Lawsuit Ron Lau filed against the city and former developers by SantaCruzSentinel

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									 1 William A. Markham, State Bar No. 132970
   LAW OFFICES OF WILLIAM MARKHAM, P.C.
 2 550 West C Street, Suite 2040
   San Diego, CA 92101
 3 Tel:        (619) 221-4400
   Fax:        (619) 224-3974
 4 E-mail:     wm@markhamlawfirm.com
 5   Attorneys for Ronald G. Lau, Plaintiff.
 6                               UNITED STATES DISTRICT COURT
 7                              NORTHERN DISTRICT OF CALIFORNIA
 8                                      SAN JOSE DIVISION
 9   RONALD G. LAU,                               )       Case No.
                                                  )
10                 Plaintiff,                     )       COMPLAINT FOR:
                                                  )
11          Vs.                                   )       1.     Deprivation of Civil Rights Under
                                                  )              42 U.S.C. §1983
12   CEIL CIRILLO; ECONOMIC                       )
     DEVELOPMENT DEPARTMENT                       )       2.     Deprivation of Civil Rights in
13   OF THE CITY OF SANTA CRUZ;                   )              Violation of California
     CITY OF SANTA CRUZ; BOLTON                   )              Constitution
14   HILL COMPANY, INC.; PACIFIC                  )
     GARDEN PLACE, LLC; SANTA                     )       3.     Relief Under California Tort
15   CRUZ COUNTY BANK;                            )              Claims Act (California
     NORMAN SCHWARTZ, and                         )              Government Code §§810 et seq.)
16   WILLIAM BROOKS,                              )
                                                  )       4.     Specific Performance of
17                 Defendants.                    )              Settlement Agreement under
                                                  )              California Code of Civil
18                                                               Procedure §664.6.
19                                                        5.     Specific Performance of Equitable
                                                                 Servitudes
20
                                                          6.     Breach of Contract
21
                                                          7.     Intentional Misrepresentation
22
                                                          8.     Negligent Misrepresentation
23
                                                          9.     Declaratory Relief
24
                                                          PRAYER FOR RELIEF
25
                                                          DEMAND OF JURY TRIAL
26
27
28


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.
 1                           I. CONCISE STATEMENT OF THE CASE
 2          Acting under color of law and in accordance with an official practice and policy, a
 3   government agency abused its power of eminent domain by condemning and taking title to
 4   Plaintiff’s property (a substantial parcel of real property in Santa Cruz, California) in order
 5   to deliver it to favored private property developers, who wished to hold the property while
 6   considering whether to develop it. The taking was not done for a necessary public use, but
 7   rather to confer a private benefit on favored local property developers. The taking was
 8   therefore void as a matter of law. The government agency and the favored private developers
 9   made misrepresentations and suppressed material facts to mislead Plaintiff about these
10   matters, so that Plaintiff declined to challenge the lawfulness of the taking during the original
11   condemnation proceedings.
12          After condemning Plaintiff’s property, and while the condemnation proceeding was
13   pending, the government agency used an aggressive litigation posture and contractual
14   stratagems in order to force Plaintiff to negotiate the sale of his property directly to the
15   favored local property developers. During these negotiations, and in the ensuing agreement,
16   the government agency wrongly disclaimed its inviolable obligation to pay just compensation
17   for the taking. It instead obliged its condemnee to agree to an arrangement by which the new
18   private owners would pay specified just compensation over many years.
19          After deciding not to develop the property, the new private developers balked at
20   paying the outstanding balance, which was approximately one-fourth the overall purchase
21   price or just compensation for the taking.
22          When forcing Plaintiff to assent to this unconstitutional payment arrangement,
23   Defendants privately understood that Plaintiff would not have any effectual recourse to
24   obtain full payment if the private developers decided not to develop the property after
25   holding it idly while speculating about its future commercial prospects.
26          This is precisely what occurred: The private developers walked away from the
27   property that they had acquired only by the government agency’s unlawful exercise of its
28   power of eminent domain. They failed to pay the required just compensation to Plaintiff and


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                          -1-
 1   ordered their affairs so that Plaintiff cannot obtain meaningful redress from them, save by the
 2   present case. The government agency has disclaimed any obligation to pay the outstanding
 3   just compensation that is still owed. The private developers’ lender, which has acquired the
 4   property by foreclosure, likewise disclaims any obligation to pay the outstanding balance.
 5          Plaintiff was sixty-nine years old when he lost his property in this manner and is
 6   seventy-eight now. He has suffered two independent wrongs: He lost his property by a
 7   wrongful act of eminent domain, and in addition he did not receive just compensation for the
 8   lawless taking. Defendants practiced fraud upon him and abused government procedures
 9   under color of law in order to commit these legal wrongs against him.
10          Plaintiff brings suit in his own behalf and also on behalf of his trust, which he has
11   solely controlled at all times. Plaintiff also asserts claims on behalf of his son, who was a
12   leaseholder at the property, and who has assigned his claims to Plaintiff. The property
13   developers are two individuals (William Brooks and Norman Schwartz) as well as two
14   companies that they used to commit the above legal wrongs (Bolton Hill and Pacific Place).
15   Their construction lender is Santa Cruz County Bank. The government agency was the
16   Redevelopment Agency of the City of Santa Cruz, which is now reorganized and operates
17   under the name of the Economic Development Department of the City of Santa Cruz. The
18   City of Santa Cruz is liable in this matter to the extent that the Economic Development
19   Department disclaims or is unable to assume legal responsibility for the Redevelopment
20   Agency’s legal wrongs, and it is further liable because the Redevelopment Agency of the
21   City of Santa Cruz was its agency.
22          Plaintiff seeks relief in this Court for the deprivation of his own and his son’s civil
23   rights in violation of 42 U.S.C. §1983, the deprivation of these civil rights in violation of the
24   laws of California, and related legal wrongs. Plaintiff and his assignor (his son) have suffered
25   substantial, demonstrable losses because of Defendants’ legal wrongs against them, which
26   include Plaintiff’s failure to receive approximately one-fourth of the just compensation owed
27   to him for a taking of his property by an act of eminent domain.
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                            -2-
 1                                         II. THE PARTIES
 2          1.     Plaintiff, Ronald G. Lau (“Lau”), is an individual who maintains his domicile
 3   in Santa Clara County, California. Lau is also the trustee of the Ronald G. Lau Trust (the
 4   “Lau Trust”). Moreover, Lau is the assignee of such claims as his son, Eric Lau (“E. Lau”),
 5   might assert in this matter against Defendants. Lau asserts the below claims in his own
 6   capacity, in his capacity as trustee of the Lau Trust, and in his capacity as the assignee of the
 7   above claims of E. Lau.
 8          2.     Defendant Ceil Cirillo (“Cirillo”) is an individual who on information and
 9   belief maintains or formerly maintained her domicile in Santa Cruz, California. She is
10   subject to the long-arm jurisdiction of the California courts. At all times relevant to this
11   complaint, Cirillo was an officer of the Redevelopment Agency of the City of Santa Cruz,
12   and she committed the acts and omissions described below in the course of this employment
13   and while performing her official duties.
14          3.     Defendant Economic Development Agency of the City of Santa Cruz (the
15   “Agency”) is an agency of City of Santa Cruz, which in turn is a municipality of the State of
16   California. The Agency is the legal successor of the Redevelopment Agency of the City of
17   Santa Cruz (the “Redevelopment Agency”), which was an agency of City of Santa Cruz.
18          4.     Defendant City of Santa Cruz is a municipality of the State of California.
19          5.     Defendant Bolton Hill Company, Inc. (“Bolton Hill”) is a corporation formed
20   under California law that maintains its business headquarters in Santa Cruz County,
21   California.
22          6.     Defendant Pacific Garden Place, LLC (“Pacific Place”) is a limited liability
23   company formed under California law that maintains its business headquarters in Santa Cruz
24   County, California.
25          7.     Defendant Santa Cruz County Bank (the “Bank”) is a chartered bank formed
26   under California and federal law that maintains its business headquarters in Santa Cruz
27   County, California.
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                          -3-
 1           8.    Defendant Norman Schwartz (“Schwartz”) is an individual who maintains his
 2   domicile and conducts business transactions in Santa Cruz County, California.
 3           9.    Defendant William Brooks (“Brooks”) is an individual who maintains his
 4   domicile and conducts business transactions in Santa Cruz County, California.
 5                               III. JURISDICTION AND VENUE
 6           10.    A. Subject-Matter Jurisdiction. Lau’s principal, primary cause of action is
 7   his first cause of action, which he asserts under 42 U.S.C. §1983 against a (former) employee
 8   of a public agency and two public agencies of the State of California. This Court therefore
 9   has original subject-matter jurisdiction over Lau’s first cause of action under 28 U.S.C. §
10   1331.
11           11.   Lau’s remaining causes of action arise under the common and statutory laws of
12   California. This Court has supplemental subject-matter jurisdiction over the remaining
13   causes of action under 28 U.S.C. §1367(a): These causes of action arise from the same
14   transactions, occurrences, and “nucleus of operative fact” that give rise to Lau’s first and
15   primary cause of action, over which this Court has original jurisdiction under 28 U.S.C. §
16   1331, as pled above. This Court therefore has supplemental subject-matter jurisdiction over
17   Lau’s remaining claims, nor should the supplemental jurisdiction be denied under 28 U.S.C.
18   § 1367(c).
19           12.   Lastly, this Court can properly exercise its pendant subject-matter jurisdiction
20   over each of Lau’s state law claims because these claims arise from the same transactions,
21   occurrences, and “common nucleus of operative fact” that give rise to his primary cause of
22   action, over which this Court has original jurisdiction 28 U.S.C. § 1331, as pled above. See
23   United Mine Workers of America v. Gibbs (1966) 383 U.S. 695, 725, 86 S.Ct. 1130, 1138
24   (“Pendent jurisdiction, in the sense of judicial power, exists whenever there is a [federal
25   claim] ..., and the relationship between that claim and the state claim permits the conclusion
26   that the entire action before the court comprises but one constitutional case. The federal
27   claim must have substance sufficient to confer subject matter jurisdiction on the court. The
28   state and federal claims must derive from a common nucleus of operative fact. But if,


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                          -4-
 1   considered without regard to their federal or state character, a plaintiff's claims are such that
 2   he would ordinarily be expected to try them all in one judicial proceeding, then, assuming
 3   substantiality of the federal issues, there is power in federal courts to hear the whole.”)
 4          13.     B. Personal Jurisdiction. This Court has personal jurisdiction over each
 5   Defendant. Each Defendant conducts business and engages in commerce in this judicial
 6   district, and therefore the Court can properly exercise personal jurisdiction over each
 7   Defendant under California’s long-arm statute and in accordance with the constitutional
 8   doctrine of a defendant’s “minimum contacts” with the forum state.
 9          14.    C. Venue. This Court is the proper venue for the present action because of the
10   following matters: (1) Every Defendant but Cirillo is domiciled in this judicial district and/or
11   regularly conducts business in this judicial district; (2) two of the named Defendants are
12   public agencies of the State of California that are located in this judicial district; (3) the
13   challenged conduct occurred in Santa Cruz County, California, which lies in this judicial
14   district; and (4) the transactions and occurrences at issue in this case concern a real property
15   located in Santa Cruz County, California, which lies in this judicial district.
16          15.    The San Jose Division of this Court is the proper intra-district venue for this
17   case because (1) the challenged conduct occurred in Santa Cruz County, California, which
18   lies within the San Jose Division’s designated territory; and (2) the transactions and
19   occurrences at issue in this case concern a real property located in Santa Cruz County,
20   California, which lies within the San Jose Division’s designated territory.
21                                  IV. COMMON ALLEGATIONS
22          16.    The Lau Trust used to be the owner of title in fee simple to a parcel of real
23   property located at 1547 Pacific Avenue, Santa Cruz, California 95060 (the “Property”).
24          17.    During the height of the great real estate bubble of the early 2000s, when
25   property values were soaring across the country, a property developer in Santa Cruz County,
26   Defendant Brooks, concluded that the Property was under-developed, and that he could
27   further develop it in order to generate outsize profits. In 2004 and early 2005, he and others
28   acting on his behalf made various overtures and entreaties to Lau, urging and coaxing him to


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                            -5-
 1   sell the Property to a company that Brooks indicated he would establish for the purpose. Lau,
 2   who was already elderly, and who had toiled most of his working life in order to purchase
 3   the Property, did not wish to sell it to anyone, least of all to Brooks, who was an avid
 4   developer of properties, and whose vision of property development conflicted with Lau’s
 5   principles of conservation and historic tradition. Lau merely wanted to continue owning the
 6   Property. It was his Property. His trust, the Lau Trust, which he solely controlled, held its
 7   title in fee simple. It was his right as a property owner to decline to pursue negotiations with
 8   Brooks over the sale of the Property.
 9          18.    Brooks was (and remains) a very well-connected property developer and
10   businessman in the close-knit community of Santa Cruz, California. Brooks managed
11   somehow to persuade the Redevelopment Agency to find that the Property was under-
12   developed, and that its under-development constituted “urban blight” and a public nuisance.
13          19.    The Redevelopment Agency indicated to Lau that the Property was under-
14   developed and constituted “urban blight,” and it insisted that Lau sell the Property to a
15   company directly or indirectly controlled by Brooks, so that this company could further
16   develop the Property in a manner that the Redevelopment Agency deemed to be preferable to
17   Lau’s use of the Property.
18          20.    The Redevelopment Agency never issued or served a notice of abatement of
19   nuisance on Lau or to any other person in order to complain or give notice that the Property,
20   as used, constituted a public nuisance or gave rise to urban blight that required remediation
21   on pain of sanctions.
22          21.    If the Redevelopment Agency had done so, Lau would have immediately
23   abated any such supposed nuisance or urban blight. Lau was a responsible owner who
24   always respected his legal obligations. He would have remediated any nuisance or blight, had
25   he received any such notice from the Redevelopment Agency.
26          22.    Rather than formally complain to Lau that the Property constituted a nuisance
27   or urban blight, the Redevelopment Agency exerted increasing pressure on him in early 2005
28   to agree to sell the Property to a company indirectly or directly controlled by Brooks, so that


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                           -6-
 1   Brooks could develop the Property in a manner that the Redevelopment Agency said it
 2   deemed to be preferable to Lau’s existing use of the Property. Lau, who wished to keep his
 3   own Property, rejected the Redevelopment Agency’s increasingly aggressive demands that he
 4   agree to sell the Property to either Brooks or a company controlled by Brooks.
 5          23.    In March, 2005, the Redevelopment Agency made a statutory offer to purchase
 6   the Property from Lau, offering to pay him $1.6 million for it. Convinced that the Property
 7   was then worth at least $2.5 million, if not substantially more in a rising market, Lau
 8   declined the offer. More to the point, Lau did not wish to sell the Property to the
 9   Redevelopment Agency or Brooks at any price.
10          24.    On June 7, 2005, the Redevelopment Agency issued a Resolution of Necessity,
11   by which it formally found that (1) the Property, as used, constituted “urban blight”; and (2)
12   the necessary public welfare of the community of Santa Cruz required that the Property be
13   condemned, taken from Lau, included with other parcels of real estate already owned by the
14   City of Santa Cruz, and sold to a private developer that would thereupon develop the
15   integrated lots in accordance with a redevelopment plan approved by the Redevelopment
16   Agency.
17          25.    As worded, the Resolution of Necessity was overly vague and failed to set
18   forth adequate grounds for an act of eminent domain. Lau would have challenged its legality
19   had Defendants not defrauded him into assenting to the below-described Settlement
20   Agreement. A true and correct copy of the Resolution of Necessity is appended to this
21   complaint as Exhibit 1 and incorporated by reference.
22          26.    After receiving the Resolution of Necessity, Lau made the following proposal
23   to the Redevelopment Agency: Lau, working with developers of his own choosing, would
24   develop the Property in exactly the same manner that the Redevelopment Agency deemed
25   necessary to the welfare of the community of Santa Cruz, California. The Redevelopment
26   Agency declined this offer, which Lau made and then repeated on several occasions in effort
27   to save his property from condemnation and taking.
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                         -7-
 1          27.    On September 29, 2005, the Redevelopment Agency exercised its power of
 2   eminent domain in order to condemn and take the Property from Lau: Specifically, it filed a
 3   civil action in the Superior Court of California, Santa Cruz County in order to obtain title to
 4   the Property in fee simple by an act of eminent domain exercised in accordance with
 5   California Code of Civil Procedure §§1240 et seq. (the “Condemnation Action”). True and
 6   correct copies of the Redevelopment Agency’s complaint and summons are appended to this
 7   complaint as Exhibit 2 and incorporated by reference.
 8          28.    After filing the Condemnation Action, the Redevelopment Agency indicated by
 9   its statements and approach to the litigation that it intended to litigate the case stubbornly and
10   aggressively and would not willingly agree to pay any price significantly higher than its
11   absurdly low statutory offer. Its message, tacit and express, was that Lau must brace himself
12   for a protracted, difficult litigation if he wished to obtain a significantly higher price from the
13   Redevelopment Agency (i.e., a price that actually reflected the Property’s likely fair-market
14   value according to its best and highest use at the time of the condemnation).
15          29.    At the time, Lau was sixty-nine years old and wished merely to cherish his
16   retirement while he continued to enjoy reasonably good health. He had little appetite for a
17   difficult litigation against a determined adversary that seemed intent on employing aggressive
18   litigation tactics and unreasonable valuations to avoid paying fair value for his Trust’s
19   Property, which moreover he did not wish to sell at any price.
20          30.    At the same time, the Redevelopment Agency encouraged, exhorted, and subtly
21   pressured Lau and E. Lau to enter into direct negotiations with its proposed transferee,
22   Bolton Hill, which was owned and managed by Schwartz, and whose own client in this
23   matter was Brooks: The plan was to have Bolton Hill acquire title to the Property by the act
24   of eminent domain, after which Bolton Hill would transfer title to a company that Brooks
25   would form for the purpose of taking title. Lau is uncertain why Brooks and Schwartz
26   preferred to have Bolton Hill take title and then transfer it to a company controlled by
27   Brooks, but he understands that they chose to proceed in this manner.
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                           -8-
 1          31.    The Redevelopment Agency’s attorneys were respectful and professional in
 2   tone and manner, but their tacit and subtle message to Lau was clear: “You cannot match our
 3   resources. We will litigate the price of the Property assiduously. In the end you may receive
 4   little more than our statutory offer, or perhaps no more at all. We will do you no favors, offer
 5   no guidance, and treat you as our absolute adversary during this lengthy proceeding. You can
 6   expect only a belated, lowly payment late in your retirement and only after enduring a
 7   thankless, marathon litigation. But perhaps Bolton Hill will agree to pay more to you if you
 8   will directly negotiate a sale to it right now. You should negotiate directly with them.”
 9          32.    Under these circumstances, Lau agreed to enter into direct negotiations with
10   Bolton Hill, which was represented by Schwartz at all times during the negotiations. Lau
11   never would have entered into these negotiations, much less agreed to a sale, if the
12   Redevelopment Agency had not condemned his Trust’s Property by an act of eminent
13   domain.
14          33.    Lau felt too old, tired, weary, and otherwise unprepared to attempt to negotiate
15   the matter on his own. He therefore asked his son, E. Lau, to intercede on his behalf and to
16   attempt the negotiation. With the assistance of counsel, E. Lau did so.
17          34.    The negotiations were conducted mostly in Santa Cruz, California during the
18   fall of 2005 by means of meetings, e-mail exchanges, and telephone calls. For all practical
19   purposes, there were two “sides” in these negotiations: (1) on the one hand, Cirillo, the
20   Redevelopment Agency, Schwartz, Brooks, Bolton Hill, and Pacific Place (identified as
21   Bolton’s “successor”); and (2) on the other hand, E. Lau and Lau. The negotiations were
22   conducted by E. Lau on the one side and Schwartz and Cirillo on the other. While these
23   negotiations took place, Schwartz conferred with and reported to Brooks, and they acted in
24   concert for the purpose of acquiring title to the Property by means of these negotiations.
25   Cirillo, the Redevelopment Agency, Schwartz, Brooks, Bolton Hill, and Pacific Place made
26   statements to E. Lau on the specific understanding that he would relate them to Lau and was
27   acting on Lau’s behalf as well as his own.
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                         -9-
 1          35.    At all times it was Lau’s strong preference that the Lau Trust remain the owner
 2   of the Property. The Lau Trust held the property in fee simple, and Lau resolutely did not
 3   wish to sell it at any price to the Redevelopment Agency, Brooks or any company controlled
 4   by Brooks. He was coerced by the condemnation proceeding and the Redevelopment
 5   Agency’s express and tacit threats into participating in the forced settlement negotiations.
 6   His only other alternative was to endure a difficult litigation, which would likely last at least
 7   one year, if not much longer, and in which he would be obliged to pay expensive valuation
 8   specialists who could credibly oppose the Redevelopment Agency’s lowly valuation of the
 9   Property. Given his age and his strong distaste for the entire proceeding, Lau reasonably
10   concluded that he must at least attempt the settlement process that the Redevelopment
11   Agency emphatically urged and pressured him to undertake.
12          36.    Under these circumstances, Schwartz and Cirillo negotiated with E. Lau over
13   the terms and conditions of Lau’s sale of the Property to Bolton Hill or its “successor.” To
14   this end, these three individuals conferred by telephone and e-mail and also met in person in
15   Santa Cruz, California on repeated occasions in the autumn of 2005. During these
16   negotiations, Cirillo represented the Redevelopment Agency and Schwartz represented
17   Bolton Hill and its successor, Pacific Place, which was a company that Brooks formed for
18   the purpose of taking title to the Property. Schwartz reported to Brooks and conducted these
19   negotiations for Brooks’ benefit and with his full understanding of all material developments
20   of the negotiations. E. Lau conducted the negotiations on his own behalf in his capacity as a
21   leaseholder at the Property who operated a valuable business on it and also on behalf of his
22   father, Lau, and his father’s trust, the Lau Trust.
23          37.    During these negotiations, Schwartz and Cirillo made various representations
24   to E. Lau that proved to be false. They also concealed from him material facts that under the
25   circumstances they owed a duty to disclose, so as to avoid misleading him and Lau about
26   their intentions or ability to purchase the Property and develop it after purchasing it.
27          38.    Cirillo and Schwartz, acting on behalf of the Redevelopment Agency, Bolton
28   Hill, Pacific Place, and Brooks, made the following false misrepresentations to E. Lau and


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                          -10-
 1   Lau during these negotiations:
 2          (1)    That the Redevelopment Agency and Bolton Hill both had sufficient resources
 3   and “cash” in order to fulfill their eventual obligations to Lau, once the parties agreed on the
 4   specific terms of Lau’s sale of the Property. This representation proved to be false, and the
 5   Redevelopment Agency’s and Bolton Hill’s representatives knew that it was false when
 6   making it to E. Lau and Lau and/or lacked a reasonable basis for making the representation to
 7   E. Lau and Lau.
 8          (2)    That the Redevelopment Agency and Bolton Hill had specific, confirmed plans
 9   that would allow Bolton Hill or its successor to develop the Property in the manner that the
10   Redevelopment Agency deemed to be a necessary benefit that justified the taking of the
11   Property. This representation proved to be false, and the Redevelopment Agency’s and
12   Bolton Hill’s representatives knew that it was false when making it to E. Lau and Lau and/or
13   lacked a reasonable basis for making the representation to E. Lau and Lau.
14          (3)    That Bolton Hill or its successor would promptly begin the development
15   shortly after acquiring title to the Property from Lau. This representation proved to be false,
16   and the Redevelopment Agency’s and Bolton Hill’s representatives knew that it was false
17   when making it to E. Lau and Lau and/or lacked a reasonable basis for making the
18   representation to E. Lau and Lau.
19          (4)    That Bolton Hill would pay an initial part of the purchase price to Lau upon
20   the transfer of title and would pay the remaining just compensation in the form of delivering
21   title to Lau to two upscale condominium units that Bolton Hill or its successor would build at
22   the Property, but if for any reason Bolton Hill or its successor failed to provide the specified
23   units in timely manner, they would pay $700,000.00 to Lau in liquidated damages on a date
24   certain – an obligation that the Redevelopment Agency and Bolton Hill expressly represented
25   Bolton Hill had sufficient cash to fulfill. This representation proved to be false, and the
26   Redevelopment Agency’s and Bolton Hill’s representatives knew that it was false when
27   making it to E. Lau and Lau and/or lacked a reasonable basis for making the representation to
28   E. Lau and Lau.


