Judge: Stephen I. Goorvitch, Case: 22STCV34236, Date: 2024-05-03 Tentative Ruling
Case Number: 22STCV34236 Hearing Date: May 3, 2024 Dept: 82
RH
Properties v. Sandra K. McBeth
Case
No. 22STCV34236
Motion
for an Order 1) Approving and Settling the
Receiver’s Final Report and Accounting; 2) Approving Final Compensation and
Reimbursement of Expenses; 3) Authorizing Receiver to Issue Receiver’s
Certificate; 4) Exonerating All Bonds; 5) Terminating the Receivership
Appointment; and 6) Retaining Jurisdiction re This Receivership Appointment
BACKGROUND
Plaintiff
RH Properties (“Plaintiff”) owns the property located at 5532 West 62nd Street
in Los Angeles, California (the “Property”).
Plaintiff filed this action against Sandra K. McBeth (“Defendant”) and
all persons unknown claiming any legal or equitable right to the Property. Plaintiff asserts causes of action for trespass,
ejectment, quiet title, and slander of title.
Defendant acquired title to the Property on or about January 17, 2007,
through an interspousal transfer deed.
Eventually, the Property fell into foreclosure, and Plaintiff acquired
the Property on or about January 3, 2022.
Plaintiff moved for appointment of a
receiver to take possession of the Property and collect the rents. The court (Beckloff, J.) held a hearing on
the motion on April 21, 2023. Prior to the hearing, Judge Beckloff issued a written tentative granting
the receivership “to preserve the Property (including the rents) while this
litigation is pending.” In the tentative
ruling, however, Judge Beckloff questioned “whether the Property generates
sufficient funds to pay the receiver’s fees” and noted that Plaintiff had not
nominated a receiver. After discussion
with the parties at the hearing, the court adopted its tentative ruling and
appointed Kevin Singer as receiver (the “Receiver”). The court issued an order on July 13, 2023,
approving hourly rates of $295 for the Receiver and $275 per hour for project
managers and $85 to $150 per hour for accounting and administrative staff.
Plaintiff obtained summary judgment on August
30, 2022, and Plaintiff obtained possession on March 1, 2024, which eliminates
the need for the Receiver. Now, the
Receiver moves for an order (1)
approving and settling the Receiver’s final report and accounting, (2)
approving final compensation and reimbursement of expenses, (3) authorizing the
Receiver to issue a Super-Priority Deed of Trust and accompanying Receiver’s
Certificate of Indebtedness to secure funding for the Receivership Estate’s
outstanding costs of administration, (4) exonerating all bonds, (5) terminating
the Receivership appointment, and (6) retaining jurisdiction regarding this
Receivership appointment. The Receiver’s
total fees and expenses in this matter from April 21, 2023, through April 3,
2024, are $121,604.96, comprised of $118,948 in fees and $2,656.96 in
expenses. To date, the Receiver has been
paid $28,453.03, so there remains an outstanding balance of $93,151.93, as of
April 3, 2024. The Receiver incurred
an additional $4,027 in fees and expenses between April 4 and April 26, 2024,
so the total outstanding balance is $97,178.93.
Plaintiff opposes the motion, arguing that Defendant
should be responsible for the Receiver’s fees and expenses, and that the
Receiver’s total request is unreasonable.
Defendant joins in Plaintiff’s opposition on the basis that the
Receiver’s total request is unreasonable.
EVIDENTIARY ISSUES
On April 29, 2024,
four court days before the hearing, Plaintiff filed an untimely supplemental
declaration of Derek Tabone. Plaintiff
did not request leave of court to file a sur-reply or a supplemental
declaration and the court did not authorize the filing of supplemental evidence. Accordingly, Receiver’s objection to the
supplemental declaration of Derek Tabone is sustained. The court does not consider the supplemental
declaration. Regardless, even if the
court considered this declaration, it would not change the court’s
decision.
LEGAL STANDARD
In order to
terminate and discharge the receivership, Receiver must prepare, serve and file (by noticed motion or stipulation of all
parties) a “final account and report, a request for discharge, and a request
for exoneration of the receiver’s surety.” (Cal. Rules of Court, rule
3.1184(a).) Notice must be provided to
every person or entity known to the receiver to have a substantial, unsatisfied
claim that will be affected by the order, “whether or not the person or entity is a party to the action
or has appeared in it.” (Cal.
