Members of Ann Arbor Country Club hope that lower rates this season will attract more people to the facility, raising the number of participants to levels that generate enough funds to cover operations and debt.

Meeting the club’s financial obligations also is the goal of the club’s board of directors and new mortgage investor, according to court documents.

But how each side reaches that goal headed into litigation in late March, with a filing in Washtenaw County Circuit Court by Michael Weikle against the club and the board members who also formed a group to try to buy the mortgage.

The Ann Arbor Country Club in late winter.

Lon Horwedel | AnnArbor.com

A2C2 paid $625,000 for the $1.7 million note that Citizens Bank told the club it would sell after the club went into default.

The transaction took place March 5, two days after Weikle and the investor - listed on West Virginia records as Lewis Whaley - committed to buying the mortgage.

That transaction, however, came as AACC board president Karen Stevens and six other club members were pursuing additional investors as part of a group called Mag7 Properties Inc., formed to submit a bid on the club’s mortgage.

Since then, Mag7 disbanded and AACC’s board called an April 1 meeting to vote on two measures: Dropping rates for 2010 and giving the board authority to file for bankruptcy or take the club into foreclosure.

Both measures passed, according to AACC attorney Joe Phillips of Ann Arbor.

But Weikle challenged that meeting in the lawsuit filed March 23, and also asks that any board members connected to Mag7 be removed from office.

The dues change, he said in the filing, “put the club at further and almost certain risk of not being able to make any payments on its loans to A2C2.”

The plan to cut the rates without a corresponding marketing plan, according to the lawsuit, is “formula for certain financial disaster.”

The lawsuit also says that his communication with Stevens on behalf of A2C2 failed to disclose her role in Mag7, raising questions about whether she and others should be making decisions on behalf of the club while part of the investment group.

Now Weikle said he’s trying to protect that investment by ensuring that the club makes enough changes to attract new revenue.

“Let’s bring people in and increase membership and ensure that the club survives,” he said in an interview.

Phillips, in a response to the lawsuit that was filed March 30, said Weikle facilitated the mortgage purchase by A2C2 immediately after learning that Mag7 was close to making an offer.

Weikle, in documents, is also accused of “meddling in the Club’s internal affairs by engaging in unauthorized meetings with Club employees.”

The April 1 vote to allow the board to file bankruptcy or enter foreclosure comes because the $1.7 million debt - described in the filing as “onerous” - meant that the board decided to consider its options.

With the purchase of the mortgage, A2C2 and the club must negotiate payment terms. The original debt remains, Weikle said, and isn’t affected by the discounted purchase price that A2C2 obtained from Citizen’s Bank.

“The club’s already agreed to the $1.7 million,” Weikle said. “That’s what they borrowed. We feel the asset’s worth $1.7 million.”

However, terms - such as the interest rate and payment schedule - could be negotiated, he said.

Those negotiations, he said, need to take place with board members who did not pursue the mortgage purchase outside of their board duties.

The Ann Arbor Country Club said the lawsuit is an “attempt to obtain an unfair advantage in negotiations between A2C2 and The Club.”

Weikle, in turn, said he doesn’t want the club to go into bankruptcy. He’s a former member who still has $2,700 in club equity that hasn’t been refunded, and he’s been concerned about the dwindling membership over recent years.

“My investor doesn’t want to run a country club,” he said. “… (We) don’t want to make decisions for the club…. But I do think we need fresh ideas. No matter what you come up with, the investor has to have some comfort level.”

A hearing will be held at 1:30 p.m. April 28 in front of Judge David Swartz. The new rates have not been posted on the AACC website; however, the club did open March 17.

Meanwhile, Mag7 was dissolved as of April 2, according to state documents.

Weikle said he wants the club to survive.

“The worst solution for all of us is a judicial solution,” he said.

Paula Gardner is Business News Director of AnnArbor.com. Contact her at 734-623-2586 or by email. Sign up for the weekly Business Review newsletter, distributed every Thursday, here.