Inve stment

North County developer Kelly Gearhart sued for $2 million

Investors allege that Kelly Gearhart and two others didn’t honor a loan deal

By Leslie Parrilla

A well-known local developer is being sued for more than $2 million by investors who allege that he and others fraudulently spent money lent to them for an Atascadero constr uction project, according to a lawsuit filed last week.

Atascadero contractor Kelly Gearhart is listed as a defendant in the lawsuit with James Hurst Miller and Courtney Brard of Hurst Financial Corp. in Atascadero.

Investors David Rios of Santa Clara County and Murray Powell of Templeton allege the defendants committed fraud, misrepresented information, breached a loan agreement and promissory note, were negligent and conspired during a loan agreement — among other accusations.

The lawsuit filing offers only one side of a story. Gearhart, Miller and Brard could not be reached for comment.

Rios and Powell said they invested about $500,000 in October 2006 to construct a commercial building on a vacant lot at 5730 El Camino Real. Other investors also participated.

Hurst Financial agreed to pay the loan amount plus interest by April 2008, according to the lawsuit.

Powell said Friday in a phone interview that he and Rios had not received any money and that the lot was still vacant. The lawsuit was triggered this year after the loan matured.

“(Hurst Financial) gave the money to Mr. Gearhart when they weren’t supposed to,” Powell said. “Our loan was only for the construction of a commercial building that was supposed to go on (the property).”

Powell said in the complaint that Gearhart received the loan money before construction began. Powell said Friday that he was unaware how the money had been spent.

“(Gearhart’s business)Morro Road Homes LLC wrote (to Powell and Rios) on April 1, 2008, admitting that it was in dire financial straits and asking that required interest payments be delayed,” the lawsuit said. “No indication of the solution to these dire financial straits was given.”

Gearhart is a longtime developer in the county and is a licensed general building contractor with the state, according to records.

The lawsuit asks the court to sell the El Camino Real property, valued at about $425,000, and order a judgment to collect the remainder of the money.

Leslie Parrilla can be reached at 783-7645.