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                         -11-
 1          39.      Moreover, Cirillo and Schwartz, acting on behalf of the Redevelopment
 2   Agency, Bolton Hill, Pacific Place, and Brooks, concealed the following material
 3   circumstances from E. Lau and Lau in order to mislead them about the contemplated sale of
 4   the Property:
 5          (1)      In fact, Bolton Hill and its successor lacked sufficient funding to develop the
 6   Property in the manner contemplated by the Redevelopment Agency’s redevelopment plan,
 7   and neither had any confirmed funding arrangement to ensure that one or the other could
 8   timely obtain the necessary funding; nor did the Redevelopment Agency or Bolton Hill have
 9   any reasonable basis for expressly representing to Lau that both of them had sufficient
10   “cash” to honor their eventual obligations to him in exchange for acquiring title to the
11   Property.
12          (2)      In fact, neither Bolton Hill nor any successor entity had obtained approved
13   maps and plans to develop the Property in the manner contemplated by the Redevelopment
14   Agency’s redevelopment plan, and neither had many any arrangement to ensure that
15   approved plans and maps would be timely obtained so as to authorize the contemplated
16   development.
17          (3)      In fact, neither Bolton Hill nor any successor entity had reserved or set aside
18   funds or otherwise made any provision to pay the specified liquidated damages, and neither
19   Bolton Hill nor any successor entity had sufficient resources to pay any part of these
20   liquidated damages, nor was there any arrangement in place to ensure that Bolton Hill or its
21   successor would make such a provision or otherwise would have sufficient resources to pay
22   any part of the liquidated damages if these damages became due and owing.
23          40.      Rather than disclose these material facts, Cirillo and Schwartz, acting on behalf
24   of the Redevelopment Agency, Bolton Hill, Pacific Place, and Brooks, made the contrary
25   representations and otherwise encouraged E. Lau and Lau to form the contrary inferences
26   and conclusions about these very matters, even though they all understood the above matters
27   and specifically understood the following additional matter: Brooks had formed or would
28   forthwith form a second company (Pacific Place), which would either directly receive title


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                         -12-
 1   from Lau if Bolton Hill so instructed, or would receive it from Bolton Hill, and thereafter
 2   Brooks and Pacific Place would idly hold the Property while evaluating fast-evolving market
 3   conditions in order to decide whether they wished to develop the Property as planned. If they
 4   decided not to develop the Property, they would allow Pacific Place’s construction lender,
 5   the Bank, to foreclose on its construction loan and take title to the Property by the
 6   foreclosure. If Pacific Place lost title in this manner, it would then wind down its affairs and
 7   dissolve itself without ever paying any part of the liquidated damages to Lau, and Bolton Hill
 8   would likewise lack any assets in order to pay any part of these liquidated damages or any
 9   other liability to Lau. The Redevelopment Agency in the meantime had expressly disclaimed
10   any obligation to provide the two units or pay the liquidated damages, so that if Pacific Place
11   failed to pay them, Lau would not receive the full purchase price stated in the Settlement
12   Agreement, unless he could enforce the Binding Covenants against the foreclosing lender or
13   other holder of title in due course. Moreover, Brooks has since disclosed that the Bank
14   advised him that the Binding Covenants were unenforceable.
15          41.    After extensive negotiations over these points, E. Lau and Schwartz reached an
16   agreement (the “Settlement Agreement”), which was memorialized and served to resolve the
17   Redevelopment Agency’s Condemnation Action on the below terms and conditions. A true
18   and correct copy of the Settlement Agreement is appended to this complaint as Exhibit 3 and
19   incorporated by reference.
20          42.    As a material and necessary inducement to the Settlement Agreement, the
21   Redevelopment Agency and Bolton Hill each made the following formal representations in
22   the Settlement Agreement itself to Lau, Lau’s Trust, and E. Lau:
23
                   The [Redevelopment] Agency and Bolton Hill represent that
24                 they will have the cash available and the authority to complete
                   all of their obligations under this Agreement as specified
25                 above. Bolton Hill reaffirms the representations that it has
                   made herein with respect to its construction of the Project and
26                 the Qualifying Units.
27   See id. at §21.
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                         -13-
 1          43.    The essential terms and conditions of this coerced Settlement Agreement were
 2   as follows:
 3          (1)    In exchange for the valuable consideration given to them under the Settlement
 4   Agreement, and in reliance on the above express representation, Lau and E. Lau would waive
 5   and release their right to challenge the lawfulness of the Redevelopment Agency’s
 6   condemnation and contemplated taking of the Property. See id. at §3.
 7          (2)    Lau would cause the Lau Trust to transfer title in fee simple directly to Bolton
 8   Hill or its successor rather than to the condemnor, which was the Redevelopment Agency.
 9   Lau would do so by depositing the title into an escrow account in accordance with
10   corresponding escrow instructions. See Settlement Agreement at §§6, 8-9.
11          (3)    Bolton Hill or its successor would make an initial payment of $1.925 million
12   towards its purchase of the title. It would do so by depositing this sum into an escrow
13   account in accordance with corresponding escrow instructions. This sum would be paid to
14   specified payees as set forth in the Settlement Agreement. Most of the sum would be paid
15   directly to Lau, but certain payments would be made directly to certain creditors of Lau in
16   order to retire debt owed by Lau. See id. at §§5a, 8-9.
17          (4)    Bolton Hill or its “successor” would thereafter proceed with the contemplated
18   development of the Property, which was the supposed basis for the condemnation
19   proceeding. When so doing, Bolton Hill or its successor would build and deliver to R. Lau
20   two condominium units in the new development within seven years of the signing date
21   (effective date) of the Settlement Agreement, failing which it would pay to him liquidated
22   damages of $700,000.00 and do so no later than seven years after the effective date of the
23   Settlement Agreement. See id. at §5b.
24          (5)    The purchase price for title to the Property, then, was an immediate cash
25   payment of $1.925 million, followed by the delivery of two specified condominium units or,
26   failing this, the payment of an additional $700,000.00 in liquidated damages. The initial cash
27   payment was due upon the transfer of title, and the remainder was due no later than seven
28   years after the effective date of the Settlement Agreement (October 25, 2005), or no later


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                        -14-
 1   than October 25, 2012. See id. at §§5a, 5b.
 2          (6)    The total purchase price (the immediate cash payment, plus delivery of two
 3   units or payment of liquidated damages) was deemed the amount paid to Lau as just
 4   compensation for the taking of the Property by an act of eminent domain. See id. at §5.
 5          (7)    Bolton Hill’s or its successor’s obligation to deliver the two condominium
 6   units or pay liquidated damages to Lau would be deemed “covenants that run with the land,
 7   covenants in gross, equitable servitudes, conditions that encumber title, and/or restrictions of
 8   title” (collectively, the “Binding Covenants”). The parties would record the Binding
 9   Covenants, so as to ensure that they would burden title to the Property until the units were
10   delivered or the liquidated damages paid to Lau. See id. at §§5b(13), 8. True and correct
11   copies of the recorded Binding Covenants are appended to this complaint as Exhibit 4 and
12   incorporated by reference.
13          44.    Lau and E. Lau were specifically and purposefully induced to assent to the
14   Settlement Agreement by the above positive misrepresentations and concealment of material
15   facts. Had they known the truth of these matters at the time, they would not have waived or
16   released their prerogative to challenge the lawfulness of the taking.
17          45.    The Settlement Agreement specified that the consideration given to Lau and E.
18   Lau, each of whom claimed an interest in the Property, was made in lieu of the just
19   compensation that the Redevelopment Agency otherwise would have been obliged to pay to
20   them in accordance with California Code of Civil Procedure §§1263.010 et seq. See
21   Settlement Agreement at §5.
22          46.    In the Settlement Agreement, the Redevelopment Agency unlawfully
23   disclaimed any legal obligation or responsibility for providing the two units or liquidated
24   damages, even though these items were part of the just compensation given in exchange for
25   the Property that the Redevelopment Agency had condemned by its power of eminent
26   domain. See id. at §5b(1-12).
27          47.    Rather than assume its constitutional duty, the Redevelopment Agency insisted
28   that the Settlement Agreement include a de facto disclaimer of its obligation under the


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                         -15-
 1   California and United States Constitution to pay “just compensation” for any property that it
 2   might take by an exercise of its power of eminent domain. It guaranteed only the initial
 3   payment of $1.925 million, but disclaimed any obligation to pay any part of the remaining
 4   price, which was the delivery of two condominium units or, failing this, the payment of
 5   $700,000.00 in liquidated damages no later than seven years from the effective date of the
 6   Settlement Agreement (i.e., October 25, 2012).
 7          48.    The Settlement Agreement thus provided that a private party, Bolton Hill or its
 8   successor, would alone assume responsibility for providing the remaining just compensation
 9   owed for the condemned Property.
10          49.    The Settlement Agreement also included a very broad provision for force
11   majeure, but it was premised on the following express understanding: The Redevelopment
12   Agency had condemned the Property precisely and only so that its favored private transferee,
13   Bolton Hill or its successor, would develop the Property in accordance with a redevelopment
14   plan already approved by the Redevelopment Agency.
15          50.    To the extent that the Redevelopment Agency, Brooks, Schwartz, Bolton Hill,
16   and Park Place intended to use the force majeure provision to allow them to acquire the
17   Property for private, speculative purposes, the arrangement constituted an unlawful taking
18   that was void ab initio.
19          51.    It further appears that the Redevelopment Agency, Schwartz, Brooks, Bolton
20   Hill, and Pacific Place privately understood when entering into the Settlement Agreement
21   that the Binding Covenants could not be enforced against a foreclosing lender or other
22   successor holder of title, so that Lau would not have meaningful recourse against a
23   foreclosing lender or other holder of title in due course; yet the Binding Covenants were a
24   material and necessary inducement to Lau, without which he never would have assented to
25   the Settlement Agreement. [Lau asserts that the Binding Covenants are enforceable and seeks
26   their specific performance against the Bank, but Defendants’ apparent attempt to misuse
27   them to deceive Lau further confirms their fraudulent purpose and intent, which they
28   otherwise accomplished by the other acts and omissions described in this complaint. If


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                      -16-
 1   moreover the Binding Covenants prove to be unenforceable, these Defendants are
 2   responsible to Lau for the ensuing harm because they defrauded him into assenting to the
 3   Settlement Agreement. The Bank apparently intends to challenge the enforceability of the
 4   Binding Covenants.]
 5          52.    More generally, the Redevelopment Agency cannot properly discharge its
 6   obligation to pay just compensation under the California Constitution and the United States
 7   Constitution by cajoling and pressuring its elderly condemnee to enter into a Settlement
 8   Agreement that it privately understood included payment provisions that were unenforceable
 9   and therefore meaningless and that at a minimum will prove problematic to enforce.
10          53.    By the above conduct, the Redevelopment Agency exercised its power of
11   eminent domain to condemn the Property on the false ground that it must be transferred to
12   new private owners, so that they could develop it in a manner that was necessary for the
13   public good of the community of Santa Cruz. It then cajoled and strong-armed the Property’s
14   elderly owner to have direct negotiations with the proposed new owners. The new private
15   owner, a shell company that reported to a favored local insider, would thereby acquire the
16   Property and assign it to a second shell company, which was directly controlled by the
17   favored local insider. This insider, a property speculator, would then evaluate whether he
18   wished to undertake a development; and, if not, he would have his shell company default and
19   otherwise ensure that it could not pay the remaining balance of the purchase price, which
20   moreover the Redevelopment Agency had unlawfully disclaimed any responsibility to pay.
21   Moreover, these Defendants privately surmised that the Binding Covenants were at best
22   problematic to enforce or would prove meaningless and unenforceable if Brooks and Pacific
23   Place decided to walk away from the Property, which is exactly what they did. Under this
24   scenario, which Defendants foresaw but did not disclose to Lau or E. Lau, the owner of the
25   Property, the Lau Trust, would never receive just compensation for the taking of his Property
26   by an act of eminent domain.
27          54.    Thus Lau lost his Property by an act of eminent domain so that a favored
28   insider could hold it for speculative evaluation. He was pressured into an arrangement under


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                        -17-
 1   which he obtained only three-fourths of the just compensation upon his transfer of title to a
 2   new private owner, who, after holding the Property idly for years, decided not to develop it
 3   and balked at paying the remaining part of the just compensation. The Redevelopment
 4   Agency refused to intervene and refused to pay the remaining just compensation. The
 5   foreclosing lender similarly has disclaimed any obligation to honor the Binding Covenants,
 6   which Defendants expected to be unenforceable or problematic. Private parties were thus
 7   given effectual discretion whether and to what extent they would pay the remaining just
 8   compensation owed for a public taking accomplished by the Redevelopment Agency’s
 9   exercise of eminent domain. Nor was the taking done for a public purpose. Nor did the
10   Redevelopment Agency fulfill its non-waivable duty to pay just compensation upon taking
11   the Property.
12          55.      In this manner, a government agency abused its power of eminent domain to
13   take a property not for any necessary pubic purpose, but merely to indulge the speculative
14   whims of a favored inside property developer. If this developer decided that he did not wish
15   to develop the property, its former owner, an elderly retiree who lived alone, would simply
16   not be paid the promised just compensation, but rather would be left only to pursue
17   problematic remedies against two defunct shell companies that lacked any assets and a
18   recalcitrant bank that would employ highly qualified attorneys to oppose his initiatives.
19          56.      If the Redevelopment Agency, Bolton Hill, Pacific Place, Schwartz or Brooks
20   had disclosed any of the above matters to E. Lau or Lau, they never would have agreed to the
21   Settlement Agreement and never would have waived their prerogative to challenge the
22   lawfulness of the taking, but instead would have objected to the Redevelopment Agency’s
23   taking of the Property on the ground that the taking was unlawful because it was not done in
24   furtherance of an appropriate public use.
25          57.      Under the circumstances, the Redevelopment Agency, Bolton Hill, Schwartz,
26   and Brooks were each required to disclose the above matters to E. Lau and Lau when
27   negotiating the Settlement Agreement with them. By failing to disclose these matters, the
28   Redevelopment Agency, Bolton Hill, Schwartz, and Brooks purposefully allowed and


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                       -18-
 1   encouraged Lau and E. Lau to form positive misunderstandings about their ability and
 2   intention to develop the Property or otherwise ensure that Bolton Hill or its successor would
 3   pay the liquidated damages to Lau.
 4            58.   Moreover, the Redevelopment Agency owed a public duty to disclose these
 5   matters to Lau and E. Lau when litigating and attempting to settle the eminent domain
 6   proceeding. Had it done so, Lau and E. Lau would have objected to its taking on the ground
 7   that it was not proposed in order to accomplish a necessary public use, but rather was
 8   intended to further the speculative ambitions of a well-connected local property developer,
 9   Brooks, who wished to obtain the equivalent of an option to develop the Property for private
10   gain if market conditions proved auspicious for a future development.
11            59.   Rather than make these disclosures, the Redevelopment Agency, Bolton Hill,
12   Schwartz, and Brooks suppressed these matters and made misleading statements that
13   suggested the contrary inferences. Indeed, the Redevelopment Agency and Bolton Hill
14   formally represented the following to Lau, E. Lau, and the Lau Trust in the Settlement
15   Agreement itself: “The [Redevelopment] Agency and Bolton Hill represent that they will
16   have the cash available and the authority to complete all of their obligations under this
17   Agreement as specified above.” See Settlement Agreement at §21.
18            60.   Moreover, Brooks, Pacific Place, Schwartz, and Bolton Hill agreed to the
19   Settlement Agreement on the basis of their own private (and disputed) understanding that the
20   Binding Covenants would be unenforceable against any subsequent holder of title to the
21   Property, even though a material, necessary inducement to Lau was that these Binding
22   Covenants would be enforceable against whichever legal person held title to the Property
23   when the remainder of the purchase price became due and owing (i.e., no later than seven
24   years after the effective date of the Settlement Agreement, or no later than October 25,
25   2012).
26            61.   Surrounding circumstances suggest that the Redevelopment Agency knew or
27   should have known that its favored transferee had privately concluded that the payment
28   provisions might prove unenforceable if Bolton Hill or its successor failed to develop the


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                        -19-
 1   Property or deliver the two units in timely manner. It appears, moreover, that the Agency and
 2   the City of Santa Cruz regard these Binding Covenants to be problematic and arguably
 3   unenforceable.
 4          62.    None of these circumstances should ever have arisen. Lau should not have been
 5   coerced to assent to a compelled transaction that was negotiated and concluded only after a
 6   public entity had exercised its power of eminent domain to force him to sell the Property to a
 7   shell company controlled by a favored local insider, whose real purpose was to hold the
 8   property for speculative purposes and, if he decided not to develop the Property, to surrender
 9   it by foreclosure and balk at the remaining payment obligations.
10          63.    Rather, a public agency should exercise its power of eminent domain only to
11   take real property for a necessary, fully disclosed public purpose. If it does so, it must pay
12   just compensation for the taking, rather than seek to use contracts and litigation posturing to
13   avoid its constitutional obligation to pay just compensation, much less suppress material facts
14   and make positive misrepresentations in order to induce its condemnee to assent to a
15   payment arrangement that it knew or should have known was liable to miscarry, leaving the
16   condemnee without proper recourse or only problematic recourse for receiving the promised
17   just compensation.
18          64.    The Settlement Agreement was signed by all of the parties to it on October 25,
19   2005. The Binding Covenants were appended to and incorporated by reference in the
20   Settlement Agreement, and they were recited verbatim in the Settlement Agreement. The
21   Binding Covenants were recorded at the Recorder’s Office of Santa Cruz County, California
22   on February 9, 2006.
23          65.    Shortly after the Settlement Agreement was made, Bolton Hill assigned its right
24   to receive title to the Property to another company controlled by Brooks, Pacific Place.
25          66.    In accordance with the Settlement Agreement, and upon Schwartz’s further
26   instruction, Lau transferred title directly to Pacific Place rather than to Bolton Hill, and he
27   did so by means of an escrow transaction that was consummated on February 9, 2006.
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                         -20-
 1          67.    Pacific Place thereafter held title to the Property, but lacked the funding or
 2   final confirmed maps and plans required to develop it in accordance with the Redevelopment
 3   Agency’s plan. Rather, Brooks cooly observed evolving market conditions to determine
 4   whether he wished to have Pacific Place develop the Property and adjoining properties.
 5   During this time, Pacific Place made a limited, halting effort to develop the Property, but
 6   lacked the funds or confirmed arrangements in order to complete the development or even
 7   begin any construction at all. After market conditions began to deteriorate, Brooks concluded
 8   that he preferred not to develop the Property any further. After years of analysis, he caused
 9   Pacific Place to default on its loan obligations and allowed Pacific Place’s construction
10   lender, the Bank, to foreclose on its loan to Pacific Place and take title to the Property by a
11   foreclosure sale.
12          68.    The Bank thus acquired title to the Property by a non-judicial foreclosure that
13   was conducted on April 10, 2012. A true and correct copy of the Trustee’s Deed by which
14   the Bank acquired this title is appended to this complaint as Exhibit 5 and incorporated by
15   reference.
16          69.    The Bank has impliedly denied that it owes any obligation to pay any part of
17   the liquidated damages to Lau or otherwise honor the express provisions of the Binding
18   Covenants. The Bank has not offered to build and deliver the units or to pay the liquidated
19   damages. On the contrary, it is apparently prepared to oppose any initiative to provide this
20   consideration to Lau on the ground that the Binding Covenants are unenforceable, exactly as
21   Schwartz, Brooks, Bolton Hill, Pacific Place, and perhaps the Redevelopment Agency
22   contemplated when they orchestrated their taking of the Property from Lau.
23          70.    In the meantime, Brooks has wound up the affairs Pacific Place, so that it
24   cannot pay any part of the liquidated damages that it expressly owes to Lau under the
25   Settlement Agreement. Schwartz appears to have done the same with Bolton Hill.
26          71.    At all relevant times, Cirillo was the director and responsible officer of the
27   Redevelopment Agency, and she personally supervised and implemented the conduct
28   charged against it in this complaint.


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                          -21-
 1          72.    The Redevelopment Agency has since been renamed or reorganized as the
 2   Economic Development Department of the City of Santa Cruz (the “Agency”). The Agency
 3   has implicitly denied any obligation to assist Lau to recoup the remaining amount of the
 4   purchase price owed to him under the Settlement Agreement, refused in practice to provide
 5   any assistance, disclaimed any obligation to make or guarantee any part of this payment, and
 6   in practice has treated Lau as an adversary, not as its former condemnee to whom it has
 7   failed to pay just compensation after taking his Property from him by an act of eminent
 8   domain.
 9          73.    Lau, an elderly man, finds himself unable to collect the remaining part of the
10   just compensation owed to him for the taking of his Property. The unpaid part is
11   approximately one-fourth of the total price.
12          74.    Neither Bolton Hill nor its assignee, Pacific Place, timely provided the
13   promised two units or timely paid the liquidated damages, which became due and owing on
14   October 25, 2012. Nor did either pay liquidated damages on February 9, 2013, which was
15   seven years after the Binding Covenants were recorded. Nor did the Bank provide the units
16   or pay the liquidated damages on or before February 10, 2013, which is the date when it said
17   the obligation possibly became due and owing according to the Binding Covenants, while
18   preserving its right to oppose the enforceability of the Binding Covenants.
19          75.    The earliest date on which the claims in this case arose was October 26, 2012,
20   which was one day after the liquidated damages became due and owing. Arguably, none of
21   these claims arose until February 10, 2013, which was the day after the liquidated damages
22   became due and owing if they were owed only seven years after the recording of the Binding
23   Covenants.
24          76.    Even though he owed no obligation to do so, Lau timely presented a claim for
25   redress in this matter to the Agency (as the legal successor of the Redevelopment Agency)
26   and also to the City of Santa Cruz on April 25, 2013. He thereby fulfilled any duty that he
27   owed to present the claim in accordance with California Government Code §911.2 and/or
28   any other applicable law. Lau presented the claim on his own behalf, on behalf of the Lau


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                      -22-
 1   Trust, and on behalf of his assignee, E. Lau. On May 28, 2013, the Agency and the City of
 2   Santa Cruz rejected the claim. The claim concerned the above matters and stated the
 3   gravamen of the claims set forth in the present complaint. True and correct copies of Lau’s
 4   claim and the Agency’s and City of Santa Cruz’s rejection of the claim are appended to this
 5   complaint as Exhibit 6 and incorporated by reference.
 6          77.    Before presenting the above claim, Lau made an informal effort to obtain
 7   appropriate redress from the Agency and the City of Santa Cruz by letter correspondence.
 8   The Agency and the City of Santa Cruz expressly confirmed by their reply that the
 9   Redevelopment Agency had conducted a lawful condemnation and proper exercise of its
10   power of eminent domain, after which it had lawfully avoided any responsibility to ensure
11   that the Lau Trust receive just compensation for its taking of the Property. In this matter,
12   then, the Redevelopment Agency and the City of Santa Cruz implemented their official
13   policy and practice. The Redevelopment Agency’s exercise of its power of eminent domain
14   was conducted in accordance with this official policy and practice. True and correct copies
15   of this exchange of correspondence are appended to this complaint as Exhibit 7 and
16   incorporated by reference.
17          78.    Lau also made timely demand on the Bank, requesting that as the holder of title
18   it either deliver the units or pay the specified liquidated damages in accordance with the
19   Binding Covenants that burden the title. In response, the Bank refused to confirm that it
20   would provide the units or pay the liquidated damages. Since then, it has failed to take either
21   measure despite Lau’s demand that it do so. The Bank has also stated to others that the
22   Binding Covenants are unenforceable against it or any holder in due course of title to the
23   Property. True and correct copies of this exchange of correspondence are appended to this
24   complaint as Exhibit 8 and incorporated by reference.
25          79.    It would have been futile for Lau to have made any demand on Bolton Hill or
26   Pacific Place, since Brooks has made sure that neither has any assets or other means of
27   paying the remaining one-fourth of the purchase price to Lau, and neither remains in
28   operation. Even so, Lau made a formal demand to Bolton Hill on May 31, 2012, requesting


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                          -23-
 1   that it forthwith pay the specified liquidated damages after it had failed to deliver the units in
 2   timely manner. Bolton Hill never responded to the demand. Its former attorneys responded
 3   only to say that they no longer represented Bolton Hill. A True and correct copy of Lau’s
 4   correspondence to Bolton Hill is appended to this complaint as Exhibit 9 and incorporated by
 5   reference.
 6
                            V. FIRST CAUSE OF ACTION
 7          (DEPRIVATION OF FEDERAL CIVIL RIGHTS UNDER 42 U.S.C. §1983)
                         (AGAINST CIRILLO, THE AGENCY,
 8                           and CITY OF SANTA CRUZ)
 9          80.     Lau re-pleads and incorporates by reference each of the preceding allegations,
10   as if he had set them forth in full within this cause of action.
11          81.     At all times relevant to this complaint, Cirillo was an officer of the
12   Redevelopment Agency of the City of Santa Cruz, and she committed the acts and omissions
13   described in the complaint during the course of this employment and while performing her
14   official duties.
15          82.     At all relevant times, Cirillo was the director and responsible officer of the
16   Redevelopment Agency, and she personally supervised and implemented the conduct
17   charged against it in this complaint.
18          83.     The Agency is the legal successor of the Redevelopment Agency and is
19   responsible for the conduct and obligations of the Redevelopment Agency that is described in
20   this complaint. The City of Santa Cruz is responsible for the conduct and obligations of the
21   Redevelopment Agency so far as the Agency either disclaims or cannot assume the
22   responsibility, and it bears this responsibility on the independent ground that it bears legal
23   responsibility for its several agencies.
24          84.     Cirillo, the Redevelopment Agency, the Agency, and the City of Santa Cruz are
25   each “persons” that can be properly sued under 42 U.S.C. §1983.
26          85.     The Fifth Amendment to the United States Constitution states in pertinent part
27   the following matters: “[N]or shall private property be taken for public use, without just
28   compensation.”


