Holmgren v. Woodside Credit, LLC
| Decision Date | 05 May 2023 |
| Docket Number | 22-cv-997 (ECT/DJF) |
| Parties | Brooks Holmgren, Plaintiff, v. Woodside Credit, LLC, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Paul Shapiro and Abby Sunberg, Taft Stettinius & Hollister Minneapolis, MN, for Plaintiff Brooks Holmgren.
Mickey L. Stevens, Dykema, Minneapolis, MN; and Ross B. Hofherr Harris Beach PLLC, New York, NY, for Defendant Woodside Credit, LLC.
Plaintiff Brooks Holmgren refinanced his purchase of a high-performance Porsche automobile with Defendant Woodside Credit. Holmgren titled the car originally in Minnesota, where he lives and where he keeps the car. After the refinancing transaction closed, Woodside unilaterally re-titled the car in Nevada.
Holmgren brought this case alleging that Woodside's re-titling of the car breached the financing contract and diminished the car's value. Woodside counterclaimed, alleging that Holmgren breached the financing contract by failing to provide Woodside with required information and that Holmgren's actions caused Woodside to incur additional costs and impaired its security interest in the car. Holmgren and Woodside agree that, owing to a choice-of-law clause in the financing agreement, California law governs their competing claims.
Holmgren moves to dismiss Woodside's counterclaim under Federal Rule of Civil Procedure 12(b)(6). Holmgren's motion will be granted because Woodside fails to allege facts plausibly showing that Holmgren's actions caused it to incur damages, an essential element of Woodside's breach-of-contract claim under California law. Though Woodside's counterclaim will be dismissed, Woodside (and Holmgren) will be allowed to seek recovery of attorneys' fees and costs in the event it is the “prevailing party” as that term is used in California Civil Code § 1717(a).[1]
I[2]
Plaintiff Brooks Holmgren purchased a new Porsche 911 GRRS in February 2019. Am. Compl. ¶ 14. The purchase price was “$345,147.94, excluding various fees and taxes.” Id. The vehicle is rare-there are fewer than 50 like the one Holmgren purchased[3]-and the car “is fully customized in terms of aftermarket options and features, many of which were specially installed by Porsche Minneapolis.” Id. ¶ 15.
Holmgren is a Minnesota citizen, and he titled the car in Minnesota. Id. ¶¶ 9, 16. He originally financed the car's purchase through Porsche Financial Services, Inc. See Id. ¶¶ 1, 16. In April 2019, the State of Minnesota issued a title certificate identifying Holmgren as the car's owner and Porsche Financial Services, Inc. as the only secured lienholder. Id. ¶ 16.
In May 2019, Holmgren refinanced the car through Woodside. Id. ¶ 17; See Am. Countercl. ¶ 1. Woodside is a limited-liability company with no Minnesota-citizen members. Am. Compl. ¶ 10; Answer ¶ 10. It is based in California and “specializ[es] in financing for exotic and collectible automobiles.” Answer ¶ 1.
As part of the refinancing, Holmgren and Woodside executed a “Promissory Note and Security Agreement dated May 29 2019.” Am. Countercl. ¶ 1; see ECF No 15-1 at 2-4.[4] As relevant here, the Agreement granted Woodside a security interest in the car, “all parts or accessories attached to [it],” and any “money or goods” Holmgren might receive for the car (including, for example, insurance proceeds). Am. Countercl. ¶ 3.a.; ECF No. 15-1 at 3.
The Promissory Note and Security Agreement included provisions imposing obligations on Holmgren, two of which are chiefly at issue here. The first of these described Holmgren's obligations with respect to the car's title vis-a-vis Woodside's security interest:
Failure to Provide Title. You agree to promptly execute or re-execute all documents we request to name you as owner on the title to the Vehicle and to perfect our lien on the Vehicle, and you authorize us to file such documents, including a UCC financing statement if we deem necessary. You will pay all filing fees, title transfer fees, and other fees and costs involved unless prohibited by law or unless we are required by law to pay such fees and costs. You also agree to promptly provide us with any other executed forms, including proof of any required inspection, we may need under applicable law to complete the registration process. If you fail to do these things to our satisfaction, you will be in default of this Agreement. In addition, if you are responsible for perfecting our security interest, you will be in default of this Agreement if you fail to promptly provide us with a title showing us as the sole lienholder. To the extent permitted by applicable law, you authorize us as your attorney-in-fact to sign your name on any documents necessary to properly record and perfect our security interest should you fail to do so. You agree that we may assign our security interest hereunder without your consent.
