1 Publication of the California Receivers Forum Summer 2005 Issue 18 I n s i d e RECEIVERSHIP NEWS 4 7 RECEIVERSHIP PROFESSIONL PROFILE Commercial Law Practice is a Movable Feast for Buchalter Nemer s Ron Oliner Coach for ll Seasons, Too! Heard in the Halls District Court Judge Dickran M. Tevrizian s Views on Receivers and Receiverships from State and Federal Court Perspectives CHUCK DOES TXES 8 It s a Payroll Fact, Jack Receivers Pay Personally For Ignoring the IRS Payroll Tax Priority 9 The List RESOLUTION OF DISSOLUTION? Family Law Court Receivers Can Solve Community Property Preservation and Protection Problems sk the Receiver (The role and responsibilities of receivers and receiverships in federal and state court is the subject of this issue s & exchange with the Honorable Dickran M. Tevrizian, Jr., Judge, United States District Court, Central District of California. Judge Tevrizian is eminently well qualified to address this topic, having served as a judge in both Los ngeles County Municipal Court and Superior Court before being elevated to the Federal bench. short biographical sketch of Judge Tevrizian precedes the interview.) J udge Dickran M. Tevrizian, Jr. was only 31 years old and seven years out of law school when he was appointed to the Los ngeles Municipal Court bench by then-governor Ronald Reagan in 1972, the youngest of former Governor Reagan s judicial appointees up to that time. Judge Tevrizian was elevated to the Superior Court in 1978 by Governor Regan s successor, Jerry Brown. In 1982 he retired to return to law practice as a partner in the law firm of Manatt, Phelps, Rothenberg & Tunney. He subsequently joined the law firm of Lewis, D matto, Brisbois and Bisgaard. In 1985 then-president Reagan again appointed Judge Tevrizian to a judgeship, this time to the United States District Court, Central District of California. He was the first rmenian-merican appointed to the federal bench. Judge Tevrizian received his undergraduate degree in finance and accounting from USC, graduating cum laude in He received his J.D. from the USC School of Law in He briefly worked for a national accounting firm before joining the law firm of Kirtland and Packard in 1966, where he practiced until his initial judicial appointment. Judge Tevrizian has received many honors, both from his legal peers in recognition of his outstanding legal abilities, and from public organizations in honor of contributions made outside the legal arena. He was named Trial Judge of the Year in 1987 by the California Trial Lawyers ssociation, the first federal judge to be so honored. He is one of the few federal judges to have been honored with Continued on page 3...
2 From the Publisher BY ROBERT MOSIER, PUBLISHER* K irk Rense and I are particularly pleased to lead this issue with a & with The Honorable Dickran M. Tevrizian, Jr, Judge of the United States District Court. Judge Tevrizian has appointed and managed receivers while sitting as a Los ngeles County Superior Court judge and later as a judge with the United States District Court, Central District of California. He participated as a panelist at a recent seminar in Los ngeles sponsored by the L/Orange County Chapter of the California Receivers Forum and did a superb job, demonstrating a genuine command of receivership issues. His outstanding contribution to the panel discussion promoted the RN invitation to participate in the & article that appears in this issue. We think you will find it useful and provocative. We particularly hope that the 1,200 Federal and State Court Judges who receive a copy of California Receivership News will find this statement of Judge Tevrizian s views of value. The State Board of the CRF met in Palm Springs in mid-may just prior to the beginning of the California Bankruptcy Forum s annual meeting and seminar. ttending members pose in their resort wear in the photo, right. Edy Bronston, chair of the State Board this year, presided. The most significant issue discussed was the reviving and updating a CRF web site. Costs and complexity are issues being sorted out by a website committee headed by Ron Oliner (profiled in this issue) from the San Francisco / Bay rea Chapter. Stay tuned for future developments. We also direct your attention to lan Mirman s Heard in the Halls column in this issue, which includes a wonderful example of how advertising in the RN pays big dividends. Mike Dow of Frenkel Insurance Brokers (a regular advertiser and strong supporter of the CRF) landed a large new account as a result of his ad. We appreciate the support of all of our advertisers, who make this publication possible. nd we delight when hearing of a success story like this one. Finally, we welcome letters to the editor on issues of interest to our readers. Please address your correspondence to Kirk Rense at the RN address (set out at right) and watch this space in the future. *ROBERT P. MOSIER is a Southern California trustee and receiver and principal of Mosier and Company, Inc., a firm that has specialized in managing and turning around troubled companies for more than 25 years. Page 2 Summer 2005 CRF State Board members catch a few rays at the May meeting in Palm Springs. ttending were (l-r) Mike Essary, Marilyn R. Bessey, Rob Warren III (rear), Bruce Cornelius (kneeling), James Lowe, Ron Oliner (kneeling), Beverly N. McFarland, Kirk Rense (rear), David L. Ray, Michael Wachtell (kneeling), Robert Greeley, Kyle Everett (rear), Edythe Bronston and Robert Mosier. Robert P. Mosier MR. RENSE is a lawyer specializing in insolvency and in representing court-appointed fiduciaries, with more than 20 years' experience. He was a journalist before attending law school at the University of Southern California Law Center. Kirk is a California Receivers Forum, L/OC Chapter Board Member. Kirk Rense Receivership News Published by California Receivers Forum 954 La Mirada St. Laguna Beach, C x 200 Publisher Robert P. Mosier Editor Kirk S. Rense, Editor Craig Collins, CP ssociate Editor ssociate Publishers Kenton Johnson Beverly McFarland Ron Oliner Rob Warren, III Contributing Columnists lan Mirman Heard in the Halls Peter Davidson sk the Receiver Charles F. Rosen Taxes and the Receiver Officers Edythe L. Bronston, Chair James Lowe, Chair Elect Marilyn R. Bessey, Treasurer Martin Goldberg, Secretary Ron Oliner, Project Manager Receivership News is published quarterly by the California Receivers Forum, a not-for-profit association. rticles in this publication express the opinions of their authors and do not necessarily reflect the views of the directors, officers or members of the California Receivers Forum. rticles are intended as a source of general information and should not be construed as specific advice without further inquiry and/or consultation with professional counsel. copyright 2005 California Receivers Forum. ll rights reserved.
