The first thing dentist Steven Miner thinks about when he wakes up is the $632,821.76 that a Harrison County judge has ordered him to pay Trustmark National Bank.
At age 64, he thought he would be looking forward to retirement and travel in a few years. Now all he sees ahead is work.
He is not alone. Four other Coast medical professionals – a chiropractor, a doctor of internal medicine, an orthopedic surgeon and an obstetrician/gynecologist — find they owe similar debts on loans that never paid them a dime.
Instead, the Trustmark loans secured financing for e-Fitness & Wellness Center, a sprawling fitness complex off Popp’s Ferry Road in North Biloxi where weeds sprout in the concrete seams of an empty parking lot.
Trustmark now owns the property, which is on the market for $5.55 million.
The five medical professionals were among 38 doctors, attorneys and other investors who signed loan guaranties, promising to repay their share of $13.4 million Trustmark loaned them, court records show.
Most of the doctors and other investors bought their way out of the loan guarantees before e-Fitness failed. Trustmark sued the five remaining medical professionals who did not participate in the buyout.
Four told the Sun Herald they could not come up with the money at the time and thought they would have a chance later to make the payments. Miner said he never received the buyout offer.
Trustmark sued the five medical professionals, winning its case this fall in Circuit Court.
After a combined 125 years-plus in practice, all five medical professionals say they face financial devastation. Judge Christopher Schmidt ruled the three doctors, dentist and chiropractor must repay the amounts they pledged, plus interest on the loans and attorneys’ fees.
All told, they owe a combined $2 million on loan guaranties that originally totaled less than $1.8 million, the judgment shows.
Trustmark has seized their personal and business accounts, leaving them scrambling to pay bills and avoid overdraft charges on automatic withdrawals. A hearing is set for January on Trustmark’s requests to collect money from the medical professionals’ practices and other businesses.
Miner said he is an employee of his business, so Trustmark is already collecting 25 percent of his wages through a garnishment.
One of the defendants, internal medicine doctor Valerie Lenox, who practices in Gulfport, has already filed for bankruptcy. Chiropractor Tim Murphy of Biloxi and obstetrician/gynecologist Michael McKay also are contemplating bankruptcy.
“It’s a mess,” said McKay, who added that Trustmark has rebuffed his settlement offers. “I think the average person wants to fulfill their obligations, but there’s been no attempt to work with you and, when you put the legal fees on top of that . . . It just makes the total so far out of reach.”
Miner and orthopedic surgeon David Clause, who relocated several years ago from Biloxi to his home state of Louisiana, are trying to figure out how they will repay the money, which amounts to more than $600,000 each for all but Lenox, who had a smaller investment in e-Fitness and, therefore, a smaller personal guaranty.
“There’s no possible way I can come up with $625,000,” Miner said. “ If I was 35 years old and just getting out of dental school, then there might be a very good chance that that payment could be made over a long period of time, but Trustmark seems bound and determined to get everything I’ve worked for. Everything.”
Trustmark’s attorney William Leech of Ridgeland-based Copeland Cook Taylor & Bush declined to comment, citing Trustmark’s concern for client privacy and the ongoing litigation.
Best of intentions
Miner, Clause, Lenox and Murphy said they had no idea they would be personally liable for the loan repayments. Only McKay said he knew the personal guaranty obligated him to repay his share of the debt if e-Fit failed because he had his wife at the time, a certified public accountant, review the paperwork before he signed.
Miner said: “Everybody else was signing it and I signed it. I’m not sure anybody really knew exactly what they were signing. Nobody told me, ‘If things fail, you’ve got to pay $425,000.’ Had I known that, I wouldn’t have signed it.
“And, quite frankly, I’m not sure the financial statement I turned in to Trustmark Bank would justify them lending me that money.”
Tim Holleman, a Gulfport attorney who has handled lawsuits involving personal guaranties, said Mississippi law is well established: “Failure to read a contract is not a defense in a contract case, whether it’s a personal guaranty or a loan.”
David McAfee, a Biloxi anesthesiologist who has since retired and moved to Tennessee, came up with the idea to build e-Fitness and brought aboard other investors.
“It was to bring health to the Coast in a more medically directed fashion than just a gym,” McAfee said. “That’s why it was called a wellness center.”
He envisioned a center that would tackle obesity, smoking and heart disease — prevalent problems in Mississippi.
