FDIC as Receiver for City Bank vs. Conrad D. Hanson and ...
FDIC as Receiver for City Bank vs. Conrad D. Hanson and ...
FDIC as Receiver for City Bank vs. Conrad D. Hanson and ...
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C<strong>as</strong>e 2:13-cv-00671 Document 1 Filed 04/15/13 Page 18 of 97<br />
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Modification provided that the repayment source w<strong>as</strong> to be the sale of the finished lots upon<br />
completion of development improvements. Although the Loan Memos did not state that the<br />
<strong>as</strong>sets of any guarantors provided a secondary source of repayment, the Loan Memos included<br />
the financial in<strong>for</strong>mation of Guarantors A-1 <strong>and</strong> A-2, who had each executed an unlimited<br />
personal guaranty <strong>for</strong> all existing <strong>and</strong> future indebtedness owed by Borrower A to <strong>City</strong> <strong>Bank</strong>.<br />
67. The security <strong>for</strong> the Borrower A (II) Loan <strong>and</strong> the Borrower A (II) Modification<br />
w<strong>as</strong> to be the project's 120 lots.<br />
68. <strong>Hanson</strong> <strong>and</strong> Sheehan engaged in imprudent, unsafe, <strong>and</strong> unsound lending<br />
practices <strong>and</strong>/or violated the Loan Policy when they approved the Borrower A (II) Loan <strong>and</strong> the<br />
Borrower A (II) Modification because they, among other things:<br />
a. Failed to require Borrower A to contribute any hard equity to the<br />
acquisition of the 22.5 acres. The purch<strong>as</strong>e price of the l<strong>and</strong> w<strong>as</strong> only<br />
$11,367,450, which w<strong>as</strong> less than the $13.3 million commitment of the<br />
Borrower A (II) Loan. The Loan Memo did not explain why the borrower<br />
needed the extra $1,932,550, nor did the Loan Memo explain why the<br />
borrower w<strong>as</strong> not contributing any hard equity to the acquisition of the<br />
l<strong>and</strong>.<br />
b. Failed to require Borrower A to contribute any meaningful amount of hard<br />
equity to the development of the lots. The Loan Memo <strong>for</strong> the Borrower<br />
A (II) Loan provided that <strong>City</strong> <strong>Bank</strong> would provide a note incre<strong>as</strong>e in the<br />
future of "approximately $8,500,000" in development funds to "give a<br />
total project cost of $21,800,000." The entire $21.8 million of the total<br />
project cost w<strong>as</strong> to be funded by the Borrower A (II) Loan of $13.3<br />
million <strong>and</strong> a future note incre<strong>as</strong>e of approximately $8.5 million. In other<br />
words, when Defendants approved the Borrower A (II) Loan, the Loan<br />
Memo showed that Borrower A would not have to contribute any equity to<br />
the acquisition <strong>and</strong> development of these 120 lots. The Loan Memo <strong>for</strong><br />
COMPLAINT - Page 18<br />
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