Judge: Walter P. Schwarm, Case: 30-2021-01177079, Date: 2022-10-11 Tentative Ruling

Plaintiffs’ (Drew Alexander, Trustee of the Adrienne Alexander Living Trust, Michael Weldon, and Russelle Weldon) Motion to Appoint Receiver for Defendant Baycliff Village East Homeowners Association, filed on 7-26-22 under ROA No. 307, is DENIED without prejudice. The Amended Notice for this Motion was filed on 8-3-22 under ROA No. 331. 

Defendants’ ((Bay Cliff Village East Homeowners Association, Lincoln Marini, Marilyn David, Susan Pope, Ruth Newby Erroneously Named and Sued as Ruth Newbie, Vince Randazzo, Thu Nguyen, Michael Waisgerber, Kate Charles, Dorothy Villa, John Rhinehart, and Sue Creamer) Evidentiary Objections filed on 9-28-22 under ROA No. 403:  Defendants  object to the supplemental declaration of Ben-Thomas Hamilton, filed on 9-14-22 under ROA No. 368, the second supplemental declaration of Ben-Thomas Hamilton, filed on 9-16-22 under ROA No. 373, and Plaintiffs’ Supplemental Memorandum of Points and Authorities on 9-14-22 under ROA No. 366. Plaintiffs served these supplemental documents more than 16 court days before the hearing scheduled for 10-11-22. supplemental memorandum, first supplemental declaration, and second supplemental declaration were filed and served more than 16 court days before the hearing. (See Proofs of Service 9-14-22 and 9-16-22 under ROA Nos. 369 and 381.)  The court exercises its discretion and considers these supplemental documents.  The court recognizes its consideration of Plaintiffs’ Supplemental Memorandum of Points and Authorities results in the combined Motion and Supplemental Points and Authorities exceeding the page limit designated in California Rules of Court, rule 3.1113(d).  Going forward, the court expects all parties to file a single memorandum within the page limits under California Rules of Court, Rule 3.1113. As to Defendants’ individual objections, SUSTAINS Objections A and B to the Hamilton First Supplemental Declaration.  The court SUSTAINS Objections A, B, C, and D to the Hamilton Second Supplemental Declaration. The court SUSTAINS Objection G to the Alexander Declaration, and OVERRULES the remaining objections to the Alexander Declaration.  The court SUSTAINS Objection G to the Weldon Declaration, and the court OVERRULES the remaining objections to the Weldon Declaration.

Plaintiffs’ Evidentiary Objections file don 10-4-22 under ROA No. 419:  The court SUSTAINS Objections Nos. 1 and 7, and OVERRULES the remaining objections.

Plaintiffs request the appointment of a receiver pursuant to Code of Civil Procedures section 564, subdivision (b)(6) and (9). (Motion; 7:2-9.)  Code of Civil Procedure section 564 states in part, “(a) 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. [¶] (b) A receiver may be appointed by the court in which an action or proceeding is pending, or by a judge of that court, in the following cases: [¶](6) Where a corporation is insolvent, or in imminent danger of insolvency, or has forfeited its corporate rights. . . . [¶] (9) In all other cases where necessary to preserve the property or rights of any party.”

Medipro Medical Staffing, LLC v. Certified Nursing Registry, Inc. (2021) 60 Cal.App.5th 622, 628 (Medipro), explains, “What we must decide is whether the trial court in this case properly exercised this authority in the post-judgment collections context. Because trial courts enjoy a ‘large measure’ of discretion, albeit ‘not an entirely uncontrolled one,’ in deciding when to exercise their authority to appoint a receiver [citations], we review the decision to appoint one solely for an abuse of that discretion [citation]. [¶] Because the appointment of a receiver transfers property—or, in this case, a business—'out of the hands of its owners’ and into the hands of a receiver (Golden State, supra, 13 Cal.2d at p. 393, 90

P.2d 75), the appointment of a receiver is a very ‘drastic,’ ‘harsh,’ and costly remedy that is to be ‘exercised sparingly and with caution.’ [Citations.] Due to the ‘extraordinary’ nature of this remedy and the special costs it imposes, courts are strongly discouraged—although not strictly prohibited—from appointing a receiver unless the more intrusive oversight of a receiver is a “necessity” because other, less intrusive remedies are either ‘ “inadequate or unavailable.” ’ [Citations.]”

The Amended Notice seeks the appointment of a receiver to “. . . oversee the operations and financial management of Defendant BAYCLIFF VILLAGE EAST HOMEOWNERS ASSOICATION (‘BCVE’) . . .; (2) hire independent or retain Cumis counsel for BCVE . . .; and (3) issue special assessments to BCVE’S homeowners to pay for Plaintiffs damages in this case.” (Amended Notice; 1:21-2:2.)

