Supporters of Fresno’s La Hacienda Mobile Estates residents called the ruling a “tremendous win.”
by Pablo Orihuela | Source |
After several years of fighting with tenants and Fresno city leaders, the owners of La Hacienda Mobile Estates have been stripped of their ability to negotiate the sale of the park. Tenants and their supporters are celebrating the ruling.
A bankruptcy judge sided with the tenants of a beleaguered mobile home park in Fresno, dealing a crushing blow to the controversial park owners who have long been accused of operating in bad faith.
Bankruptcy Judge Jennifer E. Niemann ruled in favor of the residents of La Hacienda Mobile Estates by appointing a trustee — effectively removing the park owner from the negotiating table — to oversee the sale of the park to a non-profit organization aiming to keep the space open as affordable housing for a city that is in desperate need of more.
Niemann ruled last week that the case was not made in good faith, and that the malevolent tactics used by park owner Matt Davies, representing Stockton-based Harmony Communities, both against the tenants and in the courts, was enough reason to remove them from ownership of La Hacienda.
“All (the park owner) has pursued is trying to kick the tenants off of the property, minimize the amount of the claims that they’ll have and litigate this stuff. And I just think that this case screams for a Chapter 11 trustee. It was not filed in good faith…and a trustee should be appointed,” Judge Niemann later added.
Harmony Communities and Matt Davies did not respond to request for comment for this story.
The ruling opens yet another chapter on a years-long legal battle the park residents have had against their owner, and looks to be the one they needed to keep living in their homes once and for all.
How did Harmony Communities get to bankruptcy court?
Earlier this year, the Fresno City Council OK’d a one-time $3.5 million subsidy to Self-Help Enterprises — a Visalia-based non-profit — to purchase the park with the intention of keeping it open as affordable housing. The decision came months after the council rejected the park owner’s proposal to close the park, and after the city’s mobile home park commission rejected a proposed rent increase.
In March, Fresno Superior Court Judge D. Tyler Tharpe also gave legal protections to park residents over evictions.
In May, however, the park owner filed for Chapter 11 bankruptcy in Delaware, effectively stalling the legal battles, and setting up another major hurdle for the park resident and their legal counsel to clear.
The decision to file in Delaware was a move “clearly trying to get as far away from the residents here as possible so that the residents couldn’t fight them,” Mariah Thompson told Fresnoland. Thompson is a senior litigator for California Rural Legal Assistance, and represents many of the remaining tenants at the park.
CRLA and the park tenants enlisted the help of Marc Levinson — a senior counsel for Orrick — to help them in bankruptcy court. Levinson, who joined the legal battle pro bono, also had previous working experience with CRLA.
Levinson helped the case be brought back to Fresno court, “where it belonged.”
“Let’s face it, that’s where all the residents were, that’s where the asset was,” Levinson told Fresnoland. “And (Harmony) complained that it was hard to get from Stockton to Fresno. Well, it’s even harder to get from Stockton to Delaware.
“And that, to me,” Levinson added, “was the first indication of the kind of people we were dealing with, who would file a case in Delaware simply to make life difficult, if not impossible, for the residents and for CRLA.”
‘We don’t trust these guys’
The ensuing battle in bankruptcy court had been ongoing since the summer, with court proceedings playing out like “street fights” Thompson said.
An example of the “bad faith” tactics of Harmony engaged in, according to both the judge and the tenants’ legal counsel, included the initial talks to sell the park.
Self-Help Enterprises made an effort to purchase the park for the listed price of $4 million — the property was also listed online temporarily on real estate sites like Marcus and Millchamp. Talks stalled after Harmony Communities inflated the asking price to $5.6 million, a 40% increase in valuation.
Harmony illegally attempted to raise rents on residents by “more than double,” according to Thompson, leading to the new increased valuation. The rent increase went against the city rent commission’s ruling.
When Harmony took over control of the property in 2022, they paid about $2 million for it.
Levinson said of the failed sale negotiations, “Bankruptcy is designed to help debtors survive and to get a decent return to creditors, and here, the creditors were going to get 100 cents on the dollar no matter what.”
The real estate company has long been accused of using suspicious tactics and bad-faith negotiations, even before the bankruptcy case, including a notable — and bizarre — instance where the company responded to inquiries about the property with a fake spokesperson using a joke name that, when sounded out, alluded to oral sex. The “joke” fell flat with residents fighting the company for their homes.
Though Levinson and CRLA argued for the case to be thrown out, Chapter 11 and 12 bankruptcy court allows for a judge to transfer an asset to a trustee to take over ownership of the property. The move is considered “a rarity” according to the government’s U.S. Courts’ page.
In 2022, the park was taken away from its previous owner after a deadly fire revealed they were managing the property with expired permits. The park was put under a receivership and, against the protest of the park residents and its legal counsel, they granted Harmony Communities ownership of the property.
Being placed under ownership of a trustee — an independent party vetted by agencies like the FBI — would, Thompson and Levinson said, make the potential sale and transfer of the property more objective.
Trustees in bankruptcy are governed by federal law as opposed to a receivership, which is “a creature of state court,” Levinson said.
Facing a loss of control over a potential park sale, Harmony Communities returned to the negotiating table and offered to sell the park to Self Help Enterprises at $4 million — the initial asking price.
However, upon further review from the tenants’ legal counsel, the park owner’s deal altered the lot line, sectioning off a piece of the property worth about $300,000 — something Thompson said was always included in the initial deal — and did not change the asking price to reflect that.
“We don’t trust these guys,” Levinson said he argued in court. “You know, they’ve played all sorts of games, and in fact, they played games in the offer.”
The move was a form of “sneaky gamesmanship,” Thompson said.
And that was apparently the final straw for the bankruptcy judge, who agreed Harmony was not operating in good faith.
So, is it over?
Not just yet.
The allocation of a trustee is a process that can take about a month to finalize, and the process could be delayed with the upcoming holiday schedule.
Both parties are able to submit preferences over who they would like appointed to be the trustee. Levinson and Thompson confirmed with Fresnoland that they nominated at least one person as preferred candidates for the role, but declined to identify them by name.
Whoever becomes the trustee will also inherit the lawsuits Harmony has attached to the park — including pending evictions against park tenants, and lawsuits against the city. It will be up to the trustee to either continue with the cases, settle them out of court or toss them out.
The park’s many legal battles against its tenants — including successful evictions that residents argued were illegal — also drove most of the people away from the 60-space mobile home park.
Thompson said legal counsel has tried to stay in contact with many of the tenants that were evicted, saying they would be welcomed back once the park reopens under new ownership.
Self Help Enterprises has also said they would like to assess all damages to the park before renegotiating a sale, a process Thompson said could take about eight weeks. That includes mobile homes that may not be habitable anymore, and a recent chopping of trees in the park that was seen as “vindictive” following the bankruptcy court rulings.
“It’s going to take a little bit of time, but this will guarantee that the park stays open, the residents stay in their homes, Self Help ends up with the park,” Thompson said. “It’s still not over till it’s over, because it takes a little bit of time, but it’s an incredible outcome, and it’s going to save the park.”
Tom Collishaw, CEO and President of Self-Help Enterprises declined a request from Fresnoland for an interview, but shared over email that the non-profit “remains interested in purchasing this property and is committed to making housing available to existing and future residents.”
