Award in Santa Clara HOA lawsuit is largest ever in California after ‘extensive deception’ over abandoned well under condo

SANTA CLARA — It’s been nearly seven years since water began accumulating in the crawlspace of Doug Ridley and Sherry Shen’s condo — an alarming discovery that led to the uncovering of an abandoned artesian well under their living room that would wreak havoc on the couple’s lives.

What followed was a years-long legal battle between Ridley and Shen — retirees who planned to use the rental income from the condo to travel and visit relatives in the United Kingdom and Taiwan — and the Rancho Palma Grande Homeowners Association. But late last month, Santa Clara County Superior Court Judge JoAnne McCracken ruled that the HOA had breached its duties, “engaged in extensive deception,” and violated the Elder Abuse Act, as well as a state law regulating HOAs.

Now, the HOA and its former president, Steve Moritz, will be responsible for more than $1.8 million in damages — a number that one of the couple’s attorneys, Terry O’Hara, said is the largest known award in California against an HOA for fraud and elder abuse.

“This whole thing is characterized by denial, delay and simply red herrings left and right,” Ridley, 85, said in an interview.

Ridley purchased the condo in 1991 and lived there for years until he and Shen decided to rent it out in 2015. The three-bedroom, two-bath home is one of more than 100 condos in Rancho Palma Grande, which was developed around the early 1980s.

The saga that has consumed much of Ridley and Shen’s lives began in April 2018 when their tenants at the time spotted a reflection in a floor grate from water accumulating in the crawlspace. The following month, the HOA learned that the city and the Santa Clara Valley Water District believed the water was coming from an abandoned artesian well, according to court documents.

The more-than-400-feet-deep well, which has since been destroyed, was a remnant of Silicon Valley’s agricultural days, providing irrigation for orchards and farms. Many similar wells in the area were destroyed before being developed over, but the one beneath Ridley and Shen’s living room was forgotten.

When the water first appeared, Ridley installed a sump pump under the condo that bailed 15,000 to 17,000 gallons of water a day. Meanwhile, mold and a strong odor that he said would “practically knock your head off” when you walked in the front door began to develop. The ground under the crawl space in the living room eventually collapsed into a sinkhole, which was discovered in September 2019.

In her Feb. 26 decision, McCracken wrote that if the HOA had “acted timely, the well could have been located and destroyed in a few months.”

But the HOA, despite warnings from their attorneys that they needed to immediately address the water because it could cause “exponential costs,” failed to act. The HOA didn’t provide a map from Valley Water showing that there might be a well under the condo to any of its contractors or consultants, according to the decision. And a $7,104 proposal from a water restoration company to dry out the crawl space in an effort to reduce the risk of mold and fungus growing was rejected over the cost, Moritz revealed at trial.

McCracken wrote in her decision that by June 2018, the HOA had taken “some steps to address” the issue but called them “inadequate and ineffectual and reflected a lack of urgency by the HOA.” After August 2018, however, the judge said the HOA’s conduct “involved gross negligence, deception and a breach of the duties they owed to them.”

By the end of 2018, McCracken concluded that the HOA had no intent to locate or destroy the well.

In January 2019, Steve Barber, the HOA’s newly hired attorney, falsely claimed in a letter to the city and Valley Water that no experts they contacted gave “any credence to the hypothesis that there is an abandoned well” under the condo. Instead, he claimed that there was a “consensus” that the water in the crawl space was caused by a high water table — an assertion that one Valley Water employee called “kooky” at trial.

Court documents show that Moritz testified he knew Barber’s letter “was replete with falsehoods” and acknowledged that he falsely claimed there wasn’t mold under the unit. The former HOA president had told Ridely several times that the condo was habitable despite the known presence of mold.

In March of 2019, more flooding occurred in the crawl space — this time worse than the initial flooding nearly a year prior — and the sump pump struggled to keep up. The water was discharged from a bubbling hole, and experts warned the HOA that it might continue growing. The sinkhole was finally discovered in September of 2019, and Moritz told other HOA board members that he believed the couple or their attorneys created the hole, according to court documents.

In January of 2020, the HOA finally cut a hole in the living room floor above the sinkhole to explore — something that had been suggested to them in 2018. The hole was described in court documents as large and with “no discernible bottom.” After two hours of excavation with a vac-truck, the well was discovered and subsequently destroyed the following month.

It’s been over five years since the well was destroyed, and Ridley and Shen’s condo is still uninhabitable. While the hole in the floor has been closed up, the subfloor is exposed across the condo, and the yet-to-be-installed hardwood flooring sits in boxes. Some of the baseboards have been torn out in an effort to get rid of the mold that infiltrated the condo.

Ridley doesn’t know when the condo will be livable again. He believes there’s a month’s worth of work to be completed, but the HOA has continued to drag its feet. The court order for mold remediation was originally issued in September 2022.

O’Hara called the situation a “systemic failure at all levels” and likened the case to David and Goliath.

“We’re not fighting against just this HOA board, we’re fighting against the lawyers that are representing them, we’re fighting against the three insurance companies that are backing them and paying for the defense,” he said. “It’s a multi-billion industry that we’re up against.”

The whole ordeal has put a strain on Ridley and Shen’s retirement nest egg as it has cost them a “significant fraction” of their retirement income.

“I had to sell things I wouldn’t have dreamt of selling — stocks and stock options and whatever had to go to fund the work that we were doing,” Ridley said. “The HOA would not investigate, so we paid to investigate.”

But the $1.8 million — which includes lost rent, punitive damages and the cost of emotional distress — might not be going to Ridley and Shen’s bank account any time soon. The HOA has 60 days to appeal the decision, a move that would effectively tie the money up in court. The $1.8 million, though, will collect interest in the meantime. Attorneys for the HOA and Moritz did not respond to a request for comment.

Mary Ann O’Hara, another one of Ridley and Shen’s attorneys, said that while the $1.8 million might seem like a lot of money, the price tag isn’t worth the toll it took on them.

“It’s really put them through the ringer emotionally, financially,” she said. “And it’s nothing that this hard-working couple should have to go through after working between the two of them over 100 years to deserve their retirement in peace and to have it disrupted in this way, they never would have chosen that.”