Lizama finds security company, owners in default of CDA loan

Superior Court Associate Judge Juan T. Lizama yesterday has found a security company and its owners in default of its loan to the Commonwealth Development Authority.

Lizama said whether defendants Island Security Services Inc. and its owners Joaquin V. Guerrero and Esther A. Guerrero are in default of their loan to CDA “is a legal conclusion based on the facts regarding [their] failure to pay and any mitigating circumstances.”

Because the material facts are undisputed, there is no jury question regarding default, said the judge in granting CDA’s motion for summary judgment.

Court records show that in July 1998, CDA extended a direct loan to Island Security Services Inc. in the principal amount of $275,000.

The promissory note established a schedule of monthly installments, beginning Aug. 15, 1998 and continuing until the loan was paid in full on July 15, 2008.

In April 2001, at the request of ISS, CDA revised the loan that established a new principal amount of $288,280.80 with new monthly payments.

At some point, ISS and its owners Joaquin and Esther Guerrero, failed to make the monthly payments required by the revised agreement.

In August 2003, CDA served ISS and the Guerreros with notices of default.

Defendants apparently did not resume making payments.

Defendants stated that they had communications with CDA’s loan officer Jenny Diaz regarding a restructure of their loan and a new payment schedule. They said they relied on a representation that the loan would be restructured.

While waiting for a return communication from CDA, defendants apparently took no further action on the loan.

In April 2004, CDA filed a complaint against the defendants for foreclosure.

CDA said the amount outstanding under the loan account as of Jan. 2006 is $405,104.02.

Defendants claimed that there is a genuine dispute over the amount owed, as the principal balance under the promissory note is $275,000, and the principal amount claimed in the complaint is $288,2009.74.

But Lizama said as defendants’ signature appears on the revision agreement authorizing the increased capital, the court finds that the amount owed is not really in dispute.

Defendants argued that the “due date” referred to in these clauses in July 15, 2008, such that defendants cannot be in default until the end of July 2008.

Lizama, however, found that such argument “defies the plain language of the loan agreement, which requires monthly payments commencing on Aug. 15, 1998.”

Defendants argued that their reliance on the representation of a CDA loan officer Diaz regarding a loan restructuring precludes summary judgment.

Lizama disagreed.

As plaintiff has pointed out, Lizama said, the loan agreement expressly provides that, “Lender’s S rights shall continue in full force and effect unless specifically waived by an instrument in writing executed by the lender.”

Thus, the judge said, CDA’s right to receive the payments as scheduled in the loan agreement would continue unless and until CDA agreed in writing to change the terms of the agreement.

“As sophisticated parties, defendants should have been aware that the terms of their payment schedule could only be altered through a written agreement.

Significantly, defendants had already achieved a loan revision via a written agreement in 2001,” Lizama said.