Rules of Court, rule 3.1184(c).) “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.” (Cal. Rules of Court, rule 3.1184(d).)
In addition,
“[i]nterim fees are subject to final review and 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
rendered.” (Cal. Rules of Court, rule 3.1183(a).
“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.”
(Cal. Rules of Court, rule 3.1183(b).)
DISCUSSION
A. The Reasonableness of the Fees and
Expenses
Starting
on June 27, 2023, Receiver filed interim reports with the court summarizing the
duties he performed pursuant to the Appointment Order and Amended Appointment
Order, and documenting the Receiver’s fees and expenses. These reports were served on counsel for
Plaintiff and Defendant. In the instant
motion and accompanying declaration, Receiver also summarizes the work and
duties he or his staff performed pursuant to the Appointment Order. (Receiver’s Decl. ¶ 8.) Receiver also documents, in detail, additional
fees and expenses incurred since March 2024.
(Id. ¶ 9, Exh. 3-4.)
Receiver has shown, in detail, that the Receiver’s
total fees and expenses in this matter from April 21, 2023, through April 3,
2024, are $121,604.96, comprising $118,948.00 in fees and $2,656.96 in
expenses. (Id. ¶¶ 9-10.) To date, the Receiver has been paid
$28,453.03 toward his total fees and expenses of $121,604.96 for this
appointment. (Id. ¶ 14.) Receiver
also incurred an additional $4,027 in fees and expenses between April 4 and
April 26, 2024. (Receiver’s Suppl. Decl.
¶ 15, Exh. 3.) Accordingly, there
remains an outstanding balance owed to the Receiver in the amount of $97,178.93.
In
opposition, Plaintiff acknowledges that Receiver is entitled to recover the
fees and expenses he incurred on behalf of the Receivership Estate. (Oppo. 2-3.)
Nonetheless, Plaintiff objects that the amount of fees and expenses
claimed by Receiver is “unreasonable in light of the results achieved.” (Oppo. 4.)
According to Plaintiff, “Mr. Singer's intervention, however well
intentioned, did not shorten the time it took Plaintiff to obtain possession by
even one day; did not result in the collection of even $1.00 to help defray the
cost of McBeth’s continued wrongful possession; did not result in any
improvement in the condition of the property when Plaintiff obtained possession.” (Ibid.) Plaintiff asserts that even though Receiver
was granted control of the Property, he “never had that control” and “it was Plaintiff's
principal who got rid of each set of squatters.” (Id. 4-5.) Plaintiff suggests that Receiver should have withdrawn
or stopped performing his duties when it became clear that Receiver could not
restore possession of the Property to Plaintiff. (Ibid.)
Plaintiff’s
arguments objections are procedurally improper.
On October 13, 2023, the court (Beckloff, J.)
granted Receiver’s ex parte application for an order directing Plaintiff to pay
Receiver’s outstanding fees and expenses of $53,055.10, as of September 30,
2023. (See Singer Decl. Exh. 9.) Plaintiff did not move for reconsideration of
that order, which is final. Further, Receiver
had previously served copies of each of his billing invoices through February
2024 and received no objections from Plaintiff.
(Receiver Decl. ¶ 11.) As noted,
Receiver filed and served multiple interim reports documenting Receiver’s fees
and expenses. Pursuant to the Rules of
Court, “[u]nless
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.”
(Cal. Rules of Court, rule 3.1183(b).) Because it failed to file a timely or
specific objection, Plaintiff is barred from objecting to Receiver’s fees and
expenses incurred through the report filed February 29, 2024.
Even if Plaintiff could now object
to some or all of Receiver’s fees and expenses, its objections are not
persuasive. Based on the court’s review
of the Receiver’s reports, declaration, and billing invoices, as well as
Plaintiff’s opposition, the court does not find any basis to reduce or disallow
the fees and expenses claimed by Receiver.
Significantly, Plaintiff opposed Receiver’s ex parte
application to terminate the receivership in October 2023. (See Receiver’s Suppl. Decl. ¶ 8.) Receiver was not authorized by the
Appointment Orders to expel Defendant from the Property himself. Plaintiff develops no argument to the
contrary. Receiver incurred reasonable
fees and expenses performing the duties that were assigned to him, including inspecting
the Property, installing security cameras, communicating with neighbors, investigating
Defendant’s claim of ownership and rental activities, installing an on-site
manager, coordinating the rental of a room at the Property, and preparing and
filing status reports with the court, among other duties. (Receiver’s Decl. ¶ 9; Receiver’s Suppl.
