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8 | THE COLONY NEWS | JUNE 2021 | HOA NEWS By the Board of Directors During the March 18, 2021 open forum, one of our members asked a few direct questions regarding the status of the golf course litigation. Those questions offer a proper foundation for this month's golf course litigation update. The questions submitted are as follows: Q: What steps is the Board planning, in worst-case scenario, regarding the golf course litigation? What specifically is the plan? Is it wait and see? Or is the Board making a contingency plan? By "worst-case scenario," we are assuming that the member meant that the golf course ceases operations and lets it go fallow. The Board does not believe that this worst-case scenario is likely to happen, but it is a possibility. The judgment that the Association won against the owners of the golf course mandates that they continue to operate the golf course and maintain it to the standards that they agreed to when they bought the golf course, which are the standards set forth in the judgment. After the judgment was entered, the owners of the golf course failed to make the necessary repairs to the golf course and the condition of the golf course continued to deteriorate, including the condition of the fingers and slopes. The Association's attorneys filed a motion with the court to have the court enforce the judgment. The Association is the holder of a "Performance Deed of Trust" that encumbers the golf course property. The Performance Deed of Trust allows the Association to foreclose on the golf course if the owners are in breach of the terms of the judgment and their maintenance obligations. One of the remedies that our attorneys sought in the motion to enforce the judgment was to have the court declare that the owners of the golf course were in breach of the Performance Deed of Trust and order the foreclosure of the golf course property. The Performance Deed of Trust includes a provision that the Performance Deed of Trust is only subordinate to the first $1.25 million of any encumbrance on the golf course property. At the time our attorneys first brought the motion and requested that the court order the foreclosure of the golf course property, the golf course property was unencumbered, meaning that the owners held title free and clear (except for the Performance Deed of Trust). The judge who issued the judgment was unavailable at the time our attorney filed the motion, so the case was reassigned to Judge Asberry in Department 5 of the Riverside Superior Court. Judge Asberry was out on a leave of absence at the time the motion was first heard, and the motion was heard by a retired judge who was sitting temporarily in that department. He continued the first hearing. By the time the continued hearing was held, a different retired judge was sitting in that department and he continued the hearing again to give himself time to come up to speed on the case. At the next hearing in August 2019, the judge was very adamant that the parties should meet and confer and agree on a plan to have the owners of the golf course make the necessary repairs to the golf course. The judge stated that if the owners of the golf course could not provide the Association with an acceptable plan and time frame, he was inclined to order the foreclosure of the golf course. He continued the hearing to December 2019 and ordered the owners of the golf course to meet with the Association to try to work things out. That meeting was held and the owners of the golf course, instead of trying to work things out, complained that it was impossible to comply with the court's order. They provided some plans for renovating the slopes and fingers but maintained that they were unable to generally comply with the judgment. Shortly after the August hearing, the owners of the golf course recorded a Deed of Trust on the golf course property that encumbered it for $3.5 million. This was an obvious ploy to take away the possibility of a foreclosure since no one would bid on the golf course at the foreclosure sale knowing that there was a $3.5 million Deed of Trust encumbering the property. Our attorneys believe that this Deed of Trust is a fraudulent conveyance between insiders, and the Association has filed a separate lawsuit to have the $3.5 million Deed of Trust declared invalid and removed. The trial on that case is set for September 24, 2021. In December 2019, because of the $3.5 million Deed of Trust, the Association's attorneys asked the court to appoint a receiver to take over the golf course and operate it to generate sufficient revenue to make the necessary repairs and establish a maintenance procedure in line with the judgment. By the time of that hearing, Judge Asberry had returned and she continued the hearing several times until at last, in March of 2020, she ordered the appointment of a receiver and appointed Chris Neilson of Trigild to be the receiver. As we all know, shortly after the appointment of the receiver, the pandemic caused the closure of all golf courses in California. Between the time the court ordered the appointment of the receiver and the receiver was appointed, the owners of the GOLF COURSE LITIGATION UPDATE article continued on following page

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