Friday, January 19, 2018
Court of Appeal:
Commerce Clause Not Implicated in Personal Loan Transaction
Ikola Says Tolling of Statute of Limitation While Defendant Is Out of State Is Not Unconstitutional As Applied to Suit by a Woman Who Lent Money to a Man Based on Intimate Relationship
By a MetNews Staff Writer
The Fourth District Court of Appeal has reversed a judgment of dismissal in an action by a woman to recover nearly a half a million dollars she loaned a man with whom she was then romantically involved, with the justices rejecting a judge’s notion that to apply a Code of Civil Procedure section tolling the statute of limitation during the period the defendant was out of the state would offend the U.S. Commerce Clause.
Without such tolling, the lawsuit brought by Debra Newell of Orange County against Mohamed Abouelmagd, a denizen of either New York or New Jersey would be time-barred.
Justice Raymond J. Ikola of Div. Three wrote the unpublished opinion, filed Wednesday, reinstating Newell’s action. There was no violation of the Commerce Clause, he declared, because there was no interstate commerce involved.
Marital Status Misrepresented
Newell met Abouelmagd in Las Vegas in the 1990s. He represented—falsely, she later learned—that he was unmarried.
Abouelmagd made but a faint effort to make repayment on a series of loans and, as of Sept. 11, 2001—“9/11”—he owed $490,000. In light of the terrorist attacks on that date, he told Newell he would be unfavorably viewed in the U.S. and would return, permanently, to his native Egypt, but would continue to make repayments.
At one point, she flew to Egypt to try to track him down. After locating him on the east coast, she sued in 2015.
Responding to Abouelmagd’s demurrer to her second amended complaint on the ground that the action was time-barred, Newell pointed (as she had previously) to Code of Civil Procedure §351, which provides:
“If, when the cause of action accrues against a person, he is out of the State, the action may be commenced within the term herein limited, after his return to the State, and if, after the cause of action accrues, he departs from the State, the time of his absence is not part of the time limited for the commencement of the action.”
The Commerce Clause authorizes the federal government to regulate interstate commerce. Orange Superior Court Judge Theodore R. Howard, relying on U.S. Supreme Court precedent relating to the “dormant commerce clause”—an inferred ban on states unreasonably burdening interstate commerce—held that §351 could not be invoked to save Newell’s tardy action.
Renders Discussion Irrelevant
Ikola, after discussing various cases relating to the dormant commerce clause, rendered his discussion irrelevant by declaring that interstate commerce was not implicated in Newell’s action.
“It is well-established the formation of a contract between persons in different states is not within the protection of the commerce clause unless the performance of the contract falls within its protection….To do so, performance of the contract must implicate interstate commerce.”
The loans in question, Ikola said, had no such effect.
Under the operative pleading, he noted, it was averred that Newell made the loans based on “a personal, intimate relationship” with Abouelmagd, that she “was not in the business of lending money,” and was not seeking a profit on the transaction.
Use of Loans
The defendant argued that commerce was involved because allegations in Newell’s pleading “make clear” that he had stated that the moneys lent to him would be used, at least in part, for business purposes. Ikola responded:
“Defendant provides no authority such statements, which are alleged to have been made after plaintiff loaned the money, somehow turn the transaction into one involving or substantially affecting interstate commerce.
“We are equally unconvinced by defendant’s claim that interstate commerce is implicated because plaintiff sent some of the loaned money across state lines to where defendant was located, or because the few repayments defendant made to plaintiff were done via mail or wire transfer.”
The case is Newell v. Abouelmagd, G053785.
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