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                           -24-
 1          86.    The Fourteenth Amendment imposes this same restriction on state agencies,
 2   such as the Agency, the Redevelopment Agency, and the City of Santa Cruz (which is a
 3   municipality of the government of California). See Chicago, B. & Q.R. Co. v. City of
 4   Chicago 166 U.S. 226, 236, 17 S.Ct. 581, 584 (1897) (holding that the Fourteenth
 5   Amendment obliges state government agencies to heed the “just compensation” clause of the
 6   Fifth Amendment, and stating the following: “The requirement that the property shall not be
 7   taken for public use without just compensation is but an affirmance of a great doctrine
 8   established by the common law for the protection of private property. It is founded in natural
 9   equity, and is laid down as a principle of universal law. Indeed, in a free government, almost
10   all other rights would become worthless if the government possessed an uncontrollable
11   power over the private fortune of every citizen.”) (internal quotation omitted).
12          87.    Moreover, the Fifth Amendment presupposes and requires that a public taking
13   of private land be done only for a necessary public use, but not in order to transfer the
14   property from one private owner to another for its own private benefit, even if the public
15   condemnor pays just compensation to the condemnee. See Kelo v. City of New London,
16   Conn., 545 U.S. 469, 477, 125 S.Ct. 2655, 2661 (2005) (“[T]he sovereign may not take the
17   property of A for the sole purpose of transferring it to another private party B, even though A
18   is paid just compensation.”) Accord Hawaii Housing Authority v. Midkiff, 467 U.S. 229, 245
19   [104 S.Ct. 2321, 2331 (1984) (“[T]he Constitution forbids even a compensated taking of
20   property when executed for no reason other than to confer a private benefit on a particular
21   private party. A purely private taking could not withstand the scrutiny of the public use
22   requirement; it would serve no legitimate purpose of government and would thus be void.”)
23          88.    The Fourteenth Amendment imposes this same restriction on state agencies,
24   such as the Agency, the Redevelopment Agency, and the City of Santa Cruz (which is a
25   municipality of the government of California). See Chicago, B. & Q.R. Co. v. City of
26   Chicago, 166 U.S. 226, 236, 17 S.Ct. 581, 584 (1897).
27          89.    In the present matter, Cirillo and the Redevelopment Defendants violated both
28   bedrock principles of governance, which are enshrined in the Fifth and Fourteenth


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                        -25-
 1   Amendments and guaranteed to every person who holds title to property in the United States.
 2          90.    As pled above, the Redevelopment Agency exercised its power of eminent
 3   domain over the Property in order to take it from Lau and deliver to it to a company
 4   controlled by a favored local insider in the Santa Cruz business community, Brooks. It did so
 5   not in furtherance of any necessary public use, but in order to provide the favored insider,
 6   Brooks, with a speculative opportunity to hold the Property and consider the profits he might
 7   earn by developing it if market conditions later evolved in a manner that he deemed to be
 8   enticing and profitable.
 9          91.    By so acting, the Redevelopment Agency did not take the Property in order to
10   devote it to any public use, much less a compelling one, but rather delivered it to a favored
11   insider for his own private, speculative evaluation of the Property’s commercial potential.
12   The taking was therefore absolutely wrongful and “void” as a matter of law because it was
13   not done for the sake of a recognized, lawful public use.
14          92.    To avoid a legal challenge on this ground, the Redevelopment Agency, Bolton
15   Hill, Schwartz, and Brooks suppressed material facts and made positive misrepresentations in
16   order to induce Lau and E. Lau not to challenge the legality of the taking in the original
17   condemnation case and in order to induce them to assent to the Settlement Agreement.
18          93.    To make matters worse, the Redevelopment Agency not only committed a
19   lawless taking, but failed to pay just compensation for it. Rather, it abused its power of
20   eminent domain in order to avoid its non-waivable, inviolable obligation to pay “just
21   compensation” to Lau for its taking of the Lau Trust’s Property.
22          94.    No government agency, state or federal, can properly condemn a property,
23   intimate that it will hold out for a lengthy litigation over the property’s proper value, use
24   cajolery and strong-arm threats to prevail on the condemnee to negotiate with the
25   government’s preferred private transferee, and thereafter disclaim any responsibility to
26   guarantee whatever payment the favored transferee condescends to pay to the dispossessed
27   condemnee after the coerced settlement discussions have been convened.
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                           -26-
 1          95.    It should not even be lawful to allow, much less to insist upon coerced
 2   settlement negotiations between the condemnee and the government agency’s favored private
 3   transferee. The government agency, if it chooses to condemn private property, must pay just
 4   compensation for its taking, and it cannot lawfully disclaim or avert this constitutional
 5   obligation after it has exercised its power of eminent domain, as the Redevelopment Agency
 6   purports to have done in this present matter.
 7          96.    When a public entity condemns land under its power of eminent domain, it
 8   must pay “just compensation” for its taking. There can be no lawful qualification or
 9   abrogation of this fundamental constitutional obligation. The public entity cannot make use
10   of elaborate commercial stratagems, an uncompromising litigation posture or contractual
11   arrangements to vitiate or abrogate its inviolable, non-negotiable obligation under the Fifth
12   and Fourteenth Amendments to pay just compensation to the condemnee for any taking of
13   land for a public use.
14          97.    In violation of these constitutional safeguards, the Redevelopment Agency
15   condemned Lau’s Property, obliged him to negotiate directly with a company controlled by a
16   local insider, and unlawfully disclaimed any responsibility to ensure that this company
17   honored the agreed-upon price that was supposed to constitute “just compensation” for the
18   condemnation and taking of Lau’s Property.
19          98.    As it turned out, Bolton Hill and its assignee paid only three-fourths of the
20   agreed upon “just compensation” to Lau in exchange for the Property. Brooks, Bolton Hill,
21   and its assignee, Pacific Place, have contrived to ensure that none of them can be obliged to
22   pay the outstanding amount of just compensation owed to Lau. Indeed, they apparently
23   entered into the Settlement Agreement on the private understanding that Lau could not oblige
24   them or the current holder of title to pay the remaining amount of the just compensation. The
25   Redevelopment Agency, the Agency, and the City have wrongly disclaimed any
26   responsibility to pay this amount, as does the current holder of title, the Bank.
27          99.    The Lau Trust thus lost its title to the Property by a lawless taking, and in
28   addition it failed to receive “just compensation” for the taking.


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                         -27-
 1          100.   In this matter, Cirillo and the Redevelopment Agency, acting under color of
 2   law, deprived Lau of his constitutional right not to have his Trust’s Property taken for any
 3   use other than a necessary public use, and they further deprived him of his constitutional
 4   right to receive “just compensation” for their taking of the Property under color of law. The
 5   Agency, as the successor of the Redevelopment Agency, is responsible for this legal wrong,
 6   as is the City of Santa Cruz.
 7          101.   At all times, the Redevelopment Agency implemented a conscious, deliberate,
 8   and official policy: It construed California’s eminent domain procedures so as to authorize
 9   the very conduct that it took in this matter. The conduct was therefore a custom or practice of
10   a government agency, for which the Redevelopment Agency’s successor, the Agency, and
11   the City of Santa Cruz can be properly held liable under 42 U.S.C. §1983. If there were any
12   doubt about the matter, it has been removed by the Agency’s and City of Santa Cruz’s denial
13   of Lau’s demand that they honor their obligation to pay just compensation for the taking. By
14   this denial, the Agency and the City of Santa Cruz made clear that they deemed the outcome
15   of this matter to be acceptable, lawful, and in conformity with their own disclaimer of any
16   responsibility to pay the outstanding balance of the just compensation afforded to Lau under
17   the Settlement Agreement. See Exhibits 6 and 7.
18          102.   The legal successor to the Redevelopment Agency is the Agency, which
19   therefore has legal responsibility for the Redevelopment Agency’s acts, omissions, and legal
20   wrongs in this matter. To the extent that the Agency disclaims this responsibility, the City of
21   Santa Cruz bears the responsibility, and the City of Santa Cruz is otherwise responsible for
22   the conduct and legal wrongs of its several agencies.
23          103.   By reason of the foregoing, Cirillo, the Redevelopment Agency, and the City of
24   Santa Cruz each deprived Lau and E. Lau of their civil rights under color of law in violation
25   of 42 U.S.C. §1983. Acting under color of law, they deprived Lau and E. Lau of rights
26   guaranteed to them under the Fifth and Fourteenth Amendments to the United States
27   Constitution. The Agency and the City of Santa Cruz are responsible to Lau for the harm
28   caused to Lau and his assignor, E. Lau, by this deprivation of their civil rights.


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                        -28-
 1          104.    By so acting, Cirillo, the Redevelopment Agency, and the City of Santa Cruz
 2   acted in a manner that deprived Lau and E. Lau of their right to substantive due process. The
 3   Agency and the City of Santa Cruz bear responsibility to Lau for the harm that Lau and his
 4   assignor, E. Lau, suffered in consequence.
 5          105.    In direct consequence of this deprivation of their civil rights, Lau and E. Lau
 6   have each suffered losses and damages, which include (1) Lau’s failure to receive just
 7   compensation in exchange for the Redevelopment Agency’s taking of the Property by an act
 8   of eminent domain, (2) the wrongful taking of the Property, (3) the wrongful displacement of
 9   E. Lau’s former business, Oswald, which had a leasehold at the Property, (4) emotional
10   distress suffered by Lau and E. Lau, and (5) other proximately caused losses. As the assignee
11   of E. Lau, Lau asserts E. Lau’s claims for this deprivation of his civil rights, as well as such
12   claims as he has for the deprivation of his own civil rights.
13          106.    WHEREFORE, Lau seeks the redress for which he has prayed in his Prayer for
14   Relief, which appears below.
15                          VI. SECOND CAUSE OF ACTION
                    (DEPRIVATION OF CALIFORNIA CIVIL RIGHTS)
16             (AGAINST CIRILLO, THE AGENCY, and CITY OF SANTA CRUZ)
17          107.    Lau re-pleads and incorporates by reference each of the preceding allegations,
18   as if he had set them forth in full within this cause of action.
19          108.    At all times relevant to this complaint, Cirillo was an officer of the
20   Redevelopment Agency of the City of Santa Cruz, and she committed the acts and omissions
21   described in the complaint during the course of this employment and while performing her
22   official duties.
23          109.    At all relevant times, Cirillo was the director and responsible officer of the
24   Redevelopment Agency, and she personally supervised and implemented the conduct
25   charged against it in this complaint.
26          110.    The Agency is the legal successor of the Redevelopment Agency and is
27   responsible for the conduct and obligations of the Redevelopment Agency that is described in
28   this complaint. The City of Santa Cruz is responsible for the conduct and obligations of the


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                           -29-
 1   Redevelopment Agency so far as the Agency either disclaims or cannot assume the
 2   responsibility, and it bears this responsibility on the independent ground that it bears legal
 3   responsibility for its several agencies.
 4          111.   The California Constitution states in pertinent part the following matters:
 5   “Private property may be taken or damaged for a public use and only when just
 6   compensation, ascertained by a jury unless waived, has first been paid to, or into court for,
 7   the owner.” Cal. Const. art. I, § 19.
 8          112.   Moreover, California decisional authority requires that a public taking of
 9   private land be done only for a necessary public use, but not in order to transfer the property
10   from one private owner to another for its own private benefit, even if the public condemnor
11   pays just compensation to the condemnee. See Council of San Benito County Governments v.
12   Hollister Inn, Inc., 209 Cal.App.4th 473, 493, 147 Cal.Rptr.3d 203, 217 (2012) (“The takings
13   clause of the Fifth Amendment to the U.S. Constitution provides: “[N]or shall private
14   property be taken for public use, without just compensation.” It is made applicable to the
15   states by the Fourteenth Amendment. Its text imposes two conditions on the exercise of
16   taking authority: the taking must be for a ‘public use’ and ‘just compensation’ must be paid
17   to the owner. The Fifth Amendment's taking clause bars the government from taking the
18   property of A for the sole purpose of transferring it to another private party B, even though A
19   is paid just compensation.”) (some internal quotations and internal citations omitted).
20          113.   In the present matter, Cirillo and the Redevelopment Agency violated both
21   bedrock principles of governance, which are enshrined in the California Constitution and
22   otherwise guaranteed by the law of California.
23          114.   As pled above, the Redevelopment Agency exercised its power of eminent
24   domain over the Property in order to take it from Lau and deliver to it to a company
25   controlled by a favored local insider in the Santa Cruz business community, Brooks. It did so
26   not in furtherance of any necessary public use, but in order to provide the favored insider,
27   Brooks, with a speculative opportunity to hold the Property and consider the profits he might
28   earn by developing it if market conditions later evolved in a manner that he deemed to be


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                        -30-
 1   enticing and profitable.
 2          115.   By so acting, the Redevelopment Agency did not take the Property in order to
 3   devote it to any public use, much less a compelling one, but rather delivered it to a favored
 4   insider for his own private, speculative evaluation of the Property’s commercial potential.
 5   The taking was therefore absolutely wrongful and “void” as a matter of law because it was
 6   not done for the sake of a recognized, lawful public use.
 7          116.   To avoid a legal challenge on this ground, the Redevelopment Agency, Bolton
 8   Hill, Schwartz, and Brooks suppressed material facts and made positive misrepresentations in
 9   order to induce Lau and E. Lau not to challenge the legality of the taking in the original
10   condemnation case and in order to induce them to assent to the Settlement Agreement.
11          117.   To make matters worse, the Redevelopment Agency not only committed a
12   lawless taking, but failed to pay just compensation for it. Rather, it abused its power of
13   eminent domain in order to avoid its non-waivable, inviolable obligation to pay “just
14   compensation” to Lau for its taking of the Lau Trust’s Property.
15          118.   No government agency, state or federal, can properly condemn a property,
16   intimate that it will hold out for a lengthy litigation over the property’s proper value, use
17   cajolery and strong-arm threats to prevail on the condemnee to negotiate with the
18   government’s preferred private transferee, and thereafter disclaim any responsibility to
19   guarantee whatever payment the favored transferee condescends to pay to the dispossessed
20   condemnee after the coerced settlement discussions have been convened.
21          119.   It should not even be lawful to allow, much less to insist upon coerced
22   settlement negotiations between the condemnee and the government agency’s favored private
23   transferee. The government agency, if it chooses to condemn private property, must pay just
24   compensation for its taking, and it cannot lawfully disclaim or avert this constitutional
25   obligation after it has exercised its power of eminent domain, as the Redevelopment Agency
26   purports to have done in this present matter.
27          120.   When a public entity condemns land under its power of eminent domain, it
28   must pay “just compensation” for its taking. There can be no lawful qualification or


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                           -31-
 1   abrogation of this fundamental constitutional obligation. The public entity cannot make use
 2   of elaborate commercial stratagems, an uncompromising litigation posture or contractual
 3   arrangements to vitiate or abrogate its inviolable, non-negotiable obligation under the
 4   California Constitution and decisional authority to pay just compensation to the condemnee
 5   for any taking of land for a public use.
 6          121.   In violation of these constitutional safeguards, the Redevelopment Agency
 7   condemned Lau’s Property, obliged him to negotiate directly with a company controlled by a
 8   local insider, and unlawfully disclaimed any responsibility to ensure that this company
 9   honored the agreed-upon price that was supposed to constitute “just compensation” for the
10   condemnation and taking of Lau’s Property.
11          122.   As it turned out, Bolton Hill and its assignee paid only three fourths of the
12   agreed upon “just compensation” to Lau in exchange for the Property. Brooks, Bolton Hill,
13   and its assignee, Pacific Place, have contrived to ensure that none of them can be obliged to
14   pay the outstanding amount of just compensation owed to Lau. Indeed, they apparently
15   entered into the Settlement Agreement on the private understanding that Lau could not oblige
16   them or the current holder of title to pay the remaining amount of the just compensation. The
17   Redevelopment Agency, the Agency, and the City have wrongly disclaimed any
18   responsibility to pay this amount, as does the current holder of title, the Bank.
19          123.   The Lau Trust thus lost its title to the Property by a lawless taking, and in
20   addition it failed to receive “just compensation” for the taking.
21          124.   In this matter, Cirillo and the Redevelopment Agency, acting under color of
22   law, deprived Lau of his right under California law not to have his Trust’s Property taken for
23   any use other than a necessary public use, and they further deprived him of his right to
24   receive “just compensation” for their taking of the Property under color of law. The Agency,
25   as the successor of the Redevelopment Agency, is responsible for this legal wrong, as is the
26   City of Santa Cruz.
27          125.   At all times, the Redevelopment Agency implemented a conscious, deliberate,
28   and official policy: It construed California’s eminent domain procedures so as to authorize


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                         -32-
 1   the very conduct that it took in this matter. If there were any doubt about the matter, it has
 2   been removed by the Agency’s and City of Santa Cruz’s denial of Lau’s demand that they
 3   honor their obligation to pay just compensation for the taking. By this denial, the Agency and
 4   the City of Santa Cruz made clear that they deemed the outcome of this matter to be
 5   acceptable, lawful, and in conformity with their own disclaimer of any responsibility to pay
 6   the outstanding balance of the just compensation afforded to Lau under the Settlement
 7   Agreement. See Exhibits 6 and 7.
 8          126.     The legal successor to the Redevelopment Agency is the Agency, which
 9   therefore has legal responsibility for the Redevelopment Agency’s acts, omissions, and legal
10   wrongs in this matter. To the extent that the Agency disclaims this responsibility, the City of
11   Santa Cruz bears the responsibility, and the City of Santa Cruz is otherwise responsible for
12   the conduct and legal wrongs of its several agencies.
13          127.     By so acting, Cirillo, the Redevelopment Agency, and the City of Santa Cruz
14   each deprived Lau and E. Lau of their civil rights under color of law in violation of the
15   California Constitution and the decisional authority of the courts of California. The Agency
16   and the City of Santa Cruz are responsible to Lau for the harm caused to him and his
17   assignor, E. Lau, by this violation of their constitutional and other legal rights under
18   California law, including their right to substantive due process.
19          128.     In direct consequence of this deprivation of their civil rights, Lau and E. Lau
20   have each suffered losses and damages, which include (1) Lau’s failure to receive just
21   compensation in exchange for the taking of the Property by an act of eminent domain, (2) the
22   wrongful taking of the Property, (3) the wrongful displacement of E. Lau’s former business,
23   Oswald, which had a leasehold at the Property, (4) emotional distress, and (5) other
24   proximately caused losses. As the assignee of E. Lau, Lau asserts E. Lau’s claims for this
25   deprivation of his civil rights, as well as such claims as he has for the deprivation of his own
26   civil rights.
27          129.     WHEREFORE, Lau seeks the redress for which he has prayed in his Prayer for
28   Relief, which appears below.


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                         -33-
 1
 2                         VII. THIRD CAUSE OF ACTION
                   (RELIEF UNDER CALIFORNIA TORT CLAIMS ACT)
 3          (AGAINST CIRILLO, THE AGENCY, and THE CITY OF SANTA CRUZ)
 4          130.   Lau re-pleads and incorporates by reference each of the preceding allegations,
 5   as if he had set them forth in full within this cause of action.
 6          131.   By the above conduct, Cirillo, the Redevelopment Agency, and the City of
 7   Santa Cruz committed legal wrongs against Lau, the Lau Trust, and E. Lau, causing
 8   proximate losses to each of them. The Agency and the City of Santa Cruz bear legal
 9   responsibility for the Redevelopment’s acts, omissions, and legal wrongs in this matter.
10          132.   Cirillo, the Agency, and the City of Santa Cruz are therefore responsible and
11   liable to Lau and E. Lau for these proximate losses so far as such responsibility will lie under
12   the California Tort Claims Act, which is codified at California Government Code §§810 et
13   seq.
14          133.   As pled above, Lau, the Lau Trust, and E. Lau timely presented their claims
15   against the Agency and the City of Santa Cruz on April 25, 2013, even though their claims,
16   which concern a wrongful taking, did not require presentment to the concerned government
17   agencies. The Agency and the City of Santa Cruz denied these claims on May 28, 2013. Lau
18   may therefore assert these claims in this case under California Government Code §§810 et
19   seq.
20          134.   WHEREFORE, Lau seeks the redress for which he has prayed in his Prayer for
21   Relief, which appears below.
22                          VIII. FOURTH CAUSE OF ACTION
                (SPECIFIC PERFORMANCE OF SETTLEMENT AGREEMENT)
23                     (AGAINST BOLTON HILL and PACIFIC PLACE)
24          135.   Lau re-pleads and incorporates by reference each of the preceding allegations,
25   as if he had set them forth in full within this cause of action.
26          136.   The Settlement Agreement includes a proviso that its terms and conditions may
27   be enforced in accordance with California Code of Civil Procedure §664.6. This provision
28   establishes that the parties agreed that the Settlement Agreement could be specifically


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                       -34-
 1   enforced.
 2          137.   Bolton Hill has failed either to provide the two promised condominium units or
 3   to pay the specified liquidated damages, which became due and owing on October 25, 2012,
 4   which was seven years after the effective date of the Settlement Agreement.
 5          138.   Bolton Hill’s successor, Pacific Place, has failed either to provide the two
 6   promised condominium units or to pay the specified liquidated damages, which became due
 7   and owing on October 25, 2012, which was seven years after the effective date of the
 8   Settlement Agreement.
 9          139.   Lau and the Lau Trust are entitled to immediate, specific performance of the
10   unperformed obligations that Bolton Hill and Pacific Place owe to them under the Settlement
11   Agreement – namely, immediate payment of $700,000 in liquidated damages, plus pre-
12   judgment interest at the statutory rate from October 26, 2012 onward.
13          140.   WHEREFORE, Lau seeks the redress for which he has prayed in his Prayer for
14   Relief, which appears below.
15                             IX. FIFTH CAUSE OF ACTION
                   (SPECIFIC PERFORMANCE OF EQUITABLE SERVITUDES)
16                                  (AGAINST THE BANK)
17          141.   Lau re-pleads and incorporates by reference each of the preceding allegations,
18   as if he had set them forth in full within this cause of action.
19          142.   The Bank holds title in fee simple to the Property. This title is encumbered by
20   the Binding Covenants, which oblige it to provide the two condominium units to Lau no later
21   than October 25, 2012 or, if it fails to do so, to pay liquidated damages in the amount of
22   $700,000.00 to Lau no later than October 25, 2012. The Bank has failed to meet either
23   obligation and disclaims both obligations despite the Binding Covenants, which were duly
24   recorded and encumber its title to the Property.
25          143.   Lau therefore asks the Court for a decree that compels the Bank to perform the
26   Binding Covenants and to pay damages according to proof for its failure to perform them in
27   timely manner.
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                        -35-
 1          144.   WHEREFORE, Lau seeks the redress for which he has prayed in his Prayer for
 2   Relief, which appears below.
 3                              X. SIXTH CAUSE OF ACTION
                                  (BREACH OF CONTRACT)
 4                       (AGAINST BOLTON HILL and PACIFIC PLACE)
 5          145.   Lau re-pleads and incorporates by reference each of the preceding allegations,
 6   as if he had set them forth in full within this cause of action.
 7          146.   The Settlement Agreement constitutes a contract under which Bolton Hill and
 8   Pacific Place have owed certain obligations to Lau.
 9          147.   By timely conveying proper title to Bolton Hill’s successor, Pacific Place, Lau
10   fulfilled all of his obligations under the Settlement Agreement.
11          148.   None of Lau’s counterparties under the Settlement Agreement has complained
12   that Lau failed to perform any of his obligations under the Settlement Agreement or that he
13   otherwise committed any act or omission that excuses any of them from their own
14   obligations under the Settlement Agreement. Nor is any of these counterparties so excused
15   on any ground.
16          149.   By failing to deliver the condominium units or pay the liquidated damages to
17   Lau, Bolton Hill and Pacific Place have breached the Settlement Agreement, causing contract
18   damages to Lau.
19          150.   WHEREFORE, Lau seeks the redress for which he has prayed in his Prayer for
20   Relief, which appears below.
21
                             XI. SEVENTH CAUSE OF ACTION
22                        (INTENTIONAL MISREPRESENTATION)
                   (AGAINST CIRILLO, THE AGENCY, CITY OF SANTA CRUZ,
23                 BOLTON HILL, PACIFIC PLACE, BROOKS, and SCHWARTZ)
24          151.   Lau re-pleads and incorporates by reference each of the preceding allegations,
25   as if he had set them forth in full within this cause of action.
26          152.   As pled above, one material and necessary inducement to the Settlement
27   Agreement was the following express representation, which the Redevelopment Agency and
28   Bolton Hill each made in the Settlement Agreement itself to Lau and the other counterparties


