By PETER HUSSMANN
NASCAR Hall of Famer Rusty Wallace sold his interest in the Iowa Speedway to the Clement family shortly after they acquired majority ownership from the Manatt family in June 2011, court documents filed Tuesday in the ongoing legal dispute over the sale of the Newton racetrack show.
District Court Judge Randy Hefner made the disclosure about Wallace's sale of his interest in the Iowa Speedway in his ruling on both parties' requests to have portions of the claims and counterclaims dismissed.
In outlining the background facts of the case, which Judge Hefner noted "are generally not in dispute," he noted that prior to June 2011, Manaco, an affiliate of the Brooklyn-based paving contractor Manatt's, owned on 91.5 percent of the issued and outstanding shares of common stock in the USMS Corp., the operator of the Iowa Speedway.
The remaining common stock at that time was owned by Wallace, the court filing states.
In June 2011, Manaco entered into a written purchase agreement which resulted in the transfer of the majority control of the Iowa Speedway to the Clement family. Shortly thereafter, the court filing states, the Clement family gained full control of the track.
"About this same time, USMC also acquired Wallace's USMS stock and USMC is thus now the sole shareholder of USMS," the court filing states and references affidavits signed by Conrad Clement in September and November 2012 filed in regard to the lawsuit. "USMC immediately assumed control of USMS and the Speedway."
The terms of Wallace's sale of the common stock he held in the Newton track are not included in the court document.
Judge Hefner, who has been assigned as the sole judge to hear the case, issued his ruling Tuesday on the parties' motions for partial summary judgment following a Dec. 6 hearing in Adel.
The Clements paid $19.2 million for Manaco's 91.5 interest in the track in a Purchase Agreement that closed on June 30, 2011. The sale was financed through a $13 million loan from Jeffries Mortgage Finance that matures in October 2121 and requires interst only payments through October 2015.
"There is no indication in this record that USMC is in default on this loan," the court filing states.
The remaining $6.2 million was seller financed. Manaco and the Clement family executed a business loan agreement through two promissory notes. Note A held a principal amount of $1,995,298 and was to be paid in full by Dec. 31, 2011. Note B held a principal amount of $4,272,993 and was to be paid in full by June 30, 2018.
Conrad, Stanley, Tracy and Eric Clement executed five guaranties in regard to the business loan. Conrad Clement executed two guaranties, one guaranteeing $2 million for the "Note B Remaining Balance" and one for $1,250,000 for the "Note B Remaining Balance." Manaco claims that a drafting error resulted in the Conrad Clement guaranty of $2 million incorrectly referring to "Note B" rather than "Note A," a conclusion Conrad Clement disputes.
Stanley, Tracy and Eric Clement each guaranteed $1,250,000 on the "Note B Remaining Balance."
Following the sale, the Clements discovered a document in the desk drawer of Iowa Speedway's former CEO, Jerry Jauron, who had left the company three months after the Clements assumed control, entitled "Sponsorship Agreement" entered into USMS, as the controlling corporation of the track that the Clements had assumed, and Manatt's executed on March 8, 2010.
The agreement conveyed advertising and marketing rights on the Iowa Speedway premises, as well Manatt's own business operations. Manatt's agreed to pay the Speedway $1,002,084 for these rights for a period that ran from March 8, 2010 to Nov. 30, 2010. The agreement further stated the parties had "agreed to have a fully-executed Agreement prior to March 31, 2011."
According to the suit, Manatt's continued to exercise its rights under this expired agreement through the 2011 racing season, which included racing months following the June 30, 2011 sale closing, without payment of compensation.
In late 2011, just before the due date of the $2 million Note A payment, the Clements notified Manatt's that it was exercising its set-off rights in the Purchase Agreement for pre-closing payments the former majority owner was required to pay and its losses related to Manatt's continued use of advertising and marketing rights after the sponsorship agreement had expired.
The Clements tendered a total of $152,588.37 as the balance due on Note A after applying the offsets.
Manaco and Manatt's rejected the tender and returned the money. They then declared the Note in default. After the default was not cured, Manaco and Manatt's declared Note B in default.
The Clement family filed suit in January 2012.
In the motions before the Court, the Clements argued that Manaco and Manatt's did not have the right to file counterclaims because it had not been given permission to do so under the terms of the Jeffries loan agreement. Manaco argued that the Clements did not have offset rights and therefore are in default on the loans.
Judge Hefner denied the motions for partial summary judgment.