Judge: Michael Shultz, Case: 21CMCV00193, Date: 2023-05-18 Tentative Ruling
Case Number: 21CMCV00193 Hearing Date: May 18, 2023 Dept: A
21CMCV00193
People, City of Carson v. Benjamin Onubah, et al.
[TENTATIVE]
ORDER GRANTING THE RECEIVER’S APPLICATION CONFIRMING SALE AND STRIPPING LIENS
FROM RECEIVERSHIP PROPERTY
I.
BACKGROUND
The
complaint alleges that Defendants own real property in the City of Carson
(“City”). The City has cited Defendants for ongoing and recurring violations
since January 2018 for unpermitted construction, electrical, and substandard
repairs by the Defendants, who have refused to address the violations.
Plaintiffs allege claims for public nuisance and injunctive relief for maintaining
a substandard building in violation of the Health and Safety Code.
On
January 14, 2022, the Hon. Judge Long appointed Mark Adams to serve as a receiver
at the City’s request pursuant to Health and Safety Code section 17980.7 (c).
II.
ARGUMENTS
The Receiver requests
the Court’s confirmation of the sale of the real property for $850,000 and for
an order stripping the existing liens on title and attaching the liens to the sale
proceeds to prevent potential lien claimants from interfering with the sale.
In opposition, Nationstar
Mortgage, LLC (“Nationstar”), the lender and real party in interest, argues
that the Receiver cannot strip Nationstar’s lien and subordinate it with other junior
lien holders since Nationstar is entitled to lien priority. Nationstar contends
that the Receiver and the City improperly ask for reimbursement of its costs
before Nationstar. Receiver and the City are entitled to reimbursement of costs
from the homeowner, not from Nationstar’s or other lienholders’ portion of the sale
proceeds. The Receiver’s power of sale does not include lien stripping, which
is an unconstitutional taking.
In reply, the Receiver
argues that the Court has approved the Receiver’s and the City’s fees and
costs. Contrary to Nationstar’s opposition, the Court has the power to strip
liens from title. Receiver states the proposed order permitting the sale will preserve
the lien claimants’ relative lien priorities for later adjudication.
III.
DISCUSSION
Most
matters related to receiverships rest in the Court’s sound discretion and is
“afforded considerable deference on review” even in an “extraordinary action” to
confirm a receiver’s sale of real property. (City of Santa Monica v. Gonzalez
(2008) 43 Cal.4th 905, 931.) In
exercising its discretion, the Court considers all material facts and evidence
and “applies legal principles essential to an informed, intelligent, and just
decision. … Where there is no evidence of fraud, unfairness, or oppression, the
court has wide discretion in approving the receiver's proposed actions.” (County of Sonoma v. Quail (2020) 55
Cal.App.5th 696, 671.)
Consistent
with the Court’s authority to appoint a receiver, Judge Long authorized the Receiver
to fund a Receiver’s Certificate with super priority status to cover the costs associated
with rehabilitating the property to resolve the Health and Safety Code violations.
(Court order, Yatteau Decl., Ex. 3, .pdf p.63, ¶ 11(c).) Additionally, the order provides that the City’s costs and attorney’s
fees may be paid out of any receivership certificate as approved by the Court.
((Id. .pdf p. 65, ¶ 15).
The
Court’s file reflects that Nationstar answered the complaint on August 26, 2021,
and did not oppose the City’s application for appointment of receiver filed
October 14, 2021, although it was given notice. The City sought an order giving
the receiver’s certificate “super priority” status and that the City’s costs and
fees would be paid out of the receivership certificate. Counsel for Nationstar, Katalina Bauman,
appeared at the hearing on January 11, 2022. (M.O. filed 1/11/22.) Therefore,
Nationstar acquiesced to the proceeding appointing the Receiver. (County of
Sonoma at 676 [Lender "was notified that a receivership was being
sought, appeared at the hearing on the receivership petition, did not object to
the appointment of a receiver, and did not appeal from the appointment
order."])
The costs of a receivership are
primarily a charge on the property and are to be paid out of said property,
thereby "placing any risk of loss on those with financial interests in the
property, and avoid[ing] the use of public monies to enhance the value of those
private financial interests." (County of Sonoma at 682.) Therefore, contrary to Nationstar’s belated argument, a court
has authority to give super priority status to the Receiver’s lien. Nationstar
did not object to the inclusion of the City’s costs and fees.
The
Court also has discretion to confirm the sale of the real property free and
clear of all liens. As the lender argued in County of Sonoma, Nationstar
also argues here that the sale pursuant to Code of Civil Procedure section 585.5 (governing a sale by a receiver) was governed by the Enforcement of
Judgments Law (“EJL”), which Nationstar argues, does not permit lien stripping.
(Opp., 6:22-12.) However,
the County of Sonoma court rejected the same argument, acknowledging that the
receiver “may” conduct the sale in the manner prescribed by the EJL, subject to
the Court’s supervision and authority. (County of Sonoma at 684-685 ["Given this precedent, we have no difficulty concluding
that the trial court possessed the authority to confirm the sale of the
property in this case despite the receiver's failure to follow the specific
procedure outlined in the EJL.”])
Nationstar’s
argument that stripping its lien would constitute an unconstitutional taking
and impairment of its contract rights has been rejected. For over 100 years,
California courts have had the authority to "impair property rights subject
to receivership in an appropriate case.” (Id. at 681).
Nationstar
also contends that the Receiver has not established how the sale price of $850,000
was determined, the extent of the negotiations, or how the sale would benefit
the receivership estate. (Opp. 3:3-6.) This is
accounted for in the Receiver’s Eighth Report. Defendant did not have a
refinancing plan in place causing the Receiver to list the property for sale
for $869,000. Three weeks later, the Receiver considered three offers and
accepted the present offer for $850,000. (Receiver’s Eighth Report, 2:4-5).
The Receiver’s pay off amount totals $564,955.60,
which includes the Receiver’s certificate, interest, unpaid fees, costs and
advances and the City’s costs. (Receiver’s Seventh Report, filed 4/4/23, Ex. 3, .pdf p. 17). The Receiver completed substantial repairs to the property
which was previously in a substandard condition. (Id., Ex. 1 .pdf p. 5
compared to Receiver’s Inventory filed 2/22/22, Ex. 1, .pdf p. 4.) Given the amount of work
to rehabilitate the property, the evidence establishes that the sale will allow
the Receiver to recover its substantial costs incurred to the City’s benefit as
well those of the lender’s, who did not incur any costs or risk in
rehabilitating its secured interest.
The
title report reflects a Deed of Trust in favor of Nationstar for $375,500 (Yetteau
decl., Ex. 3, .pdf page 38). Nationstar does not provide evidence of its
payoff amount to establish that the sale price was “unfair.” Additionally, there
is no evidence that the sale price or sale process involves “fraud, unfairness,
or oppression.” (County of Sonoma at 685.)
IV.
CONCLUSION
Based
on the foregoing, the Receiver’s motion is GRANTED.