the
judgment. Id. at 4. He further explained that he
“searched in vain for the allegation of a potentially
meritorious defense” to the confessed judgment, but
“never heard, never read in any of the documents that
were submitted, what this meritorious defense to the note
might be.” Id.
appealed, but the Maryland Court of Special Appeals affirmed
the lower court's refusal to vacate the confessed
judgment in February 2018. Id. at 10. The Court of
Special Appeals highlighted that “absent fraud, duress,
or mutual mistake, ‘a party who signs a contract is
presumed to have read and understood its terms and . . . the
party will be bound by them when that document is
executed.'” Id. at 8 (quoting Dashiell
v. Meeks, 913 F.2d 10, 20 (Md. 2006)). It explained that
“[a]lthough Mr. Green contended, at oral argument, that
the forum selection clause was not freely negotiated, he did
not make that assertion before the circuit court or in his
brief, and he submitted no evidence in support of that claim.
Because the contention was not made below, it [wa]s not
before [the Court of Special Appeals] for appellate
review.” Id. at 8 n.5. All in all, the Court
of Special Appeals concluded that “the borrowers are
bound [by] the terms of the forbearance agreement, including
the clause consenting to personal jurisdiction by the circuit
court.” Id. at 10.
the Maryland Court of Special Appeals's decision was
pending, Defendants' filed a motion to stay these
proceedings, which was granted. See Mot. to Stay,
ECF No. 36; Minute Order (Aug. 23, 2017). Now that the Court
of Special Appeals has affirmed the lower court's ruling
and the stay has been lifted, Presidential has moved for
summary judgment on eleven of Defendants' twelve
affirmative defenses, as well as its first request for
relief, on the grounds that these defenses and the request
are precluded by the Maryland state court judgment.
See Pl.'s Renewed Mot. Partial Summ. J.
(“Pl.'s Mot.”), ECF No. 48. It has also moved
to strike Defendants' demand for a jury trial in its
Answer, arguing that Defendants voluntarily waived that right
in the Forbearance Agreement. See Pl.'s Mot.
Strike, ECF No. 47. Defendants argue in response that the
Maryland court judgment has no preclusive effect on its
affirmative defenses or its demand for a jury trial because
neither Defendants' arguments in favor of its jury demand
nor any of its affirmative defenses “rest on the nexus
of unconscionability and ‘confessed
judgment.'” Defs.' Mem. Opp'n Pl.'s
Renewed Mot. Partial Summ. J. (“Defs.' Opp'n
Summ. J.”) at 2, ECF No. 50. Presidential's motions
are now ripe for decision.
MOTION FOR PARTIAL SUMMARY JUDGMENT
now seeks to avail itself of any preclusive effect its
success in obtaining the confessed judgment in Maryland might
have on this case. As such, it has filed a motion for summary
judgment on eleven of Defendants' twelve affirmative
defenses-all but breach of contract-as well as
Defendants' request that this Court void the entire
Forbearance Agreement, on the theory that Defendants missed
their chance to proffer these defenses and this request when
they did not raise them in Maryland. For the reasons set
forth below, the Court grants Presidential's motion for
partial summary judgment.
Rule of Civil Procedure 56 provides that a court must grant
summary judgment when “the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). “Material” facts are those capable of
affecting the substantive outcome of the litigation,
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986), and a dispute regarding those facts is
“genuine” if there is enough evidence on the
record for a reasonable jury to find for the non-movant,
Scott v. Harris, 550 U.S. 372, 380 (2007).
summary judgment, the movant bears the initial burden of
identifying portions of the record that demonstrate the
absence of any genuine issue of material fact. See
Fed. R. Civ. P. 56(c)(1); Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). In response, the non-movant must
point to specific facts in the record that reveal a genuine
issue that is suitable for trial. See Fed. R. Civ.
P. 56(c)(1); Celotex, 477 U.S. at 324. The purported
dispute may not be based on mere allegations-rather, the
non-movant must present affirmative evidence demonstrating
that there is indeed a genuine dispute. Laningham v. U.S.
Navy, 813 F.2d 1236, 1241 (D.C. Cir. 1987). However, all
underlying facts and inferences must be analyzed in the light
most favorable to the non-movant. See Liberty Lobby,
477 U.S. at 255.
the Maryland Court of Special Appeals's affirmance of the
Circuit Court's denial of Defendants' motion to
vacate the confessed judgment, Presidential moved for partial
summary judgment on eleven of Defendants' twelve
affirmative defenses, as well as their first request for
relief-that the Court “[f]ind the Forbearance Agreement
. . . unconscionable and void ab initio.”
Pl.'s Mem. P. & A. Supp. Pl.'s Renewed Mot.
Partial Summ. J. (“Pl.'s Mem.”) at 1, ECF No.
48-1. Presidential argues that “Defendants' efforts
to challenge the enforceability of the forbearance agreement
in this Court ignores the fact that the Montgomery County
Circuit Court (the “Circuit Court”) has already
held that the forbearance agreement is enforceable, ”
thereby precluding Defendants from raising defenses and
requests stemming from that contention that could have been
raised in the prior proceedings. Id. at 1-2.
Defendants respond that “Plaintiff's reasoning is
flawed because it ignores the extent to which Defendants'
affirmative defenses stand independent of and do not rely on
the question of unconscionability as a result of the
‘confessed judgment.'” Defs.' Opp'n
Summ. J. at 1. However, Defendants do concede that
“should an affirmative defense rest on the nexus of
unconscionability and [the] ‘confessed judgment,'
that defense should be stricken.” Id. at 2.
As explained below, the Court finds that Defendants'
first request for relief-that the Forbearance Agreement be
found unconscionable and void- is precluded by res judicata.
Additionally, the Court finds that all of Defendants'
challenged affirmative defenses must also be stricken because
they are precluded by the Maryland judgment.
plea of [res judicata] applies, except in special cases, not
only to the points upon which the court was required by the
parties to form an opinion, and pronounce a judgment, but to
every point which properly belonged to the subject of
litigation, and which the parties, exercising reasonable
diligence, might have brought forward at the time.”
Cromwell v. County of Sac, 94 U.S. 351, 358 (1876).
“Res judicata literally means ‘a thing
adjudicated,' and generally indicates ‘an
affirmative defense barring the same parties from litigating
a second lawsuit on the same claim, or any other claim
arising from the same transaction or series of transactions
and that could have been-but was not-raised in the first
suit.'”Lizzi v. Wash. Metro. Area Transit
Auth., 862 A.2d 1017, 1022 (Md. 2004) (quoting
Black's Law Dictionary 1336-37 (8th ed. 2004)); see
also Alvey v. Alvey, 171 A.2d 92, 94 (Md. 1961)
(“The doctrine of res judicata is that a judgment
between the same parties and their privies is a final bar to
any other suit upon the same cause of action, and is
conclusive, not only as to all matters that have been decided
in the original suit, but as to all matters which with
propriety could have been litigated in the first
suit.”); Mackall v. Zayre Corp., 443 A.2d 98,
102 (Md. 1982) (stating that “if a proceeding between
parties involves the same cause of action as a previous
proceeding between the same parties, the principle of res
judicata applies and all matters actually litigated or that
could have been litigated are conclusive in the subsequent
proceeding”). The doctrine “avoids the expense
and vexation attending multiple lawsuits, conserves the