Judge: Mitchell L. Beckloff, Case: 23STCV10983, Date: 2023-06-23 Tentative Ruling
Case Number: 23STCV10983 Hearing Date: June 23, 2023 Dept: 86
WILMINGTON TRUST,
NATIONAL ASSOCIATION v. EYP REALTY, LLC
Case Number: 23STCV10983
Hearing Date: June 23,
2023
[Tentative] ORDER
CONFIRMING RECEIVER
[upon proof
of service and filing of a receiver’s oath]
On May 16, 2023, Plaintiff,
Wilmington Trust, National Association, solely in its capacity as Trustee for
the benefit of the Certificate holders of BFLD Trust 2020-EYP, Commercial
Mortgage Pass-Through Certificates, Series 2020-EYP, filed a complaint seeking specific
performance to enforce terms and provisions of a deed of trust, appointment of
receiver and injunctive relief. Plaintiff named EYP Realty, LLC as Defendant in
the action.
On May 22, 2023, Plaintiff
filed an ex parte application seeking
the appointment of a receiver over the Ernst & Young Plaza in Los Angeles
(725 S. Figueroa Street) and a temporary restraining order in aid of the
receivership. Plaintiff sough the appointment based on the grounds that
Plaintiff’s collateral is in danger of being lost, removed, eroded, or
materially injured, and express provisions in the trust authorize such a
remedy. The application attempts to establish Defendant’s default and remedies under
the deed of trust, which include the appointment of a receiver. Based upon
Defendant’s default and the deed of trust, Plaintiff seeks the appointment of
the receiver. The application nominates Gregg Williams as the prospective
receiver.
On May 24, 2023, the court
considered and granted Plaintiff’s ex parte application for an order appointing
a receiver and issued a temporary restraining order. The court set an order to
show cause re confirmation of the hearing for today’s date. The court appointed
Gregg Williams as receiver, set the receiver’s bond at $50,000, the Plaintiff’s
bond at $1,500, and a required a bond for the temporary restraining order in
the amount of $1,500. The court ordered moving and supplemental papers to be
served on or before June 2, 2023, opposing papers with proof of service to be served
and filed on or before June 12, 2023, and reply papers with proof of service to
be served and filed on or before June 16, 2023. On May 25, 2023, the required bonds
were posted. The Court then set June 23, 2023 for an OSC concerning the
confirmation of the receiver.
Defendant has not filed
an responsive papers to the order to show cause. (In fact, Defendant has not yet
appeared in this action.) Plaintiff served Defendant’s attorney and authorized
agent for service of process by mail on May 30, 2023 with a return receipt
requested. The court cannot determine from its file that status of service upon
Defendant.
There have been no supplemental
papers or opposing papers filed since the ex parte hearing on May 24,
2023.
RELEVANT
ALLEGATIONS IN THE COMPLAINT
As noted, this matter
concerns the Ernst & Young Plaza (Property). The deed of trust executed by Defendant
pledges the Property as security for loans in the sum of $220,000,000 to Morgan
Stanley Bank, N.A. (“A-1 Note”) and $55,000,000 to Wells Fargo Bank, National
Association (“A-2 Note”) dated as September 23, 2020.
The complaint alleges Defendant
defaulted on the loans by (i) failing to pay the monthly loan payment due for
April 2023; (ii) failing to pay real property taxes when due on or before April
10, 2023, which required Plaintiff to advance funds in the amount of not less
than $2,420,964.51; (iii) failing to pay property insurance when due on or before
May 15, 2023, which required Plaintiff to advance funds in the amount of not
less than $1,975,180.02 to prevent the property insurance at the Property from
lapsing; and (iv) allowing multiple mechanic’s liens to filed against the Property,
as well as various lawsuits for foreclosure of mechanic’s liens, with respect
to Defendant’s failure to comply with certain tenant lease agreements.
As of May 15, 2023, the complaint
alleges the following amounts are owed by Defendant to Plaintiff:
The complaint seeks to
satisfy the amount owed by using the remedies provided for in the deed of
trust. The complaint states a single cause of action for specific performance through
the appointment of a receiver and injunctive relief.
STANDARD
OF REVIEW
Receivers are agents of
the court and may be appointed only where authorized by statute. (Marsch v.
William (1994) 23 Cal.App.4th 238, 246.) Code of Civil Procedure section
564 is the addresses receiverships. Code of Civil Procedure section 564,
subdivision (b)(11) provides the court with authority to appoint a receiver in
an action by a secured lender for specific performance of an assignment of
rents provision in a deed of trust, mortgage, or separate assignment document.
The appointment may be continued after entry of a judgment for specific performance
if appropriate to protect, operate, or maintain real property encumbered by a
deed of trust or mortgage or to collect rents therefrom while a pending
nonjudicial foreclosure under power of sale in a deed of trust or mortgage is
being completed.
Code of Civil Procedure section
564, subdivision (b)(12) authorizes the appointment of a receiver “[i]n a case
brought by an assignee under an assignment of leases, rents, issues or profits
pursuant to subdivision (g) of Section 2938 of the Civil Code.” (Code Civ. Proc.,
§ 564 subd. (b)(12).) Civil Code section 2938 provides that an assignment of
rents in a real property secured loan transaction constitutes a present and
perfected transfer of interest in the rents. Civil Code section 2938,
subdivision (c) further expressly contemplates the entitlement to a receiver
upon a borrower’s default.
