DLR sues developer of San Jose church site, seeks foreclosure

DLR Group plans to pursue a court-ordered foreclosure of a historic church in Downtown San Jose, whose Chinese owner failed to maintain the property and build two proposed housing towers.

The Omaha-based architectural firm behind plans to redevelop First Church of Christ, Scientist at 43 East Saint James Street has filed a breach-of-contract lawsuit seeking to recover at least $400,000 from an affiliate of Z&L Properties, the San Jose Mercury News reported.

The China-based developer with an office in Foster City had planned to restore the church and build two housing towers beside it. Instead, the former Christian Science church, built in 1905, fell into apparent abandonment by its owner, affiliate 252 N. First St. Development LLC.

DLR Group is pursuing a foreclosure through the architectural firm’s lien against the property, as well as a sale of the blighted church to pay the debt.

“252 N. First St. Development LLC breached the contract by failing to pay DLR’s invoices in a timely manner,” DLR Group stated in papers on file with the county court. “As a proximate result of the defendant’s breach, DLR has been damaged.” 

Z&L Properties denied the allegations, saying in court papers the complaint is “barred by the statute of limitations.”

Darius Chan and Henry Yu, attorneys with the San Francisco office of CCD Law Group, which is representing the Z&L Properties affiliate, weren’t available for comment.

DLR Group asked the court to grant its request to foreclose the lien and to issue a judgment allowing for the sale of the property. If the property is sold, proceeds of the sale would be used to satisfy DLR’s unpaid debt. DLR said it might bid on the property.

The firm said the statute of limitations doesn’t bar the legal battle to foreclose the lien because the Z&L affiliate agreed many times to extend the lien claim DLR initially filed in 2019.

In 2018, Z&L filed plans to restore the Greek Revival church, from which the congregation had moved in 1946, and build two highrises with 221 apartments and five townhomes, which would have helped revitalize the moribund St. James Park.

The church, designed by San Francisco architect William Polk, was then exposed to the elements, its tarps ripped to shreds while the project stalled. In May, the City of San Jose wrote up the developer for various code violations.

In July, Zhang Li, owner of  Z&L Properties, flew from house arrest in London into San Francisco to tell a court he had bribed former public works chief Mohammed Nuru, focus of a widespread city corruption scandal.

The Chinese billionaire — whose troubled company has left unfinished projects across the Bay Area — acknowledged the misconduct and paid a $50,000 fine. His Z&L Properties, charged with conspiracy and fraud for its participation in the bribery scheme, was forced to pay a $1 million fine and enter into a corporate compliance program.

In San Jose, unbought condos in the firm’s new 640-unit luxury complex at 188 West St. James Street in Downtown have been put up for sale for a combined $300 million.

In January, Z&L sold a nearly 3,700-acre ranch in southeast San Jose for $16 million, according to the Mercury News. 

— Dana Bartholomew

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