Judge: Mark A. Young, Case: 19SMCV0089, Date: 2023-03-17 Tentative Ruling


Case Number: 19SMCV0089    Hearing Date: March 17, 2023    Dept: M

CASE NAME:           Saks, et al., v. Pink, et al.

CASE NO.:                19SMCV0089

MOTION:                  Motion to Appoint Receiver

HEARING DATE:   3/18/2023

 

Legal Standard

 

Standard for Appointment of a Receiver

 

Code of Civil Procedure section 564 provides that “[a] receiver may be appointed, in the manner provided in this chapter, by the court in which an action or proceeding is pending in any case in which the court is empowered by law to appoint a receiver.” Section 564(b) lists the circumstances under which a receiver may be appointed: (1) in actions by a joint owner in any property or fund where it is shown that the property or fund is in danger of being lost, removed, or materially injured; (2) in actions by a secured lender for foreclosure of a deed of trust or mortgage where it is shown that the property or fund is in danger of being lost, removed, or materially injured; (3) after judgment, to carry the judgment into effect; (4) after judgment, to dispose of property according to the judgment; (5) in actions where a corporation has been dissolved; (6) where a corporation is insolvent or otherwise forfeited its corporate rights; (7) in actions for unlawful detainer; (8) at the request of the Public Utilities Commission; and (9) in all other cases where necessary to preserve the property or rights of any party.

 

            A receivership is a “harsh” remedy, and thus is available only where a more “delicate,” alternative remedy (such as an injunction, writ of possession, attachment, provisional director, lis pendens) is inadequate. (City & County of San Francisco v. Daley (1993) 16 Cal.App.4th 734, 745.) In other words, receivership should not be imposed unless no other remedy will do the job.

(See Id., [receiver properly appointed to repair residence maintained so poorly as to constitute a public nuisance, after owners “repeatedly thumbed their noses” at efforts to compel them to correct code violations and one owner had been jailed for contempt for disobeying earlier court orders]; Medipro Med. Staffing LLC v. Certified Nursing Registry, Inc. (2021) 60 Cal.App,5th 628 [appointment of receiver to enforce money judgment reserved for “exceptional” circumstances such as “when the judgment debtor has frustrated the judgment creditor's collection efforts through obfuscation or through otherwise contumacious conduct that has rendered feckless the panoply of less intrusive mechanisms for enforcing a money judgment”].) Admissible evidence that clearly establish a receiver is necessary to protect the property and maintain the status quo. (Barclay Bank of California v. Superior Court (1977) 69 Cal. App. 3d 593, 597; Daley, supra, 16 Cal.App.4th at 744.) As the appointment of a receiver is an equitable remedy, there must also be a showing of irreparable injury. (Alhambra-Shumway Mines, Inc. v. Alhambra Gold Mine Corp. (1953) 116 Cal.App.2d 869, 872.)

 

Appointment of Receiver

 

“‘A receiver is an agent and officer of the court, and is under the control and supervision of the court. [Citations.]’” (Southern California Sunbelt Developers, Inc. v. Banyan Limited Partnership (2017) 8 Cal.App.5th 910, 922.)  “‘The receiver is an agent of the court and not of any party, and as such: (1) Is neutral; [¶] (2) Acts for the benefit of all who may have an interest in the receivership property; and [¶] (3) Holds assets for the court and not for [any party].’”  (CRC, rule 3.1179(a).) The receiver is obligated to preserve and manage the property during the receivership.  “The receiver has, under the control of the Court, power to bring and defend actions in his own name, as receiver; to take and keep possession of the property, to receive rents, collect debts, to compound for and compromise the same, to make transfers, and generally to do such acts respecting the property as the Court may authorize.” (CCP § 568.) 

 

Persons who can qualify for the appointment are defined by statute in negative terms. The following persons may not be appointed: A party, attorney to the action, or person related to a judge of the court within the third degree. Anyone else who is qualified can be appointed. (CCP § 566.) Each party may nominate in writing one or more persons for appointment as receiver. (CRC 3.1177(a).)

 

Two separate bonds may be required: a) a discretionary bond by plaintiff, where the appointment, if erroneous, would damage the defendant; and b) a receiver’s bond, which the receiver must post before he or she enters upon performance of their duties. (CCP § 567.)

 

EVIDENTIARY ISSUES

 

Defendants’ objections to the Nordberg declaration are OVERRULED.

 

Plaintiffs’ objections to the Yang declaration are OVERRULED.

Plaintiffs’ objections to the Ulrich declaration are OVERRULED.

Plaintiffs’ objections to the Naysan declaration are SUSTAINED as to objection no. 3 and OVERRULED as to the remainder.

Plaintiffs’ objections to the Jones Declaration are OVERRULED.

 

Plaintiffs’ request for judicial notice is GRANTED.

 

Analysis

 

Plaintiffs Wayne J. Saks and Mirta Siderman move for an appointment of a receivership against Defendant Beverly Spalding Court Homeowners’ Association (the “HOA”). Plaintiffs assert that a receivership is necessary because (1) Saks’s condominium unit are in danger of being lost, due to the HOA’s failure to satisfy its obligations to Plaintiff, his property, and all other homeowners in the building (CCP§564(b)(1)); and (2) a receiver is necessary to preserve Plaintiff’s rights and property (§564(b)(9)).