Woodside alleges that Holmgren breached this provision. Specifically, Woodside alleges that it emailed Holmgren on June 4, 2019, “seeking his cooperation in providing Woodside with an original lien[-]free title (provided by Porsche Financial Services to Plaintiff), and [an] original executed Power of Attorney (form provided to Plaintiff by Woodside), and Plaintiff's current insurance card for the vehicle.” Am. Countercl. ¶ 4. Woodside believes “these documents are required by the State of Minnesota when recording a lien on title.” Id. ¶ 5. Plaintiff did not comply with this request. Id. ¶ 6. “On August 27, 2019, Woodside contacted Plaintiff via email to advise that Woodside still had not received the original lien[-]free title, and that it was urgent that Plaintiff send the title to Woodside immediately.” Id. ¶ 7. Between September 2 and September 12, Holmgren and Woodside communicated further regarding these issues. Id. ¶¶ 8-11. It is not clear from the Amended Counterclaim whether Holmgren sent Woodside nothing in response to Woodside's request, or whether whatever documentation Holmgren sent was insufficient. Regardless, on September 12, 2019, Woodside told Holmgren that he “needed [] to execute a power of attorney” that would enable Woodside's title agent, Corporation Service Company, to retitle the vehicle in a way that perfected Woodside's security interest. Id. ¶¶ 10-11, 13. Holmgren executed the power-of-attorney form “on September 17, 2019[,] before a notary and returned the executed power of attorney to Woodside on September 19, 2019.” Id. ¶ 12; see also id. ¶ 13 (). To perfect its security interest, Woodside re-titled the car “in Nevada without Holmgren's cooperation.” Id. ¶ 18.
Woodside alleges it incurred damages in connection with Holmgren's breach of the Failure to Provide Title provision. According to Woodside, “it incurred additional costs, in an amount to be determined at trial, associated with perfecting its security interest.” Id. “These costs include expenses incurred by Woodside directly, and indirectly through Woodside's Nevada title agent and other [unidentified] vendors[,]” all to re-title the car in Nevada. Id.
Woodside alleges it is entitled to recover these damages pursuant to a specific provision in the Promissory Note and Security Agreement, entitled Use of Vehicle. Id. Relevant to this remedy, that provision says:
Although we are not obligated to do so, if we pay any liens, fees, maintenance or taxes in connection with the Vehicle, or advance any other amount to protect our interest in the Vehicle, you will reimburse us, at our option, within five (5) days of our demand upon you to do so, or we may add the amount of any such liens, fees, maintenance or taxes or other charges we pay to the Principal balance. Such amounts will accrue finance charges at the rate set forth above. Unless you have paid us such amounts prior to maturity, they will be due at the maturity of this Agreement.
Woodside also alleges what it labels an “alternative” damages theory: if re-titling the car in Nevada reduced the vehicle's value (a proposition Woodside disputes), that was caused by Holmgren's breach of the Failure to Provide Title provision and “diminished” the value of Woodside's security interest. Am. Countercl. ¶ 20. Holmgren, Woodside claims, is responsible for damages relating to the diminishment of Woodside's security interest.
In addition to breaching the Promissory Note and Security Agreement's Failure to Provide Title provision, Woodside alleges that Holmgren breached a provision regarding insurance. See id. ¶¶ 3.d., 14-16. This provision reads:
Insurance. You agree to keep the Vehicle insured at all times during the term of this Agreement in our favor or that of our assignee at the address specified from time to time by us or our assignee with a policy and insurance provider satisfactory to us, with comprehensive fire, theft and collision coverage, insuring the Vehicle in an amount sufficient to cover the value of the Vehicle, and providing for a deductible equal to not more than two percent (2%) of the original Principal balance. You may obtain the insurance from any insurer or broker you choose that is reasonably acceptable to us. You agree to obtain and deliver to us a loss payable endorsement on such insurance. You agree that we may (1) contact your insurance agent to verify coverage or to have us added as a loss payee, (2) make any claim under your insurance policy for physical damage or loss to the Vehicle, (3) receive any payment for loss or damage, or return premium, and apply amounts we receive, at our option, to replacement of the Vehicle or to what you owe under this Agreement, including indebtedness not yet due. If you fail to maintain such insurance, we may, at our option, obtain such insurance to protect our...
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