Peter Leroy Miller vs Samuel Gabriel Long, III et al

Case Number

23CV01649

Case Type

Civil Law & Motion

Hearing Date / Time

Fri, 10/04/2024 - 10:00

Nature of Proceedings

Motion to Compel; Motion Confirming Sale of Real Property

Tentative Ruling

(1) With respect to the motion to compel, the parties are requested to appear at the hearing and provide a status update on whether they have resolved the issues related to Long’s further production of documents pursuant to plaintiff’s Request for Production, Set One, or whether there might be additional issues either for the parties to work out, or which might require resolution by the Court. If the discovery dispute has been resolved, this matter will be ordered off calendar. In the event that issues remain to be resolved, however, the hearing will be further continued to November 1, 2024, at 10:00 a.m. in this Department. If that hearing is set, the Court will direct the parties to file a status report on what, if anything, remains to be resolved, no later than October 23, 2024.

(2) The Court will grant the motion for confirmation of the sale of the Castillo Street property. The Court has reviewed the Referee’s proposed order in detail, and unless a valid overbid is presented at the hearing, the Court intends to execute it as presented.

(3) The Court will grant the motion for confirmation of the sale of the De la Vina Street Property. The Court has reviewed the Referee’s proposed order in detail, and unless a valid overbid is presented at the hearing, the Court intends to execute it as presented.

BACKGROUND: Plaintiff Peter Leroy Miller (Miller) filed a complaint for partition by sale of real property on April 18, 2023. The complaint relates to properties located at 2535 De la Vina Street (designated by the parties as the “Vina Property”), and 1708 Castillo Street (designated by the parties as the “Castillo Property”), both in Santa Barbara. Each property is improved with a single-family residence. The complaint alleges that Miller holds a 70% interest in the Vina Property, in which defendant Samuel Gabriel Long III (Long) holds a 15% interest, and defendant Heather Gray (Gray) holds a 15% interest. It alleges further that Miller holds a 50% interest in the Castillo Property, in which defendant Long also holds a 50% interest. The complaint alleges that defendants have refused to either sell the properties, or to buy out Miller’s interest.

Defendants Long and Gray answered the complaint on July 21, 2023, and filed a cross-complaint for breach of contract against Miller. Miller answered the cross-complaint on August 22, 2023.

On August 28, 2023, Miller filed a Motion for Interlocutory Judgment of Partition and Appointment of Referee, setting the hearing on the motion for November 17, 2023. Prior to that hearing date, the parties stipulated to continue the hearing with respect to the Vina Property only, and to grant the motion as to the Castillo Property as unopposed. On November 15, 2023, the Court entered its Order on the stipulation, granting the motion as to the Castillo Property, and continuing the hearing with respect to the Vina Property to January 5, 2024.

On December 26, 2023, the parties filed a document entitled Stipulation regarding Granting Plaintiff’s Motion for Interlocutory Judgment. In the document, the parties stipulated to also grant the motion with respect to the Vina Property as unopposed, to appoint Matthew Taylor, Esq., as referee, and to take the January 5, 2024, hearing on the motion off calendar. The Court, through the Honorable Thomas P. Anderle, entered its Order on the Stipulation on the same date.

The parties then submitted an Interlocutory Judgment of Partition by Sale of Real Property and Appointment of Referee, which was executed by the Court and filed on February 6, 2024. The Interlocutory Judgment formally appointed Matthey L. Taylor, Esq., as the referee with full authority to sell each of the properties, and set forth the powers and responsibilities of the Referee, the procedure for confirmation of the sale of the properties, the procedure for consummation of the sale following court approval, payment of expenses, payment and rate of Referee’s fees, instructions relating to the sale proceeds, retention of jurisdiction by the Court, orders restraining the parties and their agents from taking any actions to interfere with the Referee or the sales process, and addressed other issues necessary for the Referee to perform his duties.

