Lonsdale takes legal action on delinquent loan payments

Lori Nickel, Montgomery Messenger

After the City Council Meeting held Thursday, Oct. 13, it will soon be up to Rice County Conciliation Court to sort out whether or not the City can recoup delinquent loan payments from Heritage Heating & Air, Inc., a heating and cooling business that up until recently, operated from 104 Railway St. NW in Lonsdale. The council approved a resolution to initiate legal action against the business to collect delinquent payments of $7,500 on a $50,000 loan from the City's Economic Development Authority (EDA).

According to background information provided by the City to attorneys Severson, Sheldon, Dougherty & Molenda, PA, the EDA and the City Council approved the loan to Heritage Heating & Air, Inc. in February, 2009, with a term of 10 years at 4 percent interest. The terms required business owner Duane Moe to sign a statement to personally guarantee the repayment of the debt. The current principal balance still owed on the loan is $44,451.

In March of this year, Moe filed for Chapter 7 Bankruptcy protection, and as a result has been relieved of any personal liability for the loan. Under Chapter 7, assets are liquidated and sold with proceeds going to the creditors. According to a letter from the attorneys, based on Moe's bankruptcy filing, it appears that Heritage Heating & Air, Inc. has no assets to pursue.

The letter also explained why the City should not pursue collection of the full loan amount. They felt that since Moe has no personal liability for the debt, in their opinion, there is no basis for the City to claim the entire balance. That is why conciliation court (which has a limit of $7,500) to collect the past due loan payments, was suggested instead.

The second reason the attorneys gave for not pursuing the full loan amount, is the fact that Heritage Heating & Air, Inc. is no longer operating. According to Secretary of State documents, Moe recently started a new business at the same location, called Leading Edge Heating & Air, Inc.

The official Plaintiff's Statement of Claim from the City is: Heritage is now doing business as Leading Edge to avoid paying its debts. Leading Edge has successor liability for Heritage's debt to Lonsdale.

The council agreed with the advice of the attorneys and approved action in conciliation court with hopes that a judge will hold Leading Edge Heating & Air liable for some of the debt.

A frustrated Mayor Tim Rud commented that since the loan was for capital improvements only and no collateral or property was attached to the loan, the requirements for EDA loans in the future needed to be changed to address this.

This is taxpayer money