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Presidential Bank, FSB v. 1733 27th Street SE LLC

United States District Court, District of Columbia

August 30, 2019

PRESIDENTIAL BANK, FSB, Plaintiff & Counter-Defendant,
v.
1733 27TH STREET SE LLC, et al., Defendants & Counter-Claimants.

          MEMORANDUM OPINION, GRANTING PLAINTIFF & COUNTER-DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          RUDOLPH CONTRERAS UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Plaintiff Presidential Bank, FSB and Defendants Kevin Green and six LLCs he owns (“Defendants”) have been involved in a lending dispute now spanning over a decade. Between 2006 and 2010, Presidential Bank made several loans to Defendants secured by D.C. real property owned by Defendants. After Defendants repeatedly defaulted on those loans, the parties entered into, inter alia, a loan modification agreement in 2014 and then a forbearance agreement in 2015. The forbearance agreement contained several financial conditions in exchange for Presidential Bank forbearing on collection of the debt, including a lockbox provision requiring that rental revenue from the collateral properties be deposited in an account under Presidential Bank's control, to be disbursed by the bank according to a specific order of priorities. The agreement also contained a confession of judgment clause.

         After Defendants defaulted on the forbearance agreement, Presidential Bank accelerated the debt and sued Defendants in Maryland state court, relying on the confession of judgment clause. Presidential Bank also sued Defendants for conversion in D.C. Superior Court, alleging that they had failed to comply with the lockbox agreement and had retained rental proceeds for themselves. Defendants aggressively contested the D.C. Superior Court suit, first removing it to this Court and then raising no less than twelve affirmative defenses and bringing nine counterclaims. The Court dismissed all but three of the counterclaims, and, after Presidential Bank fully and finally prevailed in the Maryland state court case, granted Presidential Bank summary judgment on all but one of Defendants' affirmative defenses.

         Presidential Bank now moves for summary judgment on Defendants' three remaining counterclaims, for retaliation in violation of the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. §§ 1691-1691f, breach of contract, and tortious interference with contract. Presidential Bank argues that two of the claims are barred by res judicata and that all three claims separately fail as a matter of law. While appearing to concede much of Presidential Bank's arguments, Defendants oppose the motion, contending that it is unclear whether they were truly in default when the bank sued to enforce the forbearance agreement. The Court finds that argument meritless and is satisfied that Presidential Bank has shown its entitlement to summary judgment. The Court therefore grants the motion for summary judgment in its entirety.

         II. BACKGROUND

         The Court has already set out the underlying facts of this case in detail in its prior opinions. See Presidential Bank, FSB v. 1733 27th Street SE LLC (“Presidential Bank II”), 318 F.Supp.3d 61, 67-69 (D.D.C. 2018); Presidential Bank, FSB v. 1733 27th Street SE LLC (“Presidential Bank I”), 271 F.Supp.3d 163, 165-66 (D.D.C. 2017). It assumes familiarity with those prior opinions and only summarizes the facts most relevant to the present motion.

         A. The Initial Loans and 2015 Forbearance Agreement

         Between 2006 and 2010, Presidential Bank entered into seven loan agreements with the six LLCs controlled by Green named as defendants in this case. See Presidential Bank II, 318 F.Supp.3d at 67; Compl. ¶ 5, ECF No. 1-1; Countercl. ¶¶ 15-22, ECF No. 12. Each agreement was secured by a deed of trust, with real estate property controlled by the LLCs serving as collateral on each of the loans. See Presidential Bank II, 318 F.Supp.3d at 67; Compl. ¶ 5; Countercl. ¶¶ 15-22. Defendants defaulted on the loans in 2014 and the parties engaged in a “global loan modification agreement” on October 17, 2014. See Compl. ¶¶ 6-9; Countercl. ¶¶ 28-29. One condition of the loan modification agreement was that Defendants deposit all rental income from the collateral properties in separate accounts at Presidential Bank, to serve as additional collateral for the loans. See Compl. ¶ 9; Countercl. ¶ 29. Defendants were allowed to withdraw from those accounts only “those usual and customary funds necessary to carry out [their] day-to-day business operations.” Global Loan Modification Agreement 5, Pl.'s Mem. Supp. Mot. Summ. J. Ex. 2, ECF No. 66-2. The agreement required Defendants to bring all loans current by January 15, 2015. Id.

