Branford Partners, LLC

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UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

In re
CASE NO. SV 06-12551-KT

BRANFORD PARTNERS, LLC,
a Nevada limited liability
company, formerly Sunquest
Development II, LLC,

CHAPTER 11

MEMORANDUM ON DEBTOR'S
OBJECTION TO CLAIM NO. 37 OF

Debtor. PLUTUS ALTERNATIVE STRATEGIES

DATE: January 7, 2008

TIME: 10:00 a.m.

PLACE: Courtroom 301
21041 Burbank Blvd.
Woodland Hills, CA

nl all

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On June 19, 2007, Branford Partners, LLC, the debtor and debtor in possession
in the above-captioned case (“Debtor”), filed a Second Omnibus Objection to Claims
(the “Objection”) in which the Debtor objected to numerous claims including Claim No.
37 of Plutus Alternative Strategies, LLC (“PAS”). PAS filed an opposition to the
Objection on July 18, 2007 (the “Opposition”) to which the Debtor replied on July 24,
2007. The matter was continued from time to time thereafter pursuant to stipulation.

Claim No. 37 is based on money loaned under a Promissory Note dated
September 17, 2002, pursuant to which “DCM, a California Limited Liability Company
(‘Maker’), as well as Sunquest Development and Roth Properties Inc.” promised to pay
PAS $2,970,000 (the “DCM/Sunquest/Roth Note”). Claim No. 37 does not include
copies of any other notes.

The Debtor objected to the claim on the ground that the Debtor has no liability
under the DCM/Sunquest/Roth Note. The Opposition filed by PAS appears to assert
claims under a different note pursuant to which Sunquest Development, LLC (“SQ”)
promised to pay Genesis L.A. Real Estate Fund, LLC $9,600,000 (the “Genesis Note”).
The Opposition states that PAS intends to file an amended proof of claim concurrently
with its Opposition.

The Debtor's objection to the proof of claim filed on May 10, 2007, should be
sustained because the Debtor does not appear to be an obligor on the note attached
thereto and the opposition does not address the Debtor's liability under that note.

No amended proof of claim has been filed. The Debtor's objection should be
sustained, without prejudice, as to the argument set forth in the opposition until such
time as PAS amends its proof of claim.

The Debtor should not be required to defend against a claim without a clear
statement of that claim. In this case, for example, it is not clear whether PAS is
asserting a general unsecured claim or, in light of its argument in the opposition,
whether PAS asserts priority over other unsecured claims. Although PAS
acknowledges, on page 1 of the opposition, that the claim was filed as a “general
unsecured claim’, PAS also appears to be asserting liability on the part of the Debtor on
an obligation described as the “Genesis Note and Deed of Trust.” The Debtor counters
with the assertion that the Genesis Note and Deed of Trust was converted into equity
and, therefore, is not a basis for a general unsecured claim.

Notwithstanding the absence of an amended proof of claim, the Debtor goes on
to address PAS’s argument for liability based on its construction of the original
Operating Agreement and the Second Amendment to the Operating Agreement. The
court has addressed the PAS argument in other proceedings before this court and
found, without exception, that the distribution provisions to which PAS points govern
distributions to the Debtor's members on account of their equity or membership

2

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interests in the Debtor and do not act to give them priority over secured or other general
unsecured creditors.

Deep Blue Holdings Ltd. originally joined in the Debtor's objection to the PAS
claim and then withdrew its objection pursuant to a Stipulation filed in Adv. 07-0119.
Although no assignment of the PAS claim appears on the claims register, the court was
informed at the hearing that PAS has assigned its claims to Deep Blue. The reasoning
set forth in the memorandum filed as docket #34 in litigation between Deep Blue and
the Fornaciari parties in Adv. 07-01119 is also applicable to the argument set out in
PAS'’s opposition in this matter.

For the foregoing reasons, the Debtor's objection to the PAS claim is
SUSTAINED.

Dated: Mae oo

Kathleen Thompson ¢
United States Bankruptcy Judge

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CERTIFICATE OF MAILING

| hereby certify that copies of the MEMORANDUM ON DEBTOR'S OBJECTION TO
CLAIM NO. 37 OF PLUTUS ALTERNATIVE STRATEGIES were mailed to the following
parties in interest:

Mak - 5 2008
DATED: JON D. CERETTO
CLERK OF COURT

off ( LJ Lee) pea ie

Deputy Clerk ]

Office of the United States Trustee
21051 Warner Center Lane, #115
Woodland Hills, CA 91367

Daniel J. Weintraub, Esq.
James R. Selth, Esq.
Weintraub & Selth, APC

12424 Wilshire Blvd., Ste. 1120
Los Angeles, CA 90025

Branford Partners, LLC
1601 N. Sepulveda Bivd., #516
Manhattan Beach, CA 90266

David S. Kupetz, Esq.
Sulmeyer Kupetz

333 S. Hope Street, 35" Floor
Los Angeles, CA 90071

John W. Sheller, Esq.

David C. Hunter, Esq.
Hinshaw & Culbertson LLP
11601 Wilshire Blvd., Ste. 800
Los Angeles, CA 90025