Architecture school caught in downtown legal tangle

Even before its leaders took over an abandoned railroad freight depot as its campus five years ago, the Southern California Institute of Architecture was known for daring its students to take risks, tangle with urban troubles and think big.

But nobody’s lesson plan included the case study now being written in Department 18 of Los Angeles County Superior Court. In a three-sided legal battle, Sci-Arc’s leaders are fighting over control of their campus with their landlord and one of the city’s best-connected real estate businessmen, Richard Meruelo.

The first stage, begun Thursday, is a trial over who’s entitled to buy the building. If Judge Helen I. Bendix finds in their favor, the edgy architect-educators who run Sci-Arc could own their first campus after 33 years of leasing in three locations. If they lose, the school’s lawyers say, Sci-Arc may be forced to leave a neighborhood it has helped renew.

Sci-Arc attorney Elizabeth Mann calls it a case of “theory crashing into reality,” and for an institution that has seen its share of acclaim, including the Pritzker Prize won this year by founding member Thom Mayne, it’s been a sobering fight.

“The kids are paying for this trial,” sighed Ian Robertson, chairman of the Sci-Arc board, after the first day of testimony.

In one corner stands Sci-Arc, which had an option to buy the depot on East 3rd Street near Traction Avenue, but could never line up financing and a purchase price until, its leaders thought, last May.

In the second corner stands Ramon Bonin, owner of Dynamic Builders. From some angles, it looks as if Bonin sold the same property twice within less than two months last year. But through his attorney, Bonin has maintained he merely arranged a likely sale, then lined up a backup offer.

In the third corner -- yes, it’s a complicated fight -- there’s Meruelo, the mover and shaker behind the Merco Group, which argues that it’s been first in line to buy the depot site since April 2004.

Meruelo’s family spent more than $220,000 on direct and indirect campaign backing for Mayor-elect Antonio Villaraigosa, and in the weeks before the May runoff that saw Villaraigosa elected, Meruelo landed in controversy over his purchase of a 23-acre site in Glassell Park because the Los Angeles Unified School District was negotiating to buy it as a site for a new high school.

Merco representatives declined to comment on the Sci-Arc case. But in a trial brief, Merco attorney Robert Odson accuses school leaders of “conduct that bears all the shortcomings of a moral crusade.” When Meruelo offered to give Sci-Arc the depot building if Sci-Arc would back Merco’s development plans next door, Odson contends, Sci-Arc director Eric Owen Moss answered by “screaming” his opposition.

Moss has acknowledged “ridiculous mistakes that all parties have made” but said that he didn’t remember any screaming and that he was open to all sorts of possibilities around the campus. “We want an open and free discussion about the site,” he said.

City Councilwoman Jan Perry, who represents the area, theorized that Meruelo’s real goal may not be to acquire Sci-Arc’s home but to neutralize the school’s opposition so Merco can ultimately sell three neighboring parcels to a residential high-rise builder for top dollar. Meanwhile, the Sci-Arc-adjacent parcels lie vacant, some used for parking, some protected by chain-link fences that have set off yet another set of legal ripples and neighborhood debates.

“It’s not pretty,” Perry said.

But it’s undeniably educational. In fact, combatants and observers alike say there’s a full and free education in urban hardball on file amid the trial briefs and transcripts in Department 18. Not only does the case highlight the strange tricks of memory and understanding that can crop up among seasoned businessmen when a $12-million question is at stake, it reveals how close to the edge Sci-Arc has been since its downtown move.

“It’s one thing to sit in a sylvan setting somewhere and talk about what it’s like to do urban revitalization. It’s quite another to move a school into an abandoned freight yard,” Robertson said.

Each day at trial, the worlds of design, development and law collide anew. Friday, Judge Bendix, the attorneys and a pair of sheriff’s deputies headed out on a site visit to the Sci-Arc campus, the sun-wary judge donning a floppy canvas hat and the court reporter dragging a portable keyboard as the group circled the long building.

At one point, the judge and lawyers assembled to consult blueprints in an raw, indoor space festooned with Mylar steamers from a recent graduation ceremony.

“A very interesting, corrugated-looking drop ceiling,” said the judge, gazing skyward.

About this time, a silent student on a skateboard glided past on the concrete floor, like Steve Martin roller-skating through the Los Angeles County Museum of Art in “L.A. Story.”

