Lawsuits batter Morgan Farms: Landowner, development company locked in struggle over final 73 acres

TRAVERSE CITY – The financially troubled Morgan Farms project on Traverse City's western edge has become entangled in still more legal difficulties with the filing of a lawsuit seeking nearly $50,000 in back payments for work on a water booster station.

Integrated Controls, Inc., of Traverse City has sued Morgan Farms Development LLC so it can collect on a payment bond after it did about $400,000 worth of labor and materials at the site, according to its lawsuit.

It was the second lawsuit against Morgan Farms in 13th Circuit Court in the last six months. Last August, Roland Habrecht, the owner of the final 73 acres for the development, went to court to remove the development firm from his property, charging it with trespassing and a breach of its purchase agreement.

The suits were the latest blows against a project suffering from a glacially-slow new home market. Originally envisioned for as many as 400 homes, it now has approximately 20 homes on the property, mostly in the $350,000 range, according to the Traverse City assessor's office.

The Habrecht suit cites other financial woes as well: "Because of the defendant's failure to pay the 2006 summer taxes, I was forced to pay same in the amount of $3,168.96," Habrecht said in one court filing.

Habrecht, a long-time area real estate broker, had held onto the huge tract-both an initial 59 acres and the subsequent 73 acres-for about 40 years before development began several years ago.

Since that time, he and the principals in Morgan Farms LLC, Fred Schaafsma and Joseph Zimmers, had worked closely on the project, shepherding it through the planned unit development process with the city.

They frequently made verbal agreements and cut handshake deals, a brief filed for the Morgan Farms developers said. Now all that has apparently changed. Zimmers declined to talk about the lawsuit, and Schaafsma and Habrecht could not be reached for comment.

Habrecht charged in August that the development firm had failed to make two scheduled payments on the second phase, totaling $35,334. Habrecht and Morgan Farms LLC are now battling it out to determine whether the development firm also breached its contract when the second land deal wasn't executed on time last summer.

Under an agreement hammered out in May 2003, Habrecht and the developers settled on a price of $2,650,000 for phase two. The developers finished paying about $1.5 million for phase one in 2003, the suit said.

The terms for the second purchase called for monthly payments and then a balloon when the purchase agreement was executed. Between May 2002 and June 2006, the monthly payments ranged between $13,000 and $17,000.

The Habrecht suit said the developers paid a total of $516,000 on the property before defaulting last spring.

In a prepared statement, Steven Fox, Morgan Farm's attorney, said that "Mr. Habrecht declined to close the sale because of an alleged technicality in the purchase agreement, and he has now filed litigation in his attempt to avoid his obligation to sell the Phase II property."

"Morgan Farms had every intention of closing on the Phase II property," Fox wrote in his brief for the development group. He also said the development firm had lined up the money for the deal: "Morgan Farms obtained financing." He said the closing was to take place in June or July, and that $3,228,395 was in escrow until Aug. 4, as required by the development agreement.

But Marlena McCall, Habrecht's agent, and Habrecht prevented the agreement from taking place. He wrote: "When Mr. Zimmers contacted McCall in June to discuss the details for the closing to occur, he was told Mr. Habrecht had suffered a serious heart attack."

His hospitalization and subsequent care delayed any progress on the deal, Fox wrote. "When Mr. Zimmers asked McCall about the paperwork for the closing in June, she replied that she would take care of it."

No trial date in the Habrecht case has been set. BN