United States District Court, D. Colorado
ROBERT E. MOSES, Plaintiff,
JAMES E. HOVIS and CATHERINE HOVIS, Defendants.
A. BRIMMER UNITED STATES DISTRICT JUDGE
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.
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. At the time of
the Agreement, Mr. Hovis was the chairman of Hearing
Help's board. Id. at 2. The investment agreement
is titled “Robert E. Moses Fixed-Interest Investment in
Hearing Help Express with 48-Month Stock Purchase Option,
” id., but is referred to herein simply as
“the Agreement.” Pursuant to the Agreement,
plaintiff invested $120, 000.00 in Hearing Help on February
12, 2010, which accrued interest beginning on the date of
investment at 12.00% APR, compounded annually, with the
balance of principal and interest to be paid to plaintiff
“no later than forty-eight months after Date of
Investment.” Id. at 2, ¶ 1. For
forty-eight months after investment, plaintiff had the option
of converting his investment into stock in Hearing Help at a
price of $40.00 per share. Id., ¶ 2.
Additionally, the Agreement provided that, if Hearing Help
was “not sold within forty-eight months, then the
company shall repay the balance of Invested Funds and accrued
interest at 12.0% APR and [James] Hovis shall make up the
difference so that Investor has received 15.0% interest
compounded annually.” Id. at 3, ¶ 2;
see also Docket No. 47-1 at 2 (“James E. Hovis
. . . is confident that Investor named below will earn at
least 15.0% compounded including the future value of
Investor's stock option, and Jim Hovis and his wife
Catherine Hovis therefore personally guarantee (1) the safety
of this investment, (2) all payments to Investor, (3)
Investor's achieving 15.0% APR compound interest
(personally paying the difference between 12.0% and 15.0%
appreciation if necessary), and (4) the fulfillment of
Investor's stock purchase option.”). If Hearing
Help failed to make any required payments, plaintiff had the
option to accelerate repayment, making the principal and
accrued interest payable immediately after a five-day cure
period. Docket No. 47-1 at 3, ¶ 6.
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.
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. Second, the 2009
financial summary lists a liability of $602, 300.00 for
“Net balance of loans to/from family-controlled
corporations at 9% int.” Docket No. 30-4 at 33.
Defendants claim that this entry accurately summarizes the
net liability from Mr. Hovis borrowing $3, 823, 845 from
Hearing Help and another company he controlled and lending
$3, 221, 572 to other companies. See Docket No. 30-4
at 37. Plaintiff claims that this vague description makes no
mention of Mr. Hovis' obligation to repay Hearing Help
more than $3 million and therefore is materially misleading.
Docket No. 39 at 5; Docket No. 36-5.
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.
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).
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.
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.
STANDARD OF REVIEW
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).
“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).
Breach of ...