Posts in Ask the Receiver.

Q: I am a health and safety receiver appointed over property that had numerous code violations and was rat infested. The court ordered me to bring the property into the code compliance and, eventually, to sell the property to pay for the repairs and my fees. The owner has now sued the city and me in federal court alleging her civil rights were violated and to prevent me from selling the property. What is the best way to get rid of her federal lawsuit?

A: This seems to happen often in health and safety receivership cases. The defendants must be reading the same online posts. The normal method ...

Q: I am a partner in a partnership. Because of what I contend were misdeeds and mismanagement by the managing partner, I filed suit to dissolve the partnership and for damages. I immediately filed a motion to have a receiver appointed to run the partnership business and safeguard the partnership assets during litigation. Unfortunately, the judge denied my motion because she stated receiverships are harsh and costly remedies and that at such an early stage in the proceeding a receivership was premature. My partner has now filed a motion seeking attorney’s fees based on his ...

Q: I am a receiver in a Ponzi scheme case. While I know I can sue to recover excess payments made to investors in the scheme, the false profit they were paid, per Donell v. Kowell, 533 F3d 762 (9th Cir. 2008), in my case large sums were paid as referral or broker fees to get investors to invest. Are those payments recoverable in the Ninth Circuit?

A: Yes. While there has been split in cases across the county on the issue, the majority view has been such payments are fraudulent transfers, because no “value” is given for the services rendered. Compare, Warfield v. Byron, 436 F3d 551, 560 (5th Cir ...

Q: I am a receiver, but not an attorney. During the receivership some legal matters came up and I used my in-house counsel and an outside attorney to handle the matters. My order of appointment states I can hire attorneys, but does not specifically state who. I have filed my final account and report and the defendant is objecting, stating my attorneys are not entitled to be paid because there was no court order specifically authorizing their employment. Was that necessary?

A: Yes. California Rules of Court, Rule 3.1180 states: “A receiver must not employ an attorney without the approval ...

A prior Ask the Receiver discussed Sino Clean Energy Inc. by and through Baowen Ren v. Seiden, 565 B.R. 677 (Nev. 2017), where a  district court’s affirmed of a bankruptcy court’s order dismissing a bankruptcy case. A state court receiver for a corporation removed the corporation’s board of directors and replaced them. The unhappy, removed, board members filed a bankruptcy petition for the corporation. The district court held state law determines who is authorized to file bankruptcy for a corporation. It rejected the petitioner’s argument that states cannot ...

 Q: I am the receiver for a small grocery store and restaurant owned by an uncooperative divorcing couple. I am in the process of selling the store and restaurant and paying claims. I have been contacted by a few parties who say they have liens that need to be satisfied. I have run a UCC search and obtained a title report and I don’t see the liens they claim. I told this to one of their lawyers and he said his clients have “secret liens.” What in the world are “secret liens” and how am I supposed to know about them and deal with them?

A: Unfortunately there are numerous “secret ...

 

Q: I was appointed receiver in a health and safety case, brought by a city, over a rundown motel and an adjacent rundown office building. The owner of the property, who has been fighting the city, has now filed an action in federal court against the city alleging that the city has violated his constitutional rights and is asking the federal court to set aside the receivership order. Can a federal court do that?

A: The short answer is no. Federal courts, generally, have no power to invalidate or set aside state court orders. Federal courts also, generally, do not have power to review the ...

Q: I was appointed receiver for a corporation. My order of appointment gives me, and me alone, the power to file bankruptcy for the corporation. The former president of the corporation is threatening to file a bankruptcy petition for the corporation in an apparent attempt to oust me. Can he do that?

A: The answer depends on the specific language of your order of appointment. If it specifically vests you, and only you, with the power to file a voluntary bankruptcy for the corporation, then the former president has no right to do so. A number of recent cases have pointed out there is a major ...

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 ...

Question: I represent a creditor who had sued an entity before it was put into receivership. The court has established a claims procedure, and the receiver has sent out claim forms. Can I sign the claim form on behalf of my client or is it better to have my client sign?

Answer: Receivership cases and bankruptcy cases often require creditors to file proofs of claim. Because it may be easier, quicker and cheaper, attorneys for creditors sometimes sign and file the proofs of claim. While this is explicitly allowed in bankruptcy cases under Bankruptcy Rule 3001(b), and there is no ...

Question: 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?

Answer: 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 ...

