Case Name: Ronald F. Trinchitella, et al. v. J. Scott Riggs, et al.
Case No.: 1-11-CV-214307
Motion for Summary Judgment by Cross-Complainant Delta Communications, LLC dba Clearwave Communications against Cross-Defendant Ronald F. Trinchitella on Cross-Complaint for Recovery of Usurious Interest
This action was filed on December 5, 2011, and the cross-complaint at issue on this motion was filed June 7, 2012. The case is set for jury trial on August 25, 2014, and has been continued at least twice.
I. Objections to Evidence
Delta’s objections to the Declaration of Ronald F. Trinchitella are sustained for objections 3, 4, 7, 8, 11 and 12, and otherwise overruled. Delta’s objections to the Declaration of Wesley Ehlers are sustained for objections 1-11, and otherwise overruled.
II. Trinchitella’s Request for Continuance
In footnote 4 at page 18 of Trinchitella’s opposition brief, Trinchitella argues that the deposition of Robert Kelley has not been completed and the depositions of Scott Riggs, Carlos Tanner, and Delta’s Person Most Knowledgeable remain to be taken. On this basis, Trinchitella asks this court to either deny or continue this motion pursuant to Code of Civil Procedure section 437c(h) which states, in pertinent part: “If it appears from the affidavits submitted in opposition to a motion for summary judgment or summary adjudication or both that facts essential to justify opposition may exist but cannot, for reasons stated, then be presented, the court shall deny the motion, or order a continuance to permit affidavits to be obtained or discovery to be had or may make any other order as may be just.”
However, “[i]t is not enough to ask for a continuance … in opposing points and authorities. The statute requires that the opposition be accompanied by affidavits or declarations showing facts to justify opposition may exist; or that such showing be made by an ex parte motion on or before the date the opposition is due.” (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2014) ¶10:207.10, p. 10-87 citing Combs v. Skyriver Communications, Inc. (2008) 159 Cal.App.4th 1242, 1270.)
A declaration in support of a request for continuance under section 437c, subdivision (h) must show: “(1) the facts to be obtained are essential to opposing the motion; (2) there is reason to believe such facts may exist; and (3) the reasons why additional time is needed to obtain these facts. [Citations.]” [Citation.] “The purpose of the affidavit required by Code of Civil Procedure section 437c, subdivision (h) is to inform the court of outstanding discovery which is necessary to resist the summary judgment motion. [Citations.]” [Citation.] “It is not sufficient under the statute merely to indicate further discovery or investigation is contemplated. The statute makes it a condition that the party moving for a continuance show ‘facts essential to justify opposition may exist.’ [Citation.]
(Cooksey v. Alexakis (2004) 123 Cal.App.4th 246, 254 (Cooksey).)
Here, Trinchitella offers a declaration of counsel who states that Mr. Kelley’s deposition was taken on January 15, 2014, and attaches a copy of portions of the transcript. (Declaration of Wesley Ehlers, at 4:14-18.) However, no explanation is given as to why it was not completed in January or anytime since. Concerning the depositions of Riggs, Tanner and PMK, the declaration concedes that these depositions were first scheduled in May 2014: almost two years after the cross-complaint was filed and after the case had been set for trial at least twice. According to counsel, that date did not proceed because Mr. Tanner was not available (no information as to Mr. Riggs or PMK), and a rescheduled July date did not proceed because Mr. Riggs claims to have an injury which prevents the deposition (no information as to Mr. Tanner or PMK, or whether Trinchitella tested the assertion of unavailability).
As to “facts to be obtained that are essential to opposing the motion”, the declaration provides no facts as to Mr. Tanner. (Ehlers Declaration, at 5:9-19.) Counsel states that he plans to “question Mr. Kelley about his understanding of the meaning and intent behind the severability provisions and whether they were meant to serve as usury savings clauses.” (Id., at 5:13-15.) As to Messrs Kelley and Riggs, counsel “anticipate[s]” that the depositions “will bring to light the process Delta undertook [sic] induce Trinchitella and others into promissory notes (including those at issue here) and the truth of the representations that Delta, through Kelley and Riggs, made to Trinchitella and others to secure loans and investments.” (Id., at 5:15-19.) As to Messrs Kelley and Riggs and the PMK, counsel intends to explore the “need for and entrance into the” promissory notes. (Id., at 5:11-13.)
