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Huntington Beach refused to process CDC’s application for Phase
II development due to the State’s claim was CDC’s problem.
Many drafts of the Third Amendment went back and forth
between the parties. Mr. Steinman prepared a final version of
the Third Amendment dated June 11, 1991, which petitioners
signed, but which was never signed or agreed to by CDC.
By letter dated July 22, 1991, Mr. Michael McCaffrey (Mr.
McCaffrey), who was working with Mr. Steinman as petitioners’
attorney, requested that First American provide petitioners with
a $2 million interest-free loan because escrow for Phase II had
not closed yet and petitioners were unable to make a required
loan payment for certain real estate not relevant here. Mr.
McCaffrey stated that First American had an obligation to
indemnify petitioners for the title problem. On August 14, 1991,
petitioners and First American entered into an agreement entitled
“Limited Agreement” pursuant to which First American would lend
petitioners $600,000 interest free. The loan was secured by the
Phase II property and was to be repaid out of the proceeds of its
eventual sale.
By letter dated December 4, 1991, Mr. Steinman requested,
inter alia, that First American advance up to $700,000 to
petitioners. This amount would then be offered to CDC in order
to terminate the Agreement and discharge CDC’s claims under the
Agreement. The loan was to be interest free and would be repaid
with the proceeds from the eventual sale of Phase II. CDC was
not aware of this request. On December 10, 1991, CDC notified
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