Judge: Curtis A. Kin, Case: 24STCV03440, Date: 2025-01-28 Tentative Ruling

Case Number: 24STCV03440    Hearing Date: January 28, 2025    Dept: 86

APPLICATION FOR ORDER APPROVING THE SALE OF RECEIVERSHIP PROPERTY

MOTION FOR AN ORDER TO SEAL EXHIBITS

Date:               1/28/25 (1:30 PM)

Case:                           Genesis Capital, LLC v. 1615 Blue Jay Owners, LLC et al. (24STCV03440)

TENTATIVE RULING:

I.          APPLICATION FOR ORDER APPROVING THE SALE OF RECEIVERSHIP PROPERTY

Receiver Ryan C. Baker’s Application for Order Approving the Sale of Receiver Property is GRANTED.

Receiver Ryan C. Baker (“Receiver”) moves for an order authorizing Receiver to sell the real property commonly known as 1615 Blue Jay Way, Los Angeles, CA 90069 and the improvements and fixtures located thereon (“Property”), which are in the Receivership Estate.

“Judicial confirmation of a receiver's sale rests upon the appointing court's sound discretion exercised in view of all the surrounding facts and circumstances and in the interest of fairness, justice and the rights of the respective parties. [Citation.] The proper exercise of discretion requires the court to consider all material facts and evidence and to apply legal principles essential to an informed, intelligent, and just decision.” (Cal-American Income Property Fund VII, 138 Cal.App.3d at 274.)

The Property is a 12,049 square foot, newly constructed residential property consisting of 5 bedrooms and 8 bathrooms, on a 25,230 square foot lot in the Hollywood Hills. (Baker Decl. ¶¶ 4, 5.) The residential structure has many defects due to water intrusion and requires repairs. (Baker Decl. ¶¶ 5, 6.)

To determine whether to repair the Property or to sell the Property in its current condition, Receiver considered 1) the value of the Property if it were fully repaired, 2) the costs to fully repair the Property, and 3) the value of the Property in its current state. (Baker Decl. ¶7.)

To obtain the costs of repairs, Receiver sent a request for proposal to eight general contractors. (Baker Decl. ¶ 8 & Ex. 3.) Receiver received one bid. (Baker Decl. ¶ 10 & Exs. 4, 5.) To obtain the value of the Property, unrepaired and repaired, Receiver obtained the opinion of Jonathan Nash of Resnick & Nash, a luxury residential real estate broker. (Baker Decl. ¶ 11 & Ex. 6; Nash Decl. ¶¶ 2, 3 & Ex. 1.) Based on the bid to repair the Property, and the broker’s opinion, Receiver elected to list the Property for sale in its current condition. (Baker Decl. ¶ 12.)

Receiver hired Nash to act as broker for the Property. (Baker Decl. ¶ 13 & Ex. 7.) The Property was initially listed on the Multiple Listing Service for $11,500,000. (Nash Decl. ¶ 6 & Ex. 4.) The Property was also advertised on online residential listing services, including Zillow, Realtor.com, and Redfin; national and international publications, including the Wall Street Journal and the Financial Times; social media accounts associated with Nash; and Nash’s newsletters. (Nash Decl. ¶¶ 8-12 & Exs. 4-7.) Nash held 12 private showings and obtained two written offers and four verbal offers. (Baker Decl. ¶ 14; Nash Decl. ¶¶ 13, 14 & Ex. 8.) Nash deemed one written offer not to be viable because he was unable to obtain a pre-qualification letter and proof of funds. (Nash Decl. ¶ 14 & Ex. 8.)

With respect to the other written offer, after a series of offers and counteroffers, Receiver accepted an offer to sell the Property for $7,600,000 with the buyer’s removal of contingencies. (Baker Decl. ¶¶ 15-20 & Ex. 8 at 45-46.) Based on Nash’s marketing efforts, Receiver and the buyer’s negotiations, and the costs of repair and the uncertainty associated therewith, Receiver believes that the proposed sale of the Property for $7,600,000 is fair and reasonable, within the market range for the type, condition, and location of the Property, and in the best interests of the Receivership Estate. (Baker Decl. ¶¶ 23, 24.)

The Court has reviewed the bid to repair the Property, Nash’s opinion regarding the value of the Property, and the other offers received, all of which are subject to sealing. (Baker Decl. ¶¶ 10, 11 & Ex. 6; Nash Decl. ¶ 14 & Ex. 8.) The Court finds the proposed sale of the Property to be reasonable in light of the circumstances discussed above and in Receiver’s declaration.

Receiver requests authorization to execute a limited indemnity agreement in favor of Orange Coast Title or another title company, should the title company require indemnification as a condition to issue a CLTA title policy to the buyer. (Baker Decl. ¶ 24; see also Proposed Order at ¶ 7.) The indemnity agreement would remain in effect until the time to appeal the approval of the sale expires and would not exceed the net sale proceeds held by Receiver after closing. The Court finds this request to be reasonable.

