2 high-profile developers locked in legal battle over SLO housing project
Two prominent San Luis Obispo County developers are engaged in a legal battle after one accused the other of misappropriating more than $3 million from the coffers of a recently completed housing project, and using the funds “as his own personal piggy bank.”
Hamish Marshall — the man behind such popular venues as SLO Brew Rock and The Carissa by SLO Brew in San Luis Obispo, and several other businesses and real estate projects throughout the county — was named as defendant in a civil complaint filed in San Luis Obispo Superior Court on March 17 by developer Taylor Judkins.
Judkins’ Long Bonetti Office, LLC., the firm that co-owns The Yard SLO, a recently constructed development of townhouses off Victoria Avenue connecting the industrial area of Broad Street to the railroad district, alleges that between October 2016 and February 2020, Marshall made “unauthorized and improper disbursements of company funds through his position as one of the project managers,” according to the lawsuit.
Judkins, of Bakersfield, is behind such local projects as San Luis Obispo Public Market at Bonetti Ranch and San Luis Square, as well as a mixed-use project at the former home of The Tribune on South Higuera Street. San Luis Obispo Public Market was expected to open its first business spaces in November or December 2019, according to past company projections, but the project has been delayed.
Judkins’ lawsuit claims Marshall “knowingly and blatantly diverted and misappropriated” a total of more than $3 million from the company, “and the unreturned balance of such unauthorized disbursements is $327,717,” the lawsuit reads.
Both men’s businesses shared a 50% stake in The Yard SLO.
Civil complaints represent just one side of the story. Jay Raftery, Judkins’ attorney, declined to comment on the pending litigation.
But Marshall said on Wednesday that Judkins’ lawsuit is a ploy to squeeze Marshall out of his share of the business, and that Judkins has a history of filing lawsuits against business partners.
Marshall also accuses Judkins of failing to pay roughly $700,000 in construction costs for the project. Marshall said he will be filing a cross-complaint against Judkins over the project.
Developer sues over The Yard SLO housing complex
The civil complaint states that The Yard’s business entity was formed in 2016 to build the complex at 2450 and 2490 Victoria Avenue, as well as 780 Woodbridge Street and 783 Alphonso Street. It was managed by a board of managers with initial managers being Marshall and another businessman, as well as Judkins and his father, Don Judkins, the lawsuit states.
According to the complaint, “the unauthorized and improper disbursements to or for the benefit of of Marshall and his affiliated companies total in excess of $3 million, and the unreturned balance of such unauthorized disbursements is ($327,717).”
Taylor Judkins accuses Marshall of causing The Yard to improperly pay for overhead and office expenses of Marshall’s firm, Auzco Development, “by including such payments in construction draws not reviewed or approved by (Judkins’ Long Bonetti Office LLC) or disinterested managers of (The Yard).”
Judkins also accuses Marshall of refusing to provide an accounting of the expenses in question, and “caused (The Yard) to delay providing such information and books and records to (Judkins), in an effort to conceal his misconduct and to provide time for an accountant retained by Marshall to make adjusting journal entries to conceal improper transactions,” the complaint reads.
The lawsuit accuses Marshall of breach of fiduciary duty and constructive fraud, and seeks an unspecified amount of damages as well as restitution and punitive damages.
Attorney says lawsuit is ‘frivolous’
But Marshall said Wednesday there’s no truth to the allegations and that Don and Taylor Judkins owe him money related to the project.
In a statement provided by Marshall’s attorney, Roy Ogden, Ogden wrote that lawyers for Marshall’s Auzco Development delivered a written demand for payment on Taylor Judkins’ and Long Bonetti Office, LLC for more than $700,000, “primarily for payments due Auzco for general contracting services rendered to (The Yard) residential project.”
Ogden wrote that Judkins filed the lawsuit after that demand.
“The lawsuit is frivolous,” Ogden wrote Thursday. “The purpose of the lawsuit is based upon false claims and appears to be an attempt to gain leverage and delay by attacking Hamish Marshall personally.”
Ogden wrote that the lawsuit “appears to have been hastily drafted and constitutes a poorly-conceived strategy to avoid the mandatory arbitration agreement between the Judkins’ entity and the Marshall entity.”
“The Judkins are falsely claiming in court documents that Marshall’s companies owe money when in fact the opposite is true,” Ogden wrote, adding that an independent forensic accountant who has reviewed all financial records came to the same conclusion. “The Judkins do not have the ability to read or understand construction accounting.”
Ogden said that, at the outset of the project, the Judkins wanted to be both a participant in the project and a lender to it, but soon “got in over their heads” and were unable to provide adequate funding for a construction loan.
Because of this, Marshall’s companies were required to loan money to The Yard entity to cover the Judkins’ shortfalls, Ogden wrote.
The attorney also said that the Judkins’ claim that Marshall has not provided documentation “is another patently false claim,” saying the Judkins “have refused to retain a professional to evaluate the numbers and this level of accounting and finance is over the Judkins’ heads.”
Ogden said the practice of filing lawsuits to gain business leverage “is a technique the Judkins have employed in most of their other projects in this county.”
Court records show that Taylor Judkins has filed two lawsuits in San Luis Obispo Superior Court since 2018 — one against San Luis Obispo developer John Belsher over a property in the 400 block of Marsh Street, and another against a Santa Barbara-based developer related to a foreclosure sale of a property in the 500 block of Higuera Street.
Both lawsuits were dismissed before trial, court records show.
A case management conference in The Yard lawsuit has been scheduled for July in San Luis Obispo Superior Court.
