Buying the Home (2001)
Thomasena and Ralph Simpson bought a new home in August 2001 from the builder, Lynn O'Brien and her company Stonehenge
Properties. Coldwell Banker was the real estate company that represented both the buyer and the seller, with
Lou Rae Kagel the listing agent and Douglas Rea the selling agent. Both agents work for the Los Gatos office, which
has annual sales exceeding $1 billion, ranking it second of all 3,700 Coldwell Banker offices nationwide.
This home is located in Monte Sereno, CA (adjacent to San Jose) and was purchased for $3.25 million.
The home was significantly and knowingly misrepresented by both the builder and the listing agent. Three different
color brochures state:
- Room for pool and/or other building
- City says space in back sufficient for additional 800 sq. ft. structure
- Fibre optics for better communications
- Three zones of heating and air conditioning
- Total square footage, approx. 5300
All of the above claims were false and known to be false at the time the brochures were written.
It was also known by all parties that the Simpsons
would not have bought the home without the ability to build a pool. This was confirmed in an
email from the selling agent, Douglas Rea, to Ralph prior to closing. The other items
were not requirements but inflated the perceived value of the home.
The brochures were definitive in stating “City says space in back sufficient for additional 800 sq. ft. structure”
and “room for pool and/or other building”. Both the builder and listing agent on many occasions pointed out this
advantage, walking through the back yard to recommend likely locations for the building and pool. They described
a location for the pool where they planted grape vines as a likely site since this would not require removing
any grass or changing the sprinklers and also was visible from the family room. They also pointed out the many
uses for the 800 sq. ft. structure, including an office with separate garage, spare bedrooms, artist studio,
garage with showroom for antique cars, etc. They claimed that both the pool and separate building were already
approved by the city of Monte Sereno but they decided not to build them. They were even planning on building a
sports court.
Several years later Ralph
discovered that Lynn's architect sent her a letter stating that the property was at its impervious coverage limit and
her plans for a pool or other patios would not be allowed. He also sent a letter to the city of Monte Sereno agreeing
that the doors leading to the back yard would only have concrete landings but no patio area. Finally, the blueprints
left in the house had a highlighted, hand-written note directly on the blueprint saying the property was at its
impervious coverage limit. All this occurred before the Simpsons first viewed the property. These
blueprints did not show the patio areas added later or the circular turnaround driveway in the front yard. Lynn
extended the patio areas and driveway beyond the amount permitted by the city, resulting in the property being 874
sq. ft. over the permissible limits at the time of sale.
Several times the listing agent identified the guest house as having one of the three zones
of heating and cooling. The guest house, in fact, did not have air conditioning. Another claim written on a
large poster outside was “almost an acre!”. The actual size of the lot is 26,340 sq. ft. or .60 acre, below the realm
of any excuse of marketing exhuberence. The home was advertized as 5300 sq. ft. while it was actually 5005 sq. ft.
and known to be that size in the permits with the city.
The size of the house and lot, and the lack of air conditioning was discovered prior to closing. Air conditioning
was added to the guest house and paid for by the listing and selling agents, so this was not part of the lawsuit.
The air conditioner story is, however, very instructive in proving the level of collusion between the listing agent
and seller in their conscious attempt to defraud the buyer.
All the marketing brochures highlight the 3 zones of heating and air
conditioning, which was explained by Lou Rae as 2 zones in the main house and one for the pool house. Also, the pool
house is combined with the main house in advertizing the square footage as 5300 and later as 5100. Another brochure
says the pool house is equally grand as the main house. After buying the house but before close of escrow,
Ralph turned on the air conditioner
in the pool house during an open house and noted there was no cold air coming from the vents. He pointed this out to
Lou Rae, who claimed that A/C was installed and was probably behind the pool house. Ralph and Lou Rae walked around
the pool house and saw there was no A/C unit installed, but Lou Rae then claimed it must be on the roof or in the
garage. After checking both those locations and seeing it was in neither, Lou Rae then claimed it was in the attic.
Ralph questioned this claim, noting he had never heard of an A/C unit being placed in an attic but Lou Rae then made
the preposterous claim that she knows this is commonly done since her husband is a builder! All this occurred in late
August, 2001.
