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Case 1:14-cv-01002-CRC Document 67 Filed 03/12/15 Page 1 of 7
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
v.
Case No. 1:14-cv-01002-CRC
LAWRENCE P. SCHMIDT; FUTUREGEN
COMPANY d/b/a FUTUREGEN CAPITAL;
COMMERCIAL EQUITY PARTNERS, LTD.;
FGC DISTRESSED ASSETS INVESTMENT # 1,
LLC; FUTUREGEN CAPITAL DDA CG FUND
LLC; FGC TAX LIEN FUND #2, LLC; FGC
TRADING FUND #1 LLC; FGC SPE NO 1 LLC;
FGC SPE NO 2 LLC; AND FGC CM NOTE
FUND LLC,
Defendants.
MOTION OF RECEIVER TO COMMENCE ANCELLARY PROCEEDING
RELATING TO FOOTPRINT INVESTMENTS, LLC LOAN
Marion A. Hecht of CliftonLarsonAllen, LLP (the “Receiver”), court-appointed receiver
of FutureGen Company d/b/a FutureGen Capital, Commercial Equity Partners, Ltd., FGC
Distressed Assets Investment #1, LLC, FutureGen Capital DDA CG Fund LLC, FGC Tax Lien
Fund #2, LLC, FGC Trading Fund #1 LLC, FGC SPE No 1 LLC, FGC SPE NO 2 LLC, and
FGC CM Note Fund LLC (collectively, the “Receivership Defendants”), hereby files this Motion
to Commence Ancillary Proceeding Relating to Footprint Investments, LLC Loan (the
“Motion”).
BACKGROUND FACTS
1.
12, 2014.
This Action was initiated by the Securities and Exchange Commission on June
Case 1:14-cv-01002-CRC Document 67 Filed 03/12/15 Page 2 of 7
2.
On June 16, 2014, the Court entered the Order Appointing Receiver (Docket
Entry No. 7), which appointed the Receiver as temporary receiver for the Receivership
Defendants.
3.
On July 3, 2014, the Court entered the Order Establishing Receivership Estate and
Appointing a Receiver (Docket Entry No. 17) (the “Receivership Order”). Pursuant to the
Receivership Order, the Receiver was appointed permanent receiver for the Receivership
Defendants.
THE LOAN
4.
FutureGen Company (“FutureGen”) is the holder of a Promissory Note from an
entity known as Footprint Investments, LLC (“Footprint” or “Borrower”) and dated August 12,
2013 (the “Note”). A copy of the executed Note is attached hereto as Exhibit A. The Note
contains a confession of judgment provision by which Footprint expressly consented to the
jurisdiction of the Circuit Court for Prince George’s County, Maryland for purposes of
confessing judgment (see page 5 of the Note).
5.
Pursuant to the terms of the Note, Footprint promised to pay by no later than
February 12, 2014 (the “Maturity Date”), the principal sum of Two Hundred Fifty Nine
Thousand Five Hundred Dollars ($259,500) (the “Principal Sum”) plus the sum of Ten
Thousand Dollars ($10,000.00) as an “Exit Fee”. See Exhibit A. The Note provides that a
“Default” thereunder shall occur if “Borrower shall fail to timely pay any principal, interest or
other amounts due on this Note when due . . . .” and provides for a “Cure Period” to be “within
five (5) days of the Final Maturity Date.” See Exhibit A.
6.
The Note further provides that in the event that payment due under the Note is not
made within the Cure Period, Borrower shall be required to pay, in addition to any other
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payments due thereunder, a late charge in an amount equal to five percent (5%) of the amount of
the payment which is not made when due (the “Late Fee”).
7.
The Note further provides that in the event of any Default, Borrower shall also be
obligated to pay, in addition, inter alia, “all reasonable costs thereby incurred by Lender,
including that of attorneys’ fees in the amount of twenty-five percent of the unpaid principal
balance and interest then due hereunder …, all of which shall be added to and become part of the
debt evidenced hereby.”
8.
The Note further provides that, in the event of Default, Borrower shall also be
required to pay default interest at the rate of six percent (6%) per annum above the contract rate
defined in the Note of fourteen percent (14%) per annum on the total unpaid balance of the
Principal Sum due on the date of Default from the Effective Date of this Note through the date of
payoff.”
9.
In the event of a “Default,” the Note authorizes “any attorney of any court of
record to be borrowers’ true and lawful attorney-in-fact, and in borrowers’ name and stead, to
acknowledge service of any and all legal papers on any kind of suit brought for collection of this
obligation and to appear for borrower in any court of competent jurisdiction in the
commonwealth (sic) of Maryland and to acknowledge and confess judgment against borrower
and in favor of Lender of this Note for (A) the entire principal amount of this note then
outstanding and remaining unpaid, (B) interest thereon then accrued and unpaid, (C) reasonable
attorney’s fees and (D) court costs.”
THE GUARANTY
10.
In conjunction with the making of the loan which is the subject of the Note,
Frederick Hill, III, Ed Potillo, Antonio Gladden and Herbert Martin (collectively the
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Case 1:14-cv-01002-CRC Document 67 Filed 03/12/15 Page 4 of 7
“Guarantors”) each signed an Unconditional Guaranty Agreement dated August 12, 2013 (the
“Guaranty”). A copy of the Guaranty is attached hereto as Exhibit B.
11.
Pursuant to the Guaranty, the Guarantors each agreed to “unconditionally and
without limitation guaranty, and to be personally and individually liable, for the full performance
of all payments and obligations of the Borrower under the [Note] . . . including, but not limited
to, the Confession of Judgment provision....” See Exhibit B.
