The Battle For The Moorings
Aug. 4, 2016
A legal battle is brewing for control of The Moorings subdivision between the project’s investors, who are headed to court over allegations of financial mismanagement, sabotage, and improper bank dealings.
Managing Partners Ted Lockwood and Bob Brick – who own a combined 58 percent of the 164-unit development behind Tom’s West Bay – filed a lawsuit in 13th Circuit Court against minority investor Mark Johnson. Johnson, operating under the name Michigan Moorings, owns 42 percent of the development with partner Jason Warren.
Lockwood and Brick allege that Johnson has tried since early 2015 to renegotiate the operating agreement to earn a greater percentage of The Mooring’s profits, and to hire family members for management positions. When he was denied, Johnson began a campaign “to force” Lockwood and Brick out of the project, the pair say.
For his part, Johnson – who issued a lengthy written statement to The Ticker through attorney Dan Dingeman – says Lockwood and Brick mismanaged development of The Moorings. He alleges the pair unilaterally appointed themselves real estate agents for the project with “significantly above fair market commission rates,” and says they incurred budget overruns totaling nearly $2 million.
“Neither will provide any assurance that the project will not incur further overruns," Johnson wrote. "Our only recourse is to pursue the avenues available to us to stop their activities and protect the significant investment we have in the development.”
At the center of Lockwood and Brick's lawsuit are allegations Johnson used his relationship with Chemical Bank COO Len Amat to convince the bank to reassign The Moorings’ construction loan to a shell company owned by Johnson. After taking possession of the loan, Johnson declared it in default and demanded on July 21 that The Moorings pay the entire $3.55 million balance within 14 days or face foreclosure. Lockwood and Brick’s litigation seeks to bar any foreclosure action, and to have the loan declared in good standing.
“Johnson was able to leverage his relationship with a very well-placed person at the bank to do this end-around to buy the debt…and try and take over the development,” says attorney Brian Etzel of The Miller Law Firm, which represents Lockwood and Brick. Etzel says his clients made all of their loan payments to Chemical Bank promptly, and that the bank transferred the debt to Johnson without notifying Lockwood or Brick.
Amat did not respond to a phone request for comment; Chemical Bank Executive Vice President and General Counsel William Collins issued a written statement to The Ticker stating that “serious differences exist between the partners” that have “affected the prospects of the project,” and that as a community bank, staff “have close relationships with all of the parties involved.”
“In cases like this, it is not unusual for a bank to sell its loan to one of the partners,” Collins wrote. “That is what Chemical Bank chose to do in this situation, and is permitted to do by the loan documents. The alternative would have been for the bank to be forced to take legal action against all of the parties to protect its interests...Chemical Bank did not wish to be in an adversarial position with good customers, and could not have resolved their disputes."
So what happens next with the lawsuit – and how might it affect The Moorings? Johnson and his attorneys now have less than two weeks remaining to file a written response to Brick and Lockwood’s allegations in 13th Circuit Court. As for the subdivision itself, Lockwood says “we’re still moving forward (with construction), and The Moorings side of the project is just about complete. We have a few months more work to complete on The Leelanau Flats (the condo portion of the development).”
Lockwood also notes The Moorings has 17 reservation deposits on file, and that “nobody has dropped out” because of the pending litigation. Johnson says he hopes the conflict can “still be resolved quickly and amicably.”
“We remain confident that the development will eventually become a great addition to the community,” he says.