Judge: Ronald F. Frank, Case: 23TRCV00394, Date: 2024-11-22 Tentative Ruling
Case Number: 23TRCV00394 Hearing Date: November 22, 2024 Dept: 8
Tentative Ruling
HEARING DATE: November 22, 2024
CASE NUMBER: 23TRCV00394
CASE NAME: County of Los Angeles; The People of the State of California v. Beverly D. Morable, et al.
MOVING PARTY: Court – Appointed Receiver, California Receivership Group and its President, Mark Adams
RESPONDING PARTY: Intervenor, JPMorgan Chase Bank, N.A.
TRIAL DATE: None set.
MOTION: (1) Motion for Discharge of Receiver, Exoneration of Surety, and Distribution of Proceeds
Tentative Rulings: (1) GRANTED. The court will allow the parties including Intervenor to present oral argument regarding priority of the distribution of the sale proceeds, or a set a further hearing to address distribution where the Receiver will not need to attend.
I. BACKGROUND
A. Factual
On February 10, 2023, Plaintiff, County of Los Angeles, and the People of the State of California (“Plaintiff”) filed a complaint for injunctive and other equitable relief against Defendants, Beverly D. Morable, Dorothy Beverly Morable, and DOES 1 through 25. The complaint alleges causes of action for: (1) State Housing Law Violations (Cal. Health & Safety Code § 17910, et seq.; (2) Los Angeles County Code Violations (LACC § 1.23.010, et seq.); and (3) Public Nuisance (Cal. Civ. Code §§ 3479 & 3480.)
On September 5, 2024, Intervenor Plaintiff, JP Morgan Chase Bank, N.A. filed a complaint-in-intervention for declaratory relief against County of Los Angeles and the People of the State of California.
On May 3, 2023, the court appointed, via court order (“Appointment Order”), California Receivership Group, through Mark Adams as its president (“Receiver”), as Receiver for the property located at 3036 W. 111th Street, Lenox, CA 90304 (APN’s 4035-019-001 and 4035-019-005) (“Property”). The Appointment Order found the Property to be substandard and a public nuisance, which substantially endangered the public health, safety, and welfare. The Appointment Order also directed the Receiver to take full and complete possession and control of the Property, to develop an abatement plan and to remedy all State and local violations thereon, to relocate the tenants as necessary, and to provide the tenants with relocation compensation. The Appointment Order authorized an initial $40,000 super-priority Receiver’s Certificate to cover the costs to secure the Property, along with the initial costs of the receivership.
Now, Receiver has filed this Motion for Discharge of Receiver, Exoneration of Surety, and Distribution of Proceeds on the grounds it notes the Final Accounting and Motion for discharge are the final actions in a receivership, and only come after the conditions and violations that required the appointment are remedied, and the receivership actions are complete.
B. Procedural
On September 20, 2024, Court-Appointed Receiver filed this Motion for Discharge of Receiver, Exoneration of Surety, and Distribution of Proceeds. To date, no opposition has been filed. However, on November 8, 2024, Intervenor, JP Morgan Chase Bank, N.A. filed a Response. On November 15, 2024, Receiver filed a reply in response to JP Morgan Chase Bank, N.A.’s response. On November 19, 2024, County of Los Angeles and The People of the State of California filed a Joinder and Supplement to the Receiver’s Reply brief.
II. ANALYSIS
A. Legal Standard
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.” (Code Civ. Proc., § 564(a).) Subdivision (b) of section 564 lists the circumstances under which a receiver may be appointed, including after a judgment to enforce the judgment. (Id., § 564(b).)
California Rules of Court Rule 3.1184 provides that a receiver must present, by noticed motion or stipulation of all parties: (1) a final account and report, (2) a request for the discharge, and (3) a request for exoneration of the receiver’s surety. (Cal. Rules of Court, rule 3.1184(a).) Rule 3.1184 further provides that “[n]otice of the motion or of the stipulation must be given to every person or entity known to the receiver to have a substantial, unsatisfied claim that will be affected by the order or stipulation, whether or not the person or entity is a party to the action or has appeared in it.” (Id., rule 3.1184(c).)
B. Discussion
i. Compliance with Rule 3.1184
Here, the Receiver has submitted a final account and report, request for discharge, and request for exoneration of surety. The Receiver has also provided notice of the motion to the parties in this action. Thus, the court holds the Receiver has complied with Rule 3.1184.
ii. Final Report and Accounting
The Receiver has submitted a final report and accounting. A review of the report demonstrates that receivership is no longer necessary because the sale of the Property took place after Receiver’s efforts post appointment, given the extreme and substandard conditions that necessitated such an appointment. Thu, the Receiver has completed his obligation under the Appointment Order and seeks to be discharged.
As the Receiver has demonstrated fulfillment of his obligations under the Appointment Order, and no party has opposed the final report and accounting, the final report and accounting is approved. Moreover, discharge of the Receiver will terminate the administrative costs charged by the Receiver. The County and the State remain as parties and, together with counsel for any lien claimants, they can address distribution of net proceeds from the sale of the remediated property.
iii. Discharge of Receiver
The receiver acts as a ministerial officer and a temporary occupant and caretaker of the property for the Court.¿ (Gill v. Rich (2005) 128 Cal. App. 4th 1254, 1267.)¿ The receiver represents the Court as the medium through which the Court acts. (Id.) The receiver’s functions and powers are controlled by statute, by the order appointing him, and by the Court’s subsequent orders.¿ (Cal-American Income Property Fund Vii v. Brown Dev. Corp. (1982) 138 Cal. App. 3d 268, 273-74.)
