The general contractor for the Ritz-Carlton Hotel obtained a court order Wednesday allowing it to collect $4.1 million from the hotel to help pay bills left over from the hotel's construction. Stolte Inc., the Los Angeles contractor, has threatened to place a marshal in the lobby of the opulent Laguna Niguel hotel to impound guest receipts.
W.B. Johnson Properties, the hotel's developer, already had arranged for a $9.4-million credit line to settle the claims by Stolte and its subcontractors, an attorney for the Atlanta developer said. The credit arrangement was part of its recently completed deal with Prudential Insurance Co. of America in which the insurance giant paid $90 million for 90% ownership of the hotel.
Mike Willoughby, Johnson's attorney, said the credit line was obtained from Manufacturers Hanover Trust, the primary lender on the hotel. He said New Jersey-based Prudential is obviously interested in having the contractors remove the liens they have placed on the hotel and drop the lawsuits they have filed during a nine-month dispute with Johnson over construction bills.
But Johnson said it will not use that credit line until it sorts out the bills. Stolte said negotiations with Johnson, in which Stolte represents numerous subcontractors, recently broke down and that it will exercise its court-approved option to send in a marshal if Johnson does not resume talks.
Charles Murphy, who was Stolte's project manager on the hotel, said a marshal could be at the Ritz-Carlton as early as next week. However, Bruce Herald, Stolte's attorney, said earlier Wednesday that because Johnson could post a $4.1-million bond with the Orange County Superior Court, use of the marshal was unlikely.
But, Murphy said, "before the bond could be arranged, the marshal would be in the hotel at least a couple of days."
Johnson's attorney, Willoughby, said that if Stolte summons a marshal to the Ritz-Carlton, he would consider it "mostly a publicity stunt."
"It (the marshal) is their way of trying to put pressure on the owners (of the hotel)," he said. Willoughby contends that Johnson has been negotiating in good faith and blamed Stolte for the break in negotiations. He said Stolte officials failed to reply in writing to Johnson's last written proposal.
The court's granting of the writ of attachment means that Johnson, if requested to do so by Stolte, must hand over $4.1 million to a marshal for safekeeping. The money would be available to help pay the judgment if Stolte wins the lawsuit it has filed to collect the unpaid claims.
In addition to its debts to the contractors, the hotel borrowed $95 million to buy the land and finance construction. That $95 million debt will be shouldered by the joint venture between Johnson and Prudential.
The wrangling between Stolte and Johnson has dragged on since last July, a month before the hotel opened. Stolte said it cannot pay the subcontractors for their work on the hotel until Stolte is paid by Johnson. Although Stolte last week received a $1.1-million payment from Johnson and was to have received an additional $400,000 Wednesday, the contractor claims that it still is owed about $6.8 million.
Based on Pay Request
Court Commissioner Greer H. Stroud said she chose the $4.1-million amount for the writ of attachment based on a pay request Stolte submitted to Johnson last August. Stolte said that amount did not include bills it submitted for work completed after that date.
Meanwhile, E. F. Brady Co. Inc. of San Diego, a drywall subcontractor on the Ritz-Carlton project, asked the court Wednesday to impound Stolte's income to repay a claim of more than $1 million. Stolte's lawyers argued that Stolte is not legally required to pay subcontractors until it receives payment from Johnson, while Brady's lawyers disagreed. The commissioner took the matter under consideration and gave both parties two weeks to submit legal arguments.