Beneath the metal shed roof and barn-like wood crossbeams of Sunset magazine’s Monterey Bay Idea House, construction workers on ladders paint above a contractible wall of windows. The crew is hurriedly putting the finishing touches on the solar-powered Sunset House in time for its public opening on Friday, Oct. 3.

The pastoral-yet-luxurious abode, which sits on a prized lot in the Monterra development off Highway 68, towers above coast live oaks and overlooks Lover’s Point. Sunset’s October issue features the stone-veneer fireplace nook and waterfall-invoking master bathroom tile. The publicity is expected to attract 30,000 visits, says Sarah Gaffney, Idea House program manager. “It’s kind of like the pages of Sunset magazine coming to life for people touring the house,” Gaffney says over the sound of sawing and hammering.

There is a lot of money riding on Sunset’s glossy pages. The Sunset House, while architecturally sustainable and aesthetically opulent, rests on a shaky financial foundation. Roger and Basil Mills, Monterra’s owners, have shuttered their agricultural company, Mills Family Farms, and sunk deep in real-estate debt. Monterra faces lawsuits from unpaid construction companies and one investor alleging elder abuse. Notices of defaults continue to pile up, and some banks consider foreclosing on Monterra properties. Major lenders, including a city of Salinas employee retirement fund, hope the Sunset House will renew interest in the project and trigger lot sales– so everyone gets paid.

Monterra sales have slowed to a near-halt for the past two years. But David Armanasco, spokesman for the Mills brothers, remains optimistic. He sees things turning around in the near future, adding that three lots are now in escrow.

“With the new entrance to Monterra on Highway 68 and the opening of the Sunset House, it’s going to shine a light of interest on Monterra because this is the first Idea House created in Monterey County by Sunset,” Armanasco says.

The Sunset House has been in the works for about two years. Monterra has borrowed at least $7.3 million against the Sunset lot, including a $1.5 million loan in September 2007 from bankrupt investment firm Cedar Funding Inc. In August, Monterey County Bank kicked down another $971,000 for the house on top of a $4.9 million loan the bank made in ’07.

Monterra’s legal bills are adding up, too. RCA Enterprises, the former general contractor on the project, sued Monterra on Jan. 30 for breach of contract, asking the courts for nearly $340,000 in unpaid work. Monterra filed a cross complaint in March, alleging that RCA overbilled them and mismanaged the $3.5 million contract. On Aug. 12 Messenger Construction Management Inc. filed a mechanics lien against the Sunset House, claiming Monterra owes them $52,690.

Two days later, Monterra’s attorneys said in a legal filing they may add Sunset House architect Thomas Hood as a cross defendant to their complaint. Monterra and RCA agreed to drop their suits Sept. 18, but the Mills’ legal worries remain.

Investor Mary Margaret Graham, who is in her 80s, alleges in a June 25 complaint that the Mills brothers solicited two unsecured loans from her, totaling $500,000.

“Defendants were aware and took advantage of… Graham’s lack of understanding at the time, preying upon Plaintiff’s unique vulnerability as an elder,” the lawsuit says. As is the case with many of their investors, the Mills stopped paying Graham in March, according to the lawsuit. In a legal response, Monterra’s lawyer Paul Hart denied Graham’s accusations.

Two other lawsuits filed by The Don Chapin Company Inc. and Carmel Development Company are also moving through the courts. Don Chapin Company wants to get paid for grading and paving it did for phases six, seven and nine of the 168-lot subdivision. Chapin’s lien amounts to about $97,500 per lot plus interest. Chapin says he’s hopeful he will be paid; he’s only suing to protect his business interest.

“It’s unfortunate because I like the Mills brothers very much, and I’ve done a tremendous amount of work for them over the years,” Chapin says. “These guys are upstanding folks. They just got caught in an unfortunate situation.”

Chapin and Alan Williams, president of Carmel Development, chalk up Monterra’s cash flow problem to the real estate downturn.

“I have good faith that we are going to see our money,” Williams says. “The inherent value is in Monterra.”

Williams’ company developed the infrastructure for the gated community. Carmel Development hasn’t been paid $74,398 per lot in phase one, and $284,144 per lot in phases seven and nine, plus interest owed by Monterra.

Once the lots sell, Williams says, the mechanics liens will have to be paid first– before investors see their money. This would put Chapin and Carmel Development in front of the City of Salinas Deferred Compensation Fund.

The city employee retirement fund has 15 loans, totaling $17.2 million, in Monterra. The Mills brothers haven’t paid interest for more than six months– that’s $829,728 in unpaid interest and late fees as of Aug. 31. The committee in charge of overseeing the fund has ruled out foreclosure as an option. “We believe it’s in the best financial interest of the plan to let the project succeed,” say Tom Kever, city finance director and administrator of the fund.

Kever says appraised value of the lots is $31.2 million, although most of the appraisals were done in 2006 before the housing market dive. Two appraisals done in June valued two lots at $2.6 million each, which Kever says shows property values are rising.

Roland Fletcher of Gabilan Mortgage originally prepared the loans for the city. Fletcher’s office is now closed and cleared out; city officials say he retired. The city has hired a new loan service company for its trust deed investments. Without Monterra interest payments, the fund is still paying 4.7 percent interest to 518 employees, Kever says, adding that once lot sales rebound, Monterra will prove to be a good long-term investment.

Other lenders aren’t waiting around. Earlier this month, Sonora-based Mother Lode Bank foreclosed on two Monterra lots; San Luis Trust Bank has scheduled an Oct. 22 foreclosure auction on another lot. In July, Campbell-based Bridge Bank, National Association filed a notice of default for $7.8 million. The list goes on.

The Sunset House will be a good marketing tool for Monterra, but it’s anyone’s guess whether wealthy homebuyers will take the bait. Even if the approximately 100 remaining lots sell, it’s unclear if that income would generate enough money for the Mills brothers to pay off their debts.