Inside the Zoom CEO’s terse litigation with homebuilder, lenders over $37M Atherton purchase

Zoom CEO and founder Eric Yuan is in a legal battle over an Atherton home that he agreed to buy from builder Ali Sadeghi for $37 million in early 2021 but never actually closed on, The Real Deal has learned. 

The LLC he used to transact on 88 Tuscaloosa Avenue sued last August, claiming construction costs and timelines went far beyond initial estimates, and Sadeghi requested another $8.14 million to complete the project, according to court documents filed with California Superior Court. 

The suit names Sadeghi and his affiliated companies, as well as Pierre and Liz Buljan, who provided a $2.5 million loan guarantee for the construction, as defendants, and alleges breach of contract and breach of guarantee, among other things.

The LLC, controlled by Yuan, is asking for relief on nearly $32.5 million in secured and unsecured debt, plus $5 million in interest, as well as a foreclosure on the property to assure the debt is paid off. 

But the litigation didn’t stop there. 

In November, the Buljans, who are Peninsula-based Compass agents, countersued, alleging that Sadeghi; Yuan and his wife Sherry, also known as Hongyu Zhong; and their agents, Delia Fei and Ron Gable, who are also with Compass, misled the couple about the state of the project and how much of an impact the $2.5 million guarantee would have on closing escrow.

“These parties never intended for the loan Mr. Buljan guaranteed to be used to complete construction and close escrow,” according to the countersuit. 

In a cross-complaint, the Yuans denied those allegations, saying Buljan “had made a complete investigation and was aware of the true facts and circumstances.”

In late April, attorneys for all parties appeared — over Zoom, appropriately enough — at a hearing where the Yuans’ attorney, Daniel Chung with Spencer Fane, informed the court that the plaintiffs have depositions and discovery pending. The case was continued until July 25. Chung and attorneys for the Buljans and Sadeghi did not respond to requests for comment. Fei and Gable declined to comment.

The pending litigation has not stopped the 1.3-acre, seemingly completed property from coming to market with a nearly $55 million dollar price tag. 

Compass agents Mary and Brent Gullixson have the listing and declined to comment on the suits or the property. 

The listing website for the property describes “just completed extraordinary new construction” centered around a main residence with 14,700 square feet, including a two-car garage. 

It has eight bedrooms, 10 full baths, three half-baths, a home theater and fitness center, and 11-foot ceilings on the main and lower levels. 

The amenities are also plentiful: a two-car detached garage and a two-car carport, all wired for electric vehicle charging; a poolside cabana with a fireplace and bathroom; a saltwater pool with spa and glass wall; a tennis/pickleball court; and a fruit and vegetable garden. 

A failed escrow

Sadeghi bought the property from its long-time owners for $8.1 million in 2016 through Linda Flora Holdings LLC, according to public records. 

In 2018, he filed permits to demolish the existing property and build a new one, which he estimated would cost about $4.7 million for the main residence, according to city permits. 

The Yuans, through an LLC named Marigoldyzp, signed on to buy the property in early 2021, putting down a $1.1 million deposit, court documents show. To fund the construction, Marigoldyzp signed onto a $28.4 million loan. 

In March 2022, Atherton issued a Stop Notice because the construction was not yet complete and had gone beyond the allowable time line for the 2018 permit. 

In order to get the project going again, Sadeghi asked the Buljans in October 2022 to guarantee the $2.5 million loan, which contained a stipulation that work had to be completed by April 30, 2023. 

The Yuans also made several smaller additional payments to Sadeghi for construction, according to the complaint, but balked when he asked for an additional $8.14 million in July of 2023 to complete the project and pay for ongoing costs. 

Sadeghi “knowingly participated in a scheme that he knew would result in harm” to Yuans’ LLC, “in order to obtain a continual flow of liquidity he could access to pay personal and business expenses,” according to the suit. 

When Marigoldyzp refused to hand over more to finish construction, Sadeghi allegedly stopped construction and refused to close escrow.

In an email to agent Ron Gable explaining the need for the additional millions, Sadeghi argued that the $8.14 million simply covered carrying costs including mortgages, debt costs, property taxes, insurance and utilities since the Yuans entered into contract on the home in 2021, court records show.

“It has cost millions of dollars a year simply to keep the lights on at 88 [Tuscaloosa] and it’s not fair for me to get buried and lose my health as a result,” Sadeghi said in the email.

He added that “Covid, a lengthy payment process, hundreds of changes and meetings, and other unforeseen factors have caused construction to stop and start over and over again.”

He closed out his request by saying, “We need an outcome where BOTH sides can walk away healthy, safe and with their shirt on their back. As it stands now, I can’t afford to close this deal and this process has stretched me out to the point that it is literally killing me.”

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The Buljans countersuit also paints a similar picture, one where the Yuans’ “significant changes” drove up both the costs and timeline of the project. 

The Yuans allegedly strung Sadeghi along by promising him “various extrinsic business deals, including other real estate development, to induce him to continue work on the property,” the countersuit said.

“Ali Sadeghi was willing to continue incurring these costs because Eric Yuan and Sherry Yuan were continually promising him that he would be able to make money in other ways outside the transaction through developing a personal and business relationship with Eric Yuan and Sherry Yuan,” it went on. “All this time no party sought to close the escrow on the purchase of the property.”