Winter 2006 • Issue 20, page 12

Can the plaintiff nominate the Receiver?

By Davidson, Peter*

Q: I have been asked to be a receiver and was thinking of having the plaintiff nominate my corporation, rather than me, to take on that role. Is this okay?

A: If you review the receivership sections in the Code of Civil Procedure, starting at C.C.P. §564 et seq., or the Rules of Court relating to receiverships starting at Rule 1900 et seq., you might assume that having a corporation appointed as receiver would be okay; because there is no express prohibition in those sections. However, buried in the Financial Code there is a prohibition on a corporation acting as a receiver unless it is qualified to engage in the trust business. Section 106 of the Financial Code defines “trust business” as the “business of acting as executor, administrator… receiver…under the appointment of any court, or by authority of any law of this or any other state or the United States, or as trustee for any purpose permitted by law”. Section 1500 of the Financial Code provides no corporation shall engage in the trust business unless it has qualified as required by that section. Therefore, unless your corporation has qualified to act in the trust business, pursuant to the provisions of Financial Code §1500, it cannot be appointed or act as a receiver in California.