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Hunt v. Kadlick

United States District Court, Fourth Circuit

August 29, 2013

RON HUNT, Plaintiff,
v.
PAUL F. KADLICK, et al, Defendants.

MEMORANDUM OPINION

Paul W. Grimm United States District Judge.

This Memorandum Opinion addresses the Supplemental Motion for Summary Judgment and supporting Memorandum filed by Plaintiff Ron Hunt, ECF No. 13; the Opposition to Plaintiff’s Motion and the Cross Motion for Summary Judgment filed by Defendants Paul Kadlick, Gokhan Akkus, and AKA, Inc., ECF No. 14; Plaintiff’s Opposition to Defendants’ Cross Motion and Plaintiff’s Reply to Defendants’ Opposition, ECF No. 19; and Defendants’ Reply to Plaintiff’s Opposition to Defendants’ Cross Motion, ECF No. 17. The Court finds a hearing unnecessary in this case. See Loc. R. 105.6. For the reasons stated herein, all Motions for Summary Judgment shall be DENIED WITHOUT PREJUDICE.

I. BACKGROUND

This case is among several actions involving transactions where Defendants borrowed money from Plaintiff to open a nightclub in the District of Columbia. See Compl., ECF No. 3. Perhaps the only fact not in dispute is that it never opened. See Id . ¶ 17; see also Defs.’ Opp’n & Cross Mot. 2. In these transactions, Defendants executed two Promissory Notes, on May 5, 2010 (the “2010 Note”) and February 11, 2012 (the “2012 Note” or “Instrument”), and a Security Agreement on February 11, 2012. See Id . The principal on the two Notes totals approximately $812, 000. See Instrument 1-2, Pl.’s Mem. Ex. A, ECF No. 13; 2010 Note 3-4, Pl.’s Mem. Ex. B, ECF No. 13. The Security Agreement provided collateral on the 2012 Note and was executed on the same day. See Security Agr. 5-6, Pl.’s Mem. Ex. C, ECF No. 13. The Security Agreement granted Plaintiff a security interest in District of Columbia Alcoholic Beverage Regulation Administration License #84241 (“ABC License #84241”). Id. By their express terms, the two Notes were to be repaid in installments beginning thirty days after Defendants opened their nightclub. See Instrument 1-2, Pl.’s Mem. Ex. A; 2010 Note 3-4, Pl.’s Mem. Ex. B. As noted, to date, the nightclub has not opened. See Compl. ¶ 17; Defs.’ Opp’n & Cross Mot. 2.

Plaintiff filed a three-count complaint on March 5, 2013 in the Circuit Court for Prince George’s County, Maryland. See Notice of Removal, ECF No. 2. On April 8, 2013, Defendants removed the action to this Court. Id. In Count I, Plaintiff seeks over $769, 514 in the form of a judgment by confession, supported by the 2012 Note, which contains the authorization for entry of judgment by confession signed by Defendants, for the principal due, interest, late fees, and attorneys’ fees on that Note. See Compl. ¶¶ 9, 13. In Count II, Plaintiff seeks $72, 000, plus costs and fees, for alleged default on the 2010 Note. Id. ¶ 22. In Count III, Plaintiff prays for the return of ABC License #84241 as its security interest under the February 11, 2012 Security Agreement. Id. ¶ 30.

Defendants answered the complaint on April 26, 2013, ECF No. 7. On May 23, 2013, Plaintiff, without an entry of judgment by confession for Count I, moved for summary judgment as to Counts II and III, ECF No. 13. Defendants filed their opposition to the motion together with a cross-motion for summary judgment as to all three counts, ECF No. 14. Plaintiff replied together with an opposition to Defendants’ cross-motion, ECF No. 19. Defendants replied to that opposition, ECF No. 17. This Court stayed discovery after the Rule 16 Telephone Conference on May 13, 2013. See Paperless Order, ECF No. 11, as amended by ECF No. 12.

II. DISCUSSION

A. Entry Of Judgment By Confession (Count I)

The entry of judgment by confession is governed by District of Maryland Local Rule 108.1. That Rule contemplates that the moving party will file a complaint requesting a judgment by confession together with the relevant written instrument and attachments. Loc. R. 108.1(a). The Court then reviews the submission for sufficiency under Loc. R. 108.1(b). If satisfied, the Court directs entry of judgment by confession and the Clerk gives notice to the defendant(s), who may move to vacate or amend the judgment. Loc. R. 108.1(c)-(d). To enter judgment by confession, the Court must find,

that the aforesaid documents prima facie establish (1) a voluntary, knowing, and intelligent waiver by the defendant of the right to notice and a prejudgment hearing on the merits of the claim of the plaintiff for liquidated damages and (2) a meritorious claim of the plaintiff for liquidated damages against the defendant.

Loc. R. 108.1(b). The Rules of Procedure governing judgments by confession in Maryland state courts “are analogous to this Court’s procedures with respect to confessed judgments.” Sager v. Hous. Comm’n, 855 F.Supp.2d 524, 560 n.37 (D. Md. 2012). Notably,

“[j]udgments by confession are not favored in Maryland, because Maryland courts have long recognized that the practice of including in a promissory note a provision authorizing confession of judgment lends itself far too readily to fraud and abuse.” Gambo v. Bank of Md., 102 Md.App. 166, 185, 648 A.2d 1105, 1114 (1994) (citation omitted). Therefore, the Maryland Court of Appeals “has made clear that judgments by confession are to be ‘freely stricken out on motion to let in defenses.’” Schlossberg [v. Citizens Bank, 341 Md. 650, 672 A.2d 625, 627 (Md.1996)] (citation and some internal quotation marks omitted). The disfavored status of confessed judgments is also made plain by the many provisions of Maryland law . . . that prohibit the use of confessed judgment clauses in a wide variety of contractual contexts.

Id. at 554.

In this case, Plaintiff complied with the procedural requirements of Rule 108(a). However, the Instrument, by its terms, does not trigger repayment until “30 days after the date upon which Maker opens to the public.” See Instrument 1-2, Pl.’s Mem. Ex. A. Plaintiff does not allege that Defendants’ night club ever opened. Rather, he attempts to interpret the Instrument with an overlay requirement of commercial reasonableness. See Compl. Therefore, the Court cannot enter judgment by confession because the Instrument does not ‚Äúprima facie establish . . . a meritorious claim of the plaintiff for liquidated damages against the ...


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