A breach of contract and fraud lawsuit against a city of San Diego redevelopment corporation and a top redevelopment official will continue after a judge last week denied the government agency’s attempt to have the suit thrown out.

Lawyers for Southeastern Economic Development Corp., the organization tasked with revitalizing San Diego’s southeastern neighborhoods, and its president, Carolyn Y. Smith, argued in part that the lawsuit filed by the owners of an exotic bird store was flawed because the issue had already been dealt with in two previous suits and that Smith, as a government official, had immunity from fraud allegations.

Judge Ronald Styn ruled against SEDC and Smith last week, knocking down the arguments and clearing the way for the suit to proceed toward trial.

The lawsuit was filed in October by Mark and Sharon Petrarca, owners of Our Feathered Friends. The Petrarcas allege that SEDC broke a legal settlement that called for the government to build them a 10,000 square foot warehouse in the Valencia Business Park, which the couple was relying on to expand its business. The suit also alleges that Smith and an outside SEDC attorney, Royce Jones, tricked the Petrarcas into releasing a claim on the land, only to ignore the settlement and clear the way for a developer to move on with more profitable plans.

After the Petrarcas released the claim, the lawsuit states, they found out that SEDC didn’t intend to have the warehouse built and never asked its board to ratify the legal settlement.

Since then, SEDC has supported allowing a new developer for the Valencia Business Park to rezone the land to retail, a land-use that is generally more lucrative for developers. The developer, Santa Monica-based Pacific Development Partners LLC, has a strong and ongoing business relationship with SEDC’s board chairman, Artie M. “Chip” Owen.

The San Diego City Council will be asked to give final approval to the rezone Feb. 5.

For more background, read our special report about Valencia Business Park and our follow-up on the zoning change.

ANDREW DONOHUE

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