A.I. Credit Corp. v. Gohres, No. CV-S-02-0149LRH (RJJ).

• Decision Date: 22 January 2004
• Docket Number: No. CV-S-02-0149LRH (RJJ).
• Citation: 299 F.Supp.2d 1156
• Parties: A.I. CREDIT CORP, a New Hampshire Corporation, Plaintiff/Counter-defendant v. William L. GOHRES; Mildred L. Gohres; Villa De Reve Ltd., a Nevada Corporation, Defendants/Counterclaimants
• Court: U.S. District Court — District of Nevada

299 F.Supp.2d 1156

A.I. CREDIT CORP, a New Hampshire Corporation, Plaintiff/Counter-defendant v. William L. GOHRES; Mildred L. Gohres; Villa De Reve Ltd., a Nevada Corporation, Defendants/Counterclaimants

No. CV-S-02-0149LRH (RJJ).

United States District Court, D. Nevada.

January 22, 2004.

Maximiliano Couvillier, Lionel, Sawyer & Collins, Las Vegas, NV, for Plaintiff.

David Mincin, Richard McKnight, Law Office of Richard McKnight, Las Vegas, NV, for Defendants.

AMENDED ORDER

HICKS, District Judge.

Presently before the Court is Plaintiff A.I. Credit Corp's ("Plaintiff" or "AIC") Motion for Summary Judgment (Docket No. 77). Defendant filed an opposition (Docket No. 90) on June 23, 2003, to which Plaintiff subsequently replied. After a review of the record and relevant law, the Court grants Plaintiff's motion.

BACKGROUND

Briefly, the relevant facts are as follows: Over the course of three years, Defendant William Gohres ("Gohres" or "Defendant") and his now deceased spouse, Mildred Gohres, borrowed approximately 4.5 million dollars from AIC. The loan was obtained in order to make premium payments on several life insurance policies. The life insurance policies were assigned to AIC as collateral for this debt. In December 2000, the Gohreses defaulted on the loan. Six months later, AIC notified Defendant that the loan was being accelerated and that AIC would execute on the assigned Policies if the loan was not paid in full.

However, at Defendant's request, AIC instead agreed to forebear on Defendant's default, giving Defendant an additional two months to make full and complete payment on his debt before AIC commenced collection procedures. As a condition to making this forbearance agreement, AIC required additional collateral. It was agreed that Defendant's collection of Sky Jones art-work (the "Artwork") — which Defendant represented had a barter value of $23 million — would serve as the additional collateral during the forbearance period. Defendant was allowed to keep possession of the Artwork as "Bailee" during this time. The forbearance agreement provided that, if Defendant failed to pay, AIC was permitted to pursue a remedy by first selling Defendant's Artwork. (MSJ, App Tab 1 at Q, § 5 "Forbearance Agreement"). If the sale of the Artwork was not sufficient to cover Defendant's debt, then AIC would be entitled to execute on the policies. Id.

By the terms of the forbearance agreement, Defendant was required to pay his debt to AIC by September 1, 2001. Defendant failed to pay. On September 4, 2001, AIC made a written demand to Defendant to collect and ship the Artwork to AIC's offices in New York within 15 days. Because of the events of September 11, 2001, Defendant was granted an extension; however, Defendant failed to ship the Artwork to AIC and the Plaintiff ultimately was forced to hire a company to obtain the Artwork. When AIC then had the Artwork appraised, it discovered that the Artwork was valueless (despite the fact that the Artwork's "barter value" was estimated at 23 million). AIC then executed on the assigned policies by surrendering them for cash value. In so doing, Plaintiff was able to realize roughly one million ninety-one thousand dollars. Ultimately, Plaintiff filed a complaint in the Federal District Court, seeking the nearly 3.5 million dollar balance on the debt, plus interest and reasonable attorney's fees.

STANDARD OF REVIEW

Federal Rule of Civil Procedure 56(c) mandates entry of summary judgment if the pleadings and supporting documents, when viewed in the light most favorable to the non-moving party, "show that there is no genuine issue as to any material fact . . ." See Rose v. Wells Fargo & Co., 902 F.2d 1417, 1420 (9th Cir.1990); Palmer v. United States, 794 F.2d 534, 536 (9th Cir. 1986). The purpose of a motion for summary judgment is to determine whether a "genuine issue of material fact" exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A "material fact" is a fact "that might affect the outcome of the suit under the governing law." Id. A dispute regarding a material fact is considered genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248, 106 S.Ct. 2505. Where reasonable minds could differ on the material facts at issue, summary judgment is not appropriate. See v. Durang, 711 F.2d 141 (9th Cir.1983).

