Judge Rules Against Trinitas

Posted to CalaverasEnterprise.com: Friday, February 10, 2012 9:17 am | Updated: 9:35 am, Fri Feb 10, 2012.

After nearly three years of motions, hearings, and appeals, the Trinitas battle appears to have reached a major turning point. U.S. Bankruptcy Court Judge Ronald Sargis has decided to allow the Community Bank of San Joaquin to foreclose on the 280 acres of land which is the principal asset claimed by Michael and Michelle Nemee.

Last month, Sargis delayed the enforcement of his earlier ruling that would have required the Trinitas owners to stop all commercial golf activity by Jan. 27. But after the bank forecloses on the property, the Nemees will no longer have a golf course.

In November the Nemees lost a lawsuit that ruled their golf course did not qualify as a legal form of agritourism. The course was built without permits on agricultural land and was determined unlawful by the Calaveras County Board of Supervisors in 2009.

Judge Sargis issued a tentative ruling on Wednesday, which explained the grounds for his intended decision to permit the bank to proceed with foreclosure. In essence, Sargis concluded that because the Nemees owed more than $4 million to the bank and other lenders on a property worth less than $2 million, they had no equity in the property which would justify allowing them to retain ownership.

“At the end of the day there is no effective reorganization in this case,” Sargis wrote. “There is only the Nemees litigating with Calaveras County over whether it is legal for them to have constructed and for Trinitas Enterprises, LLC, to operate a commercial golf course on the 120-acre parcel and the 160-acre parcel. Rather than a reorganization, this Chapter 11 case has devolved into a free litigation injunction while the Nemees, on behalf of themselves and Trinitas Enter-prises, LLC, fight their battle with Calaveras County. Com-munity Bank having shown that there is no equity in the property, and the Nemees failing to provide evidence that there is an effective reorganization in prospect in this case, which is now more than two years old, the motion is granted.”

Sargis’ ruling gives the Nemees a 14-day window to either file an appeal with the U.S. District Court in Fresno, or negotiate an agreement with the bank.

As Sargis noted, such a prospect seems unlikely, as the Nemees are continuing to spend substantially more than they earn every month.

“Though Trinitas Enterprises, LLC, was operating on the property pursuant to a lease/license, no payments were being made to the estate for that use,” Sargis wrote. “Only when the court required the Nemees to make payments to Community Bank in an amount equal to the accruing interest on the senior note did the (bank) begin receiving a payment from Trinitas Enterprises, LLC (in the amount of the payment required to be made to Community Bank)”

Based upon his claim that the Nemees will prevail on appeal in their litigation with Calaveras County, their attorney Ken Foley argued that the court should keep the bank from foreclosure so that golf can continue while that appeal is pending. But in his tentative ruling, Sargis rejected that argument.

“This does not show that this property is necessary to the Nemees prosecuting an effective reorganization in this case,” Sargis wrote. “But that the only plan conceived by the Nemees is for Trinitas Enterprises, LLC, to operate a commercial golf course.”

Because bankruptcy law provides for an automatic delay in rulings of this kind, there will be an additional two-week delay before the bank can formally begin the foreclosure process.

Trinitas will be back in court Feb. 24, when the Nemees will appeal Judge Sargis’ Jan. 27 ruling in favor of Calaveras County – a ruling that would enable the county to enforce code violations. The bank, which had advertised an auction of the property on the courthouse steps on Feb. 17, will now have to wait until at least early March.

Contact Alex George at ageorge@calaverasenterprise.com or read the article in it’s original form here.