Troubled homebuilder’s funds frozen after failing to pay judgment

An order by a Marion County judge to freeze certain Hansen & Horn Group Inc. funds sheds light on the severity
of the Indianapolis homebuilder’s legal and financial woes.

The company is facing at least a dozen lawsuits
filed this year, mostly by suppliers seeking to recover money they say Hansen & Horn owes them. One would-be homeowner
also has filed suit, alleging the company misused construction funds. All told, the suits seek to recover more than $920,000.

Superior Court Judge Timothy Oakes on Thursday took the drastic step of having Monroe Bank place a 90-day hold on
a Hansen & Horn account after it failed to pay a $183,000 judgment in a suit brought by a supplier in June.

Indianapolis-based
Lee Supply Corp. sued the homebuilder after it failed to pay for materials and services, according to court documents. Hansen
& Horn, meanwhile, attempted to have the lawsuit dismissed, a legal maneuver that Oakes rejected Nov. 3.

Hansen
& Horn’s subsequent lack of payment prompted his order to have the bank freeze the homebuilder’s accounts.
In addition, the judge ordered executives of Hansen & Horn to appear in court Jan. 26.

Steve Horn, the company’s
chief operating officer, did not return phone calls seeking comment. Hansen & Horn’s law firm,
Harrison & Moberly LLP, said its policy is to not comment on pending litigation.

Local
bankruptcy attorney Jeffrey A. Hokanson of Hostetler & Kowalik PC said Hansen & Horn still can
access the account, but only if it contains more than the judgment amount.

Still, freezing the
funds of an established company such as Hansen & Horn is unusual, Hokanson said, because they tend to resolve disputes
before getting to such a critical stage.

“Usually, larger establishments tend to work out their problems
rather than have their money involuntarily held,” he said. “It usually doesn’t come to that.”
 

Founded in 1977, Hansen & Horn is building in more than 20 subdivisions in central Indiana, including Duke Realty
Corp.’s mixed-use Anson development in Boone County near Whitestown. It replaced Los Angeles-based KB Home
Inc., which backed out of plans to build in Anson when it exited the Indiana market in July 2007.

Hansen &
Horn anticipates building 168 houses priced at $180,000 and above in a first phase. Additional phases could result in a total
of 680 houses. Six homes have been built so far, with two more under construction.

Altogether, the homebuilder
has been named in at least 20 lawsuits in Marion County in the past 10 years. But the 12 filed so far this year are concerning
to Steve Lains, CEO of the Builders Association of Greater Indianapolis. Several Hansen & Horn homebuyers also have complained
that their houses aren’t getting built.

BAGI revoked Hansen & Horn’s membership
earlier this year after the company failed to pay for services the organization provided. Lains declined to specify
how much Hansen & Horn owes but said it is a “significant” amount.

“Typically, builders work
hard at trying to make sure they have strong customer relations, because a lot of this business is based on referrals,”
Lains said. “Lawsuits are not a quick and common occurrence in the industry; that’s not to say they don’t
happen.”

The damages sought by parties suing Hansen & Horn range from $6,536 to $250,000.

The
largest amount involves charges that the homebuilder failed to finish a house it was constructing on West 82nd Street for
Dr. Nedra Soltow, a physician at the Roudebush VA Medical Center.

The lawsuit said Soltow agreed in February to
pay Hansen & Horn $309,928 to build a home on her property. The money, paid up front, was to be placed in an escrow account.

Construction began, but after several delays Soltow learned in July that the escrow account only contained $130,068.86,
not enough to finish the home, according to court documents. 

“Soltow has good cause to believe Hansen
& Horn has converted and misused Soltow’s funds and lacks adequate assets to complete the home,” the
complaint said.

Soltow also said in the suit she’s been served with a mechanic’s lien in the amount
of $14,000 by a subcontractor working on the home.

Her lawyer, E. Scott Treadway at Indianapolis firm Stewart &
Irwin P.C., said another homebuilder since has been hired to finish the project.

“It’s been an enormous
headache,” he said, “because that home was to be completed during the warm months.”

A judge assigned
an arbitrator to the case earlier this month.

Other large lawsuits have been brought by the local office of Orlando-based
Creative Touch Interiors, which is seeking $162,976.39, and R.T. Moore Co. Inc., an Indianapolis-based mechanical contractor
that claims it is owed $117,989.01.

Hansen & Horn is counter-suing in several of the lawsuits, claiming breach
of contract.

Please enable JavaScript to view this content.

Editor's note: IBJ is now using a new comment system. Your Disqus account will no longer work on the IBJ site. Instead, you can leave a comment on stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Past comments are not currently showing up on stories, but they will be added in the coming weeks. Please note our updated comment policy that will govern how comments are moderated.