Judge Lynette Gridiron Winston, Case Number: 21PSCP00135, Date: 2024-01-11 Tentative Ruling

Judge: Lynette Gridiron Winston, Case: 21PSCP00135, Date: 2024-01-11 Tentative Ruling

Motion of the Receiver for an Order Approving the Receiver’s Omnibus Rehabilitation Plan and Cost Estimate, Approving the Receiver’s Interim Fees and Costs and Authorizing Issuance of a Second Certificate of Indebtedness

The Court GRANTS the motion. The Court will sign the proposed order filed concurrently with the motion.

Receiver is ordered to give notice of the Court’s ruling within five calendar days of this order.

This is a nuisance abatement action. On March 25, 2021, petitioner The City of La Verne (City) filed this action against defendants Edward Beas, Carol Beas Sanchez, All Persons Claiming Any Interest in Real Property Commonly Known as 1816 1^st Street, La Verne, California, JP Morgan Chase Bank, N.A. (Bank), and Does 1-25 for an order to abate substandard building and appointment of receiver. On May 5, 2021, the Court signed an order appointing Eric P. Beatty as receiver (Receiver). On October 10, 2023, City filed a doe amendment naming Maria C. Banales (Banales), solely in her capacity as Administrator of the Estate of Caroline[1] Beas Sanchez, as a respondent.

On December 1, 2023, Receiver filed the instant motion for an order approving the receiver’s omnibus rehabilitation plan and cost estimate, approving the receiver’s interim fees and costs and authorizing issuance of a second certificate of indebtedness. On December 21, 2023, Bank filed a response to the motion. On January 4, 2024, Banales also filed a response to the motion.[2]

Any receiver appointed pursuant to this section shall have all of the following powers and duties in the order of priority listed in this paragraph, unless the court otherwise permits:

(B) To manage the substandard building and pay expenses of the operation of the substandard building and real property upon which the building is located, including taxes, insurance, utilities, general maintenance, and debt secured by an interest in the real property.

(C) To secure a cost estimate and construction plan from a licensed contractor for the repairs necessary to correct the conditions cited in the notice of violation.

(D) To enter into contracts and employ a licensed contractor as necessary to correct the conditions cited in the notice of violation.

(Health & Safety Code § 17980.7, subds. (4)(A)-(D); see also City of Santa Monica v. Gonzales (2008) 43 Cal.4th 905, 33 [Health and Safety Code section 17980.7 authorizes receivers to contract for demolition of substandard residential buildings if necessary].)

Receiver moves the Court to approve the Omnibus Rehabilitation Plan and Cost Estimate filed with the Court on October 16, 2023 (the Rehabilitation Plan) under Health and Safety Code section 17980.7. Receiver cites to paragraph 3, subdivisions (A) through (E) of the May 5, 2021 order appointing the receiver as the basis for Receiver’s specific powers and duties in connection with the Rehabilitation Plan. Receiver contends that the Rehabilitation Plan will cost effectively remedy the issues that necessitated the Receiver’s appointment. (Motion, 5:8-10. Bank does not directly object to the Rehabilitation Plan, but contends that “the scope of any remediation should be limited to those items which (i) are required by the City of La Verne to remedy any current Health & Safety Code violations and/or (ii) will directly increase the ultimate sales price of the subject properties, net of the cost of the work proposed to be done by the receiver.” (Bank’s Response, 2:12-15.) Bank further contends that it and the estate claimants are entitled to an offer of proof that the Receiver has competitively bid the proposed work and that the cost estimates are consistent with fair market rates. (Bank’s Response, 2:15-18.) Banales agrees with this contention. (Banales’ Response, 2:23-25.)[3 ] The Court approves the Rehabilitation Plan. None of the proposed remediations in the Rehabilitation Plan appear to be beyond the scope of Receiver’s authorized powers or beyond the scope of the code violations that necessitated this action. (Rehabilitation Plan (10/16/23), § IV.) Neither Bank nor Banales object to any specific part of the Rehabilitation Plan, nor do they offer any alternatives to it. Without any such specifics, it is unclear how their suggested limitations on the scope of remediation would be implemented. While the Court understands Bank’s and Banales’ concerns about diminishing the value of the subject properties, the paramount concern right now is that the subject properties are brought into compliance with the law. Nothing here indicates that the Rehabilitation Plan does not address that concern. Additionally, neither Bank nor Banales have cited any legal authority showing that they are entitled to the offers of proof they seek. Further, both the Rehabilitation Plan and the moving papers indicate that the Receiver sought proposals from various contractors and selected the low bid contractors to perform certain services in the Rehabilitation Plan. (Motion, p. 13, 23-26.)