DISCUSSION

With regard to a claim for collection on a promissory note, summary judgment may be granted in favor of the plaintiff if the debt is undisputed and there is no articulable, genuine issue of material fact. Morris v. Bank of America Nevada, 110 Nev. 1274, 1275-1276, 886 P.2d 454, 455 (1994). In the instant case, the Defendant does not dispute that he owes the debt. There is no issue of material fact as to any of the terms of Defendant's loan, and no dispute regarding Defendant's default under the terms of the loan or Defendant's subsequent breach of the parties' forbearance agreement. Rather, Defendant asserts that AIC is not entitled to the money owed by Defendant because: (1) Plaintiff's claims are barred by illegality as Plaintiff was not licensed to grant loans in Nevada; and (2) Plaintiff is precluded from recovering against Defendant since it cannot produce the original Master Promissory Note. Additionally, Defendant claims that summary judgment should not be granted as factual issues exist as to whether AIC acted in good faith with regard to its obligations under the terms of the contract between the parties, and as to whether AIC failed to mitigate its damages.

I. Summary Judgment with Regard to Plaintiff's Claim

A. Plaintiff's claim is not barred due to illegality.

First, Defendant asserts that AIC's grant of a multi-million dollar loan to a Nevada resident was contrary to Nevada state law as AIC was not licensed to make such loans in Nevada.¹ In defense, AIC asserts that it is licensed in Nevada and that Defendant's evidence to the contrary lacks foundation and should not be considered.

Certainly, a party opposing a motion for summary judgment must offer admissible evidence, and not simply offer conclusions of experts that lack any evidentiary foundation. See, e.g., Bertolucci v. San Carlos Elementary School Dist., 721 F.Supp. 1150, 1157 (N.D.Cal.1989). However, the Court need not address either the merits of Defendant's affirmative defense or the admissibility of Defendant's evidence, because the Defendant has not directed the Court to any evidence that AIC was not properly licensed.² In contrast, Plaintiff has provided this court with a "Certificate of Compliance" from the State of Nevada, indicating that AIC is licensed to conduct the business of "premium finance" in the state. As the Defendant provides no evidence in support of its claim, summary judgment will not be denied on the basis of this affirmative defense.

B. AIC's failure to produce the master promissory note does not bar its claim.

Defendant next contends that Plaintiff may not obtain a judgement against him in the amount of the undisputed debt because Plaintiff is unable to produce a copy of the Master Promissory Note. As a general rule, the loss of a bill or note does not alter the rights of the owner, but rather renders secondary evidence necessary in order to establish the existence of the debt. See, e.g., Bingham v. Weber, 197 Or. 501, 513, 254 P.2d 219, 224 (1953); Owen v. Ostrum, 259 Mont. 249, 855 P.2d 1015 (1993).

Nevada Revised Statute 104.3309 provides:

1. A person not in possession of an instrument is entitled to enforce the instrument if:

(a) He was in possession of the instrument and entitled to enforce it when loss of possession occurred;

(b) The loss of possession was not the result of a transfer by him or a lawful seizure; and

(c) He cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person that cannot be found or is not amenable to service of process.

With regard to the first requirement under the statute, the Court must consider whether Plaintiff can be said to have had possession of the instrument at the time it was lost. At first blush, it would appear that this requirement cannot be met as Plaintiff has already conceded that the note was in the possession of Defendant's lawyer when it was destroyed. However, the primary concern with regard to the enforcement of a missing note is that the defendant may be forced to pay the note twice if he is held liable to the first holder in court, and later presented the note by a second holder. See, e.g., Powell v. First Nat. Bank of Columbus, 145 Ga.App. 19, 243 S.E.2d 315, 316 (1978). For this reason, a court may be inclined to dismiss a claim brought by a plaintiff who lost a note, rather than hold the defendant liable when there is a risk that he will ultimately be prejudiced by plaintiff's lack of due diligence.

On the other hand, evidence that the note was not lost, but destroyed; and moreover that the note was in the possession of Defendant's agent at the time it was destroyed, alleviates the aforementioned concerns and reverses the risk of prejudice between the parties. Where requiring physical possession seems unnecessarily technical and unjust, courts have been inclined to find that a person can be a holder in due course without actual possession, if he has constructive possession. See, e.g., Billingsley v. Kelly, 261 Md. 116, 118, 274 A.2d 113, 115 (Md.1971). In Billingsley, the court found that, because the Plaintiff had had a right to pick up his note at any time from the person with actual possession, the mere fact that he had not done so before the note's destruction would not preclude his status as a holder in due course. Id. Similarly, AIC was entitled to the possession of the Master Promissory Note prior to its loss, and therefore can be said to have...