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Investors work to resolve fate of Sargent Ranch

An aerial view of Sargent Ranch's borders, just south of Gilroy.

The core dispute surrounding 6,400 pristine acres just south of Gilroy – a magnet for real estate developers, a Holy Grail to nature conservationists and “most sacred grounds” to a local Native American tribe – could unravel in court this month if the property’s dozens of investors find common ground.

It would mark a milestone in the twisting and turning battle over Sargent Ranch: A vast expanse of undulating hills, unsullied wildlife habitats and unincorporated farmland located on the westside of U.S. 101 between the Castro Valley Ranch and the San Benito and Santa Cruz county lines.

The question of what – if anything – will become of the land and its “stellar natural resources” is the lingering quandary that’s dragged on for more than a decade.

New events and sources are illuminating the “incredibly complex” saga. Dozens of squabbling lenders are working to resolve a stalemate over property rights.

“There’s a lot of infighting going on … that’s why this thing has languished so long,” explains Managing Director Howard Justus with San Diego-based Debt Acquisition Company of America, which has acquired 30 percent of the debt of the first deed of trust on Sargent Ranch.

There are three deeds of trust on Sargent Ranch amounting to more than $500 million, Justus said.

Sargent Ranch has been ensnared in litigation since the former primary owner – La Jolla developer Wayne Pierce – filed for Chapter 11 bankruptcy in December 2010. At the time, Sargent Ranch, LLC owed more than $90 million on the property.

Pierce, whose past schemes for the property involved a golf course, luxury housing complex and casino/gaming resort, is completely out of the picture now, according to Justus.

Multiple attempts to reach Pierce this year were unsuccessful.

Deciding how to handle things from here is the crux of the mess. Lenders disagree on what to do with Sargent Ranch, and how the proceeds should ultimately be divvied up.

“All of the things that were proposed (for Sargent Ranch) are things that would never have been approved or weren’t realistic,” says David Wallace of Danville-based Sargent Ranch Servicing Corp., which represents some of the lenders. “All of the chatter about casinos and houses and things like that…I think those were just Pierce’s dreams. Dreams, or lies. Take your pick.”

The lenders whom Wallace represents want everyone to “get some money back” through a proposed a settlement – “but it isn’t one that (Justus) likes,” said Wallace. “We prefer a solution that works to a benefit of all of the lenders. All of these people were damaged by the actions of Pierce.”

Justus, alternately, who represents a group of lenders in the first deed of trust, says those in the first deed of trust should be paid in full with all the accrued interest, according to the law.

“We just want to foreclose and take our collateral,” he said.

The issue will be hashed out in a Contra Costa County civil court, where “we’re hoping to have it wrapped up this month,” Wallace said.

Justus thinks it will take until June 2013.

Moving forward

As for what will become of Sargent Ranch, Justus and Wallace are hesitant to speculate. They’re focused on untangling the lender dispute.

Justus says there are “a lot of different approaches with that property,” while Wallace says the “broad, underlying consensus” is that a casino, expansive real estate plans or thousands of housing units on Sargent Ranch “don’t make a lot of sense.”

There are already oil wells – some active and inactive – on the property, according to Justus and Wallace.

It’s a “good question” where those oil royalties have gone in the past, Justus said. Right now, the royalties are being held by the oil company that’s operating the wells “until they’re given clear direction on where they’re to be paid,” says Justus.

Wallace maintains there aren’t any immediate plans to erect more oil wells, which he claims have a low environmental impact.

“Most of our attention and focus is really getting the lenders to a point where they can work together,” he says. “Then, a path forward is going to emerge; one that’s going to be embraced by people in the community and county and state and everyone else involved.”

Numerous local environmental preservation organizations have expressed concern for the property over the years, including the Santa Clara County Open Space Authority, Greenbelt Alliance in San Jose, Santa Clara County Audubon Society, Loma Prieta Sierra Club, the Nature Conservancy in California and the California Department of Fish and Game.

