A months-long court feud over a retail building at the southwest corner of 49th Street and College Avenue in Indianapolis has become even more heated now that the owner has sought bankruptcy in an attempt to delay foreclosure on the structure.
The dispute started in October when the lender tried to take possession of the Uptown Business Center, whose owner, Leif Hinterberger and his partners, owed $802,500 under the defaulted mortgage, according to the suit filed in Marion Superior Court.
But late last month the fight over ownership spilled into federal court when Hinterberger filed to reorganize the assets of Uptown Business Center LLC under the protection of Chapter 11 bankruptcy.
In the filing, Hinterberger lists owner assets of nearly $1.4 million, or the assessed value of the building whose tenants include the Upland Brewery tasting room and The Paw Patch Veterinary Hospital.
Liabilities total about $1.1 million, the bulk of which is a $761,917 mortgage to Alpha Capital LLC. The bankruptcy filing also names Arturo DeRosa, Donald C. Arbogast Jr., Dan Fortune and Steve LaCross, who hold second mortgages on the property.
Alpha Capital bought the original mortgage on the building from Minnesota-based PSB Credit Services Inc. about the time foreclosure proceedings began, according to court documents.
Hinterberger says he’s willing to pay the debt but argues that PSB Credit Services is still the rightful owner of the mortgage, not Alpha Capital. He expects the bankruptcy proceeding to clarify the ownership issue.
Hinterberger specifically accuses Bryan Chandler, a principal of Alpha Capital, and his partners of trying to undermine his attempt to resolve the debt and instead take possession of the business center.
“We believe there have been attempts to hide their true motives, manipulate the legal process and take our properties, our assets, and our long-term community and economic investments,” Hinterberger said in an email.
Chandler, a local real estate investor, did not return phone calls seeking comment. But he and Hinterberger have crossed paths before.
Hinterberger in 2011 lost control of six properties across the street from the Uptown Business Center on the northwest corner of the intersection of 49th and College, where he had hoped to build a $19 million mixed-use project called The Uptown.
The properties on the northwest corner are now controlled by Strategic Mortgage Funding, a company operated by Chandler that invests in distressed mortgages.
A lawyer for Alpha Capital dismissed Hinterberger’s July 29 bankruptcy filing as a last-ditch effort to stall foreclosure on his Uptown Business Center.
“It’s our belief that it was put in place to delay procedures,” said Amy VonDielingen, a partner at Wooden & McLaughlin LLP.
A court document filed by Alpha Capital supporting its attempt to foreclose says Alpha has made concessions in an attempt to resolve the matter without taking possession of the property.
Alpha said that it agreed to delay foreclosure for three months provided that Hinterberger and his partners made payments in December and January of $2,500 per month. Alpha also agreed to accept $550,000 to settle the mortgage default, an amount nearly $250,000 less than what is owed on the unpaid principal, according to court documents.
“The forbearance agreement gave defendants exactly what they claimed they wanted — time to pay off the loan,” lawyers for Alpha wrote in a July court motion. “Despite the plain and unambiguous terms, defendants now challenge Alpha’s right to enforce the note and mortgage. But defendants cannot put the toothpaste back in the tube.”
In a phone interview, Hinterberger’s lawyer, Rob Cheeseborough, repeated their stance.
“My client wants to pay every dollar to the ultimate holder of that note, not [to] the alleged holder,” Cheeseborough said. “The [chapter] 11 will make it so he pays the appropriate party.”
Court documents show that Hinterberger bought the building in 2005 for $250,000 and so far has spent $1.2 million on renovations.
This story was originally published by Indianapolis Business Journal at IBJ.com.