CTaCI^^ &-r CgUF^NIq Attorney for...

Case5:10-cv-01087-JW Document1 Filed03/15/10 Page1 of 65

1 SHELLEY S. BUCHANANAttorney t Law

2 912 Cole Street, PMB #120 "kSan Francisco, CA 94117

3 State Bar Number 178779 R` MA's 5 zDrOTel. (415) 566-3526 o^HgRD

4 email4buch na sh [email protected] ^RmE^NO^srR►CTaCI^^ &-r5 CgUF^NIqAttorney for Plaintiffs

6 FRANCISCAN MOBILE HOME OWNERS FOR JUSTICE;ROSENDO QUINIQURQ; RORY MORDINOIA;

7 ROBERT QUINN; SANDRA HOLMAN and MAMIE ZHU

B ^ R

9 IN THE UNITED STATES DISTRICT COURT

10 FOR THE NORTHERN DISTRICT OF CALIFORNIA

11 SAN FRANCISCO DIVISION

12FRANCISCAN MOBILE HOME OWNERS C) Vase No l. 0 OR

13 FOR JUSTICE; ROSENDO QUINIQUINI; ) 7RORY MORDiNOIA; ROBERTQ UINN •COMPLAINT FOR DAMAS, ^*s

14 SANDRA HOLMAN; and MAMIE ZHU, } RESTITUTION, INJUNCTIVE RELIEF,And on behalf of all others similarly situated, } DISSOLUTION OF CORPORATION,

15 ) SPECIFIC PERFORMANCEPlaintiffs, ) DEMAND FOR JURY TRIAL

16 )vs. } CLASS ACTION

17 )LINC HOUSING CORPORATION; ) 1. Securities & Exchange Act of 1934,

18 CORPORATE FUND FOR HOUSING; ) Section 10(b), Rule 10(b)(5)LINC FRANCISCAN LIMITED PARTNERSHIP; ) 2. Fraud and Deceit

19 FRANCISCAN PARK, LLC; ) 3. Conspiracy to Commit FraudHUNTER JOHNSON; FRANCISCAN )4, Negligent Misrepresentation

20 HOUSING CORPORATION; ) 5. Breach of Fiduciary DutyRICHARD BERGER; ) 6. Breach of Contract

2 1. DALY CITY HOUSING DEVELOPMENT ) 7. NegligenceFINANCE AGENCY; PACIFIC WEST ) 8. Unfair Competition Law, Bus. & Prof.

22 MANAGEMENT; FRANCISCAN ACQUISITION ) Code § 17200 et seq.CORPORATION; DAVID KENYON; and ) 9. Involuntary Dissolution of Corporation,

23 DOES 1 through 50, Inclusive, ) Corp. Code § § 6510 et seq.10. Constructive Trust

24 Defendants. ) 11. Specific Performance12. Elder Abuse, W & Inst. Code § 15610

25 ) 13. Violation of Health & SafetyCode § 34377.6

26 )

27

28

1.

Complaint for Damages, Restitution, Iniunctive Relief, Dissolution of Corporation and Specific Performance; Demand for JuryTrial

Case5:10-cv- 01087-JW Document1 Filed03/15/10 Page2 of 65

1 Plaintiffs Franciscan Mobile Home Owners for Justice, Rosendo Quiniquini, Rory

2 Mordinoia, Robert Quinn, Sandra Holman, and Mamie Zhu individually and on behalf of all

3 others similarly situated, allege as follows:

4 1. This is an action arising under the anti-fraud provisions of Section 10(b) of the

5 Securities and Exchange Act of 1934, 15 U.S.C. §78a et seq. and the rules and regulations

6 promulgated thereunder, including Rule 10b-5 which makes it unlawful for any person to

7 employ any device, scheme, or artifice to defraud or to engage in any act, practice, or course of

8 business which operates or would operate as a fraud or deceit upon any person in connection

9 with the purchase or sale of any security. Municipal securities are not exempt from the basic

10 anti-fraud provisions of the federal securities laws. This is also an action arising under

11 California Health & Safety Code section 34377.6 which authorizes a private right of action for

12 violations of Section 145 of the Internal Revenue Code of 1986, as amended (26 U.S.C. Sec.

13 145) pertaining to requirements for qualified Section 501(c)(3) tax-exempt bond financing. This

14 Court is vested with original jurisdiction pursuant to 28 U.S.C. § 1331. The action arises out

15 of acts or omissions of defendants within the geographical boundaries of the United States

16 District Court in and for the Northern District of California.

17 2. Plaintiff Franciscan Mobile Home Owners for Justice is an unincorporated

18 association of mobile home owners at the Franciscan Mobile Home Park (hereinafter "Park")

19 consisting of 501 spaces located in Daly City, California. Plaintiffs Rosendo Quiniquini, Rory

20 Mordinoia, Robert Quinn, Sandra Holman and Mamie Zhu are all competent adult individuals

21 who are mobile home owners who have all resided at the Park from various times from 1996 to

22 the present. (collectively referred to herein as "Plaintiffs"). Through the actions of Defendants

23 as alleged herein, Plaintiffs have all indirectly or directly purchased and sold municipal

24 securities, or have had municipal securities purchased and sold on their behalf, that are subject

25 to the anti-fraud provisions of Section 10(b) of the Securities and Exchange Act of 1934, 15

26 U.S.C. §78a et seq. and the rules and regulations promulgated thereunder. including Rule lOb-

27 5.

28 3. Defendant Linc Housing Corporation (hereinafter "Defendant Line") is a nonprofit

2

Complaint for Damages. Restitution, Injunctive Relief, Dissolution of Corporation and Specific Performance; Demand for Jury"Trial


1 public benefit corporation organized and operated under the laws of the State of California.

2 Plaintiffs are informed and believe and on that basis allege that Defendant Line's assets have a

3 market value of more than $1 billion and total annual untaxed revenues of nearly $32 million.

4 Defendant Line does business in the County of San Mateo. Defendant Line is an Internal

5 Revenue Code section 501(c)(3) tax-exempt entity.

6 4. Defendant Hunter Johnson (hereinafter "Defendant Johnson") is an individual who

7 resides in Los Angeles County and does business in the County of San Mateo.

8 5. Defendant Corporate Fund for Housing (hereinafter "Defendant CFH") is a

9 California nonprofit public benefit corporation. Defendant CFH is an internal Revenue Code

10 section 501(c)(3) tax-exempt entity that does business in the County of San Mateo.

11 6. Defendant LINC Franciscan Limited Partnership (hereinafter "Defendant Line

12 Franciscan LP"), a limited partnership organized under the laws of the State of California on

13 August 27, 2001, and dissolved and cancelled with the California Secretary of State on

14 December 26, 2007, but which continues to own real property in the County of San Mateo and

15 continues to do business in the County of San Mateo.

16 7. Defendant Franciscan Park LLC, is a limited liability corporation organized under

17 the laws of the State of California on December 5, 2007, which does business in the County of

18 San Mateo.

19 8. Defendant Franciscan Housing Corporation (hereinafter "Defendant FHC"), a

20 nonprofit public benefit corporation organized under the laws of the State of California on July

21 15. 2002, which is owned and controlled by Defendants Johnson, Line and CFH, and does

22 business in the County of San Mateo. Pursuant to the First Amended and restated Articles of

23 Incorporation field September 5, 2003, the corporation is empowered to own real property and

24 to have members as provided in the bylaws.

25 9. Defendant Pacific West Management (hereinafter "Defendant PWM") is an

26 organization form unknown which does business in the County of Sari Mateo.

27 10. Defendant Franciscan Acquisition Corporation (hereinafter "Defendant FAC I"), a

28

3.

Complaint for Damages, Restitution, Injunctive Relief, Dissolution of Corporation and Specific Performance, Demand for JuryTrial

Case5:10-cv- 01087-JW Document1 Filed03/15/10 Page4 of 65

1 nonprofit public benefit corporation organized under the laws of the State of California on March

2 15, 1996, which purported to represent all residents of the Park, has been suspended by the

3 California Secretary of State.

4 11. Defendant Richard Berger, is an individual defendant who is a Daly City employee

5 who works for Defendant Daly City Housing Development Finance Agency and who was

6 appointed by Defendant Johnson to be a purported officer of the FHC and to be an absentee

7 director of Defendant Linc.

e 12. Defendant Daly City Housing Development Finance Agency is an agency within

9 the City of Daly City, State of California.

10 13. Defendant David Kenyan is an individual defendant who was attorney for

11 Defendant FAC I and is a bondholder of the Series "D" tax-exempt bonds issued as part of the

12 initial tax-exempt bond financing.

13 14. The true names and capacities of the defendants, DOES 1 through 50, whether

14 individual, corporate, associate or otherwise, are unknown to Plaintiffs at the time of filing this

15 Complaint and Plaintiffs, therefore, sue said defendants by such fictitious names and will ask

16 leave of court to amend this Complaint to show their true names or capacities when the same

17 have been ascertained.

18 15. Plaintiffs are informed and believes, and therefore alleges, that each of the said

19 defendants is, in some manner, responsible for the events and happenings herein set forth and

-20 proximately caused injury and damages to the Plaintiffs as herein alleged.

21 16. Plaintiffs are informed and believe and upon such information and belief allege, that

22 at all times herein mentioned, each of the defendants whether specifically named or designated

23 herein as a Doe, was the alter ego, agent, representative, servant, employee, principal, joint

24 venturer, co-conspirator, management company and/or representative of the remaining co-

23 defendants, and at all times herein mentioned, was acting within the course and scope of said

26 agency, employment, joint venture, conspiracy, agreement, management company agreement

27 and/or service with the approval, knowledge, authority, permission and/or consent of the

28

4.

Complaint for Damages, Restitution, injunctive Relief, Dissolution of Corporation and Specific Performancc; Demand for JuryTrial


1 remaining defendants.

2 17. Plaintiffs are informed and believe and thereon allege that at all times mentioned

3 herein, Defendant Johnson was employed by Defendants Line, CFH, Line Franciscan, LP,

4 Franciscan Park, LLC and FHC as Chief Executive Officer and managing agent and exercised

5 control and direction of Defendants Line, CFH, Line Franciscan, LP, Franciscan Park, LLC and

6 FHC, and personally directed and financially benefitted from the wrongdoings set forth in this

Complaint herein. Plaintiffs are also informed and believe and thereon allege that at all times

8 mentioned herein, there existed a unity of interest and ownership between Defendants Johnson

9 and Defendants Line, CFH, Line Franciscan, LP, Franciscan Park, LLC and FHC such that they

10 were the alter egos of each other and knowingly did acts and omitted to act to cause damage to

11 Plaintiffs or contributed to the matters and things of which Plaintiffs complain herein, and had

12 legal responsibility therefore.

13 18. Plaintiffs are informed and believe and thereon allege that Defendants Linc

14 Franciscan, LP, Franciscan Park LLC and FHC were shams and shell entities that were

15 underfunded, inadequately capitalized and did not follow state-mandated corporate formalities,

16 formed by individual Defendant Johnson who used such entities to perpetrate a fraud on

1 ^ Plaintiffs and other similarly situated and to then circumvent liability for said fraudulent conduct

18 by insulated themselves with a corporation that was unable to pay judgment creditors. Thus,

19 even if Plaintiffs prevail on this complaint, there would be an inequitable remedy available to

20 Plaintiffs unless they were allowed to pierce the corporate veil and collect any judgment against

21 individual Defendant jointly and personally.

22 19. On or about September 2001, individual Defendant Johnson of Defendant Line

23 solicited and represented to the residents of the Park that if they consented to Defendant Line

24 purchasing the Park with the proceeds of tax-exempt bond issues from the City of Daly City

25 Housing Development Finance Agency, then the residents would control the Park via

26 ownership in their mobile home spaces and/or membership interests in a new non-profit

2-/

28 5.

Complaint for Damages, Restitution, Injunctive Relief, Dissolution of Corporation and Specific Performance; Demand for JuryTrial


1 corporation that was to be formed to hold title to the Park. Defendant Johnson promised the

2 residents that if they would agree to a large monthly rent increase of $90 to $100 per month, then

3 they could participate in the initial acquisition, and that if they also paid $1,000, then they could

4 acquire ownership/membership interests in the Park.

5 20. A majority of the Park residents - approximately 363 homeowners - agreed to

6 becoming participating residents and they commenced paying increased monthly rents from $90

7 to $100 per month so that Defendant Line could purchase the Park on their behalf. Defendants

8 Johnson and Line did not explain to the Park residents how the rent and occupancy restrictions of

9 the Regulatory Agreement as a condition of obtaining tax-exempt bond financing would be

10 applicable to them or how they could participate or benefit from the rent restrictions, but instead

11 encouraged all of the residents to agree to commit to paying increased rent.

12 21. In April 2002 the Daly City Housing Development Finance Agency issued Mobile

13 Home Park Revenue Bonds - Franciscan Mobile Home Park Acquisition Project tax-exempt

14 bonds in the amount of $53.2 million dollars, comprised of an A- rated $37 million dollar limited

15 obligation revenue bond issue and several other non-rated bond series in the amount of $11.5

16 million (B series), $2.8 million (series C), and $1.9 million (series D) (hereinafter collectively

17 referred to a "initial tax-exempt bond financing").

18 22. In or about April 2002, the Daly City Housing Development Finance Agency loaned

19 the bond proceeds to Defendant Line to purchase the Park. Of the $53.2 million bond proceeds,

20 Defendant Line paid $18.5 million to purchase a fee simple interest in a 50-acre parcel of land,

21 APN 011-331-150, underlying a large part of the Park. The owner of the other 20-acre parcel

22 declined to sell the land to Defendant Linc but instead transferred the ground lease to Defendant

23 Line. As part of the purchase, the prior operator of the Park also transferred its interest in the

24 existing lease that was set to expire in 2016 and additional Park improvements. The fee simple

25 interest, the ground lease and the improvements are all collectively referred to hereinafter as the

26 "Park."

27

28 6.



1 23. As a condition of the initial tax-exempt bond financing, on April 1, 2002, Defendant

2 Line and the Daly City Housing Development Finance Agency entered into a Regulatory

3 Agreement and Declaration of Restrictive Covenants ("Regulatory Agreement") which set

4 minimum rent and occupancy restrictions by which twenty percent (20%) of the spaces would be

5 dedicated to very low income residents as defined by the Department of Housing and Urban

6 Development for the County of San Mateo. The Regulatory Agreement was recorded on April

7 18, 2002, with the San Mateo County Recorder's Office, document number 2002-075989, as

8 covenants, conditions and restrictions running with the land. Attached hereto as Exhibit "A" are

9 pages 6-7 and 11-15 of the recorded Regulatory Agreement that set forth the required rent and

10 occupancy restrictions for the Park.

