Kaura v. Stabilis Fund II, LLC

234 Cal. Rptr. 3d 265, 24 Cal. App. 5th 420
CourtCalifornia Court of Appeal, 5th District
DecidedJune 13, 2018
DocketE065751
StatusPublished
Cited by8 cases

This text of 234 Cal. Rptr. 3d 265 (Kaura v. Stabilis Fund II, LLC) is published on Counsel Stack Legal Research, covering California Court of Appeal, 5th District primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kaura v. Stabilis Fund II, LLC, 234 Cal. Rptr. 3d 265, 24 Cal. App. 5th 420 (Cal. Ct. App. 2018).

Opinion

RAMIREZ P.J.

*267*423Stabilis Fund II, LLC (Stabilis) holds a trust deed on an apartment complex in Indio. In 2013, Stabilis sued the owners of the *424property, alleging that the underlying loan was in default, seeking judicial foreclosure, and, in the interim, seeking a receiver "to make sure that the Real Property is properly maintained and that property conditions do not pose a risk of harm to tenants and third parties." On Stabilis's motion, the trial court appointed a receiver.

In 2014, the City of Indio (City) intervened. It alleged that the property was a public nuisance, riddled with hazardous and substandard conditions in violation of state and local law. It moved to modify the receivership by instructing the receiver to remedy these conditions. Stabilis did not argue that the City was not entitled to the requested modification; however, it did argue that the motion was premature, that the receiver already had the necessary powers, and that it should be allowed to proceed with foreclosure. The trial court nevertheless granted the motion.

The City then moved for an award of its attorney fees and expenses.1 As authority for the award, it cited three statutes:

1. Health and Safety Code section 17980.7, subdivision (c)(11), which provides for an award of attorney fees (but not expenses) to the prevailing party in an action to appoint a receiver pursuant to the State Housing Law.

2. Health and Safety Code section 17980.7, subdivision (d)(1), which provides for an award of attorney fees and expenses against the owner of a substandard building.

3. Indio Municipal Code section 10.20(C), which provides for an award of attorney fees and expenses to the prevailing party in an action to abate a public nuisance.

The trial court granted the motion; it awarded the City $98,190.47, to be paid out of the receivership estate, if there were sufficient funds, and if not, then by Stabilis.

Stabilis appeals. Its central position is that it is only the lender; if anyone is liable for attorney fees and expenses, it should be the owners. More specifically, it argues that none of the three statutes cited by the City authorizes the trial court's award of attorney fees and expenses against it under the circumstances of this case. We agree. Hence, we will reverse.

*425I

FACTUAL BACKGROUND

The following background facts are taken from the pleadings, but they do not appear to be disputed.

*268As of 2007, Vinod K. Kaura and Veena R. Kaura, as trustees (Kauras), owned a 75-unit apartment complex in Indio (property). In December 2007, they took out a $4,050,000 loan, secured by a deed of trust on the property.2 Stabilis is the current holder of the deed of trust.

In June 2009, the Kauras conveyed the property to Valley and Mountain, LLC (Valley and Mountain). Veena Kaura controls Valley and Mountain. (We will refer to the Kauras and Valley and Mountain, collectively, as the Kaura parties.) In September 2011, the Kaura parties stopped making payments on the loan.

II

PROCEDURAL BACKGROUND

On April 24, 2013, the Kaura parties filed an action against Stabilis.3

On June 7, 2013, Stabilis filed a separate action against the Kaura parties, asserting causes of action for (1) breach of contract, (2) judicial foreclosure, (3) appointment of a receiver to collect rent and to protect the property, and (4) possession of personal property collateral. The two actions were eventually consolidated.

On June 26, 2013, Stabilis filed a motion for the appointment of a receiver. On August 26, 2013, the trial court granted the motion; it appointed Terrence Daly as receiver.

On August 28, 2013, however, Valley and Mountain filed for bankruptcy. As a result of the automatic stay, Receiver Daly could not take possession of the property.

*426On March 12 and again on March 20, 2014, the City inspected the property. It found "hundreds of extremely dangerous building conditions that posed a risk to the health and safety of occupants and the public."

On April 8, 2014, the bankruptcy court lifted the automatic stay.

On April 23, 2014, the parties stipulated to substitute Paul Carlson in place of Receiver Daly. On September 23, 2014, the trial court confirmed the substitution.

Meanwhile, on May 16, 2014, the City issued a "Legal Notice and Order to Repair or Abate" (capitalization altered) (notice). The notice included a finding that "the unlawful conditions ... substantially endanger[ ] the health, safety, and general welfare of the Subject Property's occupants, the surrounding community, and the public...."

On December 24, 2014, the City moved for leave to intervene. On January 23, 2015, the trial court granted the motion.

On January 27, 2015, the City filed a complaint in intervention against the Kaura parties and Stabilis. It asserted three causes of action-for a substandard-housing receivership, for public nuisance, and for public nuisance per se.

Also on January 27, 2015, the City filed a motion to modify the receivership.4 The main relief sought was an order "[m]odifying *269the Receiver's orders to require the rehabilitation of the Subject Property...."

Stabilis responded that the motion was premature. It argued that the receiver already had most of the powers and duties sought, and it claimed that he had already cured 60 percent of the substandard conditions. The Kaura parties, on the other hand, stipulated that the motion should be granted.

On February 20, 2015, the trial court granted the City's motion to modify the receivership.

On June 3, 2015, the City filed a motion to disqualify Receiver Carlson, on the grounds that (1) rather than being neutral, he was under the control of Stabilis; (2) he had entered into a prohibited agreement with Stabilis;5 and (3) he had failed to fulfill his duties.

*427Stabilis did not oppose the disqualification motion; however, it did deny that it controlled Receiver Carlson.

Receiver Carlson did oppose the motion. He denied having any conflict of interest; he explained that Stabilis was funding all repairs because the property did not generate enough income.

On July 9, 2015, the trial court granted the City's disqualification motion. It found that Receiver Carlson had entered into a prohibited agreement and had failed to fulfill his duties; however, it did not find that he was under Stabilis's control. It appointed Mark Adams to replace him.

On February 2, 2016, the City filed a "cost recovery motion." (Capitalization altered.) It sought $87,407.40 in attorney fees, $4,303.51 in litigation costs, and $6,479.56 in enforcement costs, for a total of $98,190.47.

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Cite This Page — Counsel Stack

Bluebook (online)
234 Cal. Rptr. 3d 265, 24 Cal. App. 5th 420, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kaura-v-stabilis-fund-ii-llc-calctapp5d-2018.