W&Z Development v. Aztec Group CA4/3

FACTS

W&Z is in the business of acquiring, improving, and selling homes for a profit. George Zeber is W&Z’s president, and the company is owned by a family trust established by his parents. Zeber has been working at W&Z in some capacity since at least the 1980’s. Aztec engages in various business activities, primarily related to the oil industry, but also including investing in real estate. Richard McAuley is Aztec’s owner and president. As of late 2009, Zeber and McAuley were neighbors. They began discussing investment opportunities shortly after they met. Zeber eventually told McAuley about a property on Edgeview Drive in Santa Ana, describing it as a good fit for what McAuley wanted to do. At this point in time, Aztec had never purchased any homes for the purpose of rehabilitation and eventual sale. Zeber, McAuley, and McAuley’s son Alan McAuley (Alan) met together at the property, conducting a walkthrough and discussing work that needed to be done,

2 among other things. Zeber prepared a budget, which the parties referred to as a “pro forma,” estimating the costs and anticipated profits from the deal. The total costs of the project were estimated at $1,265,000, with profits…