Decl. ¶¶ 8-10.) Plaintiff has not
identified any specific billing item for work that was either not performed by
Receiver or was unreasonable under the circumstances. (See Oppo. 4-5.)
In sum, Plaintiff insisted that
Judge Beckloff appoint the Receiver, notwithstanding his concern that the
property would not generate sufficient income to pay the fees. Judge Beckloff previously approved the hourly
rates, and this court will not revisit that decision. Plaintiff did not object to any of the
Receiver’s past reports or Judge Beckloff’s prior approval of approximately
$53,000, as of September 30, 2023.
Plaintiff opposed the Receiver’s efforts to terminate his work in
October 2023, after Plaintiff prevailed on summary judgment. Plaintiff criticizes the Receiver for not
undertaking work not included in the appointment order. Based upon this record, Plaintiff has no
basis to complain about having to pay the rates set by Judge Beckloff.
Finally, Plaintiff
asserts that it paid Receiver $37,498.66, and “not the lesser amount indicated
by the Receiver.” (Oppo. 5 and Ritvo
Decl. ¶ 3.) In response, Receiver
declares: “Plaintiff has provided a total of $34,671.32 in funding for this
receivership, not $37,498.66. Of that amount, $28,453.03 was applied toward my
fees and expenses as presented in my monthly billing statements. An additional
$5,730.76 was paid to third parties for bond services, locksmith fees, property
management fees, and cloud storage services for the Property’s security
cameras, as reflected in my monthly financial statements (which were included
with my interim reports).” (Receiver’s
Suppl. Decl. ¶ 12.) Receiver’s accounting
is detailed and supported by multiple reports, to which Plaintiff did not
object. Plaintiff has not shown any
error in Receiver’s accounting of the fees and expenses incurred or in his
accounting of the payments made by Plaintiff toward the fees and expenses.
Based on the foregoing, the Receiver’s motion is granted. The court finds that the Receiver’s fees are
reasonable and that the expenses were necessary and appropriate. The court approves Receiver’s final
accounting and Receiver’s request for reimbursement of Receiver’s fees
and expenses. Plaintiff’s objections are
overruled.
B. The Means of Payment
The Receiver moves for
an order “authorizing the Receiver to issue a Super-Priority Deed of Trust and
accompanying Receiver’s Certificate of Indebtedness to secure funding for the
Receivership Estate’s outstanding costs of administration.” (Mot. 2.)
Because the Receiver’s outstanding fees and expenses remain unpaid,
Receiver proposes the following: “[T]o borrow up to $120,000 from Receivership
Lending, LLC (‘Lender’) on those terms, to be secured by the Deed of Trust and
Certificate, with a loan term of 1 year. Upon receipt of the loan proceeds, the
Receiver would pay the Receiver’s Outstanding Balance, plus any additional fees
and expenses later incurred, and release the remainder to Plaintiff, which
would have 1 year to repay Lender.”
(Mot. 10.)
“Receivers are entitled
to compensation for their own services and the services performed by their
attorneys. (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. (See Andrade v.
Andrade (1932) 216 Cal. 108, 110; McCarthy v.
Poulsen (1985) 173 Cal.App.3d 1212, 1219–1220, fn. 3.) However, courts may also impose the receiver costs on a
party who sought the appointment of the receiver or “ ‘apportion them among the
parties, depending upon circumstances.’ ” (Baldwin v.
Baldwin (1947) 82 Cal.App.2d 851, 856, 187 P.2d 429.) Courts are vested with broad discretion in determining who is to
pay the expenses of a receivership, and the court’s determination must be
upheld in the absence of a clear showing of an abuse of discretion.” (City of Chula Vista v. Gutierrez
(2012), 207 Cal.App.4th 681, 685-686.)
In paragraph 14, the
Amended Appointment Order states: “If there are insufficient funds in the
Receivership Estate to pay expenses of the receivership, the expenses of the
receivership estate shall be paid by the Plaintiff or advanced to the Receiver
by the Plaintiff or a 3rd party lender and the Receiver shall issue receiver’s
Certificates of Indebtedness to the Plaintiff in the amount of any such
payments or advances with interest paid at 12% annual rate and 3 points. Any
such Certificates of Indebtedness issued by the Receiver to the Plaintiff shall
not be the personal obligation of the Receiver but the obligation of the
Receivership Estate. Any receiver’s Certificates issued may be secured by the
Property, which shall become a first lien on the Property superior to all
preexisting private liens and encumbrances.”
