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Judge Allows Bank to Foreclose While Investors Are Stuck : Real estate: A San Bernardino apartment complex is Hill Williams' only income-producing property. The ruling blocks investors from recouping their money.


SANTA ANA — Prospects for investors in Hill Williams Development Corp. got bleaker Friday when a U.S. Bankruptcy Court judge decided to allow a bank to foreclose on their only income-producing property.

Trustees for the estates of Hill Williams and its fund-raising partnerships had argued that a 180-unit apartment complex in San Bernardino should not be released to the lender because of possible equity that could be divvied among investors. But the lender, Imperial Bank of Inglewood, said the complex is worth less than the money owed on it, $6.8 million, because of the poor real estate market.

"This puts the trustees in a very difficult spot," said Ron Rus, attorney to the court-appointed trustee for the partnerships' estate.

Hill Williams raised $90 million from about 5,000 investors, allegedly to build homes, before filing earlier this year to liquidate under Chapter 7 of the U.S. Bankruptcy Code. The California Department of Corporations, the U.S. postal inspector and the Orange County district attorney's office are conducting a criminal investigation of the company. No charges have been filed.

Donald Hill Williams, the company's president, told investors--most of whom are elderly--that their loans were secured by real estate that would be developed for a promised 15% annual return on their money. Instead, the Anaheim Hills company bought land with little money down and then attached second trust deeds under the partnerships' names.

Most of the 30 properties bought by Hill Williams during the three years that it raised money from the public remain undeveloped. Summerwind Apartments, built in 1988--the year before Hill Williams formed its first of four fund-raising partnerships--is the only property in the investors' portfolio that actually makes money.

"It will take the bank at least four months to go through the foreclosure procedure," said Robert Goe, attorney to the trustee of the Hill Williams estate. "In the interim, we will push to find a buyer, though we're not too optimistic. We were hoping for more time."

Hill Williams deemed the apartment complex to be worth $12 million, which justified a second "loan" from investors of $4.3 million.

Williams told investors that the complex was being converted into condominiums, though that never came to be. In a 1991 newsletter to investors, Williams said, "We want to let you know that the Summerwind Condominium Project is doing very well but is not completely sold out. Sales of the projects, however, are going well."

In his decision Friday to release the complex from the bankruptcy estate, Judge John E. Ryan voiced disappointment in Titan Value Equities, a Tustin-based broker-dealer that sold Hill Williams securities to the public. Last month, Titan told the court that it was working on a reorganization plan to develop some of the properties and recover a portion of the investors' money.

"Titan has not fulfilled its commitment to the court . . . that (the brokerage) would act quickly in proposing a basis for conversion to Chapter 11," Ryan said. Under Chapter 11 of the bankruptcy code, a company continues operating while it reorganizes its finances.

Titan officials and attorneys could not be reached Friday for comment.

Goe expressed little hope that the investors will retrieve much money from any of the real estate "unless a white knight comes in and develops it."

"Of the $90 million raised, Hill Williams invested only about $5 million in the properties," he said. "The trustees have been dealt a bad hand of cards. It's good to know that the investors have other sources of potential recovery. This case is really about what money can be gotten out of whoever can be sued."

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