Summer 2003 • Issue 10, page 12

Profile: Commissioner Bruce E. Mitchell

By Rense, Kirk*

Commissioner Bruce E. Mitchell — and fellow Commissioner Victor Greenberg — are the persons Los Angeles area secured lenders turn to for protection of their real property collateral interests during foreclosure proceedings. Commissioner Mitchell’s Department 59 hears half of all the applications for appointment of rents, issues and profits receivers brought in downtown LA’s Central Division Superior Court, in addition to hearing eminent domain and class action matters, making his a very busy court indeed.

The Receivership News spent part of a recent sunny afternoon chatting with Commissioner Mitchell about his “pleasure and honor” in serving as a judicial officer, some knotty receivership issues of broad interest to Forum members (see the Q & A sidebar), and Commissioner Mitchell’s life away from the rigors of one of the busiest courts in Los Angeles.

But first the vital statistics. Commissioner Mitchell joined the Los Angeles County Superior Court in 1990 after spending six years in his own private civil practice in Beverly Hills, then three years handling business litigation matters with a Glendale law firm. He earned a bachelor’s degree in psychology from USC in 1973, and his Juris Doctorate from Stanford University Law School in 1978. He has been hearing real property receivership applications and related suits, in addition to other matters, since approximately 1998. He is also a former arbitrator for the Superior Court.

Commissioner Mitchell is a native Southern Californian, born in Santa Monica. As a youth he worked at times on his parents’ avocado ranch in La Habra Heights, and he and his two brothers assisted in managing several Los Angeles rental properties in connection with his father’s real estate business.

Commissioner Mitchell said his son, Chase, who is going on 11, hasn’t yet expressed a desire to follow in his dad’s footsteps.

“He’s playing catcher on his baseball team, is active in Boy Scouts, and is heavily into video games,” Commissioner Mitchell said. “I asked Chase the other day what he wants to become when he grows up and he said he plans to be an inventor, having already progressed through policeman and fireman. We’ll see,” he added.

When not adjudicating matters or spending time with his son, Commissioner Mitchell finds time to participate in legal education programs and seminars. He has been a featured speaker and panelist for several California Receivers Forum programs in recent months, and is a strong supporter of the organization.

“The Receivers Forum is an excellent organization with strong teaching programs. It brings together receivers from Northern and Southern California, and was much needed. I think it has elevated professionalism among receivers, and I commend those who organized it and see to its continuing success,” Commissioner Mitchell said.

What about the Commissioner’s professional and personal aspirations?

“It is a pleasure and an honor to serve as a judicial officer,” he said, “and to have people trust you to help in solving their disputes. I enjoy the work very much, and find it extremely rewarding. Of course, it would be nice if the Governor would appoint me as a judge one of these days,” he added. “I also want to keep spending as much time with my son as I can, and watch him create his own life.”

What about that novel he was working on ten years ago? Has he finished it?

“No, there is no time now. I may have to wait until retirement. These days are just too busy, “ Commissioner Mitchell said. n

Commissioner Mitchell Q & A
Commissioner Mitchell candidly expressed firm opinions on several questions central to receiver operations in the Central District:

Q: What is your attitude toward the receivers you have appointed? Do you feel that they are an extension of the bench and act for you in the things they do? Or do they sometimes act as a tool of the plaintiff?

A: A receivership arises in the context of a dispute between two or more parties. Of course the court appoints the receiver, who acts as an agent of the court. But more broadly, the appointing court is trying to help the parties resolve their dispute. The receiver is a fiduciary for all the parties and must act accordingly. There is a built-in conflict, in that the plaintiff usually nominates the receiver, and the receiver’s actions primarily benefit the plaintiff. We see some instances where the receiver is too closely allied with or shows too much deference to the plaintiff/secured creditor, and stop it. It’s inappropriate for plaintiff or plaintiff’s counsel to prepare motions for the receiver or prepare the receiver’s final account and report, for example. The receiver must remember that he is a fiduciary for both sides.

