Recent Unpublished California Court of Appeal Receivership Opinions By Pasternak, David* In the experience of at least one
receiver (who is the subject of all of these cases), appeals are becoming
more common in receivership cases. The California Court of Appeal for the
Second Appellate District (which includes Los Angeles County) recently
issued three unanimous unpublished opinions concerning three very
different receiverships – a marital dissolution receivership; a civil
dispute concerning competing factions for control of a religious temple
and its assets; and a Health and Safety Code receivership. While an
unpublished decision may not be cited or referred to in any court filing
or proceeding, the opinions are still instructive for receivers in other
cases, and especially valuable if a similar issue is ever presented to one
of the Court of Appeal Justices who ruled in one of these prior cases.
Copies of these three unpublished opinions are posted on the California
Receivers Forum website. In affirming the family law court’s sale order, Presiding Justice Dennis M. Perluss noted that the exemption on execution of retirement accounts (including IRA accounts) is limited “only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the spouse and dependents of the judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judgment debtor retires. . . .” CCP § 704.115(e). In this case, the family law court heard evidence from the receiver valuing the two properties to be sold at only approximately 3% of the husband’s real property asset portfolio. During the appeal of this order, the husband and wife settled all of their disputes at a mediation at the Court of Appeal held in connection with this appeal. In footnote 2 to his opinion, Justice Perluss determined that there was still a justiciable controversy about whether the properties could be sold solely to satisfy the unpaid receiver’s fees and expenses. The Court ultimately held that the real properties could be sold solely for that purpose. Khmer Buddhist Assn. v. David
Pasternak (Division Four, Oct. 24, 2011) In this appeal, the disgruntled temple faction asserted that the receiver was not entitled to the compensation awarded to him because his appointment had been improper and impermissible. In reasoning much appreciated by the receiver, Justice Thomas L. Willhite, Jr.’s Court of Appeal opinion affirmed the trial court’s award of compensation to its receiver, stating: “We reversed the order appointing the receiver only because the stipulation to be enforced by the receiver was reversed, not because of the lack of merit of the appointment.” In the prior appeal, the Court of Appeal added
instructions to the trial court to supervise the termination of the
receivership only after the receiver filed a motion in the Court of Appeal
for rehearing or clarification of its initial opinion. This was because
the Court of Appeal’s initial opinion did not so provide, and had left the
receiver dangling without any certainty that the trial court had the
jurisdiction and authority to terminate its erroneously appointed
receiver. While the receiver was given the authority to rehabilitate the property, as the result of the sudden significant decline in real property values (especially for undeveloped properties such as the one in this case), at the conclusion of the work and following the sale of the receivership real property, there were insufficient funds to pay any of the receiver’s fees and costs as well as significant funds due to third parties for other receivership obligations. Consequently, upon approving the receiver’s final report and account, the trial court ordered McAlister Investments to pay the receiver $221,583.48 for those remaining obligations. McAlister Investments appealed, asserting that the trial court erred for multiple reasons. Holding that the receivership was a quasi in-rem
remedy (i.e., related to the property), and that this foreclosing lender
was bound by a stipulation of its predecessor-in-interest that a nuisance
existed (which resulted in the appointment of the receiver), Justice
Jeffrey W. Johnson’s Court of Appeal opinion held that the foreclosing
lender who acquired the real property during the receivership benefited
from the receivership even though the receiver sold the property and the
foreclosing lender never realized any actual gain from its ownership of
the property. The obvious lesson is that a lender forecloses on
receivership real property at its peril, and should think carefully before
embarking on such a course of action. |