Robinson v. Waldo

• Decision Date: 29 April 2022
• Docket Number: 82970-COA
• Citation: 508 P.3d 898 (Table)
• Parties: Ronald J. ROBINSON, Appellant, v. Reva WALDO, Respondent.
• Court: Nevada Court of Appeals

508 P.3d 898 (Table)

Ronald J. ROBINSON, Appellant,

v.Reva WALDO, Respondent.

No. 82970-COA

Court of Appeals of Nevada.

FILED APRIL 29, 2022

TRILAW

Law Offices of Michael F. Bohn, Ltd.

The Law Offices of David Liebrader, APC

ORDER OF AFFIRMANCE

Robinson was the CEO of Virtual Communications Corporation (VCC), a Nevada corporation.¹ VCC raised capital by issuing promissory notes to individual investors from numerous states, including Reva Waldo. To incentivize the purchase of the notes, the promissory notes came with a personal guaranty signed by Robinson. The personal guaranty "unconditionally" guaranteed Waldo a return on her investment. VCC also mentioned a personal guaranty in its marketing materials and used a PowerPoint presentation to explicitly show that Robinson's net worth was over 17 million dollars to demonstrate that Robinson's personal guaranty was meaningful. To obtain investors, VCC contracted with a company called Retire Happy. Retire Happy, in exchange for soliciting potential investors on behalf of VCC, would take a small percentage of the money from each principal amount secured for VCC.

Waldo is an elderly woman from Ohio who suffers from dementia. In 2014, a representative of Retire Happy contacted Waldo and offered her an opportunity to earn nine percent annual interest on her money by purchasing a VCC promissory note. The representative explained that VCC, a new corporation, was preparing to market a new technological invention. To do so, VCC required capital and expected to do well after receiving the initial funding from the promissory notes.

The promissory notes were generally for an 18-month duration, during which time VCC would pay nine percent interest to the noteholder. Upon the completion of the note's duration, VCC pledged to return the investor's principal investment in the promissory note. The notes also came with penalty provisions; if VCC defaulted, for example, the note required VCC to pay a five-percent non-compounding penalty as well as the accrued interest and any attorney fees. As a final incentive, Retire Happy s representative told Waldo of Robinson's personal guaranty of the terms of the promissory note, including the investor's initial investment in the note. Waldo agreed to invest $111,000 in VCC and purchased a VCC promissory note.

From there, Waldo dealt with another third-party, Provident Trust Group (Provident), to create a self-directed individual retirement account (IRA) to hold the promissory note and transfer the money to VCC. In April 2014, Provident facilitated the transaction between Waldo and VCC by accepting the transfer of Waldo's retirement money into the IRA and then transferring the funds to VCC and receiving a promissory note in return to hold for the benefit of Waldo. Waldo's agreement with Provident made it clear that Provident was only a passive intermediary. Provident did not direct, reallocate, or otherwise manage Waldo's funds; it simply performed the transaction between Waldo and VCC in the amount Waldo directed.

Pursuant to the promissory note, VCC made timely interest-only payments through January 2015. In February 2015, however, VCC defaulted, and Waldo sued. In her suit, Waldo named two corporations, VCC and Retire Happy, as well as Robinson and other prominent individuals with both corporations. In 2018, before Waldo's case went to trial, VCC filed Chapter 11 bankruptcy and her claims against VCC were stayed.² VCC prepared its bankruptcy plan in bankruptcy court as Waldo's claims against Robinson and other individuals continued in the district court.

Prior to trial, Waldo filed a motion for summary judgment on select issues, which the district court granted. Notably, the district court determined that the VCC promissory notes were securities under Nevada law. The district court also considered Robinson's pretrial motion to dismiss based on Waldo's alleged failure to join a necessary party, Provident, While litigating the necessary party issue, Waldo filed a document signed by a Provident representative that delegated and assigned any duties and rights Provident may have possessed as the custodian of the note to Waldo. On this and other evidence, the district court concluded Provident was not a necessary party because Waldo, not Provident, "directed and controlled the investments."

Waldo's trial against Robinson and other individuals from VCC and Retire Happy³ started on June 25, 2018; however, VCC's bankruptcy plan remained unconfirmed. At trial, testimony covered the general operations of VCC, detailing its relationship with Retire Happy and how individuals like Waldo came to invest in a promissory note from VCC. To rebut Robinson's assertion that his electronic signature was used on the notes without his permission, Waldo introduced the PowerPoint that VCC used to entice investors by disclosing Robinson's net worth of over 17 million dollars, to presumably show he was financially secure enough to honor his personal guaranty. Waldo also produced emails that showed Robinson's assistant sending Retire Happy the pre-signed promissory note "for the sake of ... not having to deal with different schedules." Waldo also called Robinson's assistant, Alisa Davis, as a witness to verify she sent the pre-signed note. Davis testified that she never did anything without Robinson's approval or direction.

