ITEM 3.10 Pleasant Creek 4th Addition0tSTe F o
MINNESOTA CDP
DEPARTMENT INFORMATION
Request for
City Council Action
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ORGINATING DEPARTMENT:
REQUESTOR:
MEETING DATE:
Legal
City Attorney Andy MacArthur
March 24, 2014
PRESENTER(s):
REVIEWED BY:
ITEM #:
City Attorney
City Administrator Lori Johnson
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AGENDA ITEM DETAILS
RECOMMENDATION:
Council approve attached Settlement Agreement and Release, releasing funds held in escrow for
Pleasant Creek Fourth Addition.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
I S A PUBLIC HEARING REQUIRED?
Yes
No
BACKGROUND/JUSTIFICATION:
On October 18, 2013 the City received correspondence from Conway MacKenzie, Inc. as the liquidating
agency for 300 LHC, Inc. (Lyman Lumber etc. in a consolidated bankruptcy which included the previous
owner of the Pleasant Creek Farms property, Construction Mortgage Investors Co.) making a claim on
certain escrow funds (approximately $30,000.00) held by the City for Pleasant Creek Farms Fourth
Addition.
Upon receipt of the letter, the City contacted both Conway MacKenzie and the current property owners,
Lafayette Partners, LLC regarding the escrow. There was a disagreement between the two parties as to
ownership of the funds. The City refused to release the funds until such time as there was an Agreement
between the parties and a written release of the City from any further obligation to either Party.
The parties have reached an Agreement to release the funds. The property owner or subsequent
developers will have to submit escrow funds prior to any additional development of the property.
The Agreement releases the City and it allows it to disburse funds as per the Agreement. Without such a
release the City could not comply with the bankruptcy court's liquidating agent turnover request
without the possibility of a claim for the same funds by the property owner, Lafayette Partners, LLC.
SUPPORTING DOCUMENTS: X ATTACHED ❑ NONE
• Proposed Settlement Agreement
MOTION: (Please word motion as you would like it to appear in the minutes.)
Motion to approve Settlement Agreement and Release between Conway MacKenzie, Inc. Lafayette
Partners, LLC and the City of Otsego.
BUDGET INFORMATION
FUNDING: BUDGETED: ❑ YES
Release of Escrow Funds o No
ACTION TAKEN
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is made and entered into effective as
of March 1, 2014 by and between Conway MacKenzie, Inc. as the Liquidating Agent ("Liquidating
Agent") for the 300 LHC, Inc. (f/k/a Lyman Holding Company), et al., Chapter 11 Bankruptcy
estates, Lafayette Partners, LLC ("Lafayette") and City of Otsego ("Otsego')
RELIT A I N
A. Liquidating Agent is the court-appointed liquidating agent of 300 LHC, Inc. (f/k/a
Lyman Holding Company) and its related entities ("Debtors") and is authorized to act as a
representative of the bankruptcy estate of the Debtors, to recover property of the estate and to settle
claims made in connection with recovery efforts pursuant to the Second Amended Joint Chapter 11
Plan of Liquidation of the Debtors and Official Committee of Unsecured Creditors Dated January 18,
2013 ("Plan"), confirmed by the United States Bankruptcy Court for the District of Minnesota
("Bankruptcy Court") by Order dated February 28, 2013;
B. Lafayette is the owner of certain real property located in Wright County, Minnesota
legally described on the attached Exhibit A ("Property");
C. City is holding funds in an escrow account related to development of the Property,
identified as "Pleasant Creek 4 #701-22431" ("Account") which currently has a balance of
approximately $30,360.80, more or less ("Account Balance");
D. Liquidating Agent claims that it is entitled to be paid the Account Balance for, among
other things, the reasons more fully described in a letter from Christopher Knapp, attorney for the
Liquidating Agent, to City dated October 18, 2013 ("Knapp Letter");
E. Lafayette contests the Liquidating Agent's claim of entitlement to the funds in the
Account and asserts that Lafayette alone has a valid claim to the Account Balance, for the reasons
described in a letter from Michael Brutlag, counsel for Lafayette, to Mr. Knapp dated November 27,
2013 (`Brutlag Letter");
F. City is unwilling to disburse the funds in the Account absent a resolution of the
dispute between Liquidating Agent and Lafayette; and
G. The parties hereto wish to settle the claims associated with the Account, Account
Balance and Property in the manner set forth herein in order to allow for disbursement of the funds
on deposit in the Account.
AGREEMENT
Now, therefore, in return for and conditioned upon receipt of the payments described in
paragraph 1 below and other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, Liquidating Agent, Lafayette and City agree as follows:
1. As soon as practicable after all parties have executed this Agreement, City will
disburse the funds in the Account as follows:
a. The sum of Nine Thousand Seven Hundred Fifty and 0/100 Dollars
($9,750.00) ("Liquidating Agent Payment") will be paid to Liquidating Agent in the form of
a check made payable to "Conway MacKenzie, Inc., Liquidating Agent f/b/o 300 LHC, Inc.
et al.," and mailed to Mr. Christopher Knapp, Attorney at Law, 775 Prairie Center Drive,
Suite 400, Eden Prairie, MN 55344; and
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b. A sum equal to the Account Balance less the Liquidating Agent Payment
("Lafayette Payment") will be paid to Lafayette in the form of a check made payable to
"Lafayette Partners, LLC" and mailed to Lafayette Partners, LLC, Attn: James R. Gagne,
2615 West Lafayette Road, Excelsior, MN 55331.
2. Contingent upon receipt of the Liquidating Agent Payment, Liquidating Agent hereby
releases and forever discharges Lafayette and City, and their predecessors, successors, agents,
officers, attorneys, employees, representatives, and any other person or entity affiliated with any of
the foregoing, including predecessors and successors in the chain of title for the Property ("Lafayette
Released Parties" and "City Released Parties"), from any and all claims, debts, accounts, contracts,
agreements, promises, and causes of action that Liquidating Agent ever had or now arising out of or
in connection with the Account and actions taken by Lafayette Released Parties or City Released
Parties in connection with the Account. This release specifically includes, but is not limited to, all
claims referenced in the Knapp Letter and any other claims associated with funds allegedly owed by
City or Lafayette to Construction Mortgage Investors Co., its successors or assigns.
