United States District Court, D. Colorado
ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT
CHRISTINE M. ARGUELLO UNITED STATES DISTRICT JUDGE
This
matter is before the Court upon Plaintiff Rakesh
Mahajan's Motion for Summary Judgment. (Doc. # 49.) The
Court, having reviewed all filings, exhibits, and relevant
case law, and being fully advised in the premises, grants
Plaintiff's Motion for Summary Judgment.
I.
BACKGROUND
Plaintiff
is an individual who has had dealings with a number of small
businesses. (Doc. # 52 at 2.) Defendant Boxcar Holdings, LLC
(“Defendant Boxcar”), is a Colorado limited
liability company in the asset disposal business; it
“purchases unused or unwanted assets from companies,
mostly automobiles, and sells them to auctions and
dealers.” (Id.) Critical to Defendant
Boxcar's business is “access to capital to purchase
large quantities of automobiles, ” and its primary
challenge is “reducing the cost of borrowing
capital.” (Id.) Defendant Nick Gulotta is the
sole member and owner of Defendant Boxcar. (Doc. # 8 at 1.)
He and his spouse, Defendant Carrie Gulotta (together, the
“Gulotta Defendants”), are domiciled in Colorado.
(Id. at 2.)
In late
2016, Plaintiff and Defendant Nick Gulotta began discussing
ways in which Plaintiff could be involved in Defendant
Boxcar's business. (Doc. # 52 at 2.)
On
January 6, 2017, Plaintiff and Defendant Boxcar executed a
Secured Promissory Note (the “First Note”), under
which Plaintiff loaned Defendant Boxcar $600, 000.00. (Doc. #
8-1.) The First Note required Defendant Boxcar to repay the
$600, 000.00 loan, with 17.5% interest per annum, by April
10, 2017. (Id. at 1.) The First Note is secured by
“a first priority security interest on all [Defendant
Boxcar's] vehicles in inventory . . . [and] in all of the
assets of [Defendant Boxcar].” (Id. at 3.) The
First Note provides that Plaintiff is entitled to recover
“costs of suit and reasonable attorney fees” in
pursuing a claim against Defendant Boxcar to recover amounts
owed under the note. (Id.) It also states that it is
to be construed according to the laws of Colorado.
(Id. at 4.)
Also on
January 6, 2017, contemporaneously with the parties'
execution of the First Note, Plaintiff and Defendant Boxcar
entered into a Security Agreement. (Doc. # 8-2.) Pursuant to
the Security Agreement, Defendant Boxcar granted Plaintiff a
“continuing security interest” in “all
machinery and equipment, ” “all inventory
(including vehicles), ” “all accounts, contract
rights, . . . investment property and general intangibles,
” and “all deposit accounts.” (Id.
at 1.) The Security Agreement also requires Defendant Boxcar
to reimburse Plaintiff “for all attorney fees, legal
expenses and other expenses” Plaintiff incurs in
protecting and enforcing his rights under the Security
Agreement. (Id. at 6.)
On the
same day, January 6, 2017, Plaintiff and the Gulotta
Defendants executed a Guaranty, under which the Gulotta
Defendants agreed to “jointly and severally,
absolutely, unconditionally and irrevocably guarantee prompt
payment when due and at all times in the future of the
indebtedness evidenced by [the First Note], in the original
principal amount of $600, 000.00.” (Doc. # 8-3 at 1.)
The Guaranty allows Plaintiff to recover attorney fees and
litigation costs. (Id.)
On
February 13, 2017, Plaintiff and Defendant Boxcar executed a
second Secured Promissory Note (the “Second
Note”), in which Plaintiff loaned Defendant Boxcar an
additional $200, 000.00. (Doc. # 8-4.) Like the First Note,
it required Defendant Boxcar to repay the $200, 000.00 loan,
with 17.5% interest per annum, by April 10, 2017.
(Id.) The Second Note is virtually identical to the
First Note in all material respects, including terms
regarding an event of default, acceleration, governing law,
and attorney fees and costs. See generally
(id.; Doc. # 8 at 7.)
On July
14, 2017, Plaintiff and Defendant Boxcar executed a third
Secured Promissory Note (the “Third Note”)
pursuant to which Plaintiff loaned Defendant Boxcar another
$200, 000.00. (Doc. # 8-5.) The Third Note required Defendant
Boxcar to repay the $200, 000.00 loan, with 17.5% interest
per annum, by September 14, 2017. (Id.) The Third
Note is virtually identical to the First and Second Notes in
all other regards. See generally (id.; Doc.
# 8 at 8.)
Between
January 2017 and August 2017, Plaintiff and Defendant Nick
Gulotta contemplated Plaintiff making an equity investment in
Defendant Boxcar by converting the Notes to a membership
interest in the company. (Doc. # 52 at 3.) By August 9, 2017,
Plaintiff and Defendant Nick Gulotta had drawn up documents
to formalize Plaintiff's equity investment in Defendant
Boxcar. (Id. at 6; Doc. # 52-1 at 106-08.) These
documents included a Membership Interest Purchase Agreement,
a Release of the Personal Guaranty, a Termination Agreement
(regarding the Notes), and an Operating Agreement. (Doc. #
52-1 at 41-89, 106-08.) The parties never executed these
documents. On or about August 14, 2017, Plaintiff informed
Defendant Nick Gulotta that he had made a final decision not
to make an equity investment in Defendant Boxcar. (Doc. # 52
at 7.)
Defendant
Boxcar did not repay the amounts due under the Notes by the
maturity dates set forth therein-April 10, 2017, for the
First Note and Second Note, and September 14, 2017, for the
Third Note. (Doc. # 49 at 7.)
However,
between February 2017 and October 2017, Defendant Boxcar
“made monthly interest payments under the First Note,
the Second Note, and the Third Note in an amount totaling
$105, 126.26.” (Doc. # 8 at 8.) At some point in that
time span, the parties came to an understanding that
“[d]espite the earlier maturity dates set forth in the
[N]otes, ” Defendant Boxcar would “continue to
make monthly interest payments (at 15% per annum rate) under
each of the [N]otes, and Boxcar would pay the remaining
balance due under the [N]otes on agreed-upon dates in 2018,
including the principal and interest (at a 2.5% per annum
rate).” (Id.) It is undisputed that since
November 2017, Defendant Boxcar has not made any payments due
to Plaintiff under the Notes. (Doc. # 49 at 7.)
On
March 5, 2018, Plaintiff initiated this action against
Defendants. (Doc. # 1.) Plaintiff asserts two causes of
action: (1) breach of contract of the three Notes against
Defendant Boxcar; and (2) breach of contract of the Guaranty
against the Gulotta Defendants. (Doc. # 8 at 10-12.) He seeks
damages and recovery of his attorney fees and costs.
(Id. at 12.)
Defendant
Boxcar and Defendant Carrie Gulotta assert eight affirmative
defenses in their joint Answer:
1. Failure to state a claim upon which relief may be granted;
2. The doctrine of unclean hands;
3. Promissory estoppel;
4. “[P]revention of ...