3 Judge Tevrizian.. Continued from page 1. the Los ngeles County Bar s Outstanding Trial Jurist ward, in The Malibu Bar ssociation celebrated him as Federal Court Trial Judge of the Year in I am the recipient of the merican dream, Judge Tevrizian commented in an interview with the Metropolitan News- Enterprise in 2002, upon being awarded the Maynard Toll ward for outstanding community service by the Legal id Foundation of Los ngeles. Judge Tevrizian was referring to the fact that he is the son of immigrants his father immigrated to the United States from Hartoot, Turkey at the age of 19 and his mother was born in this country soon after her family s arrival from Sevas, Turkey. Judge Tevrizian is an active member of the local rmenian merican community, and in 1998 was awarded the Peter the Great Gold Medal of Honor from the United States Section of the Russian cademy of Natural Sciences in recognition of his accomplishments in the legal field. In 1999, the National Ethnic Coalition of Organizations, Inc. awarded Judge Tevrizian the Ellis Island Medal of Honor, given `to mericans of diverse origins for their outstanding contributions to their own ethnic groups and to merican society. Judge Tevrizian has also served on the boards of many civic and charitable organizations, including the boards of the Southwestern School of Law, the Glendale Memorial Health Foundation, the ueenscare Health Foundation, the rmenian General Benevolent Union, the Glendale Memorial Hospital Foundation, the rmenian Eye Care Project, and the UCL School of Public Policy, among others. He also served on the Board of Directors of Los ngeles High School and the Good Shepherd Home for homeless women. (Some information in this sketch was abstracted from stories carried by the Metropolitan News-Enterprise in 2002 and 2004.) The Receivership News is honored to present the following interview with Judge Dickran M. Tevrizian: What are your views on how closely the appointing judge should control the actions of his or her receiver? Should receivers be vested with wide latitude of action to carry out their duties, or do you prefer they seek instruction from the court when confronted with a situation arguably beyond the clear instructions of the appointing order? I believe in close scrutiny of the receivership by the court. The receiver is an arm of the court, and I insist on specific instructions in the appointing order to guide his or her actions, instructions that are to be followed. The language of the order must be precise as possible regarding the receiver s duties and authority. request for additional instructions should be brought either ex parte or on regular notice whenever the receiver encounters a problem or issues not specifically addressed in the appointing order. I do not give wide latitude to receivers, in part to avoid the potential accrual of excessive costs and expenses in administering the receivership estate. In the same vein, do you view a receiver as a direct extension of the appointing judge, whose actions are, essentially, the actions of the court? I view the receiver as a direct extension of the appointing judge, whose actions are the actions of the court. related question is whether the receiver may converse with the appointing judge ex parte (say, by telephone or ), or only formally, in filed pleadings or upon full advance notice to all parties? How and when the receiver may converse with the appointing judge depends upon the circumstances of the case. I prefer a formal writing to be prepared and submitted under seal or communication by telephone or in person with a court reporter recording the exchange. I do not like to communicate with my receiver unless the statement or conversation is preserved as a permanent part of the record. I prefer to record it, have it reported by a court reporter or submitted by way of an ex parte application or application on full notice. I prefer historical preservation on the record. I don t like it is fraught with problems. I don t mind telephone calls, so long as they are recorded or reported. May a receiver discuss her or his actions in a case if contacted by a BOND SERVICES OF CLIFORNI, LLC Specializing in Receiver, Civil and Miscellaneous Bonds Contact: CHRISTOPHER M. HENEL RUTH DONIS (213) Bond Services of California, LLC 900 Wilshire Blvd., Suite 1400 Los ngeles, California Fax (213) Continued on page 6... License No. 0D58538 Summer 2005 Page 3
4 Receivership Professional Profile Commercial Law Practice is a Movable Feast for Buchalter Nemer s Ron Oliner Coach for ll Seasons, Too! Ron Oliner One of the great things about being a commercial lawyer is you get to deal with so many types of business problems. Since 1990 when I received my juris doctor from the University of Oregon, I have worn many hats in a diverse creditors rights practice. I have served as counsel to equipment lessors, asset-based lenders and financial institutions of all kinds, and to bankruptcy trustees and receivers throughout Northern California. I am also a chapter 11 bankruptcy trustee, a court appointed mediator, an examiner, and sometimes an expert witness. Page 4 Summer 2005 Reflecting on the breadth of cases and problems I have been involved with these past fifteen years is somewhat mindboggling. The ones I will remember after retirement (note to self: check 401k investments) range from going concern asset sales where jobs were kept and creditors paid, to a nice string of victories in appellate courts. I represented the trustee of a bankrupt but operating Ferrari dealership (man, those are expensive cars), a creditors committee in perhaps the largest chapter 11 ever filed in Santa Rosa, and a creditor with an $800 million contingent claim in the mammoth PG&E bankruptcy. In 2001, on the cusp of the great dot bomb economy, I represented fiduciaries in closing up a ton of Bay rea dot com businesses that failed for reasons all too obvious in retrospect. I was counsel to the lender in a hugely contentious receivership involving a rundown 152 unit apartment building in the Central Valley a few years ago, where an eve of foreclosure bankruptcy filing was made by the owner specifically to regain possession of the property then being controlled by a receiver who was doing a yeoman s job of cleaning up the place. I have been privileged to represent receivers in all manner of wind-ups, and dissolutions of partnerships, and even divorce cases involving significant real property and business assets over the years. Of late, I am involved in an international business case where a principal has, to date, paid to me for