Marijuana Dispensary Loan for $500,000 Doesn't Need to be Paid Back, Judge Rules, Because Pot is Illegal Under Federal Law

marijuana flowering.jpg
Image: Jamie Peachey
A $500,000 loan to a Colorado company intended for a medical-marijuana facility doesn't have to be paid back because pot is illegal under federal law, a county judge has ruled.

The bombshell ruling, (tip of the hat to lawyer Richard Keyt's medical-marijuana blog), has major implications for the budding dispensary industry in Arizona. Applications for dispensaries are set to be accepted this month, and state-authorized, medical-pot retail and grow centers are expected to open by late summer.

Although this isn't a precedent-setting ruling that other judges must consider, the basic concept of the April 17 ruling is a wake-up call for lenders and investors.

As Keyt wrote in his blog, if this goes to an appeals court and is upheld, "any contract that has a purpose related to Arizona medical marijuana may be unenforceable and not worth the paper it is written on!"

In reading the ruling by Maricopa County Superior Court Judge Michael McVey, it's easy to see how Keyt came to that conclusion.

The case involves two simultaneous $250,000 loans by Valley residents Michele Hammer and Mark Haile to Today's Health Care II, a Colorado corporation. The company is affiliated with Today's Health Care, a dispensary in Colorado Springs.

Hammer and Haile lent the money in August 2010 for the stated purpose of financing a "retail medical marijuana sales and growth center," according to loan documents signed by each side. Today's Health Care agreed to make an interest payment every month.

By March 12, 2011, the dispensary failed to make a timely payment. It defaulted on the loan agreement a week later.

Judge McVey wrote that the only relevant legal issue was whether or not the loan documents are enforceable.

He says they're not, because the U.S. Controlled Substances Act makes all aspects of pot sales and cultivation illegal.

McVey wrote:


An agreement is unenforceable if the acts to be performed would be illegal or would violate public policy... The explicitly stated purpose of these loan agreements was to finance the sale and distribution of marijuana. This was in clear violation of the laws of the United States. As such, this contract is void and unenforceable. This Court recognizes the harsh result of this ruling.


Harsh is right. Half a million bucks -- up in smoke.

Randy Nussbaum, managing partner at the Valley law firm that represented Haile and Hammer, says his clients are "not by any means wealthy," that he doesn't think they had any previous experience in the marijuana industry, and that they believed lending money to an existing Colorado business would be legal.



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truth
truth

what someone say the federal government should look into just like the lawyer said "it may come back to  bite them in the butt" is who really owns Todays health care  what is there background and "honest" intentions.

HighInHawaii
HighInHawaii

They should pay back the money. If they don't it will make all of the others look bad & will never be able to get a loan.

rsteeb
rsteeb

So why is "Schedule I Cannabis" enforceable-- given that it is a damned lie?

Horiuchicoochie
Horiuchicoochie

The loan
should simply say in the terms: Money for equipment, lights, tables retail counters,
hardware... blah blah blah...and even the lease of the building. Nothing is
illegal about that.
Wells Fargo loans money for a dude's home mortgage and  said dude rents
house to a Cat who decides to grow weed...Can you tell Wells Fargo to go fargo
themselves?
Next case please

Corey Miller
Corey Miller

I am an American Veteran, who uses cannabis for pain mamagement! Fuck you... Call me a druggie to my face, punk bitch! I bet your an alchoolic, and loans should not be made to them either, they drink it all!

slippery mike
slippery mike

GROW YOUR OWN!!!!!!!!!!

and then just try to keep friends and relatives from stealing it.
I wonder if the police would prosecute you for theft,if you stole a bag from someone?

Hohohoazhohoho
Hohohoazhohoho

remember this guy when you buy your medical marijuana, he'll no doubt screw you too...

Walter Concrete
Walter Concrete

If you can't afford to lose it then don't use it.   It doesn't seem like a wise investment to loan money any way.    Anyone can default and file bankruptcy.   Sounds like they had too much money laying around and felt the need to throw a bunch away.

Seedy Ward
Seedy Ward

Goes to show one shouldn't be too specific in documents relating to this business. I attended a MMJ business seminar at one of the NORML conferences in recent years. The speaker said that one should never lie on the paperwork. Still, one shouldn't be too specific either. Businesses can for example, be incorporated for the stated purposes of dealing in "floral arrangements" or "dried flowers." Don't lie, but don't be so explicit as to incriminate yourself.
Still, anyone who goes into the dispensary business here (or anywhere else) needs to be quite aware that the DEA/DOJ may show up and steal everything, any time they feel like it. That's what I call a financial risk.

Phil
Phil

This will be the death nail for the near future of this needed industry. Thank the coop trying to get out of the obligation they entered into; reap any benefits? Think of the people you just hurt.

Coz
Coz

The Feds end the failed policy on marijuana, not a chance, they are not that smart.
Any failed policy is a success to the Feds no matter how much it costs the tax payers.

ExpertShot
ExpertShot

Okay, now folks - the State of Arizona and the State of Colorado have CHOSEN, through their elective process, to make marijuana legal in certain respects.  Those States have the obligation now to provide for the ability of business people to get proper legal redress in the Courts.  The Plaintiffs in this case should take an appeal of this decision all the way to the Supreme Court!!! Whenever the States choose to take an action the Federal Government can not interfere in that action anymore. The Fourteenth Amendment, guarantees that the states, including the Federal Government, can not, among other things, deprive people of the equal protection of the laws.  If a contract involves a legal contract that would normally be enforced by the laws, the government can't say that other contracts are not valid.  Also
Amendment 10 - Powers of the States and People. Ratified 12/15/1791. Note

The powers not delegated to the United States by the Constitution, nor
prohibited by it to the States, are reserved to the States respectively, or to
the people.

The States of Arizona and Colorado have reserved unto themselves the right to make marijuana legal for medicinal purposes - the Federal Government is not entitled, under our system of laws, to take this "power" back. 

just sayin
just sayin

A man should never gamble more than he can afford to lose.

Marcy
Marcy

Never loan money to a druggie

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