Judge Stephen I. Goorvitch, Case Number: 21STCP00295, Date: 2024-09-18 Tentative Ruling

Judge: Stephen I. Goorvitch, Case: 21STCP00295, Date: 2024-09-18 Tentative Ruling

Court-appointed receiver Blake Alsbrook (the “Receiver”) moves for an ordering to approve the sale of certain real properties for a total purchase price of $7,250,000. The real properties at issue are: (1) 350 South Los Angeles Street, Los Angeles, California 90013 (the “Los Angeles Street Property”), and (2) 416-424 South Wall Street, Los Angeles, California 9003 (the “Wall Street Property”) (hereinafter, collectively, the “Properties”). The motion is not opposed. Cross-complainants/cross-defendants Mora Ben Neman, Simon Neman, Brian Neman, and Jessical Kilburn filed a joinder to the motion. Plaintiffs filed a “partial joinder” to the motion. Good cause having been shown, the motion is granted.

On February 14, 2023, the court (Beckloff, J.) appointed a receiver for the limited purpose of refinancing loans on certain real properties, which were in default. (See Court’s Minute Order, dated February 14, 2023.) Then, on March 29, 2024, the court (Beckloff, J.) granted a motion for an order authorizing the Receiver to list and market the Properties. (See Court’s Minute Order, dated March 29, 2024.)

Thereafter, the Receiver retained the Seymour Weinberger Group of Keller Williams Realty (the “Broker”) to market the Properties. (Id. ¶ 6.) After active marketing of the Properties, the Receiver received offers in the range of $3 million to $3.625 million for each of the Properties. (Id. ¶¶ 8-9.) After conferring with the Broker, the Receiver entered a contract with a buyer (the “Buyer”), who made an offer of $7,250,000 for both Properties, with $3.625 million allocated to each property. (Id. ¶ 10.) The Receiver states:

The proposed sale is on an as-is/where-is basis, with no representations or warrantees made by the Receiver, with all faults known and unknown, and with the payment of a 2% commission to the Receiver’s broker, Seymour Weinberger Group, KS Commercial, and the payment of a 2% commission to the Buyer’s broker. The sale is also subject to overbidding at the hearing on this Motion.

(Motion for Order Confirming Sale (“Mot.”) 2.) The Buyer has agreed to these terms. (Alsbrook Decl. ¶ 10 and Exh. 3-4.)

On September 11, 2024, Plaintiffs Siry Investment LP, Mohammed Siry, and Siry Brothers Partnership filed and served a partial joinder in the motion. Plaintiffs agree that the properties should be sold and do not object to the purchase price. However, Plaintiffs request that the court reject the Receiver’s recommendation that credit bidding not be permitted. Plaintiffs argue: “There is good reason for there to be credit bidding.” On September 13, 2024, cross-defendants/cross-complainants Mora Ben Neman, Simon Neman, Brian Neman, and Jessical Kilburn filed a joinder to the motion. The Receiver filed and served a notice of non-receipt of opposition. No opposition to the motion has been filed.

“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.” (Code Civ. Proc. § 568.5.) A sale of receivership property by the Receiver is not final until confirmed by this court. (Code Civ. Proc. §§ 568 and 568.5; see Cal-American Income Property Fund VII v. Brown Development Cor. (1982) 138 Cal.App.3d 268, 273-74.)

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”].)

The Receiver gave adequate notice of the motion to all parties to this action. (See Proof of Service filed July 25, 2024.) The Receiver also published and posted notices of the sale in a manner consistent with Code of Civil Procedure section 701.540 for each property address. (See Suppl. Alsbrook Decl. ¶¶ 2-3, Exh. 1-3; Suppl. Lake Decl. 2-4, Exh. 4-6.)

“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.” (Cal-American Income Property Fund VII, supra, 138 Cal.App.3d at 274, citation omitted.) The court must consider “all material facts and evidence” in consideration of “legal principles.” (Ibid.)

The properties were syndicated across hundreds of national and international commercial real estate platforms for maximum exposure. The listings were accompanied by 20-page offering memorandums for each property, highlighting their attributes, financials, and specifications. Since listing, the Properties garnered a significant amount of interest and received over 83,000 views and clicks, 60+ calls and inquiries from brokers and buyers, and over 300 downloads of the offering memorandums.

The Buyer accepted terms customary to receiver’s sales, “including that the purchase is on an as-is/where-is basis, with all faults known and unknown, and with no representations or warrantees” made by Receiver. (Id. ¶ 10.) The Buyer also agreed that any sale is subject to the court’s approval and subject to overbidding at the hearing to confirm the sale. (Id. ¶ 10.)

In his declaration, the Receiver summarizes the benefits of the proposed sale to the receivership estate, as follows:

I believe that a sale under present circumstances would be beneficial for numerous reasons and is critical at this point. First, the sale is for market value and accomplishes the direction provided by Judge Beckloff in his March 29, 2024 order. Second, the loans secured against both Properties are in default, accruing interest at the default rate and with threats of foreclosure by the lender, Black Gem. Third, each of the Parties has separately indicated that a sale is desirable to them at various points throughout this matter. Fourth, the sale will resolve a significant piece of the conflict between these Parties over the management of the Properties.

(Alsbrook Decl. ¶ 21.) Most of the parties concur in the sale, and the remaining parties do not oppose the motion.