Doctors could refer patients for guidance on diet and exercise. The center would have indoor and outdoor pools, a cafe that emphasized healthy food, a child-care center, salon, weight rooms and supervised weight-loss.
Doctors and other health professionals also would have space to offer lectures in their specialties.
“We were trying to bring a different model of health care for Mississippi,” McAfee said. “That was the whole point. The bottom line is, everybody’s intentions were positive from the start.”
A slow death
Investors bought in at $75,000 a share. The five medical professionals who wound up getting sued all said they supported the concept and wanted to help the community, regardless of whether they recouped those investments.
Construction started the year after Hurricane Katrina, when the price of materials soared because so many in South Mississippi and Louisiana were rebuilding.
The center opened in late 2007, over budget and behind schedule.
At least partly because of cost overruns on construction, the investors were subject to “cash calls,” having to put in $1,800 to $2,500 a month, Murphy and Miner said.
Still, those early months were promising. McAfee said the center met its membership goal within a couple of months. Trustmark provided permanent financing in July 2008, which was when the investors signed those loan guaranties.
Miner said he was unable to keep up with the cash calls. At some point after he signed his guarantee, he sold back his $75,000 share for half its value to get out of the deal.
“By doing that, I thought I was free and clear of any of the financial connections with e-Fitness,” Miner said. “I didn’t attend any of the meetings, didn’t receive any correspondence. And then three years later, I get a letter from Trustmark saying they want $425,000.”
Murphy, who lost his home to Katrina and whose chiropractic business suffered, said he borrowed money to keep up with his cash calls. He’s still paying on the loan, he said.
McAfee said e-Fitness was unable to survive once the national recession set in.
“It was the perfect storm of negative things,” McAfee said. “Maybe I should have quit, but that’s just not in me.”
Trustmark and e-Fitness managers were unable to come to terms on refinancing the short-term loans, McAfee said.
“It was just a slow and ugly death,” he said. “We tried to negotiate with the bank. Every time we negotiated with the bank, they would do something disingenuous that was incredible. The bank was just horrible.”
‘We’ve all lost’
Instead, e-Fitness representatives negotiated buyouts with Trustmark that would free participating investors from their personal guaranties.
“Everybody wanted to get off the personal guaranties,” said McAfee, who also took the buyout. “The lawyers negotiated the number. Thirty three out of 38 people took it. It wasn’t cheap.”
Miner, Murphy and McKay recalled the buyout amount being $240,000 per share in the company. Those three, and orthopedic surgeon Clause, each owned a share. The buyout for Lenox would have been lower because she owned only half a share in the business, but she did not know the exact figure.
Regardless, four of the investors — Murphy, McKay, Clause and Lenox — said they didn’t have the money at the time. Murphy said he thought he would be able to participate later in the buyout.
Both Lenox and McKay were going through divorces. A year or more after the buyout, when his divorce had been settled, McKay said he went to his banker at Trustmark about buying out of the guarantee. “He said, ‘No,’” McKay recalled. “They weren’t doing that anymore.”
Miner said the buyout offer never came to him. He had sold his share in the business. He said that he was unaware he still had any obligation to e-Fitness until a demand letter from Trustmark landed in his mailbox in September 2015. Trustmark’s lawsuit followed the demand.
E-Fitness founder McAfee concluded: “As far as I know, they knew exactly what was on the line. They were told to take the (buyout) deal and they decided not to. That’s what happened ... The deal was actually reasonable.”
Once most of the investors bailed, McAfee said e-Fitness was doomed. The business closed in August 2016, less than nine years after it opened, then filed for bankruptcy.
Trustmark has recouped most of the millions it loaned the e-Fitness businesses, court records show. By October 2016, a Trustmark legal filing showed the debt was under $2.36 million.
Murphy said his wife recently found in their mailbox three solicitations from bankruptcy lawyers.
“Maybe we’re making a mistake by putting our business out there,” Murphy said. “I just feel like Trustmark, I feel like they’ve lost, but we’ve all lost. The only people who have made any money are the attorneys.”
Murphy said his friend Miner called just the other day.
“Well, Murph,” he said, “we can move to the Bahamas. I can pull teeth and you can fix backs. We can trade goats’ milk and fresh fish for services.
“We gonna be OK.”