Judge Gregory Keosian, Case BC719593 2022-08-08 Tentative Ruling

Receiver Blake C. Alsbrook’s Motion for Issuance of Orders Related to the Receiver’s Final Report and Account is GRANTED, subject to the apportionment of receivership funds:

· $13,088.42 to the former receiver, David J. Pasternak, for services performed prior to his passing on November 21, 2019;

· $43,802.50. to the Menke Law Firm for the prosecution of the unlawful detainer action against Braithwaite’s sister;

(CRC Rule 3.1184, subd. (a)(1)–(3).) “If any allowance of compensation for the receiver or for an attorney employed by the receiver is claimed in an account, it must state in detail what services have been performed by the receiver or the attorney and whether previous allowances have been made to the receiver or attorney and the amounts.” (CRC Rule 3.1184, subd. (d).) Although interim fees are subject to approval by the court, the court “retains jurisdiction to award a greater or lesser amount as the full, fair, and final value of the services received.” (CRC Rule 3.1183, subd. (a).)

“[T]he amount of compensation paid to a receiver is within the court's discretion.” (City of Sierra Madre v. SunTrust Mortgage, Inc. (2019) 32 Cal.App.5th 648, 657.)

Receiver Blake C. Alsbrook (Receiver) has filed a final account and report. The property subject to receivership has been sold for $633,000.00. (Alsbrook Decl. ¶ 30.) From this amount, two payments of $15,825.00 went to Keller Williams offices as 2.5% commissions. (Alsbrook Decl. ¶ 30.) The closing statement on the sale indicates that once the existing mortgage and other closing costs were paid, $274,440.30 in proceeds were released to the Receiver. (Alsbrook Decl. ¶ 32.) Thus the total amount in the receivership account at this time is $275,948.26. (Alsbrook Decl. ¶ 42, Exh. 10.)

· $13,088.42 to the former receiver, David J. Pasternak, for services performed prior to his passing on November 21, 2019;

· $84,865.00 to the Menke Law Firm for the prosecution of the unlawful detainer action against Braithwaite’s sister; and

These payments, totaling $202,512.91, leave $73,435.35 to be distributed to Guest. (Proposed order.)

Receiver also hopes for entry of orders assigning the judgment in the unlawful detainer case against Tuckiesha Braithwaite in Alsbrook v. Braithwaite, LASC Case No. 20STUD03869, to Guest; exonerating all receivership bonds; discharging any further duties on the part of the receiver and terminating of the receivership; approving of the actions of the receiver; retaining jurisdiction to hear any future matters concerning this receivership; allowing Receiver to discard documents related to the receivership; and requiring up-front payment to Receiver of any fees and costs associated with any future subpoenas or court orders relating to his services. (Proposed Order.)

Both Braithwaite and Guest oppose this distribution of fees and expenses. Braithwaite argues that the Receiver has enlarged his expenses by mismanagement, such as by initiating an unlawful detainer action at an expense greater than the probable value to the estate, and by failing to move to terminate the receivership after Guest was ruled to be the sole owner of the property in August 5, 2021. (Braithwaite Opposition at pp. 4–5.) Guest, meanwhile, argues for significant reductions in the money to be paid to the Receivers and the retained law firm, on the grounds that various expenses are excessive and unreasonable, in light of her sole ownership of the property and the lack of value obtained from the Receiver’s services. (Opposition at pp. 6–12.)

Receiver argues that both parties have waived their objections by failing to submit them in response to his interim reports. (Reply at p. 2.) Rule 3.1183 states, “Unless good cause is shown, objections to a receiver's interim report and accounting must be made within 10 days of notice of the report and accounting, must be specific, and must be delivered to the receiver and all parties entitled to service of the interim report and accounting.” (CRC Rule 3.1183, subd. (b).) Thus, unless good cause is shown for the delay, objections must ordinarily be raised within 10 days of an interm report.

