Kaufman & Broad Sues Silvercrest Over Joint Venture
Los Angeles home builder Kaufman & Broad Inc. has sued Santa Ana’s Silvercrest Industries Inc., claiming that Silvercrest defrauded the company in a joint venture to develop a mobile home subdivision in the San Fernando Valley.
The suit brings the two companies’ partnership to a contentious close a little less than a year after Silvercrest had announced the project and said it would greatly boost Silvercrest sales and profits.
Kaufman & Broad alleged in its Superior Court suit that Silvercrest defrauded Kaufman & Broad in order to obtain its interest in the 385-acre Santiago Estates subdivision. Silvercrest concealed offers it had received from others interested in purchasing the property, the suit filed in Los Angeles late last month alleges.
The company asked the court to punish Silvercrest by awarding an unspecified amount of damages.
Wants $2.9 Million
Kaufman & Broad also asked for repayment of $2.9 million it said it had loaned Silvercrest or spent on improving and promoting the subdivision, which was to have contained 800 homes.
Silvercrest, a land developer and manufacturer of mobile homes, said it had already offered to reimburse Kaufman & Broad for any expenses it could document.
“The remainder of this complaint is completely without merit, and we will defend ourselves against it very aggressively,” said Richard Simonian, Silvercrest’s president, in a statement.
Silvercrest joined a Kaufman & Broad subsidiary in February, 1987, in a partnership called Homeplus-L.A. to buy land and develop the subdivision.
Silvercrest got the benefit of Kaufman & Broad’s financial and marketing muscle while Silvercrest loaned the venture its expertise in mobile homes.
Harmony Didn’t Last
In court documents, Kaufman & Broad said it loaned a Silvercrest subsidiary $1 million to build model homes and improve the land. Late last year Kaufman & Broad loaned an additional $370,000 and the company said it spent additional money promoting the development.
But the harmony didn’t last: Kaufman & Broad accused Silvercrest of not living up to its agreement to improve the land. Silvercrest disagreed. Kaufman & Broad then signed an agreement to dissolve the partnership with the understanding that it be reimbursed for the money it was owed and that there were no potential purchasers for the property.
Now Kaufman & Broad has asked the court to bar Silvercrest from selling the subdivision until Kaufman & Broad receives what it is owed, which together with other expenses and interest is now said to total $2.9 million.
The company also wants what it says is its fair share of the profits from the improvements the company financed.
Merged With Developer
Kaufman & Broad executives would not comment, and Silvercrest executives did not return repeated telephone calls Wednesday.
Silvercrest was a manufacturer of mobile homes when it merged with Santa Ana mobile home park developer Santiago Corp. in January, 1986.
The company reported revenues of $20 million for the first quarter of its fiscal year, which ended Sept. 30, up 38% from the $14.5 million it reported the year before.
Net income was $565,000 during the quarter, up slightly from $502,000 of the year before.
Silvercrest also announced last year that it was teaming with Watt Industries of Santa Monica to build Orange County’s largest mobile home park in Orange.
