Judge: Developer violated contract with city

By J. PATRICK PEPPER

Times-Herald Newspapers

    DEARBORN — It was a decision that raised as many questions as it answered.

    But Wayne County Judge Michael Sapala’s Aug. 21 ruling that Burton-Katzman Development Co. breached the 2004 developer’s agreement it signed with the city confirms what city officials have been saying for more than a year.

    The case concerns the West Village Commons project in the west business district. Located on the south side of Michigan Avenue between Tenny and Howard, the site was the former home of a Jacobson’s department store that, once closed, the city purchased with hopes of redevelopment.

    Initial plans called for 48 condominium units, 75,000 square feet of mixed-use office and retail space, in addition to dual midrise buildings – one a hotel, one an office and retail building – in between the other two components.

    Construction on the mixed-used portion was complete in June 2006, but to date only 36 of the condos have been built, and the site of the midrise buildings sits vacant and grassy. Timelines set forth in the development agreement called for all work to be completed more than two years ago.

    A Sept. 25 hearing has been scheduled to determine what Burton-Katzman will have to do to remedy the situation. In the meantime, attorneys for both the city and the company will submit briefs to outline their respective arguments on how much or how little the company should be liable for.

    City Attorney Debra Walling said the city would seek to act on a clause in the developer’s agreement that either would force Burton-Katzman to finish construction on the incomplete components or return the land and reimburse the city the $17 million spent building two parking decks to support the project’s anticipated parking demands.

    “We’re simply requesting that Burton-Katzman be compelled to uphold their contractual agreements,” Walling said.

    Calls seeking comment for this story to Burton-Katzman attorneys and company officials were not returned prior to press time, making it uncertain what they will present at the hearing.

    When asked to speculate on what their potential arguments could be, Walling said previous hearings suggest the company could rely on an impossibility defense. She said company attorneys have said that securing financing for the project and then finding tenants to occupy the structures is not an option because of the battered economy.

    She said she would counter by pointing to Burton-Katzman’s role as developer in the $100 million-plus Unity Studios project in Allen Park.

    A separate claim against the company and some of its key stakeholders still has some questions of fact and could be heard Sept. 25 as well. The claim was filed after city attorneys found out Burton-Katzman had filed for a corporate dissolution in March 2008 while doing research for the breach of contract lawsuit.

    The developer’s agreement provides that any change in the financial capacity of either the city or the developer be disclosed voluntarily. Burton-Katzman attorneys have stated that the company had no obligation to disclose the status change because a subsidiary company created to manage the development, West Village LLC, is still up and running.

Burton-Katzman’s legal woes don’t end with the city, though.

    All three components to the development now have litigation surrounding them. The condo owner’s association was added as co-plaintiffs to the city suit in July. The association claims its members are owed more than $50,000 in fees associated with unsold and unbuilt condos that Burton-Katzman is responsible for. Several unsold condos were sold at a bank auction in July.

    And on Thursday, the owner of Exclusive Styles in the retail section of the development, Hilliard Hampton III, filed for a temporary restraining order against Burton-Katzman. Hampton claims that after the company agreed indefinitely to accept a reduced rental rate from him they suddenly, without notice went to draw on a $42,000 credit line he was required to secure as part of his lease agreement.

    “Hilliard didn’t even find out about this from (Burton-Katzman),” said attoney Jim Jernigan, who also is representing the condo association. “His bank called and notified him that they had presented the letter of credit and wanted to withdraw the entire amount.”

    A Wayne County judge ruled that Burton-Katzman could not draw on the credit until more facts are presented about the agreement at a future hearing.

    “This company came in here and sold everyone an absolute bill of goods,” Jernigan said. “They have failed at every turn of this project and now they are acting like they don’t have any obligations. It’s sickening.”

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