SIOUX CITY - After battling in court for more than a year, Cornerstone World Outreach and an Ohio building company have agreed to settle the builder's multimillion dollar lawsuit against the Sioux City church.
The church and Cincinnati United Contractors have been locked in battle since April 2010, when the building company filed a $4.99 million mechanic's lien against Cornerstone alleging the church did not pay it for work on its worship center east of Sioux City.
Attorneys for the church, which filed for Chapter 11 protection on the eve of a sheriff's auction, and the builder are expected to ask a judge today to dismiss the bankruptcy proceedings because they have reached a $5.2 million settlement.
Cary Gordon, a pastor at Cornerstone, said church officials are very happy with the agreement reached with Cincinnati United.
"I think it's mutually beneficial, and I'm very glad that we were able to come to terms with it," Gordon said. "The bankruptcy proceedings turned out to be unnecessary and I'm very happy about that."
According to the proposed settlement agreement filed Aug. 8, Cornerstone has agreed to pay off a $5.25 million loan to Cincinnati United that amortizes over 30 years with a six-year balloon payment. The loan would be backed by a first mortgage on Cornerstone's current church properties at 1603 and 1625 Glen Ellen Road, and a second mortgage on its former location at 6000 East Gordon Drive.
The agreement, which the parties filed jointly, also calls for the church to give Cincinnati United a mortgage on 85 acres of farmland. Cornerstone agreed to sell the farmland and give the net proceeds to Cincinnati United.
Sioux Cityan Melissa Tjeerdsma holds the first mortgage on the second property, which was granted as collateral for $250,000 she loaned the church in on Feb. 1, 2010.
This agreement is the latest attempt to end a legal battle that began when local contractors filed a combined $745,000 in liens against the church's building project in 2007, claiming they weren't paid for work and materials.
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Cornerstone countersued, claiming it had been the victim of shoddy work, and asked a court to award them damages. Cincinnati United Contractors joined the lawsuit when it filed a $4.99 million lien on church property in April, 2010.
The local contractors later settled with Cornerstone and, late last year, a state court judge ruled Cornerstone must fulfill a settlement it reached with Cincinnati United in August, 2010.
When Cornerstone failed to pay the $3.65 million stipulated in the agreement by Dec. 10, the judge found in favor of Cincinnati United and allowed the Ohio company to seek a sheriff's auction to collect what it was owed.
The church filed for Chapter 11 bankruptcy protection on May 2, the day before church property was to be auctioned off by the Woodbury County Sheriff's Office. It also filed a complaint against Cincinnati United, which was trying to collect another $3.1 million in addition to the $3.65 million judgment.
According to the complaint filed in U.S. Bankruptcy court, Cornerstone said Cincinnati United wasn't entitled to the additional money because the agreement approved by the state court judge settled all claims between two parties.
Cincinnati United Contractors CEO Chuck Kubicki said he believes Cornerstone will make good on the latest agreement. Church officials have already made a payment that was due Sept. 1, he said.
"I think they're very honorable people and they'll honor their word," Kubicki said.
The legal dispute has been frustrating for everyone involved, Gordon said.
"It was not Cincinnati's fault that we were not able to get the loan we needed, and that wasn't necessarily our fault either. It just happened that way," he said. "We both knew going into the construction that it could be a problem, and they chose to help us anyway, and we'll always be appreciative that they did, but when the pressure gets on you and the economy is having problems, everybody starts to feel the heat and it causes a great deal of stress, and I'm glad it's over."