COMPLAINT FOR INTERPLEADER

David W. Huston serves as Special Counsel for USA Commercial Mortgage Company. He filed a Complaint for Interpleader and an Interpleader Addendum with the U.S. Bankruptcy Court on July 24, 2006. Mr. Huston recently wrote a memo outlining what an interpleader complaint is, how long the process might take, as well where those involved can find more information.

INTERPLEADER COMPLAINT – INITIAL EXPLANATORY MEMO

David W. Huston, Esq.

As Special Counsel for USA Commercial Mortgage Company (“USACMC”), one of the Debtors in the Bankruptcy proceedings, I have filed the Interpleader Complaint in order to help the Court and the parties (the “Assignors” who attempted to sell their interests and rights in particular Direct Loans and the “Assignees” who attempted to buy those interests and rights), but whose attempts to complete the transactions were interrupted by the bankruptcy filings by USACMC and many of its related companies and therefore were not completed, to determine which of the parties receive the monies paid and which receive the interests and rights in those particular direct loans.

INTERPLEADER COMPLAINT – WHAT IS IT?

An interpleader is a complaint that is brought in equity to determine the rights of rival claimants to property held by a third person. In this case USACMC is that third person for purposes of this litigation and is holding a total of $1,784,971.99 paid to it by Assignors and the assignments or copies of the assignments executed in favor of the Assignees. Some of the assignments had been recorded, and some had not been recorded, prior to the bankruptcy filings on April 13, 2006. All of the checks in process at the time of the bankruptcy filings were initially returned unpaid as a result of the bankruptcy filings, resulting in the reservoir of funds being held by USACMC.

Thus far, the Complaint has been filed, along with an Addendum to the Complaint that attaches an Exhibit showing each of claimants – the Assignors and the Assignees, collectively the “Defendants” – and the amounts to be paid and the loan interest to be assigned. Today, a Summons is being filed that will be served on each of the Defendants that provides for the timing for each Defendant to file an answer or otherwise respond to the Complaint. A preliminary court hearing has been scheduled for September 28, 2006, at 9:30 a.m., to provide for future administration of the litigation and provide information to the litigants as the Court may determine. Defending this interpleader may inevitably become complex and, as a result, I make the following recommendation:

RECOMMENDATION NO. 1: Hire counsel to represent you in these proceedings.

While it may appear, since there was recently a willing buyer (Assignee) and a willing seller (Assignor) to each transaction, and therefore the buyer should receive her/his interest in the loan and the seller her/his money, the bankruptcy may have affected that willingness and may therefore result in each transaction being contested. This interpleader action, by definition, is a contested proceeding. Your representation, under these circumstances, may best be handled by an attorney, and I recommend that you hire one now in order to protect your interests.

HOW LONG WILL THIS TAKE?

Unfortunately, that is unknowable since it depends on the issues that emerge as the case proceeds. For example, there may be regulatory and litigation complications concerning the transfer of interests in a particular project that may have been in default at the time of the attempted transfer. Certainly, those cases will probably take longer than those cases involving performing loans, where the Assignors/Assignees may be satisfied with their original bargain. That leads to my second recommendation:

RECOMMENDATION NO. 2: Discuss your transaction with counsel for the Defendant on the other side of the sale (the “counterparty”) to determine if both parties will accept the originally bargained for result.

Those Defendants that are counterparties to a transaction that they wish merely to confirm and take the benefit of their original bargain may be able early in the proceedings to file a motion or stipulation seeking to accept the benefits of their original bargain. While those persons will be responsible for their share of any administrative costs approved by the Court resulting from the interpleader litigation, those costs will be less, and your participation in the proceedings will be shorter, the sooner particular claims are resolved.

WHERE CAN I GET INFORMATION ABOUT THIS CASE?

First and foremost, from any lawyer that you hire to represent you. That counsel should be able to obtain information about your particular transaction from your Counterparty or otherwise. Copies of all pleadings filed in the interpleader case will be served on each of you and your counsel. With respect to information about the project that you bought/sold, you are welcome to contact the undersigned and I will assist in transmitting publicly available information from USACMC to you or your counsel. Secondly, concerning your rights as a Direct Lender, there is a Committee that has been appointed to represent Direct Lenders in the overall bankruptcy cases. Counsel to that committee can be reached by calling Gregory E. Garman, counsel at Gordon & Silver, 702/796-5555. Third, information about future hearings and other motions that may be of interest will be available on this web site for your review.