11 24. On August 27, 2001, Defendant Line organized Defendant Line Franciscan LP to

12 own and operate the Park. Defendant Line was designated the general partner and Defendant

13 CFH was designated the sole limited partner of Defendant Linc Franciscan LP. On or about

14 April 18, 2002, Defendant Johnson caused a grant deed to be recorded transferring title to the

15 $18.5 million parcel of land underlying the Park, APN 011-331-150, from Defendant Line to

16 Defendant Line Franciscan LP.

17 25. On April 18, 2002, Defendant Johnson, Defendant Line, Defendant Line Franciscan

18 LP and a now-defunct resident's organization, Defendant Franciscan Acquisition Corporation

19 ("FAC I"), entered into a written contract for the transfer of ownership of the Park to an entity

2 0 controlled by the Park residents who were the intended beneficiaries of the written contract.

21 Attached hereto as Exhibit "B" is a true and correct copy of the Franciscan County Club Mobile

22 Home Park Cooperation and Advisory Agreement dated April 18, 2002 (hereinafter

23 "Cooperation Agreement"). Paragraph 5 of the Cooperation Agreement promises to transfer the

24 Park to a new 501(c)(3) corporate entity to be called the Franciscan Housing Corporation

25 (Defendant FHC). However, Defendants Johnson, Line and Line Franciscan LP have breached

26 the written contract and have refused to transfer the Park to Defendant FHC or even to apply for

27

28 7.


.^Case5:10-cv-01087-JW Document1 Filed03/15/10 Page8 of 65

1 a determination letter from-the Internal Revenue Service or the Franchise Tax Board for Section

2 501(c)(3) tax-exempt status for Defendant FHC.

3 26. Instead, on July 15, 2002, Defendant Johnson organized Defendant FHC and

4 represented to Park Residents and to the Daly City Housing Development Finance Agency that

5 Defendant FHC would have some advisory role in the management of the Park and appointed

6 Defendant Berger as an officer of Defendant FHC. Plaintiffs are informed and believe and

7 thereon allege that Defendant FHC is nothing but a sham entity and fraud and that in fact

8 Defendant Johnson solely controls Defendant FHC and that the purpose of the formation of

9 Defendant FHC has been merely to create an illusion of resident participation in the management

10 of the Park. Defendant Berger and Defendant Daly City Housing Development Finance Agency

11 have not performed their oversight role that they assumed by permitting Defendant Berger to be

12 an officer of Defendant FHC. Furthermore, by permitting Defendant Berger to be an officer of

13 Defendant FHC, Defendant Daly City Housing Development Finance Agency has created a

14 conflict of interest as it is required to investigate complaints of violations of the rent and

15 occupancy restrictions that are a condition of the tax-exempt bond financing pursuant to Health

16 and Safety Code section 34377.6.

17 27. Plaintiffs are informed and believe and on that basis allege that Defendants Johnson,

18 Line, CFH, Line Franciscan LP and Franciscan Park LLC retained the services of Defendant

19 Pacific West Management (PW" to act as the property manager for the Park without consulting

20 with the Park residents as required by the Cooperation Agreement (See Exhibit "B" at ¶ 7). The

21 rate of compensation was disclosed in the 2007 bond issuance documents as 2% of the "Project

22 revenue." However, Defendants Johnson, Line, CFH, Line Franciscan LP and Franciscan Park

23 LLC, and each of them, have failed to disclose to Park residents that Defendant Line receives

24 kickbacks from Defendant PWM via other revenue sharing agreements that have never been

25 disclosed to Park residents. Furthermore, Defendant Johnson pays the salary of Defendant PWM

26 employees from the Park budget and permits them to live at the Park without paying any rent,

27

28 8.



1 thereby unnecessarily increasing the operating expenses of the Park. Defendant PWM personnel

2 routinely respond in an abusive manner and refuse to answer Park resident's questions about

3 eligibility to participate in the mandatory rent and occupancy restrictions set forth in the

4 Regulatory Agreement. Many of the Park residents are elderly and frail.

5 28. Plaintiffs are informed and believe and on that basis allege that at all times from

6 April 2002 through April 2007, Defendant Johnson exercised complete control over Defendant

7 Line, Defendant Line Franciscan LP, Defendant Corporate Fund for Housing, and Defendant

8 FHC. Throughout that time, Defendant Johnson intentionally refused to pay the property tax

9 accruing on the largest parcel of land underlying the Park, APN 011-331-150, and incurred large

10 penalties as a result. Plaintiffs are informed and believe and on that basis allege that Defendant

11 Johnson controls the selection of Defendant FHC board members, as well as the selective

12 information that is carefully disseminated from the FHC to Park residents and the City of Daly

13 City to suit his own purposes. Park residents were not told about the material issue of unpaid

14 property taxes that were accruing penalties and interest payable to the County of San Mateo until

15 March 15, 2007, when Defendants Johnson, Line, Line Franciscan LP and FHC disclosed this

16 issue in order to justify a rent increase and to justify an additional tax-exempt bond financing to

17 further overleverage the Park. Defendant Johnson did not tell the Park residents or the City of

18 Daly City that the property taxes were accruing unpaid year after year until he called a meeting of

19 the Park residents on March 15, 2007 that there was a fiscal crisis at the Park due to the unpaid

20 property tax and deferred maintenance issues. Defendant Johnson informed the Park residents

21 that he was refinancing the Park's debt and that the initial tax-exempt bond financing would be

22 retired and that a subsequent tax-exempt bond financing would be required to save the Park. The

23 Park residents had not participated in the management of the Park in any way from April 2002

24 through April 2007, and it was a complete surprise to them that there was any issue of unpaid

25 property tax and penalties accruing. Defendant Berger, a Daly City employee appointed by

26 Defendant Johnson to be a purported officer of the FHC did not even learn of the unpaid property

27

28 9_

Complaint for Damages, Restitution, Injunctive Relief, Dissolution of Corporation and Specifie Performance; Demand for JuryTrial


1 ' tax issue until late 2006. However, Defendant Johnson blamed the Park residents for the

2 nonpayment of property taxes stating that if the residents were truly low-income then they should

3 qualify for the welfare exemption from property tax administered by the County of San Mateo

4 Tax Assessor's Office.

5 29. In December 2007, the Daly City Housing Development Finance Agency issued the

6 Mobile Home Park Senior Revenue Refunding Bonds - Franciscan Mobile Home Park

7 Acquisition Project which amounted to $61 million in tax-exempt bonds to refinance the 2002

8 bonds (2002 Series A through C -- but not the 2002 Series D bonds owned by the project

9 promoters including Defendant Kenyan, which Series D bonds are still outstanding at 9% interest

10 and on which principal payments have recently been deferred) The 2007 bonds were issued in

11 the amounts of $45,725,000 for the Series A bonds, $5,175,000 for the Series B bonds, and

12 $8,110,000 for the Series C bonds. The 2002D bonds in the amount of $1,923,00 were not

13 repaid. Defendants increased the principal amount of the debt and incurred additional costs to

14 refund the 2002 bonds and additional transaction costs. The 2007 bonds were issued to pay

15 unpaid property taxes to the County of San Mateo, and to make improvements to the Franciscan

16 Mobile Home Park. As of January 2007, the principal amount outstanding of the 2002 issue was

17 $49.7 million. By December 2007, Defendants' decision to refinance the 2002 bonds resulted in

18 the Park being burdened with an additional $11 million in bond debt.

19 30. As part of the 2007 bond issue, the title to the property constituting the Park was to

20 be transferred to Defendant Franciscan Park, LLC. The sole member of Defendant Franciscan

21 Park LLC is Defendant CFH. Plaintiffs did not discover that the Park was to be transferred from

22 Defendant Line Franciscan LP to Defendant Franciscan Park LLC until they obtained

23 documentation about the Park from the Daly City Clerk's Office. Neither Defendants Johnson,

24 Line, CFH, FHC, Line Franciscan LP, nor Franciscan Park LLC advised the Park residents about

25 the purported change of ownership in December 2007, and they did not receive any notice of the

26 transfer of ownership to Franciscan Park LLC in December 2007 or at any time thereafter.

27

28 20.

Complaint for Damages. Restitution, Injunctive Relief, Dissolution of Corporation and Specific Performance; Demand for JuryTrial

Case5:1 0-cv-01 087-JW Document1 Filed03/15/10 Page1 1 of 65

1 Furthermore, Defendant Line did not obtain the consent of the Franciscan Acquisition

2 Corporation (FAC I) before transferring the Park to Defendant Franciscan Park, LLC as required

3 (although this was impossible since FAC I no longer exists).

4 31. In November 2009, PIaintiffs discovered that Defendants have caused the assessed

5 value of the $18.5 million parcel of land underlying the Park, APN 011-331-150, to be overstated

6 at the amount of $3 3.5 million in spite of the fact that the purchase price of the parcel was $18.5

7 million. As a result of this excessive valuation of the largest parcel, Plaintiffs are informed and

8 believe and on that basis allege that they have been overpaying property taxes for the $18.5

9 million parcel of land underlying the Park, APN 011-331-150 from 2002 to the present.

10 Plaintiffs are informed and believe that for purposes of the bond refinance in December 2007,

11 Defendants caused the financial statements of the Park to be restated such that the land account

12 was increased from $18.5 million to $33.5 million in spite of the fact that the cost of the land was

13 $18.5 million and not $33.5 million. Defendants restated the financial statements to make the

14 Park appear more valuable as part of the reappraisal process in May 2007 and the 2007 bond

15 issue and increasing the debt levels of the Park.

16 32. From April 2002 through April 2009, Defendant Johnson failed to advise the Park

17 residents that the Regulatory Agreement executed and recorded in April 2002 as a condition of

18 the tax-exempt bond financing created a system of mandatory rent control for twenty percent

19 (20%) of the spaces in the Park. Plaintiffs are informed and believe and on that basis allege that

20 none of Defendant Johnson, Defendant Line, Defendant CFH, Defendant Line Franciscan, LP or

21 Defendant Franciscan Park LLC have ever implemented the mandatory rent control in the actual

22 operation of the Park. Plaintiffs have repeatedly requested information about implementation of

23 the mandatory rent control program and information about how to participate in the mandatory

24 rent control program only to be advised by said Defendants and their agents that there is no such

25 program. This lack of compliance is a violation of the restrictions recorded against the property

26 in April 2002, and a violation of the occupancy and rent restrictions set forth in Health & Safety

27

28Complaint for Damages, Restitution, Injunctive Relief, Dissolution of Corporation and Specific Performance; Demand for JuryTrial


1 Code section 34377.2. Plaintiffs did not even discover the existence of the Regulatory

2 Agreement and the mandatory rent control until they requested documentation pertaining to the

3 Park from the Daly City Clerk's office in May 2009. Plaintiffs are not aware of any Park

4 residents who benefit from reduced rent as a result of the Regulatory Agreement.

5 33. Defendant Johnson formed Defendant Franciscan Park, LLC on December 5, 2007,

6 to own and operate the Park according to statements made as part of the 2007 tax-exempt bond

7 issue. However, In or about November 2009, Plaintiffs discovered that Defendants had only

8 transferred small portions of the Park to Defendant Franciscan Park LLC. In fact, Defendant

9 Johnson transferred only the long-term lease agreement for the 20-acre parcel, but retained title to

10 the largest 50-acre parcel, APN 011-331-150, in the Defendant Line Franciscan LP entity.

11 However, Plaintiffs also discovered that Defendant Johnson had caused Defendant Line

12 Franciscan LP to be dissolved and cancelled on December 26, 2007, after changing the identity

13 of the general partner of Linc Franciscan LP from Defendant Linc to Defendant CFH on the same

14 date of December 26, 2007. Plaintiffs are informed and believe and on that basis allege that

15 Defendants Johnson, Linc, CFH, Linc Franciscan LP and Franciscan Park LLC have

16 circumvented the security for the loan from the Daly City Housing Development Agency to

17 Defendant Franciscan Park LLC by retaining the title to the 50-acre parcel of land underlying the

18 Park, APN 011-331-150, in the name of a cancelled limited partner whose general partner was

19 changed to Defendant CFH on the same date that limited partnership was cancelled and

20 dissolved. Defendant Franciscan Park LLC's articles of organization specifically appoint an

21 independent manager for the purposes of instituting bankruptcy proceedings. Defendant Johnson

22 never advised Park residents at any time that there would be a new third-party "independent

23 manager" making decisions on behalf of Park residents or that he was contemplating bankruptcy

24 proceedings for the Park.

25 34. In or about November 2009, Plaintiffs discovered that Defendants Johnson, Linc and

26 CFH have established a prior pattern and practice of obtaining control of senior and low-income

27

28 I2.

Complaint for Damages, Restitution, Injunctive Relief, Dissolution of Corporation and Specific Performance; Demand for.IuryTrial


1 ' housing developments by refinancing them by means of tax-exempt financing issued by local

2 redevelopment agencies and housing authorities. The refinancing results in the properties

3 becoming highly leveraged. Defendant Johnson causes the projects to be transferred to

4 Defendant CFH which entity then disposes of the projects by selling them to private for-profit

5 purchasers and repaying the remaining outstanding tax-exempt bonds. Attached hereto as

6 Exhibit "C" is a true and correct copy of Defendant CFH's request to liquidate five senior and

7 low-income housing projects obtained via tax-exempt municipal financing. Attached hereto as

9 Exhibit "D" is a true and correct copy of meeting minutes by the City of Palm Springs

9 Community Redevelopment Agency to transfer CFH's Tahquitz Apartment project (also

10 identified in Exhibit "C") to a for-profit developer.

