Mediator to take on disputes at Leawood retirement center

09/25/2013 5:18 PM

09/26/2013 8:49 PM

A mediator — with a district attorney watching — will try next month to resolve the financial morass entrapping residents of the Villas at Grace Gardens in Leawood.

The upscale independent living facility has been a legal battleground for more than two years. A dozen lawsuits have sprouted like weeds from the complaints of current and former residents, lenders and state officials.

Residents paid large entry fees to move in — typically $250,000 or more — and were promised a 90 percent refund when they left the Villas. Some refunds have come due but have gone unpaid, leaving current residents fearful they won’t collect in the future. All told, the possible payout tops $10 million.

Cornerstone Bank sued late last year to foreclose on the property, with $3.8 million owed on a mortgage. It also is seeking to establish priority for its claim over the residents’ claims.

This summer, state officials joined the fray, charging that the Villas had violated Kansas’ consumer protection laws. Its civil lawsuit seeks fines and changes in operations at the Villas.

All the lawsuits target the Baptist Foundation of Kansas City and Baptist Senior Ministries, a nonprofit agency that the foundation formed to build and own the Villas at 145th Street and Nall Avenue.

Both Baptist entities have denied the state’s charges and asserted that the financial problems were not of their making. Baptist Senior Ministries has acknowledged in some court filings that it doesn’t have the money to pay refunds.

Jerry Palmer, a mediator in Topeka, is being asked to find a solution though one has failed to surface among more than 400 court filings in the foreclosure case.

“That’s what all parties hope for,” said Christopher Kurtz, an attorney representing 41 Villas residents in the foreclosure. “You schedule a mediation and try to resolve it.”

Palmer could not be reached for comment. The sessions are set for Oct. 17 and 18, though some said it might take longer given the large number of parties in the case.

This week, Johnson County District Judge James Vano appointed a receiver to oversee the Villas.

Going into the mediation, attorneys on all sides seemed to see it as preferable to a courtroom battle.

“Everybody recognizes a mediated outcome probably is in the best interests of everyone,” said Tom O’Donnell, senior counsel at Polsinelli, the law firm representing Baptist Senior Ministries and the Baptist Foundation of Kansas City.

“We’ve got to resolve this,” said Linda Dickens, who represents residents or their families in five lawsuits. “Every single party has too much to lose.”

A Johnson County assistant district attorney, Emilie Burdette, who has watched the foreclosure proceedings, also will attend the mediation. .

“We are concerned about the ability of these folks to continue living in the place they call home,” Burdette said.

Some residents have worried about the prospect of evictions should the property end up in the bank’s hands.

Gregory Pappas, who represents Cornerstone Bank, said it was a sensitive situation that the bankers hoped to resolve “so we don’t have to face that issue.”

In July, Burdette charged Baptist Senior Ministries and the Baptist Foundation with a dozen “deceptive” and “unconscionable” acts at residents’ expense.

At the heart of the state complaint and similar claims by residents in the foreclosure case is the unusual and large entrance fee residents paid to move in. Baptist Senior Ministries promised to refund 90 percent of the money when residents moved out or to family members if residents died. Residents also make monthly payments while living at the Villas.

Such deals are common at residential centers that provide assisted living and nursing care to residents and are regulated by Kansas law. The Villas, however, provides no care to residents.

Among the state’s charges, the Baptist entities struck “excessively one-sided” deals with residents and resorted to “innuendo” and “ambiguity” when asked about the financial stability at Grace Gardens where the Villas operate.

The state complaint seeks $10,000 for each violation of law as well as an enhanced civil penalty because the actions targeted the elderly or disabled.

It also seeks court orders that would require the Baptist defendants to honor the agreements with residents and families, prohibit agreements that withhold refunds until a unit is occupied by a new resident, and stop the sale of the Villas unless the buyer agreed to assume the obligations due residents.

The nine lawsuits by former residents and their families have won or seek judgments against Baptist Senior Ministries totaling nearly $2 million.

Baptist Senior Ministries has said in some court filings that it doesn’t have the money to make refunds. The Baptist Foundation of Kansas City has denied responsibility for the refunds in court filings.

Their reply to the state lawsuit contends the circumstances “were caused by intervening and superseding acts” over which they had no control.

Both denied the state’s civil claims that they violated Kansas consumer protection laws and that all the former residents’ refunds were due. They agree, however, that future refunds to current residents or their families boost the total of refundable amounts to more than $10 million.

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