Question: I am a receiver appointed to collect a substantial judgment. The judgment debtor’s home has appreciated since the entry of the judgment five years ago. Can I list the house with a broker and, once a buyer is located, petition the court to approve the sale? The judgment debtor claims he has a homestead exemption and that I can only sell the house if I comply with homestead statute, which requires the sale be in accordance with the provisions for execution sales. Is that correct? I thought, as receiver, I can sell property using other methods, so long as I get court approval.

Answer:

Question: I am a receiver in a fraud case where there are a lot of investors, trade creditors and secured creditors. Pursuant to my request, the court established a claims procedure and set a deadline for all creditors to file claims with me. A creditor with a lien on one of the estate’s assets did not file a claim, despite my sending it a claim form and notice of the claim filing deadline. Is the creditor entitled to participate in the distribution of estate assets? Does the answer change if it files a late claim? Does the creditor lose its security interest because it did not timely file a ...

Question: In an operating receivership , do creditors need to be served motions?

Answer: The answer is "no" if the receivership is in state court; the answer is "maybe" if the receivership is in federal court. In a state court receivership, unlike in a bankruptcy case, notice of motions need only be sent to the parties to the receivership case. Creditors having claims against the entity in receivership or the receivership estate are not parties, and hence are not entitled to notice, unless they formally intervene. See generally, C.C.P. §1004, which refers to service on "parties ...

Question: I am the Receiver for a condo project. A pre-receivership creditor has threatened to sue me because I won’t pay for the services he provided the defendant. I have explained to the creditor that the receivership is not liable for pre-receivership debts of the defendant and that all the assets in the receivership are security for the plaintiff (bank). The creditor has said he does not care, that if I don’t pay him he will sue me and that the court must allow his lawsuit to go forward. Is he correct?

Answer: You did not indicate whether your receivership is in federal or state ...

QUESTION:  I have seen a number of receivers file motions purporting to be interim versions of final accounts and reports, seeking orders approving fees and costs part-way through a receivership. Given that California Rule of Court 3.1183(a) states that all interim fees are reviewable and may be adjusted at the hearing on the Final Account and Report, is there really any point to this practice? Is an order approving interim fees worth the paper it’s written on?  

ANSWER:  Up until earlier this year I would have doubted it. Rule of Court 3.1183(a) states interim fees are just that: interim ...

QUESTION: I was appointed receiver for an apartment building. I operated the property for six months, then the defendant filed bankruptcy. I filed a claim, as a superseded custodian, under 11 U.S.C. § 543. The debtor objected to my fees and made various other crazy objections. I had to hire counsel to defend my fees and to deal with all the objections. Debtor’s counsel now claims my counsel and I are not entitled to be paid for having to defend my fee request. Is that correct?

ANSWER: The Supreme Court has held that fees incurred in defending fee applications in bankruptcy cases are not ...

A prior Ask the Receiver® discussed the Fifth Circuit case Janvey v. The Golf Channel, Inc., 780 F. 3d 641 (5th Cir. 2015) (“Golf Channel I”). There the court found The Golf Channel liable to return $6,000,000 paid to it for advertising services it provided, that were used to help solicit investors in the Allen Stanford Ponzi scheme. The court found the advertising did not provide “reasonably equivalent value,” from the standpoint of the Stanford creditors, and, therefore, could not be used to support The Golf Channel’s defense to the receiver’s fraudulent transfer ...

QUESTION:  As receiver,  I sued a third party to collect funds owed to the entity in receivership.  I have settled the lawsuit.  The defendant’s attorney insists that I get court approval of the settlement. What a pain. Am I required to get court approval of the deal I cut? If so, which court needs to approve the settlement and what do I have to establish to get the settlement approved?

ANSWER:  Sorry, but yes, you do need to get court approval of the settlement unless the court previously gave you authority to settle litigation without subsequent court approval.  The court that has to approve the ...

QUESTION:  I have been appointed receiver to enforce a judgment. I filed a motion in the case which I served on counsel for the plaintiff (the judgment creditor) and counsel for the defendant (the judgment debtor).  The court denied my motion, without prejudice, stating that I need to serve the judgment creditor himself and that service on his counsel was not good enough.  What’s going on? I thought service on counsel for a party constituted service on the party.  

ANSWER:  Prior to the entry of judgment you are correct. Service on counsel who has appeared for a party in an action constitutes ...

