Facts

On March 5, 2004, the property located at 4712 Lankershim Boulevard (formerly known as the El Sombrero Bar) was up for sale at a probate auction. The property was owned by the Estate of Pat Z. Lopez. The administrator of the estate at the time of the sale was James L. Morgan.

There were three other – higher -- offers to purchase the subject property, which was formerly a bar/nightclub called "El Sombrero." The offers ranged from $450,000 to $567,000.00 and all of them included a liquor license as part of the purchase price. Plaintiff's offer was for $450,000.00. All offers were ultimately rejected by Morgan.

Prior to the probate auction, the estate had accepted an offer to buy the property for $400,000 from World Trade Industries Inc. subject to the probate sale of March 5, 2004. The principal of World Trade Industries is Eduardo Hernandez, a long time friend of James L. Morgan. Morgan also served on the board of directors of at least 3 other corporations owned by Eduardo Hernandez. These other corporations were engaged in the businesses of selling insurance and investing in real estate.

Morgan was never made available to be questioned under oath at deposition or trial due to his infirm mental condition.

The plaintiff claimed that on the date of the hearing, the administrator of the estate, James L. Morgan, gave him fraudulent information concerning the ability to secure a liquor license and the ability to operate the property as a bar altogether. The plaintiff claimed that James Morgan, as well as other conspirators, knew that it was his intent to purchase the property and renovate it and operate it as a bar and night club.

The plaintiff contended that he was fraudulently told that no liquor license could ever be obtained for the property nor could the property be operated as a bar, in an effort to thwart him from purchasing the property so that James Morgan's friend, Eduardo Hernandez, could purchase the property without a competitive bid.

In fact, on the date of the probate hearing, March 5, 2004, the Estate's attorney represented to the Court that there was no liquor license and that the subject property could not be a bar.

Plaintiff and his lender who was present at the probate sale would not agree to buy the subject property for more than $500,000 without a liquor license. Hernandez was the successful bidder at the probate sale after bidding $505,000.

On or about April 6, 2004, Morgan transferred the Estate's liquor license to Hernandez without any open bids in court. In fact, the Estate did not have authority to sell the liquor license until May 21, 2004.

At trial, Hernandez did not have any verification of actually purchasing the liquor license.

In addition, approximately $50,000.00 in nightclub furniture/equipment (as appraised by the probate referee) owned by the Estate was then given to Hernandez for free.

Currently the subject property is a successful nightclub/bar.

The defendants conceded that James Morgan and Eduardo Hernandez had both a personal and business relationship prior to the probate sale. However, the defendants disputed that any conspiracy existed in order to dissuade the plaintiff from purchasing the property. Further, the defendants claimed that all of the information that was available to the defendants was also available to the plaintiff relating to the property. Had plaintiff performed his own due diligence, the plaintiff would have uncovered all the information necessary for plaintiff to make a reasonable decision as to how much to pay for the property.

The defendants claimed that at the time plaintiff was told that the property could not be turned into a bar/nightclub that the statement was based on the information available to the defendants as a result of research performed by an expeditor who had concluded that a conditional use permit would be required to operate the property as a bar and that because such conditional use permits were very difficult to secure, it would be highly unlikely that the property could be operated as a bar.

Settlement Discussions

The last demand was $650,000. According to plaintiff's counsel, defense counsel made a 998 offer of $0.99.

Damages

The plaintiff claimed lost profits of over $600,000. Plaintiff's two experts testified at their depositions that plaintiff had been damaged between $1 to $2 million.

Result

Defense verdict.

Other Information

Trial was bifurcated. The damages phase of the trial did not go forward because the plaintiff lost on the liability phase. The defendants are considering filing a malicious prosecution claim against the plaintiff and plaintiff's lawyers in light of the outcome of the trial.

Deliberation

70 minutes

Poll

12-0

Length

10 days