Matheny lost his home in legal fight with bank over business debt
Matheny

Matheny lost his home in legal fight with bank over business debt

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WILDWOOD • Before he was handed his dream job, new Cardinals manager Mike Matheny lost his dream house.

Matheny has a number of business and property ventures. But his attempt to develop two plots in Chesterfield Valley cost him his home last year and appears to be the key reason the man with the biggest coaching job in St. Louis sports now lists his in-laws' home as his address.

A legal fight over the failed business venture continues today — and Matheny and his wife may still be on the hook for more than $4 million.

Their financial plight is also caught up in another dispute heading to the Missouri Supreme Court that could have broad implications on foreclosures statewide. The case challenges the ability of banks to collect further debts even after foreclosing on a home.

During his playing days with the Cardinals in the early 2000s, Matheny built a 17-room sportsman's paradise on 11 secluded acres in suburban Wildwood, complete with an indoor batting cage, home theater, pool with a water slide and a treehouse wired for electricity. The home even has its own golf challenge: a floating island green in the middle of a private lake.

Matheny was forced to sell the estate last year amid the business deal gone bad. Like many investors ensnared by the real estate meltdown, he borrowed heavily for a commercial project that would have been less risky in headier times. When demand dried up, Matheny found himself unable to satisfy the debt.

By May 2010, Matheny told the lender that he would no longer make payments. Matheny, who is married with five children, wrote in a letter that he had been making payments "at great expense to myself and my family."

"I certainly hope you can understand that we need to protect our family's interest," he wrote.

The bank sued him a month later.

Matheny declined to comment last week, citing the ongoing litigation. The Cardinals, in a statement, said they were aware of the lawsuit when they named Matheny as their new manager on Monday.

"He was very upfront and candid about it from the start of our process," Cardinals spokesman Ron Watermon said. "We view this as a personal issue that has absolutely no bearing on his ability to serve as our manager."

REAL ESTATE VENTURES

Court documents show that Matheny has mixed his business interests with sports and the relationships he made in 13 seasons as a major-league catcher.

He owns 370 acres of farmland in central Illinois with former Cardinal teammates Jason Isringhausen and John Mabry. Mabry and Matheny also are partners in 250 acres in Jefferson County.

Matheny sold his previous home for $388,000 in Weldon Spring to another Cardinals teammate, former pitcher Cal Eldred, in 2004.

Matheny also, according to financial statements filed with the court, developed a business plan for a "baseball throwing aid" and helped found a shoe company. He owns a 400-acre farm in West Virginia, a house for his parents in Ohio, and, at least as recently as 2009, interest in a Long Island real estate development project, according to court records.

Matheny also runs a charitable organization, the Catch-22 Foundation, which built a baseball diamond in Chesterfield tailored for children with disabilities. Albert Pujols was among the project's benefactors.

In 2005, Matheny formed MPD Investments with two former St. Louis indoor soccer players, Daryl Doran and Brett Phillips. In 2007, after Matheny's playing career was cut short by post-concussion syndrome, the partnership took out loans from Business Bank of St. Louis that, after a series of modifications, totaled more than $11.8 million.

One $5.6 million note was to refinance a separate loan the partnership had for a building, the former headquarters of U.S. Turf in the Chesterfield Valley, near the Boone's Crossing exit on Highway 40. A $6.1 million note was to buy 11 vacant acres adjoining the building.

Matheny and his wife, Kristin, personally guaranteed $4.2 million of the debt, and gave the bank a claim worth up to $1 million on their home.

Doran and Phillips were soccer teammates. Doran and Matheny were once neighbors. Their real estate partnership went well at first. The trio bought a block at the WingHaven development in St. Charles and flipped it in six months, Doran said in an interview. According to court documents, they sold it for $2.4 million more than their purchase price.

Doran left the partnership to start a gym. When the remaining partners attempted to build on their proceeds from the WingHaven deal, the bottom fell out of the real estate market and their fortunes soured.

"There are probably 100 million people who had the same experience around that time," Doran said.

Matheny and Phillips had one tenant in the U.S. Turf building, a veterinary clinic, but their efforts to do anything more with either property proved unsuccessful. One potential tenant, a flooring company, backed out at the last minute, according to court documents. St. John's Mercy Hospital, now Mercy Hospital St. Louis, may have had interest in the vacant land, but that didn't amount to anything either, Matheny said in a deposition taken as part of the bank lawsuit.

"At the time of purchase, I don't think there was much of a plan," Matheny said.

