City of San Luis Obispo v. Patrick Smith, et al.

2. Evidence of Health and Safety Violations

The City asserts that the Court will abuse its discretion unless it defers to the City’s experts’ determination that the property is a substantial danger to the public. Neither of the cases City cites support this argument.

In City of Desert Hot Springs v. Valenti (2019) 43 Cal.App.5th 788, the trial court’s order denying appointment of a receiver was reversed because the denial was based on the court’s finding that the proposed rehabilitation plan was not financially viable. The trial court did not consider evidence that the property was dangerous and denied the motion using an improper standard. In City of Crescent City v. Reddy (2017) 9 Cal.App.5th 458, the trial court’s order appointing a receiver was upheld where the trial court “carefully examined the declarations submitted by the parties and concluded circumstances on the property justified the appointment of a receiver.” (Id. at p. 358.)

Here, the City cites to no authority, compelling the Court to follow conclusions of government experts without considering the substance of the evidence presented. (See, e.g., Vineyard Area Citizens for Responsible Growth, Inc. v. City of Rancho Cordova (2007) 40 Cal.4th 412, 435, as modified (Apr. 18, 2007) [the court gives deference to the agency’s conclusion which is reviewed for substantial evidence].)

The Court asked the City to update and clarify its evidence underlying the expert determinations particularly in light of opposing assertions that violations had been corrected and evidence that most buildings were condemned and no longer occupied. 1 Whether a building is occupied may impact its dangerousness. (See, e.g., City of Chula Vista v. Gutierrez (2012) 207 Cal.App.4th 681, 684 [receiver appointed to address safety violations opted to relocate tenants and board up building where lender was expected to foreclose and be responsible for rehabilitating property prior to resale].) The City provides no updated information.

Owners, 1160 Laurel Lane, LLC, and Patrick N. Smith (collectively LC Defendants) submit the Declarations of Cole Cheatwood, Tony Rende, and Erik Rheinisch, who are contractors that performed specified work correcting certain violations identified by City. LC Defendants further provide the Supplemental Declaration of Henry Burrows that summarizes corrections made to violations identified by City as follows: 2

a. Suite 100: This is unoccupied vacant warehouse space that is not accessible to the public. Mahogany Construction has sealed and replaced exterior wall penetrations, remedying Violations 2 and 3.

1 On May 15, 2026, in San Luis Obispo County Superior Court, Case No. 24CV-0133, CPIF filed evidence that Owners are receiving rent for use of certain portions of the Project. There is evidence of some occupancy. 2 The City objects to each of these declarations on a number of grounds without specifying which portions of the declarations to which each objection applies. The objections are overruled.

b. Suite 110: Mahogany Construction has sealed and replaced exterior wall penetrations, remedying Violations 17-18. Blocked routes have been cleared of obstacles/debris, mechanical components referenced by the City have been removed (Violation 25), and extension cords components referenced by the City have been removed (Violation 26).

c. Suite 115: This suite is unoccupied and not accessible to the public. Minor safety work has been performed, extension cords components referenced by the City have been removed, and the “Improper Hold-Open Device on Fire Door,” i.e., a wedge, has been removed. Therefore, violations 27-30 have been remedied.

d. Suite 120: This suite is unoccupied and not accessible to the public. An extra lock installed by a tenant on an exit door has been bypassed and the door is now operable from the inside, remedying Violation 35. Signage as to occupant load posting had fallen on the floor and was reposted on the wall, remedying Violation 44.

e. Suite 132: This suite is unoccupied and not accessible to the public. The previously open exterior façade has been completed by Mahogany Construction and suite is fully enclosed, remedying Violations 46 and 47. Pests have been eliminated and any waste has been cleaned, remedying Violation 57.

f. Suite 140: This is warehouse space occupied by Empire Electrical Solutions. I am informed and believe that the City has not taken issue with Empire Electrical Solutions occupying this suite. The [exit] signs have been added by Empire Electrical Solutions to this suite, addressing Violation 68.

g. Suite 160: This suite is unoccupied and not accessible to the public. Extension cords components referenced by the City have been removed, remedying Violation 78. Appliances are no longer connected and/or have been removed after the tenant vacated, remedying Violation 81. Gas Tanks are no longer in the suite, remedying Violation 82. Curtains are no longer installed in the suite, remedying Violation 83. Plastic tables have been removed and the fire extinguisher is accessible, remedying Violation 84. Objects mentioned in Violation 90 have been removed, remedying the violation. The stage mentioned in Violation 91 has been removed, remedying the violation.

h. Suite 170: This suite is unoccupied and not accessible to the public.

i. Suite 175: This suite is unoccupied and not accessible to the public.

