BACKGROUND 

This is a breach of contract case.  Defendant Avalon by the Sea AC, LLC (“Avalon”) operates a mental health care and drug rehabilitation facility in Malibu, California (the “Facility”).  Colorado Bankers Life Insurance Company (“CBL”) provides financing to Avalon and is secured by a first lien on virtually all of Avalon’s assets.  Avalon defaulted on its debt to CBL by failing to make payments as they come due and failing to pay the accelerated balance.    

The other Defendants – New Vista Behavioral Health LLC, LLMS Acquisition Holdings LLC, Infinity Malibu, LLC, Infinity Malibu ICP, LLC and Infinity in the Valley, LLC – are affiliates of Avalon who guaranteed Avalon’s payment obligations to CBL.  CBL also has a security interest in all of their assets.  

On November 2, 2018, this Court granted a joint ex parte application to appoint a receiver.  Pursuant to the Order, the Receiver was authorized to take complete and exclusive control of all the assets, personal property, operations and interests of Defendants (collectively, the “Assets”).  The Receiver was also charged with managing the Assets, making payments to CBL, assessing LLMS Acquisition Holdings LLC’s claims against third parties, and marketing and locating a suitable buyer for the Assets.    

This hearing is on the Receiver’s motion to sell the Assets to Benjamin Deutsche (“Buyer”) pursuant to the terms of the Asset and Purchase Agreement dated April 3, 2024 (the “PSA”), attached as Exhibit A to the Receiver’s declaration.  The Receiver and his broker have been marketing the Assets for over 5 years, and the Receiver believes there are no better prospects in the market for the Assets than the Buyer.  The principal beneficiary of the sale, CBL, has approved the sale and supports the Receiver’s motion.  The Receiver asks that the Court maintain the receivership and retain jurisdiction until February 1, 2025, to facilitate the implementation of the PSA and Interim Management Agreement.    

LEGAL STANDARD 

Code Civ. Proc. § 568.5 states “[a]receiver may, pursuant to an order of the court, sell real or personal property in the receiver’s possession[.]”  (Code Civ. Proc. § 568.5; see also Cal-America, 138 Cal.App.3d at 273 (“Code of Civil Procedure sections 568¿and¿568.5 authorize the receiver to perform such acts respecting the property as the court may authorize, including the sale of real and personal property upon notice and subject to court confirmation.”).)   

Likewise, the relevant case law provides that courts possess broad powers to authorize private or public receivership sales of real and personal property and to alter the terms of those sales as is equitable under the conditions of each case.  (People v. Riverside University (1973) 35 Cal.App.3d 572, 585; Lesser & Son v. Seymour (1950) 35 Cal.2d 494, 499.) 

“The receiver has the affirmative duty to endeavor to realize the largest amount from the sale of the receivership property.”  (Cal-American Income Property Fund VII v. Brown Development Corp., (1982) 138 Cal.App.3d 268, 276 fn. 8.)     

DISCUSSION 

The Receiver has been marketing the Assets for over 5 years with the assistance of a broker.  The Receiver has entered into several letters of intent, engaged in extensive due diligence and negotiated purchase and sale agreements with several prospective buyers.  But in each case, the buyers failed to post the required earnest money deposit.   

Fortunately, the Receiver has now received an offer to purchase the Assets from the Buyer as reflected in the PSA.  The material terms of the sale are as follows: