The owners of Battlefield Builders Inc., the collapsing Northern Virginia development company, have filed individual business bankruptcy petitions in federal court in Alexandria. Jimmy, Harry and Mary Ann Ghadban, who are brothers and sister, own Battlefield Builders and several other development-related firms based in Prince William County.
Each of the Ghadbans lists debts of $104.8 million, the total owed to creditors of their companies and for which the three owners together are liable. Each listed the total amount of the debt because each had signed a personal guaranty to repay the debt. In addition, Harry and Mary Ann Ghadban said in their petitions they have individual debts of more than $500,000 each, and Jimmy Ghadban lists $329,000 in individual debt. Each reported assets of around $500,000 in the documents.
They have asked for Chapter 7 bankruptcy, under which they can be required to sell all their assets to pay creditors if ordered to do so by the court. Any of the $104.8 million in business debts not covered by the proceeds of the liquidation would be wiped out, said an attorney familiar with bankruptcies. The individual debt of each of the Ghadbans is "secured," which means it is backed by property, stock or other assets, and cannot be eliminated by the bankruptcy.
Battlefield Builders Inc., with residential subdivisions under construction in Fairfax, Loudoun and Prince William counties, virtually ceased operations in early January. After several weeks of negotiations that ended in February, lawyers for Battlefield and its creditors failed to reach agreement on a plan that would allow the company to complete homes already under construction and pay bills.
The bulk of the massive debt -- more than $97 million -- is owed to banks and savings and loans companies, apparently for construction loans; insurance and warranty firms; and the governments of Manassas and Prince William, Fairfax and Loudoun counties, the court documents say. The Ghadbans signed personal guarantees for these debts, according to the court records. Another $7.4 million, described in the records as "unsecured claims," is owed principally to subcontractors and suppliers of materials for Battlefield-built homes.
The Ghadbans could not be reached for comment. The two brothers' telephone numbers are unpublished, and Mary Ann Ghadban has no listing. The Ghadbans' attorney, Raymond J. Diaz, is out of town, according to his law firm, and another lawyer described by the firm as also working on the case did not return phone calls.
Among the Ghadban creditors are Ideal Mutual Insurance Co. of New York and Eastern Indemnity Co. of Maryland, bonding firms that have gone bankrupt recently. Court documents show that Battlefield owed $3.4 million to Ideal Mutual, which held bonds covering completion of roads, storm drains, curbs and gutters and other public facilities in five Battlefield subdivisions in Northern Virginia. The company owes $50,000 to Eastern Indemnity, the records say.
The Ghadbans' 10-year-old construction company was the largest in Prince William County. In recent years they branched out, forming at least 10 other businesses, including mortgage, leasing, realty, insurance, warranty, contracting and excavating companies, according to the court records.
Mary Ann Ghadban, vice president for sales and marketing of Battlefield Builders, is, or has been within the last six years, an owner in 10 other companies, the records say. Jimmy Ghadban, president of Battlefield Builders, has, or has had, an interest in seven of these companies and Harry Ghadban, vice president, has, or has had, ownership in eight of them, according to the documents.
The bankruptcy petitions show that the Ghadbans took hefty salaries from seven of their companies last year despite their deepening financial troubles. Mary Ann Ghadban collected $179,256.25 in income in 1984 and her brothers each took $193,781, according to the records. The three took more than $215,000 income each in 1983. A reliable source said the Ghadbans also in the past have driven company-owned Mercedes autos for which they took $400 weekly operating allowances from the business.
Mary Ann Ghadban's list of personal property includes her Gainesville residence, which court records say has a market value of $134,000, as well as a $100,000 town house in Vail, Colo., a $30,000 lot in North Carolina, two Manassas houses, one valued at $105,000 and the other at $100,000, and a $68,000 lot in Manassas. Her petition said she has $16,114 worth of personal property that should be exempt from the liq- uidation requirements, including half interest in the Gainesville and Vail homes and half interest in the North Carolina and Manassas lots. The personal belongings list also includes an $8,800 diamond wedding ring, $1,600 worth of other jewelry, a $2,000 fur coat and $2,625 equity in a lot in Prince William County, the records said.
Jimmy Ghadban said in court documents that he owns two Manassas homes, one held jointly with his wife. The title to the other house is in the name of his children with his wife as trustee, according to the records. He also owns two Prince William lots valued at $139,000, but with claims, or loans, against them of $302,000. He listed $7,440 worth of personal property as being exempt from the liquidation requirements.
The property of Harry Ghadban includes two Manassas houses, one of them his residence, which has a market value of $220,000, according to the court records. He listed the value of his personal property he wants exempted from the liquidation as $5,404. Included are a 1979 Thunderbird worth $100, a 1980 Corvette worth $1,500, half interest in each of the two houses, and a $1 electric can opener, the court records say.
The court documents also list several lawsuits that are pending against Ghadbans or their companies, filed by materials suppliers, subcontractors and buyers of Battlefield homes.
The Ghadbans' biggest single creditors are District Realty Title Co., which insured the titles of Battlefield homes, and its parent company, Epic Realty Services, and Citizens Savings Bank of Ithaca, N.Y. Court documents show the Ghadbans owe each of these companies $10 million. Other big creditors, according to the court records, include Republic Insurance Co. of New York City, $5 million; Builders Trust Warranty, $2 million; Homeowners Warranty Corp., $1 million; MGIC of Fairfax, $1 million; Commonwealth Mortgage Assurance Co. of Annandale, $1 million; and attorney J. Gordon Kincheloe of Fairfax, $1 million.
In a series of foreclosures held since early January, banks and savings and loans have sold land and houses in Battlefield subdivisions to recover loans they made to the company. The proceeds from the foreclosure sales will be deducted from the amount of debt listed in the bankruptcy petitions as being owed to these lenders, said an attorney. Money recovered in a foreclosure frequently does not cover the debt, and the difference remains as a debt in the bankruptcy action, the lawyer said.
The list of suppliers and subcontractors to whom the Ghadbans are in debt covers 32 pages of the court records. The largest single amount is $1.5 million owed to Lowe's, a large supplier of construction materials in Prince William County.
The total $104 million in business debts listed in the Ghadbans' bankruptcy petitions could contain "a lot of overlap," said one attorney. In an effort "not to overlook anyone," bankruptcy petitioners often list more debts than they believe they actually owe, he said. Any creditor who is not listed in the petition still has a claim, even after the court wipes out debts reported in the bankruptcy documents.
Attorneys representing some of Battlefield Builders' subcontrators and suppliers have filed the first in what they say will be a series of suits designed to recover other debts they claim the company owes them. The first two suits, filed by Lowe's, ask for a total of about $320,000 for work done on homes in the Loudoun County subdivision of Chestnut Run, according to Michael R. Vanderpool, the Lowe's attorney and head of a committee of lawyers representing Battlefield creditors.
The actions ask the court to order sale of the homes to cover debts for work done on them. In practice, courts rarely order sale of a home. Someone, usually the title insurance company, will pay the claim rather than allow the property to be sold, said another attorney.