the benefit of a bankruptcy estate $1.6 million in coercive sanctions (this is not a typo). Throw these experiences in with troubled construction concerns, manufacturers of goods, resellers, art galleries and even law firms, and you get a sense of the breadth of legal experiences available to a commercial lawyer. I must acknowledge a few people who have been instrumental in my development as a lawyer. Two attorneys in particular two senior, seasoned and respected lawyers have enjoyed special roles in my career (well, they may not have enjoyed it, but I have). Irving Kornfield, who hired me out of law school, and sadly who passed away a few years ago, gave me an early opportunity to develop into a creditors lawyer. Irv was one of the most skilled, intelligent and thoughtful attorneys I ve ever seen, much less had the pleasure to call colleague. Those of you who practiced in Oakland in the 80s and 90s, and who saw Irv work on his feet in the courtroom, will agree he was among the most gifted bankruptcy attorneys in Northern California. The second person who has greatly influenced me as a lawyer is my partner Robert Izmirian. I joined Buchalter Nemer in 1993 and in the twelve years since Bob has affected almost every aspect of my practice and style as a lawyer. He is a lawyer s lawyer; someone who will invariably find an answer to a client s problems in a practical and cost-effective way. Even as I am now mentoring younger lawyers, I cannot help but think of the many ways Bob encouraged me these past dozen years to become involved in the Receivership Forum, the Bay rea Bankruptcy Forum, the Commercial Law and Bankruptcy Section of the San Francisco Bar ssociation (I am the 2005 chair), and always, always, to keep the best interests of clients central to my legal work. Let me mention what is most important in my life. I live in the East Bay rea and have been happily married to Kristen McDaniel Oliner since We have two boys, Evan Samuel (age 9) and Daniel Wesley (age 6). Both are active in sports, boy scouts and, ahem, XBox. Evan loves Continued on page 5...
5 Ron Oliner... Continued from page 4. Green Day, and Daniel, Star Wars. Just recently, nine-year old Evan has decided it is no longer cool to hold my hand when walking across a busy street. You can t even walk in Daniel s room without stepping on Legos and Playmobile figures. Though I am not exactly sure how this happened, one thing I am most proud of is my involvement in my kids day-to-day lives. I have coached Evan s and Daniel s soccer and baseball teams in recent years. t six or seven o clock on long summer days, you ll find us shooting hoops in the driveway. The strange thing is, by making a few adjustments this is not so hard to accomplish. The choice is pretty clear when you are left to choose between returning those last few phone calls and maybe dictating a letter or two before walking out of the office, or honoring a commitment to twelve little kids who call you coach. The secret is getting to the office early. For me, that means 7:15 a.m. My other interests include distance biking (I managed to get in five centuries last year and have two under my belt so far this season), camping, and just about any organized sport. It seems I know about a zillion lawyers in their mid-forties who have not managed to take control of their lives outside of the office. Thankfully, I do not believe I am one of them. Mr. Oliner is a commerical law/creditor s rights attorney in Buchalter Nemer s San Francisco, California office. IN CSE YOU'VE FORGOTTEN SOME RECENT RECEIVERSHIP NEWS RTICLES ON TOPICS OF CONTINUING INTEREST Primer on Receivers and Receiverships (3-part article, Spring '03 - Fall '03) Using Receiver To Resolve Community ssociation Disputes (Spring '03) Beware IRS Withholding Tax Requirements on Property Sales (Summer '03) So You Want To Be Partition Referee? (Fall '03) Receivership Borrowing From Private Lender (Fall '03) Post-Judgment Receiverships Enhance the Collection Process (Fall '03) Receivers In Bankruptcy - Strangers In Strange Land (Winter '04) New Requirements for Receiver Undertakings and Final Reports (Winter '04) Importance of Petitioning the Court for Instructions (Winter '04) Unique Challenges of Hotel and Restaurant Receiverships (Spring '04) Serving in a State or Federal Regulatory Receivership (Spring '04) The Practical Benefits of Receivership (Summer '04) Reviving Failing Companies With Consensual Receiverships (Winter '05 - Spring'05) May Receivers Obtain Business Records Over 5th mend. Privilege Claim (Spring '05) JOIN THE CLIFORNI RECEIVERS FORUM TODY SUPPORT THE RECEIVERSHIP NEWS Summer 2005 Page 5
6 Judge Tevrizian.. Continued from page 3. representative of the news media, or do you wish receivers to remain silent during the tenure of their appointment where the press is concerned? I instruct my receivers not to hold press conferences or answer questions from the news media. Such questions should be presented to the court by fully noticed or ex parte application and all the parties will discuss these questions on the record to see if a response is appropriate. How flexibly do you use the receivership tool in commercial cases? Do you generally limit appointments to commercial property foreclosure situations and to preserve property pending resolution of ownership disputes? Or do employ receivers more broadly as a financial investigative tool, for example, or to assess the continuing viability of a commercial enterprise in appropriate circumstances? Because I m a federal judge, we don t have a large volume of real property foreclosure receiverships (although I certainly did as a state court judge). They do most of those types of receiverships in pending bankruptcy liquidation matters and in state court, for the most part. It is rare in federal court that I get a receivership in a foreclosure proceeding. Generally I conduct receiverships in civil and criminal actions for fraud and other tortuous conduct brought by the SEC, FTC and other regulatory agencies. Where a company is an ongoing business and seems to be generating income then I will use a receiver to preserve the entity. If Page 6 Summer 2005 investigation of the business is required, generally I will appoint a receiver and expect the receiver to obtain the opinion of an expert to determine the viability of continuing the business. I don t want the receiver to make such determinations without the benefit of expert advice and opinion. The receiver s focus is to marshal and preserve assets. When it comes to potentially shutting down a business, the receiver should protect