11 35. Plaintiffs are informed and believe and on that basis allege that Defendants, and each

12 of them, have conspired to operate the Park in such a manner that it would ultimately force its

13 closure as a mobile home park so that it could be sold to private developers. As part of the plan,

14 Defendants and each of them have caused the Park to be operated in a grossly negligent manner

15 that has unnecessarily increased its operating costs from 2002 to the present. In 2002 Defendants

16 paid over $26 million to the prior operator of the Park for ground leases that they themselves

17 stated would be worthless in 14 years. From 2002 through 2007 Defendants intentionally refused

18 to pay the property taxes on the 50-acre parcel of land, APN 011-331-150, for which they had

19 paid $18.5 million in 2002. As a result, Defendants unnecessarily caused the Park residents to

20 incur more than $500,000 in penalties as a result of the extended nonpayment which were not

21 disclosed until March 15, 2007. Furthermore, Defendants have permitted the San Mateo County

22 Assessor's Office to assess the value of APN 011-331-150 based on $33 million rather than the

23 $18.5 million purchase price. Defendants then caused the financial statements for the Park to be

24 restated in 2007 so that the land account would reflect the $33.5 million value rather than the

25 historical cost of the land which is $18.5 million. Defendants have used the unpaid property tax

26 issue as a justification to refinance the bonds and incur even greater amounts of debt in

27

28 B.

Complaint for Damages, Restitution, Injunctive Relief Dissolution of Corporation and Specific Performance; Demand for JuryTrial


1 December 2007. In spite of the fact that the existing lease on the 20-acre parcel of land still

2 subject to a ground lease did not expire until 2016, Defendants paid the owner of the land

3 $500,000 and prematurely doubled the annual rental payment immediately in exchange for

4 extending the lease term an additional 30 years. Defendants have failed to disclose all of the

5 sources of payment paid from the Park either directly or indirectly to Defendant Line. Defendant

6 Linc received additional fees as a result of the December 2007 bond refinance as well as fees

7 from the first tax-exempt bond issue in 2002. Defendant Linc has revenue sharing agreements

8 with Defendant PWM which it does not disclose to Park residents. Defendant Linc's

9 compensation is based on the gross revenue of the Park and as such has an interest in maximizing

10 Park rents by subjecting residents to excessive rent increases while failing to abide by the rent

11 and occupancy restrictions set forth in the Regulatory Agreement. Defendant Linc refuses to use

12 any tax-exempt funds that it receives from donations or from any other sources to provide

13 financial assistance or to correct the operating deficits that it has caused at the Park by its

14 mismanagement. Defendants have caused services to be drastically curtailed and furthermore,

15 Plaintiffs are informed and believe and on that basis allege that the Park budget is actually being

16 used to clear the site for development. The Series D bonds were not retired as part of the 2007

17 bond issue in spite of the fact that they bear interest at 9%.

18 36. Defendant Kenyan purported to act as attorney for Defendant FAC I to advise the

19 Park Residents throughout the purchase process. As such, Defendant Kenyan had a fiduciary

20 duty to explain to the Park Residents how the rent and occupancy restrictions as part of the tax-

21 exempt bond financing would affect each of them individually and the Park as a whole. Instead,

22 Defendant Kenyan advised the Park residents to commit to paying $90 to $100 of increased

23 monthly rent until 2007, with additional increases thereafter. Attached hereto as Exhibit "E" is a

24 true and correct copy of a letter dated March 27, 2002 from Defendant Kenyan to Park residents.

25 Defendant Kenyan failed to advise the Park residents that some of them should not commit to

26 paying any increased rent and that at least twenty percent (20%) of the Park residents would be

27

2814. --

Complaint for Damages, Restitution, Iniunctive Relief, Dissolution of Corporation and Spccific Performance; Demand for JuryTrial


1 subject to mandatory rent control. Plaintiffs are informed and believe and on that basis allege

2 that many of the Park residents who committed to paying increased rent by $90 to $100 per

3 month in order to "participate" in the purchase of the Park by Defendant Line should have been

4 paying less rent pursuant to the terns of the mandatory rent and occupancy restrictions in the

5 Regulatory Agreement.

6 37. As compensation, Defendant Kenyan received a portion of the $2.4 million dollars

7 that was paid to the promoters of the project and he received a portion of the 2002 Series D

8 bonds paying interest at 9%, which bonds were not repaid or retired as part of the December

9 2007 refinance and are still outstanding. Defendant Kenyan's compensation was not disclosed to

10 Park residents until they obtained information about the compensation of the promoters of the

11 initial tax-exempt bond financing from the Daly City Clerk's office in May 2009. Defendant

12 Kenyan's compensation was excessive.

13 38. Furthermore, Plaintiffs are informed and believe and thereon allege that Defendants

14 Johnson, Line, Line Franciscan LP and Franciscan Park LLC have purposefully failed to repay

15 the Series D bonds held by Defendant Kenyan in the December 2007 refinance in spite of the fact

16 that the Series D bonds accrue interest at the rate of 9%. Plaintiffs are informed and believe that

17 Defendants and each of them and have failed to pay the principal payments required to create the

18 impression of a fiscal crisis to alarm the Park Residents in order to justify further rent increases at

19 the Park.

20 39. Plaintiffs are further informed and believe that Defendants and each of then are

21 conspiring to operate the Parkin a fiscally unsound manner to justify a sale of the Park to a third-

22 party for profit developer to use the 50-acre parcel of land for purposes other than a mobile home

23 park after discovering that Defendants Johnson, Line, and CFH have sold many of their other

24 senior and low-income projects to for-profit entities after causing them to be over leveraged from

25 repeated tax-exempt bond issues.

26 40. Plaintiffs seek damages and restitution including amounts for property tax penalties

27

28 >s.

Complaint for Damages, Restitution, Injunctive Relief, Dissolution of Corporation and Specific Performance, Demand for JuryTrial


1 paid to the County of San Mateo for the unpaid property tax accruing from 2002 through 2006;

2 fa excessive rents paid by Park residents to Defendants from 2002 through the present in an

3 amount to be determined according to proof; for excessive fees paid to Defendants for project

4 management fees, promotion fees, asset management fees; and for reduction of services suffered

5 by the Park residents, all in an amount according to proof. Furthermore, as a direct, legal and

6 proximate result of Defendants intentional and fraudulent conduct alleged herein below,

7 Plaintiffs are entitled to punitive damages. Plaintiffs' seek cancellation of the 2002 Series "D"

8 bonds that were issued to Defendant Kenyan. Plaintiffs' seek removal of Defendants Johnson,

9 Line and CFH from any management role of the Park and a refund of all fees, disclosed and

10 undisclosed, paid to said Defendants from 2002 to the present. Plaintiffs' seek appointment of a

11 receiver to manage the property pending establishment of and transfer of the Park to a resident-

12 owned and managed 501(c)(3) entity,. See Seal Beach Shores, Inc. announcement attached hereto

13 as Exhibit "F."

1 4 CLASS ACTION ALLEGATIONS

15 41. Plaintiffs bring this class action pursuant to Federal Rules of Civil Procedure 23 on

16 behalf of a class consisting of all current and former residents of the Franciscan Mobile Home

17 Park ("Park") residing at the Park from April 1, 2002 to the present. The initial delineation of the

1.8 subclasses of the class include all residents defined as "very low income" pursuant to the

19 Regulatory Agreement governing the rent and occupancy restrictions mandated for the Park as a

2.0 condition of the tax-exempt bond financing. These "very low income" had a right to occupy at

21 least twenty percent (20%) of the spaces at the Park and to receive reduced rent pursuant to the

22 terms of the Regulatory Agreement. Another subclass is all residents who paid $1,000 for an

23 ownership interest in the Park and whose money was never refunded. The class definition will

24 be further defined in Plaintiffs' motion for class certification, in which Plaintiffs may establish

25 the need for additional or fewer subclasses based on information obtained through discovery.

26 42. The wrongful acts or omissions were and are a uniform practice that affected all

27

28 16.

Comp[aint for Damages, Restitution, injunctive Rclief, Dissolution of Corporation and Specific Performance; Demand for juryTrial


1 ' putative. class members in substantially similar ways. Defendants, by their practices and policies,

2 have violated the rights of the Park residents by violating the terms of the occupancy and rent

3 restrictions set forth in the Regulatory Agreement as well as by unnecessarily increasing Park

4 expenses in order to justify rent increases. The questions raised are therefore of common or

5 general interest to the class members, and they have a well-defined community of interest in the

6 questions of law and fact raised in this action. The only recognizable difference between class

7 members will be the amounts owed to each individual member.

8 43. There are 501 spaces in the Park that are continuously rented to individuals and

9 family who lease their spaces and either own or rent their mobile homes that occupy the space.

10 The occupancy rate has been nearly 100% since the beginning of the Class Period. These

11 individuals have been subject to Defendants' unlawful and wrongful practices, and their

12 numerosity makes it impractical to bring them all before this forum, and disposition of their

13 claims in a class action is a benefit to the parties and to the court.

14 44. A class action is superior to other available means for the fair and efficient

15 adjudication of this controversy. individual joinder of all class members is not practicable, and

16 questions of law and fact common to the class predominate over any questions affecting only

17 individual members of the class. Each member of the class has been damaged and is entitled to

1 B recover. Class action treatment will allow those similarly situated persons to litigate their claims

19 in the manner that is most efficient and economical for the parties and the judicial system.

20 45. A class action is appropriate because Plaintiffs' and class members' damages,

21 although by no means inconsequential, do not rise to the level to make prosecution of individual

22 claims economically feasible for Plaintiffs and the large number of class members. The burden

23 and expense of individual litigation makes it economically unfeasible, for both the parties and the

24 Court, for the members of the class to seek redress other than through a class action.

25 Consequently, there would be a failure of justice but for the maintenance of the present class

26 action.

27

28 17.



1 46. Plaintiffs know of no difficulty that will be encountered in the management of this

2 litigation that would preclude its maintenance as a class action.

3 47. Plaintiffs have incurred and, during the pendency of this action, will incur attorneys'

4 fees and costs. Such attorneys' fees and costs are necessary for the prosecution of this action and

5 will result in a benefit to the class.

6 48. Defendants were aware of the facts herein alleged at the time they failed to perform

7 the duties alleged herein.

8 49. The names and addresses of the persons who are members of the class are available

9 from Defendants' records and are therefore known to Defendants. Notice can be provided to the

10 members of the class by mail, or by techniques and a form of notice similar to those customarily

11 used in class actions under California law, with the costs of any notice to be borne by

12 Defendants.

13 50. The Defendants' unlawful acts and unfair trade practices have affected all members

14 of the Class in a similar manner. Among the questions of law and fact common to the Class are

15 whether Defendants have committed actual fraud through misrepresentations, false promises and

16 tortious concealment of material facts with respect to the class; and whether Defendants have

17 violated California law, including California's unfair competition laws, Business and Professions

18 Code §§ 17200 et seq. based on their violations of California law.

19 51. Plaintiffs' claims are typical of those of the Class they seek to represent because

20 Plaintiffs and all members of the Class were injured and/or continue to be injured in the same

21 manner by Defendants' illegal acts and practices, and other wrongful conduct complained of

22 herein.

23 52. Plaintiffs will fully and adequately protect the interests of all members of the Class.

24 Plaintiffs have no interests that are adverse to or in conflict with other members of the Class with

25 respect to any of the claims asserted herein.

26

27

28 18.


Case5:10-cv-01087-JW Document1 Filed03/15/1 0 Page19 of 65

1 FIRST CAUSE OF ACTION

2 (Securities & Exchange Act of 1934, Section 10(b), Rule 10(b)(5))

3 53. Plaintiffs incorporate and reallege each of the foregoing paragraphs as though fully

4 set forth herein and further alleges as follows.

5 54. The anti-fraud provisions of Section 10(b) of the Securities and Exchange Act of

6 1934, 15 U.S.C. §78a et seq. and the rules and regulations promulgated thereunder, including

7 Rule IOb-5 make it unlawful for any person to employ any device, scheme, or artifice to

8 defraud or to engage in any act, practice, or course of business which operates or would

9 operate as a fraud or deceit upon any person in connection with the purchase or sale of any

10 security. Municipal securities are not exempt from the basic anti-fraud provisions of the

11 federal securities laws.

12 55. Defendants and each of them, acting individually and pursuant to a scheme and

13 conspiracy, directly and indirectly, caused the Park on behalf of the Park residents to cause to be

14 purchased and sold tax-exempt, municipal securities based upon Defendants' false

15 representations about the ownership and management of the Park. Defendants circulated or

16 disseminated information that falsely described Defendants' intentions in relation to the Park and

17 its residents. Defendants knew or had reason to believe that their statements were false or

18 misleading in light of the circumstances under which they were made. Plaintiffs relied on the

19 misrepresentations in supporting Defendants' purchase of the Park ostensibly on their behalf.

20 56. Defendants and each of them have knowingly provided substantial assistance to the

21 other Defendants.

22 57. As a direct and proximate result of the wrongful conduct of Defendants and each of

23 them, Plaintiffs have sustained economic losses and other general and special damages, as set

24 forth in Paragraph 40 above, and in an amount to be determined according to proof at the time of

25 trial.

26

27

28 19.

Complaint for Damages, Restitution, injunctive Relief, Dissolution of Corporation and Specific Performance; Demand for JuryTrial


1 SECOND CAUSE OF ACTION

2 (Fraud and Deceit)



5 59. Defendants, and each of them, made material misrepresentations and omissions to

6 Plaintiffs which were false and misleading, including those contained in public statements,

7 financial statements, registration statements, offering documents and other disclosures made by

8 Defendants, described above. Commencing in or about September 2001 and continuing through

9 the present, Defendants, and each of them, have made numerous untrue statements regarding

10 material facts including, but not limited to, the following:

11 a. That Plaintiffs would have ownership rights in the Park;

12 b. That Plaintiffs would have management rights in the Park;

13 c. That Defendants would operate the Park in a fiscally prudent manner;

i ll ,d. That Defendants would pay the Park expenses in a timely manner, including but not

15 limited to the annual property taxes on the 50-acre parcel of land, APN 011-331-150;

16 e. That Defendants would ensure that the assessed value for property tax purposes on the

17 50-acre parcel of land, APN 011-331-150 would be accurate;

18 f. That Defendants would ensure that the Park financial statements would be accurate and

19 not incorrectly restate and inflate the historical cost of the 50-acre parcel of land, APN 011-331-

2 0 150 from the $18.5 million purchase price to a higher arbitrary value and that is not in

21 accordance with generally accepted accounting principles;

22 g. That Defendants would not overburden the Park with debt based upon false pretenses;

23 h. That Defendants would use fiscally sound methods in negotiating the extension of the

24 groundlease on the 20-acre.parcel and not spend Park money frivolously;

25 i. That Defendants would disclose to the Park residents all sources of income Defendants

26 earn from the Park and would not participate in hidden kickback schemes;

27

28 20.

Complaint for Damages, Restitution, injunctive Relief, Dissolution of Corporation and Specific Performance; Demand for JuryTrial

Case5:1 0-cv-01 087-JW Document1 Filed03/15/10 Page21 of 65

1 j. That Defendants.would endeavor to keep the Park budget in check by having the

2 property manager pay the salaries of its employees and not forcing the Park to pay the salaries of

3 the property manager's employees;

4 k. That Defendants would scrupulously abide by the terms of the Regulatory Agreement

5 including but not limited to the rent and occupancy restrictions so that low income residents

6 could actually benefit from the program;

7 1. That Defendants would not withhold donated funds for low-income housing projects

8 from the Park residents because the Park isn't making enough money;

9 m. That Defendants would not cut services to pay for their own mismanagement of the

10 Park budget;

11 n. That Defendants would not plan to develop the Park for other for-profit uses and use

12 the Park budget for actual site development activities;

13 o. That Defendants would not purposefully over-leverage the Park for their own

14 prospective for-profit future uses.

