Hat tip to SM for sending this in from the ocregister.com:
It was a $2 million Laguna Beach dream house six years in the dreaming, building and litigating, but it was taken from Mark Zigner in less than a minute on Thursday, in an auction on the courthouse sidewalk.
I wrote last fall about the battle between Zigner and Pacific Mercantile Bank over the home on Ledroit Street. Zigner, a jewelry broker by trade, had started to build the house in 2006 and sunk his life into it.
He borrowed $2.2 million from PMB, with whom he’d done business for years. When real estate went south, PMB let Zigner slide on some payments and had given him every indication it would continue to do so until he could finish building the house and sell it. But one day in 2009, an executive who had worked at PMB 15 days decided to call the loan due, essentially wiping out Zigner’s assets and ruining his credit overnight.
Zigner sued. My column chronicled how a jury believed PMB wronged Zigner and awarded him $2.1 million – $1.87 million as punitive damages. That didn’t end it, and much has happened of late.
First, Judge Francisco Firmat on Wednesday reduced the punitive award to $950,000, making the overall judgment $1.2 million. “Disappointing but not surprising,” is how Zigner’s attorney Frank Battaile characterized the decision. A U.S. Supreme Court benchmark is that punitive damages be no more than four times the actual damages, which in this case were $250,000.
More critical to Zigner, however, was that Firmat denied PMB’s motions to toss out the verdict altogether. This means PMB’s next option is the state Court of Appeal. PMB said last fall it would challenge the verdict but on Thursday told me it would have no further comment on any aspect of the dispute.
While Zigner won the lawsuit, it is important to remember he hasn’t collected (because of the possible appeal) and by PMB’s estimate is still $2.8 million in arrears on the house. The house, however, isn’t worth that in today’s market. His real estate agent had buyers interested at about $1.8 million, which would require a short sale.
The agent, Barbara A. Amstadter of Prudential California, wrote to directly to PMB’s board and said she had three potential buyers. Amstadter, a distressed-property expert, wrote that PMB “will lose even more money foreclosing on this property than it would in doing a short sale … based on the industry-accepted knowledge that a foreclosure produces less return than a short sale.”
PMB’s lawyers, however, replied in a one-paragraph letter stating PMB wasn’t interested and would be foreclosing. Why? PMB isn’t saying. Amstader and Battaile are mystified.
“I’ve never had bank refusing to even let me present short sale offers,” Amstader said. Battaile told me: “I always thought they would come to the table, but they won’t give us the time of day.” Zigner, whose credit would be even further damaged by a foreclosure, thinks PMB is being vindictive. “I won this case. They want to bury me.” It’s also possible, he said, PMB has a buyer lined up.
In recent weeks, as Zigner saw foreclosure looming, he produced a YouTube video (“Support Mark Zigner”) telling his version of the fight. PMB attorneys fired off a cease-and-desist letter, calling the video “highly disparaging, incomplete and inaccurate” and contending that circulating it “constitutes legal defamation.”
Battaile responded that Zigner would not be removing the video – that, in fact, it is far less damaging to PMB than the court’s actual Statement of Decision of the case. “Judgments and verdicts have consequences and your client will have to live with them,” Battaile wrote back.
While Zigner may ultimately collect $1.2 million from PMB, he couldn’t hang onto his dream house. I went to the sale, held in the shade of the courthouse entryway on Civic Center Drive. Dozens of properties were on the block, and more than 35 potential buyers milled. A Mission Viejo house with an opening bid of $435,000 was the subject of an excruciating 15-minute-long bidding war in which the parties went up in $100 increments to the eventual price of $456,200.
Zigner’s house was next but there was no such fight. The preestablished opening bid by PMB was $2,046,938. “Going once … Going twice …” cried the auctioneer. Nobody spoke. In a matter of seconds, it was gone. The bank had taken it.