PHILIP A. BRIMMER, District Judge.
This matter is before the Court on Plaintiff's Motion for Partial Summary Judgment Pursuant to Fed. R. Civ. P. 56 [Docket No. 30]. This Court has jurisdiction pursuant to 28 U.S.C. § 1332.
This action arises out of a April 11, 2010 investment agreement between plaintiff Robert E. Moses, Hearing Help Express, Inc. ("Hearing Help"), defendant James E. Hovis, and defendant Catherine Hovis. Docket No. 47-1.
The Agreement includes guaranties of plaintiff's investment from both Mr. Hovis and Ms. Hovis. Mr. Hovis' guaranty states in relevant part that, "[a]s additional security to Investor, (i) Jim Hovis personally and absolutely guarantees all payments and repayment of the Invested Funds." Docket No. 47-1 at 3, ¶ 7. Hearing Help and Mr. Hovis also agreed to pay plaintiff's "necessary and reasonable legal fees as due to enforce any provision" of the Agreement. Id. Mr. Hovis signed the agreement both as a "1st personal guarantor" and on behalf of Hearing Help as its chairman. Id. at 4. Ms. Hovis agreed that, six months after any default by her husband and/or Hearing Help, she would guarantee plaintiff's investment. Id., ¶ 8. Ms. Hovis signed the Agreement as "2nd personal guarantor." Id. at 4. The Agreement is governed by Illinois law. Id., ¶ 9.
Before the Agreement was executed, Mr. Hovis supplied plaintiff with a one-page financial summary dated March 27, 2009. Docket No. 30-4 at 33. The summary lists his and his wife's combined net worth as $11,770,200. Id. Plaintiff claims the 2009 financial summary is misleading in various ways. Docket No. 30 at 9-10, ¶¶ 48-49. The main dispute focuses on two items. First, Mr. Hovis listed the River Road property he owned with a value of $2,000,000. Id. Plaintiff claims the summary overstates the value of the property by approximately $1 million. Docket No. 30 at 12.
Hearing Help made mortgage payments on plaintiff's home from March 2010 through July 2014. Plaintiff's Statement of Undisputed Material Facts ("PSUMF") 21, 23. Hearing Help's last mortgage payment occurred in July 2014. PSUMF 27.
On July 14, 2014, Hearing Help filed a voluntary petition for Chapter 11 bankruptcy. PSUMF 26; Docket No. 30-8 at 1; In re: Hearing Help Express, Inc., No. 14-82161 (N.D. Ill. filed July 14, 2014).
In November 2015, plaintiff sent defendants a written demand for repayment under their guaranties. PSUMF 40. On January 19, 2016, plaintiff followed up by email with Mr. Hovis and asked Mr. Hovis and his wife to honor their personal guaranties; he also offered them a payment alternative. PSUMF 31; Docket No. 30-9. On January 27, 2016, Mr. Hovis responded and declined the payment alternative. PSUMF 32; see also Docket No. 30-10. Defendants have yet to pay any monies to plaintiff under their guaranties. PSUMF 40-41. However, plaintiff has received a payment of $7,471.52 from Hearing Help pursuant to its confirmed bankruptcy plan. Docket No. 39 at 4.
Plaintiff filed his complaint on May 18, 2016. Docket No. 1. Plaintiff brings claims of breach of the guaranties, fraud, and unjust enrichment against both defendants. Id. at 6-10. On February 7, 2017, plaintiff filed his motion for partial summary judgment as to two claims — breach of the guaranties and fraud. Docket No. 30.
Summary judgment is warranted under Federal Rule of Civil Procedure 56 when the "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986). A disputed fact is "material" if under the relevant substantive law it is essential to proper disposition of the claim. Wright v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). Only disputes over material facts can create a genuine issue for trial and preclude summary judgment. Faustin v. City & Cty. of Denver, 423 F.3d 1192, 1198 (10th Cir. 2005). An issue is "genuine" if the evidence is such that it might lead a reasonable jury to return a verdict for the nonmoving party. Allen v. Muskogee, 119 F.3d 837, 839 (10th Cir. 1997).
