CHARLES R. BREYER, District Judge.
Plaintiff Blue Growth Holdings Ltd. moves for summary judgment on its causes of action for breach of contract against Defendants Mainstreet Limited Ventures, LLC ("Borrower") and Joseph M. Aaron ("Guarantor"). The Court GRANTS summary judgment on the issue of liability and DENIES it on the question of damages.
On or about January 1, 2011, Plaintiff lent $1,262,500 to Borrower, recorded by a promissory note. Compl. ¶¶ 8-9 (dkt. 1), Answer ¶¶ 8-9 (dkt. 10). Plaintiff then lent Borrower a further $300,000 on or about May 1, 2011, recorded in a second promissory note. Compl. ¶¶ 10-11, Answer ¶¶ 10-11. Both notes were guaranteed by Guarantor. Compl. ¶¶ 12-13, Answer ¶¶ 12-13. Borrower then defaulted on or around July 2012. Compl. ¶ 15, Answer ¶ 15. Plaintiff and Defendants then signed a Forbearance Agreement, under which Plaintiff agreed to forbear from exercising any of its rights or remedies against Defendants under the promissory notes and Defendants admitted they were and continued to be in breach of the promissory notes. Compl. ¶ 16, Ex. 5, Answer ¶ 16. Defendants did not comply with the repayment schedule in the Forbearance Agreement.
The court shall grant summary judgment if 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). An issue is "genuine" only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party, and a dispute is "material" only if it could affect the outcome of the suit under governing law.
Though Defendants initially objected to some of Plaintiff's evidence establishing liability for breach, Plaintiff's reply brief mooted those objections with additional evidence to which Defendants have not objected.
Plaintiff's allegations and evidence indicate that it contracted with Borrower to loan Borrower monies, that it performed under those contracts by loaning the monies, that Borrower breached the contracts by failing to repay those monies as required by either the promissory notes or the Forbearance Agreement, and that Borrower's failure to repay the monies caused Plaintiff damage.
Defendants have asserted a usury defense, which would preclude the collection of interest if successful—but Borrower is still liable for the principal on a usurious loan.
The same is true for the claim against Guarantor. Guarantor entered into a contract with Plaintiff to guarantee the loans to Borrower in the event of Borrower's default. As discussed above, Borrower breached the promissory notes. Consequently, Guarantor's obligations were triggered. The loans have not been repaid. Supp. Fox Decl. Ex. 1-3. Because Plaintiff has not been repaid, Plaintiff has suffered damages, and the usury defense concerns the amount and not the existence of damages.
Because Guarantor has not contested any of the other facts put forth by Plaintiff, this Court may deem those facts admitted for the purposes of this motion. Fed. R. Civ. P. 56(e). And because none of the elements of breach of contract are in dispute, summary judgment is GRANTED on Plaintiff's breach of guaranty claim except on the amount of damages.
Defendants argue that Plaintiff was obligated to give Defendants notice of the breach and an opportunity to cure before bringing suit. Defendants have presented no legal authority in support of this proposition. Nor have Defendants explained why a letter and e-mail sent to them in March 2013 notifying them of the default would not satisfy any such obligation.
The primary remaining question is whether Defendants' usury defense can be resolved as a matter of law.
Under California law, "[t]he 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."
In general, a loan of the type at issue here with an annual rate of interest exceeding 10 percent is usurious. Cal. Const. art. XV, § 1. The notes here set the interest rate on the loans at 12 percent.
Plaintiff avers that because the promissory notes at issue contained savings clauses purporting to lower the interest rate to any applicable statutory maximum,
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Plaintiff here has admitted that it collected interest at the twelve percent rate. Reply at 6. Because Plaintiff accepted payment in excess of the legal rate, the record contains evidence to support the contention that Plaintiff had usurious intent regardless of the presence of the savings clause, which distinguishes this case from the one cited by Plaintiff at the hearing on this motion,
Plaintiff has shown that there is no genuine dispute of material fact as to Defendants' liability for breach of contract. However, disputes of fact prelude summary judgment on Defendants' usury defense. Accordingly, Plaintiff's Motion for Summary Judgment is GRANTED in part and DENIED in part.