San Francisco Loan Dispute Ends in Settlement

Case Background

Plaintiff City and County of San Francisco loaned $5.5 million to Defendant Fillmore Development Commercial, LLC. The loan, issued through the Mayor’s Office of Community Development, was backed by federal funds from the Department of Housing and Urban Development. Defendant EM Johnson Interest, Inc. guaranteed repayment. Defendant Michael E. Johnson owned and controlled FDC, EJI, and Urban Core Development, LLC. Johnson executed the loan agreement, promissory note, and guaranty on behalf of FDC and EJI. The loan supported construction at the Fillmore Heritage Center, a redevelopment project that included Yoshi’s Japanese Restaurant.

Cause

The dispute arose when Defendants failed to repay the loan and interest. In 2010, the parties signed an amended loan agreement as part of a workout plan. Despite this adjustment, Defendants defaulted again. In 2015, the Mayor’s Office of Housing and Community Development issued notices of default and demanded repayment. Defendants still refused to comply. Plaintiff alleged Johnson used the entities as shells and ignored corporate formalities. Plaintiff claimed Johnson was the alter ego of the entities and personally liable for their obligations.

Injury

Plaintiff stated Defendants’ conduct caused financial harm. The loan remained unpaid, and interest and penalties accumulated. Plaintiff argued that Defendants’ refusal to honor obligations undermined public funds secured by federal grants. The default deprived the City of resources intended for community development.

Damages

Plaintiff sought repayment of all amounts due under the loan, promissory note, and guaranty. Plaintiff also claimed compensatory damages, prejudgment interest, attorney’s fees, and costs of suit. Plaintiff argued its damages were ongoing and increasing because of Defendants’ continued breach.

Key Arguments and Proceedings

Legal Representation

• Plaintiff(s): City and County of San Francisco

• Counsel for Plaintiff: Katherine B. Bearman | Thomas S. Lakritz

• Defendant(s): EM Johnson Interest, Inc. | Fillmore Development Commercial, LLC | Michael E. Johnson | Urban Core Development, LLC | Office of Community Investment and Infrastructure | Doe One through Twenty, Inclusive | Roes 1–50, Inclusive

• Counsel for Defendants: James Andrew Quadra | James Brian Morales

Claims

The City’s central claim was breach of contract, accusing the Defendants of failing to honor their agreements. In response, the Defendants denied wrongdoing and raised several defenses. They argued that the contracts were breached by the City, invalid due to misrepresentation, or unenforceable because of duress and undue influence. They also contended that the City’s conduct excused or limited any liability and that they were entitled to recover damages and costs.

Defense

The Defendants issued a general denial of all allegations and reserved the right to amend their answer after discovery. They raised multiple affirmative defenses. They argued the complaint failed to state a valid cause of action, was barred by the statute of limitations, and lacked proof of damages. They also incorporated allegations from their cross-complaint.

Further, the Defendants advanced several contract-specific defenses. They claimed the Plaintiff accepted a leasehold estate as settlement (accord and satisfaction) and therefore waived or was estopped from further claims. They alleged impossibility, frustration, mutual mistake, and Plaintiff’s own misconduct excused performance. They asserted Plaintiff acted under duress, engaged in fraudulent inducement, and failed to cooperate in good faith. Defendants also argued that any losses resulted from Plaintiff’s negligence or third-party conduct. Finally, they claimed rights to setoff and maintained that their actions were lawful, justified, and taken in good faith.

Settlement

On July 11, 2023, Plaintiff City and County of San Francisco, through Deputy City Attorney Thomas S. Lakritz, filed a Notice of Settlement before the San Francisco Superior Court. The notice confirmed a full settlement, with dismissal expected by December 1, 2023. Proof of Service showed that Kathleen K. Hill of the City Attorney’s Office electronically served defense counsel at Quadra & Coll LLP, representing Michael E. Johnson, Fillmore Development Commercial, LLC, EM Johnson Interest, Inc., and Urban Core Development, LLC. The court subsequently dismissed the case on August 13, 2025.

Court Documents

Court documents are available for purchase upon request at Jurimatic@exlitem.com