Receiver requests the sale of the Property to be free and clear of all monetary liens and encumbrances. (Proposed Order at ¶ 12.) Two liens appear in the title report – plaintiff’s lien and a mechanic’s lien recorded by Brosteem Builders Inc. on 1/4/24 for $2,703.80. (Baker Decl. ¶ 25 & Ex. 9.) Plaintiff contends that the mechanic’s lien is unenforceable because no mechanic’s lien foreclosure action has been timely filed. (Mot. at 14:7-9; Muse-Fisher Decl. ¶¶ 3, 4 & Exs. 2, 3.) Regardless of whether plaintiff’s contention is correct, “A court of equity has the power to order the sale of property free and clear of liens and encumbrances.” (City of Riverside v. Horspool (2014) 223 Cal.App.4th 670, 684.) Accordingly, the Court approves the sale of the Property free and clear of all monetary liens and encumbrances.

Receiver proposes that any liens or encumbrances attach to the net sale proceeds in the same order of priority as they attach to the Property, with the allocation of the net proceeds determined by the Court at a later date as part of a creditor’s claim process or as part of the Receiver’s final report and accounting. (Proposed Order ¶ 12.) This proposal is reasonable.

Receiver also requests exemption from the requirement to provide disclosures to buyers under Civil Code §§ 1102-1102.17 and to obtain and provide to the Buyer any reports of residential buildings as set forth in Government Code §§ 38780 et seq. and Los Angeles Municipal Code, Div. D, Ch.9, Art. 6 (LAMC §§ 96.300 et seq.). The disclosures upon transfer of real property required by Civil Code § 1102 et seq. do not apply to “[s]ales or transfers pursuant to court order.” (Civ. Code § 1102.2(b).) Accordingly, Receiver’s request to be excused from providing the disclosures required under Civil Code § 1102, et seq. is approved.

With respect to the request to be excused from having to obtain and provide any reports of residential buildings as set forth in Government Code §§ 38780, et seq. and Los Angeles Municipal Code, Div. D, Ch.9, Art. 6 (LAMC §§ 96.300, et seq.), LAMC § 96.302 states: “Prior to entering into an agreement of sale or contracting for an exchange of any residential property, or, where an escrow agreement has been executed in connection therewith, prior to close of escrow, the owner or the owner’s agent shall obtain from the Department a report of the Superintendent of Building and a report of the City Engineer; said reports, containing the information specified in LAMC Section 96.304.” LAMC § 96.307 requires that the reports of the Superintendent of Building and the City Engineer must be provided by the owner to the buyer prior to entering into a sale agreement. Receiver contends that, under the proposed purchase agreement, the buyer agrees that Receiver has made no representations or warranties regarding the condition of the Property and that the buyer is relying on its own inspection and due diligence. (Mtn. at 14:22-25.) LAMC § 96.308 sets forth the exceptions to the requirement to provide the reports. The buyer’s agreement that it is not relying on any representations made by the seller about the condition of the Property is not one of those exceptions. Before approving the portion of paragraph 17 of the Proposed Order concerning reports of residential buildings, the Court asks Receiver for authority allowing the Court to disregard the requirements of LAMC §§ 96.300, et seq.  Relatedly, the Court inquires why any such provision is necessary, as LAMC § 93.309 states that non-compliance with such requirements is not grounds to invalidate the sale of the residential property, unless such non-disclosure is, of itself, sufficient grounds for recission of the sale.  Given buyer’s agreement that it is not relying on any Seller representations regarding the condition of the Property, the exception to LAMC § 93.309 would not seem to apply.

Otherwise, the Proposed Order approving the sale of the Property appears to be reasonable to the Court.

For the foregoing reasons, Receiver Ryan C. Baker’s application to approve the sale of the Property is GRANTED, subject to authority allowing the Court to excuse Receiver from obtaining and providing the reports set forth in Los Angeles Municipal Code § 96.300, et seq.

II.        MOTION FOR AN ORDER TO SEAL EXHIBITS

Receiver Ryan C. Baker’s Motion for an Order to Seal Exhibits Filed in Support of Receiver’s Application for Order Approving the Sale of Receiver Property is GRANTED.

Receiver seeks an order sealing Exhibits 5 and 6 attached to the Receiver’s declaration and Exhibit 8 attached to the declaration of Jonathan Nash. Both declarations were filed in support of the application to approve the sale of the Property.

Pursuant to Rule of Court 2.550(d), the Court finds that:

(1)   There exists an overriding interest that overcome the right of public access to the records, namely, the protection of financial information from which Receiver derives independent economic value from the information not being generally known to the public;

(2)   The overriding interest supports sealing the records;

(3)   A substantial probability exists that the overriding interest will be prejudiced if the records are not sealed;

(4)   The proposed sealing is narrowly tailored under the circumstances; and

(5)   No less restrictive means exist to achieve the overriding interest.

Plaintiff has established that disclosure of the exhibits would provide prospective purchasers and contractors with an unfair advantage should the approved sale discussed above not occur.