First, Plaintiff contends that Baycliff Village East Homeowners Association (BVCE) has failed to perform its duties under the Second Amended & Restated Declaration of Covenants, Conditions and Restrictions (CC&Rs) by failing to “to maintain and repair the common areas, structural components, foundation and footing of PLAINTIFF’S Properties,” “to operate and maintain the common area,” “to include the cost of such maintenance and operation in its annual budget,” “to conduct reserve studies every three (3) years in order to determine annual contributions by homeowners. . .,” and “to levy a special assessment to meet expenses when the HOA funds are inadequate to meet expenses for any reason.” (Motion; 7:19-8:10 (Uppercase in Motion.).)

Defendants’ Opposition to Plaintiffs’ Motion to Appoint Receiver for Bay Cliff Village East Homeowners’ Association (Opposition), filed on 9-28-22 under ROA No. 395, states, “The HOA has been and remains, ready, willing and able to make necessary repairs and modifications to the slope and Plaintiffs’ foundations.  ordinarily, the HOA could proceed with repairs without Plaintiffs’ consent if it wanted to. Because the HOA must obtain outside financing to fund these repairs, however, the lender is requiring Plaintiffs to consent to them. Plaintiffs refuse, meaning the property remains unrepaired for that reason alone. If Plaintiffs truly believe repairs are urgently needed, then they should consent to the HOA’s repair proposals.” (Opposition; 4:12-17, Underscore in Opposition (Marini Decl., ¶ 10.).)

Plaintiff has not sufficiently demonstrated that a receivership regarding BCVE’s operations and finances is necessary to necessary to preserve the property or rights of Plaintiffs.  The Opposition states, “Resolving the parties’ differences is not what a receivership is for.  Defendants are ready, willing, and able to make repairs.” (Opposition; 12:24-25.) If the parties are unable to resolve the dispute informally, the parties can use a trial to resolve the issue of BCVE’s liability, and the extent of Plaintiffs’ damages.  Further, the evidence does not show that BCVE is insolvent or in imminent danger of becoming insolvent.  The declaration of Plaintiffs’ counsel states, “Attached to the Index of Exhibits as Exhibit P, is the Association’s balance sheet as of March 2021. Per the balance sheet, as of that time, the Association only had $11,780.90 in operating funds and $48,008.54 in its reserve fund. I have no reason to believe that these amounts have increased significantly in the last 1 ½ years.” (7-26-22 Hamilton Decl., ¶ 13.)  Plaintiffs have not provided evidence with the BCVE’s current financial condition.  Plaintiffs’ have not provided the court with evidence from a forensic examiner as to the current status of BCVE’s solvency.

Second, Plaintiffs contend, “This Court should appoint a receiver to ensure that BCVE at least seeks out independent or Cumis counsel because of the significant reservation of rights and lack of insurance coverage in this matter.” (Motion; 10:25-27.) Plaintiffs, however, have not cited any legal authority allowing the court to appoint a receiver for purposes of requiring the insured to retain different counsel to defend against its claim. The BCVE is entitled to make decisions regarding its representation. Therefore, the court declines to appoint a receiver to hire independent or retain Cumis counsel for the BCVE.

Finally, Plaintiffs contend, “To date, BCVE has not imposed an assessment to secure funding to pay for the extraordinary expenses necessary to repair the Properties which are a threat to PLAINTIFFS’ personal safety. Indeed, BCVE and its board admit BCVE has attempted to secure six (6) different loans to pay for PLAINTIFFS’ damages, but has been unable to do so. This leaves BCVE with only two choices: (1) litigate this case to trial and declare bankruptcy at which point a trustee will require BCVE to levy a special assessment; or (2) levy a special assessment now and end this litigation for the benefit of all parties and homeowners.” (Motion; 9:12-18, Uppercase in Motion.)

Plaintiffs have not shown that appointment of a receiver to require BCVE to levy a special assessment is necessary at this stage. BCVE states that it will be able to secure funding through a lender if the parties reach agreement on the scope of repairs. (For example, see Marini Decl. at ¶ 10.)

Based on the totality of this evidence, the court exercises its discretion, and DENIES Plaintiffs’ (Drew Alexander, Trustee of the Adrienne Alexander Living Trust, Michael Weldon, and Russelle Weldon) Motion to Appoint Receiver for Defendant Baycliff Village East Homeowners Association, filed on 7-26-22 under ROA No. 307, without prejudice.  Plaintiffs not sufficiently support the drastic remedy of the appointment of a receiver at this stage of the proceedings.

Defendants are to give notice.