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Merrill Lynch Commer. Fin. Corp. v. Hemstreet

Court of Appeals of Oregon

February 20, 2014

MERRILL LYNCH COMMERCIAL FINANCE CORP., a Delaware corporation, Plaintiff-Respondent,
v.
MARK S. HEMSTREET, an individual; SHILO MANAGEMENT CORPORATION, an Oregon corporation; Defendants-Appellants, and JDCK, LLC, an Oregon limited liability company; TROY LODGE, LLC, an Oregon limited liability company; and LSSR, LLC, an Oregon limited liability company, Defendants

Argued and Submitted November 14, 2013.

Washington County Circuit Court. C115161CV. Andrew Erwin, Judge.

Ridgway K. Foley, Jr., argued the cause for appellants. With him on the briefs were Charles R. Markley and Greene & Markley, P.C.

Teresa H. Pearson argued the cause for respondent. With her on the brief were Jeanne Kallage Sinott and Miller Nash LLP.

Before Ortega, Presiding Judge, and Sercombe, Judge, and Hadlock, Judge.

OPINION

Page 362

[261 Or.App. 222] HADLOCK, J.

This case involves a large commercial debt that defendants Mark Hemstreet and Shilo Management Corporation owed to plaintiff. The facts are described in more detail below. In a nutshell, after defendants repeatedly defaulted on a commercial loan from plaintiff, they executed a confession of judgment that encompassed both (1) a money judgment in favor of plaintiff " and against defendants [Hemstreet and Shilo] jointly and severally," in an amount exceeding $5 million, and (2) judgments in favor of plaintiff foreclosing trust deeds on properties that secured the same debt.[1] The confessed judgment was entered in 2011, and plaintiff later issued writs of garnishment to various banks and corporate entities in an effort to recover the amount due. Defendants challenged one of the writs of garnishment and also moved generally to enjoin plaintiff from issuing garnishments or otherwise enforcing the money judgment " until after the real property securing the indebtedness has been sold in the manner provided by law, and the sheriff's return shows that there is a deficiency owing." The trial court issued an order rejecting defendants' challenge to the writ and denying their requested injunctive relief, ruling that plaintiff was " entitled to pursue all collection activity to enforce the [confessed judgment], including but not limited to writs of garnishment and execution, * * * notwithstanding that the execution sales of the mortgaged property have not yet been completed." On defendants' appeal, we affirm.

The material facts are undisputed, at least for purposes of this appeal. The debt at issue was created in 2000, when defendant Shilo Management Corporation and plaintiff entered into a multi-million dollar loan agreement that was secured by a financial asset security agreement and by defendant Hemstreet's personal guaranty.[2] A year later, [261 Or.App. 223] Shilo defaulted on the loan, which was restructured in 2003. As part of that restructuring, Hemstreet reaffirmed his personal guaranty. Limited liability companies managed by Shilo (the LLCs) furnished plaintiff with trust deeds on several parcels of real property as additional security for the loan.[3]

Shilo defaulted again in 2008, and again the loan was restructured. This time, defendants

Page 363

executed a confession of judgment under ORCP 73.[4] After another default in 2011, plaintiff submitted the confession of judgment to the trial court, which entered the judgment in September 2011. At that point, defendants owed plaintiff more than $5.5 million. The confessed judgment provides, in part:

" IT APPEARING to the Court that defendants Mark S. Hemstreet, Shilo Management Corporation [and the LLCs] have made statements under oath in accordance with the provisions of ORCP 73 B authorizing entry of judgment by confession, * * * that the basis for the judgment is not a consumer transaction prohibited by ORCP 73 A(2) and that plaintiff is entitled to judgment against defendants Mark S. Hemstreet, Shilo Management Corporation [and the LLCs] it is hereby
" ORDERED AND ADJUDGED as follows:
" 1. Judgment is entered in favor of Merrill Lynch Commercial Finance Corp. ('MLCFC') and against defendants Mark S. Hemstreet and Shilo Management Corporation jointly and severally in the principal amount of $5,049,778.93, together with interest accrued through August 27, 2010, in the amount of $434,510.39, together with interest accruing on the principal amount on and after August 28, 2010, through the date of entry of judgment * * *, together with charges for appraisals and other miscellaneous costs of $17,000, plus plaintiff's reasonable [261 Or.App. 224] attorney fees, costs and disbursements through August 24, 2010, in the amount of $144,853.16; plus interest accruing on the sum of all the above-referenced items * * * from the date of entry of this judgment, until paid."

The confessed judgment also includes provisions foreclosing plaintiff's lien on four of the properties for which trust deeds had been executed. A representative example of those provisions follows:

" 2. Judgment is further entered in favor of MLCFC as follows:
" a. The deed of trust executed and delivered by [one of the LLCs] to Merrill Lynch Business Finance Services, Inc. ('MLBFS'), on or about December 1, 2003, and recorded on January 20, 2004, in the real property records of Klamath County, Oregon * * * ('the Klamath Trust Deed'), and assigned from MLBFS to MLCFC, is declared a valid lien for the amount of MLCFC's judgment set forth in paragraph 1 above against ...

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