Marysville Hotel ownership to be target of city lawsuit
A lawsuit aimed at recovering costs from the individual members of a limited liability company that owns the Hotel Marysville is expected to be filed by the City of Marysville next week.
Mayor Chris Branscum informed The Appeal-Democrat that the City Council voted in closed session Tuesday night to order the preparation and filing of a lawsuit against Feather River Plaza, LLC, which has owned the hotel for 17 years and missed a critical deadline this week to comply with an order to tear down the building.
The official announcement of the closed door action will be made at the city council's next meeting, but the mayor said he is authorized to disclose the council's decision to sue for recovery of current and potentially future costs. That bill already runs somewhere between $100,000 and $300,000 and could exceed $3 million if the city demolishes the structure instead of the owners, the mayor said.
"We're filing this lawsuit with a view to piercing the liability veil otherwise provided to a limited liability company," Branscum said. "The target is the present owners of the LLC."
Just who those member owners are is unknown to City Hall, but the mayor said the discovery process of the lawsuit should allow the city to find out the names of the individual members of the limited liability company.
Daniel Katz, a Los Angeles real estate attorney representing Feather River, LLC, did not respond to an email request for comment. He previously has stated the owners don't want to comment anymore about the matter.
Limited liability companies are business entities formed to shield its member owners from personal liability for damages caused by the company. Branscum said the city can pierce that veil by showing the entity is undercapitalized, with no other assets than the property itself.
The mayor described the hotel as a "naked asset encapsulated in a limited liability company that is undercapitalized. We believe it is uncapitalized.
"They have no insurance for foreseeable risks, one of which came to pass," the mayor said.
The roof of the five-story hotel was incinerated in a fire June 15, and the structure is in danger of collapsing and emitting cancer-causing asbestos in wind and rain storms.
The southbound lanes of Highway in front of the hotel have been closed since the fire, and the detours have disrupted traffic in downtown Marysville and throughout the region.
Caltrans notified Feather River Plaza, LLC, that it will seek to recover costs for closing the highway, security, detours, and a debris fence constructed to contain the fallout from a collapse of the structure.
Earlier this month, a three-member panel of building officials not affiliated with the City of Marysville but acting as an administrative appeals panel, determined the building is a risk to the health and safety of the public and ordered the owners to demolish the structure. The owners failed to meet a deadline that passed yesterday to get needed permits and show proof they had hired a demolition contractor to begin the work.
Branscum noted that both a Superior Court judge and the administrative panel of building inspectors have ordered the owners to demolish the building due to its condition. "On a parallel course the city is allowed to demolish the building with no risk of retribution from the owner," he said.
The city is attempting to avoid the cost of tearing the building down, and the lawsuit is designed to make the owners pay for the damage caused by the condition of their private property.
"The lawsuit is for money damages," the mayor said. "We have incurred damages to date of six figures, a substantial amount, and there is the prospect we may have to incur additional damages up to and including tearing the building down."
"It would be inequitable to have another party incur the burden that is otherwise the responsibility of the owner," the mayor said. "It would be inequitable to have the city, for example, bear that financial burden."