3. Contingent upon receipt of the Lafayette Payment, Lafayette hereby releases and
forever discharges Liquidating Agent and City, and their predecessors, successors, agents, officers,
attorneys, employees, representatives, and any other person or entity affiliated with any of the
foregoing, including, without limitation, the Debtors' Chapter 11 estates and their successors or
assigns ("Liquidating Agent Released Parties" and "City Released Parties"), from any and all claims,
debts, accounts, contracts, agreements, promises, and causes of action that Lafayette ever had or now
has arising out of or in connection with the Account and actions taken by Liquidating Agent
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Released Parties or City Released Parties in connection with the Account. This release specifically
includes, but is not limited to, all claims referenced in the Brutlag Letter and any other claims
associated with the Account and Account Balance.
4. Liquidating Agent, Lafayette and City have each received the advice of independent
counsel prior to signing this Agreement. This Agreement constitutes the entire agreement between
the parties. Liquidating Agent, Lafayette and City acknowledge that no other party or agent or
attorney of any other party has made a promise, representation, or warranty whatsoever, express or
implied, not contained herein to induce the other party to execute this Agreement. The terms of this
Agreement are the result of negotiation and compromise between the parties and will not be
interpreted against the party originally drafting this Agreement. Liquidating Agent, Lafayette and
City further agree that the scope and terms of this Agreement are reasonable and that it is their intent
and desire that this Agreement be enforced to the fullest extent permissible under the laws and public
policies of the State of Minnesota.
5. This Agreement shall bind Liquidating Agent, Lafayette and City, their respective
legal representatives, successors, assigns and anyone claiming through or under them.
6. This Agreement is formed and executed in the State of Minnesota and will be
governed by the laws of the State of Minnesota and applicable federal law. Pursuant to the Plan, the
Bankruptcy Court retains jurisdiction to hear any and all disputes related to the Agreement. The
recitals contained in the lettered paragraphs are an essential part of this Agreement. If any term or
provision of this Agreement is or should be held invalid or unenforceable for any reason, the
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remaining terms and provisions of this Agreement will not be affected thereby and will be valid and
enforced to the fullest extent permitted by law.
7. In the event of litigation concerning this Agreement, reasonable attorney fees and
costs shall be awarded the successful parry.
This Agreement may be executed in counterparts, each with the full force and effect
of an original document.
(The remainder of this page is intentionally blank — signature pages follow)
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Signature page to Settlement Agreement and Release
between Liquidating Agent, Lafayette and City
Conway MacKenzie, Inc., as Liquidating Agent
FB/O 300 LHC, Inc. et al.
Kevin A. Berry, Managing Director
Conway MacKenzie, Inc.
401 South Woodward Avenue
Suite 340
Birmingham, Michigan 48009
Signature page to Settlement Agreement and Release
between Liquidating Agent, Lafayette and City
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Lafayette Partners, LLC
James R. Gagne
Its: Chief Manager
Signature page to Settlement Agreement and Release
between Liquidating Agent, Lafayette and City
City of Otsego
Jessica Stockamp, Mayor
Tami Loff, City Clerk
EXHIBIT A
Legal Description of Lafayette's Property ("Property")
Lots 1 through 4, inclusive, Block 1;
Lots 1 through 4, inclusive, Block 2;
Lots 1 through 4, inclusive, Block 3;
Lots 1 through 3, inclusive, Block 4;
Lots 1 through 4, inclusive, Block 5;
Lots 1 through 5, inclusive, Block 6;
Lots 1 through 6, inclusive, Block 7;
Lots 1 through 8, inclusive, Block 8;
Lots 1 through 8, inclusive, Block 9;
Lots 1 through 8, inclusive, Block 10;
Lots 1 through 8, inclusive, Block 11;
Outlots A, C and D;
All in Pleasant Creek Farms 4th Addition, Wright County, Minnesota
AND
That part of Outlot B, PLEASANT CREEK FARMS 4th ADDITION, according to the recorded plat
thereof, Wright County, Minnesota, lying northerly of the following described line: Commencing at
the northwest comer of said Outlot B; thence South 00 degrees 58 minutes 34 seconds East, assumed
bearing along the west line of said Outlot B, a distance of 475.00 feet to the point of beginning of the
line to be described; thence North 89 degrees 01 minutes 26 seconds East, a distance of 320.30 feet
to the east line of said Outlot B and said line there terminating.
Except that part of Outlot B, PLEASANT CREEK FARMS 4th ADDITION, described as
follows:
Commencing at the northwest corner of said Outlot B; thence South 00 degrees 58 minutes 34
seconds East, assumed bearing along the west line of said Outlot B, a distance of 475.00 feet to the
point of beginning; thence North 89 degrees 01 minutes 26 seconds East, a distance of 279.00 feet,
thence North 00 degrees 58 minutes 34 seconds West, a distance of 146.00 feet; thence South 89
degrees 01 minutes 26 seconds West, a distance of 279.00 feet to said west line; thence South 00
degrees 58 minutes 34 seconds East along said west line, a distance of 146.00 feet to the point of
beginning.
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