Court Opinion

ID: 33485
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:05:37+00
Date Added: 2024-06-11T16:49:56.183381
License: Public Domain

United States Court of Appeals
                                                                                       Fifth Circuit
                                                                                    F I L E D
                                                                                    December 5, 2003
                     IN THE UNITED STATES COURT OF APPEALS
                              FOR THE FIFTH CIRCUIT
                                                                                 Charles R. Fulbruge III
                                                                                         Clerk
                                __________________________

                                       No. 03-10207
                                     Summary Calendar
                                __________________________

In The Matter Of: PREMIER INTERVAL RESORTS, INC.

                                                                                           Debtor
                                __________________________

PREMIER INTERVAL RESORTS, INC.,

                                                                                       Appellant,

versus

REVANCHE, L.L.C., et al.,

                                                                                        Appellee.

                 ___________________________________________________

                         Appeal from the United States District Court
                             For the Northern District of Texas
                                   (No. 3:02-CV-1772-G)
                 ___________________________________________________

Before JONES, BENAVIDES, and CLEMENT, Circuit Judges.

PER CURIAM:*

         *
        Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5th Cir. R.
47.5.4.

                                                1
          Appellant Premier Interval Resorts, Inc. (“Premier”) appeals the district court’s affirmance

of the bankruptcy court’s ruling that a certificate of deposit (“CD”) was cash collateral, and that, as

a result, Premier had an obligation to seek permission from the court or Appellee Revanche

(“Revanche”) to use the proceeds therefrom. Finding no error, we affirm.

                                 I. FACTS AND PROCEEDINGS

          Premier, the debtor in the bankruptcy court, borrowed $42 million from Meralex, secured by

a Deed of Trust on the property to be purchased with the $42 million, a casino named the Maxim.1

In addition, Premier made two deposits at Bank West in the form of two CD’s, one for $2.5 million

and one for $350,000. These CD’s served as collateral for a letter of credit issued to the Nevada

Insurance Commission, which served to put Premier in compliance with Nevada’s workers’

compensation laws.2

          Shortly after securing this funding, Premier filed for Chapter 11 bankruptcy. Prior to

foreclosure, Meralex assigned all of its interest to a newly-created, wholly-owned subsidiary,

Revanche. Revanche therefore proceeded to foreclose on the Maxim. At the foreclosure sale,

Revanche acquired title to the Maxim for $10 million. Revanche then filed a proof of claim for the

deficiency amount owed by Premier, approximately $32 million.          Because after the sale of the

Maxim there was no estate left to administer or reorganize, Premier sought to dismiss the bankruptcy.

After Revanche responded to Premier’s motion to dismiss the bankruptcy, it filed a Motion to

          1
        Premier makes allegations regarding another $25 million supposedly pledged and then
withdrawn by Howard Jenkins. Jenkins was allegedly connected with Meralex, and pledged the
money in exchange for 50% of Premier’s stock. The dealings between Premier and Jenkins, while
highlighted in Premier’s brief, are irrelevant for purposes of this appeal.
          2
           Nevada law required Premier to be self-insured in order to legally operate a hotel and
casino.

                                                   2
Prohibit Use of Cash Collateral and for Adequate Protection, claiming that the remains of the $2.5

million CD that was returned to Premier was cash collateral under the Deed of Trust. The bankruptcy

court granted Revanche’s motion, finding that the CD did qualify as cash collateral under the Deed

of Trust. The district court affirmed the bankruptcy court’s order and final judgment. Premier timely

appealed. This Court has jurisdiction under 28 U.S.C. § 158(d) (2003).

                                  II. STANDARD OF REVIEW

       This Court reviews the bankruptcy court’s findings of fact for clear error, and its conclusions

of law de novo. In re Williams, 337 F.3d 504, 508 (5th Cir. 2003).

                                         III. DISCUSSION

A.     A CD is a note under Nevada law.

       The Deed of Trust stipulates that it will be governed by the laws of Nevada. Deed of Trust

at § 7.6. Nevada’s Uniform Commercial Code statutorily defines a “certificate of deposit” as “an

instrument containing an acknowledgment by a bank that a sum of money has been received by the

bank and a promise by the bank to repay the sum of money.” NEV. REV. STAT. 104.3104 (2002)

(emphasis added). In the same statutory section, a note is defined as a promise of payment. Id.

