Elliott v. Bradley
A consulting fee in a consulting contract that covers the same period as a promissory note, if construed as part of the loan, can result in an interest rate that exceeds the maximum rate of 12 percent in Connecticut General Statutes §37-4. Allegedly, the defendant, Charles Bradley, asked the plaintiff, Theodore Elliott Jr., to loan him $100,000, and the defendant hired the plaintiff as a consultant for the same period as the promissory note. The plaintiff filed suit, alleging that the defendant failed to pay the amount owed pursuant to the promissory note and the consulting contract. The plaintiff filed a motion for summary judgment as to liability only, and the defendant filed an amended answer and a special defense. The defendant argued that only the holder of the promissory note could enforce the promissory note, that the plaintiff did not perform the services that were required by the consulting contract, and that the net interest rate of the transaction was 19 percent per year, which violates Connecticut's usury law. The court found that the plaintiff's complaint did not allege that there was an assignment from the holder of the note to the plaintiff. As a result, there was a genuine issue of material fact concerning whether the plaintiff was the proper party to bring suit. Also, although the promissory note includes an interest rate of 8 percent per year, if the consulting fee is construed as part of the loan, the amount of interest would exceed the statutory maximum of 12 percent per year. "[I]t appears," wrote the court, "that the parties intended that the consulting fee act as a way to circumvent the 12 percent statutory interest cap." There was a genuine issue of material fact concerning whether the parties' transaction violated usury laws. The court denied the plaintiff's motion for judgment on liability only.