himself or herself by getting expert guidance on whether the receivership is viable. Since you have employed receivers while sitting in both state and federal court, do you perceive any differences in how receivers are used in these respective jurisdictions? Yes. My answer to the last question covers some of this ground, as well. I think in both situations it is very, very important for the receiver to have a team or staff in place. I require formal reports from my receivers and complete accountings. This protects the receiver and the court from allegations that the receiver mishandled the case or ran the case for his or her own financial gain to the detriment of the parties. Receivers are generally neutrals, required to be so by statute. But in a regulatory receivership context where a receiver has been appointed pursuant to statutory authority granted to select regulatory agencies, must that neutrality be maintained? Do you expect such a receiver to make an independent evaluation of the legality of the operation that is the focus of the regulatory complaint and report findings to the court? Or do you anticipate that your receiver will immediately shut down the business as a matter of course? I expect receivers to be neutrals. bsolutely. That s part of the order. I don t want the receiver going in there and making a quick decision without the court s review. There are usually two sides to the story. I expect the receiver to preserve the status quo while presenting the facts to the court for sifting through in the courtroom. I expect the receiver to conduct an independent evaluation. The status quo is to be preserved until the court can make a fair and neutral evaluation of the activity complained of. Where a receiver is sought by a plaintiff to be imposed over an insolvent entity (i.e. one that is not paying its obligations as they become due), are you willing to surcharge the plaintiff to ensure the company does not operate in the red while under your control? Will you allow a company to operate at a loss while your receiver is in place? Will you surcharge the plaintiff to ensure receiver s fees and costs are paid? This is a really difficult question to give a yes or no answer to. Generally I will look to the receivership entity for costs of the receivership. Before any surcharge is to be made the court must go into detail about the kind of situation the company or entity is engaging in; whether it is an ownership or management dispute, or some other kind of receivership situation. I look at all the factors and make a decision as to how the receivership will be funded, who is to benefit. I may make the decision after the fact, in hindsight, rather than up front. Do you require your receivers to seek payment of fees and expenses only by noticed motion, or do you allow payments to be made monthly (or periodically) after circulation of the receiver s bills to all parties (assuming no objections and subject to a final noticed application at case end)? The receivers I appoint must make application to the court for payment of fees and expenses. What I have done in the past is I may approve the payment of rent and or Continued on page 16...
7 Heard in the Halls Notes, Observations, and Gossip Relayed by lan M. Mirman, Esq.* Welcome to the eighteenth edition of Heard in the Halls, an informal compendium of thoughts, questions and information contributed by California Receivers Forum members, and not official Forum announcements. Don t rely on any quasi-official pronouncements in this column! Send me tidbits you would like to see in future issues, such as: procedures in various courtrooms, questions on legal issues, rank gossip, firm transitions and updates on practitioners, receivers, etc. Provide your input by telephone, mail, fax, or as follows: lan M. Mirman, Horgan, Rosen, Beckham & Coren at Park Sorrento, Suite 200, Calabasas, California Phone: (818) ; Fax: (818) ; Here is what we have Heard in the Halls CRF Newsletter Publisher Robert Mosier reports on the successful auction of a 34,000 square foot warehouse and office building in Irvine, California. Mosier served as Receiver in a property dispute resulting from a 10 year old divorce where the couple tried to keep and co-manage the building that was under a long term lease. Transzon sset Strategies (Mike Walters) did the auction. Based on a market rate of approximately $100 per square foot suggested by several comps in the neighborhood, the building had an anticipated market value of up to $3.4 million with several deferred maintenance items suggesting a top price of perhaps $3.1 to $3.3 million. The auction had 17 bidders each of whom produced a $100,000 cashier s check in order to qualify to bid. When the 15 minute bidding ceased, the building sold for $4,350,000 or approximately $125 per square foot a 25% premium over market brought about through an auction, and there was no reduction for the deferred maintenance! Mosier reported that the owner of a neighboring building, who was an early bidder but dropped out after the bidding shot past traditional market rates, asked if he could sell his building that day since everyone was already assembled! The divorcees were quite pleased with the $1 million surplus, and Mosier reports that he got a job well done from the appointing court. Effective June 1, 2005, Writs and Receivers cases filed in the Stanley Mosk Courthouse in downtown Los ngeles, will be randomly assigned to either Department 85 or Department 86. The previous system assignment by even or odd case number will no longer be followed. This randomizing system for Writs and Receivers assignments is said to allow for optimal utilization of both judicial and staff resources. Is that the case, or were lawyers filing multiple cases to manipulate the odd/even filing system to get an even or odd case number for a matter that would entail a trip to the 8th floor? Inquiring minds want to know. Mike Dow of Frenkel & Company, Inc. (International Insurance Brokers) reports that advertising in the Receivership News can pay big dividends. He reports that a prominent receiver was recently on a plane headed to the east coast to take over a billion dollar troubled project when the receiver was informed that his insurance carrier was unable to renew the receiver s E&O policy. The receiver had a copy of Receivership News with the Frenkel & Company ad prominently displayed. Frenkel was immediately contacted and asked to bid on the E&O policy, and the receiver s new insurance was bound in short order. More importantly, and due to the fast work, the receiver asked Frenkel to