Here, Receiver was appointed pursuant to Health and Safety Code section 17980.7 and California Civil Procedure section 546, to take full and complete control, possession and custody of the real property in interest, and complete a number of requirements laid out by this court. The Receiver has indicated that he has completed the requirements of the court, and thus, it appears that a receivership is no longer necessary.
No judgment creditors have opposed this motion, but creditor and Intervenor, JP Morgan Chase Bank, N.A. has filed a response to this motion, arguing it should receive distribution from the proceeds of the sale of the Property based upon what it characterizes as it “first position lien,” in the sum of $131,760.99 as of November 22, 2024. However, the court notes that under Health and Safety Code section 17980.7, subdivision (c)(11), the prevailing party, County of Los Angeles and the People of the State of California, in an action pursuant to this section shall be entitled to its attorney’s fees and court costs. The court will allow oral argument on this issue. However, because JP Morgan did not file an opposition brief, the court continues with its analysis regarding this motion specifically.
Because Receiver has completed the requirements set forth by this court in the Appointment Order, the court approves Receiver’s request for discharge and orders Mark Adams discharged as a receiver from this matter.
iv. Exoneration of Surety
On May 4, 2023, a $10,000 bond in this matter with The State of California as the listed beneficiary was purchased. As the court has approved the final report and accounting and the order discharging Receiver, the court also orders the bond be exonerated.
v. Approval of Costs
Receiver also seeks the Court’s approval of the disbursement of receiver fees and costs in the amount of $671,158.82.
Receivers are entitled to compensation for their services.¿ (Venza v. Venza (1951) 101 Cal.App.2d 678, 680.)¿ Generally, the costs of a receivership are paid from the property in the receivership estate.¿ (Andrade v. Andrade (1932) 216 Cal. 108, 110.)¿ However, Courts may impose the receiver’s costs on a party who sought the appointment of the receiver or apportion them among the parties for whose benefit the receivership was created, depending upon the equitable circumstances presented.¿ (Stanton v. Pratt (1941) 18 Cal.2d 599, 603.)¿ Trial courts are vested with broad discretion in determining who is to pay the expenses of a receivership, and the Court’s determination will be upheld in the absence of a clear showing of an abuse of discretion.¿ (Baldwin v. Baldwin (1947) 82 Cal.App.2d 851, 856.)
As of September 18, 2024, Receiver contends the remaining cash balance in the receivership account was $443,958.90. The Receiver has $27,556.00 in unpaid fees along with $35.44 in unreimbursed cash advances. The Receiver estimates incurring an additional $5,000 in fees or time to respond to any opposition, appear at the discharge hearing, and then complete any administrative tasks to close this matter out. Additionally, the County of Los Angeles is entitled to reimbursement of its fees and costs pursuant to Health and Safety Code §17980.7(d)(1). The County submitted its final demand on September 17, 2024 for its fees and costs associated with this receivership property totaling $110,018.93. After paying the remaining Receiver’s fees costs and the County’s fees and costs, there will be approximately $301,348.53 in remaining sale proceeds for distribution.
The Receiver’s recommendation is to pay the Federal Tax Lien, and then distribute the remaining proceeds to the previously filed liens in chronological order of recording.
Here, the report establishes that the Receiver was reimbursed from the proceeds of the sale of the liquor license. (Brewer Decl. Exh. 2.) As Judgment Creditors were the parties who sought appointment of the Receiver, the Court finds it appropriate that they bear the fees and costs of the receivership. The Court therefore approves the disbursement of receiver fees $1,966.70, plus $62.50 in courier fees. As of April 2024, the approximate amounts due on those liens were: (1) $47,426.72 for the IRS Federal Tax Lien; (2) $96,631.76 for Chase’s deed of trust; and (3) $242,872.76 for Mark Hernadi’s abstract of judgment.
Here, the court approves of the costs and fees and approves the disbursement of receiver fees and costs.
vi. Ratification and Preclusion of Liability
An order to discharge the receiver’s will bar any claims by the parties against the receiver under the doctrine of res judicata. (Aviation Brake Systems, Ltd. v. Voorhis (1982) 133 Cal.App.3d 230, 235.) The discharge order is res judicata because the parties have had the opportunity to litigate any claims against the receiver in their inquiries and attacks on the final report and accounting. (Id. at 234.) Moreover, a receiver is an officer of the Court and manages property on behalf of the Court. (McCarthy v. Poulsen (1985) 173 Cal. App. 3d 1212, 1219.) Since a receiver is an officer of the Court and acting as an agent of the Court, a receiver is liable in tort solely in an official capacity and not in a personal one. (Id.) Further, the receiver can be sued only by permission of the Court that appointed the receiver. (Ostrowski v. Miller (1964) 226 Cal. App. 2d 79, 84.)¿ This legal rule was established to protect receivers from unnecessary litigation. (Id.)
As no party has opposed the motion, the Court finds that the requested relief is proper under established case law.
III. CONCLUSION
For the foregoing reasons, this court GRANTS Receiver’s Motion. The court will allow the parties to present oral argument regarding priority of the distribution of the sale proceeds, or a set a further hearing where the Receiver will not be seeking additional administrative fees to attend a future hearing.
Receiver is ordered to provide notice.