2017-00206453-CU-PO

People of the State of Ca. vs. Jack A. McGuire

Nature of Proceeding: Motion for Instruction and for Order on Receiver’s Certificate

Filed By: Adams, Mark S.

Receiver California Receivership Group, PBC, through its president Mark Adams (“Receiver”) moves for instruction and an order authorizing a $268,000 Receiver’s Certificate with super-priority status to pay for the purported costs to remediate the property at 2530 Queenwood Drive, Rancho Cordova, California (the “Property”), which is the subject of this public nuisance action.

The motion is continued until March 21, 2018, at 2:00 p.m. in this Department to allow the Property’s owner, Margaret McGuire, the opportunity to access the property for the purpose of obtaining an independent bid from a licensed contractor.

Background Facts & Procedure

On September 12, 2017, the Court scheduled on shortened time a October 2, 2017 hearing on Plaintiffs People of the State of California and City of Rancho Cordova’s (“Plaintiffs”) Application for Appointment of a Receiver under Health and Safety Code sections 17980, et seq. (“Receiver Motion”). Pending the hearing, the Court appointed Receiver as a provisional receiver to inspect the Property and evaluate its current condition.

An inspection occurred shortly after the ex parte hearing on September 12, 2017, with City of Rancho Cordova code enforcement officers present. Receiver determined the property to be uninhabitable and completed limited work to abate fire risks and a rodent infestation; new locks were also installed. Receiver recommended in his First Report to the Court that his appointment be made permanent.

Before the October 2, 2017 hearing on the Receiver Motion, the defaults of Defendants Jack McGuire and Margaret McGuire were taken, and Defendant Margaret McGuire filed an untimely opposition. Mrs. McGuire represents that her husband, Jack McGuire, is deceased and that she lives with her son in Berkeley, California.

The Court continued the hearing on the Receiver Motion to October 20, 2017 to provide Mrs. McGuire the opportunity to have her default vacated and her opposition considered. Mrs. McGuire’s default was vacated by stipulation and order on October 16, 2017. Accordingly, the Court considered her opposition.

On October 23, 2017, the Court granted the Receiver Motion, appointing Receiver to abate the Property’s nuisance conditions and to devise a plan to resolve the Property’s violations. Although Mrs. McGuire contended appointment of a receiver was unnecessary, her opposition was unsupported by any admissible evidence. Mrs. McGuire filed a notice of appeal concerning the Receiver’s appointment on December 21, 2017.

Plaintiffs filed an Amendment to Complaint on November 8, 2017, adding Wells Fargo Bank, N.A. (“Wells Fargo”) as a Doe Defendant. Wells Fargo made a loan to the McGuires in 1988, which is secured by a first priority deed of trust recorded against the Property. Wells Fargo states the unpaid principal balance of the loan is approximately $88,000.

Wells Fargo filed a Motion to Strike portions of the Complaint, which is scheduled to be heard on February 15, 2018.

Also pending is a hearing on the November 2017 Monthly Accounting of Receivership Income, Expenses and Interim Fees Report, which Receiver filed on January 4, 2018. Defendant Margaret McGuire filed an opposition to the report on January 5, 2018, and the Court on its own motion set the matter for hearing on January 20, 2018.

The Motion

Receiver moves for instruction from the Court concerning how to proceed and an order authorizing a $268,000 Receiver’s Certificate [the Court would note, parenthetically, that under court authority, a receiver may issue certificates of indebtedness in order to raise money to pay taxes and such other obligations as may be necessary to protect, preserve, and maintain the property committed to the receiver’s charge and provide funds for the expenses of the receivership. The Court has the right to give priority to certificates issued to enable the receiver to carry out the primary object of the appointment, namely, the care and preservation of property] with super-priority status to cover the costs of fully rehabilitating the Property. Receiver states:

At the last hearing in this matter, the Court directed that a set of options be presented for the receivership Property setting out what might be done, along with a recommendation for the best course of action. This Court has many ways to approach the problems that exist on-site, but the recommendation of the appointed Receiver is for the Court to approve a priority Receiver’s Certificate to complete the work under the Court’s supervision. . . .

. . . .

The Receiver recommends that the Court authorize a Certificate in the amount of $268,000 to cover the work in the necessary scope, because that is the only way to guarantee that the nuisance conditions are abated, and the Property returned to habitability. The Court could also order the Property to be sold as-is to a party with the ability and funds to complete the work. Or the Court could again give the owner or the lender the opportunity to act. But the sale requires due diligence, delays and oversight, all for an uncertain result. And returning possession to the owner or

a lender already has a certain result because of the history of the Property prior to the appointment. So, for all those reasons, the Certificate is the recommended way to proceed.

. . . .

The . . . options of renting the Property out, or to rely on the bank or the McGuires to do the work, are likely non-starters. Neither the lender nor the McGuires have shown a capacity or interest in doing the work, and neither of them have provided any assistance to the receivership to date.