15 60. At the time of making the statements and committing the acts alleged above,

16 Plaintiffs are informed and believes that Defendants, and each of them, failed to disclose to

17 Plaintiffs numerous material facts, including, but not limited to, the following:

18 a. That Defendants actually had no intention of permitting Plaintiffs to have any

19 ownership rights in the Park at any time in the future;

20 b. That Defendants actually had no intention of permitting Plaintiffs to have any

21 management rights in the Park;

22 c. That Defendants intended to operate the Park in such a fiscally improvident manner

23 that a bankruptcy filing was planned in conjunction with the 2007 bond issue;

24 d. That Defendants actually intended to not pay the property taxes on the 50-acre parcel

25 of land, APN 011-331-150 in order to create a fiscal crisis to justify loading the Park with $11

26 million in additional bond debt;

27

28 21.

Complaint for Damages, Restitution. Injunctive Relief, Dissolution of Corporation and specific Performance; Demand for JuryTrial


1 e. That Defendants were loading Park with debt and additional property tax bills from

2 inflated assessed values would further this purpose;

3 f. That Defendants would manipulate the Park financial statements to suit their purposes,

4 including reporting the land account at an arbitrary amount;

5 g. That Defendants would use false pretenses to overburden the Park with debt for their

6 own.purposes;

7 h. That Defendants did not care about costs in operating the Park or in negotiating the

8 lease extension on the 20-acre parcel;

9 i. That Defendants would intentionally hide from the Park residents all sources of income

10 Defendants earn from the Park including the hidden kickback schemes;

11 j. That Defendants would load the Park budget with excessive and duplicative

12 management and asset management fees and ensure that the property manager passed on its

13 salary expense to the Park residents;

14 k. That Defendants would ignore the rent and occupancy restrictions in the Regulatory

15 Agreement so that low income residents would not actually benefit from the program;

16 1. That Defendants would not abide by its tax-exempt purposes and would instead

17 withhold donated funds that might otherwise benefit Park residents;

18 m. That Defendants would drastically cut services to pay for their own mismanagement

19 of the Park budget;

20 n. That Defendants would blatantly pursue site development activities using the Park

21 budget;

22 o. That Defendants want the Park to fail so they can sell it for development.

23 61. When Defendants, and each of them, made the representations and failed to

24 disclose and suppressed information they had a duty to disclose, as set forth herein, Defendants

25 had knowledge of the falsity of their statements and representations and knew that they were

26 failing to disclose material facts which they had a duty to disclose.

27

28 22.

Complaint for Damages, Restitution, Injunctive Relief, Dissolution of Corporation and Speeific Performance, Demand for JuryTrial


1 62. Defendants made the misrepresentations and omitted the material facts with the

2 intent to defraud Plaintiffs and to induce Plaintiffs to consent to the issuance of the tax-exempt

3 bonds to purchase the land underlying the Park.

4 63. When Defendants, and each of them, made the representations and failed to

5 disclose and suppressed information they had a duty to disclose, as set forth herein, Defendants

6 had knowledge of the falsity of their statements and representations and knew that they were

7 failing to disclose material facts which they had a duty to disclose.

8 64. Defendants made the misrepresentations and omitted the material facts with the

9 intent to defraud Plaintiffs and to induce Plaintiffs to consent to the issuance of the tax-exempt

10 bonds and to retain Defendants to own and operate the Park on behalf of Park residents.

11 65. At the time these misrepresentations were made hand the material facts not

12 disclosed and at the time that Plaintiffs took the actions herein alleged, Plaintiffs were ignorant

13 of the true facts. If Plaintiff had known the true facts, they would not have done business with

14 Defendants.

15 66. Plaintiffs reasonably relied on these representations and their reliance was justified

16 since the Defendants concealed the true facts.

17 67. Defendants knew that a fraud was occurring in the representations about the

18 purchase of the Park. Notwithstanding their knowledge of this improper and unlawful conduct,

19 these Defendants, and each of them, engaged in conduct, herein described which rendered

20 substantial assistance to, encouraged and/or aided and abetted the fraud.

21 68. With knowledge of the unlawful purpose of the fraud, Defendants, and each of

22 them, entered into an agreement to accomplish the aforesaid scheme, and by their actions took

23 steps to further that scheme.

24 69. As a direct and proximate result of the wrongful conduct of each of the Defendants,

25 Plaintiffs have suffered and will continue to suffer economic losses and other general and

26 specific damages, all in an amount as set forth in Paragraph 40, above and to be determined

27

28 23.



1 according to proof at trial.

2 70. The aforementioned acts of Defendants, and each of them, were done maliciously,

3 oppressively, and with intent to defraud, and Plaintiffs are entitled to punitive and exemplary

4 damages in an amount to be shown according to proof at the time of trial.

5 THIRD CAUSE OF ACTION

6 (Conspiracy to Commit Fraud)



9 72. Defendants, and each of them, engaged in conduct, herein described above which

10 rendered substantial assistance to, encouraged and/or aided and abetted the others' conduct.

11 73. As a direct and proximate result of the wrongful conduct of each of the Defendants,

12 Plaintiffs have suffered and will continue to suffer economic losses and other general and


14 according to proof at trial.

15 FOURTH CAUSE OF ACTION

16 (Negligent Misrepresentation)



19 75. Defendants negligently made the aforementioned statements and omissions and

20 acted in the manner described above without reasonable grounds for believing that said

21 statements, omissions and conduct were truthful.

22 76. As a direct, foreseeable and proximate result of each of Defendants' wrongful acts,

23 Plaintiffs have been damaged and will continue to suffer economic losses and other general and


25 according to proof, and as set forth hereinabove.

26

27

28 24.

Complaint for Damages, Restitution, Injunctive Relief, Dissolution of Corporation and Specific Pcrformance; Demand for JuryTrial


1 FIFTH CAUSE OF ACTION

2 (Breach of Fiduciary Duty)



5 78. At all times mentioned herein, Defendant Johnson, Defendant Berger and

6 Defendant Kenyan were fiduciaries with respect to Plaintiffs and they owed a fiduciary duty to

7 Plaintiffs not to do anything that would injure the interests of Plaintiffs.

8 79. Defendant Johnson, Defendant Berger and Defendant Kenyan breached their

9 fiduciary duties to Plaintiffs. Defendant Johnson breached his fiduciary duties by so

10 controlling Defendants Linc, CFH, Linc Franciscan LP, Franciscan Park, LLC, and FHC to

11 overleverage the Park and cause the Park to incur excessive and unnecessary penalties to the

12 County of San Mateo and by causing the Park to pay excessive and duplicative property

13 management, asset management, and financing fees, by causing the Park residents to pay

14 excessive rent, and by preventing the Park residents from having any ownership interest in the

15 Park or any influence in management of the Park. Defendant Berger breached his fiduciary

16 duty to Plaintiffs but permitting Defendant Johnson to operate without any oversight, in spite

17 of the fact that Defendant Johnson appointed Defendant Berger to be a director of Defendant

18 Linc and an officer of Defendant FHC. Defendant Berger did not even discover the unpaid

19 property tax issue until the fall of 2006.

20 80. Defendant Kenyan breached his fiduciary duty to Plaintiffs by encouraging them to

21 commit to increased rental payments without consideration of the mandatory rent and

22 occupancy restrictions imposed as a condition of the tax-exempt bond financing, by

23 encouraging Plaintiff to participate in an "ownership" scheme in which the Park residents

24 would not end up owning anything and would be saddled with ever increasing debt, and by

25 overcharging for his services without fully disclosing the nature and extent of said

26 compensation to Park residents.

27

28 25.



1 81. As a direct and proximate result of said breach of fiduciary duty on the part of

2 Defendant Johnson, Defendant Berger and Defendant Kenyan, Plaintiffs have sustained

3 damages, costs and expenses in ways and means not completely known, but which will be

4 established according to proof at the time of trial, and as described in paragraph 40, above.

5 SIXTH CAUSE OF ACTION

6 (Breach of Contract)



9 83. Plaintiffs had a written contract with Defendants, (see Exhibit "B" attached) and/or

10 were third party beneficiaries of a written contract with Defendants that Defendants would

11 transfer legal title to the Park to an entity controlled by Park residents immediately, and that

12 would permit Park residents to manage the Park. Defends entered into a Regulatory Agreement

13 and agreed to abide by the terms of the rent and occupancy restrictions set forth in the Regulatory

14 Agreement (see Exhibit "A" attached).

15 84. Defendants breached that agreement by refusing to transfer legal title to the Park to

16 an entity controlled by Park residents and has refused to permit Park residents to manage the

17 Park. Defendants breached the agreement by refusing to abide by the rent and occupancy

18 restrictions set forth in the Regulatory Agreement.

19 85. As a result of the breach of the written contract, Plaintiffs have been damaged in an

20 amount as set forth above in Paragraph 40, and as to be proven at trial.

21 SEVENTH CAUSE OF ACTION

22 (Negligence)



25 87. Defendants, and each of them, owed a duty to Plaintiffs and Park residents to

26 operate the Park in a fiscally prudent manner and to not make material misrepresentations and

27

28 26.



1 omissions to Plaintiffs and Park residents which were false and misleading, including those

2 contained in public statements, financial statements, registration statements, offering

3 documents and other disclosures made by Defendants, described above.

4 88. Defendants breached their duty as alleged herein in a manner that rises to the level

5 of gross negligence and that deviates from their authorized purposes.

6 89. As a direct, foreseeable and proximate result of each of Defendants' wrongful acts,

7 Plaintiffs have been damaged and will continue to suffer economic losses and other general and


9 according to proof, and as set forth hereinabove.

10 EIGHTH CAUSE OF ACTION

11 (Unfair Competition Law, Bus. & Prof. Code § 17200 et seq.)


13 set forth herein and further alleges as follows_

14 91. Plaintiffs are informed and believe and on that basis alleges that Defendants, and

15 each of them, engaged in a pattern of unlawful activities, including violation of all applicable

16 laws, treaties and conventions of international trade, and including violations prohibiting false

17 advertising, all in furtherance of their business activities and in violation of Business and

18 Professions Code Section 17200 et seq.

19 92. As the conduct of Defendants is in violation of numerous statutes, regulations, public

20 policies and is immoral, unethical, oppressive, unscrupulous and substantially injurious to the

21 general public, such conduct amounts to unlawful, unfair and/or fraudulent business acts or

22 practices as those terms have been defined in and interpreted to apply to Business and

23 Professions Code section 17200 et seq.

24 93. The officers, directors and/or managing agents of Cross-Defendants had actual

25 knowledge that the conduct, practices and policies alleged above were illegal, against public

26 policy, immoral, unethical, oppressive, unscrupulous and substantially injurious to the general

27

28 27.



1 public and in violation of the unfair business practices under the Business and Professions Code

2 section 17200, et seq., but nevertheless authorized and/or ratified the conduct, practices and

3 policies with conscious disregard of the rights of Plaintiffs, and knowing that Plaintiffs would be

4 severely injured (financially and otherwise) as a result thereof.

5 94. As a direct and proximate result of Defendants' actions, Plaintiffs have suffered

6 damages in an atnount to be determined according to proof, and as described in paragraph 40,

1 above, and they are entitled to restitution, disgorgement of profits, and injunctive relief, as well

8 as recovery of attorney's fees pursuant to Code of Civil Procedure section 1021.5 under the

9 private attorney general theory for the enforcement of an important right affecting the public

10 interest.

11 NINTH CAUSE OF ACTION

12 (Dissolution of Corporation, Corp. §§ 6510 et seq.)



15 96. As alleged above, Defendant Franciscan Housing Corporation ("Defendant FHC")

16 is a nonprofit public benefit corporation that was organized under the laws of the State of

17 California on July 15, 2002. Pursuant to the First Amended and restated Articles of

18 Incorporation field September 5, 2003, the corporation is empowered to own real property and

19 to have members as provided in the bylaws.

20 97. Plaintiffs are informed and believe and on that basis alleged that Defendant FHC is

21 nothing but a sham entity to enable Defendant Johnson and Defendant Linc to appear to Park

22 Residents that they have an interest in the Park. However, Defendant Johnson is the President

23 and Defendant Berger of the City of Daly City is the Secretary and there are no Park members

2 4 who are officers or on the board of directors.

25 98. California Corporations Code section 6410(b)(5) authorizes involuntary dissolution

26 of a nonprofit public benefit corporation when those in control of the corporation have been

27

28 28.



1 guilty of or have knowingly countenanced persistent and pervasive fraud, mismanagement or

2 abuse of authority or persistent unfairness toward any member or the corporation's property is

3 being misapplied or wasted by its directors or officers.

4 99. All of the Park residents should have membership interests in Defendant FHC or

S alternatively at a minimum all of the initial "participating tenants" who agreed to a $90-$100

6 rent increase at the inception should have been granted membership interests in Defendant

7 FHC. In fact, the title to the Park has never been transferred to Defendant FHC and

8 Defendants Johnson, Line and Berger have made no effort to obtain a determination letter from

9 the Internal Revenue Service or the Franchise Tax Board that Defendant FHC is a 501(c)(3)

10 tax-exempt entity that would be qualified to hold title to the Park. Furthermore, membership

11 interests have never been offered to any residents of the Park. Plaintiffs have standing under

12 the Corporations Code to seek involuntary dissolution of Defendant FHC since Defendants'

13 fraudulent conduct has prevented them from benefitting from the voting rights they would have

14 obtained if they had been given membership interests in the nonprofit entity that would own

15 the Park as initially promised by Defendants.

16 100. Defendant FHC should be ordered dissolved and it should be ordered to cease

17 doing business and to cease holding meetings.

18 TENTH CAUSE OF ACTION

19 (Constructive Trust)

20 101. Plaintiffs incorporate and reallege each of the foregoing paragraphs as though

21 fully set forth herein and further alleges as follows.

22 102. By reason of the fraudulent and otherwise wrongful manner in which the

23 Defendants, or any of them, obtained their alleged right, claim or interest in and to the property

24 comprising the Park, Defendants and each of them, have no legal or equitable right, claim or

25 interest therein, but instead Defendants and each of them are involuntary trustees holding said

26 property and profits therefrom in constructive trust for Plaintiffs individually and on behalf of

27

28 29.

Complaint for Damagcs, Restitution, Injunctive Relief, Dissolution of Corporation and Specific Performance; Demand for JuryTrial


1 all others similarly situated, with the duty to convey the same to Plaintiffs forthwith.

