2 developers accuse 3rd partner of cheating them

July 13, 1993|By Dennis O'Brien | Dennis O'Brien,Staff Writer

Two prominent real estate developers told a Circuit Court judge yesterday they were cheated by a third partner who pushed them out of a proposed residential development and refused to pay them for their efforts.

Ernest J. Litty, president of Leimbach Development Inc., and W. Calvin Gray Jr., a Severna Park developer, said Warren Halle agreed to pay them roughly $700,000 in fees for various services in May 1988. In return, Mr. Litty said, they agreed to turn over their interests in Asquith Farms, a 193-unit housing development.

Mr. Litty said Mr. Halle's decision to develop the property alone came at a meeting about five months after the three developers signed a contract to purchase the 140-acre tract off Riva Road near Annapolis for $3.8 million. They had planned to develop it and split the profits into thirds, he said.

Mr. Litty said Mr. Halle, president of Halle Enterprises Inc., changed his mind and opted to finance the project alone because he wanted to use his own construction and development contractors and "not have anyone looking over his shoulder.

"In essence, he said he wanted to do the project alone, that he didn't want to be accountable to us for how he transferred money in various accounts for his companies," Mr. Litty told Judge Martin A. Wolff.

In return for signing over their interest in the property, Mr. Litty said Mr. Halle agreed to pay the two developers $4,000 for every single-family house and $3,000 for every townhouse that was approved in the subdivision.

Mr. Halle also agreed to pay his two former partners sewer and water assignment fees, at the rate of $300 for every townhouse in the development and $400 for every single-family home, Mr. Litty said. The fees are compensation paid by homebuyers to developers for the money spent on water and sewer hookups.

The three partners decided to buy the property, which had been jointly owned by Elmer and Lester Asquith, after they flew over it in Mr. Halle's helicopter sometime in 1987 or 1988, according to testimony.

Plans for the first phase of the project were approved and the subdivision was recorded in court records in January 1991, with 40 single-family homes and 59 townhouses. The second phase, with the remaining 65 townhouses and and 29 single-family homes, was recorded in January 1992.

Joel L. Katz, Mr. Halle's attorney, said Mr. Litty and Mr. Gray dropped out because they refused to personally sign loans to help pay for the project.

He said Mr. Litty was on Mr. Halle's payroll as a consultant because he could expedite projects, thanks to his close ties to the administration of former County Executive O. James Lighthizer.

"On a $4 million project, the quicker you can move it through, the more money you can save because of financing costs, debts and all the other costs that go into a $4 million project," Mr. Katz said.

He said Mr. Litty fell short on his part of the deal, which was to have the property subdivided and recorded within 18 months of the May 9, 1988, agreement signed by all three men. "The total property was not recorded until January 1992," he said.

He said Mr. Halle suffered a loss of $4 million on the property and had to sell it. It remains undeveloped to this day.

"With all the carrying charges, the bottom fell out of the market, and he had to pay his own people for the services these guys were supposed to be providing," Mr. Katz said. "There's no reason on earth my client would give them the money they're asking for."

The trial, the result of a March 27, 1991, suit, is expected to run for the next three days.

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