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Mediation is a smart and effective way to resolve disputes in
a receivership setting. A receiver, once appointed, is a neutral third
party and an agent and officer of the court. A receiver has, under the
control of the court, the power to bring and defend actions in his own
name, as receiver; to take and keep possession of property, to receive
rents, collect debts, to compound for and compromise the same, to make
transfers, and generally to do such acts respecting the property as the
court may authorize1. In this context, receivers can often find themselves
in an adversarial setting, and faced with a dispute that cannot be
resolved through negotiation between the parties. Rather than feeling the
only recourse is to litigate the dispute, which is not only a risky
option, but also very costly, mediation presents an alternative solution
that is relatively quick, inexpensive and generally risk-free. Further,
mediation allows parties to control the outcome of the dispute and to feel
like they have received a fair outcome.
A Receiver's Right or Power to Use Mediation
A receiver has only those powers granted by statute, by the
order of appointment, and by subsequent court orders2. California Code of
Civil Procedure Sections 564 through 570 provide the foundation for
California receivership procedure; Section 568 specifically sets forth the
powers of receivers.
Section 568 provides that a receiver has the power to "take
and keep possession of the property, to receive rents, collect debts, to
compound for and compromise the same . . . ” (emphasis added). Although
appearing to provide broad authority for a receiver to compromise
disputes, there is no explicit right of a receiver to use mediation and no
explicit power to "sign off" on a resolution reached through mediation, at
least without court authority or approval3.
In line with the above, a receiver's right or power to make a
contract binding the property or funds in his custody, without the
authority or approval of a court, is similarly limited. An unauthorized
agreement of a receiver does not bind the court in charge of the
receivership, is not recognized as a contract of the receivership, and is
treated as the receiver's own contract.
Case law, however, is replete with state court-appointed
receivers negotiating compromise agreements or settlements. Further, no
case has stated that a receiver could not use the assistance of mediator.
Seeking Court Approval
Based on the above, the best practice would be to include in
the order of appointment the right to, in the receiver's discretion, use a
mediator and enter into an agreement, subject to further court approval,
binding the property in dispute and the court in charge of the
receivership. To the extent that a receiver has been appointed without
such language in the order, a receiver may petition for additional
authority from the court or instructions as the need arises4.
Because parties can choose to initiate mediation at any
point, and because everyone is agreeing to participate, mediation
typically gives rise to less conflict throughout the process. This can be
critical if a party wants to maintain a good relationship with the other
side, and the concept of using a mediator in such a setting makes sense
and sets the stage for dispute resolution.
1 Cal. Code Civ. Proc. § 568.
2 See Cal. Code Civ. Proc. § 568; City of Santa Monica v. Gonzalez, 43 Cal. 4th 905, 930, 76 Cal. Rptr. 3d 483, 502, 182 P.3d 1027, 1043 (2008); Cal-American Income Property Fund VII v. Brown Development Corp., 138 Cal. App. 3d 268, 273, 187 Cal. Rptr. 703, 706 (Cal. App. 1982); Haswell v. Costellanos, 126 Cal. App. 427, 431, 14 P.2d 846, 848 (Cal. App. 1932).
3 Nulaid Farmers Assn. v. La Torre, 252 Cal. App. 2d 788, 791, 60 Cal. Rptr. 821, 823 (Cal. App. 1967).
4 See Steinberg v. Goldstein, 145 Cal. App. 2d 692, 696, 699-700, 303 P.2d 80 (Cal. App. 1956); Free Gold Mining Co. v. Spiers, 135 Cal. 130, 131-32, 67 P. 61, 61 (1901); In re Executive Life Ins. Co., 32 Cal. App. 4th 344, 399-400, 38 Cal. Rptr. 2d 453, 486 (Cal. App. 1995).
*Howard M. Ehrenberg is the President and Managing Member of SulmeyerKupetz, a premier business,
financial restructuring and litigation firm in California. He can be
reached at (213) 626-2311;
hehrenberg@sulmeyerlaw.com.
*Claire K. Wu is an
Associate with the firm and can be reached at 213-617-5284;
ckwu@sulmeyerlaw.com.
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