bid on the troubled project s insurance needs over a billion dollars worth of coverage. You guessed it. Frenkel got the nod and placed the project s insurance, as well. Congratulations to Mike Dow and Frenkel, both longtime supporters of educational programs of the California Receivers Forum, and long live the advertising prowess of the Receivership News! The CRF State Board of Directors fall meeting will be held September 30th, Noon - 5 pm at the Radisson LX on Century Blvd. in Los ngeles. ny member of a local CRF chapter is welcome to visit the Board Meeting. Kindly RSVP to JBS & ssociates by September 15th if you plan to "drop in" so we can plan ahead for sufficient seating and lunches. Contact: Megan at x 200. CRF L-OC Chapter is co-promoting a Night of Excellence Charity Networking Event at the Peterson utomotive Museum the evening of July 28th. Hosted by the Turnaround Management ssociation, the function benefits the City of Hope. Featured live entertainment is "rt in Concert" by noted action-artist Michael Israel. Two of his paintings will be auctioned that evening. The Peterson's current special exhibit features the vehicles of Presidents, Popes & Potentates. Pre-registration is REUIRED. Contact for a registration form. CRF L-OC Chapter is working with receivers from the Inland Empire to organize an October luncheon and "Receivership 101" educational program. ny non-crf members who would like to be notified of the program details, should send an to and request that your name and contact information be added to the Inland Empire meeting mailing list. * lan M. Mirman is a partner in the Calabasas law firm of Horgan, Rosen, Beckham & Coren, LLP, and specializes in creditor s rights. His practice includes aspects of provisional remedies, receiver representation litigation, loan and lease documentation, and similar matters. Summer 2005 Page 7
8 CHUCK DOES TXES It s a Payroll Fact, Jack Receivers Pay Personally For Ignoring The IRS Payroll Tax Priority BY CHRLES F. ROSEN, ES.* Let s talk about potential payroll tax problems. The following questions should interest receivers since receivers may become personally liable to Uncle Sam for unpaid pre-receivership payroll taxes and / or payroll taxes they incur during administration that are not paid. Even more chilling, the receiver may not be able to use the appointing court or its authority for a qualified immunity defense. Prior to the appointment of a receiver, the company regularly failed to pay payroll taxes. Once in receivership the operating company does not have enough cash to meet both its payroll and pay the withholding taxes. May the receiver continue the defendant s established practice and issue payroll without making the corresponding payroll tax? The rule in Federal court receiverships is simple. Under Judicial Code 980(a) [Title 28 U.S.C. 960] ny officers and agents conducting any business under authority of a United States court shall be subject to all Federal, State and local taxes applicable to such business to the same extent as if it were conducted by an individual or corporation. [nd don t think a receiver can escape the rule if the defendant is a partnership, LLC or the like.] The payment may not even be deferred until some time later in the case, when assets have been liquidated and additional funds become available to pay the receivership s taxes and other expenses. This has long been the rule, but was often ignored by bankruptcy trustees and receivers. It has been strengthened by additional language in the recently enacted Bankruptcy buse Prevention and Consumer Protection ct of 2005, which states that (b) tax under subsection (a) shall be paid on or before the due date of the tax under applicable nonbankruptcy law... Note that it says the due date of the tax, not the due date of the tax return. Thus if a Federal Tax Deposit or electronic deposit is required to be paid shortly after Page 8 Summer 2005 the payroll was paid, the funds are to be paid to the IRS or the EDD by the normal due date for the payment, not later, when the return is required to be filed. It may be argued that this rule only relates to federal court cases (since the language is in the U.S. Judicial Code), but ignoring federal taxes does not make for good state court receivership practice either. Federal tax law is not bound by state law or state court rules or state court procedures. The sovereign is not bound by the state. re unpaid payroll taxes and/or unpaid income taxes a priority over other trade creditors in making a distribution in a receivership? One of the oldest laws of the United States is commonly called The Insolvency Statute. It was first enacted on July 31, 1789 [1 Stat. 29], and has its roots deep in English common law. While it has been moved from time-to-time, codified and then moved again, it has basically remained unchanged. It is presently located at Title 31 U.S.C. 3713, and states in pertinent part, (a)(1) claim of the United States Government shall be paid first when- () a person indebted to the Government is insolvent and- (i) the debtor without enough property to pay all debts makes a voluntary assignment of property; (ii) property of the debtor, if absent, is attached... (b) representative of a person... paying any part of a debt of the person or estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government. Elsewhere in the code person is defined to include corporations and partnerships and likely also would be interpreted to include LLCs, LLPs and other legal entities. Therefore a receiver who pays another creditor before paying any federal government claim - tax or otherwise - may become personally liable for the amount paid to a third party if the U.S. debt has not first been paid in full. There is a limited exception case law has established that a receiver is permitted to pay costs ahead of the government s claim without incurring such personal liability (see, Kennebec Box v. O.S. Richards Corp., 5 F.2d 951 (2nd Cir. 1925)). Costs are defined as costs of preserving or selling assets, or using funds to generate additional assets in the estate. The receiver s fees and administrative costs are also allowed to be paid first. Today s rule for the wise: pay the federal government before paying any nonadministrative expenses or fees. receiver discovers that several individuals who are employed at a company are treated as independent contractors [ICs]. The receiver believes these individuals better fit the definition of an employee rather than an IC. Because the company paid them as ICs prior to the receiver s Continued on page 13..
