Facts

Defendants thought they owned two adjacent, vacant lots which they developed, placing a new home on each for the purpose of selling the homes. Plaintiff purchased one of the properties from defendants in early 2005. After the purchase, and while defendants were in the process of selling the second home in late 2005, defendants discovered that the subdivision of these two lots had not been completed and advised plaintiff of the problem.

Defendants contended that they worked to resolve the issue with the City of La Habra to finalize the subdivision. Defendants claimed, that while they were attempting to resolve the problem, plaintiff ceased making payments on his mortgage, causing his property to go into foreclosure. Prior to the foreclosure sale, defendants obtained a Final Map which required plaintiff's and plaintiff's lender's signatures of approval. According to the defense, plaintiff refused.

Plaintiff a complaint for damages for violation of the Subdivision Map Act, fraud and breach of contract in 2007. Plaintiff's interest in the property was sold pursuant to a non-judicial foreclosure. Thereafter, plaintiff dismissed his lawsuit in early 2008.

In February 2009, plaintiff re-filed his lawsuit, seeking damages under the Subdivision Map Act, for fraud, and for breach of contract relating to his purchase of the subject real property.

Defendants filed a cross-complaint for breach of contract, regarding outstanding promissory notes.

PLAINTIFF/CROSS-DEFENDANT'S CONTENTIONS:
Plaintiff contended that he purchased real property which was valueless. Plaintiff claimed that he was prevented from refinancing his property due to the fact that he only held a 50 percent interest as tenants in common in one lot containing two homes, and not a 100 percent interest in the property he believed he was purchasing.

DEFENDANTS/CROSS-COMPLAINANTS' CONTENTIONS:
Defendant contended that when he sold the property to plaintiff, he was unaware that the subdivision had not been completed, only first learning of the subdivision issue after the sale to plaintiff.

In addition, plaintiff, when defendants told him of the issue, voluntarily signed a Grant Deed in favor of defendants to allow defendants to complete the sale of the other portion of the unsubdivided lot to the new buyer, with each buyer now having a 50 percent interest in the whole undivided lot containing two new homes.

The second buyer obtained an appraisal for his undivided 50 percent interest in an amount $100,000 more than plaintiff had paid for his portion. Furthermore, the second buyer obtained two purchase money loans from Long Beach Mortgage for that substantially higher amount. As such, plaintiff suffered no damages.

In addition, plaintiff failed to mitigate his damages when he refused to sign the Final Map so that the property could be properly subdivided.

Moreover, in consideration for plaintiff working with defendants to complete the subdivision, defendant provided plaintiff with three loans in the sum of $39,000, which plaintiff never repaid and now claimed he never signed, despite the fact that the documents were notarized.

The SMA's statute of limitations is one year, and all causes of action revolved around that single claim of alleged malfeasance on the part of defendants. The statute of limitations for fraud had also expired due to plaintiff's dismissal of the prior complaint in 2008, and not refiling until 2009, more than three years after plaintiff learned of facts relating to the failure of the subdivision.

Settlement Discussions

At mediation, plaintiff demanded $300,000 plus forgiveness of $39,000 debt plus interest owed to defendant. Defendants offered $30,000 plus forgiveness of debt owed by plaintiff to defendant. According to plaintiff's counsel, settlement offers were premised on payments over time.

Result

Plaintiff accepted settlement offer of $10,000 from Carlos Velasquez (and his two corporate entities) and $10,000 from Saul Velasquez and Caboraca Investments Inc. to resolve the complaint and cross-complaint.

Other Information

According to plaintiff's counsel: The settlement was reached as a matter of practicality. Default judgments were entered against Carlos Velasquez, Carlos Velasquez Enterprises Inc., and Carlos Velasquez & Associates Inc. Defendants asserted that they could not satisfy any judgment rendered and there was no applicable liability insurance. All settlement payments were due within 30 days of the agreement. According to defense counsel: On the first day of trial, the court indicated that it would grant defendants' motion to try the estate's affirmative defense first. The court further indicated that it was inclined to rule in favor of defendants on seven out of the eight causes of action. FILING DATE: Feb. 18, 2009.