Paul Wellman (file)
Dario Pini at his Alamar hotel
‘Food Fight’ over Dario Pini
Banks Dragged into Crackdown on Embattled Landlord
Tuesday, November 21, 2017
This Tuesday’s courtroom drama over embattled landlord Dario Pini called to mind the old joke, “How many lawyers does it take to screw in a lightbulb?” The punchline was not as obvious as “It depends what their rate is,” but there were no less than 12 attorneys making their case before Judge Colleen Sterne over what at first blush might appear an intense but highly procedural squabble. The stakes, however, are exceptionally high and involve Santa Barbara real estate worth $62 million.
City Hall is pushing to have 12 properties — two vacant hotels, nine rental complexes, and Pini’s personal residence — legally stripped from Pini’s control so that the rents collected can be used to bring the structures up to health and safety codes and relocate the tenants, if need be, in the meantime. City Hall claims Pini’s long history of health and safety violations renders his property unsafe for his tenants. As a remedy, City Hall is arguing that the properties be turned over to a court-appointed receiver, who would be empowered to use the rental properties to secure loans, if need be, to cover the costs of remediation and tenant relocation.
On paper, Tuesday’s legal wrangling was all about calendar management. Pini and his attorney Paul Burns were demanding more time to take depositions and prepare for the final showdown over whether a receivership is warranted, and if so, who should it be. Santa Barbara City Attorney Ariel Calonne urged Judge Sterne to act sooner rather than later. “We are trying to manage the unmanageable,” he said, warning of dire consequences should Pini be allowed unfettered opportunity to interview witnesses and collect written statements. “This is going to turn into a full blown food fight for want of a better word.”
Ultimately, Judge Sterne ruled in favor of later rather than sooner, but her reasons had little to do with Pini’s arguments. First and foremost, she noted, it’s a highly complex litigation, involving not just Pini and City Hall — longtime antagonists — but the five major financial institutions that lent Pini the money to purchase the properties in question.
Brandon Yadegari (file)
Santa Barbara City Attorney Ariel Calonne
Sterne’s calendar, it turns out, is slammed — “full to the rafters,” she said — between now and March. Calonne’s legal pleadings run 3,000 pages long, detailing no less than 1,000 notices of violation. In addition, the five banks have each filed foreclosure actions against Pini for allowing his properties to become so rundown.
Adding to the volume, Pini’s attorney Burns has been nothing if not prolific, noting in a recent filing that actor James Dean spent the night in a waterfront motel, the Alamar, now owned by Pini, the night before he killed himself in 1955 by accidentally crashing his Porsche Spyder just outside Paso Robles. The Alamar is one of the properties named in the city’s legal action against Pini. Burns also waxed uncommonly philosophical, exclaiming, “The instant case is perhaps one of the most aggressive examples of a local government’s intrusion into a private property owner’s right that has ever occurred in the United States of America.”
Sterne noted that the case — not to mention the parties involved — has become “highly charged.” She stressed that she would take a cautious and reasonable approach. “There are very important rights on both sides.” Accordingly, she would allow Pini additional time for “a bit of discovery,” but not that much. “This is going to have to happen in a reasoned way,” she said. The trial, she said, would take place in March or April.
Pini’s legal friction with City Hall date back to the 1990s, when he was found guilty of criminal charges for the squalid conditions of his properties. In the past 10 years, Pini and City Hall have played a nonstop game of cat-and-mouse.
In 2013, a previous city attorney got a “special master” appointed to handle all code enforcement issues with Pini. Late last year, Calonne concluded that approach was fruitless and helped orchestrate a series of raid-like inspections of 12 Pini properties in which city building officials were accompanied by Santa Barbara city police outfitted in bulletproof vests. Calonne has since filed a legal action demanding $8 million in fines.
Pini has insisted that Calonne has violated the terms of the 2013 Special Master agreement. He has also countered that many of the allegations against him have been counted multiple times, that one of the offending properties was his own personal residence, and that half the allegations involved two hotels that have been unoccupied for years. Pini insists that efforts he’s made to rectify the problems have been thwarted by City Hall, which he claims has refused to process the applications necessary to make the repairs.
On Tuesday, his attorney reiterated claims made in previous court proceedings that Pini has set aside $2 million to begin repairs right now. City officials counter that Pini’s history of noncompliance is so egregious that no permits will be issued until Pini submits a master plan detailing how he intends to take care of all violations.
By Paul Wellman (file)
Several new wrinkles surfaced during Tuesday’s legal proceeding. Most dramatically, Pini himself has “stipulated” that a court-appointed receiver might be acceptable, if not necessary. In the past, he has not done so. Judge Sterne made much of this shift, stating with evident surprise in her voice, “There seems to be universal agreement that a receivership is going to be needed.”
The real fight is now is who — and how many — those receivers will be and what powers and authority they will be imbued with. Calonne has recommended a professional receiver named Mark Adams; Burns has contended Adams’s track record in previous receivership cases from Oakland should disqualify him from consideration. He suggested Adams could very well bankrupt the properties by taking out high interest loans against them in order to pay himself for services rendered. Calonne filed no papers in response.
Burns and Pini have suggested two alternate receivers, and the five banks have indicated their support for this proposal. This fact has City Hall’s hackles up that Pini and the banks are in cahoots. The banks, Calonne has argued previously, are worried that if City Hall secures a “health and safety” receivership, they’ll be placed second in line for payment on any debt, like monthly mortgages. A “health and safety” receiver is also empowered to secure the funds necessary to relocate tenants should that become necessary, using the properties as collateral to secure additional debt. If the banks are in the drivers’ seat, the concern is that the income stream generated by the properties will not sustain the court-ordered repairs and relocations, the properties would then be foreclosed upon, and then the tenants would have no housing to which to return.
Lawyers for all the affected lending institution were in court Tuesday, expressing both regret and agitation they’ve been dragged into a long simmering feud between Pini and City Hall. “We don’t need to be part of this bickering,” said one. “We want to get this fixed.” Another said he felt like “a substitute teacher on a playground where everyone is going crazy.”
Calonne took exception to any characterization that he was emotionally driven. “Don’t confuse animosity with resolve,” he said, insisting he was not responsible for any of “the vitriol” referenced by the banks’ attorneys or by Judge Sterne herself.
Burns got his hackles up at one point complaining that Calonne was using the legal system to punish Pini by demanding six years of tax returns. Calonne replied this request involved a separate but related legal action his office initiated against Pini, this one alleging wholesale unfair business practices. Burns termed the city’s action “a seizure” rather than a receivership motion and accused Calonne of collaborating with “a schizophrenic ex-employee” of Pini’s who is reportedly offering incriminating information about his prior boss.
Sterne quietly admonished Burns, “This type of mudslinging is not helpful.”