Court ruling could pull civil suits out of limbo: Several cases stalled by March bankruptcy filing

The Shawano Leader, Wisconsin/September 20, 2009

Several court cases alleging unpaid debts of more than $4 million against the Samanta Roy Institute of Science and Technology, Inc. and its subsidiaries could move forward again depending on the outcome of a hearing Monday in U.S. Bankruptcy Court.

The civil suits were stalled when SIST and its subsidiaries filed for Chapter 11 bankruptcy in March, but a federal bankruptcy judge has now ordered the debtors to show why the case should not be dismissed.

The March bankruptcy filing came just a few weeks before three Shawano gas station properties, owned by SIST subsidiary Midwest Oil of Wisconsin, were scheduled for a foreclosure sale.

According to a civil suit filed by Integrity First Bank, of Wausau, Midwest Oil secured a total of $1.3 million in financing from the bank in August and September 2006 by mortgaging the three properties. According to the suit, $1.2 million was remaining on the debt when the bank was awarded a summary judgment in December of last year.

Also in December of last year, another civil suit was filed by Southwest Guaranty, Ltd., of Houston, requesting a receiver be appointed for Midwest Amusement Park’s USA International Raceway over an allegedly defaulted $2.2 million mortgage.

Midwest Amusement Park is not part of the bankruptcy filing, but the racetrack property is owned by SIST subsidiary U.S. Acquisitions and Oil, which filed for bankruptcy with most of SIST’s other subsidiaries.

During the course of the bankruptcy proceedings, SIST filed a complaint arguing Southwest Guaranty’s lien against the racetrack should be nullified.

The complaint alleged that "Southwest Guaranty embarked on a blatant and illegal ‘loan to own’ scheme whereby through a combination of misrepresentations and repudiations, it fraudulently induced the Debtor to enter into mortgage documents that did not reflect the agreement of the parties and which were grossly inequitable."

The complaint accuses Southwest Guaranty of fraud, causing economic duress, violating the Equal Credit Opportunity Act, Breach of Contract and Injurious Falsehood among other allegations.

Other civil cases pending at the time of the bankruptcy filing include:

A civil claim in U.S. District Court in Green Bay involving SIST and subsidiary U.S. Acquisitions and Oil, Inc. The claim, alleging fraudulent transfer of the racetrack property, stems from a $190,000 judgment against SIST subsidiary Midwest Amusement Park last September that was still being appealed.

Two civil suits filed by Draeger Oil Co. in Shawano County Circuit Court. One of the suits claims more than $206,000 in payments due on fuel products provided to the three gas stations and the other a foreclosure action on three residential properties, which the suit contends were mortgaged to Draeger for $225,000.

Two civil suits filed by Zien Service, Inc. of Milwaukee - alleging past due payments for mechanical, plumbing and heating work performed at several SIST properties.

Also put on hold was a libel and defamation suit filed by Shawano Mayor Lorna Marquardt against Kal Gronvall, SIST, Midwest Properties of Shawano, LLC, and Midwest Oil of Wisconsin, LLC. That case had been scheduled to go to trial last month.

SIST and its subsidiaries own a number of Shawano area businesses, including the three gas stations, the AmericInn and Kiryat Hotels, Spirit of the Northwoods, Midwest Gift and Fudge Shop, and USA International Raceway.

They also own several commercial properties in the city, some of which are leased to other businesses.

SIST representatives in the past have said the businesses were intended to fund the operation of an international boarding school, which they once proposed building in the town of Wescott.

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