By Substitution of Attorney forms filed on March 29, 2024, former counsel for Long and Gray substituted out of the action as their attorney of record, and both Long and Gray substituted themselves as self-represented litigants. On April 3, 2024, John J. Thyne III of Thyne Taylor Fox Howard, LLP substituted into the action as attorney of record for defendant Gray only. Defendant Long remains self-represented in the action.

Motion to compel: On April 8, 2024, Miller filed a motion to compel defendant Long to provide further production of documents, setting the hearing for May 17, 2024. On that date, the matter was continued to July 26, 2024, with instructions for the parties to meet and confer. Prior to that hearing date, the parties on July 16, 2024, filed a document entitled “Joint Supplement to Plaintiff’s Motion to Compel Against Defendant Samuel Gabriel Long III,” in which they advised the court that plaintiff’s counsel and defendant Long met and conferred extensively between May 17 and July 15, with Long agreeing to provide supplemental, code-compliant responses and to produce additional documentation in response to the Request for Production, Set One. They advised further that as of July 15, Long had completed approximately 90% of the work, but was still working out some access issues with his prior counsel and co-defendant Heather Gray. They requested that the hearing be continued for 60 days to permit them to continue toward an informal resolution.

By Minute Order on July 26, 2024, the Court then continued the hearing to October 4, 2024. No further documents have been filed with the Court with respect to the motion to compel.

Motion # 1 by Partition Referee for Confirmation of the Sale of Real Property (Castillo Street property): On August 6, 2024, the Partition Referee filed the current motion for confirmation of sale of the Castillo Property. The motion provides that the Referee hired real estate agents Garret McCaw and Hilda Hernandez, from Berkshire Hathaway HomeServices. Ms. Hernandez has experience selling properties in partition sales, and Mr. McCaw specializes in real property sales in Santa Barbara County. The Castillo Property was initially listed for sale in April 2024, for $1,189,000.00. It was advertised for sale via industry-standard methods (MLS, internet websites, mail of postcards to surrounding addresses and personal investor addresses). No open houses were conducted, because the current tenants of the property were not cooperative, but prescreened prospective buyers were given access to inspect the property. The public notice and posting requirements of Code of Civil Procedure section 873.640 were followed.

The Referee received several offers. One initial offer was submitted for $1,000,000.00, but the offer was lowered to $900,000.00 after inspection of the property. Proposed buyer Investfirst LLC was the highest offering party with a bid of $950,000.00. The Referee has entered into a sale agreement with Investfirst, LLC, subject to court confirmation. The Referee asserts that the Court should confirm the sale, since (1) it was the highest pending offer following legally-required and industry-standard advertising when the Referee went under contract; (2) the property is being sold in “as is” condition; (3) the offer is made with a full contingency removal already in place; (4) it is an arms’ length transaction with an eligible purchaser pursuant to Code of Civil Procedures section 873.690.

The Referee also seeks confirmation of a back-up sale to RE Holdings 2 LLC for $960,000.00, in the event the primary sale to Investfirst LLC is not able to be completed. The offer by RE Holdings 2 LLC was not placed until after the Referee had executed the sale contract with Investfirst LLC. Since it is slightly higher than the Investfirst LLC bid, it is logically next in line to purchase the property. The RE Holdings 2 LLC offer was not high enough to meet statutory requirements for an “over bid” under Sections 873.730 to 873.740, which require that an overbid exceed the pending offer by 10% of the first $10,000 and 5% of the remaining balance of the highest pending offer. As such, it is treated as a back-up bid rather than an overbid which would displace the current pending contract signed by the Referee.