(Mem. of P.&A. ISO Am. Mot. 1:2-7, 2:17-24, 3:23-26.)

Wells Fargo opposes the motion, contending “[t]he receiver’s requested relief is overreaching and is not authorized by law.” (Wells Fargo Opp’n 1:18.) It argues “[t]he amounts the receiver desires to expend appear to have little relationship or proportion to the code violations described by the City’s code enforcement personnel and the receiver. . . . If the Court is inclined to approve borrowing by . . . it should be only for the amount the receiver can demonstrate is necessary to secure the property and mitigate the dangerous conditions that pose an immediate threat to the public.” (Id. at 11:28-12:2, 12:26-28.) Wells Fargo further argues: “If a receiver’s certificate in any amount is approved, it should not have the priority of an ordinary judgment lien.” (Id. at 1:18-20.)

Mrs. McGuire also opposes the motion, arguing the Receiver’s recommendation “is clearly not in the best interest of anyone except the receiver.” (McGuire Opp’n 1:20-22.) She asserts:

[T]he bids the receiver obtained are overreaching and excessive and clearly do not define what would bring the home to a state of code compliance but propose a complete remodel of the home so that Mrs. McGuire would have no possible chance of receiving her home back allowing her to do what she wants to do with her home of over 40 years. If the certificate is granted, the home would certainly need to be sold to pay for the massive amount of debt incurred by the receiver, allowing everyone to benefit from the home except the homeowner.

(Id. at 5:20-26.) Mrs. McGuire wants “to be given the opportunity to get her home back [,]” and states she “will complete the renovations” that had been abandoned so she “could then rent the property and supplement her income.” (Id. at 6:13-17.) In the alternative, Mrs. McGuire requests “continuing this motion for sixty (60) days to allow [her] limited access to [the Property] for the sole purpose of obtaining a bid” by a licensed contractor to later present to the Court in a supplemental opposition. (Id. at

7:3-11.)

Mrs. McGuire filed the declaration of her son, Michael McGuire, in support of her opposition. Michael McGuire avers, in relevant part:

2. I am the son of Defendant Margaret Y. McGuire and have been helping my mother with matters since my father’s death.

3. My mother owns the property at 2530 Queenwood Way, Rancho Cordova, CA. I am very familiar with the property and have been there countless times since my parents had the home built in 1970. Specifically, I was involved with assisting my mother in curing the Notice and Order citations issued by the City of Rancho Cordova. I went to the property on multiple occasions between 2010 and 2017, to cut the grass, trim the shrubs and trees and ensure general maintenance was done on the home. A remodel was commenced on the interior in 2002. That halted because of problems with the contactor. It was our intent to complete the remodel and rent the property when the problems leading to the receiver occurred.

4. I have reviewed the bids submitted by the receiver in his Motion for Order on Certificate. I have found the bids presented by the receiver to be completely unwarranted and excessive. The extent of the remodeling that the receiver is proposing is not wanted or needed. It clearly exceeds the items as identified in the Notice and Order issued by the City of Rancho Cordova, and further, exceeds any alleged health and safety issues.

Further, the amounts proposed in the bids far exceed the reasonable construction costs to cure all the defects but also complete the remodeling that had began [sic].

5. I have conducted extensive research and have prepared three versions of remodel that would complete the home and would place it in the rental market somewhere between $1,800 and $2,000 per month. A copy of the Zillow rental estimate is attached as Exhibit A. Further, I have information that the house next door is renting for $2,000 per month.

. . . .

10. My mother and I were unable to obtain actual

bids as we have been denied access to the home. We would request that the Court would consider granting access to the home so that we can obtain separate bids from those that the receiver obtained.

(Decl. of Michael McGuire file ISO Opp’n ¶¶ 2-5, 10.)

Receiver filed replies to both parties’ oppositions one day late on January 19, 2018. The Court in its discretion has considered the late replies since the proofs of service indicate the parties were timely served the replies via overnight and electronic mail on January 18, 2018. The Court notes the Receiver did not specifically respond to Mrs. McGuire’s request for a continuance in the replies.

In light of the referenced declarations and Mrs. McGuire’s stated intention to complete the abandoned renovations on her home, which would include the code violations, the Court finds it appropriate to continue the hearing on the Receiver Motion approximately sixty days to March 21, 2018 at 2:00 p.m. in this Department.

The purpose of the continuance is to allow Mrs. McGuire access to the Property with a licensed contractor(s) of her choosing to obtain an independent bid(s) to

perform the desired work on the Property, specifically including the work necessary to remedy all code violations. The parties shall meet and confer to complete such access in a timely manner so that further briefing can be submitted on the motion. Any supplemental opposition and reply papers shall be filed in accordance with Code of

Civil Procedure section 1005 based upon the continued hearing date, including any

declarations of contractors or other persons addressing the costs issues relevant to the home. Mrs. McGuire’s supplemental opposition, if any, shall address her financial ability to perform the work necessary to remedy the code violations and the expected

time frame to complete the work.