Capital One, National Association v. Paige Hospitality Group, LLC

Background

Capital One sued Paige Hospitality Group, LLC, Matthew Shendell, Fondue 26 LLC, Burger Fulton LLC, and Ains IP Company LLC to collect amounts allegedly due under a promissory note and related commercial guaranty agreements. On May 25, 2018, Capital One provided the borrower a loan. The note required monthly payments and allowed Capital One, after a default, to accelerate the unpaid principal, interest, fees, costs, and charges. The note also provided for interest at 18% after acceleration, although Capital One sought interest at the lower rate of 6.3%.

The borrower granted Capital One a security interest in described business assets. Capital One stated that it perfected that security interest by filing a financing statement with the New York Department of State. Shendell, Fondue 26 LLC, Burger Fulton LLC, and Ains IP Company LLC separately guaranteed the borrower’s obligations, including collection costs.

The borrower failed to make the payment due on November 18, 2018, and made no later payments. Capital One sent defendants a demand for payment on May 20, 2019, but defendants did not pay. None of the defendants opposed Capital One’s motion for summary judgment.

Legal standard and governing law

Summary judgment is appropriate when the evidence shows that there is no genuine dispute about an important fact and the moving party is entitled to judgment under the law. Although defendants did not respond, the court still examined Capital One’s evidence and legal arguments rather than automatically granting the motion.

The note and guaranties provided that Virginia law would govern unless federal law preempted it. The court applied Virginia law. Under that law, a claim for breach of a promissory note requires proof of an enforceable obligation, a material breach, and resulting damage. A holder of a note may collect from guarantors who unconditionally guarantee payment of amounts due under the note.

Liability

The court found that Capital One had shown that the promissory note was signed by the charged party or an authorized agent, that the guaranties were signed by the guarantor defendants, and that the guaranties clearly and unconditionally guaranteed the borrower’s obligations. The guarantors had waived certain notice and suretyship defenses.

The court further found that the borrower materially breached the note by failing to make the required payments. Capital One demanded payment from the guarantors after the default, and the guarantors did not pay. The court therefore held that Capital One was entitled to summary judgment for amounts due under the note and guaranties.

Damages

The court found that Capital One had established the damages with reasonable certainty. It awarded $380,083.20, consisting of $378,505.84 in unpaid principal and $1,577.36 in late fees. Interest accrued at $66.24 per day beginning December 26, 2018, and was to continue until the judgment was satisfied.

Attorney’s fees and status of the instruments

The note and guaranties allowed Capital One to recover certain attorney’s fees and collection expenses. Because Capital One had not submitted evidence establishing the amount of fees and costs, the court granted its request to file a motion supported by an affidavit or declaration, contemporaneous time records, invoices, and other supporting evidence. The court stated that this filing was due within 14 days of the decision; the conclusion stated that the case’s closure was without prejudice to a fee motion filed within 14 days of entry of judgment.

The court also found that Capital One was the holder of the promissory note and guaranties, that those instruments were enforceable, and that the security agreements created an enforceable security interest in the collateral that Capital One had perfected by filing a financing statement.

Disposition

Judge Gabriel W. Gorenstein granted Capital One’s motion for summary judgment as set forth in the opinion. The Clerk was directed to calculate and enter judgment for $380,083.20, plus daily interest of $66.24 from December 26, 2018, until satisfaction, and to close the case. The closure was without prejudice to a timely motion for attorney’s fees.