Dreams Crumble Too : Safety: San Juan Capistrano homes ruined by a landslide are razed. Only a legal scrap remains.

It took less than 90 minutes for the lumbering bulldozer to claw the two houses into splinters. But the seconds were excruciating for the owners who watched, fighting back tears, as each room was torn away.

“I put every one of those plants in there,” Nita Di Schino said shortly after 7 a.m., as the bulldozer began pushing over her family’s beloved peach tree, whose plentiful, sweet fruit had gone into countless pies and jams.

As the machine relentlessly barreled into the house, she winced. “They are now into my master bedroom, and I just papered it.”

In 20 minutes, the Di Schino’s single-story stucco home, newly painted white with blue trim, was a pile of debris that was loaded into a dump truck. Then the bulldozer began devouring the two-story clapboard home next door, belonging to the Filipowicz clan.

It was the final act in a drama that has gripped the two families for the past three months, since the houses were slowly pushed and pulled asunder by a landslide that ultimately forced the families to evacuate.

Now the lives of the families are up in the air, as they cross swords with insurance companies and lawyers in a bid to recapture their lost savings and dreams.

One thing remains certain: They will not be rebuilding soon, if ever. Officials estimate that it would cost $1.5 million to shore up the slumping hillside and rebuild the houses.

“This was my future. This was my nest egg,” said Paul Filipowicz as he watched the demolition of his house, surrounded by neighbors taking pictures and offering sympathy to his wife, Sue.

Reluctant to express his own feelings about the sad event, he said only, “I’m sort of numb right now.”

City officials had planned to wait for the owners to scrape together enough enough money to clear the property, which has been circled by a chain-link fence since the families moved out. But authorities decided to demolish the slumping structures immediately after hearing that children were “running though the houses on dares” and that the slide was continuing to undermine the structures.

The demolition will be followed by grading Monday, which officials hope will alleviate pressure the slide is beginning to exert on the corner of a third house.

Daniel McFarland, a city building official, said the city will try to pass the $9,800 cost of the demolition and grading on to the homeowners, probably by tacking it onto their property tax bill.

Unfortunately, McFarland said, the families are not eligible for state or federal disaster aid in the form of low-interest building loans, because the slide destroyed just two houses, not 25 or more.

Even as the heavy machinery crashed into the walls of their houses, the owners acknowledged that they are uncertain how they will raise enough money to rebuild and that they doubt the feasibility of using the same lots.

They are also skeptical whether their insurance company, Los Angeles-based Farmers Insurance Group, will willingly cover the loss.

John Millen, a spokesman for Farmers, said the company is wrapping up its investigation of the cause but noted that damage resulting from natural earth movement is specifically excluded from all homeowners policies.

Filipowicz, who figures his home was worth $375,000 to $400,000, said he expects geologists to prove that the landslide was caused by a leaking swimming pool in the back yard of a house on the slope above his. Soon after the slide began, the pool threatened to topple off the hill and was removed.

But even as they watched their homes and dreams disappear, the families were left with another problem: a lawsuit filed by some neighbors.

Wesley L. Davis, an attorney representing the Filipowicz and Di Shino families, said the neighbors accuse them of contributing to the slide by overwatering. They demand that the slope be stabilized and the houses rebuilt to protect property values, he said.

The lawsuit, filed in February, also names as defendants the owners of three homes, including the one with the pool, that are perched atop the failed slope, he said.

Davis said his clients will file a countersuit next week against the three uphill owners. The pool and possibly another source of water--perhaps an abandoned irrigation pipe--may be responsible for the slide, he said.

Attorneys for the owners atop the hill could not be reached Friday.

Although the houses have been demolished, both families still have mortgages. While Filipowicz said his mortgage company is not demanding monthly payments until insurance and litigation issues are resolved, Di Schino said she is not so fortunate.

“I argued with the mortgage company about payments a week ago and was told that they wanted full payment and nothing less or they will foreclose,” said Di Schino, a sales administration manager for an electronics company.

The trauma, Di Schino said, has caused her to suffer high blood pressure and hives. “I’m too old to start over,” said Di Schino, 52, who cried and hugged her daughter during Friday’s ordeal.

She cashed in her savings six years ago to make a $30,000 down payment on the house, where she lived with her 77-year-old mother, college-age son and nephew.

Di Schino said she has been repeatedly drawn in recent months back to the house, driving by and lamenting the weeds sprouting in the front lawn. She had decided to attend the demolition, she said, to put the loss behind her.

But as the bulldozer finished its work, Di Schino clutched three roses just plucked from her back yard. “At first I thought it would be a great relief closing the door on that chapter of my life,” she said. “It was rougher than I thought it would be.”