
As reported here over the weekend, the City of Dearborn has filed a lawsuit against the Burton-Katzman Development Co., Inc. and key personnel for failing to complete a commercial and residential project on the west side, and for failing to reveal that the company had filed dissolution documents in March of last year.
The official court documents can be viewed here. The suit alleges breach of contract and silent fraud arising from the 2003 development agreement signed with the City of Dearborn. That agreement legally binds Burton-Katzman and its affiliates to build two mid-rise buildings on West Village Drive, and complete 48 condos between West Village Drive and the railroad tracks in the area known as West Village Commons.
The development agreement outlined specific time frames for the completion of these projects. All of the deadlines passed a year or more ago.
The silent fraud is alleged because executives of Burton-Katzman continued to represent the company in negotiations with the city throughout 2008, despite Burton-Katzman filing a Certificate of Dissolution with the State of Michigan last March.
The city discovered the company’s status on January 9, 2009, as it was preparing the breach of contract lawsuit against Burton-Katzman.
Dearborn is asking the court to require the company to fulfill the terms of the 2003 development agreement by building two mid-rise buildings worth at least $20.2 million, and ordering its affiliate, Abbey Homes, to complete the 12 remaining condo units, which were supposed to have a value of $2.5 million.
It is also asking the court to require Burton-Katzman to pay damages of more than $349,000 for unpaid taxes, plus penalties and interest; and pay damages of $16.4 million to cover the city’s costs for two parking decks.
Based on the 2003 development agreement, the City of Dearborn built the two 300-spot parking decks on West Village Drive near Military in large part to serve Burton-Katzman’s residential and hotel projects, which the company has failed to construct.
Under the agreement, the City was to be significantly reimbursed for the cost of the parking decks through the property taxes to be generated by Burton-Katzman’s projects, as well as monthly parking permits purchased by the development’s tenants.
Mayor John B. O’Reilly, Jr. said, “The lawsuit was filed only after more than 18 months of pro-active discussions with Burton-Katzman to find suitable alternatives that were reasonable given the changing economic climate. But it became apparent a lawsuit was our only avenue. That has become even more clear after we discovered that the parties weren’t honest with us.”
Named in the lawsuit along with Burton-Katzman Co. are West Village Commons, LLC; Abbey Homes, LLC; Peter Burton, a partner and president of Burton-Katzman; Robert Katzman, a partner in Burton-Katzman; Charles Dimaggio, vice president of project management for Burton-Katzman; and Daniel Share, an attorney for Burton-Katzman.