County of Monterey v. Life Foundation Monterey, LLC, et al.

County of Monterey v. Life Foundation Monterey, LLC, et al. (and Related Cross-Action)

Defendants’ Motion to Enforce Settlement Agreement

Receiver’s Report No. 9 and Request to Approve May and June 2026 Invoices

Hearing Date: September 4, 2026

Defendants1 seek to enforce the Settlement Agreement and General Release dated June 2, 2026 (the “Settlement Agreement”) under Code of Civil Procedure2 section 664.6. They request an order for the immediate release of the remaining funds held for Life Foundation in restricted U.S. Bank accounts ending in 8000 and 8006 (“Restricted Funds”), without deducting the $175,420.84 bond-servicing payment (“Bond-Servicing Payment”) owed to Court-Appointed Receiver Brent Waldman (“Receiver”). Additionally, Defendants aim to vacate the no-contact provisions in paragraphs five through seven (“No-Contact Provisions”) of the Court’s July 21, 2026 Order After Hearing (“Order After Hearing”). Plaintiff County of Monterey (“Plaintiff”) and the Receiver oppose these requests.

After reviewing the record submitted with this motion and the Order After Hearing, the Court determines that the current evidentiary record does not provide enough clarity to definitively establish the parties’ intent regarding the final division of the Bond-Servicing Payment. Since section 664.6 only allows enforcement of settlement terms that are clear, complete, and mutually agreed upon, the Court cannot grant the relief requested by Defendants at this time. Consequently, the motion and the Dismissal Hearing are CONTINUED to October 30, 2026, to facilitate additional briefing as outlined below, following this schedule: (1) Defendants’ supplemental filings due by October 2; (2) supplemental oppositions due by October 16; and (3) Defendants’ supplemental reply due by October 23.

Defendants’ request to vacate the No-Contact Provisions is DENIED WITHOUT PREJUDICE because it was first raised in their reply papers. To avoid unintended application, the Court clarifies that the No-Contact Provisions apply to communications with U.S. Bank in its capacity as Bond Trustee, and with its counsel in that capacity, concerning all issues related to this case. This includes, among other things, issues concerning the restricted accounts, bond servicing, trust balances, defeasance proceedings, or the disposition or transfer of funds subject

1 “Defendants” collectively refer to the following: Life Foundation Monterey, LLC (“Life Foundation”); Low Income Family Enrichment Corporation; Lotus RMD, LLC; and Barnett Davis II. 2 Hereinafter, all statutory references are to the Code of Civil Procedure. 1

to the Receiver’s authority. The Order After Hearing does not prohibit Defendants, their counsel, or their representatives from communicating with U.S. Bank regarding personal accounts, unrelated business matters, or other matters having no connection to the receivership or the accounts and bond obligations at issue in this action.

Finally, on September 1, 2026, the Receiver filed his Report No. 9 and requests that this Court approve his invoices for May and June 2026. Because Plaintiff has already paid for those invoices, the Court GRANTS the Receiver’s requests.

Plaintiff shall prepare the Proposed Order consistent with this Tentative Ruling.

BASIS FOR CONTINUANCE.

A. Background.

Since December 2025, Receiver has administered an unrestricted General Operating Account ending in 3887 with U.S. Bank (“General Operating Account”). [Receiver’s Opp. at 2; see also Motion at 4.] Receiver utilized the operating cash in that account to fund required monthly bond interest payments to prevent default. [Ibid.]

By June 2, 2026, all parties and the Receiver had signed the Settlement Agreement. [Settlement Agreement, Exh. A to Order After Hearing at 12-13.] In the relevant part, the Settlement Agreement’s Recitals generally contemplate that Plaintiff take title to the building at 1000 South Main Street in Salinas, California, on July 1, 2026, for the agreed-upon option price of $7 million. [Id. at p. 2, ¶ E.] The Recitals are fully incorporated into the Settlement Agreement. [Id. at p. 2, ¶ 1.] Further, the Settlement Agreement clearly indicates that the parties agreed that the Receiver would continue making all bond servicing payments through July 1, 2026, as required by any bond-related agreements. [Id. at p. 3, ¶ 4.]

On June 24, 2026, U.S. Bank sent a letter to the Receiver. [U.S. Bank Letter, Exh. B to Receiver Decl. filed 7/20/26.] In that letter, U.S. Bank, as Trustee, recognized the parties’ desire to close on the sale of 1000 South Main Street by July 1. [Id. at p. 1.] In part, U.S. Bank required the receipt of the Bond-Servicing Payment before it could release its lien on that property. [Id. at p. 2.] That same day, the Receiver instructed U.S. Bank to immediately debit the General Operating Account to satisfy the Bond-Servicing Payment. [E-mails, Exh. A to Receiver Decl. filed 7/20/26, at p. 3.] Eventually, Plaintiff received the title to 1000 South Main Street.

On July 17, 2026, the Receiver directed U.S. Bank to place an “immediate administrative freeze” on one of the accounts holding the Restricted Funds, specifically the account number ending in 8000. [Freeze Order, Exh. E to Gorman Decl. in Support of Defendants’ Ex Parte Application, filed 7/20/26.] Defendants contested the Receiver’s “freeze order.” [Emails, Exh. F to Gorman Decl. in Support of Defendants’ Ex Parte Application, filed 7/20/26, at 2-3.]

B. Issues in the Motion and the Parties’ Arguments.

The Court must decide whether, under the Settlement Agreement, the Bond-Servicing Payment made by the Receiver from the General Operating Account should stay charged to that account, or if the Receiver can reimburse the General Operating Account for this payment using the Restricted Funds before the remaining Restricted Funds are distributed to Life Foundation.

Defendants argue that the Settlement Agreement requires the release of the Restricted Funds without deduction of the Bond-Servicing Payment.