Shielding Sargent Ranch from subdivision and development “is something we’re really interested in,” says Assistant General Manger Matt Freeman with the Santa Clara County Open Space Authority.

The organization, which works to preserve key portions of the natural environment in order to balance urban growth, is “keeping tabs” on Sargent Ranch, said Freeman. He believes a number of Bay Area conservation agencies would “line up” to establish protective safeguards for the acreage – that is, “when we have a party we could negotiate with.”

“But good luck” with that, Freeman adds.

Sargent Ranch and the Amah Mutsun

The well-being of Sargent Ranch also bears weighted significance for the Amah Mutsun Indians, who have deep ties to Santa Clara County and San Benito County.

The band of Ohlone/Costanoan Native Americans revere the land as a hallowed domain of heritage, history and territorial identity where their ancestors fished, hunted and raised families for centuries.

Not knowing what the future may hold for Sargent Ranch “doesn’t feel good,” said Tribal Chairman Valentin Lopez. “We want Sargent Ranch to stay whole as it is. Our big fear is that they will start mining or developing the land.”

The backdoor attempt to build a luxury gaming resort and sand quarry on the property surfaced on the Internet, one month prior to Wayne Pierce filing for bankruptcy in 2010. The news was met with heated contention from the Mutsun.

Several years before that, Lopez and his fellow tribal members were embroiled in a bitter land battle between Pierce and a splinter a group of Amah Mutsun Indians. The faction signed a development agreement with Pierce that could have ultimately allowed him to sidestep county zoning laws and develop 3,000 acres under Indian sovereignty.

The federal discovery of forged tribal papers, however – which were submitted by the tribe’s false leader in what Lopez called an “attempt to cling to power” – ultimately killed schemes to fast track development projects.

For decades now, the tribe has been seeking permission to have access to the land in order to hold formal ceremonies and prayers on the property – but to no avail.

Blackhawk: Out of the picture?

In most recent real events surrounding Sargent Ranch, a public foreclosure auction for the Santa Cruz County portion of the ranch was held July 26 on the steps of the Santa Cruz County Administration Building.

First Blackhawk Financial Corp., the Danville-based mortgage lender foreclosing on Sargent Ranch, was seeking to recover $21.6 million during the auction. Blackhawk was captained for 18 years by former CEO Gregory F. Griffin, who once owned 15 percent of Sargent Ranch.

During the auction, the land parcels were reverted, or sold, to the beneficiary, which is Blackhawk.

The odd fact is that Blackhawk is defunct and no longer in the picture, according to Wallace – even though the company’s 5-year-old address in Danville is still listed in county records as the primary mailing address for Sargent Ranch-related business.

Blackhawk’s rights, powers and privileges to do business as a corporation in California, furthermore, have been suspended by the Franchise Tax Board.

Wallace cannot account for why Blackhawk is still in the picture, at least on paper.

“That would be a question for Griffin, if you can find him,” says Wallace. “It’s kind of moot and doesn’t really matter.”

Marin County attorney Jeff Goodrich, who also represents some lenders in the first deed of trust, says former Blackhawk CEO Greg Griffin simply assigned his loan servicing rights to Wallace, who is a personal friend. Griffin filed for bankruptcy in 2010.

Goodrich claims there has been a “serious amount of underhanded conduct going on” on Wallace’s end, as far as Sargent Ranch dealings are concerned.

However nebulous the future of Sargent Ranch, its potential for open farm and parkland is vast, says Matt Freeman with the Open Space Authority.

The property provides habitats for the California tiger salamander, red-legged frog and burrowing owl, and could be part of a network of future protected space and open conservation lands that would facilitate long-term linkage between the Santa Cruz, Gavilan and Diablo mountain ranges. This is important for wildlife connectivity and maintaining natural ecological processes, according to Freeman.

Protecting the local agricultural economy and harboring Sargent Ranch from future subdivision, mining and development is a “priority,” he said. “Just the prospect of that is promising.”