Development partnership agrees to settle Signet suit Burwood group will pay almost $1 million to lender

March 22, 1996|By Dennis O'Brien | Dennis O'Brien,SUN STAFF

An Annapolis-based partnership has agreed to pay nearly $1 million to Signet Bank to settle a suit over the bank's financing of a 216-unit development in Glen Burnie.

The agreement between Burwood Road Limited Partnership and Signet was reached Wednesday in Anne Arundel County Circuit Court, halting a weeklong jury trial before Judge Raymond G. Thieme.

The partnership, headed by Annapolis real estate developer John W. Steffey Sr., will pay the bank $995,000, according to Circuit Court records.

Signet filed suit Feb. 24, 1993, alleging that Burwood owed $2.3 million of the $5 million it borrowed on Aug. 17, 1989, to construct Oakleaf Villas, a development of 168 condominiums and 48 townhouses near the intersection of Ritchie Highway and Ordnance Road.

The loan amount was increased to $7.5 million in 1990, according to court records.

In turn, Burwood sued the lender on continue to finance the development was a breach of contract that crippled the project and forced Burwood into bankruptcy.

The lawyer for Mr. Steffey and his partners told jurors last week that the project was expected to take five years and earn $2.4 million in profits.

Work progressed for about 2 1/2 years but came to a halt in spring 1992 after Signet stopped making periodic payments to Burwood, as called for in the loan agreement.

"Signet tried to crush these people," said Merle Maffei, Mr. Steffey's lawyer.

Mr. Steffey testified that sales were "excellent" before Signet tightened its purse strings. Lack of funding forced Burwood to close the model units, which put sales behind by three to five months, he testified.

"These were arbitrary decisions on the part of the officers of Signet," Mr. Steffey said.

But he acknowledged that costs for supplies were higher than expected and that by July 1991 Burwood owed contractors $496,000 and that much of the work had stopped.

"We were making our best effort to try to get the project completed," he said.

Mr. Steffey said in court papers that he chose Signet because he had a 30-year history of dealing with employees of the bank's predecessor, Union Trust.

But he said those employees were replaced, and he then found it difficult to deal with the bank.

"Within a year after closing the [loan] transaction, the bank decided to clean out its real estate department by retiring the majority of the senior officers, leaving a void where experience had been the norm," Mr. Steffey said in an April 14, 1993, affidavit.

Union Trust Co. of Baltimore was acquired by Bank of Virginia in 1985, and the merged company became known as Signet Banking Corp. that year.

Lawyers for Signet and Burwood declined to discuss the case yesterday.

Pub Date: 03/22/96

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