THE COLLATERAL
12.
In conjunction with the making of the loan, Footprint executed a Purchase Money
Deed of Trust and Assignment of Leases and Contracts dated August 12, 2013 and recorded
among the land records of Prince George’s County, Maryland at Liber 35196 folio 502 (“Deed
of Trust”), for the benefit of Futuregen. A copy of the Deed of Trust is attached hereto as
Exhibit C. The Deed of Trust granted Futuregen a first lien upon the property known as 14206
Greenview Dr., Laurel, Maryland 20708 (the “Property”).
13.
The Deed of Trust was intended to secure: “(a) The full and unconditional
payment of any and all amounts due and payable under the Note, including without limitation,
principal, interest (including default interest), fees and costs;” See Exhibit C at R.3(a).
14.
The Deed of Trust further provides that upon the Event of Default under the Note,
Futuregen “shall have the right to have the Trustees take possession of the Mortgaged Property
and proceed to sell the Mortgaged Property at public auction…” See Exhibit C at Section 5(b).
THE DEFAULT AND THE DEMAND
15.
The date of “Default” under the Note was February 13, 2014, when Footprint
failed to pay the amounts due under the Note by the Maturity Date. As of the date hereof, none
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Case 1:14-cv-01002-CRC Document 67 Filed 03/12/15 Page 5 of 7
of the amounts owing under the Note have been paid to Futuregen or Receiver since the Maturity
Date.
16.
Demand was sent to Footprint and the Guarantors on January 26, 2015. See copy
of correspondence dated January 26, 2015 attached hereto as Exhibit D.
ANCILLARY ACTIONS
17.
As a result of this default, Receiver is entitled to pursue a Complaint for
Confession of Judgment against Footprint and the Guarantors, in the Circuit Court for Prince
George’s County, Maryland, for all amounts due under the Note and the Guaranty (“Confession
of Judgment Action”).
18.
In light of the default under the Deed of Trust, Receiver is also entitled to
commence a foreclosure action in the Circuit Court for Prince George’s County, Maryland
(“Foreclosure Action”) order to liquidate its collateral, the Property.
19.
Section VIII of the Receivership Order at paragraph 34 provides for a stay:
“…until further Order of this Court:
All civil legal proceedings of any nature, including, but not limited to, bankruptcy
proceedings, arbitration proceedings, foreclosure actions, default proceedings, or other
actions of any nature involving: (a) the receiver, in her capacity as Receiver; (b) any
Receivership Assets wherever located; (c) any of the Defendants, including subsidiaries
and partnerships; or (d) any of the Defendants’ past or present officers, directors,
managers, agents, or general or limited partners sued for, or in connection with, any
action taken by them while acting in such capacity of any nature, whether as plaintiff,
defendant, third-party plaintiff, third-party defendant, or otherwise (such proceedings are
hereinafter referred to as “Ancillary Proceedings”).” See Receivership Order.
20.
In light of the stay of all Ancillary Proceedings until further Order of Court,
Receiver is hereby seeking authority to file the Confession of Judgment Action against the
Borrower and Guarantors, and to commence a Foreclosure Action in accordance with the Deed of
Trust.
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WHEREFORE, the Receiver respectfully requests that this Court enter an order in the
form attached hereto (i) granting this Motion; (ii) authorizing Receiver to file a Complaint for
Confession of Judgment in the Circuit Court for Prince George’s County, Maryland against
Footprint and the Guarantors; (iii) authorizing Receiver to commence a Foreclosure Action in the
Circuit Court for Prince George’s County, Maryland; and (iv) granting such other relief as the
Court deems just and proper.
Date: March 12, 2015
Respectfully submitted,
/s/ David Daneman
David Daneman (DC Bar No. 467386 )
WHITEFORD, TAYLOR & PRESTON L.L.P.
Counsel for the Receiver
Seven Saint Paul Street
Baltimore, MD 21202-1626
Telephone: (410) 347-8729
Facsimile: (410) 234-2317
Email: [email protected]
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Case 1:14-cv-01002-CRC Document 67 Filed 03/12/15 Page 7 of 7
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing was served via U.S. Mail
and e-mail, as indicated, upon the following parties this 12th day of March, 2015:
Lawrence P. Schmidt
631 D Street NW, Apt. 232
Washington, DC 2004-2919
[email protected]
[email protected]
FutureGen Company d/b/a FutureGen Capital
Commercial Equity Partners, Ltd.
FGC Distressed Assets Investment #1, LLC
FutureGen Capital DDA CG Fund LLC
FGC Tax Lien Fund #2, LLC
FGC Trading Fund #1 LLC
FGC SPE No 1 LLC
FGC SPE NO 2 LLC
FGC CM Note Fund LLC
c/o Marion A. Hecht, Receiver
CliftonLarsonAllen LLP
4250 N. Fairfax Drive, Suite 1020
Arlington, VA 22203
FutureGen Company d/b/a FutureGen Capital
FGC Trading Fund # 1 LLC
FGC Distressed Assets Investment #1, LLC
FGC SPE No 1 LLC
FGC Tax Lien Fund #2, LLC
FGC SPE No 2 LLC
FGC CM Note Fund LLC
c/o Spiegel & Utrera, P.A., Registered Agent
9 East Loockerman Street, Suite 3A
Dover, DE 19901
John V. Donnelly, III, Esquire
Securities and Exchange Commission
Philadelphia Regional Office
One Penn Center
1617 JFK Boulevard, Suite 520
Philadelphia, PA 19103
/s/ David Daneman
David Daneman (DC Bar No. 467386)
2131372
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