In many respects, the school’s position has been tenuous since 2000, when city officials helped persuade then-director Neil Denari to move the school to the freight depot. In leaving behind a leased campus near Marina del Rey, the school would become a player in downtown redevelopment, would be able to acquaint its students up close with city grit, and would give its staff the fun of redesigning a 1,250-foot-long concrete depot into an urban haven and lab for 450 undergrads and grad students, about 80 faculty and about 20 staff.

With $1.5 million in grants and loans from city officials and a lease running through 2019, the school would have a chance to buy its new site.

But things went sideways fast. Though city officials did much of the wooing, Sci-Arc made its deal with a company that had an option to buy the depot but didn’t own the depot itself. That company almost immediately went under, and the school found itself a tenant without a lease on the property of Dynamic Builders, owned by Bonin and managed by his son-in-law Ken Jackson.

Sci-Arc and Dynamic Builders did come to terms -- Dynamic would pay for $6.1 million in rehabilitation costs and Sci-Arc would start paying $69,000 per month -- but rehab costs soon swelled to more than $7.6 million. Dynamic Builders covered the bills and Sci-Arc’s rent rose to $88,000. The company also lent the school more than $500,000 to help the campus keep its doors open.

Along the way, Denari was ousted as director -- in fact, the school argues that some documents aren’t binding because he signed under financial duress after he’d lost authority to act for the school. Architect Moss succeeded him, but with money tight and Dynamic Builders standing firm on its sale price, Sci-Arc leaders say they had no way to exercise their purchase option.

By 2003, court filings show, Robertson was warning board members: “Sci-Arc has made the worst real estate deal in history, and now we have to fix it.”And yet, the Los Angeles Downtown Business News complained in a May 16 editorial, Sci-Arc’s leaders are “stomping their feet like children (or like embarrassed adults who know they should have moved quickly on the property when they had a chance).” Instead, the editorial suggested they “ought to apply some of that creative problem solving they are so famous for.”

When Sci-Arc arrived in the neighborhood, Dynamic Builders owned not only the 2-acre depot but also about 8 adjoining acres. But in 2003, Meruelo’s Merco Group stepped up and made a deal with Dynamic Builders: Merco would buy the three parcels surrounding Sci-Arc, which Sci-Arc students and faculty are in the habit of using for parking and access.

Then Merco announced plans to seek zoning variances to build a pair of residential high-rises with more than 600 units -- plans that horrified Sci-Arc leaders, who say they’ve long been counting on the cooperative development of neighborhood parcels to include student housing and parking.

Unable to get Sci-Arc’s blessing for its plans, Merco quietly went back to Dynamic Builders and entered talks over buying the Sci-Arc site as well. Then, Merco and Dynamic officials contend, they made a deal in April 2004: For $12.5 million, Merco would buy “parcel A,” the Sci-Arc building. A $200,000 escrow deposit followed.

But less than two months after Merco and Dynamic officials signed that agreement, Dynamic’s Bonin and Jackson sat down with Sci-Arc representatives and signed another agreement. This one laid out details for a $12.8-million sale.

Asked in court to reconcile these moves, Dynamic’s Jackson said he warned Sci-Arc officials that there was other interest in the property. Sci-Arc officials acknowledge that Jackson may have mentioned other would-be buyers, but never, they contend, did he say he viewed Sci-Arc’s bid as a backup offer.

Sci-Arc says it’s been cheated. Merco says it’s been blocked from following through on the deal ever since Sci-Arc filed suit last year. Dynamic Builders says it, too, wants the Merco deal to move ahead.

Sci-Arc director Moss and chairman Robertson have said they would leave the site only as a last resort and that they might stay even if they had to accept Merco as their landlord. But the school’s attorneys have argued in court that Merco’s ambitions could effectively destroy the school, which sits so close to the parcels controlled by Merco that some of its access ramps lie on Merco land.

“Sci-Arc has staked its future on its ability to purchase its school site,” Mann wrote in a brief. “Ownership of its school site is crucial to its fundraising efforts and Sci-Arc’s continued viability.”

None of the parties involved would comment on the possibility of a settlement, which could end the civil trial. Testimony is expected to wind up this week.

In all this wrangling, Robertson acknowledged last week, “there’s a lesson in administration, a lesson in process, a lesson in consequence. And I’m sure we’ll learn a lot more before this is over.”