Williams v. Central Money Co.
| Decision Date | 17 July 1997 |
| Docket Number | Civ. A. No. 96-1993(JR). |
| Citation | 974 F.Supp. 22 |
| Parties | Brad WILLIAMS, Plaintiff, v. CENTRAL MONEY CO., et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Andrew L. Sandler, Rachel A. Mariner, Skadden, Arps, Slate, Meagher & Flom L.L.P., Washington, DC, Jean Constatine Davis, Counsel for the Elderly American Assoc. of Retired Persons, Washington, DC, for Plaintiff.
Nathan I. Finkelstein, Bethesda, MD, for Defendants Industry Mortgage Co., L.P., First Gov. Mortgage and Investors Corp.
Robert E. Sharkey, Gordon, Feinblatt, Rothman, Hoffberger & Hollander, Baltimore, MD, for Defendants Central Money Mortgage Co., Charles Hardesty.
This memorandum records the reasons for an interlocutory order issued in this case [# 461] (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.1
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.
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, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (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 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.2 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.3 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.
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, 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 due diligence, the plaintiff knew or should have known of [the] injury." Id. (quoting Byers v. Burleson, 713 F.2d 856, 861 (D.C.Cir.1983)).
Plaintiff contended that defendants took actions that justified application of equitable tolling in this case. The most persuasive argument for equitable tolling was that Brian Holman, President of CMM, misrepresented material facts about the loans to Mr. Williams. For example, Mr. Holman allegedly stated that CMM was making no money from the loan and that CMM was not the lender. It was unclear whether Mr. Holman made such statements, whether the statements were untrue, whether plaintiff relied upon those statements, or whether such reliance was reasonable.4 Such fact-bound issues could not be decided on a motion for summary judgment. See Interdonato v. Interdonato, 521 A.2d 1124, 1135-6 (D.C.1987) ().
Industry Mortgage demanded dismissal because it had no direct contacts with Mr. Williams. Plaintiff responded that the fraudulent conduct of First Government was imputable to Industry Mortgage because Greg Lilienfield, the vice president of First Government who had direct contact with Mr. Williams and supervised the issuance of the third loan, was allegedly a principal and shareholder of Industry Mortgage. At oral argument, counsel for Industry Mortgage admitted that Mr. Lilienfield was a shareholder of First Mortgage but denied that he was a principal. The parties continued to dispute the exact nature of the business relationship and whether Mr. Lilienfield had knowledge of the alleged fraudulent conduct. Industry Mortgage accordingly could not be dismissed. See Slaughter v. Jefferson Fed. Sav. & Loan Ass'n, 538 F.2d 397, 400 (D.C.Cir. 1976).
Defendants argued that the D.C. Consumer Protection Procedures Act ("CPPA") did not apply in this case and relied for their argument solely on Nelson v. Nationwide Mortgage Corp., 659 F.Supp. 611, 616 (D.D.C.1987). In Nelson, the plaintiff, a D.C. resident, obtained a loan for purposes of renovating her D.C. property from a Virginia corporation with its principal place of business in Virginia. The loan transaction occurred in Virginia. Judge Harris ruled that the CPPA could not be applied to those facts: "Nothing in the statute or interpretive case law indicates such a legislative intent, and absent such affirmative evidence the Court will not presume that the statute was intended to apply to every commercial transaction involving a District of Columbia resident, wherever and with whomever that transaction occurs." Id. at 616-17.
The CPPA has been applied in at least two cases in which non-D.C. corporations loaned money to D.C. residents. See Faison v. Nationwide Mortgage Corp., 839 F.2d 680 (D.C.Cir.1987), cert. denied, 488 U.S. 823, 109 S.Ct. 70, 102 L.Ed.2d 46 (1988); Lawson v. Nationwide Mortgage Corp., 628 F.Supp. 804 (D.D.C.1986). In neither of those cases, however, was the issue of the CPPA's reach directly addressed. In light of the ambiguity...
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