QUESTION:  I am getting ready to close my receivership and distribute the funds in the estate to the two parties.  I have just learned that the Social Security number one of the parties gave me is not his.  What should I do?

ANSWER:  As a receiver you are the agent of the court.  As such, you must not be a party to any conduct that may not be legal.  You should bring this issue to the court’s attention by filing a request for instructions as to what you should do with the funds under your custody and whether you should notify the IRS and FTB about what is clearly a violation of the law by one of the parties to ...

QUESTION:  I am a receiver in a case where the court issued an injunction staying all litigation and creditor action against the entity and assets in receivership. A secured creditor wants to foreclose on one of the estate’s assets. Can it do that? What is the procedure for the creditor to obtain relief from the stay?

ANSWER: The first thing to remember is that receiverships are not bankruptcy cases. Too often, parties to receivership cases analogize to bankruptcy proceedings. While this is understandable, e, especially given the local rules in some courts which provide the receiver ...

QUESTION:   If I discover possible criminal wrongdoing, am I, as receiver, required to report it to authorities?

ANSWER:

The answer depends on whether you are a federal receiver or state court receiver. 18 U.S.C. § 3057(a) provides: “Any judge, receiver, or trustee having reasonable grounds for believing that any violation under chapter 9 of this title or other laws of the United States relating to insolvent debtors, receiverships or reorganization plans has been committed, or that an investigation should be had in connection therewith, shall report to the appropriate United ...

Question: Unauthorized Transfers of Receivership Property: Void, Voidable or Ok?

Answer: In a recent unpublished bankruptcy appellate panel decision (In Re Domum Locis, LLC, 2015 WL 4697747 (9th Cir. BAP 2015)), the BAP reversed the bankruptcy court’s published decision in which the bankruptcy court held that a transfer of property in receivership by the defendant without permission of the receivership court, was void. In Re Domum Locis, LLC, 521 B.R. 661 (Bankr. C.D. Cal. 2014). The bankruptcy court’s decision was discussed in the Winter/Spring 2015

Question: I have seen various instances where receivers have requested that funds from returned or uncashed checks from a distribution be redistributed to other claimants or used to pay administrative fees or costs. Is this proper? Can the receiver get in trouble for not simply escheating the funds?

Answer: In California, what a receiver is to do with unclaimed funds is specifically governed by California Code of Civil Procedure § 570. It provides: “A receiver having any funds in his hands belonging to a person whose whereabouts are unknown to him, shall ...

Question: Do you need a confirmation hearing when a receiver is appointed ex parte and are there any exceptions?

Answer: Yes and no. In early practice in California, the appointment of a receiver on an ex parte basis was treated similar to an application for a temporary restraining order, pending the issuance of a preliminary injunction. As in that situation, where a plaintiff sought the appointment of a receiver on an ex parte basis, the appointment was only temporary, pending a hearing on an order to show cause why the appointment of the receiver should not be made ...

QUESTION: I heard California’s fraudulent transfer law is being changed. How will the changes affect my ability to pursue fraudulent transfers as a receiver?

ANSWER: Earlier this year the California legislature, based on a proposal made by the National Conference of Commissioners on Uniform State Laws (“Uniform Law Commission”), adopted amendments to California’s Uniform Fraudulent Transfer Act (Civil Code §3439 et. seq.) which take effect on January 1, 2016. While most of the changes are not significant, they will take getting used to. The major change is there will no ...

QUESTION: The last Ask the Receiver article discussed whether, in federal court, an order approving a receiver’s sale of assets is appealable. While the discussion was interesting, it was not too helpful to me because I am a state court receiver. What is the rule in California state court? Are orders approving a receiver’s sale appealable?

ANSWER: As the prior Ask the Receiver article indicated, in federal court the appealability of orders in a receivership are limited to three types of orders: (1) orders appointing a receiver; (2) orders refusing to windup a receivership; and ...

QUESTION: I purchased assets from a receiver. The court approved the sale over the objection of one of the defendants. The sale has now closed. I was just informed that the defendant is appealing the order approving the sale. Can the defendant set aside the sale to me or am I safe?

ANSWER: In United States v. Antiques Limited Partnership, 760 F.3d 668 (7th Cir. 2014), the federal government sued to enforce tax assessments against a husband and wife and partnerships they controlled to which they transferred property. A receiver was appointed to manage the partnerships and to sell their ...

