MATTHEW J. MCGOWAN, as Receiver of Commerce Park Realty, LLC, NICHOLAS E. CAMBIO and VINCENT A. CAMBIO Plaintiffs,
POTOMAC REALTY CAPITAL, LLC, CAPITAL MANAGEMENT SYSTEMS, INC., Alias, and DANIEL M. PALMIER Defendants.
Providence County Superior Court
Matthew J. McGowan, Esq., John E. Bulman, Esq., R. Thomas Dunn, Esq., Nicholas Cambio, Richard G. Riendeau, Esq., Stephen M. Schonhoff, Esq., Vincent Cambio, Stephen M. Schonhoff, Esq., Richard G. Riendeau, Esq., Elizabeth A. Lonardo, Esq., Potomac Realty Capital, Inc., William J. Delaney, Esq., Capital Management Systems, Inc., Jeffrey S. Brenner, Esq., William J. Delaney, Esq.
Plaintiff Matthew J. McGowan, as Receiver for Commerce Park Realty, LLC (CPR or Receivership Plaintiff) brings this Motion for Partial Summary Judgment pursuant to Super R. Civ. P. 56 (Rule 56) against Defendant Potomac Realty Capital, LLC (Potomac) as to Count III of Receivership Plaintiff's and Non-Receivership Plaintiffs' Amended Complaint (Amended Complaint) seeking declaratory relief under the Uniform Declaratory Judgments Act, G.L. 1956 § 9-30-1 (UDJA). Additionally before the Court is Plaintiffs Nicholas E. Cambio (N. Cambio) and Vincent A. Cambio's (collectively the Cambios) Motion for Partial Summary Judgment as to Counts VI, IX, XII, XV, and XVIII of the Amended Complaint, each also seeking declaratory relief under the UDJA. Dependent on the Court's ultimate finding with respect to the above-referenced motions, Receivership Plaintiff additionally moves for summary judgment on Count I of Defendants Potomac and Daniel M. Palmier's (collectively Defendants) Counterclaim for breach of contract.
By Order dated July 24, 2014, the Rhode Island Supreme Court remanded the within matter to this Court to "attend to the matters set forth in the remand motions, and for such other purposes as the trial justice may deem appropriate." Receivership Plaintiff's motion to remand was for this Court to enter default and default judgment against Potomac and Daniel M. Palmier due to Potomac's failure to answer the Amended Complaint. Accordingly, the sole issue for the Court to now decide is whether the series of five loans made by Potomac to CPR from 2006 to 2008 are usurious and therefore violate G.L. 1956 § 6-26-2. Jurisdiction is pursuant to § 9-30-1.
Facts and Travel
The facts of the lending relationship between Potomac and the Centre of New England parties are the subject of several other motions-as well as other related actions-presently pending before the Court. Given the limited nature of this Decision however, only those facts relevant to Receivership Plaintiff and the Cambios' Motions for Partial Summary Judgment are presented below.
The Potomac Loans
CPR, a Rhode Island Limited Liability Company, the Cambios, as managers of CPR and as co-makers, and Roney A. Malafonte (Malafonte),  entered into a series of loan transactions with Potomac from 2006 through 2008. (N. Cambio Aff. ¶¶ 1-3, Aug. 28, 2014). On April 24, 2006, CPR and the Cambios executed a promissory note in favor of Potomac for $6, 000, 000 (the First Six Million Dollar Note). Id. Ex. A. The First Six Million Dollar Note was secured by a mortgage which covered approximately thirty acres of land, with improvements, in West Greenwich, Rhode Island and approximately seventy lots located within the Highlands at Hopkins Hill in Coventry, Rhode Island. Id. ¶ 11. One of the provisions contained in the First Six Million Dollar Note was an "Exit Fee" wherein the makers of the promissory note agreed to pay $1, 000, 000 to Potomac, upon demand, if the principal and interest accumulated on the note was not fully paid by the maturity date of May 1, 2007. Id. Ex. A. The First Six Million Dollar Note provided for an annual interest rate of 17% that increased to 24% in the event of default. Id. Ex. A.
On August 23, 2006, a second promissory note was executed and delivered by CPR and the Cambios to Potomac for $6, 000, 000 (the Second Six Million Dollar Note). Id. ¶ 12, Ex. E. The Second Six Million Dollar Note similarly contained a $1, 000, 000 "Exit Fee" and provided for 15% annual interest increasing to 24% upon default. Id. Ex. E. This promissory note was secured by the same security as was granted for the First Six Million Dollar Note together with an additional 111 lots of land in Coventry, which was amended to reflect a $12, 000, 000 security interest. Id. ¶ 16. The parties also entered into a third loan arrangement on October 27, 2006 where CPR and other co-makers borrowed $2, 920, 000 from Potomac at a 15% per annum interest rate with a default rate of 24% (the 2.92 Million Dollar Note). Id. ¶ 17, Ex. H. Again, the mortgage (then serving as the security interest for the First Six Million Dollar Note and the Second Six Million Dollar Note) further was amended by increasing the amount covered to $14, 920, 000. Id. ¶ 23-24. According to the Amended Complaint, CPR, along with other comakers, additionally borrowed $1, 350, 000 from Potomac for the construction of five residential units at the property in Coventry evidenced by a 1.35 Million Dollar Note. (Am. Compl. ¶ 16; see N. Cambio Aff. Ex. M).
Thereafter, on September 28, 2007, CPR and the Cambios executed a promissory note in favor of Potomac in connection with a $1, 000, 000 loan (the One Million Dollar Demand Note) and received a $1, 000, 000 advance from Potomac evidenced by an allonge to the First Six Million Dollar Note (the One Million Dollar Allonge). (N. Cambio Aff. ¶¶ 27-29, 32). The One Million Dollar Demand Note provided a 15% per annum interest rate, increasing to 24% in the event of default. Id. Ex. N. Essentially, the One Million Dollar Allonge was made part of the First Six Million Dollar Note and incorporated all of its terms, including the default interest rate of 24%. Id. Ex. O. Specifically, the One Million Dollar Allonge stated:
"The Maturity Date of the Note occurred May 1, 2007. Section 2.7 of the Note is no longer applicable. The entire principal balance of the Note from time to time outstanding, together with interest at the Default Rate from May 1, 2007, plus all other amounts due under the Note or ...