Facts

This case involved the design and intended construction and development of a four-story 4,000 to 5,000 square foot single family residence situated on a steeply sloped lot located at 1523-3/8 North Doheny Drive in Los Angeles (the Doheny Property). The Doheny Property is located north of Sunset Boulevard in the Hollywood Hills in an area known as the "Bird Streets." The development included the purchase of the land and construction at a combined cost of about $4.5 million, with the finished residence having a resale value of approximately $8 million or more.

Plaintiff Cassaforte Limited was an investor and mezzanine lender that prior to this project had never before invested in properties in Los Angeles, much less in the Hollywood Hills which is a unique area to design and build a home. The city's rules for design and construction and the topography of the area are different in the Hollywood Hills than in other areas of Los Angeles.

Defendant Jhonalyn Jhoiey Ramirez is an individual who held herself out as an architect and a designer of high-end residential properties and experienced in designing and acting as the project manager in the development of residences in the Hollywood Hills. Ramirez was the owner, director, chief executive officer, and president of defendant Studio Jhoiey, Inc. (Studio Jhoiey).

Cassaforte was introduced to the defendants by a co-investor. Prior to investing, Cassaforte's agent visited the Doheny Property several times and discussed the potential development of the Doheny Property on multiple occasions with Ramirez. To showcase her skills, knowledge, and experience, Ramirez showed Cassaforte's agent other properties for which Ramirez was the architect, designer, and project manager for the design and construction of a new residence. Important to Cassaforte, Ramirez said she was experienced with developing properties in the Hollywood Hills and some of the properties Ramirez showed were located in the Hollywood Hills.

PLAINTIFF'S CONTENTIONS: Cassaforte contended that Ramirez and her company committed negligent misrepresentation in making statements to Cassaforte prior to Cassaforte's decision to invest and that defendants were negligent in their design and project management of this project that caused the loss of Cassaforte's investment.

Specifically, Ramirez knew that Cassaforte was contemplating making an investment in the Doheny Property to develop it for resale. The investment comprised the purchase of the real property itself and money to design and construct the new home.
In order to obtain a lucrative $100,000 contract and a bonus of 20% of the net profits of the final sales price if she were the designer and project manager, Ramirez made a series of representations about the Doheny Property and the size and type of residence that she could design on the site. Many of these representations were not true when made, and others were made with no reasonable grounds for Ramirez to have believed them to be true.

Some of Ramirez's material misrepresentations that Cassaforte relied upon when it agreed to invest in the project were these:
that she was an architect; that she prepares architectural drawings for submission to the city; that she prepares design drawings for submission to the city; that her company, Studio Jhoiey, offered a full-service in-house group of services from predevelopment to project completion; that Studio Jhoiey was a "one-stop shop" for the development of the Doheny Property; that she would be able to provide a complete set of permitted architectural and construction plans sufficient for a construction permit to be issued to build the new proposed residence on the Doheny Property; that a four-story home could be built on the Doheny site; that the four-story home she designed would be around 4,000 square feet or more, even up to approximately 5,000 square feet; that based on her research, she did not see any inherent problems prohibiting the building of the four-story residence she proposed to design; that based on her research, there were no inherent complications to the construction of the Doheny Property.

Not only was Ramirez not an architect and did not have the legal right to prepare design and architectural plans for submission to the city, but her plans failed to comply with basic requirements in the building code, conflicted with the physical Doheny Property itself, and her design was not possible to build due to existing easements that had to be acquired from three neighboring properties in order to obtain the legally mandated right-of-way and access required by the city in the Hollywood Hills. Ramirez's negligence in preparing the plans and managing the project were so extensive that after almost 20 months (which was Ramirez's representation to complete the entire development) not a single set of plans had been approved by the city.
After Cassaforte invested over $800,000, the easement complication that Ramirez did not disclose to Cassaforte prior to its investment and Ramirez's flawed design caused the failure of the project, the foreclosure of the land, and the total loss of Cassaforte's investment.

DEFENDANT'S CONTENTIONS: Defendants contended that Ramirez was capable to undertake the responsibilities she agreed to, that she did not misrepresent any facts or her capabilities, that Cassaforte was a sophisticated institutional investor that should have done its own due diligence, and that the project failed because of other reasons.

Damages

$848,291

Result

Verdict in favor of plaintiff on its claims for negligent misrepresentation and negligence of $1,321,685.25, inclusive of attorneys' fees and costs.

Deliberation

36 days

Length

five days