Oconto Falls Tissue, Inc. v. ST Paper, LLC

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
August 29, 2023
A party may file with the Supreme Court a
Samuel A. Christensen petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2022AP729 Cir. Ct. No. 2017CV104

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT III

OCONTO FALLS TISSUE, INC.,

PLAINTIFF-APPELLANT,

V.

ST PAPER, LLC,

DEFENDANT-THIRD-PARTY
PLAINTIFF-RESPONDENT,

V.

TISSUE TECHNOLOGY INC., PARTNERS CONCEPTS DEVELOPMENT,
INC. AND TISSUE PRODUCTS TECHNOLOGY CORP.,

THIRD-PARTY DEFENDANTS.

APPEAL from an order of the circuit court for Oconto County:
JAY N. CONLEY, Judge. Affirmed.

Before Stark, P.J., Hruz and Gill, JJ.
No. 2022AP729

Per curiam opinions may not be cited in any court of this state as precedent

or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).

¶1 PER CURIAM. Oconto Falls Tissue, Inc. (“OFTI”) appeals an
order granting summary judgment in favor of ST Paper, LLC, dismissing OFTI’s
claims against ST Paper for failing to repay several loans. OFTI argues that
summary judgment should not have been granted because there are genuine issues
of material fact as to whether OFTI met the requirements for enforcing a lost,
destroyed or stolen instrument under WIS. STAT. § 403.309 (2021-22).1 We reject
OFTI’s arguments and affirm.

BACKGROUND

¶2 On April 16, 2007, ST Paper purchased the assets of a paper mill
from OFTI and other companies affiliated with OFTI’s then-president for
approximately $86,400,000. To finance the purchase, ST Paper obtained a
$70,000,000 loan from Goldman Sachs Credit Partners L.P. ST Paper also issued
four subordinated promissory notes to OFTI (“Seller Notes”), promising to pay a
total of nearly $30,600,000. Pursuant to a subordination agreement, the
Seller Notes and the indebtedness therein were subordinated to the
“Senior Indebtedness” (in essence, the Goldman Sachs loan), thereby requiring
full payment of that indebtedness before any payments could be made on the
Seller Notes.

1
All references to the Wisconsin Statutes are to the 2021-22 version unless otherwise
noted.

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No. 2022AP729

¶3 In June 2017, OFTI commenced this action, alleging breach of
contract and unjust enrichment claims against ST Paper. OFTI claimed that
ST Paper had failed to satisfy its obligations under all four Seller Notes.

¶4 ST Paper and OFTI later filed cross-motions for summary judgment.
As relevant to this appeal, ST Paper argued that OFTI lacked standing to enforce
Seller Notes Nos. 1, 3 and 4 because OFTI had previously transferred or assigned
those notes to third parties. ST Paper further asserted that OFTI could not enforce
the remaining note—Seller Note No. 2—because OFTI admitted during discovery
that it did not possess the original of that note. In response, OFTI conceded that it
had either transferred or assigned Seller Notes Nos. 1, 3 and 4, and that those notes
were no longer at issue in this case. OFTI also conceded that it no longer
possessed the original Seller Note No. 2. OFTI nevertheless argued that Seller
Note No. 2 was still enforceable under WIS. STAT. § 403.309 because no other
party had demanded repayment pursuant to the note and because the original note
could not be located.2

¶5 The circuit court subsequently granted ST Paper’s motion for
summary judgment and dismissed OFTI’s claims against ST Paper. In doing so,
the court concluded that OFTI could not enforce Seller Note No. 2
because: (1) OFTI did not possess the original note; and (2) OFTI failed to

2
OFTI also noted that it had “the original” of a different note, dated April 11, 2007,
which reflected “the same debt” as Seller Note No. 2, which was executed on April 16, 2007.
Although OFTI’s purpose for pointing out this fact is unclear, OFTI seemed to intimate that its
possession of this other note—a note that was undisputedly not the note at issue—would allow
OFTI to enforce the note at issue because it reflected the same debt. On appeal, OFTI again
discusses the existence of the April 11 note that reflected the same debt as the debt in Seller Note
No. 2. In response, ST Paper argues that OFTI cannot enforce the April 11 version of Seller Note
No. 2. OFTI, in turn, concedes in its reply brief that only the April 16 note is at issue in this case.
Accordingly, we will not further address the April 11 note.

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No. 2022AP729

produce sufficient evidence to meet WIS. STAT. § 403.309’s exception for a lost,
destroyed or stolen note.3 Specifically, as to the exception in § 403.309, the court
recognized that the “statute tells you exactly what you have to show me and you
have to show me when it was lost. You have to give me information about it.”

¶6 OFTI now appeals. Additional facts will be provided as necessary
below.

