Friday, November 10, 2017

Squireses File for Bankruptcy as Auction Looms

Posted By on Fri, Nov 10, 2017 at 4:08 PM

click to enlarge Workers board up 216, 218 and 220 Third St. after the city condemned the properties. - THADEUS GREENSON
  • Thadeus Greenson
  • Workers board up 216, 218 and 220 Third St. after the city condemned the properties.
Eureka’s most notorious landlords Floyd and Betty Squires filed for Chapter 11 bankruptcy protection this week in an apparent bid to prevent more than two dozen of their properties from hitting the auction block later this month.

According to the bankruptcy forms, the couple owes between $1 million and $10 million — the same as their estimated assets — to some 55 to 99 creditors. Those include Mark Adams, a Santa Monica-based attorney who initiated the foreclosure proceedings to collect the $158,000 he’s owed by the couple under a court order. (See “Squireses’ Properties: Going, Going, Gone?," Nov. 9, 2017.)

In an interview with the Journal for that story, Adams predicted this might happen, saying Floyd Squires was “going to try some kind of stunt, like filing for bankruptcy.”

The Squireses attorney, Bradford Floyd, who is listed as one of the couple’s top 20 unsecured creditors with $125,000 in claims, said last week that the “attempted” foreclosure “would be stopped.”

But Adams noted that because he is what’s known as a “secured creditor,” the bankruptcy court can waive the “automatic stay” on foreclosure sales that traditionally goes into effect with a Chapter 11 filing, which would allow the auction to proceed as scheduled.

The current situation all circles back to the six-year legal battle the city of Eureka has been waging to force repairs at the couple’s 26 properties, alleging the Squireses have willfully failed to address a host of conditions posing a substantial threat to the health and safety residents and the community.

According to the Squireses’ filings, however, they don’t have any “hazardous property” or “any property that needs immediate attention” or is "alleged to pose a threat of imminent and identifiable hazard to public health or safety," marking the “no” box to that question on the bankruptcy forms.

Just in the last year, however, the city has demolished two of their buildings — a historic home on H Street and the infamous Blue Heron Lodge on Broadway — and condemned a third, citing dangerous conditions.

Adams was tapped twice in 2011 to serve as a “receiver” in the city’s case — basically a court-appointed overseer charged with making sure the Squireses’ 200 or so rental units were made safe and livable. But his appointments proved to be short-lived after the couple lodged a series of appeals that halted the legal process for two years.

Eventually, the Squireses were able to have a receiver of their choice appointed to replace Adams.

Meanwhile, Judge Dale Reinholtsen put Adams’ receivership work payment on hold while an eventually unsuccessfully civil lawsuit the Squireses filed against him, his son and their company, California Receivership Group, made its way through the courts.

In February, Reinholtsen ordered the Squireses to pay Adams $158,000 to cover the legal costs he incurred while fighting the trespassing lawsuit and for payment of his work during his short term as receiver six years earlier.

When Reinholtsen did so, he basically authorized Adams to place a lien on the 26 properties as collateral. After the Squireses failed to pay him, Adams began the foreclosure proceedings, hence the scheduled auction.

In the meantime, Reinholtsen is still considering Adams’ motion — heard in August — to name a new receiver with authorization to use the estimated $90,000 the Squireses collect in rent each month from their properties to pay off the couple’s debts — including the one owed to Adams — while also making needed repairs.

If the auction goes forward, Adams said he intends to try to purchase the 26 properties slated to sell as a bundle on Nov. 27 and upgrade the properties that he says have been languishing as the Squireses’ receivership case continues. A local company has already been lined up to take care of the day-to-day property management, he added.

“Hopefully, we are within distance of closing the calamity that Floyd Squires has perpetrated,” Adams said.
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Kimberly Wear

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Kimberly Wear is the assistant editor of the North Coast Journal.

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