The Journal Gazette, 600 W. Main St., Fort Wayne IN

The plan that debt-plagued collector-car company Kruse International hoped would be a foolproof way of guaranteeing customers’ financial security has hit a snag.

Money in a third-party escrow account at Chase Bank created exclusively for paying customers is being held up by a legal battle Kruse faces in Florida.

An Allen County court Wednesday refused to free up the money, saying Florida is where the legal battle should be decided.

It’s a setback for Kruse International and owner Dean Kruse, whose financial struggles were dealt another blow late last week when a federal judge in Fort Wayne ordered him to pay $1.6 million on a defaulted loan.

“Your honor, we’re in kind of a pickle,” Kruse’s attorney, John R. Price, told Allen Circuit Court Magistrate Craig Bobay.

The escrow account at Chase Bank was a way of protecting customers at a January auction from those financial woes, but Price said two sellers remain unpaid from that auction.

Chase Bank held up payments when it received a garnishment for more than $215,000, stemming from a dispute Dean Kruse has with Royal Palm Polo Sports Club in Boca Raton, Fla., where he has conducted auctions.

Kruse doesn’t object to the garnishment order affecting his other business accounts at Chase Bank, but it shouldn’t affect the escrow account, he said.

“I do object to them having a right to other people’s money,” Kruse said during testimony Wednesday.

Bobay told Kruse that because the garnishment order came from Florida, he should take the fight there, which Kruse and his attorney said they plan to do.

Kruse said customers owe him more than $6.7 million.

The debt accumulated when he released cars to longtime customers before receiving payment, a practice he said he has suspended.

After Wednesday’s hearing, Kruse said he’s considering selling off the debts owed him, at a loss.

Kruse and his companies, including Kruse International, face legal actions seeking more than $16 million just in DeKalb County courts.

And late last week, U.S. District Judge Theresa Springmann ordered Kruse and his aircraft management company to pay nearly $1.7 million on a loan in default.

Avery Chapman of Chapman Galle PLC, the Florida firm representing the polo club, said the fight “belongs in Florida” and Kruse’s attempt to take it to Allen County was “a shell game.”

aturner@jg.net