Guest here has shown good cause for failing to object to the interim reports made by Receiver, because from this court’s order of April 27, 2020, she expected the receiver’s costs to be borne by Braithwaite exclusively as a result of his execution of a fraudulent lease. (Opposition at p. 6.) At the time of that order, Guest’s liability for receivership fees was only half of the $17,877.76 that had been incurred at that time. (Opposition at p. 6.) Guest’s expectations on this point remained intact until March 10, 2022, when this court granted Receiver’s request to sell the property and be paid from the proceeds. Thus Guest has ample reason for the delay and good cause to object at the present time.[1]

Guest argues that the fees should be reduced as follows: $6,544.21 should be awarded for the services of the former receiver; $43,802.50 should be given to the Menke Law Firm, and $70,000 to the Receiver. (Opposition at p. 7.)

Guest is correct in the first instance that the fees to be paid to the Menke Law Firm, requested at $84,865.00, should be reduced to $43,802.50, as these fees are sought solely in connection with the unlawful detainer action against Tukiesha Braithwaite, and a determination as to the Menke Law Firm’s reasonable fees was already made in that case in the amount of $43,802.50. (Opposition Exh. B.) Although the fee award in that case evidently did not account for the $3,322.89 expended in prosecuting the 2019 unlawful detainer action against the same defendant, no fees are appropriately awarded for that action, as it resulted only in a dismissal without benefit to the property or parties. (Motion Exh. 7 at pp. 166–169.)

Guest’s remaining objections are more specifically directed to particular charges indicated in the Receiver’s seven interim reports. Guest objects generally to the lack of detail in the individual billing entries, which she claims violates the requirement of Business & Professions Code § 6148 that all bills rendered by attorneys to clients “shall clearly state the basis thereof.” (Bus. & Prof. Code § 6148, subd. (b); Opposition at p. 7.) The more specific objections to the seven interim reports, the billings for which are included with the final report, are summarized as follows:

1. Receiver sent an attorney to post eviction notices and billed $1,480 for a task that could have been accomplished by messenger; a new attorney charged $609 to learn the details of the case; the $6,800.50 billed for the motion to reject lease was excessive and performed by one more attorney than necessary; Receiver charged $80 for filing his own notice of change of address;

2. Receiver billed for 11.5 hours and $3,504.00 to file the second interim report, a four-page document largely copied and pasted from the prior report; Receiver billed for accounts payable and late charges when Guest was the one paying property expenses;

3. Charged attorney rates ($625) for posting a 30-day notice to quit; 4.5 hours and $1,770.50 for preparing the duplicative interim report;

4. 8.8 hours and $2,7422.00 for preparing the interim report; Receiver billed $1,675.00 for assisting in the unlawful detainer matter already being handled by hired counsel;

5. Another 7.5 hours and $2,355.00 charged for another interim report; $175 charged to coordinate accounts payable with attorney service; $1,075.00 for an attorney to observe UD proceedings, and another $1,092.50 to review UD trial documents;

6. 2.8 hours and $1,330.00 charged for legal research on res judicata issues already being handled by UD and Guest’s counsel;

Guest also objects to the 7.6 hours and $3,115.00 charged for selling the property, which Guest had sought to do herself; $2,057.00 for an ex parte application to enter the order to sell, when the parties had already stipulated to same; $7,367.50 for 15.9 hours to prepare the final report; and $932.50 for substituting Alsbrook in as Receiver after Pasternak died. (Opposition at p. 10.)

Some of these objections are persuasive. As to the objections to the first interim report, Guest persuasively argues that the two charges for traveling to the property in October 2019 and February 2020 to post notices, block-billed with other attorney tasks and totaling $1,480.00, are excessive, and properly reduced to $500 (a $980 reduction), which more properly tracks the cost of reasonable service of the notices involved, including the other tasks listed. (Motion Exh. 7 at pp. 40, 53.)

The bills also contain another attorney travel charge to serve a notice, charging $625 for 2.5 hours of work in September 2020. (Motion Exh. 7 at p. 84.) This too is properly reduced to $250, as with similar charges in the first interim report, a $375 reduction.

