Aequitas Holdings, LLC v. Newman

UNITED STATES DISTRICT COURT

DISTRICT OF OREGON

RONALD F. GREENSPAN, in his

capacity as COURT-APPOINTED

RECEIVER for AEQUITAS

HOLDINGS, LLC, an Oregon limited

liability company,

Case No. 3:19-cv-375-JR

Plaintiff, OPINION & ORDER

v.

MICHAEL J. NEWMAN, an

individual; and SUSAN L.

NEWMAN, an individual,

Defendants.

_________________________

Russo, Magistrate Judge:

Plaintiff Ronald F. Greenspan, as the Court-appointed Receiver for Aequitas Holdings,

LLC, brings this action against defendants Michael and Susan Newman (the Newmans) asserting

breach of contract, breach of security agreement and foreclosure of security interest, money had

and received, unjust enrichment, and foreclosure of pledge and voting agreement. Both parties

now move for summary judgment. For the reasons stated below, summary judgment is granted in

favor of the Receiver.

BACKGROUND

Plaintiff Ronald Greenspan is the receiver acting under the authority granted by the Court’s

April 14, 2016, Order Appointing Receiver in Securities and Exchange Commission v. Aequitas

Management, LLC, et al., Case No. 3:16-cv-00438-JR. Under the terms of the Receivership Order,

the Receiver is responsible for taking custody and control of Receivership property and bringing

such legal actions as may be necessary to discharge his duties. The Receivership entities include

Aequitas Holdings, LLC (AH), Aequitas Commercial Finance, LLC (ACF) and APF Holdings,

LLC (APF).

On or about December 17, 2010 the Newmans executed a promissory note and entered into

a loan agreement with ACF. In return for a commercial loan of $325,000, the Newmans promised

to make monthly interest payments on the outstanding balance of the note. The Newmans also

agreed to pay an additional principal payment of $100,000 on or before June 17, 2012. The

additional principal balance and all accrued unpaid interest was due on or before the maturity date

of December 17, 2013. Ex.1 to the Complaint (ECF #2). At the time of the loan, Bob Jesenik,

CEO of Aequitas, was married to Susan Newman’s sister. Jesenik is alleged to be the architect of

the Ponzi scheme asserted in the 18-cv-438-JR action.

On December 1, 2012, ACF and the Newmans amended the note and loan agreement

decreasing the interest rate from 20 percent to 11 percent. Ex. 2 to the Complaint (ECF #2-1). On

December 17, 2013, ACF and the Newmans again amended the note and loan agreement to extend

the maturity date to December 31, 2016, and to include principal as well as interest in the monthly

payments such that the principal balance would be reduced to $200,000 or less by December 31,

2014 and $175,000 or less by December 31, 2015. Ex. 3 to the Complaint (ECF #2-2).

Michael Newman asserts that in July 2014, Jesenik told him that the loan was going to be

written-off and that the Newmans could stop paying at the end of 2014. Michael Newman

Deposition at p. 40. (ECF #28-2). Michael Newman did not ask how the loan write-off was going

to be accomplished. Id. at p. 41. Susan Newman states Jesenik said he had “forgiven that loan …

[s]top paying.” Susan Newman Deposition at p. 25 (ECF #28-1). Susan Newman stated Jesenik

did not explain how he would accomplish the loan forgiveness, but that “it was like a gift.” Id.

Mrs. Newman further stated that Jesenik never represented that Aequitas was forgiving the loan.

Id. at p. 32. She also stated that in return for the “gift” the Newmans gave Jesenik and Aequitas

their “thankfulness.” Id.

Following the July 2014 meeting, Michael Newman wrote to Jesenik:

This is one of those times where words don't say enough... "Thank You"

Sue and I would both like to give you 18% of our Stock in Dayspring, the

approximate equivalent of the $223,000 investment you have offered to make on

our behalf, based on our original investment in Dayspring. It would be 5.5% of the

Total Dayspring Stock.

It may help to alleviate the tax issues? This could add both positives and negative

connotations, I realize. We can chat about it over the coming weeks.

Ex. 4 to the Declaration of Brad Foster (ECF #27-4).1

1 Defendants object to Foster’s declarations as inadmissible hearsay arguing he is not the custodian of records for

Aequitas. However, Foster states he was retained by the Receiver to determine the nature, location, and value of all

Receivership property as well as to review the books, records, documents, accounts, and all other instruments and

papers of the Receivership entity. Foster Declaration (ECF #27) at ¶¶ 1, 3. The Receiver and his agents now stand

in the shoes of the Aequitas entities and, as such, Foster qualifies as custodian of records for Aequitas and may

introduce the business records of the Receivership entity. See. E.g., Warfield v. Byron, 436 F.3d 551, 559 (5th Cir.