2 103. Plaintiffs, individually and on behalf of all others similarly situated, claim a

3 present right to title and possession of the real property comprising the Park.

4 ELEVENTH CAUSE OF A TION

5 (Specific Performance)



8 105. Plaintiffs seek and order enforcing the terms of the Cooperation Agreement

9 attached hereto as Exhibit `B" and fully incorporated herein by reference such that the Park is

10 transferred to an entity qualified under Internal Revenue Code section 501(c)(3) as a tax-

11 exempt nonprofit owned by the Park residents to hold title to and operate the Park for the

12 benefit of the Park residents. Plaintiffs seek an order that due to the wrongful conduct of

13 Defendants Johnson, Linc, Line Franciscan L.P., Franciscan Park, LLC, or Pacific West

14 Management that they have no further involvement or management over any aspect of the

15 Park.

16 TWELFTH CAUSE OF ACTION

17 (Financial Elder Abuse - California Welfare and Institutions Code § 15610.30)



20 107. Many of the Park residents are elderly and are over the age of 65.

21 108. As alleged above, Defendants' fiscal abuse and failure to abide by the rent and

22 occupancy controls set forth in the Regulatory Agreement have caused the elderly Park residents

23 to suffer financial injury and emotional distress. Defendants' conduct was done with malice,

24 oppression, fraud and recklessness within the meaning of Welfare and Institutions Code section

25 15657.

26 109. As a legal and proximate result of the acts and omissions alleged herein, Plaintiffs

27

28 30.

Complaint forDamages, Restitution, Injunctive Relief, Dissolution of Corporation and Specific Performance, Demand for JuryTrial


1 have incurred damages as alleged in Paragraph 41, above.

2 THIRTEENTH CAUSE OF ACTION

3 (Violation of California Health and Safety Code § 34377.6)



6 111. California Health & Safety Code section 34377.6 requires the Defendant Daly City

7 Housing Development Finance Agency to promptly invcstigate complaints concerning violations

8 of the restrictions imposed pursuant to Section 34377.2, and make a report to the complaining

9 party on whether the violation existed and whether it persists, and if it persists, what action the

10 authority will take to remedy the violation. When the authority determines that a violation exists,

21 whether determined upon an investigation of a complaint or on its own motion, the authority

I12 shall take all appropriate action, including necessary legal action, to promptly eliminate the

i13 violation.

0 4 112. Defendant Daly City Housing Development Finance Agency and Defendant Berger

15 who is head of said Agency have received repeated complaints from Plaintiffs and others

I16 concerning violations of the restrictions imposed pursuant to Section 34377.2, but have failed to

17 take any action.

18 113. Plaintiffs and each of them have been aggrieved by violations of the restrictions

19 imposed pursuant to Section 34377.2 and they seek a judicial remedy pursuant to section 34377.2

20 which authorizes a private right of action without regard to whether a complaint has been made

21 to the agency or whether the agency is then taking any action to remedy the violation.

22 114. As a legal and proximate result of the acts and omissions alleged herein, Plaintiffs

23 have incurred damages as alleged in Paragraph 41, above.

24 WHEREFORE, Plaintiffs pray for relief against Defendants, and each of them, as set

25 forth below:

26 1. Certifying this action to proceed as a class action pursuant to Federal Rules of Civil

27

28 31.



1 Procedure 23 and designating Plaintiffs as the representatives of the Class and their legal

2 counsel as counsel for the Class;

3 2. Compensatory and general damages according to proof;

4 3. Special damages according to proof;

5 4. Restitution according to proof,

6 5. Injunctive relief;

7 6. For a declaration that Defendants hold the Park as constructive trustees for the

8 benefit of Plaintiffs, individually and on behalf of all others similarly situated;

9 7. Order dissolving corporate entity as to Defendant FHC;

10 8. Appointment of a receiver;

11 9. Order enforcing the terms of the Cooperation Agreement to transfer the Park to an

12 entity qualified under Internal Revenue Code section 501(c)(3) as a tax-exempt nonprofit

13 owned by the Park residents to hold title to and operate the Park for the benefit of the Park

14 residents and removing Defendants Johnson, Line, Line Franciscan L.P., Franciscan Park,

15 LLC, and Pacific West Management from the management and operation of the Park;

16 10. Order enforcing the rent and occupancy restrictions of the regulatory agreement;

17 IL Prejudgment interest at the maximum legal rate;

18 12. Punitive and exemplary damages according to proof;

19 13. Costs of suit;

20 14. Reasonable attorney's fees;

21 15. Order cancelling 2002 Series "D" bonds; and

22 16. Such other and further relief as the court deems proper.

23

24 DATED: March 15-,2010Â.L ♦L 'i -

25 LLEY S.: UC "FV AN,Attorney for • laintifts,

26 FRANCISCAN MOBILE HOMEOWNERS FOR JUSTICE, et al.

27

28 32.

Complaint for Damages, Restitution, Injunctive Relief, Dissolution of Corporation and Specific Performance; Demand for 3uryTrial


1 DEMAND FOR JURY TRIAL

2

3 Plaintiffs, FRANCISCAN MOBILE HOME OWNERS FOR JUSTICE, ROSENDO

4 QUINIQUINI, RORY MORDINOIA, ROBERT QUINN, SANDRA HOLMAN, and MAMIE

5 ZHU hereby demand a jury trial as provided by Rule 38(a) of the Federal Rules of Civil

5 Procedure.

7 DATED: March rJ , 2010

84A-A,A.A HELLEY BUC AN,

Attorney for '' lainti s,

9 FRANCISCAN MOBILE HOMEOWNERS FOR JUSTICE, et al.

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 33.

Complaint for Damages, Restitution, injunctive Relief, Dissolution of Corporation and Specific Performance, Demand for JuryTrial



DOG a `-,02-07595004J18J2002 11:55A AG Fee-127.00

Page 1 of 41Recorded In Official RecDrds

County of San ratevRECORDING REQUESTED by Marren SlocumAND WHEN RECORDED MAIL TO.' posessar —Count yy ^ Cierk—Recorder

Recorded 8y NORTH AMERICAN TITLE

KUTAK ROCK LLP717 17th StreetSuite 2900Deriver, CO 80202Attention- Scott H. Bees:

REGULATORY AGREEMENTAND DECLARATION OF RESTRICTIVE COVENANTS J

by and among

DALY CITY HOUSING DEVELOPMENT FINANCE AGENCY,as Issuer

UNION BANK OF CALIFORNIA, N.A.,as Trustee

and

LILAC FRANCISCAN LIMITED PARTNERSHIP,as Borrower

Relating to:

S37,13 5,00 37,965.000

Dal y City Housing Development Finance Agency Daly City Housing Development Finance AgencyMobile Home Park Senior Revenue Bonds Mobile Home Park Subordinate Revenue Bonds

(Franciscan Mobile Home Park Acquisition Project) (Franciscan Mobile Home Park Acquisition Project)Series 2002A Series 20028

$1 l,535,QOQ S1 .923.00bDaly City Housing Development Finance Agency Daly Cite Housing Development Finance Agency

Mobile Home Park Third Tier Revenue Bonds Mobile Home Park Fourth Tier RevCntte Bonds

(Franciscan Mobile Home Park Acquisition Project) (Franciscan Mobile Home Paris Acquisition Project)Series 2002C Series 1002D

Dated as of April 1. 2002

f1Z-R329l,.13


"City" rneans the City of Daly City, California.

"City Fee" means an annual fee equal to S33,411.25,

"Coutvy- means the County of San Mateo, California.

"Irzcorize Certification" means the income Computation and Certification attached heretoas Exhibit B.

"hlediat7 income far the Area" means the median gross income for the Area asdetermined by the Secretary of the Treasury (which detemiination is required by the Code to beconsistetlt with determinations of the area median gross income under section 8 of the UnitedStates Housing Act of 1937, or, if such program is terminated, under such program as in effectimmediately before such termination).

'wonzparticiparing Residents" means those residents of the Project who are notParticipating Residents.

"Parcel" means the Cypress Abbey Parcel or the Podesta Parcel, as the context requires.

"Participaring Residents" means those residents of the Project who, on or prior to thedate of issuance of the Bonds, have entered into new leases with the Borrower for their Spaceswhich, provides in part that such. residents agree to a higher monthly rent not to exceed $I00 permonth.

"Program Adminish-aror" means the Program Administrator appointed under theAdministration Agreement, which initially shall be Rosenow Spevacek Group Inc.

"Prog,-am Administramor's Fee" means the administrative fee of the ProgramAdministrator set forth in the Administration Agreement.

"Qualified Project Period" means the longer of 30 years front the date hereof or the termof the Bonds; provided such period is subject to extension in accordance with Section 5(g)hereof.

OuuliTed Residents" means Very Low Income Residents.

"Qualified Space' means a Very Low Income Space.

"Space" means a mobile home space within the Cypress Abbey Parcel and, so long as theBorrower has an interest, either leasehold, purchase option or outer ownership interest, in thePodesta Parcel, the Podesta Parcel upon which a mobile home may be placed.

"Tax Ccr'tificate" paeans the certificate as to arbitrage of the issuer and Borrower, datedas of the Closing Date, with respect to the Bonds_

"leery , Loiti Income Residents" means individuals or families xvith an Adjusted Incomewhich does not exceed the amount promulgated by the U.S. Department of Housing and Urban

02•F3296 13

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Development for eery low income households for the Area as adjusted for household size as setforth below. In no event, however, will the occupants of a Space be considered to be Very LowIncome Residents if all the occupants are students, as defined in Section 151(c)(4) of the Code,as such may be amended, no one of which is entitled to file a joint federal income tax return.Currently, Section 151(c)(4) defines a student as an individual enrolled as a full-time studentduring each of five calendar months during the calendar year in which occupancy of the unitbegins at an educational organization which normally maintains a regular faculty and curriculumand normally has a regularly enrolled body of students in attendance or is an individual pursuinga full-time course of institutional on-farm training under the supervision of an accredited agent ofsuch an educational organization or of a state or political subdivision thereof "Household Size"Adjustment for L = 70%; Adjustment for 2 = 80%; Adjustment for 3 = 90%; Adjustment for 4= 100%; Adjustment for 5 = 108%; Adjustment for 6 = 116%; Adjustment for 7 = 1240/0;Adjustment for 8 = 132%; and assuming one person will occupy a recreational vehicle, twopeople will occupy a single-wide mobile home, and three persons will occupy a multisectionalmobile home. In adjusting rents for household size as described in Section 5(a) herein. it shall beassumed that one person will occupy a studio mobile home, two persons will occupy a one-bedroom mobile home, three persons will occupy a two-bedroom mobile home ; four persons wi11occupy a three-bedroom mobile home and five persons will occupy a four-bedroom mobilehome.

"Very Loin Income Spaces" means the Spaces in the Project designated for occupancy byVery Low Income Residents pursuant to Section 5(a) of this Regulatory Agreement.

Such teens as are not defined herein shall have the meanings assigned to them in theIndenture. Unless the context clearly requires otherwise, as used in this Regulatory Agreement,words of the masculine. feminine or neuter gender shall be construed to include each othergender v,,hen appropriate and words of the singular number shall be construed to include theplural number, and vice versa, when appropriate. This Regulatory Agreement and all the termsand provisions hereof shall be construed to effectuate the purposes set forth herein and to sustainthe validity hereof The defined terms used in the preamble and recitals of this RegulatoryAgreement have been included for convenience of reference only, and the meaning, constructionand interpretation of all defined terms shall be determined by reference to this Section 1notwithstanding any contrary definition in the preamble or recitals hereof. The titles andheadings of the sections of this Regulatory Agreement have been inserted for convenience ofreference only, and are not to be considered a part hereof and shall not in any way modify orrestrict any of the terms or provisions hereof or be considered or given any effect in construingthis Regulatory Agreement or any provisions hereof or in ascertaining intent, if any question ofintent shall arise.

Section 2. Representations and Warranties ôf the Borrower. The Borrower herebyrepresents, as of the date hereof, and covenants, warrants and agrees as follows:

(a) The Borrower has incurred a substantial binding obligation to acquire theProiect pursuant to which the Borrower is obligated to expend at least 5% of the principalamount of the Bonds.

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02-63296.13 5

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formed all such acts and work necessary to cure the default, Pursuant to such right ofthe Issuer shall be permitted (but is not required) to enter upon the Project and

perform all acts and work necessary to protect, maintain and preserve the improvementsand landscaped areas on the Project, and to attach a lien on the Project, or to assess theProject, in the amount of the expenditures arising from such acts and work of protection,maintenance and preservation by the Issuer and/or costs of such cure, including a 15%administrative charge, which amount shall be promptly paid by the Borrower to theIssuer, upon written demand.

(f) To the extent financially feasible, the Borrower shall use good faith effortsto either purchase the Podesta Parcel or extend or renew the existing lease for the PodestaParcel prior to the stated expiration date thereof. The Borrower shall notify the Issuer inwriting upon the earlier of (i) at least twelve months prior to the stated expiration date ofsuch lease setting forth the current state of negotiations with respect to the Podesta Parcelor (ii) at least thirty days prior to entering into a purchase contract or new lease withrespect to the Podesta ParceI setting forth the basic terms contained therein. Issuer mayrequest periodic updates as to progress initiated or made in securing ownership or longertenancy as to the Podesta Parcel during the term of this Agreement.

(g) The increased rent contained in the ]eases of the Participating Residentswill not exceed $90 per month. The Borrower shall honor the existing leases of theNonparticipating Residents. Future increases in rent by the Borrower shall beimplemented only in compliance with such leases. To the extent a NonparticipatingResident desires to enter into a new lease on terms substantially the same as the leaseswith Participating Residents, the Borrower shall negotiate with such NonparticipatingResidents to enter into such new lease on terms substantially the same as such leases withthe Participating Residents. Future increases in rent may be subject to local mobilehomerunt control ordinances and administration.

(h) The Borrower shall apply amounts on deposit in t)e Rental AssistanceFund to reduce rents on Qualified Spaces occupied by Very Low Income Residents or, hithe alternative, to purchase mobile homes for sale within the Project in order to preservehousing for Very Low Income Residents. The Borrower shall notify in writing theProgram Adminisuator and the Issuer at least once each calendar year (and in no eventlater than January 31 of each year commencing January 3I, 2D03) with respect to themanner in which such funds have been applied during the prior calendar year to reduccsuch rents. In addition, the Borrower agrees to use good faith efforts to implement aprogram, if and to the extents funds are available therefor, to purchase mobile horneslocated on Qualified Spaces that are far sale within the Project in order to permit suchSpaces to retain their designation as Qualified Spaces. The Borrower, with the assistanceOf the Issuer if applicable, shall use good faith efforts to apply for grants and low, interestrate loans that may be available to implement such a program.

