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Avnet, Inc. v. Catalyst Resource Group, LLC

United States District Court, N.D. Iowa, Cedar Rapids Division

April 15, 2014

AVNET, INC., Plaintiff,
v.
CATALYST RESOURCE GROUP, LLC and DAVID A. WILD, Defendants.

RULING ON MOTIONS FOR SUMMARY JUDGMENT

JON STUART SCOLES, Magistrate Judge.

I. INTRODUCTION

This matter comes before the Court on the Motion for Summary Judgment (docket number 16) filed by Plaintiff Avnet, Inc. ("Avnet") on January 23, 2014, the Resistance (docket number 23) filed by Defendant David A. Wild ("Wild") on February 28, and the Reply (docket number 28) filed by Avnet on March 11. Also before the Court is the Cross-Motion for Summary Judgment (docket number 24) filed by Wild on February 28, the Resistance (docket number 31) filed by Avnet on March 24, and the Reply (docket number 32) filed by Wild on March 26. Pursuant to Local Rule 7.c, the motions will be decided without oral argument.

II. PROCEDURAL HISTORY

On March 13, 2013, Plaintiff Avnet, Inc. filed a complaint against Defendants Catalyst Resource Group, LLC ("Catalyst") and David A. Wild, seeking judgment on a promissory note and guaranty. Avnet claimed that Catalyst owed money on a promissory note issued in favor of Laurus Technologies, Inc. ("Laurus"), which was subsequently assigned to Avnet. Avnet also asserts that Wild is liable on the note by virtue of his personal guaranty.

On May 23, 2013, Wild filed a pro se answer, denying the material allegations. In an affirmative defense, Wild asserted that Avnet was seeking to recover an amount in excess of the rights which it obtained pursuant to a Forbearance Agreement with Laurus.

Also on May 23, Avnet filed a request for entry of default against Catalyst. The Clerk of Court docketed a default entry on the following day. On June 12, Avnet filed a motion for entry of default judgment against Catalyst. On July 2, the Court ordered that judgment enter in favor of Avnet and against Catalyst in the amount of $770, 065.80, plus post-judgment interest in the amount of 0.16% per annum. The Clerk of Court then entered judgment against Catalyst in that amount.

Meanwhile, on June 21, the Court adopted a Scheduling Order and Discovery Plan submitted by Avnet and Wild. Also at that time, the case was referred to me for the conduct of all further proceedings and the entry of judgment, in accordance with 28 U.S.C. ยง 636(c) and the consent of the parties. After consulting with counsel, this matter has been scheduled for a nonjury trial beginning on October 14, 2014.

On January 23, 2014, Avnet filed its instant motion for summary judgment. Avnet argues that it is undisputed the note remains unpaid, Wild signed a personal guaranty, and judgment should enter accordingly. On February 28, Wild (who is now represented by counsel) filed a resistance to Avnet's motion for summary judgment and filed a cross-motion for summary judgment. Wild argues, among other things, that he signed a "special guaranty, " rather than a "general guaranty, " thereby prohibiting Avnet from enforcing the guaranty given to Laurus.

III. RELEVANT FACTS

According to Wild's affidavit, Catalyst Resources Group, LLC has only two members: Braveheart Equity Holdings, LLC and Orion's Pride, LLC. Wild is the sole member of Braveheart. Bruce Willey is a member of Orion's Pride. Wild served as manager of Catalyst. Willey is a licensed attorney and served as Wild's personal attorney and as corporate attorney for Catalyst.

According to Wild, it was intended that Catalyst would be a lender or investor in "start-up and development projects including timber, ethanol, and land development projects." Wild avers that "[w]e anticipated raising approximately $100, 000, 000.00 in capital for these investments." Because neither Wild nor Willey had "sufficient personal resources, " they knew it would be necessary to obtain "outside financing."

Willey was a close friend of John Udelhofen, CEO of Laurus Technologies, Inc., and did legal work for Laurus. In his affidavit, Willey states that he believed Laurus was "financially a very strong company." According to Wild, Laurus had sales in 2007 of about $56 million and income from its operations of over $1.2 million. According to Willey, the parties discussed Catalyst investing more than $25 million in various development and other projects being pursued by Laurus.

It was agreed that Laurus would lend Catalyst $500, 000 as "seed money" to secure additional financing. According to Wild, the money would be used "to compensate the owners of bank certificates of deposit, U.S. Treasury bills, or other secure collateral who, in exchange for this compensation, would allow Catalyst to obtain financing by pledging the secure assets as collateral." Wild asserts that Catalyst had previously engaged a Belgium investment banking firm to assist in that process.

