Judge Jon R. Takasugi, Case Number: 19STCV20062, Date: 2024-12-04 Tentative Ruling

The Receiver’s motion for an Order (1) approving and settling the Receiver’s final report and accounting, (2) approving final compensation and reimbursement of expenses, (3) approving the Receiver’s recommended distribution of funds, (4) exonerating all bonds, (5) terminating the Receivership appointment, and (6) retaining jurisdiction regarding this Receivership appointment is GRANTED.

On June 7, 2019, Plaintiff Jacob Reich filed a Complaint against Defendant Mansour Hashem. On September 1, 2020, Plaintiff filed a second amended complaint (SAC) alleging: (1) breach of written contract; (2) money had and received; (3) common counts; (4) open book account; (5) account stated; (6) failure to honor checks; (7) fraud; (8) negligence; (9) unjust enrichment; (10) judiciary foreclosure; and (11) reformation of contract.

On 8/30/2024, Receiver Kevin Singer moved for an order (1) approving and settling the Receiver’s final report and accounting, (2) approving final compensation and reimbursement of expenses, (3) approving the Receiver’s recommended distribution of funds, (4) exonerating all bonds, (5) terminating the Receivership appointment, and (6) retaining jurisdiction regarding this Receivership appointment.

On July 30, 2024, the Court entered “Order Appointing Kevin Singer as Superior Court Receiver” (the Appointing Order) which appointed the Receiver to manage and sell three real properties (the Properties) to aid in judgment enforcement at the request of Plaintiff Jacob Reich. The Appointing Order did not set forth the exact amount owed on Plaintiff’s judgment (the Judgment), but rather noted that the principal amount was $357,801.80, plus certain costs and fees and interest, less sums already collected by Plaintiff. The Receiver subsequently filed his Oath of Receiver, posted his $10,000 bond, engaged Prime West Management (Prime West) as property manager for the Properties, and began carrying out his duties. On August 22, 2024, the Court, the Honorable Richard L. Fruin presiding, granted the Receiver’s ex parte application (the Application) for instructions regarding termination of the Receivership in light of a settlement payment made by Defendant Mansour Hashem and directed him to return control of the Properties to Defendant and file a final accounting, and so the Receiver now seeks discharge by way of this Motion (Singer Dec., ¶ 2, Exh. 1.)

Almost immediately following entry of the Appointing Order, Defendant contacted the Receiver’s office and claimed that one of the Properties, 10826 Wagner Street, was in escrow and that the sale would pay off the Judgment. It is the Receiver’s standard practice to attempt to facilitate settlement negotiations between the parties to receivership matters in order to resolve his appointments as early as possible, and so the Receiver urged Defendant to speak with Plaintiff directly. (Id., ¶ 4.)

On August 5, 2024, Plaintiff emailed the Receiver a copy of a proposed settlement agreement whereby Defendant would pay $440,000, plus all Receivership fees and expenses, to resolve the Judgment. Shortly thereafter, Plaintiff sent a follow-up email to the Receiver stating, in pertinent part, “The reason it is $440,000.00 and not $460,000.00 is that I agreed to give him $20,000.00 discount in exchange for him abandoning/dismissing the appeal.” Accordingly, the Receiver understood based on Plaintiff’s representation that the amount required to satisfy the Judgment was $460,000. (Id., ¶¶ 5 – 7, Exh. 2 – 4.)

On August 6, 2024, Plaintiff asked the Receiver’s office to collect funds from Defendant in order to pay the Receiver’s fees and expenses in connection with the tentative settlement agreement. That evening, the Receiver’s Senior Project Manager, Jackson Wyche (Wyche), circulated to the Parties an outline of the procedure to carry out the draft settlement agreement and a proposed final accounting stipulation that would terminate the receivership, including an accounting of the Receiver’s fees and expenses incurred to date. Wyche advised that the Receiver’s fees and expenses were estimated to total $15,000, including the fees and expenses for a stipulated final accounting. (Id., ¶¶ 8 – 12, Exh. 5 – 6.)

On August 8, 2024, Defendant’s appellate counsel, Jeff Price, Esq. (Price), advised the Receiver’s office that he understood the outstanding amount owed on the judgment to be $439,366.83, and that he had asked Plaintiff to provide an accounting. Plaintiff then agreed to provide the accounting by Monday, August 12, 2024. (Id., ¶¶ 12 – 13, Exh. 7.)

