Car dealer in legal battle over loan
A Glenwood Springs car dealer who has sued his lender over the terms of a $9.85 million loan is facing a foreclosure action involving three local properties.Falcon Financial, a Delaware company, has filed for foreclosure over a loan made to Ron Esch’s Glenwood Automotive Group Land Management company in 2000. Esch, the owner of the local Chevrolet, Subaru, Honda and Nissan dealerships, owes $8.7 million on the loan.In a lawsuit filed in June, he accused Falcon Financial of misrepresenting the terms of the loan. Esch’s attorney, Cynthia Tester, said Friday the foreclosure action appears to be “nothing more than retaliation.”Falcon Financial has foreclosed on Esch’s dealership properties at 130 Center Drive in West Glenwood, and 2718 and 2602 South Glen Ave. The Garfield County Public Trustee’s Office has scheduled a public auction for the properties for Sept. 27.However, Esch’s lawsuit is seeking an injunction against Falcon Financial, and accuses it of having imposed “draconian, unilaterally modified loan terms” on him.As a result, “Esch has simply and completely lost the ability to manage his business,” the suit alleges.He also has been left unable to sell dealerships and/or expand as he had hoped to do.Attorneys for Falcon Financial, in a motion to dismiss the lawsuit filed July 26, denied Esch’s allegations against it.”Defendants are simply insisting on adherence to the terms of the loan documents,” its motion said. “This insistence on enforcing their rights does not breach any duty of good faith or fair dealing.”Esch claimed that he had been assured in numerous conversations with a Falcon Financial vice president that it would let him pay off the loan early, following a five-year lockout period, without paying any penalty. Falcon Financial is demanding that Esch pay $3.5 million under what it is calling a “yield maintenance clause.”Esch’s suit also says he agreed to pay a 1 percent commitment fee to process the loan, and Falcon Financial unilaterally raised that fee to 3 percent, costing him $250,000.The suit claims that these loan provisions have placed him “in dire financial circumstances, such that he could not pay his last two loan payments.”It asks that he not be declared in default, face no penalties, and be credited $685,196 in overcharges related to the commitment fee and associated interest. It also asks that the loan be declared void.The suit states that some loan documents contain “abnormalities and anomalies,” including revisions that don’t contain Esch’s initials.But Falcon Financial said in its motion that Esch’s signature on a settlement statement for the loan closing “conclusively demonstrates” that it didn’t increase the commitment fee unilaterally, whereas his claim that the fee was supposed to be 1 percent isn’t contained in any document. Its motion argues that the $3.5 million yield maintenance payment also is provided for in the loan documents.The company maintains that Esch is trying to rely on oral statements about loan conditions, although state law prohibits that. It also argues that Esch also is barred by statutes of limitations from making claims about a loan executed more than six years ago.Tester said Esch had hoped to have the flexibility to be able to possibly sell some dealerships and acquire a Cadillac dealership, and also purchase land on Wulfsohn Road. He has had potential buyers lined up. However, he has been unable to complete any deals because his properties continue to be held as collateral for the outstanding loan, and as a result he has lost “vast amounts of money,” his lawsuit contends.He also has spent about $300,000 in costs associated with looking into redesigning dealerships, buying land and relocating franchises.Tester said that despite the legal battle over the loan, Esch’s business is doing fine.”We’re going to be get it all straightened out, but we’re fighting with the big boys right now,” she said.An attorney representing Falcon Financial did not return a call for comment.Contact Dennis Webb: 945-8515, ext. email@example.com
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