It appears that money owed to Midwest-based Equity Bank may have been the reason why Stephanie Morris Nissan in Durango mysteriously shut its doors in October.
The bank filed a lawsuit with the U.S. District Court for the Western District of Missouri against the dealership in November 2023 for breach of contract for all dealerships, and a breach of guarantees and fraud specifically at the Durango location.
The car dealer had a location in Sedalia, Missouri, as well as Durango.
According to the lawsuit, Stephanie Morris Nissan Durango owed more than $1.8 million to the bank for collateral sold out of trust. Selling out of trust refers to the situation in which a debtor who obtained a loan for a purchase sells those items and fails to use the sale proceeds to pay off the original loan.
On Aug. 22, 2022, Stephanie Morris Nissan entered a business loan agreement for both locations with the bank for $3 million maturing a year from the date. As part of the loan agreement, the dealership was supposed to hold proceeds from each vehicle sale and remit required dollar amounts to Equity immediately.
As collateral, Morris filed the Durango dealership, as well as herself and her husband as commercial guarantees, making the dealership and the individuals responsible for paying off the debt for both Stephanie Morris locations.
In the lawsuit, it says Equity conducted an audit on Sept. 29, 2023, at the Stephanie Morris Nissan Durango location to confirm the presence of vehicles the bank had financed for the dealership.
During the audit, it was determined that various vehicles the bank had financed were no longer at the Durango location, according to the lawsuit. A security interest is a legal right that a borrower gives to a lender over the borrowers property, also known as collateral, in the event that the borrower can't repay the loan.
Equity determined that 75 vehicles were missing from the Stephanie Morris Nissan location, or a little more than $1.8 million worth of inventory for which the bank had a vested security interest.
Equity is accusing the dealership of fraud for misleading the bank as to the location and sale status of the 75 vehicles. The bank is under the impression that the vehicles were sold out of trust or transferred to other dealership locations before the business officially closed.
During the audit, Equity also learned that the dealership fired its employees and planned to close up shop. Three days later, Stephanie Morris Nissan in Durango closed, succeeded by a slew of customer complaints including forgery and failing to pay off vehicle liens.
“The practical effect of this action by the borrower (in this case, Stephanie Morris Nissan) is to have received the value of the loan from Equity to purchase and then sell collateral, while leaving Equity with insufficient physical collateral to recover and repay debts owed under the Loan Agreement,” the lawsuit said.
The lawsuit also alleges that another lender had a similar experience with the dealership regarding vehicles that it had financed for Stephanie Morris Nissan no longer being on the business’ premises, and was taking steps to seize collateral.
The lawsuit says the total amount owed as of November 2023 was a little over $2.5 million for both Stephanie Morris Nissan locations. The dealership’s website is no longer functional and the listed phone contact on the dealership’s business license has been disconnected.
The lawsuit remains unsettled as of the last filing on May 30.
tbrown@durangoherald.com