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                     -36-
 1   (E. Lau and others):
 2
                      The [Redevelopment] Agency and Bolton Hill represent that they
 3                    will have the cash available and the authority to complete all of
                      their obligations under this Agreement as specified above.
 4                    Bolton Hill reaffirms the representations that it has made herein
                      with respect to its construction of the Project and the Qualifying
 5                    Units.
 6   See Settlement Agreement at §21.
 7          153.      This representation was false when made. The truth was that Bolton Hill lacked
 8   sufficient cash or the required authority to perform its obligations under the Settlement
 9   Agreement, and it lacked any reasonable or clear arrangement for ensuring that it or its
10   successor would have sufficient cash or the required authority to perform these obligations as
11   they fell due.
12          154.      Since this representation was set forth in a written contract (the Settlement
13   Agreement), Cirillo and the Redevelopment Agency’s successor, the Agency, can be held
14   liable for making a positive misrepresentation to Lau and E. Lau in order to induce them to
15   assent to the Settlement Agreement, by which inter alia Lau and E. Lau waived their
16   prerogative to challenge the lawfulness of the Redevelopment Agency’s taking of the
17   Property.
18          155.      In addition, the Redevelopment Agency and Bolton Hill specifically
19   represented the following matters to induce Lau and E. Lau to assent to the Settlement
20   Agreement and waive any objection that either of them might have to the legality of the
21   taking: That Bolton Hill or its successor would develop the Property in accordance with a
22   plan already approved by the Redevelopment Agency; that this development would cure the
23   alleged urban blight at the Property and otherwise further the needs of the local community
24   of Santa Cruz; and that the Redevelopment Agency’s resolution of necessity and ensuing
25   condemnation of the Property were done so that the Property might be taken for this public
26   use.
27          156.      In addition, Bolton Hill’s representative, Schwartz, specifically promised to E.
28   Lau on repeated occasions in Santa Cruz, California at settlement discussions during the fall


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                            -37-
 1   of 2005 that Bolton Hill or its assignee would be certain to build and timely deliver to Lau
 2   the promised condominium units, and that if for any reason it failed to do so, which he said
 3   was an impossibility, then Bolton Hill or its assignee would be certain to pay the liquidated
 4   damages to Lau in timely manner. Schwartz made these representations and express, material
 5   promises to E. Lau on repeated occasions. He did so at the behest of and for the benefit of
 6   Brooks and the company that Brooks formed for the purpose of taking title, Pacific Place,
 7   and he did so with their full knowledge and complicity. He did so on the specific
 8   understanding that E. Lau was acting not only or principally on his own behalf, but
 9   principally as the agent for his elderly father, Lau, and Schwartz expected and foresaw that
10   E. Lau would relate these representations to Lau. Of course, E. Lau timely related these
11   misrepresentations of material fact to his father, Lau.
12          157.   Acting for Brooks, Bolton Hill, and Pacific Place, Schwartz made the above
13   representations to E. Lau and Lau in order to induce them to assent to the Settlement
14   Agreement.
15          158.   When the Redevelopment Agency, Bolton Hill, and Schwartz made these
16   representations and express promises, including the express written representation quoted
17   above, they knew that the representations were materially false, and that Bolton Hill, Pacific
18   Place, and Brooks did not intend to honor the express promises.
19          159.   The truth of these matters was as follows. Brooks and his companies intended
20   to acquire the Property from Lau, after which they would further evaluate market conditions
21   and decide whether to develop the Property or allow it to be taken by foreclosure; and, if
22   they allowed the Property to be taken by foreclosure, they would not provide the promised
23   units or the liquidated damages owed to Lau. Indeed, Brooks, Bolton Hill and Pacific Place
24   privately understood that the Binding Covenants would be unenforceable against their lender
25   if it foreclosed on the Property, so that if they decided not to develop the Property, Lau
26   would have no meaningful recourse to obtain the remainder of the purchase price – i.e., the
27   two units or the liquidated damages. These matters are pled more fully in the section entitled
28   “Common Allegations.” See §IV, supra.


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                        -38-
 1          160.   In addition, the Redevelopment Agency, Bolton Hill, Pacific Place, Schwartz,
 2   and Brooks fraudulently concealed from Lau and E. Lau the following material
 3   circumstances: (1) Bolton Hill had not yet obtained sufficient funding to develop the
 4   Property in the manner contemplated by the Redevelopment Agency’s redevelopment plan,
 5   and it had no arrangement in place to ensure that its assignee would have such funding; (2)
 6   Bolton Hill had not yet obtained confirmed maps and plans to develop the Property in the
 7   manner contemplated by the Redevelopment Agency’s redevelopment plan, and it had no
 8   arrangement in place to ensure that its assignee could obtain such plans; and (3) Bolton Hill
 9   had not made any provision and otherwise lacked resources to pay any part of the liquidated
10   damages that it or its assignee would owe to Lau if the above units were not delivered to him
11   within seven years of the signing of the Settlement Agreement, and it had no arrangement in
12   place to ensure that its assignee would make such a provision or otherwise have sufficient
13   resources to make any part of the payment. Under the circumstances, the failure to disclose
14   these matters served to deceive Lau and E. Lau about the purpose and consequences of their
15   assent to the Settlement Agreement and their decision not to challenge the legality of the
16   Redevelopment Agency’s taking of the Property. Lau, the Lau Trust, and E. Lau would not
17   have agreed to the Settlement Agreement, but rather would have challenged the legality of
18   the taking, if these matters had been timely and properly disclosed to them.
19          161.   Lau and E. Lau justifiably relied on the above representations and express
20   promises when agreeing to enter into the Settlement Agreement, and they would not have so
21   agreed but for these representations and express promises.
22          162.   Thus induced, Lau and E. Lau assented to the Settlement Agreement. In
23   proximate consequence, each suffered proximate losses, since they relinquished their right to
24   object to an unlawful taking and also failed to receive just compensation for the taking. Lau
25   in particular has never received the promised condominium units or the liquidated damages,
26   and E. Lau was wrongly obliged to cede his leasehold and shut down his once successful
27   restaurant, Oswald.
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                        -39-
 1          163.   The present matter is far more grave than an ordinary act of civil fraud. Brooks
 2   used his influence as a well-connected insider to prevail on the Redevelopment Agency to
 3   exercise its power of eminent domain in order to condemn the Property, after its owner, the
 4   Lau Trust, refused to sell it to Brooks or a company controlled by Brooks. He then arranged
 5   to have the Redevelopment Agency pressure Lau to have direct negotiations with his
 6   manager, Schwartz. It was under these circumstances that Brooks, Schwartz, and his
 7   companies made material misrepresentations and false promises to Lau while suppressing
 8   material disclosures, so that they could acquire the Property for roughly two-thirds of its fair
 9   market value, then decide whether to develop it, and then walk-away without penalty if they
10   decided not to develop it. Their machinations worked according to plan. Lau and E. Lau
11   suffered significant damages in direct consequence. Lau seeks to recover the losses suffered
12   by himself, his Trust, and his assignor, E. Lau.
13          164.   The Agency is the legal successor of the Redevelopment Agency and is
14   responsible for the conduct and obligations of the Redevelopment Agency that is described in
15   this complaint. The City of Santa Cruz is responsible for the conduct and obligations of the
16   Redevelopment Agency so far as the Agency either disclaims or cannot assume the
17   responsibility and also because the City of Santa Cruz bears legal responsibility for its
18   several agencies.
19          165.   In this matter, Brooks, Schwartz, Bolton Hill, and Pacific Place have each
20   acted with fraud, malice, and/or oppression of the kind that subjects each of them to liability
21   for punitive damages under Section 3294 of the California Civil Code.
22          166.   WHEREFORE, Lau seeks the redress for which he has prayed in his Prayer for
23   Relief, which appears below.
24
                             XII. EIGHTH CAUSE OF ACTION
25                          (NEGLIGENT MISREPRESENTATION)
                   (AGAINST CIRILLO, THE AGENCY, CITY OF SANTA CRUZ,
26                 BOLTON HILL, PACIFIC PLACE, BROOKS, and SCHWARTZ)
27          167.   Lau re-pleads and incorporates by reference each of the preceding allegations,
28   as if he had set them forth in full within this cause of action.


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                        -40-
 1          168.   When making the above-pled representations, the Redevelopment Agency,
 2   Brooks, Schwartz, Bolton Hill, and Pacific Place lacked a reasonable basis for believing that
 3   any of them was true or would prove to be true. Rather, each made or ratified the
 4   representations (or connived with others to have them made) with a reckless, cavalier
 5   disregard as to whether they were true or would prove to be true.
 6          169.   As pled above, these representations were false when made or proved to be
 7   false: Neither the Redevelopment Agency, nor Bolton Hill, nor Pacific Place had sufficient
 8   funds or confirmed plans in order to undertake the contemplated development at the
 9   Property, provide the two units to Lau or pay liquidated damages to Lau.
10          170.   Lau and E. Lau justifiably relied on the above representations when agreeing to
11   enter into the Settlement Agreement, and they would not have so assented but for these
12   representations.
13          171.   Thus induced, Lau and E. Lau assented to the Settlement Agreement. In
14   proximate consequence, each suffered proximate losses, since they relinquished their right to
15   object to an unlawful taking and also failed to receive just compensation for the taking. Lau
16   in particular has never received the promised condominium units or the liquidated damages,
17   and E. Lau was wrongly obliged to cede his leasehold and shut down his once successful
18   restaurant, Oswald.
19          172.   The Agency is the legal successor of the Redevelopment Agency and is
20   responsible for the conduct and obligations of the Redevelopment Agency that is described in
21   this complaint. The City of Santa Cruz is responsible for the conduct and obligations of the
22   Redevelopment Agency so far as the Agency either disclaims or cannot assume the
23   responsibility and also because the City of Santa Cruz bears legal responsibility for its
24   several agencies.
25          173.   WHEREFORE, Lau seeks the redress for which he has prayed in his Prayer for
26   Relief, which appears below.
27   //
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                       -41-
 1                                XIII. NINTH CAUSE OF ACTION
                                       (DECLARATORY RELIEF)
 2                                 (AGAINST ALL DEFENDANTS)
 3          174.   Lau re-pleads and incorporates by reference each of the preceding allegations,
 4   as if he had set them forth in full within this cause of action.
 5          175.   Justiciable controversies have arisen over each of the following matters, and
 6   this Court can resolve them by providing declaratory relief as to each one. These justiciable
 7   matters are as follows:
 8
            (1)    Whether the Settlement Agreement is severable, so that its lawful provisions
 9                 can be enforced even if other of its provisions are unlawful?
10          (2)    Whether the Redevelopment Agency’s disclaimer of responsibility to pay any
                   part the purchase price to Lau is lawful? If not, does this render the entire
11                 Settlement Agreement void or voidable, or can its lawful provisions be
                   enforced even if the disclaimer is struck down as a nullity that is void ab initio?
12                 If the disclaimer is void ab initio, but the remainder of the Settlement
                   Agreement enforceable, must the Redevelopment Agency’s successor, the
13                 Agency, pay the specified liquidated damages?
14          (3)    Are the Binding Covenants enforceable against the title holder of record, which
                   at present is the Bank, so that it must pay the specified liquidated damages to
15                 Lau?
16          176.   WHEREFORE, Lau seeks the redress for which he has prayed in his Prayer for
17   Relief, which appears below.
18                                    XIV. PRAYER OF RELIEF
19          Lau now prays to this Court for the following relief in order to redress each of the
20   legal wrongs that it has alleged above.
21
22          First Cause of Action
23   1.     Compensatory damages for all proximate harm.
24   2.     Pre-judgment interest.
25   3.     Reasonable attorney’s fees.
26   4.     Costs of suit.
27   5.     Such other relief as the Court deems appropriate and just.
28   //


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                         -42-
 1          Second Cause of Action
 2   1.     Compensatory damages for all proximate harm.
 3   2.     Pre-judgment interest.
 4   3.     Costs of suit.
 5   4.     Reasonable attorney’s fees.
 6   5.     Such other relief as the Court deems appropriate and just.
 7
 8          Third Cause of Action
 9   1.     Compensatory damages for all proximate harm.
10   2.     Pre-judgment interest.
11   3.     Costs of suit.
12   4.     Reasonable attorney’s fees.
13   5.     Such other relief as the Court deems appropriate and just.
14
15          Fourth Cause of Action
16   1.     A judicial decree that instructs Bolton Hill and Pacific Place, jointly and severally, to
17          pay to Lau the specified liquidated damages of $700,000.00, along with pre-judgment
18          interest on this sum from October 26, 2012 onward.
19   2.     Costs of suit.
20   3.     Reasonable attorney’s fees, as authorized under the Settlement Agreement.
21   4.     Such other relief as the Court deems appropriate and just.
22
23          Fifth Cause of Action
24   1.     A judicial decree that instructs the Bank to pay to Lau the specified liquidated
25          damages of $700,000.00, along with pre-judgment interest on this sum from October
26          26, 2012 onward.
27   2.     Costs of suit.
28   3.     Such other relief as the Court deems appropriate and just.


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                        -43-
 1          Sixth Cause of Action
 2   1.     Contract damages.
 3   2.     Pre-judgment interest.
 4   3.     Costs of suit.
 5   4.     Reasonable attorney’s fees, as authorized under the Settlement Agreement.
 6   5.     Such other relief as the Court deems appropriate and just.
 7
 8          Seventh Cause of Action
 9   1.     Proximate damages.
10   2.     Pre-judgment interest.
11   3.     Costs of suit.
12   4.     Punitive damages, as authorized under California Civil Code § 3294.
13   5.     Such other relief as the Court deems appropriate and just.
14
15          Eighth Cause of Action
16   1.     Proximate damages.
17   2.     Pre-judgment interest.
18   3.     Costs of suit.
19   4.     Such other relief as the Court deems appropriate and just.
20
21          Ninth Cause of Action
22   1.     A judicial declaration that the Settlement Agreement is severable, so that its lawful
23          provisions can be enforced even if other of its provisions are deemed unlawful,
24          voidable or void ab initio.
25   2.     A judicial declaration that (1) decrees void ab initio the Redevelopment Agency’s
26          disclaimer in the Settlement Agreement of any responsibility to pay the purchase price
27          to Lau and (2) obliges the Redevelopment Agency’s successor, the Agency, to pay the
28          unpaid part of this purchase price to Lau, along with pre-judgment interest on this sum


     COMPLAINT FOR DEPRIVATION OF CIVIL RIGHTS UNDER 42 U.S.C. §1983, ETC.                      -44-
EXHIBIT 1
This is to certify that this docwnent is a     3 and
correct copy of Resolution No.        ra-."7 b
passed a_nd adopted by the City Council ?n       .-
the    y-n-... day of .J'-".A"UL·       • OWt• _,
                           9iAB,e.t&
                             Qeputy City Clerk
                                                       RESOLUTION NO. 1296
                              ·.-:,   .
                RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF SANTA
                  CRUZ FINDING AND DETERMINING THAT THE PUBLIC INTEREST AND
               NECESSITY REQUIRE THE ACQUISITION OF PROPERTY IN FEE LOCATED AT
                                1547 PACIFIC AVENUE, APN 005-041-15

                    WHEREAS, the Redevelopment Agency of the· City of Santa Cruz ("Agency'') is
             carrying out the Redevelopment Plan ("Redevelopment Plan") for the Merged Earthquake
             Recovery and Reconstruction Redevelopment Project ("Project") adopted by the City Council of
             the City of Santa Cruz ("City") on November 13, 1990, by Ordinance Nos. 90-40 and 90-41; and

                    WHEREAS, by Resolution 1269, adopted on November 30, 2004, the Agency adopted a
             Five-Year hnplementation Plan pursuant to Section 33490 of the California Redevelopment Law
             wherein specific projects and programs were set forth, including actions and expenditures to be
             mad_e within the term of the. Implementation Plan and further descn'bed how these projects. and
             programs would iilleViate blight; and                       .           . ..          . ..

                    ' WHEREAS, in order to carry out the Redevelopment Plan, the 'Agency desires to bring
              about the redevelopment of certain real property within the Project Area to ensure the fulfillment ·
              of the purposes of the Redevelopment Plan to eliminate blight and to prevent the recurrence or
              spread of conditions causing blight in the Project Area; and

                       WHEREAS, the Agency's Five-Year Implementation Plan includes the goal of promoting
              revitalization of the Downtown Central Business District as the City's center for commerce, office,
              entertainment, dining, and mixed-use residential space; and

                      WHEREAS, the Redevelopment Agency of the City of Santa Cruz ("Agency") has ·
              approved a Disposition and Development Agreement ("DDA'') with Bolton Hill Company, Inc.,
              a Delaware corporation ("Developer''). foi the redevelopment of certain real property located at
              1547-1549 Pacific Avenue and 1110 Cedai: Street within the boundaries of the Project (the
              "Site") as a mixed-use commercial and residential project; and

                     WHEREAS, a portion of the Site consists of the property located at 1547 Pacific Avenue
              (APN 005-041-15) owned by Ronald G. Lau, Trustee Under the Ronald G. Lau Trust dated June
              16, 1989 (the "Lau Property"); and

                       WHEREAS, the DDA provides for sale pf cert.afu real property within the Site by the
              Agency to the Developer and the development of the Site by the Developer, and for the Agency .
              to consider the ·acquisition of the Lau Property to assist in the assembly of the Site in order to
              facilitate the elimination of blight; and

                      WHEREAS, on June 7, 2005, after at least fifteen days written notice to the owner of the
              property described hereafter, as said owner appeared on the last equalized County Assessment
              Roll, the Redevelopment Agency of the City of Santa Cruz held a hearing for the purpose of
;   ...
      _,      allowing the owner thereof a reasonable opportunity to appear and be heard on the following
              matters:
RESOLUTIONNO. 1296



       a.     :Whether the public interest or necessity requires the project; and

       b.     Whether the project is planned or located in a manner which is most compatible
              with the greatest public good and least private injury; and

       c.     Whether the property proposed to be acquired is necessary for the project; and

       d.     Whether the offer required by Government Code Section 7267.2 has been made to
              the owner or owners of record.

       WHEREAS, the Redevelopment Agency of the City of Santa Cruz, as a result of said
hearing, has determined that the public health, safety, and welfare require the acquisition by the
Agency of the Lau Property, more particularly described in Exhibit "A" attached hereto and
incorporated herein, which is located within the boundaries of the Merged Project, in order to
eliminate blighted conditions within the Project; and

      WHEREAS, the improvements Will impact occupied buildings, with business tenants
which will be eligible for assistance pursuant to the requirements of California Relocation Law;
and

         wHEREAS, the proposed acquisition will eliminate blight through assembly of irregular
lots to facilitate; redevelopment of said properties consistent with the goals and objectives of the
I'roject; and- - - -                          ·                                             --

       WHEREAS, the Agency has made offers to acquire the Lau Property pursuant to Section
7267.2 of the Government Code and has attempted in good faith to negotiate a purchase of the
property and has tried to conclude a sale without taking this action; and

      WHEREAS, the findings required by Section 65402 of the California Governrrient Code
were made upon adoption of the Redevelopment Plan for the Project; and

        WHEREAS, the Site is located within the area governed by the Downtown Recovery
Plan, for which an environmental impact report has been prepared and certified; and

       WHEREAS, the development of the Site proposed by the Developer is consistent with
the Redevelopment Plan and the Project; and

       WHEREAS, an Initial Study and Mitigated Negative Declaration were prepared, in
accordance with the California Environmental Quality Act,_ which determined that the proposed
development project with mitigations would not result in significant effects to the environment;
and

        WHEREAS, a Notice of Determination was filed on December 20, 2004.
RESOLUTION NO. 1296


        NOW, THEREFORE, BE IT RESOLVED that the Redevelopment Agency of the City of
Santa Cruz, County of Santa Cruz, State of California, does hereby find, determine, and declare
as follows:

       Section I    That the property to be acquired is for the public purposes of
redevelopment as were specifically described above;

        Section 2       That the Agency is authorized to acquire property by eminent domain in
order to carry out the Project pursuant to Health and ·safety Code Section 33391 (b);

        Section 3       That the property to "be acquired is identified in the Assessor's Parcel
  Records of the County of Santa Cruz as APN 005-041-15, located at 1547 Pacific Avenue and
. more particularly described in Exhibit "A!' attached hereto.

       Section 4       That the public interest and necessity require the acquisition by the
Agency of the fee simple title in, and to, said property. The public interest and necessity require
the public project to wit:                    ·

               a       That the public interest and necessity require the proposed project.

                       The acquisition of the Lau Property will eliminate blighted conditions
                       within the Project and will promote revitalization of the Downtown
                       Central Bus~ess District in_c_ompliance with the Redevelopment Plan.· At
                       present, -the majority of the Lau Property is in a condition of serious
                       disrepair, with a large excavation (the basement of the original building)
                       bordering Pacific A venue, and with weeds and graffiti.

                b.     The proposed project is planned and located in the manner that will be
                       most compatible with the greatest public good and the least private injury.

                       The Lau Property is located within the Redevelopment. Project Area.
                       Acquisition of the property will eliminate blight, will allow the assembly
                       of land into parcels suitable for modem, integrated· development, will
                       provide housing, and will increase tax revenues which will be utilized for
                       the public good. Because publicly-owned property is proposed for
                       inclusion in the assemblage, private injury is limited to one privately-
                       owned parcel. Acquiring this property will not displace ·residential
                       occupants residing at the Lau Property, and will compensate the property
                       owner with a fair market value for the property. The acquisition and
                       development of a portion of the Lau Property is infeasible due to the
                       location of the existing improvements, the City's development standards
                       for minimum land area, the land area necessary to provide adequate
                       parking and the site configuration necessary to provide access to that
                       parking.
RESOLUTION NO. 1296

                  c.       The property proposed to be acquired is necessary for the Project.
                  '
                           The Lau Parcel is necessary in order to create a site that is large enough to
                           be developable, to eliminate blight within the Project ·Area. The
                           development of housing requires property of a certain size in order fo!' a
                           project to be feasible~ The acquisition of the property under consideration,.
                           when assembled with adjacent, publicly owned property, creates a
                           property of adequate size to provide an appropriate scale for development
                           through greater design opportunities, development flexibility, and
                           fmancial feasibility .

     . Section 5. The offer required by Government Code Section 7267.2 has been made to the
owners of record of the properties to be acquired.

         Section 6. The Redevelopment Agency of the City of Santa Cruz does hereby. declare
that it is the intention of said Agency to acquire said property in its ruiine in accordance with the
provisions of the laws of the State of California with reference to condemnation procedures.