         But Defendants defaulted on the loan modification agreement as well. See Green Dep. 78:13-79:5, Mar. 30, 2018, Defs.' Opp'n Mot. Summ. J. Ex. 2, ECF No. 66-1. Rather than foreclosing on the properties, Presidential Bank agreed to enter into a forbearance agreement with Defendants. See Id. 79:6-14; Forbearance Agreement 1, Pl.'s Mem. Supp. Ex. 3, ECF No. 66-3. The forbearance agreement included a number of conditions in exchange for Presidential Bank delaying collecting on the debt until April 1, 2017. See Forbearance Agreement 5-10. Amongst others, the forbearance agreement included an “Account and Lockbox Agreement” (the “lockbox agreement”), which provided not only that Defendants would continue to deposit rental income in separate accounts controlled by Presidential Bank, but also that Defendants would not be able to withdraw such funds from the accounts for any reason. See Id. at 5-6. Instead, the bank itself would disburse money from the accounts according to an order of priority agreed to by the parties, with the important caveat that the bank was entitled to use the entire balance of each account to pay for the loans or to protect its interests in the collateral properties if Defendants defaulted under the forbearance agreement. See Id. at 6. The forbearance agreement also included a confession of judgment clause, which provided for Defendants' confession of judgment in the event of default as to “the amount of the unpaid principal balance . . . 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 th[e] agreement.” Id. at 9. Finally, the forbearance agreement required that Defendants bring each loan current by December 31, 2015. Id. at 7.

         B. Defendants' Default Under the Forbearance Agreement and the Maryland Litigation

         Defendants never brought the loans current. See Green Dep. 89:9-90:1. By May 2016, the loans were approaching 90 days behind payment. See Id. 98:19-99:1. On May 1, 2016, Green filed a complaint about Presidential Bank with the Department of the Treasury's Office of the Comptroller of the Currency (“OCC”). See Id. 116:5-7. OCC sent a letter to Green acknowledging the complaint on May 11, 2016, see Id. 116:18-117:6, and the Bank first became aware of the complaint at some point later in the month, see Giraldi Aff. ¶ 2, Pl.'s Mem. Supp. Ex. 6, ECF No. 66-6; Green Dep. 117:14-16. At the end of the month, Green began contacting tenants of the collateral properties to ask them to no longer pay rent in the accounts identified in the lockbox agreement, and instead to begin making rental payments in accounts he controlled. See Green Dep. 34:6-35:9; 100:6-16.

         The same month, Presidential Bank began preparing to foreclose on the collateral properties. The bank engaged the services of a law firm on May 4, 2016 “in connection with the bank's rights and remedies related to Kevin Green and his affiliated entities.” Miles & Stockbridge P.C. Engagement Letter, Pl.'s Mem. Supp. Ex. 7, ECF No. 66-7; see also Giraldi Aff. ¶ 3. On June 16, 2016, the bank filed a complaint for entry of judgment by confession in the Circuit Court of Montgomery County, Maryland. See Green v. Presidential Bank, FSB, No. 2092, Sept. Term, 2016, 2018 WL 904445, at *1-2 (Md. Ct. Spec. App. Feb. 14, 2019) (unreported). The circuit court entered confessed judgment in Presidential Bank's favor, in the amount of $3, 314, 295.63, on June 27, 2016. See Id. at *2. On September 19, 2016, Defendants moved to vacate the judgment, “arguing primarily that judgments by confession are disfavored in Maryland, and [that] the circuit court lacked personal jurisdiction over them.” Id. The circuit court denied Defendants' motion on November 10, 2016, see id., and the Maryland Court of Special Appeals affirmed in an unpublished opinion on February 14, 2018, see Id. at *5.

         C. Procedural History

         In parallel with the Maryland state action, Presidential Bank began the instant action in D.C. Superior Court on July 18, 2016. See Compl. Alleging that Defendants had “absconded with th[e] funds” they were supposed to deposit in Presidential Bank accounts pursuant to the lockbox agreement, id. ¶ 22, Presidential Bank brought claims for conversion and for the appointment of a receiver, id. ¶¶ 37-65. Defendants removed the case to this Court, see Defs.' Notice of Removal, ECF No. 1, and filed an answer and counterclaim on February 3, 2017, see Countercl. Defendants asserted twelve affirmative defenses and brought nine claims in their counterclaim, including that Presidential Bank had retaliated against them for contacting the OCC by initiating foreclosure, in violation of the ECOA; had ...


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