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Retreat affiliate attorney Richard Weinstein: "You have a receiver in place. If he wants to throw out perishables, obviously, he can throw out perishables."
(Updated) An abandoned drug rehab center on Ella T. Grasso Boulevard feels a bit “like the rapture,” a foreclosure-pursuing attorney said in state court on Friday.
There’s rotting food in the kitchen. There are utility-turn off notices lying around. And there’s now more than $300,000 in back property taxes due.
It’s as if “people just picked up one day and left,” the attorney said — even though the addiction treatment center has been closed for a month and a half.
Hartford-based lawyer Kevin McEleney offered that apocalyptic biblical analogy in a third-floor courtroom at the state courthouse at 121 Elm St. Friday morning during a hearing in the foreclosure case Arba Credit Investors II, L.P. v. Coal New Haven, LLC et al.
That’s just the latest foreclosure lawsuit involving Retreat Behavioral Health, and the first to be filed in Connecticut since Retreat’s implosion on June 21 amid a trainwreck of executive suicides, corporate debt, mass layoffs, and the sudden discharge of all patients.
At Friday's housing court hearing.
Friday’s hearing — the first in-person hearing in this matter — focused on the defense’s motion to vacate, or overturn, a July 19 “ex parte” order issued by state Superior Court Judge Walter Spader in which he appointed Ian Lagowitz to serve as receiver for the defunct addiction rehab property at 915 Ella T. Grasso Blvd. (Update: On Monday, Spader denied the defendant’s motion to vacate. See more below.)
Spader’s receivership appointment empowers Lagowitz to protect and secure that property, even as it is still legally owned by the Retreat-affiliated Coal New Haven LLC, as the foreclosure case makes its way through court.
Defense attorney Richard Weinstein argued on Friday that Spader’s order violated his client’s property and due process rights — and, even further, that the underlying state statute was unconstitutional.
His argument zeroed in on the “ex parte” nature of Spader’s order — which appointed Lagowitz as receiver before the defense had a meaningful opportunity to object.
Spader issued such an order after agreeing with the urgency of the plaintiff’s plea that a court-empowered third party needed to step in right away to ensure that the property at 915 Ella T. Grasso Blvd. doesn’t continue to degrade through neglect, thereby hurting its potential resale value and hurting creditors like Arba.
Lagowitz subsequently filed an affidavit on July 25 in which he stated that a representative of his was able to push through the property’s back door, and found inside the abandoned drug rehab center a host of patient medical records, narcotics, prescription medications, personal belongings, and piles of mail — all apparent evidence that the real estate at the center of this case was at risk.
Weinstein framed the receivership order, supported by state statute 52 – 630, as granting Lagowitz an unconstitutionally wide range of responsibilities in regards to the Ella T. Grasso Boulevard property — including the ability to hire a real estate broker and even sell it.
“It is in my opinion unconstitutional,” Weinstein stressed, and “violates Connecticut foreclosure laws.” The property in question is still owned by his client, he said. “The fact that he has the power to take my client’s property without my client having a meaningful” hearing and opportunity to contest the receivership appointment represents “a terrible deficit in terms of the statute.”
Plaintiff's attorney Kevin McEleney: It was like the "rapture" at the abandoned drug rehab facility.
McEleney countered that the court needed to, and appropriately acted quickly when Judge Spader issued the ex parte receivership order on July 19.
“The business was abruptly closed,” he said. Two of the company’s principals had died by suicide. “We really had no idea what was going on. … This is an important and exigent matter that needs to be addressed promptly.”
Neither the receiver nor the plaintiff would be able to sell the property without coming back to the court for a subsequent order, he said. The temporary receivership appointment currently on the books simply allows the receiver to secure the property and protect it from further degradation before additional hearings before the court take place.
“There’s a very clear difference,” he said, “between what is a granted right today up front” and what actions the court would have to sign off on in the future. Hiring a broker and selling the property are not covered by the ex parte order, he said. “There’s going to be plenty of judicial process.”
But, he stressed, the property is in dire condition. And it does need a receiver who can intervene to keep it from losing more value.
McEleney said he had visited the property recently, and found leftover food in the kitchen and refrigerator, as well as utility turn-off notices. He also noted the $300,000 and rising in back taxes owed.
“Leaving it in limbo is not good for anybody,” he said in support of the receivership appointment. “How do we make sure this property is a viable asset for all stakeholders, including the community, going forward?”
He said that the one action the receiver has taken so far is changing the locks. That does not constitute a deprivation of the defendant’s rights, especially given that the defense has already pledged the property to the plaintiff in exchange for various mortgages, and given that they appear to have abandoned the premises.
McEleney and co-counsel Julie Murphy made clear that they were ready and willing to interview witnesses — including Lagowitz — and present evidence at Friday’s hearing in support of preserving the receivership. Weinstein argued that Friday’s hearing was limited in scope, focusing on his motion to vacate the ex parte receivership order, and therefore the two sides should rely on legal arguments about that order and not dive in to witness testimony or other evidence.
He did, in passing, deny that there were narcotics still on site at 915 Ella T. Grasso, and he accused Lagowitz’s unnamed representative of breaking into the facility, as opposed to the facility being open to trespass.
“We’re here. We’re ready to go,” McEleney said.
Judge Spader: "Unique circumstances" warranted ex parte order.
Spader ultimately agreed with Weinstein’s framing that no witness testimony or evidence needed to be heard on Friday, especially given that that evidence had been entered into the court record after the judge had first handed down his ex parte receivership appointment order. He promised to rule in a matter of days on Weinstein’s motion to vacate.
Weinstein said that the receiver — whose appointment he still contests — appears to have the court-empowered authority to, say, go into the kitchen and throw out any leftover food. “You have a receiver in place. If he wants to throw out perishables, obviously, he can throw out perishables,” he said. He can also deal with the overdue utilities.
Spader reiterated for the plaintiffs that his July 19 order appointing Lagowitz is still in place for now. And that appointment comes with all the various authorities for a receiver as defined by state statute.
“The receiver’s in,” he said. “That’s the relief you wanted.”
Update: On Monday, Spader issued a seven-page decision denying the defendants’ motion to vacate the July 19 ex parte receivership appointment.
Spader disagreed with Weinstein’s argument that the relevant state law, the Uniform Commercial Real Estate Receiver Act (UCRERA) is unconstitutional. He said the state law is a “complement to existing laws and does not change any of the framework of common laws and rules that predate it.”
He also wrote that Weinstein did not credibly provide “any argument as to how the defendants’ right of redemption has been extinguished by the appointment of a receiver. The defendants still can, at any time, redeem the mortgage. The receivership is not a disposition of the underlying foreclosure action but only the granting of a remedy bargained for by the sophisticated commercial properties when engaging in the loan transaction.”
“The Court finds that the unique circumstances regarding the abrupt closure of the tenant-entity constituted grounds under UCRERA for immediate ex parte action under the statutory provisions therein and the loan documents, themselves,” Spader concluded. “After considering the arguments of counsel, the Court denies the defendant’s motion to vacate its appointment of a receiver.”
Previous coverage:
• Foreclosure Suit: Closed Drug Rehab Center Left Open To Trespassers
• Drug Rehab Workers Seek Back Pay
• Drug Rehab Workers Seek New Jobs
• Retreat Owes City $230K & Climbing; Deeper Financial Chaos Revealed
• 2nd Drug Rehab Exec Dies; Employees, Patients Left Scrambling For Answers
• Drug Rehab Center Closes 2nd Site
• Drug Rehab Center Shuts Down