After a walk-through with Ralph, Doug Rea sent a letter on 9/4 to Lou Rae asking for verification that A/C was
installed in the pool house. She responded in writing the following day, stating “We can turn this on, I know the
air con works.” On 9/7 the selling agent met with the constuction foreman who finally verified that the A/C was
not installed. Lou Rae responded to this revelation with aplomb, informing Doug that the builder would install
the A/C for half the normal cost of $5000. Ralph refused this offer, noting that the house was advertized as having
this feature. Lou Rae then wrote a letter to Doug claiming that
the buyer is asking for an upgrade and the seller will install this at cost (now $1200). She also made the
fantastic claim that Ralph saw the blueprints so he must have known that there was no A/C in the pool house. Ralph
examined the blueprints for a few minutes to see what they included and asked to have them convey with the house.
It turns out the note about no A/C being installed is on page 12 of 12 and very difficult to find in some
handwritten notes. Doug's return letter to Lou Rae is unequivocal in stating
“This is misrepresentation. Had it not been discovered until after close of escrow, we would be facing a lawsuit.”
If all this isn't enough, the builder also signed off on a disclosure document,
checking the “No” box for the question, “Are there any rooms not served by air conditioning? If so,
which rooms?” All these documents can be viewed here.
Unfortunately, the story of the A/C is still not over. The two real estate agents secretly agreed to pay for the A/C,
telling Ralph it was being paid for by the builder and listing agent.
Ralph now insisted that this be demonstrated before closing, which was finally planned for 7pm on the
night before closing. The homeowners showed up 30 minutes early to find that the pool house was not locked, so they
entered and turned on the A/C. This was a hot day and the house felt like a sauna inside but did not cool off after
30 minutes when Doug arrived. Doug called Lou Rae to let her know the A/C was not working and she arrived
within 15 minutes. She immediately felt the air
from the vent and claimed it felt cool to her, it would just take some time to cool off such a hot house. Ralph
pointed out that the temperature only dropped one degree in the past hour, so the air doesn't feel cool to
him or to the thermostat. She then said we should open some windows to cool off the house! After this she said that
it may take all night to cool off, but we can't expect the builder to pay the price for air conditioning this 700 sq.
ft. pool house all night. Ralph threatened to call off the closing, so after arguing for about an hour, Lou Rae
finally called the builder to find that all concerned had mis-coded the thermostat and when corrected the house
was cooled down in less than 5 minutes. So, A/C was finally demonstrated 12 hours before closing after much
deception and stress.
The home closed escrow on 9/28/2001, with funds transferring to the builder by 10am that morning. Despite this,
the builder refused to turn over the keys to the house until after 5pm. The house was empty at this point, but
Lynn stayed in the empty house in order to block the Simpsons from entering or allowing their movers access.
The movers arrived as planned at noon, but moved the pallet of goods into the garage and the Simpsons moved these
into the house after 5:30pm that night without the help of the movers. Lynn and Lou Rae refused to turn over the
keys to the pool house, both claiming to have lost their keys (Lou Rae had it the night before so here is another
point of collusion). Doug had a locksmith come to the house the following day, a Saturday, in order to break
into the pool house and re-key all the locks and even paid for this as a gift to the Simpsons.
Installing the Pool (2003-2004)
The Simpsons were returning to the Bay area after spending 5 years in Europe, so they were busy re-settling in the
US and did not immediately work on
the pool plans until the following spring. They hired a pool contractor who submitted the plans to Monte Sereno to
get the required permits in January 2003. When the plans were rejected by the city, Ralph met with Brian Loventhal,
City Manager/Planner, to find out why. This is when Ralph first discovered that the house, driveway, patios, etc.
were already 874 sq. ft. over the allowable impervious coverage limit. As Brian said in that meeting, “I can't
authorize you to put a stepping-stone on your property.”
After showing Brian the marketing brochures for the house, he made a major concession which was not normally granted.
He agreed that if the Simpsons removed enough existing concrete they could add an equivalent amount for the pool
and deck, allowing the property to remain 874 sq. ft. over the limit. He was clear that this concession was only for
the pool and deck and did not include an 800 sq. ft. structure. Instead of removing the concrete, another
option was to replace concrete with paverstones, which count as half the amount of impervious coverage as concrete.
After some quick calculations, it was determined that the entire driveway, including the turnaround in the front
would have to be replaced with paverstones in order to accomodate the pool. This was documented in a
letter from Ralph to Brian Loventhal on March 31, 2003.
