Opinion
Civil No. 89-3198 (CSF).
January 16, 1990
OPINION
Plaintiffs, Annette Tobia and Joel Spivak, holders of a promissory note, are presently moving for summary judgment on the note because the maker, defendant Shad River Corporation ("SRC"), is in default. Anthony E. Sosnoskie, Martha Sosnoskie, Roy L. Snare, Alice D. Snare, John J. Warenda and Carmella Warenda, all of whom unconditionally guaranteed SRC's obligation, are also named as defendants. For the reasons set forth below, plaintiffs' motion is granted.
Facts
SRC ia a Pennsylvania corporation engaged in, among other things, acquiring and developing commercial real estate. In November, 1987, Roy L. Snare contacted Annette Tobia "to arrange a loan" in order to "provide working capital for the defendant corporation." Snare Affidavit ¶ 4. On December 4, 1987, "FOR VALUABLE CONSIDERATION RECEIVED, [SRC] promise[d] to pay to the order of ANNETTE TOBIA and/or JOEL SPIVAK at 56 Battle Road, Princeton, New Jersey . . . the total sum of SIXTY THOUSAND ($60,000.00) DOLLARS." It is undisputed that the note was given in an amount which exceeded the amount of money actually advanced at the time the loan was made. Indeed, all parties agree that $50,000 was the "valuable consideration received" in exchange for the $60,000 note.
The note was signed by Snare, as SRC's Secretary, and Anthony E. Sosnoskie, as SRC's President, and unconditionally guaranteed by Snare, Sosnoskie, John J. Warenda and their respective spouses. It bore an interest rate of 12% and required SRC to make twenty-four monthly payments of $631.94. On January 1, 1990, the date that the twenty-fourth payment was due, unpaid principle and interest became due on demand.
SRC regularly made the first twelve payments due on the note; however, payments due on February 1, 1989, and March 1, 1989, were not paid until April 6, 1989. Since then, SRC has failed to make any payments, and is currently in default. This fact is not in dispute. See SRC's Answer ¶ 3, warendas' Answer ¶ 3, Snares' Answer ¶ 3, and Roy L. Snare's Affidavit ¶ 8. The defendants argue, however, that the loan is usurious.
Discussion
The defendants assert that this dispute is governed by the laws of Pennsylvania; the plaintiffs contend that New Jersey law controls. As the choice of law question is naturally a threshold consideration, the court will make it its initial inquiry.
The Restatement (Second) Conflict of Laws § 214(1) provides that "[t]he obligations of the maker of a note . . . are determined . . . by the local law designated in the instrument as the place of payment." Unlike the varied contacts examined in determining the choice of law in a contract case, negotiable instrument law necessitates a more "imperative" approach.
Certainty and predictability are values of paramount importance in this field, and there is need for simple, hard-and-fast rules of choice of law. For this reason, only one contact is considered in selecting the state whose local law governs the obligations of the maker or acceptor of a negotiable instrument. . . . Under the rule of [§ 214], the state of payment, if specified in the instrument, will always furnish the applicable law.Id. Comment b at 702. See also National Leasing Corp. v. Williams, 80 F.R.D. 416 (W.D. Pa. 1978). In this matter the instrument identifies Princeton, New Jersey as the place of payment. Accordingly, the court concludes that the rights and liabilities of the parties will be governed by New Jersey law.
The New Jersey Legislature has statutorily established interest rate ceilings on certain loans. See Connell v. American Kunding Ltd., 231 N.J. Super. 409, 414 (Ch.Div. 1987); N.J.S.A. 31:1-1. Such limitations, however, do not apply to corporations:
No corporation shall plead or set up the defense of usury to any action brought against it to recover damages or enforce a remedy on any obligation executed by said corporation.
N.J.S.A. 31:1-6. Therefore, a corporation is precluded from raising usury as a defense to an action brought against it on a promissory note it executed. Armin v. Kullman, 127 N.J. Super. 600, 603 (Law Div. 1974). Likewise, guarantors of such corporate obligations cannot raise usury as a defense. Selengut v. Ferrara, 203 N.J. Super. 249, 258 (App.Div.) certif. denied. 102 N.J. 316 (1985) (citing cases). It is clear that even if the court were to assume that the note executed by SRC and guaranteed by the individual defendants was usurious, such a defense would be invalid.
The court notes that Pennsylvania law also precludes corporations from pleading usury as a defense. See Pa. Stat. Ann., Tit. 41, § 2 (Pardon 1971).
Regardless of whether the $10,000 difference between the face value of the note and the monies actually advanced is referred to as a discount or an origination fee, the fact remains that the instrument unequivocally manifests an obligation of $60,000. It is conceded that SRC has defaulted on that obligation. None of the defendants allege that the note should have read $50,000, nor do they claim that they were unaware that the instrument evidenced an obligation in "the total sum of SIXTY THOUSAND ($60,000.00) DOLLARS." Therefore, the court finds that the plaintiffs are entitled to summary judgment on the note.
Plaintiffs will also be entitled to a late fee of five percent and reasonable attorney's fees. Pursuant to the terms of the note, SRC agreed to assume those obligations in the event that it defaulted or failed to pay its obligations under the loan in a timely fashion. The court, however, takes issue with plaintiffs' assertion that twenty percent of the amount owed automatically constitutes a reasonable attorney's fee. Although some cases have found twenty percent to be a reasonable collection fee, see eg., Armin v. Kullman, 127 N.J. super. at 605 (20% reasonable where attorney drafted pleadings, interrogatories, moved to strike the answer, obtained a default judgment and moved for a final judgment for default), the court will not give blanket approval to such a figure. The promissory note states that the plaintiffs shall be entitled to a "reasonable" fee; therefore, plaintiffs' attorney is directed to submit an affidavit of services rendered in this matter.
Plaintiff's counsel shall submit an affidavit of services and a proposed order forthwith.