Panzica Construction sues Zaremba Inc. to collect on bill for condo tower work
By STAN BULLARD
3:00 pm, February 5, 2010
A financial dispute at the 10-story tower at the Avenue District, an upscale housing development in downtown Cleveland, has spawned a lawsuit by Panzica Construction Co. in Cuyahoga County Court of Common Pleas. The general contractor in Mayfield Village seeks to foreclose to collect $2.7 million it says Cleveland-based real estate developer Zaremba Inc. owes for work on the 62-unit condominium building at 1211 St. Clair Ave. While contractor-developer disputes are commonplace, a novel aspect of the proceeding is that one of the lenders for the multimillion-dollar project interjected itself into the wrangle. PNC Financial Services Group Inc., the Pittsburgh-based owner of National City Bank, recorded notices in the Cuyahoga County recorder's office in December ordering Panzica and a painting contractor with a lien on the project to sue for foreclosure in order to protect their claims or lose their ability to record them against the property. PNC spokesman Fred Solomon declined to comment on why the bank pushed Panzica to sue. He also would not comment on the status of the $12 million construction loan PNC has on the project.
Daniel Lindner, Zaremba's attorney, and Joseph Del Re, Zaremba's project manager, both declined comment today because they have not received copies of the lawsuit.
Mr. Lindner said Zaremba has not paid Panzica because it has a good faith dispute with the contractor. He declined to elaborate about the nature of the dispute. Mr. Lindner said it was the bank's decision to push the contractor to force Panzica to sue or lose its so-called “lien” rights.
Tony Panzica, CEO of the family-owned construction company, declined comment on the dispute's particulars. He acknowledged that Zaremba has paid his firm millions for its work on the property, but said $2.7 million remains unpaid.
A 'definitely atypical' move
The other lien against the tower is by Express Painting Corp. of Bedford Heights, which says Zaremba owes it $41,562. R. Russell O'Rourke, the attorney for Express, which was one of Panzica's subcontractors, said its bill is still unpaid. Mr. O'Rourke said Express has until Monday, Feb. 8, to protect its claims by filing its own foreclosure suit or seeking to join Panzica's action.
Tom Crist, a Benesch Friedlander Coplan & Aronoff partner who works with construction companies, said, “It's most definitely atypical for a lender to take that step” of filing notices ordering the contractors to sue.
Ohio law allows property owners to issue orders to contractors to file suit or lose the rights to record liens against a project as a means of deterring frivolous claims. Developers and property owners rarely use the provision, and it is even rarer for a lender to invoke it.
The recorded claims by the contractors refer specifically to the tower across East 12th Street from Erieview Tower. The disputes do not refer to the low-rise townhouses that Zaremba is constructing on Superior Avenue near East 13th Street as part of the Avenue project.
Zaremba started construction of the tower and some of the townhouses in 2006. The highly publicized Avenue District project envisions as many as 300 units on land the city of Cleveland acquired decades ago for urban renewal. It advances the civic goal of increasing downtown housing by adding a new neighborhood of condominiums downtown. Most recent downtown housing developments consisted of converting existing buildings to housing.
The financial dispute may slow sales at the project — a big risk in the sour residential market. Prospective condo buyers might be alarmed when they prepare to close on purchases because they should learn of the dispute when they seek title insurance.
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