Superior Court of Massachusetts, Suffolk, Business Litigation Session
August 7, 2017
ORDER ON CROSS MOTIONS FOR PARTIAL SUMMARY
P. Leibensperger, Justice
action on a promissory note the parties seek a ruling by the
court on two issues: (1) what should be the interest rate on
the promissory note when the interest rate stated in the note
is unlawful under the usury statute, and (2) what amount of
attorneys fees are recoverable by the lender under the terms
of the note. This action was commenced by plaintiff, the
lender, against defendant, a person individually liable under
the note, on January 12, 2017. As a result of this lawsuit
and collection efforts by plaintiff, the principal sum of the
note ($400, 000) was repaid to plaintiff on May 31, 2017. On
April 20, 2017, in anticipation of the imminent payment of
the principal amount, the parties submitted a Joint Proposal
for Procedure and Schedule that was accepted and ordered by
the court. In the Joint Proposal, the parties stated "
[a]ll parties believe that these two issues can likely be
resolved without discovery, on cross motions for summary
judgment. All parties further believe that if these two
issues are resolved by the Court, then that will likely
facilitate a final resolution of the case . . ."
following facts regarding the promissory note and the
interest rate are submitted as undisputed in the parties'
Consolidated Statement of Undisputed Material Facts.
2016, the parties met to discuss a business venture proposed
by defendant, Vincent Dammai. Dammai intended to form a
company called Biosimilars & Biologics to distribute
and/or manufacture generic pharmaceutical drugs. Plaintiff,
Vinod Patel, agreed to become employed by company and to
receive a 4% equity interest in the company.
the company could be organized it was recognized that the
company needed money to get off the ground. Patel agreed to
loan the not-yet-organized company $400, 000. It was
anticipated that the loan would be for a short time period
because Dammai anticipated a major investment from the
government of Brazil. On July 1, 2016, a promissory note was
executed by Dammai, Patel and a third person, Venkat Reddy.
The relevant terms of the promissory note are the following.
" Borrower" is a " new business"
designated as " NewCo." It is recited that NewCo
consists of three " Owners, " Dammai, Patel and
Reddy. NewCo and the Owners " individually and
severally" promise to pay Patel the sum of $400, 000,
plus interest on or before September 1, 2016. The promissory
note states that the " loan is intended to be used [as]
an advance to fund the start-up of a new business . . . to be
named and formed in the next two weeks (called
'Biosimilar & Biologics')."
promissory note further provides that the interest rate on
the note is 15% bimonthly. Accordingly, the amount owed under
the note on the date due, September 1, 2016, is $460, 000.
note provides that the Borrower shall pay reasonable
attorneys fees and disbursements incurred in connection with
the collection of the note.
1, 2016, Patel wired $200, 000 to a bank account for another
entity controlled by Dammai because the anticipated NewCo had
not been formed. On July 5, 2016, Patel wired another $200,
000 to Dammai.
August 5, 2016, Patel and Reddy informed Dammai that they no
longer wanted to participate in the anticipated new business
to be called Biosimilars & Biologics. On August 15, 2016,
Dammai incorporated Biosimilars & Biologics IBC as a
Bahamas corporation, with Dammai as majority shareholder.
Patel and Reddy have never been shareholders, officers,
directors or employees of this company.
admits in his answer that in May and June 2016, when the
parties discussed the short-term loan, Dammai offered and
proposed to pay Patel between 10% and 20% interest for the
two-month period. Patel chose the mid-point: 15%. Neither
Dammai nor Patel knew that the rate of interest violated the
Massachusetts usury statute. Patel obtained the form
of the note from his neighbor, an attorney, with the interest
rate left blank. Patel inserted the 15% rate without
consulting an attorney. Dammai had no objection to the 15%
interest rate. Indeed, he happily remarked in an email about
his willingness to pay the 15% interest for two months.
loan was not repaid on September 1, 2016. Patel attempted to
collect the debt by informal communications. The debt was not
paid in response. In October 2016, Patel engaged counsel to
help him collect the debt. Patel and his counsel proposed a
new note to replace the original note but the proposal was
rejected. In December 2016, Dammai, through counsel, disputed
liability under the note. Patel filed this lawsuit on January
12, 2017. As mentioned above, as a ...