Plaintiff argues that the Settlement Agreement’s language and the Receiver’s understanding during negotiations establish that the funds in the General Operating Account were to go to Plaintiff, while the Restricted Funds were to satisfy Life Foundation’s obligations. Essentially, according to Plaintiff, the Bond-Servicing Payment debited from the General Operating Account is effectively “borrowed” to avoid default. Therefore, Plaintiff contends that the Bond-Servicing Payment must be returned to the General Operating Account before the residual Restricted Funds are calculated and released to Life Foundation.

The Receiver asks the Court to deny Defendants’ motion, reaffirm the Order After Hearing, including the portion granting him priority reimbursement of the Bond-Servicing Payment, and prohibit the release of Restricted Funds to Life Foundation until U.S. Bank completes its final accounting and all bond obligations, trustee fees, and the Receiver’s priority administrative expenses are satisfied. He also asks the Court to direct U.S. Bank to release the remaining Restricted Funds in account 8000 to him.

C. Ambiguity in the Settlement Agreement.

The Settlement Agreement does not explicitly specify who is responsible for the Bond- Servicing Payment. A key challenge is that it references various bond payments without clearly indicating which payments relate to specific paragraphs — such as the Bond-Servicing Payment, the full $7.8 million payoff, or other bond obligations. The Settlement Agreement contains provisions that support the parties’ competing interpretations:

• Paragraphs 4 and 6(B) authorize the Receiver to ensure all pre‐closing bond payments are made and contemplate that base rent may be used for bond obligations;

• Paragraph 7(C) directs that Restricted Funds “shall thereafter be used to fulfill any and all of [Life Foundation’s] bond‐related obligations.”

• Paragraph 7(D) requires that “remaining Restricted Funds” be released to Life Foundation only after accounting for the transactions identified in Paragraphs 7(A) through (C).

None of these provisions expressly resolves whether the Bond-Servicing Payment, which was made from the General Operating Account before closing, was intended to be reimbursed from

the Restricted Funds or ultimately borne by the General Operating Account. The Settlement Agreement is therefore ambiguous on this point, and section 664.6 does not permit the Court to enforce an ambiguous or incomplete material term.

The Order After Hearing does not resolve this issue. In that order, the Court authorized the Bond-Servicing Payment made by the Receiver and found it was essential to prevent default due to escrow delays. However, the Order After Hearing does not resolve the question presented under section 664.6: whether the Settlement Agreement itself requires or prohibits reimbursement of the Bond-Servicing Payment from Restricted Funds. The more complete record now submitted shows conflicting interpretations that the Court cannot reconcile definitively without additional factual clarification.

D. Need for Focused Supplemental Evidence and the Scope of the Parties’ Supplemental Briefing.

The parties have submitted extensive briefing, declarations, and exhibits. Still, the evidence remains incomplete on several points essential to determining mutual intent, including: (i) whether the parties contemplated the Bond-Servicing Payment when negotiating Paragraphs 4, 6(B), and 7(C) of the Settlement Agreement; (ii) the meaning of “final bond‐related transfers” in Paragraph 6(B); and (iii) the role, if any, of reimbursement within the structure of Paragraph 7.

Given these uncertainties and to avoid inconsistent future litigation over the allocation of the Restricted Funds, the Court finds that the hearing must be continued to allow the parties to file supplemental papers. The continued hearing on October 30, 2026, at 8:30 a.m. in Department 14 will address the following single issue: What did the parties intend concerning the ultimate allocation of the Bond-Servicing Payment under the Settlement Agreement? To aid the Court, the parties’ supplemental papers shall include:

• Any contemporaneous drafts, communications, or negotiations reflecting how the parties intended the allocation of the Bond-Servicing Payment.

• Evidence relevant to the meaning of “final bond‐related transfers” in Paragraph 6(B).

• Evidence demonstrating whether the parties intended the Bond-Servicing Payment to be included within Paragraph 7(C)’s “any and all” bond‐related obligations.

• Documentation identifying the source of funds in the General Operating Account used for the Bond-Servicing Payment, to the extent relevant to interpreting the Agreement.

Declarations must identify specific communications or documents relied upon and attach supporting documentation where available. Further, to be clear, the Court is not requesting further briefing on receivership law, administrative priority, subrogation, or repairs, except to the extent directly tied to the parties’ intent under the Settlement Agreement.

CONCLUSION.

Defendants’ motion to enforce the Settlement Agreement is CONTINUED to October 30, 2026, for further briefing as outlined above. The Court does not reach the merits of the parties’ competing interpretations of the Settlement Agreement at this time because the present record does not permit enforcement under section 664.6. Defendants’ supplemental filings are due by October 2, with supplemental oppositions due by October 16 and Defendants’ supplemental reply due by October 23.

Defendants’ request to vacate the No-Contact Provisions is DENIED WITHOUT PREJUDICE because this request was not part of the motion and only raised, for the first time, in Defendants’ reply papers.

Finally, the Court APPROVES the Receiver’s invoices for May and June 2026.

Plaintiff shall prepare the Proposed Order consistent with this Tentative Ruling.

NOTE RE TENTATIVE RULING This tentative ruling becomes the court’s order, and no hearing shall be held unless one of the parties contests it by following Rule 3.1308 of the California Rules of Court and Monterey County Local Rule 7.9. Those parties wishing to present an oral argument must notify all other parties and the Court no later than 4:00 p.m. on the court day before the hearing; otherwise, NO ORAL ARGUMENT WILL BE PERMITTED, AND THE TENTATIVE RULING WILL BECOME THE ORDER OF THE COURT AND THE HEARING VACATED. You must notify the court by email or by calling the Calendar Department at 831-647-5800, extension 3040, before 4:00 p.m. on the court day before the hearing.

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