        Section 7. The Agency Counsel is hereby authorized and directed to prepare, institute
and prosecute in the name of the Redevelopment Agency of the City of Santa Cruz, such
proceedings, in the proper court having jurisdiction thereof, as may be necessary for the
acquisition of the fee interest to said property. Said Counsel is also authorized and directed to
obtain a necessary order of court granting to the Agency the right ofimm_ec!iate possession and -
occupancy of said property; -                   - - - - - - -- - -

          Section 8. The Agency Clerk shall certify the adoption of this Resolution.

PASSED. AND ADOPTED this 7th day of June, 2005, by the following vote:

AYES:                           Vice Chair Mathews; Councilmembers Coonerty, Fitzmaurice, Porter,
                                Madrigal, Reilly; Chair Rotkin.

NOES:                           None.

ABSENT:                         None.

DISQUALIFIED:                   None.

                                                                                       ;!,~c)-_..____ _
                                                     APPROVED: _ _yY}J..___-:::_:-?.,-:-.     __
                                                               -         Chair

 ATTEST:~ C-d
                      ~~eto~.
 P:\RA0507rpt-Lau RA 05-24-05
 M:\RA0507rpt-Lau RA
EXHIBIT 2
     '
         I    Anthony P. Condotti, SBN 149886
              Jeffrey E. Barnes, SBN 212154
         2    ATCIDSON, BARISONE, CONDOTTI & KOVACEVICH
              A Professional Corporation
         3

         4
              333 Chnrch Street
              Santa Cruz, California 95060
              Telephone: (831) 423-8383
              Facsimile: (831) 423-9401
                                                                                    FI            L E
         5
                                                                                             SEP 2 9 2005
              Attorneys for Plaintiff
              REDEVELOPMENT AGENCY OF THE CITY OF SANTA CRUZ                        ~~EX ~jD, Cl~        _.-
         6
                                                                                    DEPuW,$A:iJTA G~COUNTY
         7

         8                                   SUPERIOR COURT OF CALIFORNIA

         9                              IN AND FOR THE COUNTY OF SANTA CRUZ

     10                                           UNLIMITED JURISDICTION

     11       REDEVELOPMENT AGENCY OF THE CITY       )             CASE NO. CV 151983

l)   12
              OF SANTA CRUZ,

                          Plaintiff,
                                                     )
                                                     )
                                                     )
                                                                   FIRST AMENDED COMPLAINT IN
                                                                   EMINENT DOMAIN
     13                                              )
              vs.                                    )             [Code ofCiv. Proc. § 1250.310]
     14                                              )
              RONALD G. LAU, TRUSTEE UNDER THE       )
         15   RONALD G. LAU TRUST DATED JUNE 16,     )
              1989; ERIC LAU; KEREN BLOOMFIELD;      )
         16   ANANDA WEERASEKARA; SENECA             )
              WEERASEKARA; RIJITHA WEERASEKARA; )
         17   ASIAN ROSE, LLC; SHARON L. LAU;        )
              CITIBANK (WEST), FSB; GOLDEN WEST      )
         18   SAVINGS & LOAN; and DOES 1 through 10, )
              inclusive,                             )
         19                                          )
                           Defendants.               )
     20

     21              !.     Plaintiff REDEVELOPMENT AGENCY OF THE CITY OF SANTA CRUZ ("Agency")

     22       is, and at all pertinent times was, a public redevelopment agency organized and existing under the

         23   Community Redevelopment Law (California Health and Safety Code Section 33000 et seq.).

         24          2.     Plaintiff seeks to acquire by eminent domain a fee simple absolute interest in that certain

         25   property located in the City of Santa Cruz, County of Santa Cruz, State of California and commonly

         26   known as 1547 Pacific Avenue and designated in the records of the Property Tax Assessor for the

         27   County of Santa Cruz as Assessor's Parcel Number 005-041-15 (the "Property").

         28


                                                                 -I-
                                         FIRST AMENDED COMPLAINT IN EMINENT DOMAIN
 1           3.      A legal description of the Property is attached as Exhibit A hereto and is incorporated

2    herein by reference.

 3           4.      A map of the Property's location is attached as Exhibit B hereto and incorporated herein

4    by reference.

 5           5.      Defendant RONALD G. LAU, TRUSTEE UNDER THE RONALD G. LAU TRUST

 6   (CREATED BY THAT DECLARATION OF TRUST DATED JUNE 16, 1989) is record owner of the

 7   Property or is known to Plaintiff to have an interest in the Property, or to claim an interest in the

 8   Property.

 9           6.      Defendant ERIC LAU is owner of the business OSWALDS BISTRO which is a tenant

10   located on the Property at 1547-E Pacific Avenue, and is entitled to compensation for improvements to

11   real property, fixtures, and lost goodwill, if any, pursuant to Code of Civil Procedure Sections 1263.205

12   and 1263.510.

13           7.      Defendant KEREN BLOOMFIELD is owner of the business ARTFORMS which is a

14   tenant located on the Property at 1547-C Pacific A venue, and is entitled to compensation for

15   improvements to real property, fixtures, and lost goodwill, if any, pursuant to Code of Civil Procedure

16   Sections 1263.205 and 1263.510.

17           8.      Defendants ANANDA WEERASEKARA, SENECA WEERASEKARA and RlJITHA

18   WEERASEKARA are lessees of a portion of the Property at 1547-B Pacific Avenue and on that basis

19   have or claim to have an interest in the Property.

20           9.      Defendant ASIAN ROSE, LLC is the owner of the business ASIAN ROSE CAFE which

21   is operated on the Property at 1547-B Pacific A venue, and is entitled to compensation for improvements

22   to real property, fixtures, and lost goodwill, if any, pursuant to Code of Civil Procedure Sections

23   1263.205 and 1263.510.

24           10.     Defendant SHARON L. LAU has or claims to have an interest in the Property.

25           11.     Defendant CITIBANK (WEST), FSB, successor-in-interest to CALIFORNIA FEDERAL

26   BANK, has or claims to have an interest in the Property.

27           12.     Defendant GOLDEN WEST SAVINGS & LOAN has or claims to have an interest in the

28   Property.


                                                    -2-
                                 FIRST AMENDED COMPLAINT IN EMINENT DOMAIN
 1          13.     Defendants DOES 1 through 10, inclusive, have or claim to have an interest in the

2    Property, the exact nature of which is unknown to Plaintiff. The true names or capacities are unknown

3    to Plaintiff who therefore sues these Defendants by fictitious names, and will seek leave to amend this

4    complaint to show their true names and capacities when same have been ascertained.

 5           14.    Plaintiff claims no pre-existing interest in the Property sought to be taken.

 6           15.    On June 7, 2005, the Agency adopted a Resolution of Necessity to Condemn the Property

 7   pursuant to Code of Civil Procedure Section 1245.230 ("Resolution"). A true and correct copy of the

 8   Resolution is attached as Exhibit C hereto and incorporated herein by reference. As established by the

 9   Resolution, the public interest and necessity requires the construction of the mixed-use project on the

10   Property and on two adjoining publicly-owned parcels. This project is planned to be compatible with

11   the greatest public good and the least private injury for the reasons stated in the Resolution. The

12   Property sought to be acquired is necessary for this public purpose. The offer required by Government

13   Code Section 7267.2 has been made to the Property's owner of record.

14           16.    Plaintiff is authorized to acquire this Property by eminent domain under Health and

15   Safety Code Section 33391 and Code of Civil Procedure Section 1240.010, et seq. The project for

16   which the Property is sought to be acquired is described in the Resolution.

17           WHEREFORE, Plaintiff prays for judgment as follows:

18           1.     That a fee simple absolute interest in the Property be awarded to Plaintiff;

19           2.     That just compensation for the Property be determined, assessed and awarded to

20   Defendants;

21           3.     That all liens and encumbrances against the Property, if any, be deducted from the

22   judgment, and that the amount of compensation determined by the Court be paid to persons entitled

23   thereto; and

24   Ill
25   Ill
26   Ill
27   Ill
28   Ill


                                                          -3-
                                 FIRST AMENDED COMPLAINT IN EMINENT DOMAIN
 1         4.     For such other and further relief as the Court may deem proper.

 2

 3                                              ATCHISON, BARISONE, CONDOTTI &
                                                KOVACEVICH
 4                                                                                  '
 5   Dated: September 29, 2005                  ~r                 ?"3?             ~
                                                       ANTHONY P. CONDOTTI
 6                                                     Attorneys for Plaintiff REDEVELOPMENT
                                                       AGENCY OF THE CITY OF SANTA CRUZ
 7

 8

 9

10

11
12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


                                                 -4-
                              FIRST AMENDED COMPLAINT IN EMINENT DOMAIN
This is to certify that this docwnent is a     3 and
correct copy of Resolution No.        ra-."7 b
passed a_nd adopted by the City Council ?n       .-
the    y-n-... day of .J'-".A"UL·       • OWt• _,
                           9iAB,e.t&
                             Qeputy City Clerk
                                                       RESOLUTION NO. 1296
                              ·.-:,   .
                RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF SANTA
                  CRUZ FINDING AND DETERMINING THAT THE PUBLIC INTEREST AND
               NECESSITY REQUIRE THE ACQUISITION OF PROPERTY IN FEE LOCATED AT
                                1547 PACIFIC AVENUE, APN 005-041-15

                    WHEREAS, the Redevelopment Agency of the· City of Santa Cruz ("Agency'') is
             carrying out the Redevelopment Plan ("Redevelopment Plan") for the Merged Earthquake
             Recovery and Reconstruction Redevelopment Project ("Project") adopted by the City Council of
             the City of Santa Cruz ("City") on November 13, 1990, by Ordinance Nos. 90-40 and 90-41; and

                    WHEREAS, by Resolution 1269, adopted on November 30, 2004, the Agency adopted a
             Five-Year hnplementation Plan pursuant to Section 33490 of the California Redevelopment Law
             wherein specific projects and programs were set forth, including actions and expenditures to be
             mad_e within the term of the. Implementation Plan and further descn'bed how these projects. and
             programs would iilleViate blight; and                       .           . ..          . ..

                    ' WHEREAS, in order to carry out the Redevelopment Plan, the 'Agency desires to bring
              about the redevelopment of certain real property within the Project Area to ensure the fulfillment ·
              of the purposes of the Redevelopment Plan to eliminate blight and to prevent the recurrence or
              spread of conditions causing blight in the Project Area; and

                       WHEREAS, the Agency's Five-Year Implementation Plan includes the goal of promoting
              revitalization of the Downtown Central Business District as the City's center for commerce, office,
              entertainment, dining, and mixed-use residential space; and

                      WHEREAS, the Redevelopment Agency of the City of Santa Cruz ("Agency") has ·
              approved a Disposition and Development Agreement ("DDA'') with Bolton Hill Company, Inc.,
              a Delaware corporation ("Developer''). foi the redevelopment of certain real property located at
              1547-1549 Pacific Avenue and 1110 Cedai: Street within the boundaries of the Project (the
              "Site") as a mixed-use commercial and residential project; and

                     WHEREAS, a portion of the Site consists of the property located at 1547 Pacific Avenue
              (APN 005-041-15) owned by Ronald G. Lau, Trustee Under the Ronald G. Lau Trust dated June
              16, 1989 (the "Lau Property"); and

                       WHEREAS, the DDA provides for sale pf cert.afu real property within the Site by the
              Agency to the Developer and the development of the Site by the Developer, and for the Agency .
              to consider the ·acquisition of the Lau Property to assist in the assembly of the Site in order to
              facilitate the elimination of blight; and

                      WHEREAS, on June 7, 2005, after at least fifteen days written notice to the owner of the
              property described hereafter, as said owner appeared on the last equalized County Assessment
              Roll, the Redevelopment Agency of the City of Santa Cruz held a hearing for the purpose of
;   ...
      _,      allowing the owner thereof a reasonable opportunity to appear and be heard on the following
              matters:
RESOLUTIONNO. 1296



       a.     :Whether the public interest or necessity requires the project; and

       b.     Whether the project is planned or located in a manner which is most compatible
              with the greatest public good and least private injury; and

       c.     Whether the property proposed to be acquired is necessary for the project; and

       d.     Whether the offer required by Government Code Section 7267.2 has been made to
              the owner or owners of record.

       WHEREAS, the Redevelopment Agency of the City of Santa Cruz, as a result of said
hearing, has determined that the public health, safety, and welfare require the acquisition by the
Agency of the Lau Property, more particularly described in Exhibit "A" attached hereto and
incorporated herein, which is located within the boundaries of the Merged Project, in order to
eliminate blighted conditions within the Project; and

      WHEREAS, the improvements Will impact occupied buildings, with business tenants
which will be eligible for assistance pursuant to the requirements of California Relocation Law;
and

         wHEREAS, the proposed acquisition will eliminate blight through assembly of irregular
lots to facilitate; redevelopment of said properties consistent with the goals and objectives of the
I'roject; and- - - -                          ·                                             --

       WHEREAS, the Agency has made offers to acquire the Lau Property pursuant to Section
7267.2 of the Government Code and has attempted in good faith to negotiate a purchase of the
property and has tried to conclude a sale without taking this action; and

      WHEREAS, the findings required by Section 65402 of the California Governrrient Code
were made upon adoption of the Redevelopment Plan for the Project; and

        WHEREAS, the Site is located within the area governed by the Downtown Recovery
Plan, for which an environmental impact report has been prepared and certified; and

       WHEREAS, the development of the Site proposed by the Developer is consistent with
the Redevelopment Plan and the Project; and

       WHEREAS, an Initial Study and Mitigated Negative Declaration were prepared, in
accordance with the California Environmental Quality Act,_ which determined that the proposed
development project with mitigations would not result in significant effects to the environment;
and

        WHEREAS, a Notice of Determination was filed on December 20, 2004.
RESOLUTION NO. 1296


        NOW, THEREFORE, BE IT RESOLVED that the Redevelopment Agency of the City of
Santa Cruz, County of Santa Cruz, State of California, does hereby find, determine, and declare
as follows:

       Section I    That the property to be acquired is for the public purposes of
redevelopment as were specifically described above;

        Section 2       That the Agency is authorized to acquire property by eminent domain in
order to carry out the Project pursuant to Health and ·safety Code Section 33391 (b);

        Section 3       That the property to "be acquired is identified in the Assessor's Parcel
  Records of the County of Santa Cruz as APN 005-041-15, located at 1547 Pacific Avenue and
. more particularly described in Exhibit "A!' attached hereto.

       Section 4       That the public interest and necessity require the acquisition by the
Agency of the fee simple title in, and to, said property. The public interest and necessity require
the public project to wit:                    ·

               a       That the public interest and necessity require the proposed project.

                       The acquisition of the Lau Property will eliminate blighted conditions
                       within the Project and will promote revitalization of the Downtown
                       Central Bus~ess District in_c_ompliance with the Redevelopment Plan.· At
                       present, -the majority of the Lau Property is in a condition of serious
                       disrepair, with a large excavation (the basement of the original building)
                       bordering Pacific A venue, and with weeds and graffiti.

                b.     The proposed project is planned and located in the manner that will be
                       most compatible with the greatest public good and the least private injury.

                       The Lau Property is located within the Redevelopment. Project Area.
                       Acquisition of the property will eliminate blight, will allow the assembly
                       of land into parcels suitable for modem, integrated· development, will
                       provide housing, and will increase tax revenues which will be utilized for
                       the public good. Because publicly-owned property is proposed for
                       inclusion in the assemblage, private injury is limited to one privately-
                       owned parcel. Acquiring this property will not displace ·residential
                       occupants residing at the Lau Property, and will compensate the property
                       owner with a fair market value for the property. The acquisition and
                       development of a portion of the Lau Property is infeasible due to the
                       location of the existing improvements, the City's development standards
                       for minimum land area, the land area necessary to provide adequate
                       parking and the site configuration necessary to provide access to that
                       parking.
RESOLUTION NO. 1296

                  c.       The property proposed to be acquired is necessary for the Project.
                  '
                           The Lau Parcel is necessary in order to create a site that is large enough to
                           be developable, to eliminate blight within the Project ·Area. The
                           development of housing requires property of a certain size in order fo!' a
                           project to be feasible~ The acquisition of the property under consideration,.
                           when assembled with adjacent, publicly owned property, creates a
                           property of adequate size to provide an appropriate scale for development
                           through greater design opportunities, development flexibility, and
                           fmancial feasibility .

     . Section 5. The offer required by Government Code Section 7267.2 has been made to the
owners of record of the properties to be acquired.

         Section 6. The Redevelopment Agency of the City of Santa Cruz does hereby. declare
that it is the intention of said Agency to acquire said property in its ruiine in accordance with the
provisions of the laws of the State of California with reference to condemnation procedures.

        Section 7. The Agency Counsel is hereby authorized and directed to prepare, institute
and prosecute in the name of the Redevelopment Agency of the City of Santa Cruz, such
proceedings, in the proper court having jurisdiction thereof, as may be necessary for the
acquisition of the fee interest to said property. Said Counsel is also authorized and directed to
obtain a necessary order of court granting to the Agency the right ofimm_ec!iate possession and -
occupancy of said property; -                   - - - - - - -- - -

          Section 8. The Agency Clerk shall certify the adoption of this Resolution.

PASSED. AND ADOPTED this 7th day of June, 2005, by the following vote:

AYES:                           Vice Chair Mathews; Councilmembers Coonerty, Fitzmaurice, Porter,
                                Madrigal, Reilly; Chair Rotkin.

NOES:                           None.

ABSENT:                         None.

DISQUALIFIED:                   None.

                                                                                       ;!,~c)-_..____ _
                                                     APPROVED: _ _yY}J..___-:::_:-?.,-:-.     __
                                                               -         Chair

 ATTEST:~ C-d
                      ~~eto~.
 P:\RA0507rpt-Lau RA 05-24-05
 M:\RA0507rpt-Lau RA
EXHIBIT 3
                            SETTLEMENT AND PURCHASE AGREEMENT

                   This settlement agreement (the "Agreement") is made between the

    Redevelopment Agency of the City of Santa Cruz (the "Agency") and Bolton Hill Company, Inc.

    ("Bolton Hill") (collectively "Buyers") on the one hand and Ronald G. Lau, individually and as

    trustee of the Ronald G. Lau Trust created by that Declaration of Trust dated June 16,1989 (the

    "Trust"), Eric Lau ("E. Lau"), and Lani Lau ("L. Lau") (collectively, the "Laus") on the other

    hand. As used herein "R. Lau" means Ronald G. Lau both in his individual capacity and as the

    trustee of the Trust.


                                             I. RECITALS

    1.                                                                                   iy
            The Agency has filed the following civil action: Redevelopment Agency o the Ct of
                                                                                   f

    Santa Cruz v. Lau et al., filed in California Superior Court, Santa Cruz County, Case Number

    CV 151983 (the "Action"). In the Action, the Agency seeks to acquire in fee simple certain real

    property owned by R. Lau as the trustee of the Trust, commonly known as 1547 Pacific Avenue,

    Santa Cruz,California 95060 (the "Property"), as more particularly described in Exhibit A,

/   attached hereto and incorporated herein by reference, for purpose of effectuating redevelopment

    of the Property in accordance with the Merged Earthquake Recovery and Reconstruction

    Redevelopment Plan (the "Plan") approved and adopted by the City Council of the City of Santa

    Cruz on November 13,1990 by Ordinance Nos. 90-40 and 90-41, as amended. The Project
    (defined below) is being undertaken pursuant to that certain Disposition and Development

    Agreement dated November 24,2004 (the "DDA") by and between the Agency and Bolton Hill ,

    pursuant to which the Agency has agreed to acquire the Property with funds advanced by Bolton




    SETTLEMENT AND PURCHASE AGREEMENT
                                                                                                 Page 1
Hill and to transfer title of the Property to Bolton Hill, which, in turn, has agreed to build the

Project.

2.       The Action names the following parties as defendants (hereinafter collectively

"Defendants"):

         a.      R. Lau;

         b.      E. Lau, who is a lessee of a portion of the Property at 1547-E Pacific Avenue, and

who is the sole proprietor of a business that he operates there under the name "Oswald". E.

Lau's has an oral lease with R. Lau by which E. Lau has possession of the above-indicated

portion of the Property from month to month. E. Lau has claimed entitlement to compensation

under the Eminent Domain Law, and has also claimed a right to seek compensation under the

California relocation assistance statutes. E. Lau's interest in the Property is further described

below.

         c.      RIJITHA WEERASEKARA ("Weerasekara"), who is a lessee of a portion of the

Property at 1547-B Pacific Avenue, and who has an interest in Asian Rose, LLC, which in turn

owns and operates a business called "Asian Rose Cafe" at the above-identified part of the

Property. Weerasekara's lease with R. Lau (dated January 9, 1993, w/ addendum of May 28,

1998) grants to R. Lau (the lessor) all compensation awarded in an eminent domain proceeding

for a partial'or entire loss of the lease. Nevertheless, Asian Rose, LLC may claim entitlement to

compensation (lost goodwill) under the Eminent Domain Law, and Weerasekara and Asian Rose,

LLC may also seek compensation under the California relocation assistance statutes. In addition,


SETnEMFNT AGREEMENT


                                                                                                Page 2
Ananda Weerasekara and Seneca Weerasekara are named as Defendants and have an unspecified

interest in the Action.

       d.      Keren Bloomfield ("Bloomfield"), who is the lessee of a portion of the Property at

1547-C Pacific Avenue, and who is the sole proprietor of a business that she operates there under

the name "Artforms". Bloomfield's lease with R. Lau (dated May 25,2001, w/ addendum of

same date) grants to R. Lau (the lessor) all compensation awarded for a taking in an eminent

domain proceeding. Nevertheless, Bloomfield may claim entitlement to compensation (lost

goodwill) under the Eminent Domain Law, and she may also seek compensation under the

California relocation assistance statutes.

        e.      SHARON L. LAU, who has a security interest recorded against the Property;

        f.      CITIBANK (WEST), FSB, successor-in-interest to CALIFORNIA FEDERAL

BANK, which has a claim of entitlement to a portion of the compensation provided pursuant to

this Agreement as a result of a security interest recorded against the Property; and

        g.      GOLDEN WEST SAVINGS & LOAN, which has or claims to have an interest in

the Property in the nature of an easement.

3.      The Laus hold legal or other interest in the Property, as follows:

        a.      R. Lau, as trustee of the Trust, holds title in fee simple to the Property. R Lau

represents and warrants to the Agency and Bolton Hill that he is the sole trustee of the Trust.

        b.      E. Lau, doing business as a sole proprietorship called "Oswald, holds a leasehold

in the Property.


                                                 -3-

 SETTLEMENT AND PURCHASE AGREEMENT
                                                                                               Page 3
       c.        L. Lau is an interested party in this settlement, without a record ownership interest

in the Property.



4.     In order to avoid the expense, uncertainty and ongoing burdens of a contested litigation,

and for the sake of sewing the greater Santa Cmz community to which all the parties belong, the

Agency and Bolton Hill on the one hand and R. Lau, E. Lau, and L. Lau on the other hand have

agreed to a settlement of the Action on the below-stated terms and conditions.



                      11. TERMS AND CONDITIONS OF SETTLEMENT

1.     Effective Date. The effective date of this Agreement (the "Effective Date") will be the

first date on which it has been signed by every party to this Agreement and by their respective

attorneys.

2.      Binding On Affiliates, Etc. This Agreement shall bind not only Bolton Hill, but also

any affiliates, legal successors, successors-in-interest, developers or other legal persons to whom

it sells, assigns or otherwise transfers in whole or in part its legal interest in the Property or its

obligation to develop the Property. As used in this Agreement, the term "successor" of Bolton

Hill shall refer to any such affiliates, legal successors, successors-in-interest, developers or other

legal persons.

3.      The Laus' Waiver of Challenge to Taking. R. Lau and E. Lau hereby waive their right

to object to the Agency's proposed taking of the Property under California Eminent Domain Law



SETTLEMENT AGREEMENT


                                                                                                   Page 4
or under any other law (federal or state constitutional provision, federal or state constitutional

doctrine, fedeml or state case law authority, or federal or state statutory authority).

4.      E. Lau's Waiver of Relocation Assistance. E. Lau hereby waives his right to seek or
obtain relocation assistance or relief under Sections 7260 et seq. of the California Government

Code.