The motion separately sets forth the information required by Code of Civil Procedure section 837.710, including (1) description of the property sold to each buyer—the sale involves the entirety of the property; (2) name of purchaser—Primary Sale to Investfirst LLC or assignees; Back-up Sale to RE Holdings 2 LLC; (3) sale price—Primary Sale of $950,000; Back-Up Sale of $960,000; (4) Terms and conditions of sale—both the Primary Sale and the Back-Up Sale are standard commercial sales on California Association of Realtors form contracts titled “RESIDENTIAL INCOME PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS” with addendum relating to sale by court-appointed Referee, and provides that full amount of the purchase price will be deposited into escrow or paid to Referee on or before close of escrow; (5) Any amounts payable to lienholders—(a) Deed of Trust securing an indebtedness of $552,500, dated July 28, 20045, recorded August 5, 2005, as Instrument No. 05-74444 of Official Records, with lender as Lehman Brothers Bank, FSB, a Federal Savings Bank, with Trustors as Miller and Long, and Trustee as Chicago Title Company, and Beneficiary as Mortgage Electronic Registration Systems, Inc. The amount of indebtedness is expected to have changed; (b) Deed of Trust dated February 21, 2023, to secure unknown amount of indebtedness, recorded March 23, 2023, as Instrument No. 23-8259, with Trustor as Miller, Trustee and Beneficiary as Talkov Law Corp, a California Professional Corporation; (c) Deed of Trust dated May 1, 2024, to secure an indebtedness of $60,000, recorded July 11, 2024, as instrument No. 24-20219, with Trustor as Partition Referee Matthew L. Taylor and Beneficiary as Loretta Berlin, to secure a loan to pay off arrearages in debt secured by the senior deed of trust, made pursuant to court order in this action. A Preliminary Title Report is attached. As part of the standard sale transaction, the title insurance company will request that a Statement of Information form be completed for or on behalf of each of the owners, which it will use to search for involuntary liens that might not be apparent based upon the address of the property and which, if located, will be paid as part of the property sale escrow from the gross sale proceeds. The proposed order requires the owners to complete the form, and authorizes the Referee to completed it on behalf of any owners who do not complete it. (6) Agent commission—Primary Sale--$47,500, which is 5% of the sale price, to be split between buyer’s agents/brokers and seller’s agents/brokers, and is the sales commission amount approved by the court in the order; Back-Up Sale--$28,800, which is 3% of the sale price, to be paid to the seller’s agent/brokers. The buyer’s broker is attorney John Thyne, who has waived any commission. (7) Determination as to opening and closing public and private roads, etc.—N/A. (8) Other material facts of the sale—N/A.

The motion notes that the court may confirm the proposed sales, or may order the property sold to another buyer through the statutory overbid procedure. Code of Civil Procedure sections 873.720 through 873.740 govern the outcomes of a motion for confirmation of a proposed sale by a partition referee. Under 873.730, the court has the power to confirm the proposed sale, or vacate the sale and direct another sale if it finds any of the following are true: (1) the proceedings were unfair or improper notice was given; (2) the sale price is disproportionate to the value of the property; (3) any other buyer submits an overbid for the property that exceeds the proposed sale by at least 10% of the first $10,000, and 5% of the amount in excess thereof. The motion notes that no overbids have yet been received that satisfy the statutory threshold; in light of the current offer of $950,000, an offer would need to exceed that amount by at least $48,000, for a total offer of at least $998,000.

