Application for Appointment of Receiver and Preliminary Injunction
Laurel Creek, LP, et al. v. CPIF California, LLC, 24CV-0133
Hearing: Application for Appointment of Receiver and Preliminary Injunction
Date: June 3, 2026
This case arises from Laurel Creek LP’s (Laurel Creek) and Laurel Creek II LP’s (Laurel Creek II) project to convert commercial warehouse and office buildings to mixed warehouse, office, and residential use (the Project). Construction began in June of 2020 but was never completed. The buildings lie in various stages of partial construction and disrepair, and the City of San Luis Obispo has declared the project a health and safety violation and public nuisance. Multiple lawsuits have been filed, including mechanic’s lien actions by general and subcontractors.
The subject action was filed by Laurel Creek and Laurel Creek II (collectively Owners) and Patrick N. Smith (Smith) against lender CPIF California, LLC (CPIF). Owners obtained loans from CPIF for the Project. Smith guaranteed those loans. (Owners and Smith are collectively referred to as Plaintiffs). Plaintiffs allege that CPIF stopped funding the construction, the first phase of which was approximately 95% complete, breached the loan agreement and manufactured alleged breaches by Owners in an attempt to take over the project for its own financial advantage. (Complaint, ¶ 2.)
CPIF filed a cross-complaint against Plaintiffs alleging breach of the loan agreement and guarantee and seeking to foreclose and appoint a receiver.
The extent of Plaintiffs’ and CPIF’s liability, if any, for the failure of the Project to progress has not been litigated. CPIF presents evidence that the Project was overbudget and Plaintiffs defaulted on loan payments. Plaintiffs present evidence that CPIF refused to pay legitimate construction draws and violated the loan agreement by paying itself millions of dollars from the PACE Reserve funds.
Before the Court is CPIF’s application for appointment of a receiver and preliminary injunction. CPIF filed the application on June 3, 2024. Through a series of bankruptcy stays and stipulated continuance orders, the application has been continued for nearly two years.
The hearing of the motion was continued to allow CPIF to address the Court’s concerns regarding its jurisdiction to appoint a receiver, the state of the Project, and equitable issues.
On May 21, 2026, the bankruptcy court dismissed the bankruptcy cases of Laurel Creek, LP and Laurel Creek II, LP. (See, Notice of Lodgment of Orders Dismissing Chapter 11 Case Nos. 9:25- BK-10985-RC and 9:25-BK-10986-RC, filed in San Luis Obispo County Superior Court, Case No. 25CV-0667.) 1 Accordingly, there is no longer an issue regarding this Court’s jurisdiction to appoint a receiver.
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1 In its separate lawsuit (San Luis Obispo County Superior Court, Case No. 25CV-0667 (Enforcement Action)), the City of San Luis Obispo (City) seeks to appointment of a receiver. City and CPIF seek the appointment of the same individual, Kevin Singer, but oppose one another’s motions.
I. Status of the Project
The moving papers provided no evidence that the Project was occupied or receiving rents. CPIF presents evidence showing that the Project is partially occupied and Owners receive some rent. (Colabianchi Dec., ¶¶ 6, 7; Exs. E, F.) CPIF presents file-endorsed copies of monthly operating reports for December 2025 through March 2026 for each of the Owner bankruptcies. CPIF argues “[g]iven what appears to be regular rental review being generated from the Project, the need for the appointment of a receiver to oversee and control these rents is apparent and even further warranted.” (Response to Court’s Tentative Ruling (Response), p. 12, lns. 7-9.)
However, there is no evidence Owners are misreporting or misusing the rent money. CPIF provides evidence that $45,000.00 in aggregate rental revenue has been received since December 2025. This amounts to about $7,500 per month. There are multiple millions of dollars in liens against the Project and CPIF asserts that further lending cannot be obtained without Court approval of super-priority liens. The amount of rent being generated is not a basis for appointment of a receiver.
CPIF argues, “the Property remains ‘plagued with immediately dire health, safety, fire, and other hazards posing substantial dangers to any entrants, neighbors, and the community.’ (City’s Receivership Application, p. 1.) Further, the Property allegedly ‘still sits full of dangers and hazards from significant unfinished and unpermitted construction; unfinished exterior structural elements and building materials left out in winter weather and rain have become more deteriorated and dilapidated; various areas of the Subject Property have become a dumping ground with a large accumulation of junk, trash, debris; and, the lack of necessary permits or corrective action to the exterior areas reflect the interior is also in the same or worse conditions without any sign of improvement anytime soon, without this court’s intervention.’ (Id., p. 5.)” (Response, p. 9, fn. 9.)
CPIF waited nearly two years after filing its receivership application to pursue appointment of a receiver and the property fell into disrepair during that time. These conditions may no longer exist given evidence in the Enforcement Action that many of the violations have been remediated. In any event, the Court finds that unsafe conditions support appointment of a health and safety receiver to protect the public and the interests of all lienholders rather than the receiver proposed by CPIF.
