A Colorado car dealer who has sued his lender over the terms of a $9.85 million loan is facing a foreclosure action involving all of his properties, reports the Glenwood Springs (CO) Post Independent.

Dealership franchise lender Falcon Financial has filed for foreclosure over a loan made to Glenwood Automotive Group Land Management company in 2000. The firm has Chevrolet, Subaru, Honda and Nissan dealerships and still owes $8.7 million on the loan.

Falcon Financial foreclosed on the dealership properties and the local sheriff has scheduled a public auction for the properties for Sept. 27.

The dealer's lawsuit is seeking an injunction against Falcon Financial, and accuses it of having imposed "draconian, unilaterally modified loan terms" on him.

Attorneys for Falcon Financial denied the allegations.

"Defendants are simply insisting on adherence to the terms of the loan documents," its motion said. "This insistence on enforcing their rights does not breach any duty of good faith or fair dealing."

Here's the problem: The car dealer claims that he had been assured in numerous conversations with a Falcon Financial officer that it would let him pay off the loan early, following a five-year lockout period, without paying any penalty. But Falcon Financial is demanding that the dealer pay $3.5 million under what it is calling a "yield maintenance clause."

Falcon maintains that the dealer is trying to rely on oral statements about loan conditions, although state law prohibits that. It also argues that the dealer is barred by the statute of limitations from making claims about a loan executed more than six years ago.

The suit states that some loan documents contain "abnormalities and anomalies," including revisions that don't contain the dealer's initials.

But Falcon Financial said in its motion that the dealer's signature on a settlement statement for the loan closing "conclusively demonstrates" that it didn't increase the commitment fee unilaterally, whereas the dealer's claim that the fee was supposed to be 1 percent isn't contained in any document. Its motion argues that the $3.5 million yield maintenance payment also is provided for in the loan documents.