Q: I am a receiver in a family law matter. There is a property held in the name of an LLC, wholly owned by one of the parties. The court has authorized me to sell the property, but the party on title refuses to sign the escrow documents and deed. While I could bring a contempt motion, that is a long, drawn out and expensive undertaking. My broker asked me why I couldn’t just ask the court to appoint me or the clerk as an elisor to sign the documents and deed. What is an elisor?
A: An “elisor” is person appointed by the court to perform functions like the execution of a deed or document. A court typically appoints an elisor to sign documents on behalf of a recalcitrant party in order to effectuate its judgments or orders where the party refuses to execute such documents. Blueberry Properties LLC v. Chow, 230 Cal. App. 4th 1017, 1020 (2014). In California, the authorization to appoint an elisor is found in C.C.P. § 128 (a)(4) which provides the court has the power: “To compel obedience to its judgments, orders, and process and to the orders of a judge out of court, in an action or proceeding pending therein.” In the Blueberry Properties case, the defendant had entered into an agreement to sell an apartment complex. She refused to complete the sale and Blueberry Properties brought an action for specific performance. The parties then settled, with the defendant agreeing to sell the property to Blueberry Properties as originally agreed to. She, however, once again failed to comply. The court then entered judgment pursuant to C.C.P. § 664.6, requiring the defendant to execute all documents necessary to complete the sale. The defendant, however, refused to execute the documents. Blueberry Properties then filed a motion to have the clerk appointed as an elisor to execute the deed and other documents, which the court granted. On appeal that order was upheld. In another very recent case, SEC v. BIC Real Estate Development Corporation et. al., 2017 WL 2619111 (E.D. Cal. 2017) (“BIC”), a receiver was appointed in an SEC enforcement action where the defendants, just prior to the receivership, had transferred fractional interests in certain real properties it owned to certain investors. The order appointing the receiver provided that all persons in possession or control of receivership assets must give control of that property to the receiver. The receiver reached out to investors holdings fractional interests in the properties and requested that they be reconveyed so that the receiver could sell the properties. While most investors complied with the receiver’s request, a number of investors failed to do so. The receiver, therefore, filed a motion requesting that the court appoint him as elisor, so that the fractionalized interests could be transferred back to the receivership estate. The court cited Blueberry Properties, supra, and also federal cases where courts also recognized the use of elisors to enforce their orders. Id. at *3.
One interesting part of the BIC decision is the court’s discussion of the use of summary procedures. The receiver had not sued the holders of the fractionalized interests. He merely filed a motion, which he served on them. Citing a number of cases, the court held that summary proceedings are appropriate and proper to protect equity receivership assets, so long as the third parties are afforded due process and have adequate notice and an opportunity to be heard. This part of the decision, however, is questionable, given Ninth Circuit’s decision in SEC v. Ross, 504 F.3d 1130 (9th Cir. 2007), where a receiver filed a motion in an SEC case against a number of sales agents seeking to have them disgorge $21 million in commissions they had received from the sale of unregistered securities. Some of the agents opposed the motion, arguing the court lacked personal jurisdiction over them because they had not been served with a summons and that proceeding by the way of summary proceedings violated their rights to due process. The district court rejected that argument, indicating the third parties were only required to receive notice of the motion and have a reasonable opportunity to be heard. The Ninth Circuit, however, reversed. It held the agents’ due process rights were violated when the receiver proceeded to attempt to have agents disgorge the funds they received by use of a summary proceeding. The Ninth Circuit distinguished a number of cases, many of which the court in BIC, supra., cites, on the ground that in those cases the parties subject to the summary of proceedings had submitted themselves to the court’s jurisdiction, by either filing claims to receivership assets or by having participated in the receivership proceeding. The Ninth Circuit admonished the receiver and the SEC for trying to take improper shortcuts and concluded that if the receiver wanted to recover purported improper distributions, the receiver needed to file complaints and serve the agents with a summons.
Based on the Ninth Circuit’s decision in Ross, it is questionable whether appointing the receiver as an elisor to recover the transferred fractionalized interests would hold up on appeal, if the matter were appealed, which is unlikely, given the fact that the district court indicated that the receiver’s motion was not opposed by any party; which may be the reason why no one cited the court to the Ninth Circuit’s decision in Ross. Therefore, while use of an elisor is a good remedy to be aware of when parties refuse to execute documents as ordered by the court, it is questionable whether it can be used to recover transferred assets by use of summary proceedings. Since title in your case is in one of the parties, this should not be an issue.
*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.