Together these statutory provisions
authorize the appointment of a receiver to collect rents pending trial in an
action to specifically enforce the terms of a deed of trust (1) assigning rents
and profits to the creditor upon default or (2) providing for appointment of a
receiver to take possession of the property to the extent necessary collect the
rents and profits from it. (Mines v.
Superior Court of Los Angeles County (1932) 216 Cal. 776, 779; Turner v. Superior Court (1977) 72
Cal.App.3d 804, 811.) No showing that the property’s value is insufficient to
satisfy the debt is required for a “rents and profits receiver.” (Turner v. Superior Court, 72 Cal.App.3d
at 811.) The courts’ usual reluctance to appoint a receiver should not apply
where a receiver is sought to enforce a rents and profits provision. The
parties have agreed by contract to the appointment, and there is usually
(though not always) less potential for harm from the appointment. (Barclays Bank of California v. Superior
Court (1977) 69 Cal.App.3d 593, 602 [discussing power court retains, but
noting language in deed of trust should still be considered]; see also
Rylaarsdam & Edmon, California
Practice Guide: Civil Procedure Before Trial (Rutter Group 2012), ch.
9(II)-B § 9:777; Ahart, California
Practice Guide: Enforcing Judgments & Debts (Rutter Group 2012), ch.
4-C § 4.871.1.)
The appointment of a
receiver is a drastic remedy to be utilized only in “exceptional cases.” As
such, a receiver should not be appointed unless absolutely essential and
because no other remedy will serve its purpose. (See City & County of San Francisco v. Daley (1993) 16 Cal.App.4th
734, 744.) A plaintiff who seeks appointment of a receiver of certain property has
the burden to establish by a preponderance of the evidence that the appropriate
factual predicates are present. (Cf. Alhambra-Shumway
Mines, Inc. v. Alhambra Gold Mine Corp. (1953) 116 Cal.App.2d 869, 873.)
DISCUSSION
Plaintiff seeks the
immediate appointment of a receiver to preserve, protect, sell, operate, lease
and collect the revenues, rents, profits and proceeds derived from the Property.
Code of Civil Procedure section 564(b)(11) permits the appointment of a
receiver here: “[i]n an action by a secured lender for specific performance of
an assignment of rents provision in a deed of trust, mortgage, or separate
assignment document.”
Plaintiff also references
Code of Civil Procedure section 564, subdivision (b)(2), which authorizes a
receivership: “[i]n an action by a secured lender for the foreclosure of a deed
of trust or mortgage and sale of property upon which there is a lien under a
deed of trust or mortgage, where it appears that the property is in danger of
being lost, removed, or materially injured, or that the condition of the deed
of trust or mortgage has not been performed, and that the property is probably
insufficient to discharge the deed of trust or mortgage debt.”
Plaintiff also refers to Code
of Civil Procedure section 564, subdivision (b)(1), as the statute to which
courts routinely appointed rents and profits receivers (prior to the enactment
of Code of Civil Procedure section 564, subdivision (b)(11)) which provides for
a receiver: “[i]n an action by a vendor to vacate a fraudulent purchase of
property, or by a creditor to subject any property or fund to the creditor’s
claim, or between partners or others jointly owning or interested in any
property or fund, on the application of the plaintiff, or of any party whose
right to or interest in the property or fund, or the proceeds of the property
or fund, is probable, and where it is shown that the property or fund is in
danger of being lost, removed, or materially injured.”
Finally, Plaintiff refers
to Code of Civil Procedure section 564, subdivision (b)(9)—a catch-all provision
authorizing the appointment of a receiver to “preserve the property or rights
of any party.”
The court finds the statutory
provisions authorize the court’s receivership order. A receivership will empower
a Receiver (Gregg Williams) to preserve and protect Plaintiff’s collateral, the
gross monthly rents, which have been assigned to Plaintiff by an absolute
assignment of rents. (The court notes gross monthly rents derived from the Property
can be substantial, in excess of $2.7 million per month.)
Further, no party has
asserted a receiver is not necessary here. Plaintiff argues a receiver is necessary
to take possession and charge of the collateral, with the power to collect all
rents, revenues and profits, manage, lease, sell, protect and preserve the
collateral. Unless a receiver is so appointed, Plaintiff states that there is
immediate and substantial danger that the collateral may be lost, secreted,
and/or misappropriated, all to the detriment and irreparable loss to Plaintiff.
Plaintiff’s arguments have merit. Plaintiff has posted the required bond, however,
the court notes that the Oath of the Receiver has not yet been filed. The court
will confirm the appointment of the Receiver.
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CONCLUSION
For the foregoing reasons, the confirmation
of appointment of receiver Williams is confirmed. Williams shall file his oath
with the court forthwith.
[Proof
of service shall be verified.]
IT IS SO
ORDERED.
June 23, 2023 ________________________________
Hon. Mitchell
Beckloff
Judge of the
Superior Court