2006) (Ponzi scheme receiver qualified as records custodian for receivership entity).

Jesenik responded:

Working on distribution of note to me personally. Will then be able to gift you

$40k-50k/ year end and then Jan 1 as well. At that point you can stop making

payments, and in a couple years we will be done. Hang in there.

Id.

On November 11, 2014, Ryan Steffner, a financial analyst with ACF, wrote to Michael

Newman regarding the $23,000 payment that was due before the end of the year to bring the loan

balance to under $200,000. Ex. 5 to the Declaration of Brad Foster (ECF #27-5).

Michael Newman responded that he and Jesenik were working on it. When Steffner asked

what he and Jesenik agreed to so he could handle changes on his end, Newman responded, “You

should probably talk to Bob J. to get his ideas on this one.” Id.

In April 2015, discussions regarding the conversion of assets from ACF to APF concluded.

Foster Declaration (ECF #27) at ¶ 11. Accordingly, ACF’s rights in the loan were transferred to

AH as part of its non-cash investment conversion to APF. Exhibit 6 attached to the Complaint

(ECF #2-5).

On July 22, 2015, Jesenik confirmed to Aequitas general counsel Bob Holmen that he

planned to buy out the Newmans’ note from AH. Ex. 6 to the Declaration of Brad Foster (ECF

#27-6). Holman therefore stated an intent to prepare an assignment and assumption agreement

wherein Jesenik assumed AH’s rights under the note in return for Jesenik’s payment to AH for the

amount due on the note. Id.

Although a draft assignment was prepared, Jesenik did not execute the agreement. Ex. 7

to the Declaration of Brad Foster (ECF #27-7); Declaration of Brad Foster at ¶ 12. The loan

remained on the agenda but unresolved through the Aequitas integrated tax meetings into January

2016 and remains unpaid to date with an outstanding balance of $380,082.25 as of December 31,

2019. Id. at ¶¶ 13-14.

On or about August 9, 2018, Bob Jesenik indicated:

In 2014, Mike and Sue experienced certain financial difficulties and Mr. Jesenik

agreed to apply the proceeds from his Aequitas incentive compensation to the loan

balance which would have been sufficient to satisfy their outstanding loan. The

2014 incentive compensation was due to be paid in 2015. As a result of the situation

with Aequitas, the compensation amounts due to the officers, including Mr. Jesenik,

was never paid and therefore the proceeds of the 2014 incentive compensation were

not applied to the loan.

Ex. 3 to the Declaration of Sara Cotton (ECF #28-3).

DISCUSSION

As noted above, the Receiver brings claims for breach of contract, breach of security

agreement and foreclosure of security interest, money had and received, unjust enrichment, and

foreclosure of pledge and voting agreement related to the Newman’s failure to repay the loan they

received from ACF. There is no dispute the Newmans failed to repay that loan. Accordingly, the

Receiver moves for summary judgment on his claims for relief. The Newmans also move for

summary judgment asserting the agreement between them and Jesenik in July 2014 constitutes an

accord and satisfaction extinguishing the debt they owed to ACF and subsequently to AH. The

Newmans also suggest they and ACF entered into a release agreement or that ACF and AH waived

any right to pursue the collection of any amounts due under the loan.

A. Accord and Satisfaction

Under conventional contracting principles, if parties dispute their rights under a contract in

good faith, they may resolve that dispute through accord and satisfaction. Accord and satisfaction

is the substitution and execution of a new agreement in satisfaction of the former agreement.

Erickson v. Am. Golf Corp., 194 Or. App. 672, 680, 96 P.3d 843, 848 (2004). In the

creditor/debtor context, an accord and satisfaction results when a debt is unliquidated or disputed

in good faith, the debtor offers a sum on the condition that it be received as full payment, and the

creditor accepts it. Id. at 680-81. Accord and satisfaction is an affirmative defense and the burden

is on the Newmans to establish the new agreement. Id.

In support of the new agreement, the Newmans offer their own recollection of statements

made by Jesenik personally and do not offer any evidence that ACF or AH agreed to accept either

no further payments as Susan Newman suggests or regular payments only through the end of 2014

as Michael Newman suggests. Indeed, the testimony of the Newmans, at best, established that

Jesenik offered them a gift of repaying the loan for them. To the extent the Newmans argue that

in lieu of the loan payment they offered 18% of their stock in Dayspring, they provide no evidence

that ACF agreed to accept this stock transfer in satisfaction of the loan or that they actually

transferred the stock.

In addition, an agreement to take less than the whole amount of a liquidated claim is not

supported by sufficient consideration and is, therefore, unenforceable. Portland Mortg. Co. v.

