California Supreme Court Upholds Receivership and Demolition of Santa Monica Apartments

The California Supreme Court last week ruled in favor of the City of Santa Monica and ended a decade-long legal battle with the owner of a multi-unit rental property who refused to correct dangerous Code violations at the property. The court upheld the appointment of a receiver to take over the property. The court also upheld the receiver’s decision to demolish the building.

In December 2004, the Consumer Protection Unit of the Santa Monica City Attorney’s Office originally filed the civil lawsuit on behalf of the City against the building owner, Guillermo Gonzalez.

In January 2005, Judge Lisa Hart Cole of the Beverly Hills Superior Court appointed a receiver to take control of the three-unit property located at 2438 Ocean Park Boulevard. One of the units is occupied by Gonzalez. The court found that the property was in a chronic state of severe disrepair and had become a dangerous blight to the community.

The health and safety code violations at the property included:

• The exterior was overrun with garbage, flammable materials, and junk.

• In a single bedroom on the second floor there were seven bunk beds being individually rented out by the week.

• Due to the filthy and littered condition of the kitchen and dining area of the main unit, the front yard has been converted to a makeshift dining area with a refrigerator, microwave, TV, and the storage of food.

• The property lacks heating in any of its units.

• Temporary extension cords are used in place of proper electrical wiring throughout the building.

• The property has been the site of chronic criminal activity for many years.

The City had received numerous complaints about the property from neighbors. Twice in the past decade the City Attorney’s Office had filed criminal charges against Gonzalez to compel him to bring the building up to Code. Both times Gonzalez was convicted, but he nonetheless refused to make the repairs. In both cases he served time in Los Angeles County Jail for his refusals.

The Consumer Protection Unit finally sought a court-appointed receiver as a last resort to assure that the property be made safe and legal.

The court appointed Century City-based attorney David Pasternak as receiver. In May 2005 Pasternak requested the court’s permission to demolish the building in light of the fact that it was not financially feasible to rehabilitate the property due to the longstanding and extensive nature of the Code violations. The court granted his request.

Gonzalez appealed from the appointment of the receiver as well as the order allowing the demolition. He argued to the Court of Appeal that the City had not complied with certain technical requirements of the receivership law; and that demolition would be unfair since he wished to remain living in the building and preferred to pay the cost of repairs instead.

In June 2006 the Court of Appeal ruled that the receivership was proper. It held that any technical deviations from the statute by the City did not prejudice Gonzalez since he had ample notice of the violations. The court also held that it was reasonable to allow the demolition of the building since rehabilitation was not economically feasible.

The California Supreme Court granted Gonzalez’s petition for review from that decision.

The Supreme Court heard oral argument in San Francisco on March 6, 2008.

The Supreme Court’s decision last week upheld the Court of Appeal’s ruling in every respect. The court noted that judges have broad discretion in appointing receivers - and in overseeing their actions and recommendations for problem properties.

“We are glad that the court preserved the flexibility of this important remedy for cities and for tenants,” said Deputy City Attorney Adam Radinsky.  “Apartment owners need to know that they must correct code violations within a reasonable time,” Radinsky said. “Receivership is drastic medicine, but we won’t hesitate to use it in proper cases to protect the well-being of the community.”