II. Equitable Considerations
An application for appointment of a receiver is equitable in nature. (Republic of China v. Chang (1955) 134 Cal. App. 2d 124, 130.) “Our Supreme Court reminds us that courts cannot properly exercise equitable powers without considering the equities on both sides of a dispute. (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 180, 96 Cal.Rptr.2d 518, 999 P.2d 706.) This basic principle of equity jurisprudence means that in any given context in which the court is prevailed upon to exercise its equitable powers, it should weigh the competing equities bearing on the issue at hand and then grant or deny relief based on the overall balance of these equities. (Ibid.)” (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal. App. 4th 1125, 1133–34.)
The Court previously raised equitable concerns regarding CPIF’s alleged failure to fund valid loan draws, CPIF’s proposed order seeking more favorable treatment than other lienholders, and CPIF’s attempt to foreclose on three quarters of the Project.
CPIF responds that it did not wrongfully withhold draws (Response, ¶ III.E.); the Court need not use CPIF’s proposed order in appointing a receiver (Response, p. 7, lns. 16-19); and CPIF is entitled to appointment of a receiver despite its attempt to foreclose.2 (Response, ¶ III.C.) These arguments do not address the Court’s concern that CPIF has not been equitable in seeking a receiver.
While a neutral receiver may benefit all lienholders it is detrimental to the owner of the property. (See, Medipro Medical Staffing LLC v. Certified Nursing Registry, Inc. (2021) 60 Cal.App.5th 622, 628.) The parties accuse one another of causing the Project’s collapse and these accusations have not been litigated. CPIF’s claimed right to appointment of a receiver is not independent of its alleged refusal to pay valid draws and improper payment to itself. CPIF has not provided sufficient evidence or authority for the Court to find CPIF is without some fault for creating the situation that calls for a receiver.
CPIF does not provide a valid basis for including provisions in its proposed order giving CPIF special treatment and control over the receiver. In addition to provisions highlighted in the Court’s earlier tentative ruling (i.e., proposed order ¶¶ 10.k., 10.l., 10.n., 10.v., 10.w.), Plaintiffs identify provisions in CPIF’s proposed order which would require the receiver to obtain CPIF’s approval before hiring contractors, entering into leases and managing tenants, and purchasing insurance. (Plaintiffs’ Supplemental Opposition Brief, p. 4.)
In its earlier tentative ruling, the Court cited Kaura v. Stabilis Fund II, LLC (2018), 24 Cal.App.5th 420, as authority that it is improper for a lender to control a receiver appointed by the Court. Rather than provide legal support for submitting a proposed order that seeks to control the receiver, CPIF asks the Court to ignore its conduct. (Response, p. 7, ln. 27-p. 8, ln. 3.)
CPIF argues the preliminary injunction that stopped CPIF from foreclosing on three-quarters of the Project property “does not deprive Lender of its separate right to seek appointment of a receiver.” (Response, p. 10, ln. 20.) CPIF does not address the Court’s concern that CPIF opposed the preliminary injunction on an inequitable ground, i.e., that there are no prior liens on the three parcels. The order, attached as Exhibit 1 to the Supplemental Declaration of Jordan Liebman, explains that mechanic’s lien rights and CPIF’s own deed of trust attached to the entire Project property before the property was subdivided. CPIF offers no authority holding that subdivision of real property subject to liens invalidates those liens.
The Court must also consider the City’s application for appointment of a health and safety receiver. While the City did not file opposition to CPIF’s application in this case, the City argues in the Enforcement Action that Health and Safety Code section 17980.7, subd. (c)(3) enjoins the encumbrance or transfer of an interest in the Project. (Enforcement Action, Notice of Ex Parte
2 A preliminary injunction was entered in San Luis Obispo County Superior Court, Case No. 24CV-0693, Smith & Company v. Laurel Creek, LP et al., to prevent CPIF from foreclosing on three deeds of trust it purchased from American Riviera Bank.
Application for Appointment of Receiver, pgs. 1-2, ¶¶ 6, 8.) The City contends that safeguards to prevent transfers of title or an interest in the property are necessary to stabilize and manage the Project. City notes that CPIF would not be barred from transferring its interests but would have to obtain receiver and Court approval before doing so. (Enforcement Action, Reply to CPIF’s Opposition, p. 1, ln. 28-p. 2, ln. 8.)
CPIF has not satisfied the Court that it is entitled to equitable injunctive relief or appointment of a receiver.
The Court intends to grant the City’s application for receiver which includes no request to favor a particular party. While the receiver’s mandate, i.e., to remediate health and safety violations, is not as broad as requested by CPIF, the powers of a health and safety receiver are broad and will benefit all lienholders. (See, County of Sonoma v. Quail (2020) 56 Cal.App.5th 657, 681.)
III. Ruling
CPIF’s application for appointment of receiver is denied.
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