GardenWood in Blaine is joining the list of stalled housing developments that may spawn as many lawsuits as neighbors.

What was to be an upscale community of luxury homes and townhouses on 125 acres is at the center of a legal shootout no doubt being repeated across the country, as the U.S. housing market continues to slide amid a faltering economy.

The trouble began when Sienna Corp., a developer based in Edina, defaulted late last year on a large development loan from Village Bank and two other banks. Village Bank sued Sienna in January in Anoka County District Court and recently won a $14 million judgment.

Last week, an Anoka County district judge agreed to a hold on pursuing the personal assets of Sienna principals Rodney Hardy, John Hankinson and Bruce Nimmer for the money on the condition that Sienna posts a large bond.

A date for a sheriff's foreclosure sale has not been set, according to an attorney for the bank.

Sienna and luxury home builder Toll Bros., meanwhile, have countersued each other in federal court in Minnesota because of the Horsham, Pa.-based builder's decision to exit GardenWood two years ago and $750,000 in earnest money that Toll paid Sienna. A trial concerning related matters with S.R. Weidema Inc., a Maple Grove excavator, is set for spring.

Village Bank, based in St. Francis, declined to comment about the matter.

Sienna, meanwhile, is still marketing the vacant developed lots on the site, though buyers are "few and far between," Hankinson said. The value of the site, originally appraised at $28 million for all the developed lots, has been lowered to about $12 million, court documents show. The average price for finished lots has dropped from $158,000 to $135,000 for a lot averaging about 12,000 square feet.

Other deals go unfinished

"All the big builders are sitting there hiding still," Hankinson said in an interview. "Everybody's bottom-fishing. They're nervous, plus their financing isn't there."

Sienna is also dealing with a half-dozen or so other unfinished projects, he said.

Sienna is perhaps best known for working with golf legend and course designer Jack Nicklaus to create the Bearpath Golf and Country Club and community in Eden Prairie. Sienna still owns the golf club, which opened in 1996. Rumors that Sienna is selling it are false, Hankinson said: "It's not up for sale now and never has been."

Sienna also worked with Arnold Palmer, another of golf's Big Three, to develop Deacon's Walk and the Tournament Players Club, a golf community in Blaine.

Hankinson blames the GardenWood legal mess on Toll Bros. Sienna had signed an agreement to sell the luxury home builder about 119 finished lots for single-family homes, he said. They rushed to build streets, grade lots and install sewerage to prepare for Toll Bros.' model homes, he said.

Partners back out

In 2006, Toll Bros. and another buyer for a section of the townhouses backed out, he said. Toll demanded that Sienna return the $750,000 in earnest money that it had been paid. Sienna refused. In the fall of 2007, with interest in new housing continuing to wither, Sienna defaulted on interest payments to Village Bank.

Court documents show that Sienna invoked the force majeure (uncontrollable event) clause in the contract, saying that it couldn't meet deadline at GardenWood because of problems getting permits from Blaine and the Minnesota Pollution Control Agency.

Toll Bros. said it won't comment concerning active litigation. But Michael Noonan, head of Toll Bros.' Minnesota division at the time, said Toll Bros. was justified in exiting the deal, because Sienna didn't deliver everything promised by the Oct. 1, 2006, deadline. GardenWood's pool and clubhouse weren't built, and landscaping was never finished, he said.

Hankinson said he's been in business more than 30 years and that this is the toughest real estate market he's seen. Sienna has also never had a builder walk away from a project before, he said.

"It's a day-to-day battle out there," he said.

Jennifer Bjorhus • 612-673-4683