The suit, filed May 5 in federal court, hinges on a promissory note, allegedly signed by Edwin L. Martin of Sallisaw, also known as Eddie Martin, agreeing to pay J. Max Jiles $2 million. A copy of the note was attached to the lawsuit filing.
While the note does not mention the nursing homes in question, or the sale of nursing homes, it begins by stating "for value received," and goes on to say that Martin promises to pay Jiles $2 million.
On Aug. 14, Martin filed an answer to that lawsuit against him and filed a counterclaim, alleging Jiles committed fraud. Oklahoma City attorney Kevin R. Donelson filed the counterclaim on behalf of Martin.
According to court documents, Martin admits he executed the promissory note, but he alleges he was defrauded into signing the promissory note and agreement. Martin also denies that he defaulted under the terms of the note.
"Jiles made misrepresentations and did not disclose material facts related to the promissory note and accompanying agreement," court documents state. "For instance, and without limitation, Jiles misrepresented the financial status of certain companies, Jiles concealed equity skimming from the companies and concealed payments directly to Jiles from loans insured by the U.S. Department of Housing and Urban Development (HUD), in violation of the regulatory agreements with HUD. Martin detrimentally relied on Jiles misrepresentations and omissions."
Martin alleges the contract between Jiles and Martin is void as Jiles did not fulfill all conditions precedent to consummation of the transaction, including transfer of ownership and licensing with HUD.
In the counterclaim, Martin alleges that on Jan. 26, 2007 he and Jiles executed an agreement for the sale and purchase of Jiles' shares of stock in companies owning nursing home facilities in Ponca City, Owasso, Bartlesville, Mannford, Coweta, Catoosa, and Local Hospice Inc. with locations in Choteau, Owasso and Sallisaw for the sum of $2 million.
The intent of the transaction was to shift ownership and control of these entities and nursing home facilities from Jiles to Martin, the counterclaim alleges.
As a part of this transaction Martin executed an installment promissory note in the amount of $2 million to cover the purchase price for Jiles' shares of stock, according to the counterclaim.
"On information and belief, prior to the transaction, Jiles placed fictional debts on these facilities, utilized non-recourse loans insured by the HUD to repay the fictional debt and in the process simply and unlawfully pocketed HUD loan proceeds," Martin's counterclaim alleges. "Because of the proceeds from such loans were not utilized by Jiles for the subject entities or nursing home facilities, Martin has been forced to incur hundreds of thousands of dollars of debt merely to continue the operation of these facilities."
Martin alleges that Jiles did not obtain the written approval of HUD prior to agreeing to sell his stock to Martin, but Jiles has also failed or refused to assist transferring ownership and control of the nursing homes to Martin or assist in the transfer of physical assets procedure with HUD.
"Such action has prevented Martin from refinancing the homes and actually becoming the legal operator of the homes," the countersuit alleges.
Martin is asking for five claims for relief, including more than $75,000 in damages in several of those claims, as well as punitive damages.
Jiles' Sallisaw attorney, Frank Sullivan Jr., said last month that prior to January 2007, Martin had purchased a 20 percent interest in two of the nursing homes, in Ponca City and Coweta. Sullivan said in about 2000 Phil and Gilbert Green and Jiles decided to give Martin a one-third interest in the other four homes if Martin agreed to manage all six of the homes for the Greens and Jiles.
In January 2007, Jiles was no longer interested in staying in the nursing home business and Jiles sold his remaining one-third interest in the six homes to Martin, Sullivan said. Martin was allegedly supposed to pay Jiles, but he didn't, Sullivan said.
Sullivan indicated that the case centers on a debt owed by Martin to Jiles in the sum of $2 million.
According to the note, Martin allegedly promised to pay Jiles $2 million, with 6 percent interest per year, from the date of Jan. 27, 2007, until the debt was paid.
As part of the alleged agreement, Martin was supposed to pay interest only installments on July 27, 2007, and Jan. 27, 2008, as well as 120 equal monthly installments of principal and interest starting Feb. 27, 2008, and on the 27th day of each month until paid in full. Those installments were to be in the sum of about $22,204 each, according to the suit.
In Jiles' suit against Martin, Jiles claims that Martin breached the terms of the note and failed to make the monthly installments due on Feb. 27, 2008, March 27, 2008, and April 27, 2008, resulting in Martin being in default.
