Confidential
Settlement – $220,000Court
Lake Superior
Attorneys
Plaintiff
Clifford E. Hirsch
(Hirsch Closson APLC)
Defendant
Experts
Plaintiff
Lawrence Robey
(technical)
Paul Seidelman
(technical)
Leo Saunders
(technical)
Defendant
Glenn Forsyth
(technical)
Paul Millar
(technical)
Richard Byerrum
(technical)
Wes Daniels
(technical)
Facts
On November 25, 1990 Defendant sellers sold Plaintiffs 10 acres of land with a 3,150 square foot home; a 2,250 square foot gymnasium; a storage building; and a pole barn. The subject property was listed as a "contractor's home; 3,150 square foot; 3 bedroom; 2 1/2 bath plus den, master bedroom suite, with a loft for an office; and 10 acres in a quiet valley." The listing also described a 2,250 square foot gymnasium which contained a full bathroom with a fire-pole exit for the kids. Plaintiffs paid $265,000; consisting of a $45,000 cash down payment and a $220,000 promissory note in favor the Defendants. Prior to this sale, Defendants assured Plaintiffs that, except for some lighting in the gymnasium, all structures were built to code and properly inspected. Defendants represented that a building permit was not needed for the gym because it was constructed as an "agricultural building." In the seller's disclosure statement, Defendants denied knowledge of "room additions, structural modifications, or other alterations or repairs made with necessary permits, other than the gym and dining room dormer." Defendants also denied knowledge of "room additions, structural modifications or repairs not in compliance with the building codes." The sellers required that a clause barring government inspections be inserted into the sales agreement. After the sale, the deteriorated conditions of the residence became apparent; it shook violently in mild earthquakes; and as a result, the Lake County Building Department was contacted. Their inspector's report noted that construction work was done without permits. The county building department records revealed that an original 1984 permit was issued for a 2-bedroom, one-bath house of approximately 672 square feet of living area; a carport of an additional 672 square feet was also permitted at that time. The actual "as-built" dwelling area consisted of an unpermitted and uninspected carport-converted-to-a-living-room and upstairs-storage-converted-to-living area. An unpermitted loft was built above the master bedroom and attached to the roof. The dwelling area alone contained some 49 separate violations of the Uniform Building Code, occurring mostly in the uninspected portions of the structure. The septic system for the house was inadequate to serve a 3-bedroom, 2-1/2-bath home and was not properly permitted either. The gymnasium was unpermitted and contained a toilet, shower, and sink that were not connected to a septic system; it either emptied into a buried pipe or barrel. On October 6, 1993, the Lake County District Attorney wrote to the State Contractor's License Board and stated: Defendants sold this property to Plaintiffs through a realtor, after representing to the Plaintiffs that the home and other buildings were built to code with the proper permits. When the buildings developed cracks and started to fail this year, the Plaintiffs notified the Lake County Director of Building and Safety, who discovered that the proper permits were not obtained for the construction and numerous code violations (sic). The construction was done by the seller. The building and safety director described it as the worst case he has ever seen. Our office does not have the resources or manpower to investigate this kind of case and prepare it for possible criminal prosecution. (The current status of the criminal investigation is unknown.)
Settlement Discussions
Plaintiffs contend that offers and demands were too numerous to quote here; but that, shortly before trial Defendant's insurer appointed cumis counsel and offered its policy limits of $100,000; and, as part of the settlement, Defendants offered $100,000 out their own funds.
Damages
Plaintiffs claimed that none of the structures were habitable, that all structures required demolition; and that the land was merely worth $60,000 to $70,000
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