On May 5, 2008, Catalyst signed a promissory note in favor of Laurus for the principal sum of $500, 000. The note required interest paid at the rate of 8% per annum. The due date was March 31, 2009. The note was executed by Wild as manager for Catalyst. The promissory note includes language relating to "JOINT AND SEVERAL OBLIGATION."

This Note shall be the joint and several obligation of the Borrower and all sureties, guarantors and endorsers, if any, and shall be binding upon them and their successors and assigns. This means that the rights of the Holder may be enforced against the persons who are obligated to pay the sums owing under this Note either individually or together.

Contemporaneously, Wild signed an individual "GUARANTY, " which states:

The undersigned do hereby personally guarantee, severally and jointly, to Laurus Technologies, Inc, the Holder, full, complete and timely performance by the Borrower, of all obligations of the Borrower under the foregoing Promissory Note.

The promissory note was modified 13 times - extending the due date - with the final extension executed on March 8, 2012. Pursuant to the modification, the due date was extended from March 31, 2012 to June 30, 2012.

Upon receipt of the $500, 000 from Laurus, Catalyst wired the money to Ramis, Limited ("Ramis"). According to Wild, he was assured by Willey that the $500, 000 would be secured by U.S. Treasury bonds or similar financially solid collateral. Willey assured Wild that he would handle the closing of the transaction "so that this collateral would be obtained and held in escrow until Ramis had obtained the additional financing for Catalyst." Instead, the money was sent and no security was received. Ramis failed to obtain additional financing and, apparently, the money is gone.

On August 29, 2012, Laurus assigned the promissory note to Avnet. Laurus had previously borrowed $2.9 million from Avnet, as evidenced by a promissory note dated November 21, 2011. Laurus was unable to pay Avnet the amount owed. As part of a Forbearance Agreement, Laurus agreed to assign the Catalyst promissory note and Wild guaranty to Avnet. According to its terms, the assignment was "effective as of May 8, 2012."

In September 2012, an attorney for Avnet sent a letter to Catalyst, demanding payment of $500, 000, plus interest, not later than September 19, 2012. On November 2, 2012, Avnet's attorney wrote to Wild in his capacity as guarantor, and demanded payment not later than November 9, 2012. It is undisputed that neither Catalyst nor Wild have paid any amount on the promissory note.

IV. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate if the moving party shows that "there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(a). A genuine dispute as to a material fact "exists if a reasonable jury could return a verdict for the party opposing the motion.'" Anderson v. Durham D & M, L.L.C., 606 F.3d 513, 518 (8th Cir. 2010) (quoting Humphries v. Pulaski County Special School District, 580 F.3d 688, 692 (8th Cir. 2009)). A fact is a "material fact" when it "might affect the outcome of the suit under the governing law...." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In order to establish the existence of a genuine dispute as to a material fact, the non-moving party "may not merely point to unsupported self-serving allegations.'" Anda v. Wickes Furniture Co., 517 F.3d 526, 531 (8th Cir. 2008) (quoting Bass v. SBC Communications, Inc., 418 F.3d 870, 872 (8th Cir. 2005)). Instead, the non-moving party "must substantiate [its] allegations with sufficient probative evidence that would permit a finding in [its] favor.'" Anda, 517 F.3d at 531 (quoting Bass, 418 F.3d at 873); see also Anderson, 477 U.S. at 248 (A nonmoving party must offer proof "such that a reasonable jury could return a verdict for the nonmoving party."). "Evidence, not contentions, avoids summary judgment.'" Reasonover v. St. Louis County, Mo., 447 F.3d 569, 578 (8th Cir. 2006) (quoting Mayer v. Nextel W. Corp., 318 F.3d 803, 809 (8th Cir. 2003)). The court must view the record in the light most favorable to the nonmoving party and afford it all reasonable inferences. Baer Gallery, Inc. v. Citizen's Scholarship Foundation of America, Inc., 450 F.3d 816, 820 (8th Cir. 2006) (citing Drake ex rel. Cotton v. Koss, 445 F.3d 1038, 1042 (8th Cir. 2006)).

V. DISCUSSION

It is undisputed that on May 5, 2008, Wild signed a promissory note in his capacity as manager of Catalyst. The note obligated Catalyst to pay Laurus the sum of $500, 000, plus interest. The note - which was extended by modification multiple times - is now due. It is also undisputed that nothing has been paid on the note. A default judgment has been entered in favor of Avnet and against Catalyst in the amount of $770, 065.85, plus post-judgment interest.

It is undisputed that contemporaneously with the execution of the note, Wild executed a personal guaranty.[1] Wild personally guarantees full, complete, and timely performance of all Catalyst's obligations under the note. Significantly, however, the guaranty is directed "to Laurus Technologies, Inc., the ...


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