9 THE LIST RE PHONE E-MIL Bay rea David. Bradlow Kyle Everett Dennis P. Gemberling David. Summers Robert M. Rouse Donald G. Savage Steve Siljestrom Douglas P. Wilson Sacramento Valley Robert C. Greeley Beverly N. McFarland J. Benjamin McGrew Kevin J. Whelan Fresno rea Clifford Bressler Steve Franson James S. Lowe II Hal Kissler Los ngeles/orange County Edythe L. Bronston Weldon L. Brown Linda J. Chu Robert Crane James H. Donell Steve Donell Dean Duncan Howard Ehrenberg Robb Evans & ssociates Louis. Frasco David. Gill Gary Haddock Randal Lee Richard E. Lucy WHILE THERE IS NO COURT-PPROVED LIST OF RECEIVERS, THE FOLLOWING IS PRTIL LIST OF RECEIVERS WHO RE MEMBERS OF THE CLIFORNI RECEIVERS FORUM ND HVE CONTRIBUTED TO THIS PUBLICTION. RE PHONE E-MIL Los ngeles/orange County Michael D. Myers George R. Monte Douglas C. Morehead Robert P. Mosier William E. Nix David J. Pasternak James L. Peerson, Jr Theordore G. Phelps Gary. Plotkin David L. Ray Thomas. Seaman Kevin Singer Steven M.Speier William E. Turner David D. Wald Robert C. Warren III Richard Weissman J. Scott Williams John M. "Jack" Wolfe drian Young ndrew R. Zimbaldi San Diego rea M. Daniel Close Mike Essary Martin Goldberg William J. Hoffman Richard M. Kipperman Douglas P. Wilson The bullet indicates those receivers who completed a comprehensive 16-hour course on receivership administration and procedures presented at Loyola Law School in pril 2000 The diamond indicates those receivers who completed a comprehensive 16-hour course on receivership administration and procedures presented at Loyola Law School in October 2004 The square indicates those who facilitated the October 2004 forum Summer 2005 Page 9
10 Robb Evans Robb Evans & ssociates LLC Tel: is pleased to announce David L. Ray Saltzburg, Ray & Bergman, LLP Tel: Is pleased to announce Steve Donell, CPM, CCIM Jalmar Properties, Inc. Tel: Is pleased to announce Receiver of the assets of DebtWorks, Inc. and ndris Pukke n FTC Regulatory Receivership Referee in Partition ction Koefoed vs. Camejo Receiver for MRG Corporation n operating restaurant U.S District Court District of Maryland Superior Court County of Los ngeles Superior Court County of Los ngeles Steve Donell, CPM, CCIM Jalmar Properties, Inc. Tel: Is pleased to announce Receiver over Judgment Debtor Robert Cullen Judgment Enforcement Case Superior Court County of Tuolumne Dominic LoBuglio LoBuglio & Sigman Certified Public ccountants Tel: has been engaged as an EXPERT WITNESS on behalf of the Securities and Exchange Commission in a lawsuit alleging violations of the federal securities laws against Emvest Mortgage Fund, LLC and related entities James H. Donell, CPM, CCIM Jalmar Properties, Inc. Tel: Is pleased to announce Receiver as a Remedy for Fraudulent transfer for real property Superior Court County of Los ngeles Robert P. Mosier Mosier & Company, Inc. Tel: x222 Is pleased to announce Receiver in Falas vs. Scott To manage and dispose of 12Rental properties in Buffalo, New York Superior Court County of Orange Robert C. Greeley Greeley, Lindsay Consultant Group Tel: is pleased to announce his retention as Financial Consultant to the Debtor and subsequently as Disbursing gent in the PM, Inc. Chapter 11 liquidating plan n Operating Company Eastern District U.S. Bankruptcy Court County of Sacramento Theodore G. Phelps Phelps Consulting Group Tel: is pleased to announce Receiver for H & C Electric Company, Inc. n Operating Company Superior Court County of Los ngeles Page 10 Summer 2005
11 Robert P. Mosier Mosier & Company, Inc. Tel: x222 Is pleased to announce Trustee d Litum in the Dobbie Family Trust To reconcile the disposition of assets of a disputed family trust. Superior Court, Probate Department County of Orange Douglas P. Wilson Douglas Wilson Companies Tel: is pleased to announce Receiver for Pacific Southwest Construction and Equipment n Operating Company Superior Court of California San Diego Steven R. Skirvin Dion-Kindem & Crockett Tel: has been retained as Counsel for Receiver Tom Grimmett Curo Funds, LP and Curo Management, LLC n Operating Company United States District Court Southern District of California Douglas P. Wilson Douglas Wilson Companies Tel: is pleased to announce Robert P. Mosier Mosier & Company, Inc. Tel: x222 Is pleased to announce For information about advertising in the Receivership News Receiver and as Forensic ccountants for uail Lake Estates and Cypress bbey Company Rents and Profits Receivership Superior Court of California County of Nevada Receiver for the 2nd Time in Six Months For the Franciscian Plaza commercial center in San Juan Capistrano Superior Court County of Orange Contact: Robert Mosier, Publisher L/OC CHPTER SEMINR THE RIGHTS, POWERS ND LIBILITIES of receivers were the topics on the table at the CRF Los ngeles / Orange County Chapter s June 1, 2005 evening symposium in West Los ngeles. lan Mirman, Esq. (Horgan, Rosen, Beckham & Coren, LLP) (2nd from the right) posed sometimes chilling questions to all-star panelists (l-r) David Gill, Esq. (Danning, Gill, Diamond & Kollitz, LLP), Peter Davidson, Esq. (Rein, Evans & Sestanovich, LLP) and Commissioner Bruce Mitchell of the Los ngeles County Superior Court (Horgan, Rosen, Beckham & Coren, LLP). substantial, detailed treatise on the personal liability of receivers written by Mr. Gill was included in the written materials provided to all attendees. Summer 2005 Page 11
