The 192-acre Manchester Lakes project in southeast Fairfax County was plunged into a legal thicket this week as one set of creditors sought to force its developer into bankruptcy while others sought millions of dollars in damages from its principal financial backer.
Two lawsuits were filed this week in different courts involving the project. Both named Manchester Lakes Associates as defendant, but named different individuals within that company, an indication of the confusion that exists over the relationship between developer James Brehoney and Dominion Federal Savings and Loan Association, the project's financial backer.
Charging that Manchester Lakes Associates, a Virginia limited partnership, has "stopped paying its bills," three creditors this week asked a federal bankruptcy court in Alexandria to force the development company into an involuntary Chapter 11 bankruptcy. Papers were served on James Brahoney, whom that petition named as general partner and president.
But in a lawsuit filed Thursday in circuit court in Fairfax County, four property owners who sold land for the project are asking damages that range from $50 million to $60 million from Dominion Federal Savings and Loan. That suit also charges that Dominion Federal, through a subsidiary operation known as Dominion Mortgage Center (formerly known as Dominion Financial and Investment Corp.) is an equal partner in the development. Brahoney is not named as a defendant, but the suit charges that Dominion Federal used him as "an innocent dupe and selected figurehead."
The suit in Fairfax was filed on behalf of Wade A. Campbell, Beulah Campbell, Raymond L. Campbell and Aurella P. Campbell, who sold 30 acres to the developer and still hold what amounts to a second trust that was to assure payment for their land.
In addition to Dominion Federal, the suit cites other companies which it alleges are subsidiaries of the lending institution. They are: McLean-based Dominion Mortgage Center Inc., Appraisal Service of America of Arlington, and Development Corp. of America. Manchester Developers Inc. is also cited. The suit charges that the Manchester Developers Inc. firm was created by defendants to appear as the sole general partner of Manchester Lakes Associates.
Brahoney, who first conceived the Manchester Lakes project, said he is "out of business." His development company, known as The Heritage Group, is gone, he said. "There are no employees anymore. I just have to pick up the pieces.
"I have no idea why they are doing this. We don't understand why," Brahoney said. "We had requests in to Dominion Federal for funding and they cut our funds at that site and two other projects we were involved in."
The Campbells' suit also charges that Bruce Lyons, an employee of Dominion Federal Savings, "solicited a petition for involuntary bankruptcy," referring to the case in Alexandria.
Lyons Thursday said, "Dominion Federal is the lender," and referred most questions to the lender's lawyer William Dorn, who did not return reporter's phone calls.
Tom Mains, Brahoney's lawyer, said Dominion Federal "will never admit that they are a partner. But we have a bushel basket of evidence that shows that one of their subsidiary companies is a 50-percent partner."
Mains said Brahoney will "oppose the Chapter 11 bankruptcy in court." Mains, Brahoney, Lyons and several developers surveyed agreed that the Manchester Lakes project is a viable one.
"This is a very unfortunate situation that we hope we can resolve, and leave the community undamaged," Lyons said.
The Campbells' suit charges that Dominion Federal Board Chairman William L. Walde is an officer and director of each of the defendants named in their case. Walde is in Florida and could not be reached for comment.
The suit charges "fraud" in the way Walde and Manchester Lakes officials handled a long series of subordinations of their deed of trust on the 30-acre site which is a part of the Manchester Lakes development.
According to court papers, the Campbells signed the deed in order to obtain construction loans for improvements on their land as long as "construction loans were obtained by Brahoney or his assignees from a bona fide lender for construction of improvements on the Campbell tract." However the suit charges that their deed was used basically as collateral to finance the overall project without their knowledge.
A series of subordinations of the Campbells' deed to back funds for improvements to the general development site and not their own site was carried out without their knowledge, lawyers said. In early summer, at the beginning of what the plaintiffs contend is "the biggest building season," Dominion Federal allegedly cut off funds to Manchester Lakes.
That was long before costly delays generated by claims by an environmental group of potential toxic danger at the site took place. The county later gave the development a clean bill of health after lengthy testing of soils and water in the area. Construction and sales of townhouses are proceeding. But the cutoff at the beginning of the season was disastrous, said one man who asked not to be quoted.
The Campbells' suit charges that Dominion Federal has refused to make them any payments and that the value of their land has been hurt by Dominion Federal's actions.
The 30 acres involved are considered critical to Fairfax County because they are the site of a proposed 180-bed nursing home facility. Certificates of approval for those beds are expected from state health officials any day.
Fairfax supervisor Joseph Alexander, within whose magesterial district the project lies, this week vowed to "fight to preserve the whole project."
Alexander said the entire Manchester Lakes project is crucial to the future of southeast Fairfax, "including the road network that is included in the project that the developer was to pay for."
The nursing facilities are part of a large, elderly section planned for Manchester Lakes. The whole section is to be built by Fellowship Square Foundation, best known for its operations of senior-citizen residential housing in Reston. The plan for that portion of the Manchester Lakes project was approved by the County Board of Supervisors less than two months ago.
NVHomes and Pulte Homes are in the middle of construction of sites they purchased from the development company. Those sites are owned by those two builders. But some purchasers of completed units have been having trouble securing clear title in order to go to settlement. But a spokesman for one of the companies said that problem is expected to be cleared up soon, in spite of the other lawsuits.
Manchester Lakes was originally planned to include 1,294 housing units, in addition to the several hundred units designed for the elderly.