Developer Sues Over Moratorium : Land use: Southwest Diversified Inc. asks a court to force Signal Hill to lift a building ban on a proposal calling for 1,279 homes, apartments and condominiums.

A battle over the future of this tiny oil town’s largest piece of land has spilled into a courtroom.

Southwest Diversified Inc., which owns about 125 acres on what the local residents call the Hilltop, filed a lawsuit Aug. 30 in Superior Court against the city and its agencies.

The company has asked the court to force the City Council to lift a building moratorium that was imposed in May so council members would have more time to review the company’s plan.

Southwest Diversified’s original proposal called for 1,279 homes, apartments and condominiums, which could increase the population of this 2.2-square-mile city by nearly 50%, according to city officials. In the last decade, the city’s population has increased by 44%, to 8,276 residents, according to preliminary Census Bureau statistics.

Company officials said the city had led them to believe that the original project would be approved. After the moratorium, Southwest Diversified filed an amended plan in which it proposed building “a minimum of” 425 homes and apartments.

But council members want to conduct further studies, City Manager Doug LaBelle said. “We don’t know whether 425--from a planning perspective or an economic perspective or from an engineering perspective--would work,” LaBelle said.

Officials from the Irvine-based development company accuse the city of stonewalling and are seeking $450,000 per month, effective back to March, 1989.

The company’s attorney, Paul Hamilton said in a recent press release: “It is a case of deception, chicanery, venal gamesmanship and ultimate repudiation of commitments by the city of Signal Hill and its administrative bodies.”