The developers of Lake Linganore, a lavishly planned southern Frederick County recreation community that has had severe financial problems, have been ordered by a Maryland Circuit Court judge to pay between $4 million and $5 million to the investment trust that bankrolled their development.
Under the ruling, by Montgomery County Circuit Court Judge John J. Mitchell, developers J. William Brosius and Loule J. Brosius and their wives are liable to First Mortgage Investors, a real estate investment trust, for the payments and interest due a series of loans they cosigned in the early 1970s.
The order signed by Judge Mitchell on Tuesday actually requires the Brosiuses to pay FMI $11.9 million, but this amount has been reduced by between $7 million and $8 million to compensate for the value of the lands and other assets that FMI holds as collateral on the loans.
The development originally was to consist of 4,800 individual lots on a sweep of 4,100 acres in the hills east of Frederick. It has been dormant for the past four years. During that time, the Brosiuses and the Linganore Corporation that they own, have been wrestling with the financial problems sparked by the nationwide collapse of the real estate market in 1974.
J. William Brosius and his brother Louie planned the development in the mid- and late-1960s, when the real estate market was riding a persistent upward spiral. In 1971, they took out a series of loans totaling $6 million from FMI in the name of the Linganore Corporation - loans that they and their wives Merle and Angle cosigned.
When the first of these loans came due in 1974, FMI, which was itself in financial difficulty, told the Linganore Corp. it would not renew the loan, according to court documents filed in the case.
By late December of that year, with FMI about to foreclose on the 2,100 acres that Linganore had put up as collateral for that loan, the Linganore Corp. filed for bankruptcy in U.S. court under Chapter II of the federal bankruptcy laws.
That action protected the company from FMI and other creditors for more than two years while the case was pending, but in February a bankruptcy judge in Baltimore freed FMI - although not all the other creditors - to try to recover the money they had lent, plus interest and penalties.
Under this judgment that Judge Mitchell gave FMI late Tuesday, Linganore Corp. and the Brosiuses now are obliged to repay FMI any money owned beyond the value of the collateral FMI already holds.
One week ago, FMI foreclosed on the 2,100 acres that had been its collateral for one loan. During the foreclosure sale, FMI itself purchased that land for $3.25 million, thus reducing the developers' debt by a like amount.
FMI also holds the mortgages of many lot owners who arranged to finance their purchases through the Linganore Corp.; these notes were given to FMI as collateral for two additional loans it made to Linganore. When the value of these notes is also deducted from the $11.9 million owed, the final debt owned by Linganore and the Brosiuses is reduced to between $4 million and $5 million, according to FMI attorney Peter Barnes.
Carolyn Brosius, dauther of J. William Brosius and an employee of the Linganore Corp., said yesterday that corporation officials have not had sufficient time to decide whether they will appeal Judge Mitchell's ruling.
However, she said, such Linganore amenities as the golf course, clubhouse and swimming pools will be functioning as usual this summer, despite the court battle.