On August 9, 2024, Defendant agreed to pay $475,000 to the Receiver to resolve the receivership based on Plaintiff’s payoff amount, consisting of $460,000 to satisfy the judgment plus $15,000 for the Receiver’s fees and expenses, including a stipulated final accounting. On August 12, 2024, the funds arrived in the Receiver’s trust account for this matter. On the evening of August 13th, Plaintiff presented his accounting, alleging that $467,833.30 was owed, plus daily interest at $117.53 per day. (Id., ¶¶ 14 – 15, Exh. 8.)

Wyche presented the accounting to Defendant the following morning (August 14, 2024) and proposed that Defendant transfer an additional $9,000 to the Receiver to satisfy the additional amount Plaintiff claimed was owed, noting that the Receiver’s fees and expenses were approaching $15,000 so the payoff figure previously quoted would no longer be valid if the parties did not reach a swift resolution (as the $15,000 estimate assumed that the Parties had already agreed on the settlement terms, and that minimal additional negotiation would be required). Price responded, disputed the accounting, and alleged that Plaintiff had failed to account for additional payments received toward the judgment. Wyche then proposed to Plaintiff that he accept the $460,000 to satisfy the judgment and stipulate to the Receiver’s discharge. The following morning (August 15, 2024), Plaintiff instead proposed that he accept the $460,000 as partial satisfaction, stipulate to the Receiver’s discharge, and continue pursuing the purported additional balance owed after the termination of the receivership. Wyche confirmed that Defendant would agree to those terms, modified the proposed stipulation accordingly, and asked Plaintiff to confirm his agreement (to his own proposal) by the end of the morning—but Plaintiff declined to agree. (Id., ¶¶ 16 – 22, Exh. 9 – 12.)

Finally, on the afternoon of August 16th, instead of providing comment on the proposed final accounting stipulation, Plaintiff presented his own proposed stipulation, which was substantively equivalent to the proposal Defendant had agreed to, except that it required Defendant to acknowledge that a greater amount than $460,000 was owed—which was a nonstarter—and failed to include the necessary provisions regarding termination of the receivership and exoneration of the Receiver’s bond. Wyche then advised Plaintiff that he could either agree to the proposed stipulation prepared by the Receiver’s office based on Plaintiff’s own proposal (which Defendant had already signed, and which acknowledged that the $460,000 payment would be “in partial satisfaction” of the Judgment), or else the Receiver would be forced to seek the Court’s instructions, which would deplete the $10,000 funding advance Plaintiff had provided, as it would cause the Receiver’s fees and expenses to exceed the $15,000 provided by Defendant. Plaintiff did not agree to the stipulation or provide any proposed changes. (Id., ¶¶ 23 – 26, Exh. 13 – 15.)

Faced with a dispute amongst the Parties as to whether the Judgment had been satisfied, with fees mounting each day because of the Receiver’s duty to manage three residential properties, the Receiver filed the Application. Department 17 was dark on the August 21 scheduled hearing date, and Department 15 agreed to hear the matter on the following day after initial oral argument. On August 22, the Court, the Honorable Richard L. Fruin presiding, granted the Application, thereby terminating the Receiver’s management duties and directing him to file a final accounting. During the hearing, the Court asked the Receiver what steps remained to conclude the receivership, and Wyche advised that the Receiver would once again seek Plaintiff’s agreement on a final accounting stipulation, but would file a final accounting motion by the end of the following week should Plaintiff fail to stipulate. Following the hearing, the Receiver returned possession of the Properties to Defendant. (Id., ¶ 28.)

That afternoon, Wyche presented a revised draft of the stipulation to the Parties, taking into account the concerns raised by Plaintiff for the first time in his opposition, requested comment by close of business the following day, and set a deadline of close of business on Wednesday, August 28 to finalize the stipulation, after which time the Receiver would need to begin preparing the instant Motion in order to file it by the end of the week. Wyche included updated copies of the Receiver’s billing statements in the email. (Id., ¶¶ 29 – 30, Exh. 16.)

Defendant signed the proposed stipulation on August 23, 2024. Neither Plaintiff nor his counsel provided substantive comment on the proposed stipulation; instead, Plaintiff emailed Wyche directly to demand that he receive a refund of the full $10,000 funding advance—which Wyche explained was no longer possible because Plaintiff had forced the Receiver to deplete the advance via the Application. Despite repeated follow-up by the Receiver’s office, Plaintiff refused to stipulate (and accused the Receiver of “extortion” for explaining that not stipulating would force the Receiver to incur additional fees and expenses), thereby forcing the Receiver to prepare the instant Motion. (Id., ¶¶ 31 – 36, Exh. 17 - 20.)

The Receiver contends that “[g]iven that the Court has already ordered the Receiver to prepare his final accounting, the Properties have been returned to Defendant, and Defendant has submitted a $475,000 payment to the Receiver pursuant to Plaintiff’s initial payoff demand, the Receiver has completed his duties under the Appointing Order and should be discharged, and the receivership appointment should be terminated.” (Motion, 5: 5-9.)

