Judge: Theodore R. Howard, Case: 17-915900, Date: 2022-11-10 Tentative Ruling

The hearing is CONTINUED to 02/09/23. 

Before the court on receiver Mark Adams’ (“Receiver”) Motion is the issue of $2,048,714.45 in currently outstanding billing, which comes from $1,023,001.55 to pay Receiver’s various remaining costs/expenses, and another $1,025,712.90 to pay petitioner City of Dana Point’s (“City”) unpaid attorney fees.

Receiver has identified the following costs and expenses related to and incurred throughout the receivership, which total $2,670,826.35:

a. $787,738.32 in construction costs.

b. $469,186.25 in receivership fees and costs paid to California Receivership Group

c. $407,586.91 in security costs.

d. $303,977.89 in professional fees paid to multiple vendors to complete the ARG Construction Plans.

e. $197,580.89 in interest paid to Glan Investments.

f. $128,618.95 in interest paid to Dr. Manchanda.

g. $107,500 paid to Ervin, Cohen & Jessup, LLP, the Receiver’s Court-approved counsel.

h. $101,524.77 in City fees and costs.

i. $70,692.70 in loan fees.

j. $37,234.50 in accounting expenses.

k. $26,863.39 for insurance.

l. $15,008.79 for repairs and maintenance.

m. $9,361.56 for postage, delivery, recording, and filing fees.

n. $4,722.43 for utilities.

o. $2,706.00 in court fees.

p. $520.00 for the bond.

Receiver requests the court order respondents Sunshine Group and Dr. Manchanda to pay the outstanding expenses pursuant to Health & Safety Code § 17980.7(c)(15), which states, “[u]pon the request of a receiver, a court may require the owner of the property to pay all unrecovered costs associated with the receivership in addition to any other remedy authorized by law.”  Receiver acknowledges the Property is no longer owed by Sunshine or Manchanda and that it was initially purchased by Miken, and then sold 11-months later to AG.  As Sunshine/Manchanda were the entities that allowed the Property to fall into disrepair and drove up expenses, Receiver asks the outstanding amount be ordered to be paid by them, and not by either Miken or AG.

Receiver submitted regular accounting reports between August 2017 and July 2021.  (Adams Decl. ¶ 33.)  Sunshine/Manchanda filed timely objections to 38 of the reports, but failed to file timely objections to the May 2017, June 2018, June 2019, September 2019, March 2020, September 2020, and January 2021 report.  (Id.)  There are apparently no available funds in the receivership account to pay any of the unpaid fees and costs.  (Adams Decl. ¶ 42.)

There is an opposing motion by respondent The Sunshine Group. Sunshine opposes the final accounting and discharge on three points:

1) Receiver allegedly “bait and switched” everyone by initially stating there was a “not greater than” repair and abatement bid of $1 million, but then approximately one-year later requesting additional $4,063,832 in funding, which was based on the “false claim” the Property was on the California Historic Registry and abatement would need to conform with Historic rehabilitation requirements;

2) Receiver obtained a “hyper short term” hard money receiver certificate against the Property with a 23% per annum rate from Receiver’s longtime hard money lender Glan; and

3) Receiver allegedly secretly facilitated and participated in an assignment of Glan’s foreclosing deed of trust to Miken at a discounted price.  Miken had a junior lien of $800,000 on the Property that was inferior to Glan’s first priority deed.  Sunshine alleges Receiver acted without disclosure/permission of the court or Sunshine, and actively opposed Sunshine’s assumption of the super priority first lien at Sunshine’s two ex parte applications.  Sunshine alleges Receiver’s company, California Receiver Group, acted as escrow to the Glan/Miken sale.  Sunshine argues the court must deny Receiver’s demand for $2,048,714.45 and instead must surcharge Receiver $3.8 million plus fees, costs, and punitive damages.

After reviewing a massive amount of evidence and pleadings, the court finds that additional information is needed from the Receiver and City.  The court requests the following information and evidence from Receiver:

o    A breakdown of Receiver’s cost and fees incurred by month, billing individual, item(s) billed, time billed, and amount billed for solely litigation matters attributed to Sunshine’s pleadings and/or updating the court as to the status of the Property since July 2020.  This can be done either by submitting a spreadsheet with this information or re-submitting Receiver’s bills with the items highlighted;

o    A breakdown of City’s alleged unpaid fees and costs that equate to the requested $1,025,712.90.  The court notes Exhibit 8 actually requests $957,778.32 in unpaid billing plus an anticipated $50,000 for fees incurred up to the hearing on this matter.  This appears to make City’s requested amount $1,007,778.32 and not the higher amount noted by Receiver.  This needs clarification.  Additionally, nothing was submitted regarding how the over $1 million in fees and costs were incurred.  The fees on the first page have Hours Billed, Std Value, and Billed Value.  Presumably the difference between Std and Billed values is a discount, but that is unclear.  Very few of City’s line item bills for the services rendered were provided to the court.  It is impossible for the court to determine if over $1 million is proper.  Receiver/City is to produce Rutan’s billing for this matter showing what service was provided by what attorney, hours billed for that service, attorney billing rate, and total billed for the service.  The court also requests identification of items City specifically filed with this court or other courts pertaining to issues surrounding the Property.  Identifying the ROA number for items filed by City is permitted;

o    Receiver’s ownership interest in Rancho Boca De La Playa GP, LLC, (if any) and any contracts or terms of any agreements for future payments to Receiver from earnings/income generated by the Property from any entity (if any).

Receiver and/or City are to file and serve the supplemental briefs with the above information no later than 12/12/22.

No appearances necessary at the 11/10/22 hearing.

Court to give notice.