Mobile Home Park Bankruptcy Smells

By John Perry

Just two hours before the residents of the Capistrano Terrace Mobile Home Park were scheduled to receive an offer from an insurance company to settle a “failure to maintain” lawsuit, park owners Capistrano Terrace Ltd. filed for Chapter 11 bankruptcy protection.

This appears to be a move by the mobile home park owners to avoid paying residents both the damages from the “failure to maintain” lawsuit and the relocation costs to which they are entitled as mandated by state law.

When asked by a reporter about the timing of the bankruptcy filing, Richard “Rick” Julian, former general partner of Capistrano Terrace Ltd said the bankruptcy was ”just a coincidence”.

The “failure to maintain” lawsuit was filed by park residents frustrated with the lack of maintenance and repair at the mobile home park. Their claims for damages included park owners refusal to flush the sewer system resulting in sewage backing up into the streets and the units; failure to repair faulty and exposed electrical wiring resulting in blackouts, brownouts and unsafe conditions; failure to maintain slopes and banks resulting in severe erosion and endangering several units; reducing water pressure so severely that units were unable to flush toilets and fire hydrants were rendered inoperable creating a fire hazard, etc.

An OC jury agreed, finding that park owners acted with “malice, oppression or fraud”. They awarded 17 residents $1.1 million in damages. Another 100+ residents have filed and have yet to have their day in court.

Some residents believe that the bankruptcy is an attempt to avoid paying the residents for any of the damages they have suffered.

The settlement offer of $4.85 million by the Capistrano Terrace Ltd’s insurance company would have covered all of the 127 plaintiffs in the lawsuit and would have superseded the jury award.

Since purchasing the park in 2003, Capistrano Terrace Ltd, an affiliate of Advanced Real Estate Services (ARES), has twice attempted to close the park. However, the current closure effort has been postponed by the City because the partnership has not paid the City’s required administrative fees.

Some park residents voiced the opinion that the partnership’s objective for purchasing the mobile home park to begin with was to force closure so that the land could be used for development.

Adjacent to the high-density “Distrito La Novia” project which was the subject of the contentious Measure B initiative. Park residents implored the council members at the time not to support ARES who they insist is a “bad neighbor”. The council majority dismissed the residents’ concerns and instead supported ARES and promoted the development.

Attorneys for the park owners are trying to get the bankruptcy court to order the insurance settlement into a “funding pool” to pay the creditors listed in the bankruptcy filing. This is particularly onerous to some park residents since the majority creditor is listed as Myron C. Sukut, a partner with Rick Julian in the Distrito La Novia development.

CCS hopes the residents of the mobile home park are successful in getting the compensation and justice they deserve.

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