Judge Denies Creditor’s Request To Foreclose on Land Owned by Santa Paula Memorial Hospital Land
U.S. Bankruptcy Court Judge Robin Riblet on Tuesday rejected a motion that would have allowed a lender to foreclose on hilltop property owned by Santa Paula Memorial Hospital, the Ventura County Star reports (Wilson, Ventura County Star, 9/29). The 49-bed facility, which operated the only emergency department between Santa Clarita and Ventura, closed in December. The hospital's board of trustees filed for Chapter 11 bankruptcy protection in federal court in Santa Barbara three days after the closure.
Court documents list no claims or creditors, but board members have said that the not-for-profit hospital has debts of about $7.5 million and about 400 creditors. The Ventura County Board of Supervisors in September voted unanimously to purchase the hospital through a deal with the bankrupt facility's creditors (California Healthline, 9/17).
The hospital owes Los Angeles-based Fidelity Mortgage Lenders $1.875 million plus unpaid interest under a loan the hospital board took out three months before closing to keep the facility open. According to the Star, the 29-acre property is "seen as the most valuable asset in the hospital's bankruptcy case."
Riblet on Tuesday ruled that the hospital was not a "single-asset real estate" case -- a designation that would have required hospital trustees to begin interest-only payments or file a reorganization plan within 90 days.
Fidelity attorney Thomas Mulally, who had argued that the hospital was a single-asset case because it had not conducted business on the space for nearly a year, said he had hoped Riblet would provide at least partial relief for the lender, such as imposing a 90-day deadline for action. Mulally said, "We just want to get our payment. We lent the money. We want to get paid back."
In the ruling, Riblet stated, "It is not a piece of real estate that has been abandoned in terms of operation, so the motion is denied."
Alan Stomel, an attorney for the creditors, said a foreclosure on the property "would have been fatal to the creditors" and "fatal to the hospital."
The board of supervisors is scheduled on Oct. 5 to hear the creditors' plan for paying off the debts, the same day the board is expected to approve an agreement with the creditors for the purchase of the hospital, the Star reports (Ventura County Star, 9/29). Under the creditors' proposal, the county would absorb about $2.7 million in debt in return for the hospital's title and 13 acres of land. Another 16 acres would be sold to a developer for as much as $12 million.
Supervisor Kathy Long has said that if the plan is approved, the hospital likely would not reopen before 2005.
Meanwhile, the hospital's board of trustees has said that it is working with Kare Healthcare on a rival business proposal. The hospital board and Kare signed an agreement in June to allow Kare to prepare a business plan for the hospital and take over management of the facility (California Healthline, 9/17).
Hospital attorney Jay Michaelson said, "A joint plan between the debtor and the (creditors) committee has an almost guaranteed chance of success. Otherwise, we'll have competing plans." The hospital board was scheduled Tuesday to hear Kare's plan (Ventura County Star, 9/29).