QUESTION: I know receivers often bring actions to set aside fraudulent transfers and recover the property transferred, but can a receiver be appointed in a fraudulent transfer lawsuit to take possession of and safeguard transferred property pending trial?

ANSWER: Yes, a receiver can be appointed in a fraudulent transfer lawsuit to take charge of the asset transferred or its proceeds, or an injunction can be obtained to prevent further transfers of the asset or its proceeds. These remedies are especially useful when the property involved is income producing. California’s, as ...

QUESTION:  Can a magistrate appoint a receiver?

ANSWER: While an arbitrator cannot appoint a receiver, Marsh v. Williams, 23 Cal. App 4th 238 (1994), a magistrate can.

A district judge may designate a magistrate judge to hear and determine any non-dispositive civil matter. 20U.S.C. § 636(b)(1)(A). With respect to dispositive motions, a district judge may designate a magistrate judge to conduct hearings, including evidentiary hearings, and to submit to the district judge proposed findings of fact and recommendations.28 U.S.C. § 636(b)(1)(B). Dispositive motions include those ...

QUESTION: I am a receiver and I have just learned that the defendant purported to sell property I am receiver over. I contacted counsel for the defendant and for the buyer and demanded that the property be returned to me. The buyer’s attorney said his client would not reconvey the property, that the sale was good, and that I should bring a contempt action against the defendant if the defendant violated my order of appointment by selling the property. Is this correct?

ANSWER: A recent case, In Re Domun Locis LLC, 521 B.R. 661 (Bankr. C.D. Cal. 2014), decided by bankruptcy Judge Kwan, dealt ...

Receivers handling Ponzi schemes and fraud cases are familiar with the concept of suing the “winners” in the scheme to recover transfers made to them in excess of their investment. Such suits are based on the theory that the excess payments are fraudulent transfers. Indeed, it is generally accepted that where a Ponzi scheme is involved, no value is given for the excess payments received by investors. Donell v. Kowell, 533 F.3d 762 (9th Cir. 2008). Cases are split on whether parties that aided the fraud, such as brokers or sales people, can be held liable for payments they received. A ...

QUESTION: I purchased assets from a receiver. The court approved the sale over the objection of one of the defendants. The sale has now closed. I was just informed that the defendant is appealing the order approving the sale. Can the defendant set aside the sale to me or am I safe?

ANSWER: In United States v. Antiques Limited Partnership, 760 F. 3rd 668 (7th Cir. 2014) the federal government sued to enforce tax assessments against a husband and wife and partnerships they controlled and transferred property to. A receiver was appointed to manage the partnerships and to sell their assets to ...

QUESTION: I am a receiver for an operating entity. It has three offices. The rent for one of the offices is excessive and the business does not need all the space. I have approached the landlord about giving back some of the space or terminating the lease, but no dice. Can I reject the lease like a bankruptcy trustee?

ANSWER: While trustees and receivers are different, there are many similarities. The Bankruptcy Code adopted many provisions from prior receivership practice. The power to assume or reject a lease is one of them. A receiver is not stuck with a defendant’s leases just ...

QUESTION: I am a receiver appointed pursuant to stipulation in an action pending in superior court between a husband and a wife over the operation of a business they own. After operating the business for many months, I agreed to a settlement with the husband resolving many of the disputed issues. The wife disagreed with the proposed settlement and moved to transfer the litigation to the family law court. After the action was transferred, the judge in the family court ruled that the original judge who appointed me had no jurisdiction to do so and that the appointment was “void.” The ...

QUESTION: I am a receiver for a partnership. While most of the partnership assets are in California, I have discovered the partnership owns a storage facility in Nevada and mining equipment in Arizona. Can I take over and operate the storage facility and/or seize and sell the mining equipment based on my California order of appointment or do I need to do something special?

ANSWER: The “something special” you need to do will depend on whether you were appointed by the superior court or the district court. If you are state court receiver, your authority over the business activity and ...

QUESTION: Can a receiver be appointed to sell intellectual property to satisfy a judgment?

ANSWER: Yes. A receiver in aid of execution is an excellent way of liquidating intellectual property assets to satisfy a judgment. Because these types of intellectual property assets are intangibles, a writ of execution cannot be used. It is important, however, to do it the correct way so that a buyer will be able to prove the chain of title needed in any later infringement action. A method approved in California is to obtain an order compelling the judgment debtor to assign the copyright ...