No explanation is offered as to why Mr. Kelley’s private understand of contract provisions, or the other matters referenced, are “essential to opposing the motion”. The showing by declaration is insufficient to support a request for a mandatory continuance. “Code of Civil Procedure section 437c, subdivision (h) requires more than a simple recital that ‘facts essential to justify opposition may exist.’ ” (Lerma v. County of Orange (2004) 120 Cal.App.4th 709, 715 .) “The statute cannot be employed as a device to get an automatic continuance by every unprepared party who simply files a declaration stating that unspecified essential facts may exist. The party seeking the continuance must justify the need, by detailing both the particular essential facts that may exist and the specific reasons why they cannot then be presented.” (Id. at pp. 715–716.) (See also Johnson v. Alameda County Med. Ctr. (2012) 205 Cal.App.4th 521, 532 (affirming defendant’s summary judgment: declaration stating that “discovery is reasonably necessary to determine who ‘may be responsible for injury’ is insufficient to support a continuance”).)
In evaluating whether the court should exercise its discretion to continue the motion, the court should consider: the length of time the case has been pending; the proximity of the trial date; and whether the evidence sought is “essential” to the issue to be adjudicated. Trinchitella has not adequately explained why the discovery could not have been completed in the two years that the cross-complaint was pending. Lack of diligence is a basis to deny a motion to continue a summary judgment motion. (Cooksey, supra, 123 Cal.App.4th at 257; Hoffman v. Sports Car Club of America (1986) 180 Cal.App.3d 119, 127.) This case is on the eve of an already continued trial date. Trinchitella has not identified the issues of facts that might be identified through the discovery he has not diligently pursued. There is no good cause for a continuance.
The request for continuance of the motion for summary judgment pursuant to Code of Civil Procedure section 437c, subdivision (h) is DENIED.
III. Delta Has Met its Initial Burden
“‘The essential elements of usury are: (1) The transaction must be a loan or forbearance; (2) the interest to be paid must exceed the statutory maximum; (3) the loan and interest must be absolutely repayable by the borrower; and (4) the lender must have a willful intent to enter into a usurious transaction.’ [Citation.] ‘A transaction is rebuttably presumed not to be usurious.’ [Citation.]” (Bisno v. Kahn (2014) 225 Cal.App.4th 1087, 1097.) Delta has established each element of usury against Trinchitella. (See Defendant and Cross-Complainant Delta Communications, LLC’s Separate Statement of Undisputed Facts in Support of Motion for Summary Judgment on Cross-Complaint for Recovery of Usurious Interest, Fact Nos. 1 – 8 and 10 – 13.)
IV. Trinchitella Has Failed to Raise a Triable Issue of Fact
In opposition, Trinchitella argues first that Delta should be estopped from asserting a claim for usury because it proposed the loan terms including the interest rate. Trinchitella relies on Buck v. Dahlgren (1972) 23 Cal.App.3d 779 (Buck), where the court held a borrower could be estopped from asserting usury. “The California courts have held the Usury Law was designed to penalize lenders taking advantage of unwary and necessitous borrowers. [Citations.] [Footnote.] In order to effectuate the statutory policy of protection, the courts have also regularly held a borrower and a lender are not in pari delicto in a usurious transaction and the lender may not assert an estoppel against the borrower simply because the borrower took the initiative in seeking the loan, knew of the usurious nature of the transaction, and paid usurious interest without protest.” (Buck, supra, 23 Cal.App.3d at 787; emphasis added.)
Despite this general rule, the Buck court went on to state that under particular circumstances, a borrower could be estopped from recovering treble damages or the amount of usurious interest paid. In Buck, the borrower was an experienced real estate developer who took advantage of the lender who was a native of Sweden with limited English language ability and no real estate borrowing savvy. The borrower induced the lender to loan more money although the borrower did not intend to repay and knew that the security for the debt was worth substantially less than the principal. The borrower represented that the loan would be repaid on completion of certain projects, which was false. Because of the “particular and unusual equities of this case” (Buck, supra, 23 Cal.App.3d at 791), the court of appeal affirmed the trial court’s finding that the borrower was estopped.