5.      Compensation to the Laus. In exchange for the Laus' right, title and interest in the

Property, and to provide recompense to the Laus for their respective interests in the Property, and

to pay E. Lau for any possible loss of goodwill that might otherwise be compensable in the

Action, and otherwise to satisfy all compensation claims to which the Laus might be entitled

under Sections 1263.010 et seq. of the California Code of Civil Procedure, or any other claims of

whatever nature, the Agency and Bolton Hill or Bolton Hill's successor shall deliver to R. Lau,

the   rust, and E. Lau payment as follows:

        a.     Cash Payment. The sum of one-million-nine-hundred-hventy-five-thousand

dollars ($1,925,000.00) (the "Cash Payment"), which shall be distributed as follows.

                1.      $1.781.000.00 to R. Lau or for his benefit. To R. Lau or for R. Lau's

benefit the sum of one-million-seven-hundred-eighty-one
                                                      thousand dollars ($1,781,000.00).

This sum shall be distributed through escrow as follows:

                        (a)     Sharon L. Lau: $0 (zero dollars).

                        (b)     California Federal Bank: Three-hundred-three-thousand-three-

        hundred-nine dollars and fifty-eight cents ($303,309.58) as of January 20,2006, and to be

        adjusted to reflect any accrued interest and principal payments, if any, at close of escrow.
                                                  -5-

SETTLEMENT AND PURCHASE AGREEMENT
                                                                                                Page 5
                    (c)     Hubbard & Hubbard, LLP, a limited liability partnership: Forty-

     two-thousand-five-hundred-three dollars and ninety-six cents (%42,503.96),plus interest

     at $8.15 per day from March I, 2005 until this obligation is paid in full.

                    (d)     Hubbard & Hubbard, LLP, a limited liability partnership: Twenty-

     four-thousand-two-hundred-seventy-seven dollars and two cents ($24,277.02) as of

     October 17,2005, and to be adjusted to reflect any payments made or future services

     rendered

                    (e)     Thompson & Hubbard, A Law Corporation: One-hundred-thirty-

     one-thousand-eight-hundred-twenty-three dollars and forty-six cents ($13 1,823.46), plus

     interest at $25.28 per day from March 1,2005 until this obligation is paid in full.(f)

                    (f)     William A. Markham: One-hundred-one-thousand-four-hundred-

     fifty-one dollars and forty cents ($101,451.40).

                    (g)     The balance to R. Lau.

      R. Lau, L. Lau and E. Lau represent and warrant to the Agency and Bolton Hill that

      there are no other lienholders or claimants who are asserting or are entitled to assert or

      impose any liens or encumbrances against the Property, that the amounts above

      constitute all sums owing to the Lienholders/Claimants or any other lienholders ox

      claimants in connection with any liens or encumbrances against the Property and that

      payment of such amounts shall fully satisfy and discharge such liens and encumbrances

      and any other claims the Lienholders/Claimants or any other lienholders or claimants

      may have with respect to the Property; and R. Lau, L. Lau and E. Lau shall indemnify,
SETTLEMENT AGREEMENT


                                                                                              Page 6
        defend and hold Agency and Bolton Hill harmless from any claims asserting otherwise.

        The Escrow Holder (defined below) shall obtain appropriate documentation and

        unconditional releases of claims from these lien claimants prior to payment.

               ii.     $144,000.00 to E. Lau. To E. Lau the sum of one-hundred-forty-four

thousand dollars ($144,000.00), which shall be deemed to be full and complete compensation to

E. Lau for loss of goodwill enjoyed by his restaurant Oswaid and for the loss of his leasehold

interest in the Property and all other compensable claims that E. Lau may have.

       b.      Conveyance of Two Residential Units. Provided that title to the Property has

been conveyed through close of escrow to Bolton Hill or its successor, then Bolton Hill or its

successor shall also convey to R. Lau,either in his individual capacity or in his capacity as the

trustee of the Trust, as determined by him, the below-described "R. Lau Units," subject to the

terms and conditions set forth in this Agreement.

       Subject to the force majeure provision that appears below in this Agreement, Bolton Hill

or its successor shall construct the below-defined Project at the Property, and this Project, if

constructed, shall include at least two below-defined Qualifying Units, and two such Qualifying

Units shall be conveyed to R. Lau or the R. Lau Trust in the below-described manner.

       As used herein, the term "Project" refers to the redevelopment project that Bolton Hill or

its successor intends to build at the Property and certain adjacent property. The Project is

planned to be a multi-story, mixed-use condominium project that will have commercial

condominiums on the street level and residential condominiums on the upper level(s) (each

residential condominium being a "Residential Unit" and collectively, the "Residential Units").




SE7TLEMENT AND PURCHASE AGREEMENT
                                                                                               Page 7
       Bolton Hill or its successor's conveyance of the R. Lau Units to R. Lau ,shall be done on

the following terms and conditions.

       (1)     The title to the Residential Units conveyed to R. Lau shall be subject to all non-

monetary encumbrances then of record, but prior to conveyance Bolton Hill or its successor shall

cause to be removed all monetary liens except the following: (i) non-delinquent real property

taxes and assessments, and (ii) liens caused or created by R. Lau, E. Lau, S. Lau, Bloomfield

and/or Weerasekara or any of their respective agents, employees, affiliates, contractors, assigns,

heirs, administrators, trustees, or other representatives before the close of escrow. Without

limiting the generality of the foregoing, title shall be subject to all encumbrances of record upon

acquisition of the Property and the other real property that will be a part of the Project by Bolton

Hill or its successor and any new encumbrances thereafter created as described below, other than

the monetary liens required to be removed pursuant to the prior sentence. E. Lau and R. Lau

acknowledge and agree that, subject to this paragraph above, Bolton Hill or its successor shall

have the right to further encumber the Property and other real property used in their Project after

the Effective Date (but a s to the Property, only after close of escrow) in Bolton Hill or its

successor's sole and absolute discretion, including without limitation creation of assessment

districts, and recordation of any and all documents desired by Bolton Hill or its successor in

connection with the creation, ownership, operation and administration of the Project (including

without limitation easements, condominium maps, declarations of covenants, conditions and

restrictions, and use restrictions and other restrictive covenants), provided that with respect to the

Residential Units to be conveyed to R. Lau, the new encumbrances are applied on an equitable

basis to all of the condominium units.
SETTLEMENT AGREEMENT


                                                                                                 Page 8
        (2)    The Residential Units to be conveyed to R. Lau ("R. Lau's Units") shall consist of

two (2) single-bedroom Residential Units located within the Project. Each of R. Lau's Units shall

not be smaller than the larger of the following: (a) seven-hundred-fifty square feet, or (b) the

average size of the other single-bedroom residential condominium units that Bolton Hill or its

successor constructs within the Project and then offers for sale to the public at large.

        (3)    In material quality, design, workmanship, and amenities, R. Lau's Units shall

meet or be as good as the building standard established for the Residential Units in the Project by

Bolton Hill or its successor (i.e., the base, standard material quality, design, workmanship and

amenities, and not any optional upgrades offered at the Project).

        (4)    If there are more than five (5) single-bedmom Residential Units meeting the

above-described minimum square footage requirement within the Project ("Qualifying Units"),

Bolton Hill or its successor may, at its sole option, exclude any of the Qualifying Units in

 accordance with the following table from the list of Qualifying Units offered to R. Lau as

 described below:

I Total Number of Qualifying Units                 ' Number of Excluded Qualifying Units
                                             -^
                                              -                                                         I




 SETTLEMENT AND PURCHASE AGREEMENT
                                                                                               Page 9
       (5)     If there are more than fifteen (15) Qualifying Units within the Project, the number

of Qualifying Units that Bolton Hill or its successor may exclude shall be calculated by dividing

the total number of Qualifying Units within the Project by three (3). If the resulting number

includes the fraction 0.5 or less, the number shall be rounded down to the nearest whole number;

if the fraction is greater than 0.5, the number shall be rounded up to the nearest whole number.

       (6)     If there are five (5) or fewer Qualifying Units within the Project, Bolton Hill or its

successor may, at its sole option, exclude any one (1) of the Qualifying Units from the list

delivered to R. Lau as described below.

       (7)     Not less than two (2) weeks before offering any of the Qualifying Units (other

than the excluded Qualifying Units described above) for sale to the public at large, Bolton Hill or

its successor shall deliver by fax, e-mail and regular mail a list of the Qualifying Units (less the

excluded Qualifying Units described above) to R. Lau, and R. Lau shall designate as the R. Lau

Units any two (2) of the listed Qualifying Units in his sole and unfettered discretion by written

notice delivered to Boiton Hill or its successor not later than five (5) days after the list of

Qualifying Units is delivered to R. Lau ("Designation Notice"). If R. Lau fails to deliver the

Designation Notice within this five (5) day period, then the R. Lau Units shall be selected by

Bolton Hill or its successor from the list previously delivered to R. Lau, in Bolton Hill or its

successor's sole and absolute discretion. Not later than ten (10) days after the later of Bolton Hill

or its successor's receipt of the Designation Notice or issuance of the Final Public Report for the

Residential Units from the California Department of Real Estate, Bolton Hill or its successor

shall convey to R. Lau, either in his individual capacity or in his capacity as Trustee of the Trust,

SETTLEMENT AGREEMENT


                                                                                                  Page 10
as designated by him, title in fee simple to the two Residential Units that have been selected from

the proffered Qualifying Units pursuant to the procedure described above, and Bolton Hill or its

successor shall make this conveyance by a grant deed or grant deeds that are substantially

identical in f o m as those used to convey other Residential Units to third-party purchasers, with

title thereto in the condition described above, as evidenced by a standard CLTA owner's policy

of title insurance for a commercially reasonable amount issued by a title company of Bolton's

Hill's choice. Title insurance premiums, escrow fees and other closing costs shall be shared by

Bolton Hill or its successor and R. Lau in accordance with the custom in Santa Cruz, California

for sales of real property. If Bolton Hill or its successor constructs only two Qualifying Units at

the Property, title to each Qualifying Unit shall be conveyed to R. Lau in the above-mentioned

manner as soon as each Qualifying Unit has received a certificate of occupancy and the Final

Public Report has been issued.

       (8)     If Bolton Hill or its successor constructs the Project, it shall construct at least two

Qualifying Units at the Property.

       (9)     Bolton Hill or its successor shall not offer the Qualifying Units (other than the

excluded Qualifying Units described above) for sale to the public prior to first offering the

Qualifying Units to R. Lau as described in this Agreement. Prior to the date on which R. Lau is

required to provide the Designation Notice, Bolton Hill or its successors shall provide R. Lau

and his agents a reasonable opportunity to inspect the Qualifying Units.

        (10)   No later than upon close of escrow, Bolton Hill or its successor shall pursue all

government approvals required to construct the Project as a mixed residential and commercial




SETTLEMENT AND PURCHASE AGREEMENT
                                                                                               Page 11
condominium development and shall undertake the construction and completion of the Project in

an expeditious manner in conformance with the standards and practices of experienced real

estate developers. Construction and design of the Project, including without limitation

architectural design, project siting, amenities, standard fixtures and upgrades, and the number,

size, location and configuration of Residential Units shall be in Bolton Hill or its successor's sole

and absolute discretion subject only to the development regulations of the City of Santa Cruz.

        (1 1)   Subject to the force majeure provision recited below in this Agreement, Bolton

Hill or its successor shall develop the Project, and the Project shall include at least two

Qualifying Units. If Bolton Hill or its successor builds any improvement at the Property that

includes at least one for-sale residential unit, the improvement shall be deemed to be the Project

and shall therefore include at least two Qualifying Units. R. Lau shall have the right to compel

specific performance of Bolton Hill or its successor's obligation to construct two (2) Qualifying

Units if it builds the Project at the Property.

        (12)    LIQUIDATED DAMAGES. NOTWITHSTANDING THE FOREGOING, IF

BOLTON HILL OR ITS SUCCESSOR DOES NOT BUILD THE PROJECT, IT OR ITS

SUCCESSOR SHALL INSTEAD PAY LIQUIDATED DAMAGES TO R. LAU IN THE

AMOUNT OF SEVEN-HUNDRED-THOUSAND DOLLARS ($700,000.00) UPON THE

EARLIER OF THE FOLLOWING TWO OCCURRENCES: (1) SEVEN (7) YEARS FROM

THE EFFECTIVE DATE, OR (2) THE COMMENCEMENT OF CONSTRUCTION OF ANY

PERMANENT BUILDING ON ANY PART OF THE PROPERTY BY BOLTON HILL OR

ITS SUCCESSOR. THE PARTIES ACKNOWLEDGE THAT R. LAU'S ACTUAL

SETTLEMENT AGREEMENT

                                                                                              Page 12




                                                                                               -   -..- .
DAMAGES IN THE EVENT BOLTON HILL OR ITS SUCCESSOR FAILS TO BUILD THE

PROJECT WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO

DETERMINE. THEREFORE, BY PLACING THEIR SIGNATURES OR INITIALS BELOW,

THE PARTIES ACKNOWLEDGE THAT PAYMENT OF THE LIQUIDATED DAMAGES

DESCRIBED IN THIS PARAGRAPH HAVE BEEN AGREED UPON, AFTER

NEGOTIATION, AS REASONABLE LIQUIDATED DAMAGES PURSUANT TO THE

TERMS HEREOF, CALIFORNIA CIVIL CODE SECTIONS 1671 AND 1677 AND ANY

OTHER APPLICABLE LAW, AND SHALL CONSTITUTE R. LAU'S EXCLUSIVE

REMEDY AGAINST BOLTON HILL OR ITS SUCCESSOR IN THE EVENT BOLTON HILL

OR ITS SUCCESSOR DOES NOT BUILD THE PROJECT AS DESCRIBED HEREIN.

THESE LIQUIDATED DAMAGES ARE NOT mTENDED TO SERVE AS A FORFEITURE

OR PENALTY FOR NON-PERFORMANCE, BUT RATHER ARE INTENDED TO

PROVIDE DAMAGES IN LIEU OF CONTRACT DAMAGES ACCORDING TO PROOF

AND IN LIEU OF ALL OTHER REMEDIES AVAILABLE TO R. LAU. THESE

LIQUIDATED DAMAGES SHALL SERVE AS R. LAU'S SOLE AND EXCLUSIVE

REMEDY IF BOLTON HILL OR ITS SUCCESSOR DOES NOT BUILD THE PROJECT AT

THE PROPERTY. THE AMOUNT OF THE LIQUIDATED DAMAGES IS A

REASONABLE ESTIMATE OF R. LAU'S PROBABLE DAMAGES INSOFAR AS CAN BE

REASONABLY APPROXIMATED IN LIGHT OF THE CIRCUMSTANCES EXISTING AS

OF THE EFFECTIVE DATE OF THIS AGREEMENT. THE AGENCY, E. LAU, AND L.

LAU PUT THEIR INITIALS BELOW ONLY TO SIGNIFY THEIR ACKNOWLEDGMENT

OF THIS PROVISION; UNDER NO CIRCUMSTANCES SHALL THE AGENCY, E. LAU
                                  -13-

SETIZEMENT AND PURCHASE AGREEMENT
                                                                   Page 13
OR L. LAW BE LIABLE FOR PAYMENT OF LIQUIDATED DAMAGES, WHICH SHALL

REMAIN THE SOLE RESPONSIBILITY OF BOLTON HILL OR ITS SUCCESSOR.

     BOLTON HILL:                           R LAU.                    AGENCY:

     E. LAU:                               L. LAW:

        (13)   The provisions of this entire paragraph (entitled "Conveyance of Two Residential

Units"), including all sub-paragraphs, are hereby agreed to be and shall be deemed covenants

that run with the land, covenants in gross, equitable servitudes, conditions that encumber title,

andlor restrictions of title (collectively, the "Binding Covenants"). The provisions of Paragraph

5(%) shall be stated in a document (the "Binding Covenants Document") that shall be recorded

concurrently with the close of escrow at the Recorder's Office of Santa Cruz County, California;

provided, however, that R. Lau or R. Lau's successors shall quitclaim all further or other interest

in the Property including, but not limited to, the Binding Covenants, at the time the R. Lau Units

are transferred to R. Lau or, alternatively, concurrently with payment to R. Lau of liquidated

damages pursuant to paragraph (12), ab0ve.A true and correct copy of the Binding Covenants

Document is appended to this Agreement as Exhibit C.

6.      Surrender of Title. In exchange for the foregoing valuable consideration, R. Lau, as

Trustee of the Trust, shall convey by grant deed all of his and the Trust's right, title and interest

in the Property either to Bolton Hill or its successor or another entity acceptable to Agency and

Bolton Hill or its successor. Except as otherwise expressly set forth in this Agreement, this

conveyance will be made without any express or implied warranty of any kind whatsoever, nor

in particular any express or implied warranty concerning any condition or proposed use of the

SETTLEMENT AGREEMENT


                                                                                               Page 14
Property, nor any express or implied warranty concerning any local or state zoning or regulatory

matter, environmental hazard, other toxic hazard, grading problem, or soil condition that might

affect or concern the Property or its suitability for the development project that Bolton Hill or its

successor contemplates performing at the Property.

7. Termination of Leaseholds.' If either Bloomfield or Weerasekara terminate their rental

agreements affecting the Property before the close of escrow, neither R. Lau, E. Lau or the Trust

shall enter into any new rental agreements or leases for the Property. The amount of rent which

would have been paid by Bloomfield and/or Weersekara from the effective date of their

respective rental agreement termination to the close of escrow shall be added to and considered

part of the Cash Payment.

8. Conveyance of TitlelDisbursement of the Cash PaymentlRecording of Binding

Covenants Document. The purchase and sale of the Property shall be consummated by means of

an escrow which is to be opened at First American Title Company, 330 Soquel Avenue, Santa CNZ,

CA 95062 ("Escrow Holder"), on the Effective Date. Bolton Hill shall deposit one-hundred

percent (100%) of the Cash Payment in escrow with the Escrow Holder in cash or by cashier's

check during business hours at least three (3) business days before close of escrow. Should

Bolton Hill fail to timely deposit the Cash Payment as stated herein, Agency shall deposit the

Cash Payment into escrow from "Agency Working Capital" or the "Letter of Credit" as those

terms are defined by the DDA. To ensure adequate funds are available to close escrow, Bolton

Hill has approved the revised Agency Budget submitted to Bolton Hill on or about September

2 1,2005 and increased the letter of credit (or cash deposit) as required by the DDA to include

the Cash Payment. At least three (3) business days before close of escrow, R. Lau shall deposit
                                                 -15-

SETTLEMENT AND PURCHASE AGREEMENT
                                                                                              Page 15
with the Escrow Holder a grant deed, in the Escrow Holder's standard form, conveying all of his

and the Trust's right, title and interest in the Property. At least three days before the close of escrow

R Lau and Bolton Hill shall deposit with the Escrow Holder in recordable condition the Binding

Covenants Document. R. Lau shall cause title to the Property to be conveyed to Bolton Hill by

grant deed, subject only to the Binding Covenants Document, current taxes and the exceptions

approved by Agency and Bolton Hill pursuant to Paragraph 15, below (the "Permitted Exceptions").

At closing, R Lau shall instruct Escrow Holder to cause its underwriter to issue its CLTA (or

extended ALTA if required by Agency or Bolton Hill) policy of title insurance insuring title to the

Property with liability in the amount of the Cash Payment. The policy shall list only the foregoing

taxes, Permitted Exceptions, and printed exclusions and exceptions standard to such CLTA or

ALTA policies. R. Lau shall provide Escrow Holder with such owner's affidavits or other

documents as may be required by Escrow Holder to enable its underwriter to issue the required title

policy at closing. At close of escrow, which shall be no later than February 12,2006 unless all the

parties to this Agreement specify otherwise in writing, the Escrow Holder will disburse the Cash

Payment as set forth above and record the grant deed and the Binding Covenants Document.

9. Escrow Instructions. The escrow instructions given to Escrow Holder shall be consistent with

the terms of this Agreement and, as between the parties, the terms of this Agreement shall prevail if

there is any inconsistency.

10. Nonforeign Certificate. R. Lau shall deliver to Buyer, at or prior to close of escrow, a

Transferor's Certificate of Nonforeign Status pursuant to Section 1445 of the Internal Revenue Code

of 1986, as amended, certifying that R. Lau is not a foreign person.

11. Reporting to Internal Revenue Service. The escrow instructions for this transaction shall
SETTLEMENT AGREEMENT


                                                                                                Page 16
obligate Escrow Holder to report this transaction to the Internal Revenue Service pursuant to

Section 6045 of the Internal Revenue Code of 1986, as amended.

12. California Franchise Tax Withholding. R. Lau shall provide Agency and Bolton Hill as well

as Escrow Holder with a duly executed Califomia Form 593-C, certifying that R. Lau is exempt
from the provisions of Section 18662 of the California Revenue and Taxation Code and that Agency

and Bolton Hill or Escrow Holder will not be required to withhold any amounts from the Cash

Payment pursuant thereto. If R. Lau has not provided such evidence by the closing date, Agency

and Bolton Hill are authorized to instruct Escrow Holder to withhold three and one-third percent

(3.333%) of the Cash Payment and to remit the amount withheld to the Califomia Franchise Tax

Board ("FTB") in accordance with the provisions of Section 18662; provided, however, that should

Escrow Holder be required to withhold any amounts if R. Lau has not requested an authorization

from the FTB that a reduced or no amount be withheld, or has requested such an authorization and

received no response from the FTB, the parties may instmct the Escrow Holder to hold in trust the

amount required to be withheld for a period of forty-five (45) days from the closing date. M e r said

forty-five (45)-day period, the amount withheld shall be remitted to the FTB unless an authorization

that a reduced or no amount be withheld has been received within that time. The parties shall further

instruct the Escrow Holder that if an authorization that a reduced or no amount be withheld is
received within the forty-five (45)-day period, the excess of any amount required to be remitted

pursuant to any such authorization shall be disbursed to R. Lau upon receipt of such notice. The

parties stipulate that the acquisition of the Property will be done in response to Agency's

condemnation of it and in response to Agency's Action to take the Property by eminent domain.

This Agreement constitutes a settlement between the parties hereto of Agency's action to take the


SETTLEMENT AND PURCHASE AGREEMENT
                                                                                                Page 17
Property by eminent domain.

13. Close of Escrow. Escrow shall close no later than February 12,2006, unless extended in writing

by mutual agreement of the parties.

14. Costs and Prorations. Agency and Bolton Hill shall bear all closing costs, including transfer

taxes, CLTA title insurance premiums, escrow fees and recording costs, but excluding any costs of

clearing title. Real property taxes, premiums on fire and extended coverage insurance acceptable to

Agency and Bolton Hill, rents, utilities and other operating expenses, if any, shall be prorated as of

the close of escrow. Agency and Bolton Hill shall assume any bond or assessment which is a lien on

the acquired property, with interest on such bonds or assessments prorated as of the close of escrow.

15. Approval of Encumbrances. Bolton Hill has previously obtained a preliminary title report

and legible copies of all documents referred to therein covering or relating to the Property. A true

and correct copy of the preliminary title report is attached hereto as Exhibit B. Agency and Bolton

Hill hereby approve all exceptions and exclusions listed therein, doing so on the specific

understanding that (1) the above-listed Lienholders/Clairnants shall be paid in full in the above-

stated manner; (2) R. Lau shall not allow any new or additional encumbrances to be recorded

against the Property; and (3) R. Lau shall assume hll, sole responsibility for removing or otherwise

satisfying any new or additional encumbrance other than (1) those that will be paid by the Agency

from the above-stated Cash Payment, or (2) then current real property taxes and assessments not yet

due and payable. Bolton Hill may at its discretion obtain an updated preliminary report prior to

close of escrow to verify that no further encumbrances have been placed upon the Property before

the close of escrow.

16. The Agency and Bolton Hill's Approval Of Property Conditions.
SETTLEMENTAGREEMENT

                                                                                               Page 18
Agency and Bolton Hill have had a full opportunity to enter into and upon the Property for the

purpose of inspecting the physical condition of the Property and have concluded all such inspections

to their satisfaction. Agency and Bolton Hill hereby approve the physical condition of the propay

as of the EffectiveDate. R. Lau acknowledges and agrees that Agency and Bolton Hill nonetheless

are relying on R. Lau's representations and warranties made herein, unless such representations and

wananties are specifically waived in whole or in part by Agency and Bolton Hill.

17. Leases. R Lau represents and warrants that as of the Effective Date there are no rights of

possession of the Properly by any thud party other than the lease agreements referenced above. R.

Lau further represents and warrants that, as between R. Lau and any lessee, R. Lau shall not enter

into any new lease agreements and has not extended and will not extend the lease agreement

referenced above.