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13 Chuck Does Taxes... Continued from page 8. appointment, may the receiver continue this practice, or must the receiver change the procedure? IRS Publication 15-, Employer s Supplemental Tax Guide, has a detailed discussion of what constitutes a statutory employee, a common law employee and an independent contractor. In determining how a receiver should treat such a person, the receiver should carefully read this publication, which is available on the IRS web site at If an informed receiver determines that a person previously treated as an IC is actually properly classified an employee, appropriate withholding taxes should be deducted from wages paid to this person in the future. Failure to do so as determined by a later IRS payroll tax audit could result in a deficiency that is chargeable to the receivership estate. Though unlikely, it is not impossible that the receiver responsible for not withholding payroll taxes would be held personally liable for the tax under another provision of the Internal Revenue Code. The best advice is for the receiver to convert the IC to employee status and withhold and pay appropriate payroll taxes. It is also true that (a) if a claim is filed against a receivership by a person who was inaccurately classified as an IC, (b) the claim is being paid by the receiver, and (c) the receiver therefore knows the person should have been paid as an employee, the receiver is obligated to withhold taxes from sums paid to this person, report the tax on a payroll tax return and pay the tax over to the government. The receiver should also issue a W-2 form to the person. The receiver shuts down a company, and wishes to retain one of the former accounting department employees to assist in the collection of accounts receivable. May the receiver re-hire this person as an IC, or must the receiver retain the individual (who will be doing essentially the same job as before the closure) as an employee if that definition seems most applicable? Depends. gain, look to IRS Publication 15- to determine the proper status for this person. Whether a person is an employee or IC is based on the facts in each case. Generally, an individual is an IC if the person for whom the services are performed has the right to control or direct only the result of the work and not the means and methods of accomplishing the result. person is best defined as an employee when the employer has the right to control what will be done and how it will be done. This is even true when the employee is given freedom of action. What matters is that the employer has the right to control the details of how the services are performed. If the person fits the definition of an employee, appropriate taxes should be withheld and the receiver should either (a) secure a new Federal Employer Identification Number for the receivership or (b) include this person in the receiver s own staff payroll. Either way, the tax should be paid over to the government, reported on the proper payroll tax return, and Form W-2 should be issued to the employee. Charles F. Rosen, Esq. *CHRLES F. ROSEN, ES. of the Law Offices of. Lavar Taylor has substantial tax expertise involving receiverships and bankruptcy. Mr. Rosen served as a bankruptcy advisor for the Special Procedures Branch of the Internal Revenue Service for more than twenty years. Summer 2005 Page 13
14 Resolution of Dissolution? Family Law Court Receivers Can Solve Community Property Preservation and Protection Problems BY M. DNIEL CLOSE, CP/BV, CV* ND COMMISSIONER GRETCHEN WELLMN TYLOR, LOS NGELES COUNTY SUPERIOR COURT** (This discussion of the many uses for receivers in a family law court written by experts from both sides of the bench begins with a hypothetical that, according to the authors, is all too realistic.) J ohn and Mary Smith are separated and have filed for dissolution of their marriage. The Smith's community property includes a closely held business, CME Corp. ( CME ) that is managed by Mary Smith. John Smith has no involvement in the business. In fact, John is a busy UPS driver who has relied on his wife to take care of family and business financial items like preparing and filing tax returns and reconciling the community bank account. John has a friend who works in the accounting department in CME, however, and has learned that Mary Smith has been taking large checks and depositing them in an account in Nevada. John notified his attorney, who successfully obtained a temporary restraining order -- a TRO -- to prevent Mary from hiding assets of CME. Since the issuance of the TRO Mary Smith has begun taking frequent trips outside California, supposedly on business. John has now learned that Mary's trips are not business-related, but are actually visits to members of her family in Canada and in the Eastern United States. John has also learned that large disbursements have been made from CME bank accounts to questionable vendors. Page 14 Summer 2005 John has notified his attorney, who is considering filing an ex parte application for the appointment of a receiver for CME. ppoint a Receiver! Situations like this do arise in family law matters (and in other dissolutions) where an in-spouse -- the spouse with control of assets -- threatens to liquidate community assets, is uncooperative, or attempts to hide, destroy or waste community assets prior to the case conclusion. These threats are often ignored, due to the emotional nature of divorce. The court will often grant a specific property restraining order, with the hope that the restriction will prevent future dissipation of assets. But another alternative, one perhaps more costly but arguably more effective, is to seek and obtain appointment of a receiver to preserve assets. Just seeking the appointment of a receiver may have benefits -- even if the attorney's initial request for appointment of a receiver is denied by the court, the bringing of the application puts the court on notice that there exists the potential for community assets disappearing before the court can divide them. Violation of the court's temporary restraining order should provide an adequate basis for bringing an ex parte application for appointment of a receiver. Bringing an