Real estate: Bank of Ann Arbor wins lawsuit over value of foreclosed developments

Bank of Ann Arbor recently prevailed in a court case involving disputed land values in unfinished subdivisions where the bank foreclosed on the developers.

Washtenaw County Circuit Court Judge Archie Brown ruled that the bank's more conservative appraisal was the most accurate.

Real estate experts have said the so-called "deficiency cases" could become more common as developers increasingly default on loans on incomplete developments and appraisals increasingly come in more conservative than in the past. The cases arise when the value of the land drops lower than the amount of the loan on the property.

This recent decision leaves developers Francis and Marcus Yono owing the bank more than $500,000 from unpaid loans in dispute after Bank of Ann Arbor foreclosed on two unfinished housing developments.

The  developers, who own Livingston Building Co., disputed the bank's appraisal that put the value of lots in West Bloomfield Township and Brighton Township at well below the original loan amounts.

But Brown ruled that the bank's appriasers, Mike Williams of Alcock & Associates and Ken Blondell of Integra Realty, had a more valid valuation method than the Yono's expert witness, appraiser David Burgoyne.

The differences between the appraisals on the 26 lots amounted to $530,000, plus unpaid property taxes. The bank valued the lots at $2.09 million, while the developers put it at $2.6 million.

While Brown favored the bank's appraisal methods -- in which one of the issues was whether one of the subdivisions should be considered two separate developments -- he found for the developers on the issue of how to amortize income from sales of the housing. That resulted in a $110,000 adjustment in the Yonos' favor.

Brown awarded the bank $371,877 for the Fairfield development in West Bloomfield Township, $151,622 for the Peninsula project in Brighton Township, and $40,736 in attorney fees.

Brown's opinion was unambiguous: "The court finds that at the time of the foreclosure sale, the Fairfield property was not fairly worth the amount of outstanding debt secured by the property." And he made an identical statement with regard to the Peninsula development. The ruling was dated Oct. 8.

"We're obviously very pleased," said Veronique Liem, the attorney who represented the bank along with Perry Kantner.

Liem said most of the deficiency cases she's seen are settled out of court, but the differences in valuations were so large, and the negotiations with the Yonos so fruitless, that this one went to trial.

"We never got a reasonable settlement proposal," she said.

Tim Galligan of Auburn Hills, attorney for the Yonos, could not be reached for comment.

Freelance reporter Dan Meisler can be reached at danmeisler@gmail.com.