18. Deed and Cash. Agency and Bolton Hill shall instruct Escrow Holder to be ready, willing and

able to deliver the Cash Payment required from Agency and Bolton Hill as specified above. R. Lau

shall instruct Escrow Holder to be ready, willing and able to record and deliver to Bolton Hill the

grant deed required from R. Lau, duly executed by R. Lau and notarized. R. Lau and Bolton Hill

shall instruct Escrow Holder to be ready, willing and able to record and deliver to R. Lau and

Bolton Hill the Binding Covenants Document, duly executed by R. Lau and Bolton Hill and

notarized. Possession of the Property shall be delivered to Bolton Hill immediately following

recordation of the Grant Deed and the Binding Covenants Document.

19. R Lau's Representations. Except as otherwise expressly set forth in this Agreement, R.

Lau will convey the above-described grant deed to the Property without any express or implied

warranty of any kind whatsoever, and without any express or implied warranty concerning any



SETTLEMENT AND PURCHASE AGREEMENT
                                                                                              Page 19
condition or proposed use of the Property, and without any express or implied warranty

concerning any local or state zoning or regulatory matter, environmental hazard, other toxic

hazard, grading problem, or soil condition that might affect or concern the Property or its

suitability for the development project that Bolton Hill contemplates performing at the Property.

R. Lau, E. Lau, and L. Lau hereby make the following representations:        -- The consideration
furnished by Agency and Bolton Hill is in exchange for all of their right, title and interest to the

Property.   --   Before the Effective Date, they have given to Bolton Hill a full disclosure of all

conditions and problems at or relating to the Property of which they were actually aware at the

time of disclosure, but without any duty to investigate. These disclosures are as follows: The

roofs of both buildings leak when it rains; the sewer system is prone to frequent clogging; and

Lulu's Cafe keeps a garbage dumpster on the parking lot. These disclosures having been made,

neither E.Lau, nor R. Lau, nor the Trust shall have any further responsibility for any harm or

loss caused by any condition or problem that affects or concerns the Property, including without

limitation any local or state zoning or regulatory matter, environmental hazard, other toxic

hazard, grading problem, or soil condition that might affect or concern the Property or its

suitability for the development project that the Bolton Hill contemplates performing at the

Property. Nevertheless, R. Lau, E. Lau, and L. Lau assume responsibility for (i) breach of any

express representation or warranty made in this paragraph, (ii) breach of any obligation owed

under this Agreement by E. Lau, R. Lau or L. Lau, and (iii) matters or conditions caused by or

occurring after the conveyance of the Property to the extent caused in whole or in part by E. Lau,

R. Lau or L. Lau. To the best of their current actual knowledge, R. Lau, E. Lau, and L. Lau do

not have in their possession or have current knowledge of soil investigations or hazardous
SETTLEMENT AGREEMENT


                                                                                                 Page 20
materials investigations related to the Property. R. Lau may have caused to be prepared one or

more soil investigations for the Property, but R. Lau and E. Lau have no current knowledge as to

the contents, author or whereabouts of those soil investigations.

20. Full and Complete Settlement. The Laus hereby acknowledge that the valuable

consideration given to them under this Agreement constitutes the full and complete settlement of

any and a l l claims against the Agency, Bolton Hill or its successor by reason of Agency and Bolton

Hill's purchase of the Property, including compensation of whatever nature to which the Laus may

be entitled under state or federal law including, but not limited to, the California Eminent Domain

Law and the Califomia Relocation Assistance Act. The Laus further agree to execute any and all

documents required by Agency and Bolton Hill to effect this full and complete settlement,

including, but not limited to, application forms and other documents submitted to the City of Santa

Cruz for the Project.

21. Buyers' Representations. The Agency and Bolton Hill represent that they will have the cash

available and the authority to complete all of their obligations under this Agreement as specified

                           the
above. Bolton Hill reaff~rms representations that it has made herein with respect to its

construction of the Project and the QualifyingUnits.

22.     Eminent Domain Proceedings. The Laus, Agency, and Bolton Hill acknowledge that the

Agency possesses the power of eminent domain and has commenced eminent domain proceedings

in the Action to acquire title to the Property and to obtain possession thereof for purposes of

constructing the Project pursuant to its authority under the California Eminent Domain Law.

Nothing contained herein shall be deemed to affect or limit the Agency' s rights to continue to

pursue the Action as between the Agency and any other party to the Action. Notwithstanding the

                                                 -21-

SETTLEMENT AND PURCHASE AGREEMENT
                                                                                                  Page 21
foregoing, the parties hereby agree that, so long as the substantive terms of this Agreement are

fulfilled, the parties will approve such other documents as may be necessary to convey title, such

as grant deeds, quitclaims deeds or disclaimers of interest. The parties further agree that upon

the close of escrow the Agency will dismiss with prejudice the defendants in the Action who are

                                                                                             in
parties to this Agreement, and each party shall bear its own attorney's fees and costs incu~~ed

connection with the Action.

23. Failure to Convey Title. Notwithstanding anything in this Agreement to the contrary,

conveyance of title to Agency, Bolton Hill or their designee described in this Agreement shall be

a concurrent condition to the Agency's and Bolton Hill's obligations to provide the consideration

described above. In the event that title is not transferred and the Agency thereafter abandons or

dismisses the Action nothing herein shall be deemed to preclude Defendants from seeking

recovery of allowable costs and damages, including but not limited to damages authorized by the

Eminent Domain Law, Cal. Code of Civil Procedure sections 1268.610 through 1268.720.

24.    Public Statements. If requested by Bolton Hill, E. Lau and L. Lau agree to attend press

conferences as well as meetings with planning commissioners, city council members, the public

and others, and at these press conferences and meetings they will express their support for the

Project, including, without limitation, support of any additional entitlements deemed necessary

by Bolton Hill to provide the compensation to the other parties as described in this Agreement,

but they shall be obliged to do so only if the Agency and Bolton Hill are not in breach of this

Agreement and only so far as is lawful, reasonable, practical and not overly onerous (e.g., neither

E. Lau nor L. Lau shall be obliged to miss a work or school obligation or to travel to or from a

SETIZEMENT AGREEMENT


                                                                                            Page 22
different county, etc.). E. Lau, R. Lau and L. Lau, and their agents and attorneys, shall refer all

media inquiries to Bolton Hill.

25.    Confidentiality. Other than as stated in the immediately preceding paragraph, and

except to the extent that disclosure is required by law (including without limitation the Public

Records Act and the Brown Act), Bolton Hill and the Laus agree to keep confidential the terms

and conditions of this Agreement. If asked to comment about this Agreement or its performance,

each of them may say only that "the settlement is a fair and satisfactory arrangement that

includes both a cash payment and condominiums to be developed on the Property, but I am not at

liberty to comment further on its terms or conditions" (or use like words to this effect).

Nevertheless, any party to this Agreement may disclose its terms and conditions under any of the

following circumstances:

       (a)     To an attorney for legal advice concerning the Agreement or its performance; or

       (b)     To an accountant or other licensed tax advisor for advice concerning taxable

events caused by the Agreement or its performance, as well as any other tax consideration

reasonably related to the Agreement or its performance.

       (c)     To an examining attorney, examining officer, judge or magistrate, if compelled to

do so by a properly issued and served legal subpoena, but only to the extent that any such

disclosure is thus compelled.

        (d)    To enforce this Agreement, obtain declaratory relief concerning its proper

meaning, or seek damages or other relief for its non-performance or misperfomance.



                                                 -23-

SETTLEMENT AND PURCHASE AGREEMENT
                                                                                             Page 23
        (e)     As to the Agency, in response to a request made pursuant to the California Public

Records Act (Cal. Govt. Code Section 6250 et seq).

26.     Force Majeure Provision. Bolton Hill's obligation to develop and construct the Project

under this Agreement may be excused or delayed for supervening causes beyond the control of

any party to this Agreement that render timely performance impossible or utterly impracticable;

these causes shall be the following ones, but no other: War, an act of terrorism, insurrection,

strikes, lock-outs, riots, floods, earthquakes, fires, casualties, acts of God, acts of the public

enemy, epidemics, quarantine restrictions, freight embargoes, litigation, unusually severe

weather, inability to secure necessary labor, materials, tools or transportation, or substantial

adverse changes in economic or market conditions that would cause the Project to be

economically infeasible f r a prudent, experienced real estate developer. This force majeure
                         o

provision does not apply to the disbursement of the $1,925,000 Cash Payment or to R.Lau's

potential right to liquidated damages.

27.     Condemnees' Release. Save for the obligations and preservation of claims expressly

recited in this Agreement, R. Lau, the Trust, E. Lau and L. Lau each hereby renounce, foreswear,

and unconditionally release the Agency, Bolton Hill, and their respective officers, directors,

managers, members, directors, partners, agents, employees, successors, and assigns from any

claim or demand of redress that any of them might otherwise assert against them or any of them,

including any claim or demand of redress that arises in part or in full, or directly or indirectly,

from any of the matters stated in the recitals of this Agreement, and also including without

limitation any other claim or demand of redress that arises from any matter, transaction,

SETTLEMENT AGREEMENT


                                                                                                Page 24
occurrence or event that occurred at any time from the dawning of creation until the Effective

Date, and also including any claim or demand of redress that might otherwise be preserved by

Section 1542 of the California Civil Code, which provides the following:

               A general release does not extend to claims which the creditor does
               not know or suspect to exist in his or her favor at the time of
               executing the release, which if known by him or her must have
               materially affected his or her settlement with the debtor.

28.    Condemnors' Release. Save for the obligations and preservation of claims expressly

recited in this Agreement, the Agency and Bolton Hill each hereby renounce, foreswear, and

unconditionally release R. Lau, the Trust, E. Lau, L. Lau, and their respective officers, directors,

managers, members, directors, partners, agents, employees, successors, and assigns from any

claim or demand of redress that either of them might otherwise assert against them or any of

them, including any claim or demand of redress that arises in part or in full, or directly or

indirectly, from any of the matters stated in the recitals of this Agreement, and also including

without limitation any other claim or demand of redress that arises from any matter, transaction,

occurrence or event that occurred at any time from the dawning of creation until the Effective

Date, and also including any claim or demand of redress that might otherwise be preserved by

Section 1542 of the California Civil Code, which provides the following:

               A general release does not extend to claims which the creditor does
               not know or suspect to exist in his or her favor at the time of
               executing the release, which if known by him or her must have
               materially affected his or her settlement with the debtor.

29.     Categorical Releases. The releases given in the two preceding paragraphs are

unconditional and comprehensive, but exclude any breach of any express representations,

warranties or covenants contained in this Agreement. This Agreement shall be binding upon the
                                                 -25-

SETTLEMENT AND PURCHASE AGREEMENT
                                                                                                Page 25
agents, heirs, administrators, trustees, representatives, assigns, successors, affiliates and

successors-in-interest of the parties to this Agreement.

30.    Miscellany. This Agreement can be modified only by a subsequent agreement made in

writing and signed by every party to this Agreement. This Agreement shall be governed by the

laws of the State of California. The parties shall bear their own legal fees and costs incurred

with respect to the Action and the negotiation and preparation of this Agreement. In any legal

proceeding brought to enforce this Agreement, or brought because of its breach or non-

performance, the prevailing party or parties shall be entitled to recover reasonable attorney's

fees. This Agreement can be enforced under Section 664.6 of the California Code of Civil

Procedure. This Agreement recites the entire understanding between the parties to this

Agreement as to the matters addressed herein. Notwithstanding any statutory or case law to the

contrary, the ambiguities herein, if any, shall not be construed in favor of any party to this

Agreement. The captions in this Agreement are inserted for convenience of reference and in no

way define, describe or limit the scope or intent of this Agreement or any of the provisions

hereof. The parties' representations, warranties and obligations under this Agreement shall

survive the transfer of title to the Property to Bolton Hill or any other transferee designated by

Bolton Hill pursuant to this Agreement.

31.     Ancillary Documents. The parties agree to execute and cooperate in the processing of

such additional documents as are necessary to the performance of this Agreement and which are

necessary to obtain approval of the Project including, without limitation, development permit

applications andlor documents designating Bolton Hill as the agent for such applications.

32.     Signing. For all intents and purposes, facsimile signatures shall be deemed and treated as
SETTLEMENT AGREEMENT


                                                                                                 Page 26
original signatures. This Agreement may be executed in two or more counterparts, each of which

shall be deemed an original, but all of which together shall constitute one and the same

instrument.

33.    Brokers. Each of the parties hereto represents that it has dealt with no broker or finder in

connection with this Agreement and the transactions described herein and, insofar as they know, no

broker or other person is entitled to any commission or finder's fee in connection with this

Agreement and the transactions described herein. Agency and Bolton Hill, each of them

individually on behalf of themselves, on the one hand and R. Lau on the other agree to indemnify

and hold harmless one another against any loss, liability, damage, cost, claim or expense incurred by

reason of any brokerage commission or finder's fee alleged to be payable because of any act,

omission or statement of the indemnifying party.

34.    Notice. Any notice or other communication required or permitted to be given under this

Agreement ("Notices") shall be in writing and shall be (i) personally delivered; (ii) delivered by

a reputable overnight courier; (iii) delivered by certified mail, return receipt requested and

deposited in the U.S. Mail, postage prepaid; or (iv) delivered by fax. Fax notice shall be deemed

received upon confirmation of successful transmission during regular business hours (i.e.,

Monday through Friday between 8:00a.m. and 5:00 p.m. California time, legal holidays

excepted) or, if sent during non-business hours, it shall be deemed received on the next business

day so long as the transmission was successful. Non-fax notices shall be deemed received at the

earlier of actual receipt or (i) one (1) business day after deposit with a reputable ovemight

courier as evidenced by a receipt of deposit; or (ii) three (3) business days following deposit in

the U.S. Mail, as evidenced by a return receipt. Notices shall be directed to the parties at their
                                                 -27-

SETTLEMENT AND PURCHASE AGREEMENT
                                                                                                Page 27
respective addresses shown below, or such other address as either party may, from time to time,

specify in writing to the other in the manner described above:

       If to Bolton Hill:     Bolton Hill Company, Inc.
                              303 Potrero Street, #42-204
                              Santa Cmz, CA 95060
                              Attention: Mr. Norman Schwartz
                              Tel: (831) 457-8696
                              Fax: (831) 471-2300

       With a copy to:        BERLINER COHEN
                              10 AImaden Blvd, 11' Floor
                              San Jose, CA 951 13
                              Attention: Andrew L. Faber, Esq.
                              Tel: (408) 286-5800
                              Fax: (408) 998-5388

       If to R. Lau:          Ronald G. Lau
                              PO Box 7057
                              Santa CNZ, CA 9506 1
                              Tel: (831) 761-1360
                              Fax: (831) 761-1360

       With Copy to :         William Markham, Esq.
                              MALDONADO & MARKHAM, LLP
                              402 West Broadway, Suite 400
                              San Diego, CA 92 101
                              Tel: (619) 22 1-4400
                              Fax: (619) 224-3974
                              E-mail:wrn@maldonadomarkham.com


        If to E. Lau:          Eric Lau
                               514-B Washington St.
                               Santa Cruz, CA 95060
                               Tel: (831) 41 9-5361
                               Fax: (83 1) 429-8586


        With Copy to :         William Markham, Esq.
                               MALDONADO & MARKHAM, LLP
                               402 West Broadway, Suite 400
SETTLEMENT AGREEMENT
                        San Diego, CA 9210 1
                        Tel: (619) 221-4400
                        Fax: (619) 224-3974
                        E-mail:wm@maldonadomarkham.com

    If to L. Lau:       Lani Lau
                        5 14-B Washington St.
                        Santa Cruz, CA 95060
                        Tel: (831) 345-1501
                        Fax: (831) 429-8586

    With Copy to :      William Markham, Esq.
                        MALDONADO & MARKHAM, LLP
                        402 West Broadway, Suite 400
                        San Diego, CA 92101
                        Tel: (619) 221-4400
                        Fax: (619) 224-3974
                        E-mail:wm@rnaldonadomarkham.com

    If to the Agency:   Redevelopment Agency of the City of Santa Cruz
                        337 Locust Street
                        Santa Cruz, CA 95060
                        Attn: Executive Director
                        Tel: (831) 420-5150
                        Fax: (831) 420-5151

    With Copy to :      ATCHISON, BARISONE, CONDOTTI & KOVACEVICH
                        333 Church Street
                        Santa Cruz, CA 95060
                        Tel: (831) 420-6200
                        Fax: (83 1) 423-9401

    IT IS SO AGREED.




DATED:      October 25,2005                &
DATED:      October 25,2005
                                            LC  Lani Lau



SETTLEMENT AND PURCHASE AGREEMENT
                                                                         Page 29
DATED:     October 25,2005

                             Lau Trust and also in his individual capacity



DATED:     October 25,2005
                             ~olton~ill
                                    cohpany, Inc.           /

DATED:     October 25,2005       /                    r
                                                      - <


                             Redevelopment Agency of the City of Santa
                             Cruz



APPROVED AS TO FORM:

DATED:     October 25,2005
                             William A. Markham, Esq.
                             MALDONADO & MARKHAM. LLP
                             Attorneys for Ronald G . Lau, Eric Lau and


DATED:     October 25,2005
                             Anthony P. Con otti, Esq.
                             ATCHISON, BARISONE, CONDOTTI &
                             KOVACEVICH, Attorneys for
                             Redevelopment Agency of the City of Santa
                             Cruz

DATED:     October 25,2005
                             Andrew L. Faber
                             BERLINER COHEN
                             Attorneys for Bolton Hill Company, Inc.




SETTLEMENT AGREEMENT


                                                                    Page 30
                               SCHEDULE OF EXHIBITS

Exhibit A:   Legal Description of Property

Exhibit B:   Preliminary Title Report

Exhibit C:   Binding Covenants Document




                                             -31-

 SETTLEMENT AND PURCHASE AGREEMENT
                                                      Page 3 1
EXHIBIT 4
EXHIBIT 5
EXHIBIT 6
EXHIBIT 7
                                         MALDONADO           &      MARKHAM,           LLP
                                              A1TORNEYS    AND COUNSELORS        AT 'LAW

WILLIAM A. MARKHAM*                             402 WEST BROADWAY, SUITE 2050                            MEXICO OFFICE:
DIRECT: (619) 221-4418                               SAN   DIEGO,     CA 92101               GUADALUPE VICTORIA 2306-201, ZONA RIO
E-MAIL: wm@maldonadomarkham.com.                                                             TIJUANA, BAJA CALIFORNIA, 22010, MEXICO
                                                      (619) 221-4400 (TEL.)
                                                      (619) 224-3974 (FAX)                           +52 (664) 200-2392 (TEL.)

                                                                 ..
ANTONIO MALDONAOO+
DIRECT: (619) 819-5166                            v.fww.maldonadomarkham.com                         +52 (664) 200-2536 (FAX)
E-MAIL: am@maldonadomarkham.com


       Executive Director
       REDEVELOPMENT AGENCY OF THE CITY OF SANTA CRUZ
       337 Locust Street
       Santa Cruz, CA 95060

       ATCHISON, BARISONE, CONDOTTI & KOVACEVICH
       333 Church Street
       Santa Cruz, CA 95060

                         BY ELECTRONIC TRANSMITTAL, FAX AND REGULAR MAIL

                                                          May 31,2012

                                   Re:   1547 Pacific Avenue, Santa Cruz, CA


       Dear Gentlemen:

              I represent Ronald Lau" Eric Lau, and Lani Lau. Ron Lau formerly held title in fee simple
      to the parcel ofreal'property located at 1547 Pacific Avenue, Santa Cruz, California 95060 (the '
      "Condemned Property"), and he rented part ofthe Lau Property to Eric Lau and Lani Lau.

               In 2005, the City of Santa Cruz (the Redevelopment Agency ofthe City of Santa Cruz)
      condemnedJhe Property in order to allow a developer (Bolton Hill Company, Inc.) to acquire and
      develop it in accordance with an elaborate redevelopment plan. The City of Santa Cruz
      accordingly prosecuted a condemnation against my clients that quickly led to a settlement under
      which my clients received (1) a cash payment and (2) binding assurance that the acquiring
      developer or its successor would either develop two condominiums on the properties for my
      clients or, failing this, pay them liquidated damages inthe amount of$700,000.

              ,It appears, however, that the City of Santa Cruz took my clients' property under its power
      of eminent domain in order to deliver it to a private property developer whose controlling
      decision-makers later decided that after all they did not wish to develop the property at all, and so
      they allowed their lender to take the property by foreclosure. My clients so far have never
      received either the promised cOndominium units or the liquidated damages, even though these
      items were material inducements to their agreement to settle the City of Santa Cruz's
      condemnation proceedings against their property.




                                         * ADMiTTED IN CALIFORNIA AND WASHINGTON, D.C.
                                         tADMITTED  IN MEXICO, CALIFORNIA AND NEW YORK
Redevelopment Agency of the City of Santa Cruz
Atchison, Barisone, Condotti & Kovacevich
Page 2
May 31,2012



        The obligation to build the units or pay the liquidated damages is set forth as a covenant
that runs with the land that is recorded as an equitable servitude against title to the Property. The
latest possible date on which the liquidated damages can be timely paid is October 25,2012.

         It is now possible that the foreclosing lender will take the position that at the trustee sale it
acquired title free and clear of this equitable servitude. Ifit does so, and if you decline to afford
my clients their promised consideration, I will be obliged to re-open the condemnation
proceedings, over which the Superior Court has preserved ongoing jurisdiction under Section
664.6 ofthe Code of Civil Procedure. If! re-open the proceedings, I will seek a rescission of my
clients' agreement to the settlement -and a reconveyance to them of their title to the Property.
                                                 "\

       Ifhowever you will confirm that you will honor the equitable servitude by providing the
promised units or paying the $700,000 to them no later than October 25,2012; then there will be
no need for me to seek any further redress.

         I would greatly appreciate your prompt response to this demand. Thank you.


                                                      Yours sincerely,

                                                        M~,....--
                                                      William A. Markham

WAM/la




cc:      Mr. Ronald Lau
         Mr. Eric Lau
         Don Hubbard, Esq.
                                                                ,
                                                            ~
                                                            CITV            OF



                                                  SANTACRUZ
                                                  ~
                                            C   ( T' \'         A   T   TOR           N   E   Y
         PO BOX 481, SANTA CRUZ, CA 95061-0481'                 831420-6200'        Fax: 831576-2269'   www,cityoisanta(TUZ,COm


                                                          June 19,2012

United States Mail

William A. Markham
Maldonado & Markham, LLP
402 Y{est ~~oadway, Suite 2050
San Diego,-CA 92101'      ~

               Re:      1547 Pacific Ave, Santa Cruz, CA

Dear Mr. Markham:

         Thank you for your May 31, 2012 letter. We have carefully reviewed that letter as well as
the 2005 settlement agreement concerning the litigation to which your letter pertains. We have
now also had the opportunity to confer with our client concerning the issue raised in your letter.
Please be advised that the Redevelopment Agency of the City of Santa Cruz fully performed all
of the obligations it incurred under the settlement agreement and that, accordingly, the City of
Santa Cruz (a separate legal entity from the Redevelopment Agency and the Redevelopment
Agency's Successor Agency) respectfully declines your client's demand as set forth in your
letter. In closing, we will also note that Civil Procedure Section 664.6, referenced in your letter as
providing a legal basis for re-opening the litigation, pertains only t6 matters for which a
stipulated judgment has been entered. The subject lawsuit was resolved by way of a settlement
agreement, not a stipulated judgment. In any event, we note that the settlement agreement's
liquidated damages clause provides the exclusive remedy for the Bolton Hill Company's failure
to deliver the condominium units called for by the settlement agreement.
  ~                             ...•.•...   -              '"        '"---.,.....                 ~     ----   -   '-~   --
       Thank you for your attention to the foregoing.

