Real estate agent wins $47 million in legal battle over commissions.

Real estate agent wins $47 million in legal battle over commissions

Judgment plunges loser into personal bankruptcy 

After a six-year legal battle, a real estate broker has won $47 million in legal judgments against property doyen Naftali "Tuli" Deutsch and other former owners of the Beaudry Center I in downtown Los Angeles, in a court ruling that has sent aftershocks running through the real estate community and plunged Deutsch into personal bankruptcy.

Donald Greenwood, of the Westside firm Greenwood & Co. Real Estate Inc., was awarded $30 million in punitive damages by a jury in Los Angeles Superior Court on March 5, in addition to $16.6 million in commissions and interest awarded by Superior Court Judge Jerome K. Fields earlier in the case.

The judgments will be appealed, the soft-spoken Beverly Hills resident Deutsch said last week, in a short interview. "We are appealing the judgment," he said. "That is all I can say, on advice of counsel."

Deutsch's legal nemesis Greenwood claimed that in 1984, as exclusive leasing agent under contract by Deutsch's C-D Investment Co., he obtained a commitment from Los Angeles-based Security Pacific National Bank to be major tenant in the Beaudry Center I, a 29-story tower in the so-called West Bank section of downtown, west of the Harbor Freeway.

Greenwood, represented in the long-running trial by independent Westside lawyer Hillel Chodos, claimed he was entitled to $12.1 million in broker commissions and interest on the $518.9 million, 21-year lease Security Pacific ultimately signed to rent Beaudry Center I.

Shortly after Greenwood allegedly secured Security Pacific as tenant for Beaudry Center I in 1984, Deutsch's C-D Investment sold the building, and 20 other properties with a combined value reaching $1 billion, to a Texas limited partnership organized by Sun Cal Inc., subsidiary of Dallas-based Sunbelt Savings & Loan, a thrift since seized by federal regulators, C-D took a position in the new limited partnership.

Sun Cal, having never inked an agreement with Greenwood, refused to pay him the $12.1 million commission. Deutsch didn't pay the commission on grounds that Greenwood never signed Security Pacific while C-D Investment owned the building.

Greenwood claimed in court that Deutsch, Sun Cal and others intentionally acted to deny him his commission, and on those grounds Greenwood sought $36 million in punitive damages for "international interference with economic opportunity."

The jury on March 5 ruled largely in Greenwood's favor, and awarded him the $30 million in punitive damages. Deutsch, personally liable for $7 million in punitive damages and the commission, recently declared personal bankruptcy.

The Greenwood case is important to commercial property buyers, because claims of Greenwood's type now represent a potentially large but unrecorded liability on property, said Charles Vogel, partner with the Century City-based law firm Sidley & Austin, which represented Sun Cal in the trial.

"Broker agreements are not recorded [at the Los Angeles County Recorder's Office]. They are something you have in a desk drawer or in a file," said Vogel.

Virtually all other claims against a property, such as loans and liens, must be filed in the County Hall of Records, where they are public record.

A buyer of a property, by doing a title search, can ascertain a property's legal and financial strings -- but not in the case of broker's agreements, said Vogel.

Making the Greenwood ruling doubly vexing is that Greenwood never had a written contract with Sun Cal, asserted Vogel. "It has been black-letter law that a broker cannot recover [damages] unless he has a signed agreement with a defendant," said Vogel. "If they don't have a written agreement, they have nothing."

In the wake of the Greenwood case, said Vogel, "The problem for the business community is the possible exposure out there when you buy a building. A broker may sue you for a commission and claim that you interfered with his economic opportunity....Then you have to go down to the Central District [Superior Court] with that pool of jurors, where anything can happen."

The courts may soon bristle with broker's claims, which most likely will be settled out of court, said Vogel -- at some expense to property buyers.

In all, Greenwood was awarded $16.6 million in commission and interest, and punitive damages of $7 million from Deutsch; $1 million from Deutsch-controlled entities; $4 million from Sun Cal; $9 million from Sun Cal partners Stanley Castleton and William Dobrowolski, and $9 million from Edwin McBirney, chairman of Sun Cal and Sunbelt Savings and Loan.

McBirney, known to readers of the best-selling McGraw Hill book "Inside Job: The Looting' of America's Savings and Loans," entered the case when he bought Beaudry Center from a struggling Tuly Deutsch, according to court documents.

Sun Cal lawyer Vogel said Deutsch's C-D Investment limited partnership was a real estate empire in dire financial straits until Sun Cal chanced upon the scene.

"C-D was burdened with debts and on the verge of bankruptcy when Sun Cal emerged as a possible `white knight.' C-D could not depend on a piecemeal property-by-property solution to its financial problems, but needed a massive infusion of capital -- over $100 million from Sun Cal -- to resolve its overall problems," wrote Vogel in court documents.

C-D could not make service and operating payments on 21 commercial properties, including the Beaudry Center, and Sun Cal bought the whole package from C-D, said Vogel.

McBirney is known as the Sun Belt thrift chieftain who threw parties wild by even Texas standards -- nude prostitutes performed public favors at one event, according to the McGraw Hill book -- but left the taxpayers holding a $1.2 billion bill when his thrift was seized by federal regulators. The Federal Savings and Loan Insurance Commission is now suing him.

The past owner of the Beaudry Center I, Tuli Deutsch, is noted in Beverly Hills real estate circles for his house, a 30,000-square-foot manse visible from the intersection of Beverly and Coldwater Canyon drives.

Perched upon stilts, the Deutsch house is adjacent to another stilted giant domicile, that of Deutsch's former partner, Alexander Coler. Reportedly, the pair had their houses built together as an expression of their friendship, but the two have had a falling out since.

PHOTO : On stilts: The Coler and Deutsch homes in Beverly Hills