After fruitlessly waiting for more than six months to be paid, Big-D Construction Corp. and several subcontractors sued the developer of the stalled Midtown Village and its financial backers last week to force a foreclosure sale of the multi-million-dollar property in Orem.

Construction stopped in February at the proposed 1.2 million square-foot mixed-use project at 320 S. State St. in Orem as Larry Myler, the project's owner, ran into difficulty selling his luxury condominium units as the housing slump worsened and credit requirements tightened, affecting his ability to get additional financing to pay Big-D and the subcontractors.

To date, only the south wing, which consists of seven stories of retail, office and residential space, and a portion of the north wing, are built. The proposed west wing, also a seven-story building consisting of residential space with restaurants, shops and entertainment venues, is unbuilt. Of a total of 310 condo units -- which retail for as low as $200,000 and as high as $1.4 million -- 160 are presold. Only four units are actually sold and occupied, Myler said.

"All the presold deals are on hold, waiting for the project to be done," he said. Without buyers for the condos, Myler said he won't be able to pay his contractors or his bank loans.

Myler declined to comment on how the lawsuit will affect his attempts to get additional financing to complete the project.

"Eventually, the project will be finished. There's just too much money, too many sales involved for the project to not be finished," he said. "The economy is not only affecting Midtown Village, but also the tenants that want to move there."

So far, only gourmet restaurant Pizzeria 712 has opened at Midtown Village, and it is apparently thriving. Other businesses including Prudential Real Estate, Equity Title, Centurion Security and Kneaders restaurant have held off for now.

Contractors' claims

Bob Babcock, lead counsel for Big-D and several other contractors, said they took legal action to force a foreclosure sale of the Midtown project and to be first in line to recover their damages ahead of several of Midtown's lenders.

The lenders include Marshall Investments Corp., which provided $42 million in construction financing in June 2005 to Midtown after the project was suspended in January 2005 because of financial difficulties. Other lenders include BankFirst; and First United Funding LLC, which provided around $20.7 million in additional financing.

"We believe we have priority over the bank because work started on the project [in 2004] before Marshall recorded the trust deed against the property in June 2005," Babcock said. "Ideally, the best way is to get the project finished and the units sold, but it's hard to say if the banks will put up more money. And this needs to get moving, because the contractors have been waiting for the past six months or longer to be paid."

Marshall Investments declined comment on the lawsuit.

"The understanding between Midtown and the bank is to first build the south wing, sell it to pay down the loan, and then build the north wing, sell that and pay down the loan, and then build the west wing," Babcock said.

But the contractors weren't privy to the loan documents, or the arrangement between Midtown and the banks, and were just told to keep building because Midtown claimed it had enough funding from the banks when in fact it didn't, he said.

Orem City's claims

Meanwhile, the list of creditors against Midtown is growing, and Big-D and the subcontractors aren't the only ones wanting to be first in line to be paid.

Jim Ream, Orem's city manager, invoked state laws that ensure Orem is in first position to be compensated ahead of the other lien holders.

"We have protections provided by state law to protect the money that has been spent so that those funds can be repaid," he said. "We'll leave it to our lawyers to decide what to do next."

In April 2005 Orem city officials passed a resolution for a $7 million Special Improvement District bond to finance the building of part of Midtown's 600-lot parking garage. Bond payments are to be made with money secured by assessments against Midtown Village, rather than with taxpayer funds, Ream said.

"As Midtown sells its condo units, a part of sales of those units will go to payment of the bond. If the bond payments aren't made, then the city has the right to foreclose on the property because the city is protected by a lien on the property," he said.

To date, about $3.5 million has been paid by the city to the contractors for work done on the parking garage in the south wing, and a significant portion of the garage in the north wing, Ream said. The next bond payment is due on Nov. 1.

"I can't discuss now whether Midtown can or can't make the bond payments," Ream said. "We haven't seen the lawsuit and the contractors haven't spoken to us about it. I'm not going to comment on what the contractors' rights are."

Also included as defendants in the lawsuit are James A. and Coralee Ellis, Edna H. Leavitt, The Leila Welling Horne Family Trust, and Phyllis Wilson -- all of whom are condominium owners in the project.

Myler, who said they are mostly retirees who had purchased the four condo units before the housing slump, are implicated because Big-D and the subcontractors have liens on their properties.

But Babcock said, "Nobody wants to drag them in the lawsuit. We named everyone who's involved, and hopefully, they bought title insurance to insure their property."