Section S. Qualified Residents. Pursuant to the requirements of the Code and the Act.the Borrower hereby represents, as of the date hereof, and warrants, covenants and agrees asfollows:

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AG Page! it of 41


(a) During the Qualified Project Period:

0) not less than 20% of the Spaces in the Project shall be designatedas Very Low Income Spaces and shall be continuously occupied by Very LowIncome Residents. The monthly rent charged for one-half of the Very LowIncome Spaces (i.e., -10°% of the Spaces) shall be not greater than the lesser of (x)the monthly rent permitted under any lease then in effect and any restrictionsunder applicable law or (y) the amount calculated as follows:

. (A) Where a Very Low income Resident is both the registeredand legal owner of the mobile home and is not making mortgage paymentsfor the purchase of that mobile home, the total rental charge for occupancyof the Space (excluding a reasonable allowance for other related housingcosts determined at the time of acquisition of the Project by the Borrowerand excluding any supplemental rental assistance from the State, thefederal government, or any other public agency to the Very Low IncomeResident or on behalf of the Space and the mobile home) shall not exceed1/12 of 30% of 50% of Median Income for the Area, adjusted forhousehold size. Calculated as a monthly rent which does not exceed theamount produced by (I) beginning with the Median Income for the Area(which figure, as established by the U.S. Department of Housing andUrban Development assumes a four-person household), (II) establishingthe number of persons in the Space for purposes of this calculation usingthe assumed standard household sizes set forth in definitions, Fiery LoxIncome Residents, (III) multiplying by the relevant Family SizeAdjustment Factor, (IV) multiplying by 50%, (V) multiplying by 30%.and (VI) dividing by twelve.)

- (B) Where a Very Low Income Resident is the registeredowner of die mobile home and is making mortgage payments for thepurchase of that mobile home, the total rental charge for occupancy of theSpace (excluding any charges for utilities and storage and excluding anysupplemental rental assistance from the State, the federal government, orany other public agency to the Very Low Income Resident or on behalf ofthe Space and mobile home), shall not exceed 1112 of 15% of 50% ofMedian Income for the Area, as adjusted for household size. Calculated asa monthly rent which does not exceed the amount produced by (I)beginning with the Median Income for the Area (which figure, asestablished by the U.S. Department of Housing and Urban Developmentassumes a four-person household), (1I) establishing the number of personsin the Space for purposes of this ca[culation using the assumed standardhousehold sizes set forth in definitions, Yery Low Income Residents, (III)multiplying by ' the relevant Family Size Adjustment f= actor, (IV)multiplying by 50%, (V) multiplying by 15%, and (VI) dividing bytwelve.)

0243296.13

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AG P&ID&7 12 of 41

Case5:1 0-cv-01087-JW Document1 Filed03/15/10 Page40 of 65

(C) Where a Very Low Income Resident rents both the mobilehotre and the Space occupied by the mobile home, the total rentalpayments paid by the Very Low Income Resident on the mobile home andthe Space occupied by the mobile home (excluding any supplementalrental assistance from the State, the federal government, or any otherpublic agency to that Very Low Income Resident or on behalf of thatSpace and mobile home) shall not exceed 17:2 of 30% of 50% of MedianIncome for the Area adjusted for household size. Calculated as a monthlyrent which does not exceed the amount produced by (1) beginning with theMedian Income for the Area (which figure, as established by the U.S.Department of Housing and Urban Development assumes a four-personhousehold), (II) establishing the number of persons in the Space forpurposes of this calculation using the assumed standard houselold sizesset forth in definitions, Very L", Income Residents, (III) multiplying bythe relevant Family Size Adjustment Factor, (IV) multiplying by 50%, (V)multiplying by 30%, and (VI) dividing by twelve.)

The monthly rent charged for the remaining one-half of the Very Low IncomeSpaces (i.e., 10% of the Spaces) shall not be greater than as set forth above in clauses(A), (B) and (C); provided however that the Borrower shall in all such cases consideronly the rent for the Spaces (and not any other payments, including without limitation,rent for the mobile home or any mortgage payments) in determining the maximummonthly rental to be charged regardless of whether the Very Low Income Resident ismaking mortgage payments or renting both the Space and the mobile home.

(b) In the event a recertification of such tenant's income in accordance withSection 5(d) below demonstrates that such tenant no longer qualifies as a QualifiedResident the Space occupied by such Resident shall continue to be treated as a QualifiedSpace unless and until any Space in the Project thereafter is occupied by a new tenantother than a Qualified Resident. Moreover, a Space previously occupied by a QualifiedResident and then vacated shall be considered occupied by a Qualified Resident untilreoccupied, other than for a temporary period, at which time the character of the Spaceshall be redetermined. In no event shall such temporary period exceed 31 days.Notwithstanding anything herein to the contrary, if at any time the number of QualifiedResidents falls below the number required by subparagraph (a)(i) of this Section, the nextavailable vacant Space shall be rented to a Qualified Resident.

(c) Immediately prior to a Qualified Resident's occupancy of a QualifiedSpace (or prior to the Closing Date with respect to Very Low Income Spaces previouslyoccupied), the Borrower will obtain and maintain on file an Income Certification fromeach Qualified Resident occupying a Qualified Space, dated immediately prior to theinitial occupancy of such Qualified Resident in the Project (or prior to the Closing Datein the case of existing Very Low Income Residents). In addition, the Borrowerwillprovide such further information as may be required in the future by the State ofCalifornia, and by the Act, as the same may be amended from time to tin ge, as requestedby the Issuer or the Program Administrator. The Borrower shall verify that the incomeprovided by an applicant with respect to a Space to be occupied after the Closing Date is

0243296. 13 ^^Î^ÎIIIIIîIlIIIIII^lIl 11`ÎÎIINII ^1 EEF31^^^Î ' 2001 1 t 55989

of 41


accurate by taking one or more of the following steps as a part of the verification process:(i) obtain a federal income tax return for the most recent tax year; (ii) obtain a writtenverification of income and employment from applicant's current .employer; (iii) if anapplicant is unemployed or did not file a tax return for the previous calendar year, obtainother verification of such applicant's income reasonably satisfactory to the Issuer orProgram Administrator; or (iv) such other informations as may be reasonably requested bythe issuer or Program Administrator.

Within 10 days after the last day of each calendar quarter during the term of thisRegulator) , Agreement commencing with the quarter ending June 30, 2002, the Borrowershall advise the Program Administrator or in the absence of a Program Administrator, theIssuer, of the status of the occupancy of the Project by delivering to the ProgramAdministrator or the Issuer, as the case may be, a Certificate of Continuing ProgramCompliance; provided, however, with the prior written approval of the Issuer or theProgram Administrator, as the case may be, such Certificate need be filed onlysemi-annually. Copies of the most recent Income Certifications for Qualified Residentscommencing or continuing occupancy of a Qualified Space shall be made available to theIssuer or the Program Administrator upon request.

(d) On the first anniversary date of the issuance of the Bonds, and on eachanniversary date thereafter, the Borrower shall certify the income of the occupants ofsuch Qualified Spaces by obtaining a completed Income Certification based upon thecurrent income of each occupant of the Space. The Borrower shall verify the income oftenants in connection with any such recertification. In the event the recertificationdemonstrates that such household 's income exceeds 140% of the income at which suchhousehold would qualify as Qualified Residents, such household will no longer qualify asa Qualified Resident, and the Borrower either (i) will designate another qualifying Tenantand Space in the Protect as a Qualified Resident and a Qualified Space, respectively; or(ii) will rent the next available vacant Space to one or more Qualified Residents.

(e) The Borrower will maintain complete and accurate records pertaining tothe Qualified Spaces, and will permit any duly authorized representative of the Issuer, theProgram Administrator, the Trustee (who shall have no duty to inspect), the Departmentof the Treasury or the Internal Revenue Service to inspect during normal business hoursand with prior notice the books and records of the Borrower pertaining to the Project,including those records pertaining to the occupancy of the Qualified Spaces.

(0 Each lease pertaining to a Qualified Space occupied after the Closing Dateshall contain a provision to the effect that the Borrower has relied on the IncomeCertification and supporting information supplied by the Qualified Resident indetermining qualification for occupancy of the Qualified Space, and that ally materialmisstatement in such certification (whether or not intentional) may be cause forimmediate termination of such lease. Each lease will also contain a provision that failureto cooperate with the annual recertification process reasonably instituted by the Borrowerpursuant to Section 5(d) above will disqualify the Space as a Qualified Space and providegrounds for termination of the lease. The Borrower agrees to provide to the Program

02-83296 . 13 1 7

11ti1^^^l1^til^till^llti«^tititi^^lll^^^^^ll^H^l41 q ^ ,2afof 51


Administrator and the Issuer, a copy of the form of application and lease to be providedto prospective Qualified Residents and any arnendments thereto.

(g) In the event, despite Borrower's exercise of best efforts to comply with theprovisions of Section 5 of this Regulatory Agreement, the Borrower shall have been outof compliance with any of. the restrictions of Section 5 hereof relative to QualifiedResidents, for a period in excess of six months, then at the sole option of the Issuer theterm of the Regulatory Agreement shall be automatically extended for the period ofnoncompliance rlpon written notice to the Borrower, the Program Administrator and theTrustee from the Issuer, such extension to relate to the Qualified Spaces and QualifiedResidents as to which such noncompliance relates.

Section 6. Tax Status of the Tax-Exempt Bonds. The Borrower and the Issuer eachhereby represent, as of the date hereof, and warran ts. covenants and agrees that:

(a) it will not knowingly take or permit, or omit to take or cause to be taken,as is appropriate, any action that would adversely affect the exclusion from gross incomefor federal income tax purposes of the interest on the Tax-Exempt Bonds or theexemption from California personal income tax or the interest on the Bonds and, if itshould take or permit, or omit to take or cause to be taken, any such action, it will take alllawful actions necessary to rescind or correct such actions or omissions promptly uponobtaining knowledge thereof;

(b) it will take such action or actions as may be necessary, in the writtenopinion of Bond Counsel filed with the Issuer, the Trustee and the Borrower, to complyfully with the Act and all applicable rules, rulings, policies, procedures; Regulations orother official statements promulgated, proposed or made by the Department of theTreasury or the Internal Revenue Service to the extent necessary to maintain theexclusion from gross income for federal income tax purposes of interest on the Tax-Exempt Bonds; and

(c) it will file of record such documents and take such other steps as arenecessary, in the written opinion of Bond Counsel filed with the issuer, the Trustee andthe Borrower, in order to ensure that the requirements and restrictions of this RegulatoryAgreement will be binding upon all owners of the Project, including, but not lirrmited to.the execution and recordation of this Regulatory Agreement in the real property recordsof the County.

The Borrower hereby covenants to include the requirements and restrictions contained inthis Regulatory Agreement in any document transferring any interest in the Project (other thanleases of Spaces in the Project to individual tenants) to another person to the end that suchtransferee has notice of, and is bound by, such restrictions, and to obtain the agreement from anytransferee to abide by all requirements and restrictions of this Regulatory Agreement.

Section 7. Modification of Spcdal Tax Covenants. The Borrower, the Trustee and theIssuer hereby agree as follows:

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EDIT "B"


Franciscan County Club Mobile Home ParkCooperation and Advisory Agreement

This Cooperation and Advisory Agreement (the "Agreement") is made between LINCFranciscan Limited Partnership, a California Limited Partnership, ("LINC Franciscan"),LINC Housing Corporation, a California Public Benefit Corporation, ("LINC") and theFranciscan Acquisition Committee, an Unincorporated Association, ("FAC°) dated as ofApril 18, 2002,

Whereas, on April 18, 2002 LiNC Franciscan purchased the existing leasehold interestin the Franciscan Country Club Mobile Home Park (the "Park") and the fee simpleinterest in a portion of the Park with the proceeds of certain bonds (the "Bonds") issuedby the Daly City Housing Development Finance Agency (the "Agency"); and,

Whereas, the documents related to the Bonds, (collectively the "Financing Documents"),impose certain affordability requirements on the owner of the Park; and,

Whereas, the ability of LINC Franciscan to purchase its interest in the Park andsubsequently transfer it to another organization which qualifies for tax-exempt financingwith resident-homeowner representation is predicated on LiNC's experience andfinancial stability; and,

Whereas, FAC represents the homeowner residents of the Park; and

Whereas, LINC, LINC Franciscan and FAC all desire to enable the residents of the Parkto participate in the governance of the Park and the establishment of park policies,budgets, and community guidelines; and

Whereas, it is the intent of the parties to create, through this Agreement, a managementstructure for the Park to cover budget, capital improvements, community guidelines, andthe selection of the Property Manager, that is first established upon LINC Franciscan'sacquisition of the Park, and preserved upon transfer of the Park to a subsequent entity,where such management decisions are made with input from LINC, FACrepresentatives, and City representative(s) as set out below.

It is therefore agreed:

1. LINC, LINC Franciscan, and FAC will endeavor to form a 501(cx3) non-profitcorporation to be known as Franciscan Housing Corporation (FHC). in the eventthis name is not available, another similar name shall be chosen.

Z The FHC by-laws shall provide that FHC shall have seven (7) directors, three (3)of which shall be appointed by FAC, three (3) of which shall be appointed byLINC, and one (1) of which shall be appointed by the City of Daly City and shallbe an elected, management or appointed official of the City. The term of officefor directors and term-limits (if any) shall be described in the by-laws of FHC. Tothe extent required for iRS approval of the 501(c)(3) status of the FHC, thenumber of resident directors or their voting rights, or both, may be reducedsubject to the approval as to any such restructure by the City of Daly City and the

02-11251$.03


Franciscan Country Club Mobile Home Park Cooperation AgreementApril 18, 2002Page 2

FAC. FAC acknowledges that in order to qualify for 501(c)(3) status and thusassume ownership of the Park from LINC Franciscan, the ability of residents ofthe Park to serve as directors of FHC or otherwise participate in the managementof the Park may be restricted or limited.

3. FAC agrees that it will continue to be an association of resident-owners with thepurpose of promoting and protecting the general welfare of the residents andowners of mobile homes within the Park. Only those households that both ownand occupy a home in the Park will be eligible for voting membership in FAC.FAC will hold Park-wide elections of its directors in a time and manner specifiedin its by-laws. Such elections shall be monitored by a quallfied, neutral third-party entity. FAC will determine a process for selecting their appointments to theFHC Board of Directors and amend its by-laws to describe and require thisprocess as well as owner-occupancy membership. FAC shall provide FHC andLILAC Franciscan with a written certification of both the election and theappointments.

