Carl Holcombe
The Arizona Republic
Sept. 20, 2006 12:00 AM

Home buyers hopeful to recoup their earnest money from shuttered home builder Turner-Dunn have found themselves at the back of a long and frustrating line.

The Phoenix-based builder walked away from hundreds of home lots in Pinal County last spring, leaving in its wake millions of dollars owed to banks and subcontractors, lawsuits, an ongoing Arizona Department of Real Estate investigation, unfinished homes and home buyers who paid thousands of dollars each in hopes of finally getting their big dream home.

The company's latest court filings in U.S. Bankruptcy Court reveal 152 people or families paid a combined total of about $650,000 in earnest money for new homes in Casa Grande and Maricopa.

But those earnest money payments for homes that were never completed are classified as unsecured non-priority claims.

That means lenders like Ohio Savings Bank and Weyerhauser Realty Investors, which hold Turner-Dunn's land and unfinished homes as collateral, have the first shot at getting their money back when a repayment plan is developed.

After them come former employees, companies with collateral and subcontractors with liens already against the builder's lots and unfinished homes. After all of them come the home buyers.

"Basically, they're last in line," said Casa Grande attorney David McCarville, who is representing one couple in a lawsuit against the builder and in Bankruptcy Court.

"These people certainly deserve better than to lose all their money and not get into their houses."

Most home buyers paid $2,500 or $5,000 in earnest money. But some, like Gerald and Barbara McCurdy of Caledonia, Ill., plunked down nearly $28,000 because, they said, Marcus E. Dunn-owned Turner-Dunn charged them more for buying an investment home they would live in mostly in winter months.

"We're just hoping it works out," Barbara McCurdy said. "But we haven't heard from them (Turner-Dunn) since May."

In some cases, home buyers have been stranded for two years awaiting their new dream homes. Some sold other homes because Turner-Dunn required that their new home be their primary residence.

Others moved into apartments, losing equity they could've otherwise built up in their old homes.

Tony Tellez of Maricopa paid $2,500. After waiting 19 months, he gave up and bought a smaller, cheaper home in Maricopa from Capital Pacific. He and his family can look out through their backyard sliding-glass door across a park space and see the Turner-Dunn home he was in contract to buy. He said he has no hopes of ever getting his money back from the builder.

" It's a stark reminder every day of how much we got screwed," Tellez said.

Turner-Dunn's five corporate entities, all of which have filed Chapter 11, have a combined debt of about $29.5 million.

The assets listed by the companies include the land, unfinished houses and some model home furniture.

"In most cases, companies are required to pay some fraction of claims," said Pete Rathwell, an attorney with Phoenix-based Snell & Wilmer LLP specializing in bankruptcies and collections. He isn't involved with the case.

"But you can never tell for certain what will happen in a case."

Turner-Dunn's attorney, Alan Meda, said about 90 homes were 85 to 90 percent finished and the builder still hopes to eventually finish all of the homes. But since construction ceased in the spring, many have deteriorated from summer heat, monsoon storms and neglect, and it's uncertain how much work would have to be redone.

The builder still has about three months to devise a court- and creditor-approved reorganization plan to continue operating.

"We're very motivated to get these homes closed," Meda said.



Ohio Savings estimated it would cost about $9.4 million to finish the homes.

Turner-Dunn has so far received about $10.5 million of a $17.6 million loan agreement from Ohio Savings, but the bank won't disburse any more of the loan because of "poor performance" managing the housing project, including $1.8 million that couldn't be accounted for, according to the bank's court filings.

The filings also showed that former Turner-Dunn president and partner Louis Turner, who left the company late last year, had his ownership stake in the company bought out for $1.5 million prior to the spring 2006 construction stoppage.
http://www.azcentral.com/arizonarepublic/business/articles/0919biz-turnerdunn0920.html