A Regency-related entity will default on $26.5 million in loans if a shuttered recycling facility is placed in receivership and the company is prevented from managing its assets, Regency’s former finance officer said in a court document.

John Gamble said Regency Capital Fund I LLC was created at the urging of JPMorgan Chase & Co. in order to pool properties that were used as collateral on two loans from the bank in December 2007.

The money was to be used to help Regency recover from a cash-flow crisis in its homebuilding unit that eventually led to its downfall and the collapse of an array of businesses that fell under its umbrella.

Among the properties used as a lending base for the JPMorgan loans was a construction and demolition debris recycling facility at 1422 Scott Ave., former home of Environmental Reclamation and Recycling Services, a Regency-linked company that operated under a variety of names until its demise earlier this year.

The property was mortgaged under the name of Scott Street Properties LC, another limited liability company that included James Taylor of New York state as a 50 percent partner, with former Regency officers, various limited liability companies they had formed and another individual holding the remaining 50 percent stake.

Gamble’s GF Investments LC was one of the investors, as were the Regency-related Westwood Partners LC and Richard Moffitt’s Foxboro Enterprises II LP.

Taylor and family members have filed a lawsuit in Polk County District Court claiming that the property was transferred from Scott Street Properties to Regency Capital Fund without his knowledge.

The lawsuit names the Myers brothers, Moffitt, Gamble, Kurt Pagliai, Timothy Hogan, GF Investments, Foxboro Enterprises II and Westwood Partners as defendants.

Taylor is not listed as a member of Regency Capital Fund in an exhibit filed with Gamble’s affidavit. However, it does list the Myers brothers, GF Investments, Foxboro Enterprises II and Westwood Partners as members.

Gamble said in the affidavit resisting a temporary injunction and appointment of a receiver for the property that Regency Capital Fund received a deed to the property for $1.7 million, a value established by an appraisal company hired by JPMorgan.

The money was used to pay the $887,725 balance of a loan from Bank of the West, property taxes and an equity interest to Regency Capital Fund, Gamble said.

Meanwhile, Polk County District Judge Eliza Ovrom has ruled that the Myers brothers, Moffitt and Gamble must repay Taylor and family members up to $1 million if a default judgment is issued in a separate lawsuit filed by Northwest Bank in an effort to recover a loan for operating funds and equipment for the Scott Avenue business.

The Taylors and the former Regency executives guaranteed the loan. However, Ovrom noted that Taylor had been released from his interest in the recycling business.