The Receiver’s motion included billings records and invoices which indicate that he has incurred total fees of $24,330.50 and total expenses of $967.34, for a total outstanding balance of $25,297.84.[1] Additionally, Prime West collected rents totaling $2,400, paid expenses totaling $500 (for its monthly management fee) and is currently holding $1,900 in its property management bank account pending further order of this Court. (Id., ¶ 38, Exh. 22.)

The Receiver is currently holding funds totaling $485,000 in his trust account, which consists of $10,000 provided by Plaintiff pursuant to paragraph 3 of the Appointing Order (which “shall be used to cover the cost of the bond and the Receiver’s initial fees and expenses”), $460,000 provided by Defendant to pay the Judgment, and $15,000 provided by Defendant to pay the Receiver’s fees and expenses. The Receiver also anticipates that his trust account will accrue interest before this Motion is heard.” (Id., ¶ 33, Exh. 23 - 24.)

“[T]he court when appointing the receiver and when explicitly or impliedly authorizing him to incur indebtedness, pledges the faith of the court that its officer will be paid his compensation…” (2 Clark on Receivers (3rd Ed. 1959) § 637.1(e) at p. 1058.) The court in McLane v. Placerville, and Sacramento R.R. Co. (1885) 66 Cal. 606 noted:

The expenses of a [receiver] in the execution of the [receivership] are a lien upon the estate, and he will not be compelled to part with the property until his disbursements are paid…If a person undertakes an office for another in relation to property, he has a natural right to be reimbursed for all money necessarily expended in the performance of the duty. The costs of winding up a [receivership] and distributing the money, and all expenses for documents, deeds and other papers, must be paid from the [receivership] fund.”

Here, California receivership law is clear that the funds should first be applied to pay the Receiver’s fees and expenses, and all remaining funds should be released to the Plaintiff to satisfy the Judgment. (Id.) As for the question of how to apply the payments toward the Judgment, and how to apportion responsibility for the Receiver’s fees and expenses, the Court accepts the Receiver’s proposal that “Defendant’s $460,000 payment should be credited in full against the Judgment as of the date it was paid to the Receiver, and that Plaintiff should be responsible for the Receiver’s fees and expenses in excess of $15,000, because it was Plaintiff’s unreasonable and dilatory conduct that forced the Receiver to incur said fees and expenses. (Id., ¶ 34.)” (Motion, 6: 11-15.)

This conclusion is based on the extensive timeline of events set forth by the Receiver, and replicated above as “Factual Background.” The Receiver’s motion indicates that Defendant acted with speed to resolve the Judgment following the Receiver’s appointment, and promptly performed what was asked of him. By contrast, “Plaintiff unreasonably refused to cooperate with the Receiver, ignoring deadlines, submitting proposals and then reversing his positions, and opposing the Receiver’s efforts to resolve his appointment and release the funds in his possession to Plaintiff. Plaintiff was provided with repeated opportunities to avoid this outcome, and clear explanations of the consequences should he refuse to cooperate, to no avail.” (Motion, 8: 2-6.) Accordingly, equity weighs in Defendant’s favor, and it would be inequitable to force him to bear the costs of Receiver fees and expenses incurred solely due to Plaintiff’s unreasonable conduct after Defendant tendered his settlement payment.

Based on the foregoing, the Court grants the Receiver’s request for the following:

- Defendant be credited $460,000 against the amount of the Judgment—which amount is subject to future determination by the Court, given the Parties’ ongoing dispute—as of August 12, 2024.

- All funds remaining in the Receiver’s trust account after payment of the Receiver’s fees and expenses be released to Plaintiff, with an explicit finding that $10,297.84, plus any additional amounts incurred after the filing of this Motion, of the fees and expenses are Plaintiff’s sole responsibility (meaning that such amounts are not to be added on to the remaining balance of the Judgment, if any).

- The remaining $1,900 held by Prime West should also be released to Plaintiff and credited against the Judgment as of the date the funds are actually transferred to Plaintiff. (Id., ¶ 43.)

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org. If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative. If all parties to a motion submit, the court will adopt this tentative as the final order. If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar. For more information, please contact the court clerk at (213) 633-0517.

[1] The Receiver anticipates incurring additional fees and expenses after filing the Motion. At minimum, he must serve notice of the August 22 order granting the Application, which Judge Fruin ordered him to do, but which he cannot do until the signed order is available to download, and pay the cost of his bond. He also expects to prepare a reply should Plaintiff oppose this Motion.