Facts

Guillermo Crosbie-Grimaldo, decedent, purchased property, Unit #301, located at 160 Gardenside, San Francisco, California, through defendant The Public Administrator's Office of defendants city and county of San Francisco (together San Francisco) on Sept. 27, 1999. Plaintiff Ernesto Estenoz, Administrator With Will Annexed of the Estate of decedent, stated that the property was purchased for $130,673, and subject to a life estate of George Bergman, who paid $691 in rent monthly. In a different transaction, decendent also purchased Unit #303, a second unit in the same apartment complex, for $155,167.

The units were two non-contiguous, individual and separate units, that had different legal descriptions, Assessor's Parcel Numbers, and separate property tax statements. Defendant First American Title Insurance Company (FATIC) was the title insurer and escrow holder for both transactions. FATIC conducted only one escrow for both property purchases. In addition, it only prepared one preliminary title report and one HUD-1 Settlement Statement, which included only one "Contract sales price" of $285,840. It also combined settlement charges, title charges, and adjustments, as well as issued only one policy of title insurance.

On July 26, 2006, Estenoz entered into a purchase agreement to sell the property for $499,000. Before escrow closed, the Estenoz, under the advisement of the title insurance company handling the escrow, discovered that when the property was purchased it was one of five out of 12 unties in the complex designated by defendant The Mayor's Office of Housing (MOH), as a moderate income unit. With this classification, the property was subject to the resale and price restrictions of section 1341 and 1385 of the San Francisco Subdivision Code (the Code). There was no documentation or information that decedent knew of the restrictions or complied with the Code at the time of purchase. FATIC informed Estenoz that, by law, MOH was required to record a restriction on an owner's ability to transfer his estate, and the restriction is only valid after a document specifically describing the property is filed, and that MOH failed to record.

Due to the restrictions set out in the Code, the title insurance company would not insure the title until the provisions were complied with. The requirements required that MOH evaluate and approve the sale by (1) establishing and approving the sale price, not exceeding 2.5 times the annual median income for low- or moderate-income households; (2) grant a right-of-first refusal to San Francisco to repurchase the dwelling from the initial purchaser; (3) confirm the unit is sold to a moderate-income houshold that meets a certain earning criteria; (4) ensure that buyers are first-time homebuyers who will be owner-occupants; (5) approve the purchase offer and application to verify the buyer's income; and (6) add the unit to the MOH public listing of available properties on its Web site.

Estenoz was informed on Sept. 20, 2006 that pursuant to the Code, the sale price of the property could not exceed $134,783. However, Unit #303, which was purchased at the same time, was not designated as a moderate-income unit, and so did not have to comply with the Code's restrictions.

PLAINTIFF'S CONTENTIONS:
Estenoz alleged that San Francisco knew or should have known of the property's designated status at the time of sale, and had a duty to disclose all relevant facts to decedent to ensure he complied with the restrictions of the Code. In addition, Estenoz claimed that the decedent would not have purchased, nor been qualified to purchase the property, if he had been informed of the restrictions. Estenoz further contended that MOH's calculated affordable resale prices based on the most recent sales price adjusted by the increase in the Consumer Price Index-Housing Component, and that the Code stated that if low-income units were to be included in a conversion of apartments to condominiums, such units could not be sold for more than other similar low-income units. Estenoz also contended that the tenant had right of first refusal to purchase the property. In addition, the decedent was not given the requisite information by MOH when he purchased the property, nor did MOH follow proper procedures for a moderate-income designated property.

Result

Defendants were granted summary judgment, and the parties entered into a settlement agreement in exchange for Estenoz's waiver of the right to appeal.

Other Information

FILING DATE: Nov. 26, 2007.