DISCUSSION

¶7 We review a grant of summary judgment de novo, employing the
same methodology as the circuit court. Stroede v. Society Ins., 2021 WI 43, ¶9,
397 Wis. 2d 17, 959 N.W.2d 305. Summary judgment shall be granted if “the
pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law.” WIS.
STAT. § 802.08(2). This case also involves the application of WIS. STAT.
§ 403.309, which is a question of law that we review de novo. See Security Fin.
v. Kirsch, 2019 WI 42, ¶10, 386 Wis. 2d 388, 926 N.W.2d 167.

¶8 In order to enforce an instrument, such as a promissory note, a
person must be: (1) “the holder of the instrument”; (2) “a nonholder in possession
of the instrument who has the rights of a holder”; or (3) “a person not in
possession of the instrument who is entitled to enforce the instrument under [WIS.

3
OFTI mischaracterizes the circuit court’s decision as concluding that Seller Note No. 2
could not be enforced under WIS. STAT. § 403.309 “because the original [n]ote was not
produced.” This statement is patently incorrect. As stated above, the court concluded that OFTI
could not enforce the note because it neither possessed the note nor satisfied the requirements
under § 403.309.

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No. 2022AP729

STAT. §] 403.309 or 403.418(4).”4 WIS. STAT. § 403.301; see also WIS. STAT.
§ 403.104(1)-(2) (defining “negotiable instrument” and “instrument”). “Generally
speaking, a ‘holder’ is the person in possession of the instrument.” Bank of N.Y.
Mellon v. Klomsten, 2018 WI App 25, ¶22, 381 Wis. 2d 218, 911 N.W.2d 364
(citing WIS. STAT. § 401.201(2)(km)1.). OFTI does not possess the original Seller
Note No. 2, nor does it argue that § 403.418(4) is applicable here. Therefore, the
only issue in this appeal is whether OFTI is entitled to enforce Seller Note No. 2
under § 403.309.5

¶9 WISCONSIN STAT. § 403.309(1) provides that a person who is not in
possession of an instrument may nevertheless enforce that instrument if all of the
following apply:

(a) The person was in possession of the instrument and
entitled to enforce it when loss of possession occurred.

(b) The loss of possession was not the result of a transfer by
the person or a lawful seizure.

(c) The person cannot reasonably obtain possession of the
instrument because the instrument was destroyed, its
whereabouts cannot be determined or it is in the wrongful
possession of an unknown person or a person that cannot be
found or is not amenable to service of process.

4
To the extent that OFTI attempts to argue that it can enforce Seller Note No. 2 because
a copy of that note can be authenticated under WIS. STAT. § 909.015(1) or 909.02(9), we reject
that argument as undeveloped and unsupported by legal authority. See State v. Pettit, 171
Wis. 2d 627, 646-47, 492 N.W.2d 633 (Ct. App. 1992) (we need not address an argument that is
undeveloped and unsupported by legal authority).
5
OFTI contends for the first time on appeal that it is a “holder in due course” pursuant to
WIS. STAT. § 403.302. In response, ST Paper argues that this argument fails because OFTI
forfeited the argument by not raising the issue in the circuit court and because OFTI cannot be a
“holder” without possessing the original Seller Note No. 2. OFTI does not respond to these
arguments in its reply brief and therefore concedes their validity. See United Coop. v. Frontier
FS Coop., 2007 WI App 197, ¶39, 304 Wis. 2d 750, 738 N.W.2d 578 (appellant’s failure to
respond in reply brief to an argument made in response brief may be taken as a concession).

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No. 2022AP729

A person seeking to enforce an instrument under § 403.309(1) must also prove the
terms of the instrument and the person’s right to enforce the instrument.
Sec. 403.309(2).

¶10 Here, the record contains little evidence related to OFTI’s possession
of Seller Note No. 2. In opposing summary judgment, OFTI presented evidence
showing that ST Paper had issued Seller Note No. 2 to OFTI, that OFTI promptly
transferred the note to a third party, that OFTI eventually reacquired the note, that
ST Paper did not subsequently acquire the note, and that no other party had
demanded repayment of the note from ST Paper. These facts—which we assume
are true for purposes of summary judgment—fail to establish the exception for
enforcing a lost, destroyed or stolen instrument under WIS. STAT. § 403.309.

¶11 As ST Paper correctly observes, the available facts do not show
approximately when OFTI lost possession of the note or whether OFTI was
entitled to enforce the note at that time. See WIS. STAT. § 403.309(1)(a). The
facts also provide no basis for a fact finder to reasonably find or infer that OFTI
did not lose possession of the note as a result of either a transfer or a lawful
seizure. See § 403.309(1)(b). Finally, the record contains no facts from which a
fact finder could reasonably find or infer that OFTI “cannot reasonably obtain
possession of the instrument because the instrument was destroyed, its
whereabouts cannot be determined or it is in the wrongful possession of an
unknown person or a person that cannot be found or is not amenable to service of
process.” See § 403.309(1)(c).