Where "the moving party does not bear the ultimate burden of persuasion at trial, it may satisfy its burden at the summary judgment stage by identifying a lack of evidence for the nonmovant on an essential element of the nonmovant's claim." Bausman v. Interstate Brands Corp., 252 F.3d 1111, 1115 (10th Cir. 2001) (quoting Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998) (internal quotation marks omitted)). "Once the moving party meets this burden, the burden shifts to the nonmoving party to demonstrate a genuine issue for trial on a material matter." Concrete Works of Colo., Inc. v. City & Cty. of Denver, 36 F.3d 1513, 1518 (10th Cir. 1994) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)). The nonmoving party may not rest solely on the allegations in the pleadings, but instead must designate "specific facts showing that there is a genuine issue for trial." Celotex, 477 U.S. at 324; see Fed. R. Civ. P. 56(e). "To avoid summary judgment, the nonmovant must establish, at a minimum, an inference of the presence of each element essential to the case." Bausman, 252 F.3d at 1115 (citation omitted). When reviewing a motion for summary judgment, a court must view the evidence in the light most favorable to the non-moving party. Id.; see McBeth v. Himes, 598 F.3d 708, 715 (10th Cir. 2010).
"To establish a prima facie case for enforcement of a guaranty under Illinois law, plaintiff must [1] enter proof of the original indebtedness, [2] the debtor's default, and [3] the guarantee." Gen. Elec. Bus. Fin. Servs., Inc. v. Silverman, 693 F.Supp.2d 796, 799 (N.D. Ill. 2010) (alterations and internal quotation marks omitted).
Defendants do not raise any genuine issues of material fact as to whether they have breached their guaranties under the Agreement. Defendants do not contest that Hearing Help owed plaintiff money, that Hearing Help defaulted on its payment obligations, and that defendants guaranteed those obligations. Defendants do, however, dispute whether the guaranties are unambiguous and the amounts due under the guaranties. Docket No. 36 at 14-15. Defendants also claim that the legal fees claimed by plaintiff are unreasonable and that they are unable to pay. Id. The Court addressees each of these issues in turn.
"Under Illinois law, a guaranty is regarded as a legally enforceable contract that must be construed in accordance according to its terms, so long as they are clear and unambiguous." Gen. Elec. Bus. Fin. Servs., Inc., 693 F. Supp. 2d at 800 (N.D. Ill., 2010) (internal quotation marks omitted). "[T]he guaranty's language is ambiguous only if it is `susceptible to having more than one meaning.'" Chromalloy Am. Corp. v. Fields, 1992 WL 38975, at *2 (N.D. Ill. Feb. 26, 1992) (quoting Flora Bank & Trust Co. v. Czyzewski, 583 N.E.2d 720, 725 (Ill. App. 1991)). "Whether a guaranty is ambiguous is a question of law." Id. (citation omitted).
Defendants claim that the guaranties are ambiguous because they "do not define whether the investment under-earning the 15% goal is a default, when the `bonus' interest is payable,
Moreover, even if defendants are correct that the guaranties are ambiguous, under the circumstances here, such ambiguities would not create a genuine issue of material fact precluding summary judgment. Interpretation of an ambiguous contract remains an issue of law if the extrinsic evidence bearing on the ambiguity is undisputed. Moore v. Lomas Mortg. USA, 796 F.Supp. 300, 303 (N.D. Ill. 1992) (citing City of Clinton v. Moffit, 812 F.2d 341, 344 (7th Cir. 1987)) (applying Illinois law). Defendants do not point to any disputed, extrinsic evidence that would bear on the interpretation of guaranties. See Docket No. 36 at 14, ¶ 67. Defendants do, however, argue that the Agreement's recitals are not part of the Agreement, id. at ¶ 66, and thus would be parol evidence of the Agreement's meaning. See Regnery v. Meyers, 679 N.E.2d 74, 78 (Ill. App. 1997) ("a recital is merely an explanation of the circumstances surrounding the execution of the contract"). When considered as extrinsic evidence, the recitals reaffirm that defendants are obligated to personally pay the difference between a 15.0% return and the return plaintiff actually achieves. See Borg-Warner Corp. v. Anchor Coupling Co., 156 N.E.2d 513, 516 (Ill. 1958) ("[I]f the terms and provisions of a contract are ambiguous, or if the writings are capable of more than one construction, parol evidence is admissible to explain and ascertain what the parties intended."). Specifically, the recitals state that "Jim Hovis and his wife Catherine Hovis . . . personally guarantee . . . Investor's achieving 15.0% APR compound interest (personally paying the difference between 12.0% and 15.0% appreciation if necessary)." Docket No. 47-1 at 2. The Court finds that defendants fail to raise any genuine issues of material fact with respect to plaintiff's claim to enforce defendants' guaranties.
