Lure of Laguna Is Subject of Suit : Homeowners Allege Fraud

George and Yolanda Davis always loved Laguna Beach. For 30 years, they came down from San Mateo, Calif., each summer for a vacation on its balmy, breezy beaches.

And when it came time for George to retire from his job as a restaurant supply salesman last year, the Davises thought they had found the ideal spot: a two-story, three-bedroom home off El Toro Road which, according to the sales brochures, signs and documents, appeared to be in Laguna Beach.

Or so they thought.

As it turned out, the Laguna Audubon tract home the Davises bought for $233,900 is not in the city of Laguna Beach at all. Instead, it is in the planned community of Aliso Viejo, across the street from an apartment and town home complex that is in Laguna Beach. And the Davises are hopping mad.

On Wednesday, they and the owners of about 140 other homes filed a lawsuit in Orange County Superior Court against the Kathryn G. Thompson Development Co., the general partner of Laguna Audubon, and other companies involved in the home sales. The homeowners allege that Thompson and the other companies--the Saddleback Escrow Co. and Martin Advertising Agency--fraudulently misled them into buying houses they believed were in the city of Laguna Beach.

Attorney Scott Karlin, who is handling the case for the Laguna Audubon homeowners, said they are asking for $5 million in compensatory damages and unspecified punitive damages. “We’re asking for the difference between the value of a property in Laguna Beach versus Laguna Hills,” Karlin said. “The estimates range from $30,000 to $100,000 per house.”

The Kathryn G. Thompson Development Co. referred calls about the lawsuit to its attorney, Angelo Palmieri, who declined comment.

Joe Martin of Martin Advertising, which handled the advertising for the Laguna Audubon project, also declined to respond.

The Davises, and other homeowners who are suing the developers, had plenty to say.

“The contract of sale says ‘Laguna Beach,’ ” said Estella Chaidez, a neighbor of the Davises, holding the document in question as proof. She paid $213,900 for her house on Hummingbird Lane. “If it says ‘Laguna Beach,’ I expect to live in Laguna Beach.”

The homeowners point to brochures, business cards given to them by the development’s sales agents, floor plans and billboards that appear to suggest that Laguna Audubon is part of Laguna Beach. One billboard--it has since been removed--virtually screamed at motorists that the address was “LAGUNA BEACH.” Sales brochures described the project as in “the Laguna Beach area” or in “the coastal highlands of Laguna Beach.”

Before the Laguna Audubon homeowners moved in, they were sent license plate frames that said “Laguna Beach” across the top and “Laguna Audubon” at the bottom. And just before they moved, the sales agents gave them a list of useful phone numbers, including the numbers for Laguna Beach police and fire departments--neither of which serves the development.

“We finally found out we didn’t live in Laguna Beach when a neighbor took his dog to get registered at the city pound,” said George Davis. “They told him he didn’t live in the city.”

The development is in the 92656 ZIP code, which for about a year did have a Laguna Beach mailing address, according to Laguna Beach postal Supt. William J. Aspinwall. About a year ago, the Mission Viejo Co., which is the major developer of the Aliso Viejo planned community, got Aliso Viejo recognized in the National ZIP Code directory.

For Davis and other homeowners, though, the matter is more important than an address on an envelope.

“Aliso Viejo--what’s that, a subdivision of Tijuana?” Davis said. “I thought we were buying in Laguna Beach. . . . Let’s face it, I wouldn’t have moved here if we had known.”