Premier Interval Resorts, Inc. v. Revanche, L.L.C. (In Re Premier Interval Resorts, Inc.)

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
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In The Matter Of: PREMIER INTERVAL RESORTS, INC.
Debtor
__________________________
PREMIER INTERVAL RESORTS, INC.,
Appellant,
versus
REVANCHE, L.L.C., et al.,
Appellee.
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Appeal from the United States District Court
For the Northern District of Texas
(No. 3:02-CV-1772-G)
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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Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5th Cir. R.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.
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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
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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.
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Nevada law required Premier to be self-insured in order to legally operate a hotel and
casino.
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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,
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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
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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.
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