j. Suite 180: This suite is unoccupied and not accessible to the public. The electrical outlet identified by the City has been fixed, remedying Violations 118 and 119. All fire sprinklers are operational, addressing Violation 121. The City claims the

corridor in this suite is not to code, but it was built as to approved City plans (Violation 124).

k. Suite 184: This suite is unoccupied and not accessible to the public.

l. Suite 190: This suite is unoccupied and not accessible to the public.

m. Suite 300: There is no designated Suite 300 in the building.

n. Apartments/Dwelling Units: All apartment/dwelling units are not occupied and are not accessible to the public. The missing sprinklers at issue in Violation 167 and unfinished sprinklers at issue in Violation 200 were installed and/or completed by Alpha Fire in 2025, remedying the violations. The extension cords at issue in Violation 193 have been removed, remedying the violation.

o. Exterior: The open and exposed north and west exterior walls have been replaced and sealed with steel walls by Mahogany Construction, remedying Violations 206 and 207. All exterior doors required for egress have been replaced with the appropriate doors, addressing Violation 209. The entire roof of the building was replaced by Wicks Roofing in 2022, making Violation 213 inaccurate. The gas lines at issue in Violations 218-220 have been shut off. Obstructions to the accessing of the electrical transformer have been removed, remedying Violation 222.

Violation 226 alleges unpermitted heaters being used at the Property; these are not in use. Violation 234 alleges obstructed or locked exit doors and Violation 235 alleges obstructed stairway exits; however, all obstructions have been removed, remedying these violations. New fencing has been installed, addressing Violation 237. Violation 243 alleges obstructed fire hydrants; however, all fire hydrants are presently accessible. Trash left by trespassers has been removed on a regular basis, addressing Violation 261.

Weeds and vegetation on the premises are being maintained, addressing Violation 262. Stormwater drain obstructions are regularly removed as they arise, addressing Violation 263. Violation 265 concerns an “unpermitted banner sign”; however, all banner signs have been removed from the Property. Violation 266 concerns scaffolding at the Property, which has been removed.

p. Violations Applicable to Entire Subject Property: I believe these violations have been addressed by my prior declaration in this action dated April 23, 2026, and the remediation efforts described above.

(Supplemental Declaration of Henry Burrows (Sup. Burrows Dec.), ¶ 10.)

Mr. Burrows also states that the water leak recently identified by City has been repaired and a new water leak was discovered which is currently being repaired. (Supp. Burrows Dec., ¶ 9.)

The April 29, 2026, Declaration of Enforcement Supervisor John Mezzapesa states “that none of the specified conditions have been fully corrected,” “no new permits have been sought, issued, or approved for repairs to any of the offices identified in the N&O,” and “[a]t least twenty (20) projects remain incomplete with expired permits” provides substantial evidence of health and safety violations. (April 29, 2026, Declaration of John Mezzapesa, ¶ 7.)

With regard to the expired permits, Mr. Borrows reports that in April 2026, he contacted the City seeking extensions or reinstatement of permits for the Project. As of May 26, 2026, “neither the City nor its counsel has agreed to any extension or reinstatement of the permits necessary to address the alleged violations asserted by the City.” (Sup. Burrows Dec., ¶¶ 7, 8.)

The wide chasm between Mr. Burrow’s declaration that all code violations have been remedied and Mr. Mezzapesa’s declaration that none of the violations have been fully corrected creates a factual dispute the Court hoped to avoid by seeking an update and clarification from the City. However, there is no evidence Owners obtained permits to perform work nor evidence LC Defendants asked the City to inspect and verify remediation.

The City issued the Notice and Order to Repair or Abate (N&O) on September 2, 2025, and the compliance deadline expired on October 2, 2025. Owners were afforded a reasonable opportunity to correct the violations before City filed its application for a receiver on March 10, 2026. The City provides uncontested evidence that at least twenty projects have expired permits. Construction work done without a permit puts a unit’s occupants, neighbors, and the public at risk of harm. (County of Sacramento v. NKS Real Est. Holdings, Inc. (2026) 119 Cal.App.5th 390, 403.)3

A receiver is needed to obtain permits which may or may not require further remedial work. While the Court applauds LC Defendants’ efforts to comply with the N&O, after more than eight months the Project remains mostly vacant, without permits, and without evidence of a viable plan for maintaining the Project in a safe condition.

3. Ruling

The application is granted.

3 The City objects to the Supplemental Declaration of Patrick Smith as untimely, irrelevant, containing hearsay, and with prejudice outweighing any probative value. The Court agrees and sustains the objections. The declaration has a Term Sheet, for a new loan to finance the construction and development project attached. The deadline for filing additional opposition papers was noon on May 27, and the Term Sheet constitutes hearsay and states “The offer in this document will expire on May 23, 2026, at 5:00PM EST.” Smith and Owners should provide the Receiver with any offer of financing that may be in the interest of all lienholders.

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