The court notes that Receiver has not filed, at least for this motion, any professional valuations of the Properties by an appraiser or the Receiver himself. Nonetheless, the robust marketing of the Properties by Broker, as well as the lack of opposition from Plaintiffs, Defendants, or Cross-Defendants, generally supports Receiver’s assertion that the “sale is for market value.” (Alsbrook Decl. ¶ 21.) In addition, Receiver received four offers in the range of $3 million to $3.625 million for each of the Properties. (Id. ¶¶ 7-9.)[1] The court is satisfied that the Buyer’s offer is reasonable based upon the marketing of the Properties, the four offers in a similar price range, and the lack of opposition. The opportunity for overbidding will also ensure that the sale price is fair and reasonable. Further, as stated by the Receiver and Plaintiffs, the proposed sales are beneficial to the receivership estate because the loans secured against the Properties are in default and are accruing interest; there is a risk of foreclosure by the lender; and the sales will resolve a significant part of the conflict between the parties. Based on the foregoing, the court finds that the proposed sales to the Buyer are reasonable in light of all surrounding circumstances.

The Receiver asserts that the Properties should be sold “free and clear” of liens and encumbrances (other than the primary loan from Hanmi Bank), including a 30-year-old deed of trust in favor of Solos, Inc., a dissolved entity. (Mot. 11-12.) “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; see also County of Sonoma v. Quail (2020) 56 Cal.App.5th 657, 683-87.)

The evidence does not show any liens or encumbrances on the Los Angeles Street Property, other than the primary loan by Hanmi Bank which was apparently purchased by Black Gem. The Receiver acknowledges that the Hanmi Bank loan must be repaid by the proceeds of the sale. (Alsbrook Decl. ¶ 13, Exh. 5.) The court agrees and will not clear the lien by Hanmi Bank.

The preliminary title report for the Wall Street Property reflects the loan purchased by Black Gem from Hanmi Bank, “which must be paid.” (Id. ¶ 14.) The court agrees and will not clear the lien by Hanmi Bank.

The title report for the Wall Street Property also reflects a deed of trust for an indebtedness of $350,000, recorded in 1995, and for which the beneficial interest was assigned to Solos, Inc., a California Corporation. However, public records of the State of California show that Solos, Inc. was dissolved in 1999. (Id. ¶ 14, Exh. 6 and RJN Exh. A.) The Receiver concludes that the Wall Street Property may be sold free and clear of the deed of trust assigned to Solos, Inc. because “this Deed of Trust is 30 years old, held by an entity that has been dissolved for nearly thirty years, and … major financial institutions have lent money secured by 416 S. Wall Street over the past thirty years.” (Id. ¶ 14.) The certificate of dissolution of Solos, Inc. is signed by the two directors—Yue Wing Choi and Luen C. Choi—and states: “The corporation’s known assets have been distributed to the persons entitled thereto.” (RJN, Exh. A.) No one filed a new lien against the Wall Street Properties making clear that he/she obtained the note in the dissolution. (See Alsbrook Decl., Exh. 6.) The Receiver provided notice of the sale and hearing via publication and no one came forwarded claiming ownership the Solos, Inc.’s former note. Based upon the foregoing, the court agrees that it would be equitable to confirm the sale free and clear of the deed of trust assigned to Solos, Inc.

Based upon the foregoing, the court clears any lien by Solos, Inc., or anyone who acquired the note in the dissolution of Solos, Inc. The court declines to clear the liens by Hamni Bank and any successor who acquired the notes. The title reports reflect no additional liens against the properties.

The Buyer agreed that the proposed sales may be subject to overbidding at the hearing on this motion. (See Alsbrook Decl. ¶ 10 and Exh. 3-4.) The Receiver recommends that the court utilize the overbidding standards used in partition actions, as summarized in the Receiver’s declaration and the proposed overbidding rules agreement submitted as Exhibit 7. (Id. ¶¶ 17-19.) To participate in the overbidding process, bidders must, among other things, submit to Broker: “(a) a signed copy of these Rules for Confirmation and Overbid Hearing; (b) proof of funds in an amount equal to or greater than the highest amount the bidder is willing to bid; and (c) a cashier’s check in the amount of $220,000, payable to Receiver Blake Alsbrook, for the earnest money deposit.” (Id. Exh. 7.) The hearing is scheduled for September 18, 2024. The Receiver provided notice by publication. No potential buyers complied with the terms or appeared at the hearing.

The Receiver states: “Some of the parties have indicated a desire to ‘credit bid’ their ownership interest.” The Receiver recommends against credit bidding because “given the ongoing litigation between the Parties, including the ownership entities, it is unclear what the value of any party’s ownership interest is at this time, such that it is impossible to determine what credit should be provided.” (Alsbrook Decl. ¶ 20.) The court agrees.

2. Based upon the foregoing, the court clears any lien by Solos, Inc., or anyone who acquired the note in the dissolution of Solos, Inc. relating to the Wall Street Property. The court declines to clear any other liens, including those by Hamni Bank and any successor who acquired the notes. If additional liens are discovered, the Receiver shall file an ex parte application with the court.

[1] For 416 S. Wall St., Receiver also received three counteroffers, with a high-priced offer at $3.8 million. The Receiver did not accept the high counteroffer because “the $3.8M offer had a 15-day inspection contingency, meaning that the prospective purchaser was free to cancel or significantly reduce the offering price during that 15- day period, whereas Buyer was fully committed.” (Id. ¶ 9.) The court concurs in this decision.