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Condo owners settle lawsuit

REAL ESTATE: Developers will pay fair market value for units at Crown Cove, which was hit by a landslide.

September 12, 1998


Developers have agreed to settle a $23 million-plus construction-defect lawsuit by buying out all of the homeowners at the landslide-ravaged Crown Cove condominiums in Laguna Niguel.

Local construction-defect attorneys said the settlement — for nearly $10 million — marks the first time in Orange County history that developers resolved such a claim by buying an entire condominium project. However, the settlement dollar amount is not a record.

The Crown Cove homeowners association alleges the developers negligently created a steep, unstable hillside behind their complex while constructing the separate Niguel Summit housing project. Five Niguel Summit homes fell off a cliff after a March landslide.

Blaming the shifting slope, condo owners have complained for years of cracked walls and other problems. The March landslide destroyed nearly half of Crown Cove and displaced about half its residents.

Crown Cove attorney Thomas E. Miller said Friday that he could not comment beyond a written statement he and the developers issued because of a confidentiality agreement.

The statement said two of the main defendants, Niguel Summit developer Hon Development Co. and homebuilder J.M. Peters, and their insurers have agreed to buy Crown Cove owners' property at fair market value. The condo owners recovered "$9.4 million for construction damage" and "an additional $100,000 for relocation expenses," according to the statement.

Neither Laguna Hills-based Hon nor J.M. Peters Co. would comment on the settlement.

J.M. Peters is now a subsidiary of Newport Beach-based developer Capital Pacific Holdings under different management.

Last week, before the confidentiality agreement, Miller explained what it would take to settle the case: The developers, their insurers and the Niguel Summit engineering firm and grading contractor would have to collectively pay each Crown Cove owner $180,000 to $210,000, depending on the size of the condo. The sums are based on recent appraisals of each unit.

Miller said that if the case didn't settle, he would seek more than $23 million from the developers in court to pay for rebuilding the condominiums, temporary housing for residents and shoring up the unstable hillside.

"My husband and I are thrilled to be out from underneath the stress and to be able to walk away from this and start over again," said Crown Cove homeowner Paige Carratturo, who bought her condo last year.

But not all owners are feeling victorious.

"I don't think anyone will come out a winner in this whole thing — either us, the homeowners up above us (on top of the unstable hill), or the people who will pay us," said Crown Cove resident Donna Brandt.

Condo owner Mike DeStefano, president of the Crown Cove homeowners association board of directors, said the settlement offers residents "some relief" in the wake of the destructive landslide.

"Although the initial shock has worn off, we will never really get over it," he said. "We will certainly never forget it."

About half of Crown Cove's residents left the 41-unit, 18-year-old complex months ago because their units were threatened or destroyed by the shifting hillside. Hon already owns four of the units, which the developer bought last year because the condos were in harm's way, Carratturo said.

Some Crown Cove residents said they won't be able to replace what they've got, or had, at Crown Cove with their share of the settlement. That's because most Orange County condo complexes are larger and have smaller units packed in more densely than at Crown Cove, where 41 units are spread over five acres. Crown Cove condos, which measure up to 2,000 square feet each, are also large by today's standards.

After the March landslide, 21 Crown Cove units were declared uninhabitable by the city of Laguna Niguel. Seventeen were destroyed. The rest have remained occupied.

The statement issued Friday by Miller and the developers explained that a portion of the land beneath Crown Cove will be incorporated into a plan to repair the unstable slope. It also said the settlement gives the Crown Cove homeowners association enough money to pay its debt, expert fees, loans, emergency relocation expenses and other costs stemming from the March landslide.

The condo association, Crown Valley Parkway Homeowners Association, filed a lawsuit in 1994 against Hon, J.M. Peters and several subcontractors.

Lawyers for homeowners allege Niguel Summit was constructed atop the clay and sandstone remnants of an ancient landslide. They contend it's three to five times larger than the March slide.

Moreover, they allege the developers made the hill 15 times steeper than its original slope by adding 275,000 tons of soil.

The settlement lays to rest one of three major lawsuits filed against Hon and J.M. Peters. Attorneys for eight Niguel Summit homeowners and the Niguel Summit homeowners association say their clients continue to negotiate with the developers in hopes of settling those lawsuits, which also allege negligence in construction of the hillside.

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