Summer 2012 • Issue 44, page 19

Can a creditor with a judgment levy on receivership estate funds?

By Davidson, Peter*

Q: I am a receiver for a partnership. A creditor with a judgment has threatened to levy on funds I have collected. Can she do that?

A: No. Remember you are the court’s agent and property you hold as receiver is actually in the custody of the court–sometimes referred to as “in custodia legis.” As a result, the property in your possession cannot be levied on, garnished, or attached without the consent of the receivership court. Robbins v. Bueno, 262 Cal.App.2d 79 (1968) (“Property in the custody of a receiver is generally not subject to garnishment or attachment without the court’s consent. Because the receiver is appointed by the court, he becomes an officer of the court; thus his custody is actually the custody of the court. (citations omitted)”); City of Los Angeles v. Knapp, 22 Cal.App.2d 211, 212 (1937) (“The general rule is the property in custodia legis is not subject to garnishment.”). The one exception is, if a person is entitled to a definitive distributive share of the fund being held, one of his creditors may garnish it after the court has ordered the receiver to pay. Knapp at 212 (“If a party has a right to a certain distributive share of a fund in custodia legis, the officer having custody of the fund may be effectively garnished by a creditor of the party entitled to such fund”).

*Peter A. Davidson is a Partner of Ervin Cohen & Jessup LLP a Beverly Hills Law Firm. His practice includes representing Receivers and acting as a Receiver in State and Federal Court.