Elderly couple battles with CRA over empty nest egg.

Pair forecloses on Convention Center lot to get cash

An elderly Malibu couple is foreclosing on the new Los Angeles Convention Center parking structure in an attempt to collect money they are owed on an old lien they have against the land underneath.

Penny Grosz-Salomon, an attorney with Reznik & Reznik of Sherman Oaks representing Jack and Pearl Shultz, said the couple has already won a court ruling that the Community Redevelopment Agency owes them about $175,000, but the CRA has appealed the decision and won't pay. Meanwhile, the couple is old and sick and needs the money, so they decided to foreclose on the land, said Salomon.

"They've been in and out of hospitals. ... This money was intended by them to be used in their retirement years," said Salomon. "I would really like (Jack Shultz) to get this money before he dies."

Attorney Edwin Freston of Kane, Ballmer and Berkman in Los Angeles, representing the CRA, said he is attempting to block the default sale of the property on the grounds that it is illegal to foreclose on a public improvement.

"If the foreclosure is allowed to take place, there is that risk" that it could greatly interfere with the convention center expansion project, said Freston. "That's why the courts have ruled that in these cases, the people have to sue for money," he said. "The property has been devoted to a public use, and a foreclosure is simply improper."

According to the attorneys, the situation evolved this way:

The Shultzes sold their land at 611-621 Venice Blvd. in 1982 to Chevrolet dealer/real estate investor Nickolas Shammas for $450,000. Shammas owned adjacent property.

The sale included a note for $385,000, which Shammas was to pay off over 10 years at 12.5 to 13 percent interest.

But in 1988, the city decided it needed Shammas' property for its convention center expansion. Negotiations began, and the CRA took action to condemn the property.

In 1989, a process server named Alice Yoakum reported that she had gone to the business address for the Shultzes (J&P Enterprises Inc. of Los Angeles) and not found them in. She also reported attempting to locate them through phone directories and the state Department of Motor Vehicles with no success. A summons was published in the Los Angeles Daily Journal (a publication devoted to legal news), to which the Shultzes did not respond.

Los Angeles County Superior Court Commissioner Herbert Klein ruled that a reasonable effort had been made to find the Shultzes and allowed the property to be condemned and a default entered against the Shultzes.

In 1990, Shammas sold the property (the part he bought from the Shultzes and adjacent property he also owned) to the CRA for $5.4 million, but he kept making monthly payments (inadvertently) of $3,860 to the Shultzes for eight months, until September 1990. When the payments stopped, the Shultzes learned of the sale to the CRA.

The Shultzes went to court and proved to Klein that they were generally available at their business address, they were listed in the phone book, and they had valid driver's licenses; in other words, they proved that a reasonable person could easily have located them back in 1989.

The order of condemnation and the default order were vacated, but the CRA and Shammas couldn't agree on who owed the Shultzes their $175,000.

"I think everyone agrees that the Shultzes should be paid," said Freston. "Unfortunately, we disagree on who should be the primary responsible party to do that."

Superior Court Judge Raymond Cardenas ruled in May of last year that the CRA must pay the Shultzes, plus reimburse Shammas for his extra eight months of payments. But the CRA appealed, and Shammas filed a "cross appeal."

Meanwhile, the city started construction of a parking structure on the property. Construction is scheduled for completion this August.

Jack Shultz, 76 years old and suffering from cancer and heart problems, went to Reznik & Reznik at this point.

"The first question we had was: 'We have this deed of trust. Why don't we just foreclose on the property?'" said Salomon.

Last November, the Shultzes filed a notice of default, the first step in foreclosing and scheduling an auction sale.

The CRA filed a motion for an injunction to stop the sale. That motion is scheduled for a hearing before Cardenas on March 8. If the injunction is denied, and the CRA still refuses to pay, Salomon said the property will go on the auction block in mid-March.

"My goal is not to stop a convention center project. I expect the CRA will pay to stop the sale," said Salomon. "I don't know why they will not pay the money to my clients and seek reimbursement from Shammas."

If the sale goes ahead, Salomon said, the Shultzes will submit a "credit bid" (what they are owed on their note, plus costs and attorney fees) of about $250,000. If no one else bids, the Shultzes would become the full "fee owners" of the property, and the CRA would have to buy the property from them in order to use it.

If someone else were to bid more, the Shultzes would be paid from the proceeds, and the CRA would have to negotiate with the new owner, Salomon said.

Freston said if Cardenas denies the CRA's request for an injunction, he will appeal that decision also.