Brooke stock seller files lawsuit to recover interest in preferred shares

By Caroline Salls

Pittsburgh, Jan. 23 - Brooke Corp. stock sale agreement party Northern Capital, Inc. filed a lawsuit Friday against Brooke Capital Advisors, Inc. and the Stockton National Bank that asks the court to determine stock ownership in connection with an alleged default, according to a filing with the U.S. Bankruptcy Court for the District of Kansas.

According to the complaint, Stockton filed a petition against Brooke Corp. on Sept. 30 in the District Court of Johnson County, Kan., claiming rights and other legal interests in 748,000 class B preferred shares of Northern Capital in connection with an alleged loan default by Brooke.

Although Stockton obtained a default judgment against Brooke, Northern Capital said it owns all of the rights and interests in the stock in question, not Stockton.

Specifically, Northern Capital said it sold the stock to Brooke in March 2007 for $1.87 million.

Then, on March 28, 2007, the plaintiff said Brooke Capital sold Northern Capital a $1 million participation interest in a separate loan, with an agreement to repurchase the loan interest by June 30, 2008. The June 30 deadline was later extended to Sept. 30.

If the deadline was not met, Northern Capital said it had the right to retire the loan debt through the assignment by Brooke to the plaintiff of all of the rights and interest in the class B preferred shares, as well as the right to future dividend payments.

Northern Capital said Brooke Capital failed to repay the $1 million participation interest by Sept. 30, and it also failed to repay a $692,698 promissory note.

As a result, Northern Capital said it, and not Stockton, is entitled to the class B preferred shares.

Based in Overland Park, Kan., Brooke is a holding company for insurance and banking services distribution companies. The company filed for bankruptcy on Oct. 28, and its Chapter 11 case number is 08-22786.

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