CDA to pay Pacific Gardenia receiver $17K

A judge has ordered the Commonwealth Development Authority to pay $17,000 in fees linked to the now closed Pacific Gardenia Hotel and its long embattled former manager, Rex Palacios.

The ruling in Superior Court Tuesday clears the way for the CDA to sell the hotel to an already approved buyer, according to a confidential government source. However, the buyer remains unidentified for now.

“We’re moving forward,” Matthew Smith, the CDA’s attorney, said of the pending sale.

CDA took over the Pacific Gardenia Hotel and its attached restaurant by foreclosing on it. The agency later put Palacios in place as a so-called “receiver” to manage the property and attempt to revamp the business.

However, Palacios struggled to keep the hotel on solid financial footing due to tax problems, labor disputes and other issues.

The hotel later shut its doors and litigation followed; with Palacios demanding payment for attorney fees linked to the labor dispute and more than $79,000 for his services as manager of the property.

CDA contested the fees, however, saying Palacios misrepresented the financial status of the hotel and had agreed he would be paid only from the proceeds of the hotel’s operation.

“CDA was misled and Mr. Palacios was negligent in the way he handled” his management of the hotel, Smith said in court.

Yet attorney Timothy Bellas defended Palacios’s management of the hotel, saying among other arguments that the contract between Palacios and the agency overburdened him with duties. Moreover, the CDA was aware the hotel had seen financial problems during Palacios’ management, Bellas said, adding that the hotel’s failure can largely be attributed to “economic forces outside of [Palacios’] control” such as the diminished local tourism market.

Judge Ramona Manglona ruled the costs Palacios faced settling the labor dispute—which stemmed from thousands in unpaid wages—and the related attorneys fees are an “administrative expense” that CDA should pay through the eventual sale of the property. Those fees total $17,000. Manglona stopped short of ruling on the remaining fees Palacios is demanding that CDA pay, saying the amount requested, “warrants review” in light of the questions surrounding his management.

Palacios was absent during the hearing.