 

Plaintiff Saks contend that the HOA continues to violate the requirements of the covenants, conditions and restrictions (the “CC&Rs”) which govern the HOA, including: a) refusing to repair a deteriorated and malfunctioning common-area drainage system that has resulted in extensive water damage to Plaintiff’s property; b) failing for years to hold elections; and c) eschewing their fiduciary duties to the HOA in favor of their personal interests. Plaintiff claims that the building has sustained damage for years as a result of a failing and dilapidated drainage system exclusively within the HOA’s control. Plaintiff argues that the damage became so significant that on January 17, 2023, emergency shoring was recommended by a structural engineer for Units 101, 203, and 303 (all on the south-side of the building). Plaintiff claims that the need for this shoring was never investigated by the HOA after being brought to its attention by Plaintiff. Plaintiff contends that the building will continue to deteriorate under the HOA’s auspices.

 

The Court does not find that the property is in danger of irreparable injury by the Board’s action, justifying the imposition of a receivership. Plaintiffs assert that the HOA Board has completely abrogated its duties. Plaintiff observes that the HOA has known about the degrading drainage system since 2016, but did not put it on their agenda until May 2018 and still has done nothing to correct the problem. (Saks Decl., ¶¶ 21-24; Fisher Decl., Ex. 3(a), pp. 94:5-95:25, Ex. 12, pp. 57:7- 25, Ex. 6.) However, Plaintiffs only assert that that the HOA has “abrogated” its duty as to his condo unit. The damages cited by Plaintiff Saks appears personal to him. Certainly, Plaintiff fails to put on sufficient evidence showing that the entire HOA would be at risk of damage. Instead, the evidence shows that there is only a limited area affected by the drainage issues. (See Saks Decl., ¶ 50.)

 

Indeed, Plaintiff’s evidence demonstrates the highly personal nature of this action. Plaintiff claims that the HOA Board is violating its fiduciary duties to the HOA members by refusing to take any action to stop Defendant Jeffrey Pink (“Pink”).  Plaintiff assert that Pink owns and resides in the unit above Plaintiff’s unit, and the HOA has refused to stop Pink from watering his deck and balcony using a self-installed watering system (without the HOA’s approval) in violation of the CC&Rs, which has further increased the water damage to Plaintiff’s Unit. Again, this only demonstrates that Plaintiff is seeking to adjudicate his damages for his own benefit, and not the HOA as a whole.

 

Plaintiff further contends that the HOA makes self-serving decisions. Plaintiff cites the fact that Naysan has refused to make the repairs, but has a conflict of interest because he does not live in the affected part of the building. Even if this refusal was improper, Plaintiff provides no evidence that this was “self-serving” of the board members or a conflict of interest. There is no evidence that Naysan or the Board took this course in order to enrich themselves at the expense of the HOA. At worst, this is a breach of a duty to Plaintiff.

 

Plaintiff also cites the Board’s bad faith and dishonesty. Specifically, Plaintiff has evidence which contradicts that the Board was advised by legal counsel that the HOA was not responsible for repairs of that area because it was an “exclusive common area.”  (RJN, No. 2, Art. VII, §1.A.) While this may be the case, this does not strongly evidence the Board’s inability or refusal to comply with any other remedies that the Court may impose in this action. Finally, Plaintiff speculates that the HOA lacks insurance. Plaintiff cites no evidence in support of this accusation.

 

The Court would note that other effective remedies are available, such as an injunction. There is no indication that the HOA would not follow this Court’s orders or judgment regarding any repairs. The record before this Court shows that while the Board is reluctant to act as Plaintiff wishes, when push-comes-to-shove, they ultimately have acted. For instance, Plaintiff notes that the HOA was suspended as an entity for approximately seven years, but also acknowledges that the HOA has been reinstated. (Saks Decl., Ex. 5.) Plaintiff proffers that the HOA ignored city citations to make repairs until threat of criminal prosecution. (Saks Decl., ¶37.) As to the shoring issues, while the HOA only “addressed” this issue upon the demands of Plaintiff in this Action and city inspectors, the HOA apparently addressed the issue. This would tend to demonstrate that the HOA is responsive to court orders. Incumbent on a receivership motion is a showing that other remedies would be ineffectual. Here, since an injunction would likely be followed, Plaintiff cannot meet this burden.

 

The Court does have an issue, however, with the HOA’s failure to have a Board election since December 2020.  Defendant contends that there was no Board election in 2021 and 2022 because of the COVID pandemic. The Court is unsure why the HOA was able to have a Board election in December 2020 – during the height of the COVID pandemic – yet subsequently could not hold an election allegedly due to COVID.  Defendants do not explain this inconsistency. That said, the lack of elections alone would not justify a general or limited purpose receivership. This is principally because Plaintiff has an adequate remedy at law. Under Corporation Code section 305(c)(2), Plaintiff may seek an order for a special meeting to elect the Board. Furthermore, there is an election for the HOA board of directors planned for 2023, with the annual meeting scheduled for May 8, 2023. (Jones Declaration, ¶ 17; Naysan Declaration, ¶ 15; Ulrich Declaration, ¶ 6.)

 

Accordingly, Plaintiff’s motion is DENIED.