In Stern V. Marshall, ____ U.S ___, 131 S. Ct. 2594 (2011), the Supreme Court held that bankruptcy courts cannot issue final judgments on state law counterclaims even though they are “core proceeding”. Stern V. Marshall is the bankruptcy courts’ equivalent of Dickens’ “Bleak House”. Like in “Bleak House”, by the time the litigation concluded, all the initial participants were dead. Although the litigants are deceased, the case continues to haunt the bankruptcy court system. Stern V. Marshall’s meaning and effects are still being litigated. Indeed, there have ...

QUESTION: I have concluded my work as a receiver in a case, and the parties have requested that I enter into a stipulation with them waiving my final account and report discharging me as a receiver so they can avoid the cost and delay of my preparing a final account and report and the hearing on same. Is this a good practice?

ANSWER: Although in the past parties would sometimes enter into stipulations with a receiver to waive his or her final account and report and stipulate to the receiver’s discharge, so as to avoid the cost involved, in 2002, Rule of Court 1908 was adopted, which changed the ...

QUESTION: I am a receiver for a shopping center. I want to enter into a five year lease for one of the stores. Is there a statute or rule that limits the term of leases a receiver can execute?

ANSWER: There is no California statute or case that limits the term of leases a receiver can execute. However, limits are often placed on the term of such leases by the order appointing the receiver and often depend on the type of receiver appointed, i.e., a rents, issues and profits receiver versus an equity receiver. You don’t indicate which you are. In rents cases, the practice developed, at least in ...

QUESTION: I am counsel to a receiver for a corporation and things aren’t going too well. The receiver is thinking of filing a bankruptcy petition for the corporation. If this happens, are my fees in jeopardy?

ANSWER: They might be. Generally when a bankruptcy petition is filed for an entity in receivership, the receiver becomes a “custodian” under the Bankruptcy Code. 11 U.S.C. §101(11). As a custodian the receiver has certain duties as set forth in 11 U.S.C. §543, including delivering property in his or her possession, custody or control to the trustee and filing an accounting of ...

QUESTION: I am an equity receiver and I am setting up a claims procedure. I know some creditors and investors have filed suit against third parties to recover their losses. Can I consider these possible third party recoveries in fashioning the claims procedure and ultimately paying claims? a receiver appointed by a court in California in a contentious case. One of creditors has threatened to sue me in Nevada were he is located. How can this creditor sue me? I am a receiver appointed by the Court!

ANSWER: Yes. This issue is not new but was recently highlighted by the Ninth Circuit in ...

QUESTION: I am a receiver appointed by a court in California in a contentious case. One of creditors has threatened to sue me in Nevada were he is located. How can this creditor sue me? I am a receiver appointed by the Court!

ANSWER: Welcome to the gritty world of receiverships. While you are a court appointed receiver, and may personally have quasi-judicial immunity, you can still be sued. Your question is unclear as to why the creditor wants to sue you and whether he intends to sue you in your official capacity as receiver or individually. Generally, receivers do have quasi-judicial ...

QUESTION: I am a receiver. I filed a fraudulent transfer action against the mother of the defendant in the main case in which I was appointed. I only discovered six weeks ago that the defendant had transferred hundreds of thousands of dollars to his mother, approximately 4½ years ago, in order to, I believe, hide assets from creditors pursuing him. Counsel for the mother claims that the causes of action I am asserting against the mother are barred by the statute of limitations. How can that be when I only just obtained the documents showing the transfers to the mother?

ANSWER: For actual ...

QUESTION: My cousin, who is a lawyer, asked me to act as a receiver in a case where he represents the plaintiff. Is there some prohibition on my doing so? Am I ineligible to act as receiver because of our family relationship?


ANSWER: In California, Code of Civil Procedure § 566(a) sets forth who is ineligible to be appointed a receiver. It provides: “No party, or attorney for a party, or a person interested in an action, or related to any judge of the court by consanguinity or affinity within the third degree, can be appointed receiver therein without the written consent of the parties, filed ...

QUESTION: I have noticed language in a number of receivership orders providing that the receivership entities’ officers and directors are removed and their powers are vested in the receiver and further enjoining the officers and directors from filing a bankruptcy petition on behalf of the entity placed in receivership. Are such provisions effective in preventing former management from commencing a bankruptcy for the receivership entity and, if a petition is filed, can the receiver easily have the case dismissed because the persons filing the bankruptcy petition have no ...

