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Doral Money, Inc. v. Hnc Properties, LLC

United States District Court, D. Oregon

November 6, 2014

DORAL MONEY, INC., d/b/a DORAL HEALTHCARE FINANCE, a Delaware corporation, Plaintiff,
v.
HNC PROPERTIES, LLC, a Minnesota limited liability company, Defendant.

ANNA M. HELTON, DAVID ARDEN ANDERSON, Schwabe Williamson & Wyatt, PC, Portland, OR, Attorneys for Plaintiff

LESLIE S. JOHNSON, CHRISTOPHER H. KENT, Kent & Johnson, LLP, Portland, OR, TREVOR R. WALSTEN, DANIELLE K. NELLIS, Walsten & Te Slaa, P.A., Bloomington, MN, Attorneys for Defendants.

OPINION AND ORDER

ANNA J. BROWN, District Judge.

This matter comes before the Court on Plaintiff Doral Money, Inc.'s Motion (#40) to Dismiss HNC Properties, LLC's Amended Counterclaims. For the reasons that follow, the Court GRANTS Plaintiff's Motion.

BACKGROUND

On June 1, 2008, Defendant HNC Properties, Inc., LLC and/or its three members, Ken Clark, Bruce Hinks, and Phillip Nelson, [1] entered into a Loan and Security Agreement (Loan 1) with Crystal Care Home Health Services, Inc.; Crystal Care PCA, Inc.; and Premier Healthcare Services, Inc. (referred to collectively as Borrowers)[2] in which Defendant provided $750, 000 to Borrowers.

On October 28, 2009, Defendant entered into a Loan and Security Agreement (Loan 2) with Borrowers under which the Defendant provided $350, 000 to Borrowers.

On June 23, 2010, Defendant entered into a Loan and Security Agreement (Loan 3) with Borrowers under which Defendant provided $225, 000 to Borrowers.

On April 30, 2012, Plaintiff entered into a Loan and Security Agreement with Borrowers. Under the Loan and Security Agreement Plaintiff provided Borrowers with "certain credit facilities... in the amount of $2, 500, 000." Compl. at ¶ 1; Am. Answer at ¶ 63. Pursuant to the Loan Plaintiff agreed to extend to Borrowers a revolving line of credit up to 2, 500, 000

provided, among other things, [that] Borrower[s were] in compliance with the terms of the Loan Agreement, including... maintaining a specified net worth as calculated in accordance with the Loan Agreement (the "Net Worth Covenant"), and maintaining [their] "borrowing base, " as calculated in accordance with the Loan Agreement (the "Borrowing Base"), such that the aggregate outstanding principal balance under the Loan agreement [ sic ] would not exceed the Borrowing Base.

Am. Answer at ¶ 63.

Also on April 30, 2012, Plaintiff, Defendant, and Borrowers executed a Landlord Subordination Agreement in which Defendant agreed, among other things, that if Borrowers defaulted on the Loan Agreement, Defendant would "(a) subordinate [Defendant's] right to payments from Borrower[s] to [Plaintiff's] right to payments under the Loan Agreement; (b) hold in trust all payments received from Borrower[s]; and (3) [ sic ] promptly pay to [Plaintiff] any payments received from Borrower[s]." Compl. at ¶ 6.

"During the term of the Loan [A]greement" Plaintiff hired Breslin, Young and Slaughter, LLC (BY&S) to perform

certain auditing and accounting services, including, but not limited to, asset based examination and accounting functions, auditing Borrower[s'] financial reports and statements, auditing Borrower[s'] assets, accounts receivable and equipment, advising Borrower[s] concerning financial, management and accounting issues to assist [Plaintiff] in making evaluations and decisions regarding the Loan Agreement, and providing other related services (collectively the "Debt/Equity Evaluation").

Am. Answer at ¶ 65.

At some point before November 7, 2012, Borrowers defaulted on Loans 1, 2, and 3.

On or about November 7, 2012, Borrowers proposed to Defendant a repayment schedule and business turn-around plan to cure the nonpayment defaults then existing under Loans 1, 2, and 3. Evidently Defendant did not accept this plan because Defendant alleges in its Amended Answer that Defendant provided Borrowers with a Confession of Judgment and Forbearance Agreement on December 21, 2013, which Borrowers rejected.

On January 13, 2013, Borrowers provided a revised recovery plan to Defendant.

On or about January 30, 2013, Borrowers disclosed their Profit and Loss Statement to Defendant for the period January 15 to January 30, 2013.

On April 5, 2013, Borrowers emailed Defendant and advised Defendant of various financial obligations of Borrowers; specifically, money owed by Borrowers to the Internal Revenue Service (IRS) to be paid in order to prevent the IRS from filing a lien and funds owed to Borrowers' outside Certified Public Accountant (CPA).

On April 18, 2013, Plaintiff advised Defendant that it was Plaintiff's position that Borrowers must take immediate action to avoid an IRS lien and that Plaintiff "would have little option but to stop funding" if the IRS did effect a lien.

On April 19, 2013, Defendant emailed Borrowers' accounting personnel and advised it was having "a hard time following [Borrowers'] P and L [Profit and Loss Statement]." In their reply Borrowers offered to allow Defendant to review any financial information it found necessary.

On May 2, 2013, Plaintiff emailed Defendant and advised:

In order to provide [Defendant] and principals additional security as a result of their additional contribution to [Borrowers] for delinquent IRS 641 tax payments, [Plaintiff] has agreed to allow [Defendant] to file a 2nd lien position behind [Plaintiff]. [Plaintiff's] attorneys are preparing a waiver to the [April 30, 2012, Loan Agreement] and will be forwarding it to [Borrowers] and [Defendant] for review.

Am. Answer at ¶ 89.

On May 2, 2013, Defendant entered into a Promissory Note (Loan 4A) with Borrowers to lend them the funds "necessary to cure monetary defaults in the Loan Agreement." Am. Answer at ¶ 107. Defendant alleges in its Amended Answer that it entered into the Promissory Note "in reliance ...


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