Court Trustee for Baldwin Co. Sues Over Land Rights
The trustee running bankrupt Newport Beach home builder Baldwin Co. has sued the firm’s owners, brothers Alfred and James Baldwin, claiming they want to resurrect their development empire by wresting rights to thousands of acres of valuable land from the business that bears their name.
Bankruptcy Trustee David Gould argues that the brothers are jeopardizing his efforts to nurse Baldwin Co. through a reorganization and repay more than $250 million in debts. Last week, he won a temporary restraining order barring the Baldwins from disposing of the land pending an Aug. 30 hearing in U.S. Bankruptcy Court in Santa Barbara.
“These development opportunities are crucial assets” for Baldwin Co., which may never emerge from bankruptcy without them, the suit says.
The Baldwin brothers, ousted from operating control of Baldwin Co. in May, are in business as Village Development. The company, which formerly was called Village Properties and was not part of the bankruptcy case, has sold Baldwin Co. most of the raw land for its housing developments.
Village’s properties include about 16,000 acres in the Otay Mesa region of southern San Diego County, as well as hundreds of acres in master planned communities in Thousand Oaks, Oxnard, north San Diego County and the south Orange County planned community of Portola Hills.
The dispute centers on a long-standing agreement giving Baldwin Co. the first option to acquire land owned by Village Development. Gould alleges that the Baldwin brothers are actively developing and marketing some of the land without having first offered it to Baldwin Co. The brothers contend, however, that the agreement has been canceled.
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Already, the suit says, Village Development has surrendered title to 80 lots, worth $4 million, in a project in the San Diego County community of Del Mar to stave off foreclosure of the property and has begun construction of homes on 23 lots in the same development.
The Baldwin brothers also are in the process of obtaining financing to develop other properties owned by Village and are actively selling homes in an 106-acre Baldwin-developed project in Ventura County called Lang Ranch, the suit says.
The Baldwins could not be reached for comment. But they insisted in a recent court filing that the agreement was nullified earlier this year when Village severed its ties with Baldwin Co. after paying off $60 million in debts.
The brothers argue that they would be forced out of business if Baldwin Co. retains the first rights to acquire property from Village.
The case illustrates how complex a bankruptcy can become, especially when the people who led the company into bankruptcy remain involved.
From the beginning of the Baldwin case, filed in Santa Barbara a year ago, the Baldwin brothers have been accused of allegedly using the business as their own money machine, taking what they needed when they needed it.
Among other things, the brothers put several relatives on the Baldwin Co. payroll and, in the weeks before filing the Chapter 11 bankruptcy petition, awarded themselves pay raises of almost $800,000 a year each.
When Baldwin was a privately owned company, it didn’t matter much because the profits belonged to the Baldwins. But in 1993 the brothers sold $155 million worth of junk bonds to Wall Street investors, effectively bringing in silent partners and shouldering legal responsibilities to protect their financial interests.
The bankruptcy left Baldwin Co. responsible for repaying as much of the $155 million as possible, and left it with an additional $95 million in operating loans and millions more in debts to subcontractors and suppliers.
