Builders to Pay $8.5 Million for Condo Repairs

Russell Powell woke up early one February morning in 1984 to the sight of dozens of his prized hard-cover books floating down the gutter outside his new Laguna Hills home, swept to their ruin in a rainstorm that had flooded his basement.

Powell’s wife was upset; he himself was just plain angry.

That was because Powell and others among the 914 condominium owners at Laguna Village say their ongoing problems with faulty roofs, improper drainage, slipping soil foundations and asbestos exposure could have been prevented easily if not for sloppy design and construction work.

But on Tuesday, the homeowners gained some relief from their frustrations when their condominium association finalized in Superior Court in Santa Ana an $8.5-million settlement with Laguna Village Inc., the main developer, and about 52 subcontractors.

Lead attorneys on both sides said the settlement--to be paid directly to the Laguna Village Owners’ Assn. rather than to any individual homeowners--marks one of the biggest homeowner-developer cases in county history, both in dollars and numbers of litigants.

No Liability Admitted

The many development-industry defendants in the dispute admitted no liability for problems at Laguna Village, saying instead that the pact posed the simplest way of avoiding a long and costly trial.

“This proves nothing,” said Daniel Kreis, president of the now-inactive Laguna Village Inc. “This was a well-planned and carried-out project, and it violated no rules or laws of any kind.”

“We didn’t really have much choice,” Kreis added. “Who wants to spend a year or more of their lives bogged down in a trial like this?”

The pact, hammered out over four days of negotiations under the supervision of Judge Jerrold S. Oliver, avoids the prospect of Superior Court administrators having to spend perhaps $70,000 to revamp his courtroom for a trial that could have lasted 18 months. Additional seating and a costly new sound system would have been needed to accommodate the dozens of lawyers involved in the complex case.

And more important for the homeowners, say owners’ association directors, the settlement will allow them to turn away from “putting out fires” on an emergency basis and start planning for long-term repairs and reconstruction at the complex, at Ridge Route and Santa Vittoria drives in Laguna Hills.

“This gives us a fresh start,” said Pat Gummeson, president of the Laguna Village Owners’ Assn. “It’s a pretty area. It’s a lovely neighborhood, but all the construction problems have made living there a nightmare,” she said.

While no life-threatening accidents were reported, the homeowners’ association had maintained that a spate of structural problems at the complex had forced them to spend thousands of dollars and man-hours over the last decade in repairs.

Among the alleged problems, the homeowners cited improperly designed roofing and drainage systems that caused flooding in the two-story condominium units; inadequate soil foundations that have resulted in the slippage of some homes located on slopes; premature corrosion and electrical malfunctions; and asbestos exposure.

Gummeson said the homeowners’ association, responsible for certain upkeep on the facilities, has had to raise village dues and has still been “drained financially” trying to keep up with repairs in recent years.

“It’s just been very anguishing and upsetting for all of us,” she said.

A private study conducted for the homeowners’ association estimated that it would take more than $50 million to properly fix the structural defects at the site, Gummeson said.

Under the terms of Tuesday’s settlement, the homeowners’ association will receive about half of the $8.5 million up front, with the remainder coming over the next 15 years through an annuity plan.

Attorneys in the case refused to specify publicly the breakdown of the $8.5-million settlement plan among the various defendants.

But David L. Jenkins, a private mediator from San Francisco brought in to help resolve the dispute, said in an interview that Laguna Village Inc. was responsible for roughly half the costs, with the remainder falling to the other defendants who worked on construction, architecture, plumbing and other phases of the project.

Prompted by last-minute concerns by some of the defendants, lawyers for the homeowners’ association also agreed that they will not represent any individual homeowners in future actions they may seek to bring against the developers.

While asserting that they made significant compromises over the total settlement figure, homeowner leaders said they are happy to now be able to put five years of legal haggling behind them.

At the close of a full day of final settlement talks in Oliver’s courtroom, Gummeson let out a loud “whoopee!” as she and other Laguna Village directors headed out of the courthouse to celebrate.

And Powell, a part-time security guard who also develops strategic planning games, added: “It’s going to take a lot of work and a lot of planning on the part of the homeowners, but I think now the problem may finally be solved.”