Receiver Prevails in Sunnyvale Town Center Dispute

By Sharon Simonson

The receiver charged with overseeing the Sunnyvale Town Center for two years beginning in late 2009 has acted within the authority granted him by multiple court orders, including the power to develop the property, a Santa Clara County Superior Court judge has found.

Furthermore, in a seven-page ruling outlining his findings regarding multiple additional complaints by San Mateo developer Peter Pau, Judge Peter H. Kirwan found that Pau failed to show “adequately” how he or the receivership estate were harmed by the receiver’s purported mistakes.

The October 2009 appointment order, which was issued by Santa Clara County Superior Court Judge William J. Elfving, was far broader than Pau acknowledges, Judge Kirwan said.

Hunt was not simply a “rents and profits” receiver, responsible for protecting and preserving the Town Center while it remained in receivership. Rather, the appointment order granted Hunt wide authority, including the right to develop, Kirwan found.

Hunt is entitled to receive fees and expenses totaling more than $2.6 million incurred through Oct. 4, 2011, after which the bank took over management of the property, the judge said. The judge also ordered Wells Fargo & Co., the lead construction lender behind the $108.8 million loan that is the genesis of the entire case, to pay “all remaining unpaid costs of the receivership estate through the date of the entry of this order.”

In a prepared statement, Hunt said, “Our team is very proud of the work we performed, and we are confident in the continued success and momentum of the Sunnyvale Town Center project.”

His attorney Chris Hunter also thanked Judge Kirwan for his diligence “in reviewing thousands of pages of documents submitted in connection with the receiver’s Final Account.” Hunter also noted the detail of the judge’s order.

Hunt and the receivership estate are no longer subject to the legal claims against them, and the receivership is terminated, the judge said. Pau at one point had sued the receiver but later dropped the complaint.

Ron Rossi, Pau’s attorney, said he was unsure if his client would appeal the ruling.

The order leaves intact Pau’s lawsuit against Wells Fargo and RREEF LLC, his former business and development partner at the Town Center. “Given what we know based on the discovery we have taken, we are ready, willing and able to go to trial against the bank and RREEF,” Rossi said.

Besides his contention that Hunt acted outside the scope of the court orders governing his behavior, Pau complained of three additional affronts. The receiver failed to produce a monthly report required by law, which is supposed to include information on the receiver’s activities and fees and the finances of the underlying property. Pau also contended that the receiver did not act as a neutral agent of the court as required by law and that he suppressed bidding for the Town Center at the foreclosure sale of the property in August.

While Hunt did not deny that he had not produced the monthly reports, his attorneys argued at a May 17 hearing that Pau was not entitled to receive the reports in any event. They also argued that public presentations by the receiver before the Sunnyvale City Council were open to all. The judge found simply that Pau did not “adequately demonstrate that [he] or the receivership estate have suffered harm as a direct and proximate result of any failure by the receiver to issue monthly reports.”

The judge made a similar finding regarding claims that Hunt had not acted impartially as the receiver and an agent of the court. A receiver is charged with acting “for the benefit of all who may have an interest in receivership property, and holds assets for the courts rather than the parties,” the judge said. “On this issue, the court finds again that [Pau has] not adequately demonstrated that any bias or lack of impartiality by the receiver caused [Pau] or the receivership estate to suffer injury.”

Finally, the judge said that evidence presented to the court by Pau to show that the receiver had chilled bidding at the August 2011 foreclosure sale “does not substantiate” Pau’s claim.

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