Encompassing both the definition of a certificate of deposit and the definition of a note, 104.3104

defines negotiable instruments as

       an unconditional promise or order to pay a fixed amount of money, with or without
       interest or other charges described in the promise or order, if it (a) is payable to bearer
       or to order at the time it is issued or first comes into possession of a hol der; (b) is
       payable on demand or at a definite time; and (c) does not state any other undertaking
       or instruction by the person promising or ordering payment to do any act in addition
       to the payment of money . . ..

Id. (emphasis added). By definition then, a CD is a promise of payment; a promise of payment, in

turn, is a note. Further, the Uniform Commercial Code Comment to § 104.3104 makes clear that,

                                                   3
while the former version of Nevada’s Article 3 treated CD’s as instruments separate from notes and

drafts, the revised Article 3 treats CD’s as notes. Id. The bankruptcy court, and consequently the

district court, did not err in determining that the CD in question was a note under Nevada law.

B.     The CD “relat[es] to” the Maxim.

       Neither party disputes that section 3.1 of the Deed of Trust expressly grants a security interest

in certain items to Meralex, which Meralex transferred to Revanche. Specifically, Premier granted

       to [Revanche] (as Creditor and Secured Party) as security for the payment of the Note
       and all other sums secured by this Deed of Trust a security interest in all the following
       described property presently owned or hereinafter acquired wherever the same be
       situated relating to or arising from the [Maxim]: . . . any other tangible . . . property
       or rights or any other matters listed in any “Financing Statement” (all as hereinafter
       defined) of [Premier], all of which property, rights or other matters are hereby
       incorporated herein by this reference.

Deed of Trust at § 3.1 (first emphasis added). Premier claims that this language is ambiguous.

       Under Nevada law, “[a] contract is ambiguous if it is reasonably susceptible to more than one

interpretation.” Margrave v. Dermody Properties, Inc., 878 P.2d 291, 293 (Nev. 1994). Only if the

contract is ambiguous may parol evidence be introduced. Trans W. Leasing Corp. v. Corrao Constr.

Co., Inc., 652 P.2d 1181, (Nev. 1982). Although Premier maintains that the parties had no intent to

increase the scope of the security agreement by incorporating items listed in financing statements, and

claims to have evidence to that effect, there is no ambiguity in the contract such that we would permit

the introduction of parol evidence. The co ntract clearly states that items listed in a financing

statement are the subject of Revanche’s security interest. We must therefore determine whether the

Financing Statement lists Premier’s returned CD.

       The Schedule 1 Financing St atement in Paragraph (h) identifies the following items:

“instruments, documents, notes, drafts, and letters of credit (other than letters of credit in favor of

                                                  4
Creditor), which arise from or relate to construction on the Land or to any business now or later to

be conducted on it . . . .” Financing Statement (emphasis added). Nevada law, as discussed above,

includes CD’s in its definition of “notes”.

       Because the CD is a note, and notes are listed in the Financing Statement, the CD is subject

to Revanche’s security interest if it “relate[s] to . . . any business now or later to be conducted” on

the land. We conclude that this CD is related to the business of the Maxim. The CD would not have

been purchased had it not been necessary for the running of the Maxim. More importantly, once the

Maxim was no more, the CD was returned.

       This is not to say, as Premier suggests, that Revanche’s interpretation of the financing

statement means that all assets mentioned on a financing statement are secured by the Deed of Trust.

If Premier had, say, two properties, the Maxim and the Minim, a CD taken out for purposes of self-

insurance on the Minim would not “relat[e] to” the Maxim. Such assets would not be secured by the

Deed of Trust. Unfortunately for Premier, the CD in question is secured by the Deed of Trust.

                                       IV. CONCLUSION

       Because the CD in question is listed in the Schedule 1 Financing Statement, which is in turn

incorporated into the Security Agreement, the district court did not err in concluding that the Deed

of Trust granted Revanche a security interest in the CD and the proceeds therefrom. Accordingly,

the ruling of the district court is AFFIRMED. The motion of Revanche to dismiss and for costs is

denied as MOOT.

                                                  5