Finally, the motion sets forth the orders required by the Code of Civil Procedure, and the Referee contends that his proposed order includes all required provisions, including: (a) Section 873.790(b) requires that the order confirming sale be recorded, and the proposed order describes the property address, APN, and legal description, so that it can be recorded; (b) Section 873.750 requires that the Court order the Referee to execute a conveyance or other instrument to transfer the property, and Section 873.790 directs the Referee to execute a conveyance or other instrument of transfer to the purchaser; the proposed order directs the Referee to sign the grant deed to transfer the property. (c) Section 873.750 requires that the Court issue an order allowing the Referee to collect the sale proceeds, and the proposed order directs the Referee to receive the net sales proceeds from escrow. (d) Section 873.750 requires the court to order the Referee to perform other acts required to consummate the sale, and the proposed order authorizes the Referee to sign the contract, escrow instructions, tax forms, and other commercially-standard actions to close escrow, and requires that the parties cooperate with the Referee by completing documents required by the escrow officer or title insurance company, and authorizes the Referee to complete those documents on behalf of any owners who fail to comply; (e) Section 873.810 requires the Court to instruct the Referee on where to disburse or hold funds pending further court order, and the proposed order authorizes the Referee to deposit the funds in a federally-insured bank account or similar financial institution. Here, the account has already established a bank account, as allowed by prior court orders, and the order contemplates that the Referee will deposit the sales proceeds into that account. (f) Section 873.850 provides that when the sales proceeds have not previously been allocated among the parties, the Court has continuing jurisdiction to determine the respective claims of the parties to the sales proceeds, and the proposed order contemplates that the Referee will hold the sales proceeds until further order of the Court.

The motion is supported by the declarations of the Referee, Matthew L. Taylor, and Real Estate Broker Associate Garrett McCaw.

Motion # 2 by Partition Referee for Confirmation of Sale of Real Property (De la Vina Street property): On August 7, 2024, the Partition Referee filed the current motion for confirmation of the partition sale of the Vina Property. The motion provides that the Referee hired real estate agents Garret McCaw and Hilda Hernandez, from Berkshire Hathaway HomeServices. Ms. Hernandez has experience selling properties in partition sales, and Mr. McCaw specializes in real property sales in Santa Barbara County. The Castillo Property was initially listed for sale in April 2024, for $1,250,000.00. It was advertised for sale via industry-standard methods (MLS, internet websites, mail of over 200 postcards to surrounding addresses and personal investor addresses). No open houses were conducted, because the current tenants of the property were not cooperative, but prescreened prospective buyers were given access to inspect the property. The public notice and posting requirements of Code of Civil Procedure section 873.640 were followed.

The Referee received four offers, ranging from a low of $1,265,000, to the accepted highest offer from Austin and Brian Borgatello, which was initially submitted at $1,275,000, later increased to $1,375,000, and then reduced following buyer inspections to the final number of $1,357,000. The Referee entered into a sale agreement with the Borgatello buyers, subject to court confirmation. The Referee asserts that the Court should confirm the sale, since (1) it was the highest pending offer following legally-required and industry-standard advertising when the Referee went under contract; (2) the property is being sold in “as is” condition, and the buyer conducted an inspection and provided the Referee with an estimate that the property needs between $80,300 and $141,400 in foundation repairs; (3) the offer is made with a full contingency removal already in place; (4) it is an arms’ length transaction with an eligible purchaser pursuant to Code of Civil Procedures section 873.690; and (5) the final price exceeds the listing price for the property.

The motion separately sets forth the information required by Code of Civil Procedure section 837.710, including (1) description of the property sold to each buyer—the sale involves the entirety of the property; (2) name of purchaser—Austin and Brian Borgatello; (3) sale price—$1,357,000.00; (4) Terms and conditions of sale—the proposed sale is a standard commercial sale on California Association of Realtors form contract titled “RESIDENTIAL INCOME PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS” with addendum relating to sale by court-appointed Referee, and provides that full amount of the purchase price will be deposited into escrow or paid to Referee on or before close of escrow; (5) Any amounts payable to lienholders—(a) Deed of Trust securing an indebtedness of $725,000 dated January 3, 2018, and recorded on January 31, 2018, as Instrument No. 1-4151, with Lender/Beneficiary Montecito Bank and Trust, Trustors Long and Gray, and Trustee Mountain Financial Corporation. The amount of indebtedness is expected to have changed; (b) Deed of Trust dated February 21, 2023, to secure unknown amount of indebtedness, recorded March 23, 2023, as Instrument No. 23-8259, with Trustor as Miller, Trustee and Beneficiary as Talkov Law Corp, a California Professional Corporation; (c) Deed of Trust dated May 1, 2024, to secure an indebtedness of $40,000, recorded July 11, 2024, as instrument No. 24-202155 with Trustor as Partition Referee Matthew L. Taylor and Beneficiary as Loretta Berlin, to secure a loan to pay off arrearages in debt secured by the senior deed of trust, made pursuant to court order in this action. A Preliminary Title Report is attached. As part of the standard sale transaction, the title insurance company will request that a Statement of Information form be completed for or on behalf of each of the owners, which it will use to search for involuntary liens that might not be apparent based upon the address of the property and which, if located, will be paid as part of the property sale escrow from the gross sale proceeds. The proposed order requires the owners to complete the form, and authorizes the Referee to completed it on behalf of any owners who do not complete it. (6) Agent commission—$67,850, which is 5% of the sale price, to be split between buyer’s agents/brokers and seller’s agents/brokers, and is the sales commission amount approved by the court in the order. (7) Determination as to opening and closing public and private roads, etc.—N/A. (8) Other material facts of the sale—N/A.

