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Life Share Collateral Holdings, LLC v. Hood

United States District Court, D. Minnesota

May 6, 2014

Life Share Collateral Holdings, LLC, Plaintiff,
v.
Charles Hood, Defendant,
v.
Wells Fargo Bank, N.A., Third-Party Defendant.

Adam M. Simon, The Simon Law Firm, and Thomas H. Schaefer, Erstad & Riemer, P.A., appeared for Plaintiff Life Share Collateral Holdings, LLC.

Jeffrey C. Brown, Sapientia Law Group, appeared for Defendant Charles Hood.

ORDER

JOAN N. ERICKSEN, District Judge.

An insurer issued a life insurance policy on the life of Charles Hood to a trust that Hood had established. The trust, Hood, and a lender entered into an agreement to provide financing for the payment of premiums for the policy. After the policy had lapsed due to nonpayment of premiums, the lender's successor, Life Share Collateral Holdings, LLC (LSCH), brought this action against Hood to enforce a personal guarantee. Hood asserted counterclaims for fraud and conversion, as well as third-party claims against the trust's trustee, Wells Fargo Bank, N.A., for breach of fiduciary duty and violation of Minn. Stat. ยง 325D.44 (2012). Wells Fargo Bank asserted counterclaims for declaratory relief. The Court previously granted summary judgment in favor of Wells Fargo Bank on Hood's claims against it. The case is before the Court on Hood's Motion for Summary Judgment. Hood moved for summary judgment on LSCH's claim against him, as well as his fraud counterclaim.[1] For the reasons set forth below, the Court denies Hood's motion.

Summary judgment is proper "if 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). To support an assertion that a fact cannot be or is genuinely disputed, a party must cite "to particular parts of materials in the record, " show "that the materials cited do not establish the absence or presence of a genuine dispute, " or show "that an adverse party cannot produce admissible evidence to support the fact." Fed.R.Civ.P. 56(c)(1)(A)-(B). "The court need consider only the cited materials, but it may consider other materials in the record." Fed.R.Civ.P. 56(c)(3). In determining whether summary judgment is appropriate, a court must view genuinely disputed facts in the light most favorable to the nonmovant, Ricci v. DeStefano, 557 U.S. 557, 586 (2009), and draw all justifiable inferences from the evidence in the nonmovant's favor, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

Borrower

Hood first argued that summary judgment is appropriate because he is not the borrower on the note. Instead, he argued that the trust is the borrower. LSCH responded that its "claims against Hood arise out of his default on a personal guaranty [he] made of obligations under the... loan taken by Hood Trust as Borrower." At the motion hearing, LSCH stated that it is not attempting to hold Hood liable as the borrower for the entire amount of the loan. Hood's argument that he is not the borrower on the note does not render summary judgment in his favor appropriate because LSCH's claim against him is one for breach of a personal guarantee.

Fraud

Next, Hood argued that the personal guarantee was secured by fraud. He began his argument by essentially copying the allegations he had made in support of his fraud counterclaim:

When Charles Hood executed the aforementioned Loan and Security Agreement, he relied on Life Share Financial, LLC's representations and warranties and "Commitment" to pay the premiums on the insurance policy using the full amount of the $941, 083 loan to keep the policy in force. As a direct, proximate, and attributable result of Life Share's deceit, Charles Hood has been damaged by the lapse of the Lincoln policy and Life Share's demand that Charles Hood pay the insurance policy premiums to keep the policy in force beyond the two-year incontestability period.

The personal guarantee that LSCH seeks to enforce here is not the same as the loan and security agreement to which Hood referred. Moreover, Hood's interpretation of the loan and security agreement is not supported by the agreement's terms. Subject to certain conditions, the lender agreed to make loans up to a certain amount to pay the policy premiums. It did not unconditionally commit to pay the premiums.

Hood also argued that he did not execute the personal guarantee that LSCH seeks to enforce here. According to Hood, he signed a personal guarantee in early December 2008 in connection with an application for a life insurance policy that never issued. He asserted that the signature page of the December 2008 guarantee was affixed to a January 2009 guarantee, which is the basis of LSCH's claim against him. Although Hood stated that he only signed an application, loan documents, and guarantee associated with a policy to be issued by Phoenix Variable Life Insurance Company, there is evidence that he knew of the "change in carrier, " that he signed the loan and security agreement associated with the Lincoln policy, and that he signed associated loan documents. Viewing the record in the light most favorable to LSCH, the Court denies Hood's motion for summary judgment insofar as he asserts the personal guarantee that LSCH seeks to enforce here was procured by fraud.

Enforce the guarantee

Next, Hood maintained that LSCH "has not shown it has standing to enforce the personal guaranty." There is evidence in the record that the original lender, Life Share Financial, LLC, assigned its interest in the loan and security agreement and associated documents to Gesher LLC. There is also evidence in the record that Gesher assigned its interest in the loan and security agreement and associated documents to LSCH. Viewing ...


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