A lender has asked an Orange County judge to seize control of the palatial Villa del Lago estate from its defaulting owners, saying that urgent action is needed to preserve the compound’s value.
Superior Court Judge Tam Nomoto Schumann decided Wednesday to deny the bank’s request to have a receiver named on an emergency basis. But she left the door open to taking control after a hearing in June.
Newport Coast’s Villa del Lago estate features a 17,500-square-foot mansion with marble columns, a lake, tennis court, equestrian facilities and a vineyard.
It’s also the priciest home currently for sale in Orange County with an asking price of $37 million – marked down from a one-time price tag of $87 million two years ago.
At issue is who holds the keys to McMonigle’s 12.5-acre dream home in Newport Coast. The property, which is at least 90 percent complete, features a three-story 17,500-square-foot mansion with marble columns, gold-leaf doors and ceilings, a 7,000-square-foot garage, a lake, stables, vineyard and tennis court.
McMonigle has been developing the property on spec since he bought it from the Irvine Co. in June 2003.
McMonigle stopped making payments on a $21.6 million construction loan in July, complaining that failed lender La Jolla Bank breached its terms when it stopped funding the loan in late 2009 and early 2010.
OneWest Bank, which took over La Jolla Bank after it was seized by federal regulators, sued McMonigle last month seeking to have the property auctioned off to satisfy the debt, now ballooned to $22.6 million because of fees and late charges.
In addition, OneWest asked the court to appoint a receiver, who would take control of the project on the court’s behalf, with virtually all the powers of an owner. Among the powers OneWest wants the receiver to have:
- Possess, operate, manage and preserve the property.
- Take possession and control of all records, correspondence, books and accounts of the property.
- Obtain copies of all plans, specifications and drawings pertaining to the property.
- To enter or modify contracts affecting any part of the property, including the power to terminate contracts.
- To make any repairs he or she deems necessary.
“The receiver would have, generally speaking, the duties and powers that an owner would have,” commented Steve Donell of FedReceiver.com, who has been appointed receiver on dozens of properties.
“The down side for the owner is the owner’s lost control and the owner can’t make decisions,” he said. ” … (A receiver) can even limit the ability of the owner to set foot on the property.”
While McMonigle continues his efforts to sell the property for a price above $30 million, the receiver can entertain offers for far less, so long as they cover the bank’s loan amount. The final decision for such a sale would be up to the judge, but could take place over McMonigle’s objections, Donell said.
“The court can force a sale,” he said.
In court papers, McMonigle’s attorney argued that it was the bank that breached its duties when it failed to fully fund the construction loan, relieving the property’s owners of their “legal obligation to comply with terms of the (loan) contract.”
The attorney, Sean O’Keefe, argued further that cutting off just under $2 million in funding also made it impossible for the owners to meet their obligations.
The Villa del Lago loan is one of five with OneWest that McMonigle defaulted on.
He also has stopped making payments on his headquarters building near Fashion Island, on two units in a Newport Beach building and a vacant lot near Palm Springs. McMonigle said that all five defaults are in response to the bank’s action on the Villa del Lago loan.
The bank’s actions “had a devastating effect upon the construction effort” at Villa del Lago, McMonigle said in a court declaration. “Materials were delayed, construction slowed and finally stopped, and cost overruns occurred.”
McMonigle said construction would have been completed last spring had funding not been cut, saying that the lack of progress “cast a taint over the project.”
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