Opinion ID: 2716864
Heading Depth: 4
Heading Rank: 1

Heading: American Steel’s Witnesses

Text: John Vallone testified that he was the attorney who represented American Steel “in connection with [the] loan to [N.E.] Development;” he stated that he prepared the promissory note from N.E. Development to American Steel, as well as “a loan agreement between the parties,” a guarantee from Mr. LaBonte, and a “mortgage deed to secure the promissory note.” He testified that the purpose of the loan was to purchase property which he termed “the Hope Mill property” located in Scituate. Attorney Vallone further testified that he was a party to “two or three” meetings between Mr. LaBonte on the one hand and Eric Greene (who, according to the “Proof of Claim” filed by American Steel, was “the managing member” of American Steel), and Joseph Garies (who Mr. Vallone stated was Mr. LaBonte’s “advisor”) on the other hand.7 Mr. Vallone testified that it was his understanding that American Steel would provide “$275,000” as a “short term loan for 6 General Laws 1956 § 6-26-2(a) sets the maximum rate of interest at “twenty-one percent (21%) per annum.” See Part II.B, infra, for a more thorough discussion. 7 Joseph Garies testified that he was a “consultant” who “introduce[d] borrowers to lenders for different transactions.” He stated that he was the “sole shareholder” of a company called “Global Consulting [Group],” which contracted with Mr. LaBonte to obtain financing to purchase the Scituate property. -3- 30 days,” to enable Mr. LaBonte to purchase the Scituate property. Mr. Vallone added that the intent of the parties was effectuated by a loan in the amount of $325,000 with an interest rate of 16 percent per annum. According to Mr. Vallone’s testimony, at the maturity date, N.E. Development would pay back $325,000 plus interest, which would include a $50,000 “commercial loan commitment fee,” to be split between American Steel and Mr. Garies. Mr. Vallone testified that the $50,000 would be split—$30,000 being allocated to American Steel and $20,000 being allocated to Mr. Garies.8 It was Mr. Vallone’s testimony that the borrowers on the loan was both N.E. Development “[a]nd Mr. Labonte [sic] individually.” Mr. Vallone further noted that he included a “savings clause” in the promissory note to “alleviate [his] concerns about any potential usury for the note.” The promissory note was admitted as an exhibit.
American Steel called Lawrence LaBonte as an adverse witness. Mr. LaBonte testified to the details of the loan agreement in a manner largely consistent with Mr. Vallone’s testimony. Mr. LaBonte acknowledged that he signed the loan agreement “[b]oth individually and as a member of [N.E.] Development.” He confirmed that, at the closing on January 8, 2010, $275,000 of the $325,000 loan amount was provided by American Steel. Moreover, in his testimony, he confirmed that a $50,000 fee was due at the closing to be divided between American Steel and Mr. Garies; he added that the loan agreement provided that at the closing he owed American Steel $325,000 plus “16 percent” interest. It was Mr. LaBonte’s further testimony that he had not made any of the payments owed to American Steel pursuant to the loan agreement. 8 Mr. Garies testified that, as of the time of the hearing, he had not received his $20,000 fee. -4- 2. Lawrence LaBonte & N.E. Development’s Witnesses i. The Testimony of James M. Roche James Roche testified that he was a “[s]elf-employed commercial finance specialist and a turnaround company consultant.” His testimony focused on commercial loan commitment fees in general as well as the specific commitment fee at issue in the instant case. He testified that a commitment fee is generally money that is “paid at the closing,” not money that is paid at a later time. He stated that a commitment fee “is basically a lender committing that they have the funds available, and by executing that commitment document, you would either pay the commitment fee with the execution of the document or you would pay it at the closing of the loan;” he added that commitment fees are “typically” a “percentage of the loan” and that “industry standards” would call for a commitment fee which was “half to one percent of the total amount financed.” It was his testimony that, in his experience, a $50,000 commitment fee on a $275,000 loan was “[u]nreasonable.” He further stated that he had “[n]ever” seen “a situation where the commitment fee was paid at the time the loan was supposed to be paid off[.]” ii. The Testimony of Eric Greene Mr. Greene, the “managing member” of American Steel, was the last witness to testify at the hearing. According to his testimony, his loan to N.E. Development was the first loan that he had made to anyone other than a member of his family; he stated: “Prior to this, prior to me being asked to lend Mr. Labonte [sic] some money, I have never lent any money in my life other than family.” He testified that, because N.E. Development “couldn’t afford to pay” the $50,000 commitment fee at the time of closing, he “allowed” it to be paid at the maturity date. When asked what he “expected to be paid back” at the maturity date, he testified as follows: “I expected to get back after 30 days $325,000, which included [Mr. LaBonte’s] commitment to his mortgage broker [(Mr. -5- Garies)], which he couldn’t afford to pay at the closing; and it included the commitment fee which I had extended him, the 30 days with interest. That was his design. And, plus one month’s interest based upon 16 percent per    annual amount, which -- which would’ve been $329,000, $4,000 interest approximately at the time when the note was due. That’s what we expected back.” It was Mr. Greene’s testimony that the commitment fee was “going to reimburse [his] costs to make the loan.”