CEF: Higgerty Law Statement of Claim Section H – The Strathmore Loan

This article is part of the series from the Higgerty Law statement of claim. You can read what a statement of claim and a Quistclose Trust is in the first article in this series.

This portion of the statement talks about the Strathmore Loan which was made as part of a plan to construct 50 units of seniors housing in Strathmore AB.

This section alleges:

• The loan contravened CEF’s mandate,
• The loan was contrary to CEF’s policies and procedures,
• The loan was contrary to the CEF Quistclose Trust,
• ECHS’s transfer of the property to ABC District for $1 and the “extinguishment” of the loan deprived the CEF Trust or in the alternative the CEF Quistclose Trust of the Strathmore Loan receivable,
• that LCC / LCCFM knew of and approved of this or was wilfully blind to this action.

Please note that these are allegations only and this case has not been adjudicated in a court of law. As always, if you have any legal questions or need legal advice please consult appropriate legal counsel.

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From Higgerty Law Statement of Claim

H. The Strathmore Loan
91. In or about August 2007, the ABC District approved a CEF mortgage loan of approximately $5,850,000.00 to ECHS for the purpose of purchasing real property in Strathmore, Alberta (the “Strathmore Lands”) and constructing a 50-unit seniors’ condominium development (the “Strathmore Loan”).

92. The Strathmore Loan contravened the mandate of the ABC District’s Church Extension Program and the terms of the CEF Trust, in that it was not made for the purpose of building churches and/or schools in which to carry out the ministry of the Lutheran faith, but rather for the purpose of enabling ECHS to engage in speculative real estate development.

93. Further, the Strathmore Loan was contrary to the policies and procedures of the ABC District Church Extension Fund, and the CEF Trust, in that:

a. ECHS was not a “congregation of the ABC District in good standing” nor an institution or entity of the LCC whose constitution, policies and practices were consistent with those of LCC;
b. ECHS lacked the experience and qualifications to bring the Strathmore development to successful completion;
c. ECHS had no ability to service or repay the Strathmore Loan;
d. ECHS did not and was not required to provide financial support to ABC District and/or LCC in exchange for the Strathmore Loan;
e. The Strathmore Loan was very risky and inadequately secured;
f. The officers of ECHS were not required to sign Loan Repayment Agreements with ABC District in respect of the Strathmore Loan;
g. ECHS was not required to make a commitment to promote Church Extension deposits among its members or others; and
h. ECHS was not required to submit financial statements to the ABC District, or alternatively the ABC District failed to scrutinize those financial statements to assess the risk to the Strathmore Loan.

94. Further, or in the alternative, the Strathmore Loan was contrary to the terms of the CEF Quistclose Trust in that:

a. ECHS was not a congregation or agency of the LCC;
b. ECHS lacked the experience and qualifications to bring the Strathmore development to successful completion;
c. ECHS had no ability to service or repay the Strathmore Loan; and
d. The Strathmore Loan was very risky and inadequately secured.

95. In or about August 2008, ECHS transferred the title to the Strathmore Lands to ABC District for consideration of $1.00. Concurrently, ABC District purported to “extinguish” the Strathmore Loan payable by ECHS to the CEF, thereby simultaneously obtaining the Strathmore Lands on its own account and depriving the CEF Trust or in the alternative the CEF Quistclose Trust of the Strathmore Loan receivable.

96. The LCC and/or LCCFM were aware of the Strathmore Loan and the “extinguishment” of that Loan in exchange for the transfer of the Strathmore Property to ABC District. In the alternative they were willfully blind to said facts.