Facts

Plaintiffs Makonnen Abdo and Meaza Tesfa entered into a contract with defendants Michael Marks and Helen Essien to sell property located on San Pablo Avenue in Oakland as part of a 1031 Exchange Escrow. Marks and Essien agreed to pay $1.4 million when the exchange escrow was opened in November 2003, they also agreed to take a carry-back note and deed of trust for $806,796. Abdo and Tesfa retained NCS Exchange Professionals Inc. for assistance. NCS agreed to take the note and deed of trust, in its name, until the exchange was complete. Before closing, the contract terms were re-negotiated, whereby Abdo and Tesfa agreed to advance the payment of $30,000 closing costs. Escrow closed on Nov. 19. At closing, the property had a mortgage from CMR Mortgage of $400,000, as well as NCS's $806,789 seller-carry back second mortgage.

Abdo and Tesfa filed suit against Marks, Essien and defendant brokers Gary Flores and Ritchie & Ritchie, alleging negligence, breach of contract and misrepresentation. NCS filed cross-complaints against Abdo and Tesfa, as well as Alliance Title, the escrow agent. Marks and Essien cross-claimed against Abdo and Tesfa, as well as the brokers.

PLAINTIFFS' CONTENTIONS:
Abdo and Tesfa contended that one month after the close of escrow, NCS illegally subordinated the carry-back deed of trust to a new deed of $650,000 in favor of HRF Financial, for a refinancing loan for the CMR mortgage. Abdo and Tesfa contended that they relied on the brokers' misrepresentations that Marks and Essien were established developers with strong financial assets when agreeing to renegotiate the contract terms. Abdo and Tesfa further claimed that Marks and Essien were not developers, with property assets heading for foreclosure due to other loans.

DEFENDANTS' CONTENTIONS:
NCS contended that Alliance Title told NCS that Abdo and Tesfa had requested subordination.

Marks and Essien alleged that pre-sale fire damage to the property was discovered after purchase.

Damages

Abdo and Tesfa sought damages for $648,000.

Result

The court awarded Abdo and Tesfa $250,000 in compensatory damages, as well as $164,400 in attorney fees, $125,000 in interest, and $12,864 in costs against NCS. The court also granted HRF Mortgage and Howard Leight and Associates $567,000 in compensatory damages against NCS.

Other Information

FILING DATE: June 25, 2004.