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under the indemnity agreement was secured by a deed of
trust and assignment of rents with respect to the real
property owned by the partnership.
At some point, some or all of the limited partners of
Dakotah Hills ceased to pay their investor notes, and they
refused Northern Telecom’s demand for payment. According-
ly, Northern Telecom demanded payment from Admiral pursuant
to the terms of the financial guaranty bond, and Admiral
paid the outstanding balance of the defaulted investor
notes. Admiral then sued the individual limited partners
who had defaulted for collection of their investor notes,
and the investors countersued Admiral, alleging that they
had been fraudulently induced to enter into the partnership
and that Admiral was a party to the fraud.
In 1987, Dakotah Hills filed for protection under
chapter 11 of the U.S. bankruptcy laws. On or about
June 20, 1989, Admiral filed its First Amended Proof of
Claim in Dakotah Hills’ bankruptcy. Admiral’s claim states
as follows:
Through rights of subrogation and through
direct liability pursuant to that certain
Indemnity Agreement from Debtor attached hereto,
the Debtor is indebted or liable to this Claimant
in the sum of $367,142.68 (the “Specific Claim”),
plus accrued and accruing interest, costs and
attorneys’ fees. This sum includes approximate
legal and professional fees and expenses as of
March 31, 1989, and principal, interest and
salvage payments of $372,233.32. The liability
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