Based on the foregoing, the Court GRANTS the motion and approves the Rehabilitation Plan.

Interim fees are subject to final review and approval by the court. The court retains jurisdiction to award a greater or lesser amount as the full, fair, and final value of the services received.

Unless good cause is shown, objections to a receiver's interim report and accounting must be made within 10 days of notice of the report and accounting, must be specific, and must be delivered to the receiver and all parties entitled to service of the interim report and accounting.

Receiver seeks an order approving the Receiver’s interim fees and costs per Rule 3.1183 of the California Rules of Court. Receiver seeks $113,859.63 for fees and costs incurred from April 2021 through October 31, 2023. Receiver also specifies that Receiver does not seek payment of these fees, and states that no fees are included in the receivership estate’s operating budget. Rather, Receiver seeks approval of Receiver’s fees and costs to satisfy the requirements for submission for a creditor claim in the Carol Beas Sanchez probate proceedings (presumably LASC Case No. 20STPB05469) under Probate Code section 9103. Bank and Banales do not object to this request, as long as the fees and costs come out of the probate proceedings rather than the receivership estate. (Bank’s Response, 2:19-24.)

The Court finds the amount of $113,859.63 to be reasonable for approximately two and a half years’ worth of work, a third of which are fees incurred and personally advanced by Receiver to pay for preliminary remediation efforts. (Beatty Decl., ¶ 38.) Additionally, Bank’s and Banales’ lack of objection further supports the reasonableness of these fees and costs.

Accordingly, the Court GRANTS the motion and approves Receiver’s interim fees and costs.

Receiver also seeks an order from the Court to authorize Receiver to issue a Second Certificate of Indebtedness secured by a super-priority lien on the subject properties in the amount of $115,000. Bank and Banales do not directly object to this second issuance of indebtedness, but as noted above, they instead seek limitations on the scope of remediation to ensure an increase of the ultimate sales price for the subject properties. As also noted above, they contend that they are entitled to an offer of proof that Receiver has competitively bid the proposed work and that the cost estimates are for fair market value.

Again, while the Court understands Bank’s and Banales’ concerns here, they have not cited any authority that entitles them to such an offer of proof. Moreover, their lack of objection regarding the amount of $115,000 further supports the Court finding that Receiver’s request is appropriate here.

Based on the foregoing, the Court GRANTS the motion and approves Receiver’s request for a Second Certificate of Indebtedness in the principal amount of $115,000 for a term of six months at an interest rate of 13.5%, with a 5% origination fee. (Motion, 8:1-6.)

The Court GRANTS the motion. The Court will sign the proposed order filed concurrently with the motion.

[1] “Caroline” appears to have been a typo, as all subsequent filings from Respondent Banales indicate she is acting for the Estate of Carol Beas Sanchez.

[2] It is unclear why Banales filed this response on January 4, 2024, when the deadline for any opposition of sorts was December 28, 2023. (Code Civ. Proc., § 1005, subd. (b).) Nevertheless, the Court will still exercise its discretion to consider Banales’ response.

[3] Banales’ response raises the question of bringing the 1822 1^st Street property into a related pending probate matter (LASC Case No. 20STPB05469). That issue is beyond the scope of this motion.