Judge: Curtis A. Kin, Case: 23STCV16300, Date: 2024-12-17 Tentative Ruling

Case Number: 23STCV16300    Hearing Date: December 17, 2024    Dept: 86

MOTION FOR AN ORDER AUTHORIZING SALE OF RECEIVERSHIP PROPERTY

Date:               12/17/24 (1:30 PM)

Case:                           Axos Bank v. 7040 Van Nuys Partnership, LLC et al. (23STCV16300)

TENTATIVE RULING:

Receiver Thomas Hebrank’s Motion for an Order Authorizing the Receiver to Sell the Receivership Property Commonly Known as 7040 Van Nuys Boulevard is GRANTED.

This action concerns real property commonly known as 7040 Van Nuys Boulevard, Van Nuys, CA 91405 (“Property”), where a residential care facility for the elderly (“RCFE”) currently operates. The Property includes the buildings and structures on the land (“Improvements”) and the easements and rights appurtenances to the real property (“Appurtenances”). (Hebrank Decl. ¶ 1 & Att. 1 to Ex. 1.)

On 2/13/24, the Court appointed Thomas A. Seaman as receiver for the Property and entered an order setting forth powers and duties with respect to the Property. (Hebrank Decl. ¶ 1 & Ex. 1 [“Receiver Order”].) On 6/4/24, the Court entered an order substituting Thomas Hebrank (“Receiver”) in place of Seaman as receiver.  (6/4/24 Order Replacing Receiver at ¶ 2.) On 10/31/24, the Court entered an order authorizing Receiver to retain and employ counsel in connection with the sale of the Property, including negotiation, review, and execution of a purchase agreement and filing of a motion for approval of the sale of the Property. (10/31/24 Order Authorizing Receiver to Retain and Employ Counsel at ¶ 2.)

Receiver moves for an order authorizing him to sell the Property. No oppositions or replies have been filed.

The Receiver Order expressly granted Receiver the authority to take possession of the Property and to sell the Property, subject to prior approval of the Court. (Receiver Order at ¶¶ 30.1(A), 30.3.) That Order also provides that Receiver may hire real estate brokers to assist in the marketing and sale of the Property. (Receiver Order at ¶¶ 30.1(B)(iv), 30.5.)

CCP § 568.5 states: “A receiver may, pursuant to an order of the court, sell real or personal property in the receiver's possession upon the notice and in the manner prescribed by Article 6 (commencing with Section 701.510) of Chapter 3 of Division 2 of Title 9. The sale is not final until confirmed by the court.” A receivership court is not strictly bound to the procedure set forth in section 568.5. “Code of Civil Procedure section 568 grants receivers the general power ‘to do such acts respecting the property as the court may authorize.’ Read together, these provisions permit a court to tailor the method of sale of receivership property to the circumstances before it.” (County of Sonoma v. Quail (2020) 56 Cal.App.5th 657, 684.) The receivership court has broad discretion in determining the proper manner of sale of the property. (Lesser & Son v. Seymour (1950) 35 Cal.2d 494, 499 [“a court in an equity proceeding has the power to change the manner of sale of property in its custody by a receiver appointed by it from that previously prescribed by it in the order directing the sale”].)

Notice procedures for the sale of real property are set forth in CCP § 701.540, et seq. (CCP § 568.5.) While a court sitting in equity is not strictly required to follow such procedures, the court must consider the circumstances of the case in determining the appropriate method of sale, including the notice given. (County of Sonoma, 56 Cal.App.5th 657, 684.) Absent some reason to not give notice of the sale, it would appear notice generally should be given. (See Cal-American Income Property Fund VII, 138 Cal.App.3d at 273-74 [CCP sections 568 and 568.5 “authorize the receiver to … [sell] real and personal property upon notice and subject to court confirmation”].) It appears from the proof of service and Receiver’s declaration that all parties have been served with the motion. (See Hebrank Decl. ¶¶ 17, 18 [Receiver only aware of lien held by plaintiff Axos Bank].)  

Pursuant to paragraph 30.1(B)(iv) and 30.5 of the Receiver Order, the receivers in this case utilized brokers to market and sell the property. Prior to Receiver’s substitution into the case, Seaman, the prior receiver, hired broker Sherman & Roylance (“S&R”). (Hebrank Decl. ¶ 3.) S&R’s listing agreement ran through 8/1/24. (Hebrank Decl. ¶ 3 & Ex. 2.) S&R procured an offer to purchase the Property for $23 million. (Hebrank Decl. ¶ 3.) However, even though plaintiff Axos Bank agreed to finance the balance of the purchase price for the prospective buyer, the prospective buyer could not secure financing for the down payment. (Hebrank Decl. ¶ 4.) The attempted transaction was never reduced from a Letter of Intent to a contract. (Hebrank Decl. ¶ 4.) The sale of the Property never occurred. (Hebrank Decl. ¶ 4.)

On 8/26/24, Receiver hired Nick Stahler of Marcus & Millichap. (Hebrank Decl. ¶ 5; Stahler Decl. ¶¶ 4, 6.) Stahler has been a senior housing investment broker for over 18 years. (Stahler Decl. ¶ 2.) On 9/11/24, the Property was listed at $24,500,000. (Hebrank Decl. ¶ 5.) Mr. Stahler marketed the Property to his contacts in the RCFE industry. (Hebrank Decl. ¶ 6; Stahler Decl. ¶ 7.) By 10/17/24, there were eight Letters of Interest for the Property, ranging from $17,000,000 to $21,000,000. (Hebrank Decl. ¶ 7; Stahler Decl. ¶ 7.) Mr. Stahler subsequently requested the prospective buyers to submit their best offers. (Hebrank Decl. ¶ 7; Stahler Decl. ¶ 9.) After several prospective buyers dropped out, the range of offers narrowed to between $19,750,000 and $22,000,000. (Hebrank Decl. ¶ 7; Stahler Decl. ¶ 9.) Mr. Stahler then asked the remaining prospective buyers for their best and final offers. (Hebrank Decl. ¶ 7; Stahler Decl. ¶ 9.) In response, Receiver received an offer from Alamo Health Management, LLC (“Alamo”) for $22,200,000. (Hebrank Decl. ¶ 7; Stahler Decl. ¶ 9.) Alamo’s offer was substantially better than the next highest offer with respect to the price and other terms. (Hebrank Decl. ¶ 7.)

Alamo seeks to convert the use of the building on the Property from an RCFE to behavioral health, which means that Receiver does not have to delay the close of the transaction due to any licensing issues. (Hebrank Decl. ¶ 8(a).) The RCFE will be leased back to Receiver to allow the current licensee to close the facility. (Hebrank Decl. ¶¶ 8(a), 9.) Alamo agrees to work with the current manager of the RCFE to prepare and submit a closing plan to the Department of Social Services (“DSS”), pursuant to which the residents of the RCFE will be relocated. (Hebrank Decl. ¶ 8(b); see also Health & Saf. Code § 1569.682 [providing for relocation of residents of RCFE pursuant to closing plan approved by DSS].) The relocation will occur under Receiver’s supervision and at Alamo’s expense. (Hebrank Decl. ¶¶ 8(b), 9.) Alamo will also pay half of the $1,221,000 tax that will result from the sale of the Property. (Hebrank Decl. ¶ 8(c).) No other prospective buyer offered these additional terms. (Hebrank Decl. ¶ 8.)

On 11/5/24, Receiver and Alamo entered into a Letter of Intent. (Hebrank Decl. ¶ 11 & Ex. 3 [“LOI”]; see also LOI at ¶¶ 3, 11, 13 [terms consistent with proposed terms offered by Alamo].) The parties are negotiating a Purchase and Sale Agreement and will provide a copy of the final executed version to the Court. (Hebrank Decl. ¶¶ 12, 25.) Receiver attests that the proposed sale is in the best interest of the Receivership Estate. (Hebrank Decl. ¶¶ 10, 14.) Plaintiff Axos Bank filed a joinder in support of the proposed sale, even though the sale will not fully satisfy the outstanding $40.5 million due under its Loan Agreement. (Joinder at 1:15-28, citing Constantine Decl. ¶ 4.)

The Court finds the proposed sale of the Property to be reasonable in light of the circumstances discussed herein.

Receiver is also requesting payment of commissions to Stahler in the amount of $333,000; authorization to pay closing costs, taxes and assessments, and the Receiver’s Certificates from the sale proceeds, and permission to hold back $50,000 to cover any and all outstanding fees or other expenses of the Receivership Estate. (Hebrank Decl. ¶¶ 19-23 & Ex. 5; Receiver Order at ¶ 30.17 [providing for issuance of Receiver’s Certificate as a senior lien when income from operation of RCFE is insufficient to meet normal operating expenses and costs].) Such requests are reasonable.

For the foregoing reasons, the motion is GRANTED. Within two court days hereof, Receiver shall submit a proposed order that comports with the ruling above and contains the fourteen (14) terms listed in the notice of motion. Insofar as the $50,000 Receiver holdback may be used for payment of Receiver’s income, expenses, and fees, it must be done in accordance with the provisions of the Receiver Order, including paragraph 13.