Bankruptcy Judge Deborah J. Saltzman’s decision on Tuesday to ask La Casa de la Raza for an Order to Show Cause puts the legendary nonprofit’s bankruptcy and attempt to sell its iconic building in peril. La Casa hoped to place its East Montecito Street building on the market for $5.5 million, its bankruptcy attorney Eric Bensamochan told the judge, which is today’s value compared to the 2016 appraisal of $2.2 million. The hearing was to approve an agent to sell the property so that La Casa could cover its creditors, he said, with the surplus to allow the debtors to continue their community work.
Judge Saltzman observed that a title company had found issues when La Casa tried to sell the property previously. She questioned whether the debtor in possession — the current board of directors — was able to make such a decision. Bensamochan countered that it had been the buyer, not the title company, who’d had an issue. He asked for 90 more days so that La Casa could confirm the filing of its new bylaws with the Secretary of State, adding that members did not need to be consulted because no actual memberships had been issued or fees paid.
The attorney for La Casa’s main creditor, MLG Leasing, owned by Tomas Castelo, agreed with the judge. Anthony Fischer protested that the bylaws had never been made public and argued that the Order to Show Cause and Dismissal was the quickest way to know who had the authority to act for La Casa.
Contacted after the first version of this story was posted, La Casa board vice president Michael Gonzales insisted, “This board is legitimate. We will not engage in fraudulent activities.” Gonzales also disputed the amount of money owed to Castelo, but he added that following Tuesday’s hearing, the loan payments — which had been on hiatus during negotiations — resumed and are more than $3,000 per month at about a 15 percent rate of interest.
Whether La Casa’s board can navigate the pending dismissal of the bankruptcy will be the focus of the next hearing on July 17. According to Fischer, dismissal could result in the building being sold on the courthouse steps.