Summer/Fall 2017 • Issue 61, page 8
Can a Receiver Keep Fees If the Underlying Judgement is Reversed on Appeal?
By Davidson, Peter*
Q. I have been appointed receiver to collect a
judgment. The judgment is on appeal. I am concerned that if the judgment
is reversed my fees might be in jeopardy. Am I entitled to keep the fees I
have been paid even if the underlying judgment is reversed?
A. You should be o.k., so long as the court which appointed you had
jurisdiction to do so. In a recent bankruptcy case, In Re Patrick Cox,
2017 W.L. 1058263 (Bankr. S. D. Texas 2017), the State of Texas obtained a
$46 million judgment against the debtor in state court prior to the debtor
filing bankruptcy. The state court appointed a receiver for all the
debtor’s non-exempt assets. The receiver collected $830,756 from the
debtor’s assets, disbursed $186,736 for his and his law firm’s fees and
reimbursed his law firm for $32,502 in expenses. Once the debtor filed
bankruptcy, the receiver turned over the remaining funds. Subsequently,
the Texas Court of Appeal reversed the trial court. The debtor then sued
the receiver contending that the state court judgment against the debtor
was void ab initio and that, by reason of its reversal, the funds paid to
the receiver and his law firm should be returned to the debtor on
equitable grounds or because they were avoidable as fraudulent transfers.
Bankruptcy Court ruled in favor of the receiver. The court held the focus
is not in whether the trial judge’s specific act was proper or whether the
judgment was proper or improper, but whether the trial court had
jurisdiction to appoint the receiver. Because the bankruptcy court found
the trial court had jurisdiction to enter the judgment and order the
appointment of a receiver, the receiver shared in the appointing court’s
judicial immunity and the receiver could not be sued, as long as the
receiver’s actions were taken in good faith and within the scope of the
authority granted to the receiver, citing Davis v. Bayless, 70 F.3d
367 (5th Cir. 1995).
Therefore, your fees should be safe so long as the
court appointing you had jurisdiction to do so. Further, you would have
the fallback position that the judgment creditor, who sought your
appointment, should be responsible for your fees if, for some reason, you
had to return them to the former judgment debtor, since the judgment
creditor is the party who sought your appointment. See Ephraim v.
Pacific Bank, 129 Cal. 589 (1900); Baldwin v. Baldwin, 82
Cal.App. 2d 851 (1947).
*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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