The motion notes that the court may confirm the proposed sales, or may order the property sold to another buyer through the statutory overbid procedure. Code of Civil Procedure sections 873.720 through 873.740 govern the outcomes of a motion for confirmation of a proposed sale by a partition referee. Under 873.730, the court has the power to confirm the proposed sale, or vacate the sale and direct another sale if it finds any of the following are true: (1) the proceedings were unfair or improper notice was given; (2) the sale price is disproportionate to the value of the property; (3) any other buyer submits an overbid for the property that exceeds the proposed sale by at least 10% of the first $10,000, and 5% of the amount in excess thereof. The motion notes that no overbids have yet been received that satisfy the statutory threshold; in light of the current offer of $1,357,000, an offer would need to exceed that amount by at least $68,350.

The motion is supported by the declarations of the Partition Referee, Matthew L. Taylor, and Real Estate Broker Associate Garret McCaw.

ANALYSIS: Motion to compel As noted above, the Court has no information on the status of the parties’ meet and confer efforts with respect to resolution of the issues related to Long’s further production of documents pursuant to Miller’s Request for Production, Set One. The parties are directed to appear at the hearing and provide a status update on whether they have resolved all such issues, or whether there might be additional issues either for the parties to work out, or which might require resolution by the Court.

If the discovery dispute has been resolved, this matter will be ordered off calendar.

In the event that issues remain to be resolved, however, the hearing will be further continued to November 1, 2024, at 10:00 a.m. in this Department. If that hearing is set, the Court will direct the parties to file a status report on what, if anything, remains to be resolved, no later than October 23, 2024.

Motions # 1 and # 2 to confirm sale of property by partition referee

1. Statutory authority.

The statutory provisions with respect to sale of property subject to partition are set forth in Chapter 6 [Sale of the Property] of Title 10.5 [Partition of Real and Personal Property] of Part 2 [Of Civil Actions] of the Code of Civil Procedure.

Among those sections of particular relevance to the Partition Referees’ motions, Code of Civil Procedure section 873.710 requires that the referee, upon contracting for sale of the property, must provide a report of the sale to the court which includes all of the following information, as well as any such other information as may be appropriate:

(1) A description of the property sold to each purchaser.

(2) The name of the purchaser.

(3) The sale price.

(4) The terms and conditions of the sale and the security, if any, taken.

(5) Any amounts payable to lienholders.

(6) A statement as to contractual or other arrangements or conditions as to agents' commissions.

(7) Any determination and recommendation as to opening and closing public and private ways, roads, streets, and easements.

(8) Other material facts relevant to the sale and the confirmation proceeding.

Code of Civil Procedure section 873.720 provides further:

(a) A purchaser, the referee, or any party may move the court to confirm or set aside the sale.

(b) The moving party shall give not less than 10 days' notice of motion to:

(1) The purchaser if the purchaser is not the moving party; and

(2) All other parties who have appeared in the action.