The parties agreed to simultaneously submit closing arguments in writing, which were due on September 4, 2018. Around this same time, the bankruptcy court confirmed VCC's bankruptcy plan. Under the bankruptcy plan, the promissory noteholders, like Waldo, held an "impaired" interest under the final plan, and the plan provided that Waldo would receive " a pro rata share" of VCC stock in satisfaction of VCC's debt to her. On September 20, to apprise the district court of the status of VCC's bankruptcy, the parties submitted the approved bankruptcy plan to the district court.⁴ In February, the district court found for Waldo. It concluded that Robinson intended to guarantee the promissory note and that Robinson's debt to Waldo pursuant to the guaranty survived VCC's bankruptcy. Moreover, it found Robinson liable under Nevada securities law.

To remedy Waldo's injury, the district court awarded Waldo $208,146. The district court awarded Waldo her initial investment of $111,000 in the promissory note, added the note's nine-percent interest rate as well as other penalties contained in the note, and attorney fees and costs. Despite finding Robinson liable for securities violations under NRS 90.660, the district court did not calculate damages under that statute.

Robinson appealed, but the supreme court dismissed the appeal after determining that the challenged judgment did not fully resolve the matter because the district court had not issued a written order dismissing defendants Minuskin and Davis, which in turn resulted in the district court order certifying the judgment as final under NRCP 54(b). This appeal followed.

On appeal Robinson argues that (1) VCC's bankruptcy paid Waldo in full, satisfying Robinson's debt under the personal guaranty; (2) the district court's judgment is flawed due to Waldo's failure to join Provident, an allegedly necessary party; (3) the district court erred when it determined Waldo presented substantial evidence to support her claims; and (4) the district court abused its discretion by awarding attorney fees in an amount equal to Waldo's contingency fee agreement.⁵ We address each of Robinson's arguments in turn.

First, Robinson argues that VCC's payment of stock to individual noteholders through its bankruptcy plan operated to satisfy VCC's debt and, in turn, satisfied any liability he may have had under his personal guaranty. In other words, because VCC paid its debt to Waldo in VCC stock, pursuant to the bankruptcy plan, there is no underlying obligation left for Robinson to guarantee here. Waldo argues that Robinson's debt as a personal guarantor exists independent of VCC's bankruptcy. She further contends that Robinson failed to prove the value of VCC stock, and therefore, the district court was correct to refuse to offset Robinson's debt under the guaranty.

We review a district court's damages calculations for an abuse of discretion. Flamingo Realty v. Midwest Dev., 110 Nev. 984, 987, 879 P.2d 69, 71 (1994). A bankruptcy only discharges debts of the bankrupt entity. 11 U.S.C. § 524(e). And a corporate executive incurs separate, personal liability when the terms of a promissory note provide for such liability. Threlkel v. Shenanigan's, 110 Nev. 1088, 1093, 881 P.2d 674, 677 (1994) ("Nothing in the other documents detracts from the conclusion that the language ‘the undersigned do hereby personally guarantee the payment of this note’ means what it says."). It is also true that "the payment or other satisfaction or extinguishment of the principal debt ... by the principal ... discharges the guarantor." First Interstate Bank v. Shields, 102 Nev. 616, 619-20, 730 P.2d 429, 431 (1986). However, where the personal guaranty is unconditional, it may survive partial bankruptcy payouts. United States v. Tharp, 973 F.2d 619, 622-23 (8th Cir. 1992) (rejecting guarantor's argument that, because the debtor corporation's bankruptcy was full and final satisfaction, the personal guarantor was relieved of personal obligations (following United States v. Beardslee, 562 F.2d 1016 (6th Cir. 1977) )). And guarantors may remain liable on a deficiency judgment after a creditor collects what it can from a debtor. See First Interstate Bank, 102 Nev. at 619, 730 P.2d at 431 (discussing guarantors and liability on deficiency judgments).

The Tharp opinion provides guidance on this issue. Tharp Brothers, Inc. (TBI) obtained a loan in exchange for a promissory note. 973 F.2d at 619. Both Tharp brothers signed personal guarantees as further security for the loan. Id. at 619-20. Each personal guaranty "unconditionally guarantee[d]" TBI's debts. Id. at 620. TBI later...