Developer Erik Behman faces an Aug. 24 deadline to get his allegations that San Luis Obispo County officials tripped up his 77-lot project before a state appeals court.
“This appeal can pull Maria Vista Estates out of its Chapter 7 bankruptcy,” Benham wrote in motion to the bankruptcy court asking to let him take over the case.
Benham is one of the partners behind Maria Vista Estates, a project near Nipomo that filed for bankruptcy in 2007, listing as its biggest debt a $26 million loan taken out to finance construction.
Since the bankruptcy filing, the case has proved a tangle: the trustee charged with divvying up the assets hired a real estate firm to evaluate the property for liquidation but couldn’t come to any sort of consensus and now says in court filings that it’s unlikely he can sell the property.
Benham filed for personal bankruptcy in mid-2008. He declined to comment for this story and pointed to his statements in court filings to express his positions.
Behnam has pushed to pursue a $30 million lawsuit he filed against the county alleging, among other things, that county and employees at the Nipomo Community Services District shook him and the company down for bribes and sexual favors in exchange for getting permit processing and inspections done on time. The county denied the allegations and won in San Luis Obispo County Superior Court.
Maria Vista Estates filed an appeal last year. But early this year, the U.S. Trustee in the case moved to settle it for $133,000. The rationale was that money in hand was worth more to the creditors than lengthy, expensive appeal that might not succeed.
“[T]he Trustee has determined that it is not in the bankruptcy estate’s best interest to continue to litigate the action because of the uncertainty of success, the complexity and difficulty of litigation, and the uncertainty and delay in obtaining an ultimate recovery even if successful in the trial court, as compared with the immediate infusion of a significant amount of money into this estate,” the trustee’s attorneys wrote in court filings.
Benham has pushed in the bankruptcy court to keep the appeal alive, but from a legal standpoint, only the trustee can pursue the case. And after the Second District Court of Appeals sent a notice June 2 that said Maria Vista Estates would be dismissed if it didn’t file an opening brief, Benham asked the bankruptcy court to let him take over the case himself, bearing the costs on his own.
Benham said he still believes his case is strong if pursued.
“I am only filing this motion because Trustee Jerry Namba has done nothing to defend Maria Vista Estates on the foregoing appeal,” Benham wrote in his motion. “[T]he Appellants submit that it is not even a close case.”
Namba’s attorneys did not respond to a request from the Business Times for an interview. But in court filings, Namba filed a notice that he does not oppose the move.
Meanwhile, Benham has also filed for a personal bankruptcy. In that case, the Federal Deposit Insurance Corp. is pursuing a $26 million claim on behalf of Security Pacific Bank, which originally gave Maria Vista Estates its loan but then was taken over by federal regulators in November.
Benham signed a personal guarantee on the loan, so the FDIC argues he’s on the hook for it. But Benham is also a creditor to Maria Vista Estates – he has argued in court documents that he has an interest in project’s property, which the FDIC also wants as collateral for the $26 million loan from Security Pacific.
The FDIC filed allegations that Benham invalidated that claim with a transfer and subsequent paperwork correction that occurred when one of the houses in the project was sold. Benham fired back that the correction was minor and well within the law. A judge has yet to rule on that dispute.
The 84-acre Maria Vista Estates contains 77 buildable lots, according to bankruptcy court filings. On those stand 24 completed homes, 15 homes that are about 70 percent finished and 37 lots with utility entitlements but no homes built.