During this negotiation and over the ensuing 2 months, Ralph talked to Ryan Iwanaga, manager of the Los Gatos
office of Coldwell Banker. Ryan was kept up-to-date with the problem and Ralph asked Coldwell Banker to pay
for the paverstone replacement. He also let Ryan know that there were other issues remaining, i.e. the 800 sq. ft.
structure which would never be allowed, the size of the house and the lack of fiber optics in the house. Ryan asked
Lou Rae Kagel go to the city to find out if there was any other solution. She reported back to Ryan that the
Simpson's pool could be built if they would simply change the design. This conversation took place in March 2003,
prior to any agreements with the city and was an out-right lie from Lou Rae to her manager, since at this point
there was no agreement and a stepping-stone would not be allowed. In deposition in 2006, she claimed to go to the
city after receiving Ralph's letter to Ryan on June 9, 2003. Monte Sereno gave final
approval for the pool on May 22, 2003 so there would have been no reason to ask Lou Rae to check with the city
in June. In fact, the letter itself mentions her previous claim to have already gone to the city.
This June letter from Ralph to Ryan was written at Ryan's request. He asked for price quotes to replace the
driveway and to specifically request Coldwell Banker pay for it.
This letter was hand-delivered on 6/9/2003, with the lowest quote of $42,620.
Ralph agreed that this amount would settle the entire matter even though the final price for the paverstones was
likely to be much higher (it was, the final bill was $63,754) and this did not include reimbursement for the other
misrepresentations of the house. This settlement offer represents about one-fourth of the real estate commission
on the sale of the house. Coldwell Banker's response to this generous offer was to arrogantly ignore it. When
Ralph gave a deadline for a response of 6/20/2003, Ryan called back on that day to say there would not be a response,
“so do what you have to do.” He understood this meant Ralph would be seeking legal remedies that would include
all the items in dispute, well beyond the $42,620.
The Simpsons demolished their brand-new driveway and installed paverstones in December of 2003 and the pool was
completed in May of 2004, one year later than planned. They then hired an attorney to pursue reimbursing their
costs and the lost value of the other misrepresentations.
Negotiating a Settlement (2005-2006)
First, a non-binding mediation was required by the purchase contract, which was held on
11/17/2005. The various mediation and arbitration sessions are confidential, so all the lies told by both
Lynn and Lou Rae can not be recounted here, but there was no settlement and the case did go to trial.
Both Lou Rae and Lynn lied throughout their depositions, even when it seemed trivial.
Unfortunately for them, they were caught in several lies that were documented. They also contradicted each other
in their depositions. Lou Rae and Lynn were long-time family friends and had previously worked together to sell
a $6.5 million home in 2000. Now they are cross-suing each other in this litigation.
The Trial (2007)
The trial was held in Santa Clara County Superior Court from January 31 to February 2, 2007. You can read the
complaint here. On the first day, Coldwell Banker settled for $250,000. The jury was
selected and Lynn O'Brien agreed to settle for $200,000 just before opening arguments were scheduled to begin.
Other Lawsuits
Lynn O'Brien built and sold 6 multi-million dollar homes since 1996 and, so far, 4 of those home sales resulted in
lawsuits. In 3, Lynn was a defendant and in one she was the plantiff. Yet when asked in deposition if she was ever a
plantiff in a lawsuit, she replied, “No.” When asked if she ever listed a home with a particular high school friend,
she again said “No.” This friend has a website showing she listed Lynn's home on Bruce Avenue in Los Gatos
and sold it in 14 days in 2005.
One of the lawsuits was over a $1.9 million vacation home built in Santa Cruz and sold in 2003.
This lawsuit was filed because Lynn refused to repair a very minor leak in the roof and
in the discussion with the homeowner, called him a “Jew-boy used car salesman”! This used car salesman, actually the
wealthy owner of several new car dealerships, then discovered his home was built on the site of a previously
“red-tagged” home, meaning the home was not allowed to be occupied because of a landslide on the property.
Lynn spent a large sum of money to stabilize the hillside lot, but then fraudulantly claimed no prior
history of problems. She signed disclosure documents claiming no soil stability problems on the lot, no previous
landslides, etc. This lawsuit was settled out of court in April 2006.
Another lawsuit was due to 10 inches of standing water under a $2.1 million home sold in 2000. The home owner
discovered that some of the foundation support beams were made of wood and sitting directly on the ground, in the
10 inches of water. Lynn did replace these deteriorating beams but refused to fix the water problem. The fix was
only $6,000 for installing sump pumps, but the home owner had to go to small claims court for reimbursement. She
won the case but later lost on appeal, fighting as an individual against the resources and lawyers brought in by
Lynn O'Brien. In deposition, Lynn twice stated she lived in this home, which was not true since the new homeowner
finished the construction of the house and months later turned on the water and electricity for the first time.