Zions Bank is suing Draper

A bank that once served Draper's financial needs is now suing the municipality for $25 million over allegations the city hampered the progress of the half-finished SunCrest development.

In a lawsuit filed this month in 3rd District Court, Zions First National Bank also accuses the city of sabotaging buyout deals with potential developers.

Zions Bank bought the development for $25.3 million in a bankruptcy hearing one year ago this week with the intention of selling it as quickly as possible to help recoup losses.

When SunCrest finally failed two years ago, it left about $40 million in unpaid loan debt to Zions Bank on its path to bankruptcy.

The city strongly opposed the bank's ownership from day one, but the already estranged relationship between the city and bank grew more strained when a near deal to sell the development fell through in December.

On the eve of a tacit sale, the bank's potential buyer, Raddon Bros. Construction, pulled out and faulted city staff for bringing up infrastructure issues at the last minute that made the purchase no longer financially feasible.

Draper city manager Layne Long denied surprising Raddon Bros. with any 11th-hour requirements at the time and said the contractor's concerns were always part of the negotiations.

In apparent reprisal, Zions Bank hand-delivered a letter to Draper a week later saying the city had 30 days before all of its deposits, savings accounts, credit cards and payroll functions were terminated.

Now, Draper has until the first week of July to respond to the lawsuit, for which a jury trial has been demanded.

Draper spokeswoman Maridene Hancock said city officials were not available to respond Thursday.

Nine days after Zions Bank filed suit, a jury in a separate case awarded a Tooele developer $20.7 million because it was determined Tooele city had obstructed the developer's progress and breached contractual duties.

E-mail: jhancock@desnews.com