¶12 Still, OFTI argues that it has met each of the requirements in WIS.
STAT. § 403.309(1), asserting—without citing any evidence in the record—that
“[Seller Note No. 2] was in the possession of [OFTI] when it was lost,” that the

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No. 2022AP729

note was not transferred or lawfully seized, and that it “cannot say” which
circumstance under § 403.309(1)(c) “applies because [the note] is lost.” OFTI’s
arguments, however, are not evidentiary facts upon which we can base a summary
judgment decision. See Helland v. Kurtis A. Froedtert Mem’l Lutheran Hosp.,
229 Wis. 2d 751, 756, 601 N.W.2d 318 (Ct. App. 1999) (“It is not enough to rely
upon unsubstantiated conclusory remarks, speculation, or testimony which is not
based upon personal knowledge [when opposing a motion for summary
judgment].”); see also WIS. STAT. § 802.08(3). Furthermore, to our knowledge,
the record does not even contain evidence supporting the fact that OFTI actually
“lost” the original note or could not find it; OFTI appears to have made that
assertion only in written and oral arguments.

¶13 OFTI also repeatedly emphasizes that no other party has made a
claim regarding Seller Note No. 2 and that any claim would now be unenforceable
under the relevant statute of limitations. Even if we assume that those
propositions are true and that they could create an inference that OFTI owns the
absent note at issue, they do not create any inference—much less a reasonable
one—that OFTI had a right to enforce the note when the note was lost, see WIS.
STAT. § 403.309(1)(a), nor do they create any inferences supporting the remaining
requirements in § 403.309(1).

¶14 OFTI suggests that WIS. STAT. § 403.309 does not require any more
evidence than the evidence OFTI provided because “no one can come to court and
say what happened to [the note] because it is lost” and “an explanation as to what
happened to the note … is absolutely impossible.” OFTI suggests that if more
evidence were required, then § 403.309 would be superfluous.

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No. 2022AP729

¶15 OFTI’s argument is misplaced. By concluding that OFTI did not
present sufficient evidence supporting each of the requirements in WIS. STAT.
§ 403.309(1), we are not suggesting that OFTI needed to produce evidence
detailing exactly how, when and where OFTI lost possession of Seller Note No. 2,
such that OFTI could actually locate the note. Nevertheless, a party must do more
than simply provide evidence that the party owned the instrument at one time, as
OFTI did in this case. See id. For example, a party seeking to enforce a lost
instrument could provide an affidavit or testimony averring: (1) approximately
when and where the party last knowingly possessed the instrument; (2) any efforts
made to locate the instrument; (3) that the party was entitled to enforce the
instrument during the time period when the party lost possession of it; (4) that the
party has not transferred the instrument since acquiring it; (5) that the instrument
was not lawfully seized; and (6) that the party has no knowledge regarding the
current whereabouts of the instrument. See id. Of course, the evidence in each
case might be different, but it is by no means, as OFTI argues, “absolutely
impossible” to produce evidence supporting the requirements in § 403.309.

¶16 Finally, our conclusion that OFTI has not produced sufficient
evidence under WIS. STAT. § 403.309 is supported by decisions in other
jurisdictions applying analogous statutes.6 See, e.g., Seven Oaks Enters., L.P. v.
Devito, 198 A.3d 88, 99-100 (Conn. App. Ct. 2018) (concluding “[t]here was no
evidence presented from which the jury reasonably could infer that the note was

6
As an alternative basis for affirming the circuit court’s decision, ST Paper argues that
the subordination agreement bars OFTI’s claims due to the existence of “Senior Indebtedness.”
We need not address this argument, however, because we conclude, as a matter of law, that OFTI
cannot enforce Seller Note No. 2 under WIS. STAT. § 403.309, which is dispositive of this appeal.
See Turner v. Taylor, 2003 WI App 256, ¶1 n.1, 268 Wis. 2d 628, 673 N.W.2d 716.

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No. 2022AP729

lost while in [the relevant party’s] possession”); Sabido v. Bank of N.Y. Mellon,
241 So. 3d 865, 866-67 (Fla. Dist. Ct. App. 2017); U.S. Bank Nat’l Ass’n Tr. v.
Jones, 2016-Ohio-7168, ¶¶14, 19, 22-23, 71 N.E.3d 1233 (Ct. App.) (concluding
“there is no evidence in the record that establishes that U.S. Bank was in
possession of the note and entitled to enforce the note when loss of possession
occurred”); McCay v. Capital Res. Co., 940 S.W.2d 869, 870-71 (Ark. 1997).

By the Court.—Order affirmed.

This opinion will not be published. See WIS. STAT.
RULE 809.23(1)(b)5.

9