4. The director representative of the City of Daly City shall be that person as theDaly City City Manager so informs the FAC, LINC Franciscan and, if applicable,FHC. The City of Daly City representative director may change, unrestricted byterm, and shall be as designated by the City Manager, subject to the limitationset forth in paragraph 2 above.

5. This agreement shall serve as ZINC Franciscan's non-revocable commitment totransfer the Park to FHC upon receipt by FHC of Federal and State tax-exemptstatus, including without limitation receipt of a determination letter from theInternal Revenue Service that FHC qualifies as a 501(c)(3) corporation with thepurpose of owning the Park. LILAC Franciscan and LINC shall pursue formationand tax exemption with reasonable diligence. Transfer shall be subject toapprovals by the City, the Agency and meeting each of the requirements for suchtransfer as detailed in the Financing Documents.

6. In the event that conditions prevent the establishment of FHC as a 501(c)(3)corporation meeting the necessary approvals and requirements as described inparagraph 5 above, LINC Franciscan and FAC each shall use its best efforts toaffect the intent of this agreement through the entity that holds title to the Park.

7. FAC shall establish a Resident Advisory Committee (RAC) to review and adviseHNC Franciscan on such issues as operating budgets, capital improvements,community guidelines, selection and performance of the Property Manager, andother items, as may be deemed appropriate. In addition, the City shall have theright to appoint an elected, management or appointed official of the City toParticipate with RAC (the "City Representative'. LINC Franciscan shall provideRAC and the City Representative with budget, program, financial information andsuch other information as may be reasonably requested by RAC and the CityRepresentative. LINO Franciscan shall also meet with the RAC and the City

02-112516.03


Franciscan Country Club Mobile Horne Park Cooperation AgreementApril 18, 2002Page 3

Representative at least quarterly (and more often, as may be reasonablyrequested by RAC) and give serious consideration to RAC recommendations. Inproviding and considering advice, RAC and LILAC Franciscan shall be mindful ofrequirements to operate, maintain; and control the Park in accordance with theterms of the Financing Documents and in accordance with all applicable law. TheRAC shall continue to provide advice to FHC after transfer of the Park to FHC,and in the event it is not possible to make such transfer, to LINC Franciscanthroughout its ownership of the Park.

8. Upon the transfer of the Park to FHC, LILAC shall be retained to provide assetmanagement services under a separate agreement that shall run for the term ofthe Bonds. LINC shall receive compensation equal to 1.5% of the gross rentalreceipts of the Park as specified in the Financing Documents. CommunityHousing Management Services, a LINC affiliate, shall be the initial PropertyManager.

9. Upon repayment of the Bonds and any other financing related to the Park, andupon request by a majority of the households in the Park, LINC irrevocablycommits to relinquish Its right to appoint its three (3) directors of FHC.Replacement directors shall be selected by the remaining four (4) directors.

10.Current rules and regulations shall remain in effect until changed. Newcommunity guidelines supplanting the existing rules and regulations will beestablished jointly with LINC Franciscan and FAC.

11.FAC will use its best efforts to obtain the cooperation of all residents of the Parkin providing information required to document compliance with the FinanceDocuments. FAC will convene regular meetings of all residents to disseminateinformation and report on progress. Copies of documents shall be provided tothe City of Daly City upon request and without cost to the City.

12.The operation of the Park will be consistent with a regulatory agreement and theIndenture, included as part of the Financing Documents specifying affordabilityand other obligations arising from the utilization of tax-exempt financing for theacquisition by LINC Franciscan of the Park.

13.Rents shall be increased in accordance with the contingent lease amendment forthose residents of the Park who have signed the contingent lease amendment,and consistent with existing rental agreements or leases for those who have notsigned the contingent lease agreement.

14.Approximately 363 homeowners have executed contingent lease amendmentsthat become effective upon acquisition of the mobilehome park by LINC or itsaffiliate. These contingent lease amendments provide for a $90 per monthincrease in rents, then a stabilized rent for a period of five years, then increasesas necessary to maintain the park, pay the financing and maintain reserves. In

02-112516.03


Franciscan Countfy Club Mobile Home Park Cooperation AgreementApril 18, 2002Page 4

the event that homeowners wish to execute such leases after close of escrow forpurchase of the park the monthly increase shall be $100. The rent increase inthe contingent lease amendment will commence in the first month afteracquisition of the park. If a homeowner signs a contingent lease amendmentafter close of escrow for purchase of the park, that homeowner shall be requiredto pay a lease commencement fee equal to the difference between the rentalready paid by such homeowner or his or her predecessor, and the increasedrent under the lease amendment (using the $100 per month starting increase).For instance, if three months have accrued, the homeowner would pay $300upon execution of the lease amendment to "catch up" to those executing prior toacquisition.

Rents under the existing, non-amended leases will increase over time. The"Buy-in" amount for homeowners signing the lease amendments will bemeasured from the actual rent paid to the rent that would have been paid underthe lease amendment had it been signed. After July 1, 2002, any homeownersigning a lease amendment hereunder shall pay no less than $500 at the time ofsigning the lease amendment, even if the cumulative rents under the "old lease"have exceed those under the lease amendment.

15.New leases will be available to all residents who signed up for the contingentlease amendment and will be for a term of up to 34 years if they so desire, or ifon the Podesta property, for the balance of the Podesta lease term, but not Inexcess of 34 years if the Podesta lease term is extended beyond that period.

16.Leases will require owner occupancy except in certain hardship cases and willprovide for the minimum income certification required for ensuring:

a. Compliance with the Financing Documents:b. Property tax exemption for the Park;c. Compliance with the Park Rules and Regulations.

17-No sub-leases will be permitted except in the case of hardship. Hardship will. bedefined as:

a. Illness or unemployment of a family/household member with a loss ofincome that mattes it impossible to pay housing costs existing prior tosuch illness or unemployment; or

b. A transfer of employment more than 100 miles from the Park.

18.Hardship subleases shall be for a maximum of one year, but may be reviewedand renewed for one additional year.

19.New long-term leases will remain in effect upon any sale or transfer of the Parisand, upon transfer of a home, will be fully assumable by a qualified buyer of thathome in the Park. Long-term leases shall also be assumable by heirs of theHomeowner-Lessee, provided they meet all regular requirements for owner-

02-112Si 8.03


Franciscan Country Club Mobile Home Park Cooperation AgreementApril 18, 2002Page 5

occupancy. Should an heir not choose to live in the Park, the long-term leaseshall remain in effect upon the sale of the home to a qualified buyer.

20.No legal resident of the Park shall be displaced because of their income levelabsent some other breach of lease or rules such as a failure to pay rent whendue or falsifying income certification information.

21.Park Management Staff are employees of the Property Manager. As such, theywill not expect to receive direction or supervision from resident directors of FHCor FAC and they will not follow such direction or supervision if it is given.

22-The primary point of contact between residents and the Park Management is tobe the resident manager. In the event a resident is dissatisfied with the residentmanager's actions, an appeal should be directed to the resident manager'ssupervisor by telephone or in person. Further appeals shall be in writing anddirected first to the local or regional manager of the Property Manager, then tothe President of ZINC. 'If, following this procedure, the resident is stilldissatisfied, a written appeal may be directed to the Chairman of the Board ofFHC who will convene a grievance committee of Directors to consider the matter.

23.This Agreement may be amended from time to time by unanimous mutualagreement of all parties. Although not a party to this Agreement, no amendment.modification or cancellation of any portion or all of this Agreement, or otherchange to this Agreement can be made without the prior written consent of theCity of Daly City to the extent such amendment, modification or change affectsthe -City of Daly City or any of its rights herein, as expressed through acommunication from the Daly City City Manager, which consent shall not beunreasonably withheld and shall be deemed to have been given if not recelvedwithin 10 days of receipt by the City of such proposed amendment, modificationor change.

24. LINC and LiNC Franciscan shall each be bound by the actions of the other in allmatters related to management of the Park.

25.As long as homes in the park meet the requisite standards under state and citycodes, they can continue to be sold in place. New homes proposed to beinstalled in the Park shall be subject to Park standards as established from timeto time.

26. Reference to The City" or "City of Daly City" within this Agreement does notestablish the City of Daly City as an owner of any interest in the Park, or in anycomponent part, facility, or unit of the Paris. Neither does such reference reflectthe City's participation in routine policies, daily management decisions, orpractices of the parties to this Agreement, the Paris Manager, or any employeesor representatives of the Park, LINC, LILAC Franciscan, the FAC, the proposedFHC, or any other such entity. The parties to this Agreement, jointly and

02-112519.03


Franciscan Country Club Mobile Home Park Cooperation AgreementApril i 8, 2002Page 6

severally, agree to indemnify and defend the City of Daly City, its officers andemployees, from and against all claims and legal actions, costs, penalties andfines, damages and liabilities arising from operating, management and injuryrelating to any activity concerning the Park. Such duty to indemnify and defendextends to claims for civil rights violations, actual or threatened release ordischarge of hazardous materials, claims of negligence or willful misconduct.

02-112518,03


F anciscan Country Club Mobile Home Park Cooperation AgreementI 1K 2002

ge 7

Agreed

LIN F antis -n t mimed PartnershipBy L Housing Corporation,Its General PartnerBy Hunter L. JohnsonIts President,

wn.i4LIN H ► .ing orporationBy Hunter L_ JohnsonIts President

Francocan A q lsitian mmitteeSy Don TullIts President

02.112516.03


EXHIBIT "C"


^^PR CARL.E, MACKIE, POWER & Ross LLP

ATTORNEYS

IGn 8 SruFEr. Su'TE 400 TEL: (707) 526-4700

SANTA ROS I , CA g IFORNIA A5CIFAX: (747) 526-4707

October 21, 2005

Office of the Attorney GeneralCharitable Trusts Section300 South Spring Street, 5"' FloorLos Angeles, CA 90013-1230

Re: Corporate Fund for Housinâ Califon iaNQU-ProEt Public Benefit Cor uatian

Dear Sir:

Introducti ort

This firm represents Corporate Fund for Housing, a California non-profit public benefitcorporation (the "Corporation'. The Corporation acurrently owns six (6) multifamily residentialrental developments in California. - TheCorporation is proposing, to sell . f ve (5) of thesedevelopments as described below.

This letter and .its enclosures represents notice to the Attorney General pursuant toCalifornia Corporations Code section 5913.

Background to the Transactions

The Corporation currently owns six (6) residential rental developments in Cali forma brief detailsof which are as follows:

• A 149 unit senior apartment complex located at 23750 Highland Valley Road, DiamondBar, California (the "Diamond Bar Project");

• A 201 unit senior apartment complex located at 3200 South Street, Lakewood, California(the "Lakewood Project");

• An 85 unit senior apartment complex located at 2500 Damien Avenue, La Verne,California (the "La Veme Proj ect'O;

• A 241 unit senior apartment complex at 1024 Royal Oaks Drive, Monrovia, California(the "Monrovia Project');

%&IVvW-Cmpriaw.corn <[email protected]


LCMPR E

CARLE, MACKIF, POWER &- Ross L[.P

A multifamily residential apartment complex located at 2894 East Tahquitz Canyon Way,Palm Springs, California (the "Tahquitz Praject'^; and

• A 169 unit senior apartment complex located at 12251 Washington Boulevard, Whittier,California (the "Whittier Project").

The Corporation plans to sell all of these projects apart from the Tahquitz Project.

The construction of the five s} develo znents that ate, corporation is glami - g to1z_........sell the "Sale Projects'^ was_ftanccdJn..15194.b_y.._tbe net_proceeds of certain bonds issued bythe California Statewid5_Cgmw nines IlcyeJQpment.Authority_&e "Bonds"fir In__^nnectionwith the sale to defease ,and/gr retire the Bonds.

The Board of Directors has concluded that the Sale Projects are too over-leveraged tocoFn ò' jy allow the Corporation to coninut to the anticipated capital improvements that areanticipated and that therefore it would be in the best interests of the Corporation to dispose of theSale Projects. The aggregate sale price of the Sale Projects is $79,000,000. After allowing fordefeasance and/or retirement of the Bonds and closing costs, the Corporation expects to netapproximately $5,000,000.

Details of the Transactions

The details of the transactions are as follows:

Sale Project Sale Price Buyer

Diamond Bar $14,400,000 1315 Meadows, L.P., a California.limited partnership.

Lakewood $18,600,000 3200 Lakewood L.P., a Californialimited partnership

La Verne $ 7,800,000 Jagdish Varna and Usha K. Varnahusband and wife as communityproperty as to an undivided 509/vinterest and Ahmed M. Hassan andMagda A. Hassan husband andwife as community property as toan undivided 50% interest, as

tenants in common.Monrovia $22,700,044 10214 Royal Oaks L.P., a California

limited partnership.Whittier $15,500,000 1315 Meadows, L.P., a California

limited partnership.

With regard to those transactions, please note the following;


CMPR]CARLL, MACKIE, POWER & ROSS LIT

• The buyers of the Diamond Bar-Project, the Lakewood Project, the Monrovia Project andthe Whittier Project are aff entities ultimately controlled by Robert Korda;

• All of the buyers of the Sale Projects are for-profit parties;

• In each case the sale price is payable in cash in tall on closing;

• In each case the sale price exceeds the appraised market value of each of the Sale Projectsassuming a for-profit buyer; and

• Closing is scheduled to occur on November 18, 2005.

Enclosed with this letter you will find copies of the following:

• 'Audited Financial Statements of the Corporation for the year ending December 31, 2004;• Unaudited financial statements of the Corporation for the nine months ending September

30,2005;• Resolutions of the Board of Directors of the Corporation authorizing the transactions.• The Restated Articles of Incorporation of the Corporation;• The organizational documents for each of the Buyers that are entities (we will forward

certified copies as soon as these are available); and• Letters dated March 4, 2004, confirming the appraised market value of each of the Sale

.Projects.

Should you require any additional information, please do not hesitate to contact me. In themeantime please return the duplicate copy of this Ietter with a date stamped confirmation ofreceipt in the enclosed reply paid envelope.

Yours sincerely,

S imam Inman

cc Hunter Johnson, Corporate Fund for Housing

3


. ^:^'^%•art

BILL LOCBYER State o California J'T^f-Z^0 .

