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Greenwood sues bank to collect $917,000 letter of credit

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The City of Greenwood says a Minnesota bank owes it more than $900,000 to pay for street and sewer improvements left undone by the bankrupt developer of a mobile home park along U.S. 31.

But TCF Bank N.A. has refused for the past nine months to pay out on the letter of credit it gave to the developer of Southwood Estates mobile home park. So, Greenwood took the bank to court last month.

“We’re kind of perplexed that we ended up in court,” said Sam Hodson, an attorney at Indianapolis law firm Benech Dann Pecar, who is representing Greenwood. “I’ve been practicing for 25 years, and this is the first time I have ever had to sue a bank for not paying a letter of credit.”

Vincent Borst, a Chicago attorney representing TCF Bank, declined to comment. TCA Bank has not filed a response to Greenwood’s lawsuit.

The case began in Johnson County courts but was removed to federal court in Indianapolis on Monday.

TCF Bank issued the letter of credit for $916,788 in October 2003 to Southwood Estates LLC, which was controlled by Chicago-based Capital First Realty Inc.

But Richard Klarchek, the owner of Capital First, filed for Chapter 11 bankruptcy protection in October 2010, declaring $12.2 million in assets and $53 million in liabilities, according to filings in the U.S. Bankruptcy Court in Chicago.

That left undone the construction of sanitary sewers, streets, sidewalks, signs, monuments and storm sewers, according to a letter sent by Greenwood City Attorney Shawna Koons to TCF Bank in August 2011. Koons at that point demanded payment of the letter of credit in order to fund that work.

But TCF ignored the demand for five months, Hodson said. In January, city and bank officials opened settlement discussions during which Greenwood officials proposed a payment at a “substantial discount” to the full amount of the letter of credit, Hodson said.

When TCF asked for an even bigger discount, Greenwood decided to go to court. TCF has not stated any “plausible” reason for its failure to pay, Hodson said.

“I’m going to be interested to see what it is,” Hodson said.

Greenwood is funding construction of a new entrance and exit, as well as stormwater drains at Stop 18 Road, Hodson said. Other improvements will be made only as remaining units in the park are sold, he said.

“The city could certainly use the money,” Hodson said, but the improvement work, “It’ll get done one way or the other.”

 

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  1. If I were a developer I would be looking at the Fountain Square and Fletcher Place neighborhoods instead of Broad Ripple. I would avoid the dysfunctional BRVA with all of their headaches. It's like deciding between a Blackberry or an iPhone 5s smartphone. BR is greatly in need of updates. It has become stale and outdated. Whereas Fountain Square, Fletcher Place and Mass Ave have become the "new" Broad Ripples. Every time I see people on the strip in BR on the weekend I want to ask them, "How is it you are not familiar with Fountain Square or Mass Ave? You have choices and you choose BR?" Long vacant storefronts like the old Scholar's Inn Bake House and ZA, both on prominent corners, hurt the village's image. Many business on the strip could use updated facades. Cigarette butt covered sidewalks and graffiti covered walls don't help either. The whole strip just looks like it needs to be power washed. I know there is more to the BRV than the 700-1100 blocks of Broad Ripple Ave, but that is what people see when they think of BR. It will always be a nice place live, but is quickly becoming a not-so-nice place to visit.

  2. I sure hope so and would gladly join a law suit against them. They flat out rob people and their little punk scam artist telephone losers actually enjoy it. I would love to run into one of them some day!!

  3. Biggest scam ever!! Took 307 out of my bank ac count. Never received a single call! They prey on new small business and flat out rob them! Do not sign up with these thieves. I filed a complaint with the ftc. I suggest doing the same ic they robbed you too.

  4. Woohoo! We're #200!!! Absolutely disgusting. Bring on the congestion. Indianapolis NEEDS it.

  5. So Westfield invested about $30M in developing Grand Park and attendance to date is good enough that local hotel can't meet the demand. Carmel invested $180M in the Palladium - which generates zero hotel demand for its casino acts. Which Mayor made the better decision?

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