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08/04/65 Ten Individual v. Ten Individual

August 4, 1965




Wilbur K. Miller, Senior Circuit Judge, and Fahy and Danaher, Circuit Judges.

Petition for Rehearing Denied October 7, 1965.



We earlier reversed a judgment which had been entered in favor of the appellees in Indian Lake Estates, Inc. v. Lichtman. *fn1 We then deemed "not susceptible of disposition by summary judgment" the appellant's claims that the appellees had violated the usury statute, D.C.CODE § 28-2703 (1961), "by charging interest in excess of 8%" and the so-called "Loan Shark Law," D.C.CODE §§ 26-601 to 26-611 (1961), "by lending money without a lender's license." After further proceedings in the District Court, the appellant's second amended complaint was dismissed, and this appeal followed.

Following remand, the appellant had filed an amended complaint. It was alleged that the appellees, who include two corporations and ten individuals, between 1955 and 1959 had participated with the appellant through various joint venture groups in some 17 business dealings having nexus with the District of Columbia. The appellant asked the District Court to declare that the transactions had required usurious payments and that the individual appellees should be caused to pay to the appellant usurious interest in the amount of $1,291,000. The appellant also prayed that the court declare its entitlement to recoup the total principal of various "void and illegal loans" in the amount of $2,125,819.31. The several transactions had involved participation by the respective parties in financing large real estate development projects organized by the appellant. The appellant additionally had asked the District Court to declare the two corporate appellees *fn2 "to be the alter ego of the individual defendants"; that certain assignments of land purchase contracts to the corporate appellees be declared void; and, finally, that the principal of the allegedly void loans "be forfeited by the individual appellees and remitted" to the appellant.

The respective appellees answered in March, 1963, setting up various defenses and counterclaims. The ten individual appellees and the appellee, Net Limited, Inc., represented by Mr. Bress, counterclaimed in part for damages aggregating $250,000. The appellee, Special Investments, Inc., represented by Mr. Albert Philipson, counterclaimed in part for damages of $953,000. At that time D.C.CODE § 29-904(h) (1961) of the "District of Columbia Business Corporation Act," 68 Stat. 177 (hereinafter referred to as the 1954 Act), provided that a corporation had power "to borrow money at such rates of interest as the corporation may determine without regard to the restrictions of any usury law . . .." Appellees have pointed to the legislative history of the 1954 Act and of the 1963 amendments which we have examined in detail.

It appears that on April 11, 1963, a Subcommittee of the House Committee on the District of Columbia conducted hearings on H.R. 4330 respecting certain proposed amendments to the 1954 Act. *fn3 In due course, as of September 3, 1963, Public Law 88-111, 77 Stat. 136, was approved. Pertinent here, D.C.CODE § 29-904(h) (1961) was thereby amended by adding a new sentence:

"No corporation formed hereunder shall plead any statutes against usury in any action." (D.C.CODE § 29-904(h) (Supp. IV, 1965.))4

On September 13, 1963, the appellees joined in filing a motion to dismiss on the ground that the complaint had failed to state a claim upon which relief could be granted. The motion recited, in pertinent part,

"The action is for alleged usury. By reason of the District of Columbia Business Corporation Act, D.C.Code Secs. 29-904(h) and 29-933a, plaintiff corporation cannot assert usury, as more fully set forth in the memorandum in support hereof."5

The appellant's opposition to the motion to dismiss, filed September 27, 1963, relied upon this court's earlier opinion and order (supra) and asserted further that the 1963 amendment applied only to corporations "formed hereunder."6 It argued that since the appellant is a foreign corporation, its rights did not depend upon the provisions of the Business Corporation Act of the District of Columbia.

Such was the state of the record when the "first judge" on November 27, 1963 heard argument on the appellees' motion to dismiss the complaint.7 Orally the judge announced his "opinion that the action in this case is barred by the statute." An order was entered on December 3, 1963 granting the motion to dismiss, but "with leave to amend within 20 days." A further order on December 19, 1963 extended the time within which an amended complaint might be filed to January 2, 1964.8

The appellant's "second amended complaint" was filed on January 2, 1964. Its allegations were unchanged from those of the first amended complaint except that appellant this time pleaded that the appellant is a Florida corporation which

"was authorized to and did conduct business in the District of Columbia until plaintiff applied for and was issued, on June 9, 1960, a Certificate of Withdrawal by the Superintendent of Corporations ...

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