Judge orders sale of proposed sewer plant property

A 242-acre Magnolia Springs property at the center of a five-year legal battle involving some of Baldwin County’s biggest movers and shakers will be equitably divided among the two contesting parties, according to a court order Tuesday.

In what may be the final hearing in the case of Bass Enterprises vs. Pennstar et al, Baldwin County Circuit Court Judge Joe Norton accepted a request to have the property appraised and if no agreement on its division is reached, “I’ll enter an order directing how that takes place,” he said.

After this report was initially published, Judge Norton’s order more specifically repeated each party has a one-half interest in the subject property. The court will conduct a private sale of the property between Bass Enterprises and Pennstar in open court on Oct. 22 at 2:30 p.m. in Courtroom 4 of the Baldwin County courthouse, where the parties may submit a sealed bid. The minimum price shall be equal to the appraised value “or agreed upon by the parties or ordered by the court.”

Further, the order states “each party shall be responsible for the payment of their own respective liens or encumbrances of record.” Records indicate the encumbered balance for the Delaney defendants and Pennstar stands at $3,725,202.91.

In the event that neither party purchases the property, Norton ordered that it be listed for sale by Jason Harris with Coldwell Banker Reehl Property, Inc., with the net proceeds divided equally between Bass and Pennstar.

The action will settle the final complaint in a case initially filed by Phillip Bass in 2014, alleging he was defrauded by Baldwin County Sewer Service (BCSS) owner Clarence Burke and others in a deal to purchase a half-interest in the property for $2.4 million in 2004. As Lagniappe detailed last week, Bass claimed he was lured into the deal by Burke, who he thought would return Bass’ investment plus $300,000 after state permits necessary to build a sewage treatment plant on the property were secured.

But nearly a decade later, after plans for the plant fell through, Bass says he discovered he actually paid 77 percent of the total price to procure the property, despite falsified federal settlement statements indicating his ownership was 50 percent.

Also named as defendants were Small Business Management Corporation and Alabama Capital, owned by the Delaney family, and Pennstar, Wolf Creek Industries, Summit Construction Company and Magnolia River Management, various entities either owned or controlled by Burke and the Delaneys at the time. Former Baldwin County Commissioner Tucker Dorsey has also worked with Burke and played a role in events leading up to the suit.

Evidence submitted in the case indicated the Pennstar defendants created a “straw company,” Hopper Land Development South LLC, which purchased the land from the Nolte family for $2.4 million, then sold it to Bass and Pennstar for $4.8 million the same day. However, bank records submitted in the case show the $2.4 million check Pennstar wrote for the property was no good and even so, the company was, in essence, writing itself a check, as it owned Hopper Land Development South.

Burke, according to court records, borrowed $700,000 from the Delaneys to purchase an option for the land that was held by two other men, which brought the total paid to acquire the property to $3.1 million. Still, the HUD statement signed by both Burke and Bass showed the total paid to Hopper as $4.8 million.

Wayne Hopper, the namesake of Hopper LDS and Dorsey’s former college fraternity brother, was paid $1,000 for lending his name to the “straw company” and was also indemnified from any legal liability as a result of his participation.

In 2017, Norton issued summary judgment in favor of the defendants a week before the trial was supposed to begin, a ruling affirmed by the Supreme Court last year without an opinion. But in a phone call to Lagniappe last week, David Delaney claimed while the Delaney defendants “never had anything to do with [the deal],” it appeared Burke did indeed intentionally mislead Bass.

“In my opinion Bass wanted to be sure that Clarence paid as much half-interest as he did and Clarence wasn’t doing that, but he had the closing statement done wrong so he would lie to Bass about it,” Delaney said. “And that’s what I call it and that’s what I said, that I didn’t know anything about it until the lawsuit started. Because I never saw the closing.”

Evidence submitted to the court indicated Delaney and Burke owned equal shares of Baldwin County Sewer Service at the time of the purchase in 2005, and Burke has borrowed millions from the Delaneys over the years.

Asked if he would have felt comfortable moving forward with the deal if he believed Burke to have falsified federal settlement statements, Delaney explained: “If I was aware that [Burke] had sold a half-interest for a profit I was comfortable with it because he does that all the time. The only thing I did not know was that [Burke] lied to Bass that he was paying $4.4 million for the whole thing. I never knew that.

“He never explained it to me and … he never explained it very well even in his depositions,” Delaney continued. “It’s obvious what he did. He had Bass thinking he paid as much as Bass, but he didn’t.”

Burke did not attend court Tuesday and has not replied to requests for comment, but he was represented at the hearing by attorney Larry Sutley. Delaney’s attorney, Daniel Blackburn, noted if Pennstar’s half-interest in the property is sold, the price will likely not be enough to cover mortgages encumbering the property since issued by Alabama Capital. Norton acknowledged the mortgage holder has the only claim remaining on the title.

Separately, BCSS is the defendant of another lawsuit filed by residents in the 650-home GlenLakes community in Foley. There, plaintiffs claim BCSS violated a 1991 agreement between the subdivision and South Alabama Sewer Service, BCSS’ predecessor, which was owned by Phillip Bass.

That case was also scheduled for a hearing in Norton’s courtroom Tuesday, but it was continued while his ruling to deny the plaintiffs a class-action certification is appealed to the Alabama Supreme Court. In May Norton dismissed four of the six named plaintiffs in the complaint, but allowed those four to pursue individual claims if they choose.

Richard Dayton, one of the two plaintiffs whose standing in the original complaint was affirmed, explained last week the 1991 agreement with South Alabama Sewer limited tap fees at GlenLakes and provided rates “that were supposed to be an average of rates in South Baldwin County.”

Before Burke purchased South Alabama Sewer, Dayton said, rates in the subdivision were $32.50 but afterward were raised to $54.50, “an increase of over 70 percent in a year when the national inflation rate was 2.1 percent,” he said.

“We thought we had an agreement with Mr. Burke. He gave us a handshake and was going to honor that agreement,” Dayton continued. “But in 2011, as new people moved in, he had us sign contracts with BCSS superseding other contracts.”

Dayton said the Supreme Court has already overturned one ruling in the case — determining the contract is valid, but it does contain an inaccurate description of the property — but declined to say whether he was optimistic about a successful challenge to the class-action denial. Norton accepted BCSS’ argument the plaintiffs had to be “owners,” not simply “users.”

“I got involved because the rates [BCSS] charges for sewage in Baldwin County are totally unregulated,” he said. “The worst part is if tomorrow BCSS decided to charge $154.50 per month, there would be nothing we could do and our sewage would be turned off if we didn’t pay. They are a monopoly.”

Dayton said while the case is pending, he has also reached out to state and local officials to discuss the possibility of instituting certain regulations on private sewer companies.

“I found the Shelby County Commission and the city of Chelsea banded together and produced a bill that indicates rates there should be regulated,” he said. “It’s gone through examination but it hasn’t been voted on yet.”