May 26, 1995

He owned it outright, sinking the money from an inheritance into designing and building it so he wouldn't have to borrow from a bank. It turned out just the way he wanted. There are no hard edges in this house; every woodcapped corner has been lovingly rounded.

But Mahaffay lost it all when he fell $567 behind in dues to his homeowners association back in 1993. The Sea Ranch Association began foreclosure proceedings, and the house eventually wound up being sold at an auction where only one bidder showed up.

For just $2,403, Real Estate Recovery of Sebastopol walked away with a house worth an estimated $300,000.

"I had never been notified- no phone calls, no letters, no nothing," Mahaffay said. "The one thing I wanted was to own my house free and clear. I thought I was safe."

The other parties involved in the mater sharply dispute Mahaffay's version of events. They insist that the situation, however incredible, resulted from an impartial application of the law.

David Feingold , the lawyer for the Sea Ranch Association, said the homeowners group was undeniably within its rights when it turned to Bay Counties Foreclosure Service to collect the to California Civil Code2924 which covers foreclosures.

So far, the 45-year-old Mahaffay, a craftsman whose work provides the finishing touches to custom homes, has fought off efforts to force him from the house. The next round in that battle takes place next week, when Real Estate Recovery will ask the courts to declare it a "good-faith purchase" and allow it to evict Mahaffay.

Michael G. Miller, the Santa Rosa attorney who is donating his services to Mahaffay, scoffs,

"To buy that property for $2,400 - that should have put (the firm) on notice that something was wrong, " he said. There's such a huge discrepancy between what they paid and the value."

Parkinson, the firm's attorney, disagreed that price alone could be an indication of any irregularity.

"Let's assume they bought it for $150,000. It's still a real bargain. Should they have given it back in that case?" he said. "If you start doing this, there's not going to be a foreclosure sale that won't be attacked. To the extent somebody screwed up, it was Mr. Mahaffay sticking his head in the sand."

Mahaffay insisted otherwise, "I was not notified," he said. "There's no proof I was notified."

The trouble began, Mahaffay said, when he ran into a stretch where jobs were few and far between. He worried about paying utility bills and keeping food in the refrigerator. He admits that for seven months, he llet the $80-a-month association dues lapse.

His lawyer said Mahaffay had been through a similar period earlier and had fallen behind in his dues that time, too - and he paid up as soon as he could and nothing ever happened.

"He knew he was in arrears," Miller said. "He just figured, like last time, he would get caught up."

Everyone agrees Mahaffay had resumed monthly payments when the foreclosure ax fell. But while Mahaffay says he never received any warning from the association or from the foreclosure company, Feingold contends that more than 17 letters, some certified, were sent to a variety of addresses.

The certified letters, Parkinson said, were returned unclaimed ; indeed, most of the mail was undeliverable. But two letters addressed to Mahaffay's current post office box never came back. Parkinson said he discounted Miller's theory that the letters were wrongly delivered to a nearby box whose holder's last name is the same as Mahaffay's but for one vowel; Mahaffey.

Mahaffay also claims he never saw a foreclosure notice that supposedly was posted on his front door, "The person who says he did it is fellow from San Jose who says he taped it with one little piece of tape," Miller said, raising the possibility that the notice had blown away, since Sea Ranch is that. They rejected that."

Instead, Miller said, the company offered to let Mahaffay buy the home back for $10,000. Parkinson confirmed the offer, then added; "My clients are willing to compromise beyond the offers that are on the table... but they've never offered enough cash to make my clients whole. They just want my clients to say, 'Gee whiz, we never should have done this,' and just go away. I think he's in denial."

Some of Mahaffay's friends have criticized the Sea Ranch Association for not contacting Mahaffay in person before letting the home go on the block and have questioned whether the group's policies were followed.

Feingold contends that they were - adding that the association has to treat all residents equally. If it intervened once, he said, it would have to intervene every time. Once the matter was turned over to Bay Countries Foreclosure he said, Sea Ranch "was out of the loop."

"Frankly, it's not fair," Feingold said of the current situation. "The only way for justice to be done is to take away the windfall and give the property back to Mr. Mahaffay."

IIf it were up to Sea Ranch, a resort community where many of the Bay Area's wealthy have second or third homes, such a transfer would already be history, Feingold said.

" I'm convinced the association did everything by law," Feingold said, "The cause of what occured, in my mind, was Mahaffay's failure to ge the help he obviously needed to understand the process."

State law grants homeowners associations the "ultimate remedy" of nonjudicial foreclosure, he said, "because of the enormous problems associations have had with collection abuse."

Most associations would doexactly what Sea Ranch did, Feingold said.

"It's a quick, simple, relatively inexpensive remedy for associations. Most of all it's effective," he said, adding the law does not require that a person be served notice personally because that would be too "cumbersome."

"The intent is to collect the dues that are delinquent," Feingold added. "Actual sales are extremely rare." The rarity of what happened is of little comfort to Mahaffay, who bought his half-acre of land on the northern Sonoma County coast in 1989. The spacious house was designed and constructed over the next three years.

"I wanted everything as open as possible," Mahaffay said as he walked through his pride and joy one recent afternoon. In the living room, the woodwork that frames the eight-foot-tall windows seem to be one with the redwoods outside. The paneling in that room is fir.

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