Condo buyers fight for deposits

Barbara Chandler had to compose herself a couple times Tuesday while testifying about unfulfilled promises at Spanish View Towers, a luxury condominium project that left buyers in the lurch for $3.5 million in deposits when construction stopped in 2006.

The California real estate agent plunked down $210,000 in July 2005 for a unit in the first of three 18-story towers planned at the Las Vegas Beltway and Buffalo Drive in the southwestern Las Vegas Valley. Her mother, who had suffered a stroke and needed care, deposited $175,000 for a unit on the same floor.

They both lost their money. Chandler lost her mother in late 2006.

"It was very stressful. I didn't get to spend that quality time with my mom," Chandler said during the first day of trial in District Court in Las Vegas.

She's among 22 plaintiffs who put down 20 percent deposits at Spanish View Towers, where prices ranged from $800,000 to more than $5 million. With developer Tower Homes in bankruptcy, buyers are trying to recover their deposit money from Prudential Americana broker Mark Stark and sales agents David Berg and Jeannine Cutter.

Usually, deposits go into an escrow account as "earnest money" toward the full payment and cannot be used for any other purpose. However, Spanish View contracts included releases allowing the developer to use the money to start construction before securing permanent financing.

The financing never happened. The site remains an eyesore, with a partially built underground garage and concrete and steel sticking up from the ground.

The funds were transferred from escrow into developer Rod Yanke's general checking account and were used for personal expenses, including the mortgage on Yanke's Spanish Trail home, a yacht in Florida and payments to Berg and Cutter, the lawsuit alleges.

Yanke drained the account to negative 53 cents, then filed for bankruptcy. He has since agreed to a $1 million judgment, but has no money to pay it.

Chandler said she fully expected to get her deposit back if the project failed.

"I feel really foolish," she said. "It's a lot of money, most of our money, and we're not rich people."

Brian Hardy of the Marquis Aurbach Coffing law firm, representing the plaintiffs, said brokers Berg and Cutter of Prudential Americana Group withheld crucial information from the buyers, including Yanke's personal relationship with Cutter and the project's lack of financing. Also, Yanke was involved in a serious car accident that left him on medication and a "shell of himself," Hardy said.

Real estate agents should be "gatekeepers," looking out for their buyers, he said. When the agents represent both the seller and buyer, transparency becomes tenuous, Hardy said.

"We're not asking for hundreds of millions of dollars in damages. They just want their money back," Hardy told the jury.

Berg and Cutter did not know the developer was taking money from the escrow account and had no idea about construction financing efforts, countered defense attorney Michael Stoberski.

Berg received $53,000 in commissions over three years, or about $17,000 a year, while Cutter got $126,000 because she was involved in both marketing and sales, Stoberski said. They spent $50,000 on advertising.

Stoberski said the sales contract clearly stated that the developer could "pledge" the deposits toward construction costs.

He asked buyer Larry Schiffman if he had read the contract thoroughly. Schiffman said he did not see the sentence in the contract that allowed the developer to use the money to start construction, and that he was told by Berg that it was "not necessary" to read the entire contract.

"Do you consider yourself to be a sophisticated purchaser?" Stoberski asked.

"To a certain extent," Schiffman responded. He testified that he recently sold his home, worth more than $1 million.

"Did you feel coerced to sign (the sales contract)?" Stoberski continued.

"No," Schiffman said.

The trial is expected to continue for a least two weeks in District Court Department 11 with Judge Elizabeth Gonzalez presiding.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.