Q: How much independence do you wish your receivers to exhibit? Do you wish them to apply for instructions only where a highly significant issue is involved?

A: The number one area where receivers get themselves into trouble is where they do not seek instruction from the court. The best receivers come to court on a petition for instructions whenever a significant event occurs. This has a couple of benefits. All parties have an opportunity to address the issue. And once the court orders a course of action, my personal belief is that the receiver is not personally liable for following the court’s instructions. I find that non-lawyers and newer receivers are reluctant to ask the court for instructions, even embarrassed to do so. This leads to unfortunate events in some circumstances. The best receivers come to court often.

Q: Do you encourage receivers to seek instructions on shortened notice?

A: It depends on what the matter is. Today a receiver sought to sell a $2.8 million property on shortened notice, which would usually be inappropriate, but the receiver had all the parties’ concurrence. If the receiver thinks it appropriate, it is best that he/she bring the matter ex parte and ask if a fully-noticed motion is appropriate. The receiver should file at a minimum a declaration of ex parte notice to all parties, a written statement of the issues the court is requested to address, the receiver’s evidentiary declaration under penalty of perjury as to the principal facts and a proposed order for the court’s review. Some judges have no problem with a receiver calling directly to chambers to discuss an issue in the case. I do not encourage this. My personal feeling is that whatever the court hears the parties should hear.

Q: Do you encourage your receivers to retain counsel?

A: Usually not. Counsel is retained by the receiver in only approximately five percent — or fewer — of the cases I hear. In routine cases the receiver is essentially a property manager, with his own staff. He knows how to handle matters. But where the parties are taking very different positions and there is significant liability for the receiver is where we would expect counsel to be sought. I find that lenders and their counsel are quite sophisticated and know when counsel for the receiver is appropriate. For example, in lien disputes - what are and are not valid liens to be paid? The most experienced lawyer-receivers are the ones who will come to court and seek counsel — they know the risks. On the other hand, the receiver’s retaining independent counsel becomes a significant cost to the estate.

Q: Has there been an increase in the number of receivership applications recently?

A: The number of applications has been going down for some time. I think it was three or four years ago when the economy was in a sort of recession, and I understand there used to be lines to get into Departments 85 and 86. The situation can and will change again, but it doesn’t look like it is going to change soon, given the availability and money at low interest rates.

Q: Do you have a problem with a receiver staying on as property manager after completion of a foreclosure?

A: Historically there was a problem with lenders shopping for receivers to appoint or nominate and asking the receiver to agree to certain provisions about how the receiver was going to manage the property. Obviously that was a problem. I would be concerned if there were an agreement that the receiver would stay on as a manager. We require a statement from the receiver that no such agreements exist. In the event that the receiver and the lender enter into a new agreement after foreclosure because the receiver did a god job, I would not be offended by that.

Q: Under what circumstances may a receiver seek to issue a receiver’s certificate senior to existing secured debt?

A: This was the topic of a February Receivership Forum panel discussion in which I participated. California Health and Safety Code Section 17980.7 authorizes issuance of receiver’s certificates in connection with preserving substandard properties. The code says nothing about the priority of such certificates, however. The standard for granting priority was enunciated by the California Supreme Court in the 1915 decision Title Insurance and Trust Company v. California Development Company, which authorized granting of priority where the funds raised by the certificate were to be used for the care and preservation of the affected property. The court’s rationale was, I believe, that all parties - including existing secured parties whose collateral interests would become junior to the new debt - would benefit from such preservation. Some very qualified receivers and attorneys argue that this case is too old to be of much precedential value. I disagree. It is good law, with a basis in fact. But the court and the receiver must be sure the funds are used only for repairs that are reasonable and necessary. If not, there is the risk the order authorizing priority for the funds might be overturned on appeal, creating substantial problems for the receiver and, possibly, existing secured lenders.

*Mr. Rense is a lawyer specializing in insolvency and in representing court-appointed fiduciaries, with more than twenty years of experience. He was a journalist before attending law school at the University of Southern California Law Center. Kirk is a former board member of the California Receivers Forum, LA/OC Chapter.