Trinchitella argues that the facts here are similar to those in Buck and warrant application of the doctrine of estoppel. Trinchitella contends that he did not suggest or propose the interest rate; rather, it was Delta who solicited him for loans and offered to provide interest rates in excess of 12%. These facts, however, do not support estoppel. As stated at the outset in Buck, “the lender may not assert an estoppel against the borrower simply because the borrower took the initiative in seeking the loan, knew of the usurious nature of the transaction, and paid usurious interest without protest.” (Buck, supra, 23 Cal.App.3d. at 787; emphasis added.)
Trinchitella contends there are additional facts which support estoppel: i.e., that Delta fraudulently represented that it needed the loans to finance its operations and “look good” in the eyes of other creditors. Trinchitella contends these representations were false because there is no evidence to suggest Delta was in “grave danger of collapse” without the loans. (Opposition Memorandum, at 13:18.)
However, Trinchitella’s contentions do not resemble the facts in Buck and do not raise an issue of fact as to estoppel. Whether the loans were “needed” is an opinion, and to the extent it implies a fact, a statement that the loans are needed does not imply that without them, the company is in imminent danger of collapse: accordingly, a failure of proof on the latter point does not logically support an inference of falsity. Moreover, there is no element of undue advantage in this case. In any event, unlike the lender in Buck who lost any means of recovering, Trinchitella has not established how he suffered any harm from the claimed representations as he was paid the contracted interest rate and returned the principal sum. The fraud in Buck related to the borrower’s ability to repay and the damage suffered by the lender when the borrower defaulted. Here, even if Trinchitella were fraudulently induced to enter into the loan agreements, he did not suffer any harm as he was paid in full.
Trinchitella argues further that Delta perpetrated a fraud in the execution of the promissory notes because he negotiated for a prepayment penalty, but was forced to sign only the signature page and the prepayment penalty was not included in the final document. Trinchitella argues he wanted to include a prepayment penalty because he relied on the interest payments from the promissory notes to pay for his monthly bills. This fact, if relevant at all, undercuts Trinchitella’s argument regarding estoppel. The court in Buck applied estoppel due to the borrower’s fraud in obtaining usurious terms. By admitting he needed the usurious interest payments to pay his monthly bills, Trinchitella is effectively saying he agreed to the usurious term. By arguing that he wanted a prepayment penalty, Trinchitella is effectively saying he sought an even more usurious interest rate through a prepayment penalty. The facts here are distinguishable from Buck and do not warrant application of estoppel.
Trinchitella also contends that the original note and amended note both contain a severability provision which states, substantively, “If any one or more of the provisions of this Note are determined to be unenforceable, in whole or in part, for any reason, the remaining provisions shall remain fully operative.” Trinchitella contends that this provision should be interpreted to allow him to retain any interest received up to the maximum legal rate and to repay only that portion of the interest which exceeds the maximum legal rate. Based on Trinchitella’s calculation, Trinchitella would only be liable for $64,916.65, not the $166,500 that Delta now seeks.
Trinchitella relies on a federal bankruptcy decision, In re Dominguez (9th Cir. 1993) 995 F.2d 883 (Dominguez), in which a loan extension agreement specified an interest rate of 17%. However, the agreement also contained a savings clause: “In the event Borrower pays any interest on the . . . Promissory Notes . . . and it is determined that such rate[] . . . [was] in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rates shall be deemed a payment of principal and applied against the principal of the . . . Note.” (Dominguez, supra, 995 F.2d at p. 885.) The Dominguez court held that the extension agreement did not violate the usury law, because the savings clause operated to limit the interest rate to the maximum non-usurious rate.
The purported savings clause is quite different here and does not contain any limitation on the interest rate. The more persuasive authority is clear: “When a loan is usurious, the creditor is entitled to repayment of the principal sum only. He is entitled to no interest whatsoever.” (Gibbo v. Berger (2004) 123 Cal.App.4th 396, 403.) Since the interest rate here is usurious, Trinchitella is not entitled to any interest whatsoever. Trinchitella is limited to the interest he obtained outside of the statutory time period and to recovery of the principal sum.
In sum, none of the arguments advanced by Trinchitella in opposition provide a defense or create a triable issue of material fact. Accordingly, Delta is entitled to summary judgment on its cross-claim for usury against Trinchitella in the amount of $166,500.
Delta is the prevailing party on the cross-complaint.
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