Horenstein, 162 Or. 243, 248, 91 P.2d 533, 534–35 (1939). Assuming the Newmans continued to

pay amounts due on the loan through the end of 2014 per the alleged agreement with Jesenik, that

would not be sufficient consideration for any promise for a new agreement in satisfaction of the

loan agreement. See id. at 162 Or. at 248, 91 P.2d at 535 (Since a debtor incurs no legal detriment

by paying part or all of what he owes, and a creditor obtains no legal benefit in receiving it, if such

a payment is made at the place where the debt is due in the medium of payment due, and at or after

maturity of the debt, that payment is not sufficient consideration.).2 Defendants have not

2 Defendants’ argument that Aequitas’ agreement to forebear pursuing collection is sufficient consideration under

Emmert v. No Problem Harry, Inc. 222 Or.App. 151, 192 P.3d 844 (2008), fails to demonstrate what consideration

they provided in support of the alleged agreement. In Emmert, in exchange for the forbearance, one party agreed to

allow access to property to which the other party would not otherwise have had a right. Id. at 222 Or.App. at 155,

192 P.3d at 848. In addition, to the extent defendants cite Emmert for the proposition that Jesenik agreed to answer

for their debt, they still do not offer any consideration on their part, and any such agreement must be in writing. Or.

Rev. Stat. § 41.580(1)(b).

demonstrated a genuine issue of fact as to whether they and ACF entered into an accord and

satisfaction.3 The Receiver is entitled to summary judgment on this defense.

B. Release

A release is a contract that, if not under the seal of the releasor, must be supported by a

sufficient, valid or valuable consideration. In re Kulka's Estate, 142 Or. 104, 113, 18 P.2d 1036,

1039 (1933). As noted above, there is no genuine issue of fact that the Newmans did not provide

consideration in return for release from the loan agreement. Accordingly, the Receiver is entitled

to summary judgment in his favor regarding the alleged release.

C. Waiver

Waiver is the voluntary relinquishment of a known right…. A party to a written

contract may waive a provision of that contract by conduct or by oral

representation. Unlike a modification of a contract, waiver can be accomplished

unilaterally, and it need not be supported by consideration.

Bennett v. Farmers Ins. Co. of Oregon, 332 Or. 138, 156, 26 P.3d 785, 796 (2001). However, a

waiver must be clear, unequivocal, and decisive. At best defendants demonstrate that Jesenik

agreed to distribute the note to himself so they would not have to pay the remainder of the loan.

Defendants provide no support that ACF or AH clearly, decisively, and unequivocally waived any

right to collect on the note. Indeed, the note itself provided that the lender may delay or forego

enforcing any rights or remedies under the note without losing them. Ex.1 to the Complaint (ECF

#2) at p. 3 (Promissory Note at ¶ 19). In addition, the loan agreement provided that the “Lender

shall not be deemed to have waived any rights under this Agreement unless such

3 Defendants speculate that Aequitas tax information will confirm that Aequitas acknowledged the extinguishment

of the debt and accepted the tax benefit in the form of a bad debt credit against income as a result of the parties’

agreement. Speculation is insufficient to overcome summary judgment and the Receiver confirms that books and

records of Aequitas show the loan was never written off or reserved and did not issue a 1099-C to the Newmans

indicating a cancelation of the debt. See Supplemental Declaration of Brad Foster (ECF #31) at ¶ 4.

waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in

exercising any right shall operate as a waiver of such right or any other right.” Ex. 1 to the

Complaint (ECF #2) at p. 10 (Loan Agreement at ¶ 11(h). Accordingly, the Receiver is entitled to

summary judgment in his favor on the issue of waiver.

D. Promissory Estoppel

In their response to the Receiver’s motion for summary judgment, defendants suggest the

court apply promissory estoppel to prevent unjust collection of the loan because of their reliance

on Jesenik’s promise to “release” them from payment. However, defendants did not raise this

affirmative defense in their answer. Nonetheless, defendants fail to show that Jesenik made the

promise to release them from further payment under the loan on behalf of ACF or AH. Indeed,

the record evidence shows, at best, that Jesenik intended to personally pay the loan as a gift.

Neither ACF nor AH made any promise to the Newmans upon which they could have relied.

E. Default on the Loan

There is no genuine issue of material fact that the Newmans failed to repay the loan as

agreed in the promissory note and loan agreement. Accordingly, the Receiver is entitled to

summary judgment on his claims for relief.

CONCLUSION

The Receiver’s motion for summary judgment (ECF #26) is granted and the Newmans’

motion for summary judgment (ECF (#20) is denied. The Receiver shall submit a proposed

judgment for the Court’s signature within 30 days from the date of this order.

DATED this 16th day of March, 2020.

____/_s_/ _Jo_l_i_e _A_._ R__u_s_so________

JOLIE A. RUSSO

United States Magistrate Judge