QUESTION: I have been appointed receiver in a case where the defendant appealed my appointment. If the appeal is successful, and the receivership is terminated, how do I get paid?


ANSWER: As a general rule, fees and costs of a receiver and his or her professionals are administrative expenses, chargeable against the assets in the receivership estate. The assets in the estate are liable for those fees and costs even if the underlying litigation is dismissed or judgment is rendered for the defendants. Venza v. Venza, 101 Cal. App. 2d 678, 680 (1951). The receivership court has discretion ...

QUESTION: The court has approved my final account and report, discharged me as receiver and exonerated my bond in a difficult, litigious case I am glad to have over. An elder receiver I know told me I could still be liable for acts or omissions that occurred in the case even though I have been discharged and my bond exonerated. Is this true?

ANSWER: As the saying goes: “Listen to your elders”. There are situations where you may still have liability for actions taken or not taken during your term as receiver; even personal liability. Although there is a dearth of case law on this subject, the ...

QUESTION: I have been appointed receiver in a case involving contentious litigation over a business. The defendant has appealed my order of appointment. The defendant has also repeatedly violated the injunction issued along with my appointing order and has refused to turn over or account for receivership property. Because of the defendant’s conduct, at my request, the court issued an order to show cause why the defendant should not be held in contempt. Given the defendant’s conduct, is there an argument that his appeal should be dismissed because he has refused to comply with the ...

QUESTION: Before the Commercial Code was amended a few years ago, it provided that a receiver becomes a lien creditor over personal property in the receivership estate and can avoid unperfected security interests in such property. I can’t find that provision in the amended code. Does it still exist, and if so where is it?

ANSWER: The concept of a receiver becoming a lien creditor upon his appointment, with the ability to avoid unperfected security interests in property of the estate, still exists in the amended Commercial Code; it’s just harder to find than it used to ...

QUESTION: Should receivers appear only through counsel to avoid civil liability?

ANSWER: In Re Shattuck, 411 B.R. 378 (10th Cir. BAP 2009), which held that a receiver, who is not a lawyer, cannot appear in federal court without a lawyer. The decision was based not only on 28 U.S.C. §1654 but also on the fact that a receiver acting in a representative capacity and, not being a lawyer, cannot represent third parties or entities. In thinking further about this issue it dawned on me, like the boy who suddenly realized “the emperor has no clothes”, what authority does a California ...

QUESTION: I have been a receiver for quite some time and know how the system works. I have a case without much money currently in it. Instead of hiring counsel, can I file pleadings in the bankruptcy court or the district court, on behalf of the receivership estate, or do I need to employ counsel to do so?

ANSWER: A new appellate decision calls into question the ability of a receiver, and, in fact a bankruptcy trustee, to file pleadings and represent the estate (receivership or bankruptcy) in federal court. The case holds that only attorneys can appear and sign pleadings on behalf of the ...

QUESTION: I just received notice that the lender to one of my clients is seeking to have a receiver appointed over my client’s shopping center. I think the proposed receiver is in the lender’s pocket and will not be neutral. The lender has used her many times, and in negotiations to restructure my client’s debt, comments were made that if an agreement could not be reached the lender would have “its receiver” take over and run the property. Is there anything I can do to prevent the lender’s receiver from being appointed if I cannot defeat the receivership’s motion?

ANSWER:

QUESTION: When I am appointed receiver is there anyone in particular that I need to notify?

ANSWER: There are a number of statutes which require a receiver to notify certain agencies of the receiver’s appointment. In particular, California Revenue & Taxation Code §18650 requires the receiver to notify the Franchise Tax Board of his or her appointment. Similarly, Internal Revenue Code §§6036 and 6903 require a receiver to notify the Internal Revenue Service of his or her appointment; as does California Unemployment Insurance Code §1090. IRS Form 56 may be used to provide such ...

QUESTION: My order of appointment states that I have the power to commence litigation. Do I need a separate order from the receivership court if I want to sue someone?

ANSWER: A receiver’s “order of appointment,” along with any applicable statutes, vests the receiver with his or her powers. The order of appointment can provide that a receiver has the power to file suit without the need for a specific court order which provides for the litigation to be filed. That permission can be relied upon. Harting v. Cebrain, 10 Cal. App. 2d. 10, 17 (1935) [“The order appointing the receiver ...

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