(Receiver’s Decl. Exh. 2.)
Plaintiff did not challenge this condition.
On October 13, 2023, the court (Beckloff, J.) granted Receiver’s ex
parte application for an order directing Plaintiff to pay the Receiver’s
outstanding fees and expenses of $53,055.10, as of September 30,
2023. (See Singer Decl. Exh. 9.) The court’s minute order states: “Plaintiff
is ordered to pay the sum of $53,055.10 to the Receiver to satisfy his
outstanding fees and expenses through September 30, 2023, within seven
calendar days of entry of this order. If Plaintiff fails to make the
Payment to the Receiver within seven calendar days of entry of this order, the
Receiver is authorized to immediately record a super-priority lien on title for
the Property to secure his fees and expenses in the amount of $53,055.10, which
Lien shall have super priority as to any preexisting private lien(s) and
encumbrances, except against federal, state, and county tax lien(s).” (Ibid. [bold italics added.]) Plaintiff did not move for reconsideration of
this order and did not pay the amounts due.
Plaintiff concedes
that “where the estate lacks the funds needed to pay the receiver the court has
the authority to impose those fees upon one or more of the parties to the
litigation.” (Oppo. 3.) However, Plaintiff argues that Defendant
should pay the Receiver’s fees because her actions made the appointment
necessary. (Ibid.) The court will not revisit Judge Beckloff’s
decisions requiring Plaintiff to pay for the Receiver for several reasons: (1) Judge
Beckloff has already ruled; (2) Plaintiff insisted on the appointment of the
Receiver and opposed the Receiver’s efforts to terminate his work; (3) Plaintiff
does not demonstrate that Defendant has the financial ability to pay any of the
Receiver’s fees; (4) It would not be fair to the Receiver to make him attempt
to collect a judgment against Defendant; and (5) Plaintiff has a remedy because
Plaintiff is already seeking a judgment against Defendant which includes the
Receiver’s fees and expenses.
Based upon the
foregoing, the court authorizes the Receiver to issue a Super-Priority Deed of Trust and accompanying Receiver’s Certificate of
Indebtedness to secure funding for the Receivership Estate’s outstanding costs
of administration. Because the
Receiver’s outstanding fees and expenses remain unpaid, the court authorizes
the Receiver to borrow up to $100,000 (not $120,000, as requested by the
Receiver, because the outstanding amount is only approximately $97,000).
C. Additional
Orders
Finally, the court discharges the
Receiver, terminates the receivership appointment, and retains jurisdiction
over receivership matters. “A receivership terminates upon completion of the duties for which the
receiver was appointed; or at any time, upon court order.” (Rutter, Civ. Pro. Before Trial ¶ 9:774; see
generally Code Civ. Proc. § 568 [receiver is “under the control of the Court”]
and O’Flaherty v. Belgum (2004) 115 Cal.App.4th 1044, 1053, 1062.) “As a general
proposition a receiver has no official duties and is not a proper party to any
action after being discharged by the court…. The discharge order operates
as res judicata as to any claims of liability against the receiver in her
official capacity.” (Vitug v. Griffin
(1989) 214 Cal.App.3d 488, 494.) The
court also exonerates the Receiver’s bond.
CONCLUSION AND ORDER
Based
upon the foregoing, the court orders as follows:
1. The Receiver’s motion is granted.
2. The court orders Plaintiff to pay the
Receiver $97,178.93
within ten days.
3. If
Plaintiff fails to do so, the Receiver is authorized to: (1) Issue a Super-Priority Deed of Trust and accompanying Receiver’s Certificate of
Indebtedness to secure funding for the Receivership Estate’s outstanding costs
of administration; (2) Borrow up to $100,000 from Receivership Lending, LLC
(‘Lender’) on those terms, to be secured by the Deed of Trust and Certificate,
with a loan term of one year; (3) Pay the outstanding balance plus any
additional fees and expenses later incurred; and (4) Release the remainder to
Plaintiff, which would have one year to repay the Lender.
4. The court signs the Receiver’s proposed
order with one modification (changing the loan amount from $120,000 to
$100,000).
5. The Receiver shall provide notice and
file proof of service with the court.