Matheny and Phillips made their last $16,000 monthly principal payment in March 2010.

In May 2010, according to an affidavit from Business Bank, Matheny met with the bank and said the development partnership "was no longer going to make any further payments" and that Matheny and his wife would not satisfy the $4.2 million they had vouched for.

"I couldn't afford it, and I needed to protect my family," he recalled in the September deposition.

The Business Bank sued Matheny and Phillips in June 2010, claiming they owed $10.2 million, including interest and expenses.

In July 2010, the bank scheduled a public auction for the two Chesterfield Valley properties. The bank then bought the two commercial properties for a combined $4.5 million, an amount that was credited to the loan debt.

Prior to a scheduled foreclosure, Matheny's Wildwood home was bought by a private investment company for $1.9 million. Per the Mathenys' guarantee agreement, $1 million from the sale went to the bank.

Although the sale of assets cut the amount due on the loans, the total is still more than the $4.2 million personally guaranteed by Matheny and his wife.

The Business Bank vice president who handled Matheny's loan, David Gamache, did not respond to requests for comment.

Matheny's attorney, Robert Blitz, declined to comment. In court papers, Blitz wrote that Matheny's obligation to the bank is "excused by commercial frustration" caused by the economic downturn.

SUPREME COURT CASE

Blitz is handling a separate case that could potentially affect Matheny's debt.

In 2008, First Bank sued home builder Fischer and Frichtel over loans for a residential development in Franklin County. The company was unable to sell nine of the lots in the subdivision, which were bought by First Bank at a foreclosure auction.

The bank bought the lots for $466,000, which was deducted from Fischer and Frichtel's debt. But the builder still owed the bank more than $667,000 on its original loan.

Fischer and Frichtel refused to pay, claiming they should be credited for the fair market value of the lots, "not the grossly inadequate price under depressed economic conditions."

Noting the importance of the issues at stake, the appellate court took the unusual step of taking it upon itself to refer the case to the Missouri Supreme Court.

Other states place restrictions on banks collecting so-called "deficiency" debts, the difference between the balance of a loan and the amount property is sold for at foreclosure. Banks argue that such debts are seldom pursued; after a foreclosure, borrowers usually have limited assets and often declare bankruptcy.

Both the First Bank dispute and Matheny's case, Blitz said in court papers, deal with the same issue: whether the value of property sold at foreclosure 'should be measured by the amount paid at the sale or by the fair market value at the time of the sale."

Matheny, Blitz argues, did not get the proper amount deducted from his loan for the sale of the two Chesterfield Valley properties because they were acquired by the bank far below fair market value.

On Nov. 4, the judge in Matheny's case agreed to delay any decision until the Supreme Court case is settled. The Supreme Court is set to hear oral arguments Jan. 11.

The case could have broader implications for borrowers in Missouri who, already at rock bottom after their homes are foreclosed, find they still owe the bank money.

"Some years from now they get that letter, they open it innocently and they are just floored," said David Weiss, a St. Louis lawyer who is not directly involved in the case. "They thought this nightmare was over."

Either way, relying on the Supreme Court for relief might be a legal long shot for Matheny. Even if the court rules against the bank, that is no guarantee that the judge in his case will adopt a favorable fair market value, a figure that could be open to wide interpretation.

For now, the Cardinals' new skipper appears to be adjusting to the financial strain. The Cardinals have not announced how much they will pay Matheny, though his base salary will be less than $750,000.

According to court documents, Matheny sold his vacation home at Table Rock Lake in early 2010. Public records list his new address as the Chesterfield home of his wife's parents.

The new owner of his old home in Wildwood, a limited liability company with an address that matches that of the president of Ladue-based McCarthy construction, has been attempting to resell the 7,900-square foot estate.

In real estate listings, the property is described as a "mini-resort" with a maid's quarters, four-car garage, five fireplaces and room for horses. Photos show a bar lined with baseball bats and a workout room with a sauna.

A scoreboard next to a baseball diamond on the property bears the name "Field of Dreamers."

The online listing of the property includes an asking price at $2 million.

One of Matheny's former neighbors, Pat Whittenberg, 81, said she was sad to see him leave the neighborhood. She first met Matheny when he stopped by her house a couple years ago, asking where he could buy some hay.

Whittenberg's eyes widened when she talked about the former Matheny residence, and how grand it is in comparison to the rest of the area's mostly older and more modest homes.

"It must've been their dream house," she said.

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