Moreover, the amount of time expended in preparing the motion to reject lease — 22.6 hours by two attorneys, charging a total of $10,275.00, at an average rate of $454.65 per hour, including a $609 charge to bring a new attorney into the case (Motion Exh. 7 at p. 52) — is also excessive in relation to the utility and complexity of the motion that was ultimately filed. A more appropriate amount of time for this motion would have been 10 hours, which at the average rate amounts to a reduction of 12.6 hours and $5,728.50.

Receiver also claims to have incurred $563.11 in late charges (two charges of $276.10 and $287.01 in July and August 2020 (Motion Exh. 7 at p. 77)) for unspecified reasons, when Guest was charged with paying the bills on the property. (Manoukian Decl. ¶ 14.) Therefore the $563.11 is properly deducted from the fees sought here. For the same reason, the $175 charge for coordinating accounts payable with Nationwide Legal in February 2021 is properly deducted. (Motion Exh. 7 at p. 107.)

Similar reductions are appropriate for the expenditure of Receiver time and resources for matters already being handled by hired UD counsel. Receiver charges $1,075.00 for 4.3 hours to attend the UD trial in June 2021 and write a summary of the day’s proceedings, and another $1092.50 was billed to review UD counsel’s trial briefs in August 2021. (Motion Exh. 7 at pp. 123, 131.) These amounts, totaling $2,167.50, are also not properly awarded to Receiver.

Guest’s challenges to the time expended in preparing successive and in large part duplicative interim reports is also well-taken. The records presented by Receiver show 32.3 hours of work expended preparing the first four interim reports, for a total expense of $9,771.50, for an average rate of $302.50 per hour. (Motion Exh. 7 at pp. 75, 80, 84, 89, 93, 98, 102, 107, 111, 115, 119, 123, 131, 135.) As the sixth and seventh interim reports filed with the court on December 20, 2021, and April 29, 2022, illustrate, these reports consist in the main of a brief summary of case proceedings, largely duplicated from prior reports, and exhibits demonstrating receivership expenses and fees. The amount of fees sought in connection with the preparation of these comparatively simple reports is properly reduced from 32.3 hours to 16 hours, or four hours per report. At an average rate of $302.50 per hour, this yields a reduction of $4,931.50.

Additionally, the 2.8 hours and $1,330.00 charged in September 2021 for researching res judicata issues is subject to reduction, as Guest’s counsel declares that such issues were also being researched by UD counsel and by herself specifically. (Motion Exh. 7 at p. 135; Manoukian Decl. ¶ 32.)

Another charge, 4.2 hours and $1,050.00 for an attorney to oversee lockout proceedings and prepare a summary of same for use by other Receiver personnel and attorneys, is excessive. (Motion Exh. 7 at p. 154.) This amount is reduced to 2 hours, which at a rate of $250 per hour amounts to a $550 reduction.

Guest also challenges the 15.9 hours and $7,367.50 incurred (at an average hourly rate of $463.36) in preparing the present final report. (Opposition at p. 10; Motion Exh. 8 at p. 193.) Given the largely duplicative nature of the report from prior interim reports, the court agrees that a reduction is appropriate. Ten hours is a reasonable amount of time for the preparation of this final report and account, yielding a reduction from the requested amount of $2,733.85.

· $13,088.42 to the former receiver, David J. Pasternak, for services performed prior to his passing on November 21, 2019;

· $43,802.50. to the Menke Law Firm for the prosecution of the unlawful detainer action against Braithwaite’s sister; and

When these amounts are paid from the remaining $275,948.26 in the receivership account, Guest is to receive $133,857.31.

[1] No good cause, however, is presented as to Braithwaite’s delay in serving objections to the interim reports. In any event, Braithwaite’s argument is unpersuasive, as the lack of rental value resulting from unlawful detainer proceedings against Bratihwaite’s sister was the unforeseen result of Braithwaite’s own efforts to saddle the property with a fraudulent lease. The unlawful detainer proceedings at least disencumbered the property in that respect.