Attorney General DEPARTMENT OF JUSTICE ^^'

RONALD REAGAN HUtLDCNG300 SOUM SP LOS

ANGELES, CA DQ13

Public: 213) 897-2400Telephone: Z13) 897-7D76Fimacsile: Zl3 897-7605

E-Mail: Adrie=.Watla(a doj.ca.gav

December 9, 2005

Simon R. IamanCarle, Mackie, Power & Ross LLP100 B Street, Suite 400Santa Rosa, CA 95401

RE: Corporate Fund For Housing

Dear Mr. Inman:

This will acknowledge receipt of your notice of the sale of substantially all assets of theabove referenced California nonprofit public benefit corporation pursuant to CaliforniaCorporation Code section 5913

This letter is neither an approval nor disapproval of the proposed transaction, and thisOffice reserves the right under Corporations code section 5250 to investigate fwther to determinewhether the above corporation has complied with the charitable trusts upon WN ch it holds itsassets.

Sincerely,

(

ADRIENNE W. WA SInvestigative Auditor

For BILL LOCKYERAttomey General

cc: Registry of Charitable Trusts


RESOLUTIONS OF THE BOARD OF DIRECTORS OF CORPORATE FUND FORHOUSING, A CALIFORNIA NONPROFIT PjJWIC BENEFIT CORPORATION

AUTHORIZING THE CORPORATION TO DISPOSE OFCERTAIN REAL ESTATE PROJECTS

At a meeting of the Board of Directors of Corporate lend for Housing, a CaliforniaNonprofit Public Benefit Corporation (the "Corporation") duly convened and held on August i I,2005, the Board of Directors resolved as follows:

WHEREAS, the Corporation is presently the owner of six residential rental developmentslocated in California in the cities of Diamond Bar, Lakewood, La Verne, Monrovia, Whittier andPalm Springs and Whittier (collectively the "Projects'');

WHEREAS, in connection with the refinancing of the acquisition and construction of theProjects located in Diamond Bar, Lakewood, La Verne, Monrovia and Whittier (collectively the"Sale Projects") the net proceeds of certain bonds issued the California Statewide CommunitiesDevelopment Authority (the "Bonds') were advanced to the Corporation;

WHEREAS, the Corporation intends to sell the Sale Projects aad-Ap Vthe tuetPMceeds._of sale towatds.defeasance and/or retirement of the Bonds.

WHEREAS, the Board of Directors of the Corporation deems it to be in the best interestof the Corporation to sell the Sale Projects and to defense and/or retire the Bonds.

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of the Corporationhereby approve and authorize the Sale of the Sale Projects and the defeasance and/or retirementof the Bonds (collectively the "Transactions"), and the consummation of the transactionscontemplated thereby are in all respects approved and authorized; and,

RESOLVED FURTHER., that the Executive Committee of the Board of Directors ., ishereby authorized and directed:

(i) to approve or authorize the approval of any and all necessary documents,agreements, certificates or other instruments in connection with the Transactions ("TransactionDocuments");

(ii) to authorize or approve the engagement by the Corporation of such professionaladvice and assistance as is deemed necessary for the purposes of the Transactions;

(iii) to authorize officers of the Corporation to execute, and deliver any and allTransaction Documents on the Corporation's behalf;

(iv] to authorize or approve any and all other acts as the Executive Committee in itssole discretion may deem necessary or ,appropriate to effect the Transactions on such terms andconditions as the Executive Committee may determine; and

C_MCCUMEE—ISR1nman1l.DCALS—I\Temp\CM geya 9-11-45 5 Smsom Sale Auftdoc


(v) to authorize or appzove the performance of all of the Corporation's obligations inconnection with the Transactions.

I `"

RESOLVED FURTHER, that any acts on behalf oft:he Corporation by the ExecutiveCommittee or any officers, employees or agents of the Corporation in connection with theTransactions occurring before this date are hereby ratified and approved by the Corporation:

The undersigned, as Assistant Secretary of the Corporation, hereby certifies that theBoard ofDirectors of the Corporatioti unanimously passed and adopted these resolutionseffective on August 11, 2005.

Hunter Johnson, Assistant Secretary

C;.WCUWE -1^SRinmau\LOCAL-,- I\TMp1CFH R®o S-1 l-05 5 acasons Sale Amb.doc


E)KMU "D"

Case5:10-cv-01087-JW Document1 Filed03/15/10 Page59 of 65 r

COMMUNITY REDEVELOPMENT AGENCYCITY OF PALM SPRINGS, CALIFORNIA

MINUTESWEDNESDAY, NOVEMBER 19, 2008

City Hall Council Chamber

CALL TO ORDER: Chair Pougnet called the meeting to order at 6,40 p.m.

ROLL CALL:PRESENT: Agency Member Hutcheson, Agency Member Weigel, Vice Chair

Foat, and Chair Pougnet.ABSENT: Agency Member Mills.ALSO PRESENT: Executive Director Ready, Agency Attorney Holland, and Assistant

Secretary Thompson.

PUBLIC COMMENT:

ROGER EVERSHED, commented on the Tahquitz Court Apartments, Item RA2., andrecommended approval Of the modifications and assignment of the regulatoryagreement

1. PUBLIC HEARINGS: (Joint Public Hearing with the City Council)

I.S. AMENDMENT NO. 1 TO DISPOSITION AND DEVELOPMENTAGREEMENT NO. A0470C WITH SANTIAGO SUNRISE VILLAGEMOBILE HOME PARK CORPORATION FOR AGENCY ASSISTANCEIN THE AMOUNT OF $153,700, FOR LAUNDRY AND OFFICEFACILITIES AT SUNRISE VILLAGE MOBILE HOME PARK LOCATEDAT 9500 EAST SAN RAFAEL ROAD:ACTION: 1) Continue the Public Hearing to December 3, 2008, with nopublic testimony; and 2) Direct the City ClerldAssistant Secretary to frost aNotice of Continued Public Hearing. Motion Agency MemberHutcheson, seconded by Agency Member Weigel and unanimouslycarried 4-0 an a roll call vote.

AYES; Agency Member Hutcheson, Agency Member Weigel, ViceChair Foat, and Chair Pougnat.

NOES: None.ABSENT: Agency Member Mills.


Ci#y of Palm SpringsCornmix ty Redevelopment AgencyNovember 19, 2008Page 2

RA, COMMUNITY REDEVELOPMENT AGENCY.,

RA1. APPROVAL OF MINUTES;ACTION: Approve the Community Redevelopment Agency Minutes OfOctober 1, 2008, and November 5, 2008. Motion Agency MemberWalgei, seconded by Agency Member Hutcheson and unanimouslycarried 4-0 on a roll call vote.

AYES: Agency Member Hutcheson, Agency Member Weigel, ViceChair coat, and Chair Pougnet.

NOES: None..ABSENT: Agency Member Mills.

The Community Redevelopment Agency continued at 6:56 p.m., and the City of PalmSprings Housing Authority convened for a Joint Meeting.

RA2. MODIFICATION OF REGULATORY AGREEMENT, ASSIGNMENT ANDASSUMPTION OF LOAN DOCUMENTS, FREDDIE MAC RIDER TO THEREGULATORY AGREEMENT AND A SUBORDINATION AGREEMENTBY AND BETWEEN THE COMMUNITY REDEVELOPMENT AGENCYOF THE CITY OF PALM SPRINGS AND CORPORATE FUND FORHOUSING, D.B.A., LINC HOUSING CORPORATION, TO ASSIGN THEAGREEMENT TO TAHQUITZ ASSOCIATES, LP, AND 13Y THEHOUSING AUTHORITY OF THE CITY OF PALM SPRINGS ANDCORPORATE FUND FOR HOUSING, D.B.A., LINC HOUSINGCORPORATION, TO ALLOW FOR THE TRANSFER OF THE nom/PROPERTY TO A PARTNERSHIP THAT IS NOT A S01C(3) 1GORGANIZATION FOR THE TAHQUITZ COURT APARTMENTS AT2800, 2890, 2900 and 2980 EAST TAHQUITZ CANYON WAY:ACTION: 1) [Community Redevelopment Agency] Adopt ResolutionNo. 1369 , "A RESOLUTION OF THE COMMUNITY REDEVELOPMENTAGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA,APPROVING A MODIFICATION OF THE REGULATORY AGREEMENT,ASSIGNMENT AND ASSUMPTION OF LOAN DOCUMENTS, FREDDIEMAC RIDER TO THE REGULATORY AGREEMENT AND ASUBORDINATION AGREEMENT BETWEEN THE COMMUNITYREDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS ANDCORPORATE FUND FOR HOUSING, D.13.A., LINCHOUSINGCORPORATION, TO ASSIGN THE AGREEMENT TO TAHQUITZASSOCIATES, LIP, FOR THE TAHQUITZ COURT APARTMENTS AT2800, 2890, 2900, and 2990 EAST TAHQUITZ CANYON WAY;" 2)[Housing Authority] Adopt Resolution No. 34, "A RESOLUTION OF THEHOUSING AUTHORITY OF THE CITY OF PALM SPRINGS,CALIFORNIA. APPROVING AN AMENDMENT TO A REGULATORYAGREEMENT AND DECLARATION OF COVENANTS AND


Clty of Palm SPrfnxCommunity Redevelopment AgencyNovember 19, 2006Page 3

RESTRICTIONS BETWElrN THE HOUSING AUTHORITY OF THE CITYOF PALM SPRINGS AND CORPORATE FUND FOR HOUSING, D.B.A.,LINO HOUSING CORPORA7iON, TO ALLOW FOR THE TRANSFER OFTHE PROPERTY TO A PARTNERSHIP THAT IS NOT A 501C(3)ORGANI77-ATION FOR THE TAHQUiTZ COURT - APARTMENTSLOCATED AT 2800, 2$90, 2900 AND 2990 EAST TAHQUITZ CANYONWAY;" and 3} Authorize the Executive Director to execute all necessarydocumer ts_ A0501 C. Motion Agency Member Weigel, seconded byAgency Member Hutcheson and unanimously carried 40 on a roilcall vote.

AYES: Agency Member Hutcheson, Agency Member Weigel, ViceChair Foat, and Chair Pougnet

NOES: None.ABSENT: Agency Member Mills.

ADJOURNMENT: The Community Redevelopment Agency adjoumed at 6:57 p.m.

APPROVED BY A MOTION OF THE CITY OF PALM SPRINGS COMMUNITYREDEVELOPMENT AGENCY THIS 3RD DAY OF DECEMBER, 2008.

ATTEST:STEPHEN P. POUGNET, CHAIR

JAMES THOMPSON, Qf Y CLERK

03


EXIIISIT "E"

68/1612009 SUNCase5:10-cv-01087-JW Document1 Filed03/15/10 Page63 of 65 iôr3 /o3a

1 2:34 F

Law Office of

Dwo G. KENYON -

OwD G. KFNym 7200 Redwood 91vd., Site 404 • Novafo, CA 94945FRFOERIGI M. CHAWA&W Telephone (415) 992-1968 • Fax (415) 892-1716 • E-mil: I.awkenyon @col.com

i

March 27, 2002

Residents of the Franciscan

Dear Residents:

You are receiving with this letter a notice of rent increase from CWS, theoperators of the park, telling you of the annual jacretase that occurs on July 1 st, per youroriginal Lease. This increase is not the one that many of you have agreed to pay if ZINCHousitig is able to purchase th= park for your benefit.

We are having some difficulty and delays with the purchase. It will not occurbefore April 1 ° The primary problem is that certain restrictions have been planed on thebonds that have made them, difficult to sell. For now, you should assinne that thetransaction will close in April and that those who have signed the Lease Amendment willbegin paying the $90 increase in May.

When the Acquisition transaction is completed, those who have signed the Lease "-Amendment will pay only the agreed-upon $90/month increase. Ever if the transactioncloses after July 1 m% youi CWS increase will be superseded by the LILAC $90 increase,And your total rent increase will amount tD $901month. Those who did not sign the LeaseAmendment will receive the emnual, CWS increase, per your original Lease.

For those efyou who have not yet signed a Lease Amendment agreeing to pay$90 more per montb if the Acquisition is successful, it is not too Iate. The $90 inmwsewill be valid up to -the closing of the aransacdon, after which time the increase will bePro-rated but not less than $100 per month.

Sincerely

David G. Kenyon

' If

4.

j

. r

I

I


EXHIBIT "F"

Case5:10-cv-01087-JW Document1 Filed03/15/10 Page65 of 65;x it i, a 1 N^ ti ;af ^^^ r^' ? r ti ^

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Another • Su' ccessful Conversion to Bet^^ "^ ^ ^ }. _

ship: Cooperative Acquires Seal Beach Trader PAr. _r i

On Friday, October 30th, The Loftin Firm LLP successfully assisted Seal Beach Shores, Inc, in acquiring theSeal Beach Trailer Park from the Seal Beach Affordable Housing Corporation, making the community a resi-dent owned mobilehome park. Seal Beach Shores, Inc. is the first resident owned corporation to have acquireda mobilehome home park from another entity organized as a 501(c)(3) nonprofit corporation and is itself a 501(c)(3) nonprofit corporation.

The deal included Seal Beach Shores assuming all underlying financing in place on the Park, including Cityissued bond financing, Califomia Department of Housing and Community Development ("HCD" ), Mobile-home Park Resident Ownership Program financing and other loan and grant money from the RedevelopmentAgency of the City of Seal Beach. The cooperative relationship development between Seal Beach AffordableHousing Corporation and its affiliated entity LILAC Housing Corporation, the City of Seal Beach, HCO, SealBeach Shores, the bond issuers and all attorneys is a testament to a collective desire to see a communitythrough the entire process of becoming resident owned.

Seal Beach Shores, as a limited equity housing cooperative, will provide residents within the mobilehome parkan opportunity to own a piece of the corporation that owns the park, an opportunity to regulate their own com-munity and their lives overall and to continue the protection for residents from unnecessary rent increases. Theprocess took many years to complete, but the residents are ecstatic about the opportunity and over 81 % of theresidents have opted to become members of the cooperative.

Ariel R. Bedell, a partner with The Loftin .Firm LLP stated that "Without the tenacity of the residents and thefull cooperation of everyone involved, the dream of resident ownership would not have occurred." Such testa-ment was reiterated by Ken Williams, Secretary of Seal 13 each Shores, Inc-, who stated that after the closing onFriday, residents were celebrating throughout the weekend and they are very thankful to Seal Beach Afford-able Housing Corporation, LILAC Housing Corporation, the City of Seal Beach and HCD for their respectiveparticipation, assistance, guidance and professionalism.

The Loftin Firm LLP has converted over 80 mobilehome parks to resident ownership a^pFR _ 11 rrriia,

representing park owners, residents and govemment agencies in the process. ^;'w £ R

For additional information regarding the conversion of the Seal B- ^, y 'ark to residett F^please contact either Ariel Bedell with The Loftin Firm at 76Q:E, or Ken Wil2iarrts.:vsrlt 13Shores at 562.397.0999..• . _:"! r'

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