Cal-American Income Property Fund VII v. Brown Development Corp.

During the pretrial skirmishing between plaintiff Cal-American Income Property Fund VII, a California limited partnership (Fund VII), and defendants Brown Development Corporation and Richard T. Brown (collectively Brown), the trial court authorized and confirmed the receiver’s private sale of a shopping center, the subject of the litigation between the parties. Because we conclude the court abused its discretion in authorizing the sale, we reverse the order.

Factual and Procedural Background

The property involved in this dispute is a shopping center and office complex (the Center) in Corona, California. Brown, the builder and developer, sold the Center to Fund VII in June 1979 for $4.2 million. The sale price included Fund VH’s 30-year all-inclusive $3.8 million purchase money promissory note secured by an all-inclusive trust deed wrapped around an underlying first trust deed which secured a promissory note for about $2.3 million. Typical of transactions of this nature, the parties agreed to adjust the all-inclusive note to reflect the commercial success of the Center. In order to give Brown sufficient time to complete construction and lease the premises, Fund VII…