Spring 2017 • Issue 60, page 17
Ask the Receiver: How Does a Receiver Sell the Homesteaded Home of a Judgment Debtor to Satisfy the Judgment?
By Davidson, Peter*
Q: I am a receiver
appointed to collect a substantial judgment. The judgment debtor’s home
has appreciated since the entry of the judgment five years ago. Can I list
the house with a broker and, once a buyer is located, petition the court
to approve the sale? The judgment debtor claims he has a homestead
exemption and that I can only sell the house if I comply with homestead
statute, which requires the sale be in accordance with the provisions for
execution sales. Is that correct? I thought, as receiver, I can sell
property using other methods, so long as I get court approval.
A: Because you are a
receiver in aid of execution, appointed pursuant to C.C.P. § 708.620,
which is part of the Enforcement of Judgments Law, C.C.P. § 680.010 et.
seq., courts have held such a receiver’s sale of a judgment debtor’s home
must be conducted pursuant to the provisions for execution sales involving
real property, C.C.P. § 704.740.
See Wells Fargo Financial Leasing,
Inc. v. D&M Cabinets, et. al., 177 Cal. App. 4th 59 (2009) (“D&M”). In
the case, the court undertook a “plain meaning” review of the relevant
statute and held, because the statue is clear and unambiguous, it must be
applied as the legislature wrote it, despite the fact that, as Wells Fargo
argued, a sale by the receiver directly, subject to court approval,
without complying with the execution sale statute, might be cheaper,
quicker and actually result in a higher sales price. Section 704.740
states: “the interest of a natural person in a dwelling may not be sold
under this division to enforce a money judgment except pursuant to a court
order for sale obtained under this article...” The court explained that
the “division” referred to is Division 2 of the Enforcement of Judgments
Law – which includes § 708.620, the statute authorizing the appointment of
a receiver in aid of execution. The “article” referred to is Article 4.
“Homestead Exemption,” sections 704.710 through 704.850 . The court,
therefore, concluded: “Read in its entirety, the plain language of section
704.740 contemplates that a receiver may be appointed to sell a dwelling,
but the receiver must obtain a court order for sale under article 4” Id.
at 103-104. That procedure, however, as one court has acknowledged: “is a
cumbersome, time-consuming and expensive undertaking,” Dang v. Smith,
190 Cal. App. 4th, 646, 662 (2010), and “due to the minimum bid
requirements… it is very difficult, if not impossible, for a debtor’s
home actually to be sold at an execution sale.” Id. at 660
(citations omitted, emphasis in original). The D&M court did review, and
distinguish, a number of familiar cases receivers often cite to justify
their ability to sell residences, or other property, using procedures
other than execution sales. It distinguished each, because in each case
the receiver was not a receiver in aid of execution and, therefore, was
not bound by the Enforcement of Judgments Law. For example, People v.
Riverside University, 35 Cal. App 3d 572 (1973) involved personal
property being sold by a receiver of a school over a charitable trust;
City of Santa Monica v. Gonzalez, 43 Cal. 4th 905 (2008) was a health
and safety receivership; People v. Stark, 131 Cal. App. 4th 184 (2005) was
a ‘white-collar’ crime receivership; Lesser & Son v. Seymour,
35 Cal. 2d 494 (1950) was a partnership dissolution receivership.
Therefore, while a receiver in aid
of execution can sell a residence, which a judgment debtor claims as his
or her homestead, the normal execution procedures for such a sale must be
followed. They include: (1) a hearing at which the court determines
whether a homestead exemption exists; (2) if it does, the court it must
determine the amount of the exemption; (3) the court must also determine
the “fair market value” of the dwelling (this will require appraisals);
(4) if a sale, subject to the homestead exemption, would produce a
sufficient bid to satisfy any part of the judgment, the court can order
the sale, but the order must specify the amount of the proceeds to be
distributed to each person having a lien on the dwelling, including their
name and address; (5) if no bid is received that exceeds the homestead
exemption plus the amount needed to satisfy all liens, the property cannot
be sold, and the creditor cannot try again for one year; (6) the bid must
also be 90 percent or more of the fair market value.
See generally C.C.P. §704.750
– 740.850.
*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.
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