The three commercial buildings on West Lincoln Street in Banning, California, were in absolute disrepair. With hundreds of violations of State and local laws between them, the buildings were deteriorating and suffering from fire damage, hazardous electrical wiring, and an accumulation of garbage.
Structures like this in any City are more than an eyesore, they are a grave threat to the health and welfare of the community. So when the City of Banning was faced with difficulties in getting these properties in compliance with the law and up to code, it was fortunate that they had the out-of-the-box thinking of Serviam by Wright LLP Senior Attorney Rene L. Farjeat to assist.
In November 2017, the Riverside County Superior Court appointed a court receiver to take possession and control of the structures pursuant to the City of Banning’s request. The property was sold and the court receiver was eventually discharged so that the new owner of the nuisance properties could rehabilitate them within specified timelines.
However, when the new owner failed to rehabilitate the nuisance properties as well, the City requested the Court to reappoint the court receiver to rehabilitate the nuisance properties once and for all. The City was again successful, and the Court reappointed the court receiver to retake possession and control of the nuisance properties. The Court further ordered the court receiver to demolish the dangerous structures on the nuisance properties since they were beyond salvaging.
“Things were on track,” said Rene. “But then we hit a big roadblock when the new owner decided to file bankruptcy without merit.”
The new owner argued that the bankruptcy statutes required the court receiver to return possession of the nuisance properties back to the owner. If the owner had prevailed in bankruptcy court, the case would have set a dangerous precedent for the rehabilitation of run-down and abandoned properties should a city attempt to intervene with a receivership.
“Luckily for us, there’s an exemption under federal bankruptcy laws, which has to do with police action by a City to protect the community, ” said Rene. “This was exactly the case in Banning–they were attempting to protect their community and that’s ultimately what our case was about. It wasn’t about money, the City wanted the community to be safe.”
Rene, along with his team at Serviam by Wright LLP, argued that the State court and the State statutes that work to protect communities and public health should take priority over mere financial protections for the owner under federal bankruptcy law. The defense Rene presented was new for this type of attack on the receivership, and ultimately he was able to convince the bankruptcy judge and litigate a win for the City of Banning.
“By winning that case, we put a stop to a problem that could have caused a lot of trouble for other cities going forward,” said Rene. “It’s a narrow issue, but it has a big impact on our entire practice and on the State’s health and safety receivership laws in general. Had the case gone the other way, it would have undone the entire process and procedure.”
Most importantly, the court receiver has now demolished the neglected properties, and soon these structures will no longer be a threat to the City or nearby residents.
“These dangerous properties have been a nuisance for almost a decade and because of our victory, they have finally been demolished. Finally, the City of Banning’s community is no longer going to have to put up with these dangers,” said Rene. “It’s a victory for the community because the City of Banning is safer.”
Rene, an expert in code enforcement, receiverships, police services, land use, zoning, and planning, has also successfully negotiated receiverships on behalf of numerous other cities throughout California.
