Judge: Armen Tamzarian, Case: BC290553, Date: 2024-09-20 Tentative Ruling

Case Number: BC290553    Hearing Date: September 20, 2024    Dept: 52

Defendant Haresh Jogani’s Application for an Order Setting a Receiver’s Undertaking

Defendant Haresh Jogani applies for an order setting the amount of the undertaking by receiver Aaron J. Kudla.  After defendant filed this application, Kudla posted a $10,000 undertaking. 

Reconsideration

            Plaintiff Shashikant Jogani argues this application is an improper motion for reconsideration in violation of Code of Civil Procedure 1008.  As Haresh Jogani argues (reply, p. 3), the court did not consider or decide the issue of the amount of an undertaking.  Moreover, Code of Civil Procedure section 995.930, subdivision (b) provides that an objection to a bond “shall be made within 10 days after service of a copy of the bond on the beneficiary or such other time as is required by the statute providing for the bond.”  Haresh Jogani made this application before the receiver posted the undertaking.  Assuming this were an improper motion for reconsideration, the court would exercise its inherent authority to reconsider the issue of the amount of the undertaking.  (See Le Francois v. Goel (2005) 35 Cal.4th 1094, 1096–1097.)  As discussed below, the receiver was required to give an undertaking in a sum set by the court. 

Undertaking Requirement

Plaintiff argues an undertaking is only required when the court appoints a receiver via an ex parte application instead of a noticed motion.  The statutory scheme provides for two different types of undertakings: (1) an undertaking by a party who applies ex parte to appoint a receiver (Code Civ. Proc., § 566, subd. (b)), and (2) an undertaking by the receiver himself or herself before becoming receiver (Code Civ. Proc., § 567, subd. (b)). 

California Rules of Court, rule 3.1178 states the requirement is not limited to ex parte applications: “At the hearing of an application for appointment of a receiver on notice or ex parte, the applicant must, and other parties may, propose and state the reasons for the specific amounts of the undertakings required from (1) the applicant by Code of Civil Procedure section 529, (2) the applicant by Code of Civil Procedure section 566(b), and (3) the receiver by Code of Civil Procedure section 567(b), for any injunction that is ordered in or with the order appointing a receiver.”

Kudla was required to “give an undertaking to the State of California, in such sum as the court or judge may direct, to the effect that the receiver will faithfully discharge the duties of receiver in the action and obey the orders of the court therein.”  (Code Civ. Proc., § 567, subd. (b).) 

Amount of Undertaking 

The purpose of a “bond furnished by the Receiver” is “to protect those who might suffer loss from his failure to discharge his duties and administer his business in accordance with law and properly account for funds coming under his control.”  (State Through State Bd. of Equalization v. Stewart (1969) 272 Cal.App.2d 345, 351.)

Haresh Jogani cites a practice guide stating: “In determining the amount of the undertaking, judges consider such factors as: (1) the nature and value of the assets to be controlled by the receiver; (2) the likelihood that these assets would be dissipated; (3) the risk of any action having a negative impact on the assets; and (4) the length of time the receivership might be in place (e.g., if the receiver is to collect rents on real property pending foreclosure, the undertaking might be set at a multiple of the monthly rental receipts times the number of months until likely foreclosure).”  (Cal. Judges Benchbook: Civ. Proceedings—Before Trial (CJER 2023) § 14.155.)

It is undisputed that the assets controlled by the receiver are valued around $8 billion.  Though Kudla is an experienced receiver, there remains some likelihood the assets would be dissipated.  There is an inherent risk that some actions could have a negative impact on the assets.  Haresh Jogani, however, provides little explanation beyond generalities.  Finally, the receivership may be in place for years. 

Notably, Haresh Jogani did not propose any specific amount for the undertaking.  He only argues it should be “substantial” and that $10,000 is not enough.    

Receiver Kudla submitted a “statement regarding” this application.  The court agrees that Kudla “would be unable to secure a bond in the amount of the judgment at issue in this case given its size, and doing so would essentially defeat the purpose of the appointment of the Receiver.”  (Receiver’s Statement, p. 3.)  A mere one percent of the receivership estate would be about $80 million.  The receiver could not feasibly obtain an amount anywhere near the size of the receivership estate.  For reasons discussed in the court’s order appointing the receiver, the likelihood of dissipating assets would be far greater without a receiver.  Setting a prohibitively large undertaking would not serve the interests of justice.

After considering the totality of the circumstances, the court sets the amount of the receiver’s undertaking at $100,000.  Receiver Kudla therefore must give an additional undertaking of $90,000.

Disposition

            Defendant Haresh Jogani’s application for an order setting receiver’s undertaking is granted in part.  The court hereby sets the amount of the receiver’s undertaking under Code of Civil Procedure 567, subdivision (b) at $100,000.