Code of Civil Procedure section 873.730 further provides:

(a) At the hearing, the court shall examine the report and witnesses in relation to the report.

(b) The court may confirm the sale notwithstanding a variance from the prescribed terms of sale if to do so will be beneficial to the parties and will not result in substantial prejudice to persons interested in the sale.

(1) The proceedings were unfair or notice of sale was not properly given. If there is no finding at the hearing of unfairness or improper notice, the sale may thereafter not be attacked on such grounds.

(2) The sale price is disproportionate to the value of the property.

(3) It appears that a new sale will yield a sum that exceeds the sale price by at least 10 percent on the first ten thousand dollars ($10,000) and 5 percent on the amount in excess thereof, determined after a reasonable allowance for the expenses of a new sale.

Code of Civil Procedures section 873.740 also provides:

(a) If at the hearing under Section 873.730 a responsible bidder makes a written increased offer that exceeds the sale price by at least 10 percent on the first ten thousand dollars ($10,000) and 5 percent on the amount in excess thereof, the court in its discretion may do either of the following:

(1) Vacate the sale and direct that a new sale be made.

(2) Vacate the sale, accept the increased offer, and confirm the sale to the offerer.

(b) Except as provided in subdivision (c), the amount by which an increased offer exceeds the sale price is determined on the basis of the gross amount of the increased offer including any commission on the increased offer to which an agent may be entitled.

(c) Where in advance of sale the court has so ordered or the parties have so agreed, if an increased offer is made by a party to the action who is not represented by an agent, the amount by which an increased offer of a nonparty exceeds the sale price is determined on the basis of the net amount of the increased offer excluding any commission on the increased offer to which an agent may be entitled.

Pursuant to Section 873.750(a), upon confirmation of a sale, the court shall order the referee to execute a conveyance or other instrument of transfer, to collect the proceeds, take security, and perform other acts required to consummate the sale. Pursuant to subdivision (b), the order may direct the referee concerning the distribution, deposit, or securing of sale deposits and sale proceeds.

Section 873.810 directs that “[t]he court shall order the proceeds of sale and any security therefor to be paid, transferred, deposited in court, placed in trust, or invested in State of California or United States government obligations or interest-bearing accounts in an institution whose accounts are insured by an agency of the federal government, to or for the benefit of the persons in interest entitled thereto, as may be appropriate or as specifically provided in this article.”

Pursuant to Section 873.820:

The proceeds of sale for any property sold shall be applied in the following order:

(a) Payment of the expenses of sale.

(b) Payment of the other costs of partition in whole or in part or to secure any cost of partition later allowed.

(c) Payment of any liens on the property in their order of priority except liens which under the terms of sale are to remain on the property.

(d) Distribution of the residue among the parties in proportion to their shares as determined by the court.

2. Motions #1 and #2

The Court has evaluated the motions, their supporting declarations and exhibits, and finds that it is appropriate to grant the motions. The Referee has presented evidence that the proper public notice and posting requirements were met. It further appears to the Court that both properties were properly marketed. Both properties are being sold in “as is” condition. The offers for both properties have had all contingencies removed. Both proposed sales are arms’ length transactions with eligible purchasers. The motions expressly set forth all information which Code of Civil Procedure section 837.710 requires the referee to report to the court, with respect to each proposed sale.

Based upon the information provided by the referee, the Court has determined that it is appropriate to confirm the sales of each of the properties, as well as to confirm the Back-Up Sale for the Castillo Street Property, in the event that the Primary Sale of that property cannot be completed.

The Court has reviewed in detail the proposed orders submitted by the referee with respect to each motion, and finds that each proposed order contains all matters which the law requires that they address. Unless an overbid is received at the hearing on the motion which meets the requirements of Code of Civil Procedure section 873.740(a) quoted above, the Court intends to execute each of the proposed orders after the hearing.

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