                                                                                 Very Truly Yours,


                                                ~~~
                                                                                 Anthony P. Condotti

cc:    Martin Bernal, City Manager
       Bonnie Lipscomb, Economic Development Director
       Brent Hawkins, Best, Best & Krueger
       John G. Barisone, City Attorney
                                         MALDONADO         &    MARKHAM,        LLP
                                              ATIORNEYS AND COUNSELORS AT LAW

WILLIAMA. MARKHAM.                              402 WEST BROADWAY, SUITE 2050                        MEXICOOFFICE:
DIRECT:(619) 221-4418                                SAN DIEGO, CA 92101                 GUADALUPEVICTORIA2306-201, ZONA RIO
E-MAIL: wm@maldonadomarkham.com                                                          TIJUANA, BAJA CALIFORNIA,22010, MEXICO
                                                      (619) 221-4400 (TEL.)
ANTONIO MALOONAOOt                                    (619) 224-3974 (FAX)                       +52 (664) 200-2392 (TEL.)
DIRECT:(619) 819-5166                             www.maldonadomarkham.com                       +52 (664) 200-2536 (FAX)
E-MAIL: am@maldonadomarkham.com



          Anthony P. Condott~ Esq.
          CITY OF SANTA CRUZ, CITY ATTORNEY.
          P.O. Box. 481
          Santa Cruz, CA 95061-0481

                                           BY FAX AND REGULAR MAIL

                                                        July 24,2012

                                  Re:     1547 Pacific Avenue, Santa Cruz, CA


          Dear Mr. Condotti,

                  I write to respond to your letter of June 19, 2012.

                  I appreciate the care you have taken in preparing the response of the City of Santa Cruz
      I   (the "City") and the Redevelopment Agency of Santa Cruz (the "Agency"), and I accept that it
          was the Agency that condemned my clients' land, not the City. Otherwise, I respectfully disagree
          with your assessment of the matter.

                  The Agency condemned my clients' property in order to transfer it to a favored private
          developer that was controlled by a well-connected insider in Santa Cruz circles (Bill Brooks).
          This taking always constituted a questionable application ofthe Kelo doctrine, which allows a
          public entity to exercise its power of eminent domain in order to transfer a property from one
          private owner to another, when the new private owner will develop or use the property in a
          manner that better suits the public entity's public policies.

                 When Kelo was announced, many commentators on the matter feared that it established a
          dangerous and "slippery slope," but I doubt that any of them envisioned anything quite so
          dangerous or slippery as the present case.

                  Using its power of eminent domain, the Agency condemned my clients' property and
          delivered it to Bolton Hill Company, Inc. ("Bolton Hill") so that Bolton "or its successor" would
          develop the property in accordance with the Agency's stated preferences for private development
          of available land in Santa Cruz. Bolton Hill was a modest company with no demonstrated
          capacity to perform the promised development or otherwise honor its obligations under the
          settlement agreement that was made between my clients on the one hand and the Agency and



                                         • ADMITTED IN CALIFORNIA AND WASHINGTON, D.C.
                                        tADMlTTEO IN MEXICO, CALIFORNIA AND NEW YORK
Anthony P. Condotti, "Esq.
Page 2
July 24, 2012



Bolton Hill on the other. After gaining title in this manner, Bolton Hill transferred it to a
company wholly controlled by Bill Brooks, the well-connected property developer in Santa Cruz
County. Bolton Hill eventually dissolved itself and no longer exists. Mr. Brooks, who is not a
party to the settlement agreement, decided eventually that he did not wish to develop the property
at all, so that my clients lost their property by an act of eminent domain so that a favored insider
could evaluate whether he wished to develop it after acquiring it in this manner.

         This would have been an improper taking under any standard even ifthe Agency or Bolton
Hill had timely paid my clients their promised consideration. But instead they paid only part of
the 'Just compensation" that the parties agreed my clients were entitled to receive, and then
Bolton Hill's successor, Bill Brooks, abandoned the project, leaving my clients unpaid and with
only problematic legal recourse against a subsequent purchaser.

         When I wrote to complain about this matter, the City took pains to affirm that it cannot be
held responsible for the Agency's conduct, and the Agency took pains to emphasize that it owes
no responsibility to my clients because of the manner in which the settlement agreement was
structured. Of course, my clients never would have agreed to any sale at all, ifthe Agency had
not exercised its power of eminent domain to condemn their property - a point that we both know
is true and that I can easily demonstrate by overwhelming contemporaneous evidence.

       I now tum to the Agency's position that the settlement agreement cannot be enforced
under C.c.P. ~ 664.6. This is arguably correct.

        PleaSe therefore take notice of the following. Ifmy clients are obliged to bring a legal
challenge to obtain their just compensation, they will do so in federal court and seek relief from
the Agency for misusing its power of eminent domain. It should be clear that Kelo cannot be
misused to allow a government agency to condemn property, deliver it to a favored insider who
then evaluates whether he wishes to develop it, and afterwards disclaim responsibility for paying
'Just compensation" in exchange for the taking after the favored insider reverses course on his
development plans and balks at paying the agreed-upon just compensation.

        We are prepared to litigate this point all the way to the United States Supreme Court. I
sincerely think that we will prevail in the end because the result so far in this case is egregiously
contrary to more than one-h~dred years of jurisprudence on eminent domain proceedings.

       We would prefer, however, that the Agency work constructively with Santa Cruz County
Bank and my clients in order to ensure that they are timely paid the liquidated damages
unambiguously owed to them. Can you please assist us to ensure that we are paid rather than
merely explain why the Agency has no responsibility, and that we have must do what we can with
our equitable servitude?
Anthony P. Condotti, Esq.
Page 3
July 24, 2012



      I ask that you pleaSe respond to this simple request and indicate what specifically the
Agency can and will do. Thank you.


                                                     Yours sincerely,

                                                        (AN.t.,--
                                                     William A. Markham


WAM/la
                                                       ,
                                                   ~
                                                   CITY       Of



                                            SANTACRUZ
                                           ~
                                     ClT\             ATTORNEY
         PO BOX 481 SANTA   CRUZ, C A 95061-0481   • 831 420-6200'   Fax: 831 576.2269'   WWW(,ityotsanlucruz.coln


                                               August 6, 2012

 United States Mail

  William A. Markham
  Maldonado & Markham, LLP
  402 West Broadway, Suite 2050
. San Diego, CA 92101

        Re:    1547 Pacific Ave, Santa Cruz, CA

Dear Mr. Markham:

Thank you for your letter dated July 24,2012 concerning the above-referenced property, which
has been forwarded to the City.

Please be advised that the City Council is in recess during the month of August and, therefore,
the earliest I will have an opportunity to discuss with the City Council will be the next regular
meeting scheduled for Tuesday, September 11th. I will let you know following that meeting if the
City's position has changed.

In the meantime, your letter requests that the City work constructively with Santa Cruz County
Bank to assure that your clients, the Laus, are paid the liquidated damages called for by the
settlement agreement. If you have any suggestions to share with the City Council as to how the
City might facilitate this payment by Santa Cruz County Bank or Mr. Brooks, you may wish to
share them before the September 11th meeting.

Incidentally, your letter reminded me that, during settlement negotiations, a similar threat of a
legal challenge to the RDA's legal authority to acquire the subject property by eminent domain
based on the Keto decision was made, along with the same indication of willingness to litigate
"all the way to the United States Supreme Court." I believe I stated during those negotiations,
and I subsequently advised the RDA, that I did not view the Keto decision as having a bearing on
the Agency's right to exercise the power of eminent domain, and therefore did not consider such
a threat to be credible. The settlement agreement presents another, and in my view
insurmountable, obstacle.
William A. Markham
August 6, 2012
Page 2 of3


Of course, the City hopes that expense of further litigation can be avoided. But it will not
hesitate to vigorously defend any action seeking to invalidate the settlement agreement or to hold
the City responsible for obligations it did not assume under the terms of the agreement.

Thank you for your consideration of the foregoing.

                                                Sincerely,


                                            .           ~ ~~, 'l
                                                           :;tk&,
                                                Anthony P. Condotti

cc:    Martin Bernal, City Manager
       Bonnie Lipscomb, Economic Development Director
       Brent Hawkins, Best Best & Krieger
       John G. Barisone, City Attorney
                                            MALDONADO          & M~RKHAM,          LLP
                                                 AITORNEYS AND COUNSELORS AT LAW

'WILLIAM A.MARKHAM*                                402 WEST BROADWAY, SUITE 2050                       MEXICOOFFICE:
DIRECT:(619) 221-4418                                   SAN DIEGO, CA 92101                GUADALUPEVICTORIA2306-201, ZONA Rio
E-MAIL: wm@maldonadomarkharn.com                                                           TIJUANA, BAJA CALIFORNIA,22010, MEXICO
                                                         (619) 221-4400 (TEL.)
ANTONIO MALOONAOOt                                       (619) 224-3974 (FAX)                      +52 (664) 200-2392 (TEL.)
DIRECT:(619) 819-5166                                www.rnaldonadomarkham.com                     -to 52 (664) 200 -2536 (FAX)

E-MAIL: arn@maldonadornarkharn.com



         Anthony P. Condotti, Esq.
         CITY OF SANTA CRUZ, CITY ATTORNEY.
         P.O. Box. 481
         Santa Cruz, CA 95061-0481

                                              BYFAX AND REGULAR MAIL

                                                         August 21, 2012

                                     Re:     1547 Pacific Avenue, Santa Cruz, CA


         Dear Mr. Condotti,

                I write to respond to your letter of August 6, 2012. I begin by respectfully objecting to
        the tone of your correspondence. You represent a public condemnor that has exercised its power
        of eminent domain against land formerly owned by one of its citizens. In this capacity, you have
        certain statutory and common law obligations towards the condemnee that include a duty to deal
        with it candidly and in good faith. Your correspondence suggests that you have adopted a cordial
        and professional but nevertheless strictly adversaria1 stance towards the condemnee, who has lost
        his land but has not been paid the stipulated just 'compensation.

                Rather than allude vaguely to private advice that you previously gave to the Agency, I ask
        that you please clarifY your statement that the present matter is not governed by the principles of
        Kelo v. City of New London, 545 U.S. 469, 125 S.Ct. 2655 (2005).

                So far as I can discern, Kelo is squarely applicable. The Agency's position, if! am not
        mistaken, is that it concluded after hearings that the land in question was in part blighted and
        would be devoted to a better use if it were taken from its current owner and transferred to a
        private developer that proprised to redevelop the land in accordance with a comprehensive
        redevelopment plan that the Agency had prepared and approved. Is this correct? If not, why not?

                 On the basis of the foregoing analysis, the Agency condemned the property in order to
        take it and resell it to a private entity, Bolton Hill. Shortly after condemning the property, the
        Agency expedited its stated goal by encouraging and participating in settlement discussions held
        directly between the condemnee and Bolton Hill. Thus the Agency used its power of eminent
        domain to compel the former owner to sell the property to a new private owner. The sale itself



                                            *ADMITTED IN CALIFORNIA AND WASHINGTON, D.C.
                                           tADMITTEO IN MEXICO, CALIFORNIA AND NEW YORK
Anthony P. Condotti, Esq.
Page 2
August 21, 2012



was set forth in a settlement agreement that settled the Agency's condemnation proceeding
against the property.

        Kelo, which you say is inapplicable, specifically stands for the proposition that a public
agency can properly use its power of eminent domain to take property from one private owner
and transfer it to another private owner, provided that the taking is done in furtherance of a duly
adopted redevelopment plan that promotes a "public purpose" and confers general benefits on the
public at large, and further provided that the public agency pays just compensation to the
condemnee.

        In particular, Kelo contemplates that such a taking is lawful precisely and only because the
new owner will acquire the property in order to redevelop it in accordance with the public entity's
redevelopment plan, which in tum must further a "public purpose" and confer benefits on the
public at large.

       Kelo would therefore appear to be "on all fours" with the present case, and therefore the
express and implied limitations of Kelo are likewise applicable. You apparently take a different
view of the matter, but have never explained why. Please do so.

         I also add the following points.

       First, the only reason we did not pursue further litigation the last time around was that we
reached a satisfactory settlement, which of course required payment of the stated consideration to
my clients (in lieu of just compensation for the taking).

         Second, Kelo and many other cases make clear that a condemnor must never exercise its
power of eminent domain without paying just compensation. It is not possible to use a contract
or forced settlement discussionS between two private parties in order to avoid this constitutional
obligation. The Agency cannot exercise its power of eminent domain, thereby compel the
condemnee to sell the property to a private entity, and then disclaim any responsibility for paying
just compensation when the private entity fails to pay the stipulated purchase price that the
condemnee accepted only because it was forced to sell after a condemnation. If you disagree with
this position, please state specifically why.

         Third, Kelo and many other cases make clear that a condemnor cannot use its power of
eminent domain to condemn a property merely in order to force its transfer to. another private
party, yet this is precisely what has occurred in this case. Neither Bolton Hill nor its successor
ever developed the property at all, much less put it to use in the manner supposedly required by
the Agency's redevelopment plan. Please explain to me therefore why this taking was lal1!ful.
Please also explain why the Agency has not proceeded with the redevelopment plans that it used
to justify the taking in the first place.
Anthony P. Condotti, Esq.
Page 3
August 21, 2012



       I respectfully ask that you please directly answer my questions. Thank you for your
prompt attention to these matters.

                                                    Yours sincerely,
                                                    JNi 6,r-:--
                                                    Bill Markham




WAM/la
EXHIBIT 8
                                        MALDONADO           &       MARKHAM,        LLP
                                             ATIORNEYS    AND COUNSELORS       AT LAW

WILLIAM A. MARKHAM*                            402 WEST BROADWAY,      SUITE 2050                     MEXICO OFFICE:

DIRECT: (619) 221-4418                              SAN    DIEGO,   CA 92101              GUADALUPE VICTORIA 2306-201,     ZONA Rio
E-MAIL: wm@maldonadomarkham.com                                                           TIJUANA, BAJA CALIFORNIA, 22010, MEXICO
                                                     (619) 221-4400   (TEL.)
ANTONIO ~LOONAOOt                                    (619) 224-3974   (FAX)                       +52 (664) 200-2392   (TEL.)

DIRECT: (619) 819-5166                           www.maldonadomarkham.com                         +52 (664) 200-2536   (FAX)

E-MAIL: am@maldonadomarkham.com


       Mr. David V. Heald, President & Chief Executive Officer
       SANTACRUZ COUNTY BANK
       740 Front Street, Suite 220
       Santa Cruz, CA 95060

                         BY ELECTRONIC      TRANSMITTAL,                 FAX AND REGULAR MAIL

                                                         May 31,2012

                                  Re:   1547 Pacific Avenue, Santa Cruz, CA


       Dear Mr. Heald:

               .I represent Ronald Lau, Eric Lau, and Lani Lau. Ron Lau formerly held title in fee simple
       to the parcel of real property located at 1547 Pacific Avenue, Santa Cruz, California 95060 (the
       "Condemned Property"), and he rented part ofthe Lau Property to Eric Lau and Lani Lau.

                In 2005, the City of Santa Cruz (the Redevelopment Agency of the City of Santa Cruz)
       condemned the Property in order to allow a developer (Bolton Hill Company, Inc.) to acquire and
       develop it in accordance with an elaborate redevelopment plan. The City of Santa Cruz
       accordingly prosecuted a condemnation against my clients that quickly led to a settlement under
       which my clients received (1) a cash payment and (2) binding assurance that the acquiring
       developer or its successor would either develop two condominiums on the properties for my
       clients or, failing this, pay them liquidated damages in the amount of$700,000.

               It appears, however, that the City of Santa Cruz took my clients' property under its power
      of eminent domain in order to deliver it to a private property developer whose controlling
      decision-makers later decided that after all they did not wish to develop the property at all, and so
      they allowed their lender, your bank, to take the property by foreclosure. My clients so far have i
      never received either the promised condominium units or the liquidated damages, even though           .
      these items were material inducements to their agreement to settle the City of Santa Cruz's
       condemnation proceedings against their property.

                The obligation to build the units or pay the liquidated damages is set forth as a covenant
       that ruils with the land that is recorded as an equitable servitude against title to the Property. The
       latest possible date on which the liquidated damages can be timely paid is October 25,2012.




                                        * ADMITTED IN CALIFORNIA AND WASHINGTON,  D.C.
                                        tADMITTED  IN MEXICO, CALIFORNIA AND NEW YORK
Mr. David v. Heald
Page 2
May 31,2012



        It is possible, however,. that your bank will take the position that at the trustee sale it
acquired title free and clear of this equitable servitude. Ifso, please promptly confirm the point. I
will then re-open the condemnation proceedings, over which the Superior Court preserved
ongoing jurisdiction under Section 664.6 of the Code of Civil Procedure. If! re-open the
proceedings, I will seek a rescission of my clients' agreement to the settlement and a
reconveyance to them of their title to the Property, and we will demand that your bank look to
Bolton Hill and/or the City of Santa Cruz for relief

       Ifhowever your bank will confirm that it will honor the equitable servitude by providing
the promised units or paying the $700,000 to them no later than October 25,2012, then there will
be no need for me to seek any further redress.

         I would greatly appreciate your prompt response to this demand. Thank you.


                                              Yours sincerely,

                                                 Jl.J.it.~
                                              William A. Markham

WAM/la

cc:      Mr. Ronald Lau
       . Mr. Eric Lau
         Don Hubbard, Esq.
                                          MALDONADO          & MARKHAM,          LLP
                                               ATTORNEYSAND COUNSELORS AT LAW

WILLIAMA. MARKHAM*                               402 WEST BROADWAY, SUITE 2050                       MEXICOOFFICE:
DllRECT:(619) 221-4418                                SAN DIEGO, CA 92101                GUADALUPEVICTORIA2306~201, ZONA RIO
E-MAIL: wrn@maldonadomarkham.com                                                         TIJUANA, BAJA CALIFORNIA,22010, MEXICO
                                                       (619) 221-4400 (TEL.)
ANTONIO MALOONAOOt                                     (619) 224-3974 (FAX)                      +52 (664) 200-2392 (TEL.)
DllRECT: 619) 819-5166
        (                                          www.rrialdonadomarkham.com                    +52 (664) 200-2536 (FAX)
E-MAIL: am@maldonadomarkham.com



                                   BY FAX AND ELECTRONIC TRANSMITTAL

                                                          July 24,2012
        David W. Lively, Esq.
        HOPKINS & CARLEY
        P.O. Box 1469
        San Jose, CA 95109-1469

                                   Re:     1547 Pacific Avenue, Santa Cruz, CA


        Dear Mr. Lively,

                 I write to respond to your letters ofJune 5 and 8,2012. I acknowledge your client's
        confirmation that title to the subject property is encumbered by an equitable servitude that obliges
        its holder either to provide the designated two units to my clients or to pay liquidated damages of
        $700,000 to them no later than the "effective date."

                 The effective date, however, is not February 6, 2013, but rather October 25, 2012. The
        recorded equitable servitude also appears in a settlement agreement (the "Settlement Agreement")
        that was made between Bolton Hill Company, Inc. ("Bolton Hill") and the Redevelopment
        Agency of Santa Cruz (the "Agency") on the one hand and my clients on the other. In the
        settlement agreement, the term "effective date" is specially defined as the first date on which the
        settlement agreement was signed by all of the parties and their attorneys, and in the event this date
        was October 25,2005. See ~ 1 ofthe Settlement Agreement (which I have appended to this
        letter for your immediate reference).

                 Therefore, the applicable seven-year deadline runs from October 25,2005, not from
        February 9,2006, which is merely the date on which the Recorder's Office for Santa Cruz County
        entered the equitable servitude as an encumbrance of record after Bolton Hill submitted it for
        recording in accordance with the above settlement agreement. From October 25,2012 onward,
        statutory interest on my clients' monetary encumbrance will accrue at 7% per year, and, if we are
        obliged to obtain a judgment to enforce the servitude, post-judgment interest on the debt will
        accrue at the statutory rate of 10% per year.

                My clients strongly prefer to avoid any litigation or proceeding at all. They merely want
        to be paid the remainder oftheir just compensation for the Agency's taking of their land under its
        power of eminent domain. Please therefore explain to us exactly how your client will ensure that


                                          *ADMITTED IN CALIFORNIA AND WASHINGTON, D.C.
                                         tADMITTEO IN MEXICO, CALIFORNIA AND NEW YORK
David W. Lively, Esq.
Page 2
July 24,2012



they are timely paid the sum of$700,000 on or before October 25, 2012 (e.g., "the Bank will
either pay this sum itselfto your clients or set aside the first $700,000 from its sale of the property
and have this sum paid from escrow directly to your clients"). If your client can provide such a
clear statement, it will put my clients at ease and resolve this matter, presuming that your client
afterwards honors its statement ofthe matter.

         I look forward to your prompt response to this matter. Thank you.




                                               Yours sincerely,

                                                 ~jf/","


                                               William A. Markham


WAMIla
EXHIBIT 9
                                             MALDONADO           &      MARKHAM,LLP
                                                  AITORNEYS    AND COUNSELORS        AT LAW

WILLIAM A. MARKHAM*                                 402 WEST BROADWAY, SUITE 2050                         MEXICO OFFICE:
DIREcr: (619) 221.4418                                   SAN   DIEGO,     CA 92101            GUADALUPE VICTORIA 2306-201, ZONA RIO
E-MAIL: wm@maldonadomarkham.com                                                               TIJUANA, BAJA CAUFORNIA,    22010, MEXICO
                                                          (619) 221-4400 (TEL.)
ANTONIO MALOONAOOt                                        (619) 224~3974 (FAX)                        +52 (664) 200 -2392 (TEL.)
DIREcr:    (619) 819-5i66                             www.maIdonadomarkham.com                        +52 (664) 200-2536 (FAX)
                                                                     t.
E-MAIL: am@maldonadomarkham.com



          Andrew L. Faber, Esq
          BERLINER COHEN
          10 Almaden Blvd, 11th Floor
          San Jose, CA 95113

          Mr. Norman Schwartz
          BOLTON HILL COMPANY, INC.
          303 Potrero Street, No. 42-204
          Santa Cruz, CA 95060

                            BY ELECTRONIC        TRANSMITTAL,                 FAX;AND REGULAR MAIL

                                                              May 31,2012

                                  Re:        1547 Pacific Avenue, Santa Cruz, CA


          Dear Gentlemen:

                  I represent Ronald Lau, Eric Lau, and Lani Lau. Ron Lau formerly held title in fee simple
          to the parc~l of real property located at 1547 Pacific Avenue, Santa Cruz, California 95060 (the
          "Condemned Property"), and he rented part of the Lau Property to Eric Lau and Lani Lau.

                   In 2005, the City gfSanta Cruz (the Redevelopment Agency of the City of Santa Cruz)
          condemned the Property in order to allow a developer (Bolton Hill Company, Inc.) to acquire and
          develop it in accordance with an elaborate redevelopment plan. The City of Santa Cruz
          accordingly prosecuted a conderimation against my clients that quickly led to a settlement under
          which my clients received (1) a cash payment and (2) binding assurance that the acquiring'
          developer or its successor would either develop two condominiums on the properties for my
          clients or, failing this, pay them liquidated damages in the amount of$700,000.

                  It appears, however, that the City of Santa Cruz took my clients' property under its power
          of emlnent domain in order to deliver it to a private property developer whose controlling
          decision-makers later decided that after all they did not wishto develop the property atall, and so
          they allowed their lender to take the property by foreclosure. My clients so far have never
          received either the promised condominium units or the liquidated damages, even though these
          items were material inducements to their agreement to settle the City of Santa Cruz's
          condemnation proceedings against their property.
                                     \   .




                                             * ADMITTED IN CALIFORNIA AND WASHINGTON, D.C.
                                             tADMITTED  IN MEXICO, CALIFORNIA AND NEW YORK
Andrew L. Faber, Esq
Mr. Norman Schwartz
Page 2
May 31,2012




        The obligation to build the units or pay the liquidated damages is set forth as a covenant
that runs with the land. that is recorded as an equitable servitude against title to the Property. The
latest possible date on which the liquidated damages can be timely paid is October 25,2012.

         It is now possible that the foreclosing lender will take the position that at the trustee sale it
acquired title free and clear ofthis equitable servitude. Ifit does so, and if you decline to afford
my clients their promised consideration, I will be obliged to re-open the condemnation
proceedings, over which the Superior Court has preserved ongoing jurisdiction under Section
664.6 ofthe Code of Civil Procedure. If! re-open the proceedings, I will seek a rescission of my
clients' agreement to the settlement and a reconveyance to them oftheir title to the Property ..

       Ifhowever you will confirm that you will honor the equitable servitude by providing the
promised units or paying the $700,000 to them no later than October 25,2012, then there will be
no need for me to seek any further redress.

         I would greatly appreciate your prompt response to this demand. Thank you.


                                                 Yours sincerely,

                                                   /lA.1.t ,.--
                                                 William A. Markham

WAM/la


cc:      Mr. Ronald Lau
         Mr. Eric Lau
         Don Hubbard, Esq.

								
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