Mr. Hovis states that plaintiff has received two payments from Hearing Help under Hearing Help's confirmed bankruptcy plan — one payment of approximately $10,000 and another of approximately $7,000. Docket No. 36-1 at 3, ¶ 8 (referencing the bankruptcy court's order confirming Hearing Help's plan of reorganization). Plaintiff acknowledges that, after filing his motion, he received a payment of $7,471.52, but he does not acknowledge any other payments. Docket No. 39 at 4. The Court finds that whether plaintiff has received an additional payment from Hearing Help is genuinely disputed.
Defendants also argue that plaintiff improperly calculates the amounts due under the guaranties. Docket No. 36 at 15, ¶ 69. In particular, defendants note that the Agreement states that interest on the investment will be "compounded annually." Docket No. 47-1 at 2, ¶ 1 ("12% APR interest, compounded annually") and at 3, ¶ 2 ("15.0% interest compounded annually").
According to plaintiff, plaintiff was owed $133,408 as of January 16, 2017.
According to defendants, plaintiff was owed $112,451.95 as of February 2017, less any amounts received pursuant to the Hearing Help bankruptcy. Docket No. 36 at 15, ¶ 69. Defendants' calculations differ from those of plaintiff's in several ways. In defendants' calculations, the dates that mortgage payments were made varied from month to month, instead of all falling on the twelfth of the month. Docket No. 36-4.
Plaintiff claims that he is owed attorney fees and costs. Docket No. 30 at 12. Plaintiff does not, however, provide any evidence to substantiate his attorney fees and costs or show that such expenses were reasonable. The Court will, therefore, deny plaintiff's request without prejudice for failing to comply with D.C.COLO.LCivR 54.3(b). F.H. Prince & Co. v. Towers Fin. Corp., 656 N.E.2d 142, 153 (Ill. App. 1995) (holding that "open-ended" damages for attorney fees pursuant to a contract could be determined by the court without infringing defendant's Seventh Amendment rights).
Defendants claim that they have not paid the amounts owed on the guaranties because they lack the necessary funds. Docket No. 36 at 14-15, ¶¶ 68, 72. Defendants do not identify any language in the Agreement or authority that indicates their ability to pay is relevant to whether summary judgment should be entered on plaintiff's breach of guaranty claim.
The Court will enter partial summary judgment of liability on plaintiff's breach of guaranty claim pursuant to Fed. R. Civ. P. 56(g). The amount of damages, however, depends on disputed issues of fact.
"A plaintiff seeking to prevail on a claim of fraud must establish: (1) that the defendant made a false representation of material fact; (2) that the one making the representation knew that it was false; (3) that the person to whom the representation was made was ignorant of the falsity; (4) that the representation was made with the intention that it be acted upon; and (5) that the reliance resulted in damage to the plaintiff." Vinton v. Virzi, 269 P.3d 1242, 1247 (Colo. 2012).
As defendants argue, plaintiff does not present evidence that Ms. Hovis made any misrepresentations of material fact. Docket No. 36 at 16, ¶ 74. Plaintiff does not argue otherwise. Docket No. 39 at 10. Accordingly, the Court will deny summary judgment on plaintiff's fraud claim with respect to Ms. Hovis.
Defendants focus on two aspects of Mr. Hovis' alleged fraud in claiming that genuine issues of material fact preclude summary judgment — whether Mr. Hovis knew his 2009 financial statement was false and whether plaintiff reasonably relied on that financial statement. Docket No. 36 at 16-18, ¶¶ 75-79. While it is a close question, the Court is unable to conclude that no reasonable jury could fail to find that Mr. Hovis' valuation and disclosure of his assets and liabilities was "made with a reckless disregard of its truth or falsity" or concealed a "material existing fact, that in equity and good conscience should be disclosed." Bemel Assocs., Inc. v. Brown, 435 P.2d 407, 409 (Colo. 1967) (internal quotation marks omitted). Likewise, the Court cannot conclude as a matter of law that plaintiff reasonably relied on Mr. Hovis' 2009 financial statement. Both issues turn, to some extent, on the credibility of plaintiff's and Mr. Hovis' claims about their subjective mental state, which the Court cannot properly resolve on summary judgment. Accordingly, the Court will deny summary judgment on plaintiff's fraud claim.
For the foregoing reasons, it is
