Stein-Brief Sued by S&L; Seeking Loan Payments
Butterfield Savings & Loan Assn. has accused the Stein-Brief Group of fraud and breach of contract for allegedly refusing to make payments on a $1.5-million home bought as a condition for obtaining an $8.2-million loan from the S&L.;
The Santa Ana-based S&L; is suing Stein-Brief to uphold the sale of the house and to collect unspecified damages.
The Butterfield lawsuit was filed in Orange County Superior Court earlier this month after Stein-Brief, the partnership that is developing the Monarch Beach resort and residential community in Laguna Niguel, initiated its own suit against Butterfield.
The Stein-Brief suit, filed in August, alleged that when it “desperately needed” funds from Butterfield to make a multimillion-dollar mortgage payment on its Laguna Niguel development in 1984, the S&L; fraudulently coerced it into buying the custom home in the Harbor Ridge Development in Newport Beach as part of the deal. The suit also alleges that the S&L; failed to make required repairs to the home.
Butterfield has denied the allegations.
Payments Made to Court
As a result of its lawsuit, Stein-Brief obtained a preliminary injunction preventing Butterfield from filing a notice of default against it for failing to make house payments on the $800,000-mortgage from Butterfield S&L.; The company is required to make $8,000-per-month payments to the court, which is holding the money until a final settlement is reached.
Stein-Brief officials say that the Butterfield lawsuit is particularly damaging because it comes on the heels of Stein-Brief’s struggle last year to restructure more than $80 million in debt to halt foreclosure on its Monarch Beach project.
San Diego-based Avco Community Developers posted a notice of default last April 17 against Stein-Brief for failing to make payments on a $49-million loan. In late June, Avco was repaid after Stein-Brief obtained $68.3 million in new financing from Southmark Mortgage Corp. As part of the financing package, another Stein-Brief creditor, Beverly Hills Savings & Loan, took over 170 acres of the 400-acre Monarch Beach development.
The Butterfield lawsuit, also filed against partners David Stein and Barry Brief, says that the two men misled “the general public and Butterfield . . . to believe that Stein-Brief was adequately capitalized, and able to discharge all newly undertaken obligations without resort to further borrowing when, in fact, Stein-Brief was not adequately capitalized.”