application on an ex parte basis also underscores the exigencies of the situation and may bring the parties to a quicker resolution / settlement prior to trial. Why ppoint a Receiver in a Family Law Proceeding? The appointment of a receiver may be necessary whenever a party (spouse) threatens to or begins to liquidate community property, or when there is a community business operated by both spouses that becomes the dissolution battleground. In these situations, other remedies are unlikely to preserve the marital estate until the community assets can be divided. The problem may be particularly acute where it is a cash business (and there are allegations of asset waste or outright deception), or where management and control authority in the business is not clear and the spouses countermand one-another's operating decisions. Receivers in this scenario need to be alert to the following abuses: sabotage of the business, such as stealing clients; diverting business to a new corporate shell or business entity; the all-too-frequent disappearing cash component; the existence of several sets of books; fraudulent tax filings; spy employees; and the predictable disruption of business caused by the dissolution proceedings and business uncertainty. When Should a Receiver be ppointed? receiver is usually appointed in urgent situations, and the appointment is considered a drastic remedy. receiver may not be appropriate where a restraining order will meet the needs of the case. The best time to suggest appointment of a receiver may be at the initial order to show cause ( OSC ) hearing, or even earlier when practical. In certain instances a limited receiver may be appointed to simply conduct an audit of a business and make a report to the Continued on page 15...
15 Resolution of Dissolution?... Continued from page 14. court. This allows quick approbation by the Court, limits the scope and cost of the receivership to the parties, preserves community assets and allows the court to assess the need for stronger measures (i.e. a full receivership). Judicial Council Form, No. RC-310, Order ppointing Receiver, along with addendums explicitly defining the powers and restraints of a limited receiver, may be used in obtaining such an appointment. uthority for Receiver ppointment The authority for the family law court to appoint a Receiver is contained in Family Law Code 290 (subject to 291), that provides: a judgment or order made or entered pursuant to this code may be enforced by the court by execution, the appointment of a receiver, or contempt, or by any other order as the court in its discretion determines from time to time to be necessary. dditionally, California Code of Civil Procedure states, The court may appoint a receiver to enforce the judgment where the judgment creditor shows that, considering the interest of both the judgment creditor and the judgment debtor, the appointment of a receiver is a reasonable method to obtain the fair and orderly satisfaction of the judgment. CCP indicates that CCP 564 (Chapter 5) and CCP 571 (Chapter 5a) of Title 7 govern the appointment, qualifications, powers, rights and duties of a receiver appointed under this article. Counsel may also look to California case law, both family law and general civil decisions, for examples of when a receiver may be useful in marital dissolution actions. Receivers from a Judicial Perspective receiver is considered an officer or representative of the court and, as such, is generally protected from personal liability, unless the court determines the receiver has committed a breach of fiduciary duty or a negligent tort. See, generally, viation Brake Sys. Ltd. v. Voorhis, 133 Cal. pp. 3d 230, 183 Cal.Rptr.766 (1982) and Smith v Hill, 237 Cal. pp. 2d 374, 47 Cal. Rptr. 49 (1965). The family law court has a duty to preserve the community assets during the pendency of the case. The usual situation requiring a receivership in family law is where community assets need to be both valued and, at the same time, preserved. Receivers can be also be used to marshal property in the face of threatened violation of a property division order. See, generally, Darter v Magnussen, 172 Cal.pp2d 714, 342 P.2d 528 (1956). The if I can't have it, no one will mentality permeates the type of case requiring a receivership, where the asset will deteriorate in value over a period of time to the detriment of all concerned. See, generally, Marriage of Economou, 224 Cal.pp.3d 1466, 274 Cal. Rptr. 473 (1990). The court can only adopt a management approach and operate 'hands on' pursuant to stipulation of the parties, Continued on page INSOLVENCY SOLUTIONS REL PROPERTY Since 1970, Louis Frasco and his team offer clients a full range of specialized real estate services in assisting banks, REITs, Trustees, Receivers, Referees, and Estate dministrators. RESIDENTIL COMMERCIL MULTI-FMILY HOSPITLITY BUSINESS OPPORTUNITIES EUITY/DEBT FINNCING MNGEMENT CERTIFIED PPRISL SERVICES When your case requires the sale of real property assets, management, or repairs, we will be pleased to discuss, in detail, the array of specialized services we can provide. CONTCT: Louis Frasco, Managing Director Victor Sampson, Probate Referee William Nix, Property nalyst, Financial Consultant Tel: Fax: COLDWELL BNKER COMMERICL PORTER RNCH Corbin ve., Suite Porter Ranch, C Summer 2005 Page 15
16 Judge Tevrizian.. Continued from page 6. certain recurring monthly costs up front, and some costs may be approved in advance retaining the services of an expert in some situations, for example, but always on noticed motion. Receiver s fees and most costs may only be paid after a noticed motion to the court. Do you require that all receivers post a bond? By regulatory receivers? Yes, a bond must be posted by all receivers. Regulatory receivers as well. Do you expect (a) the receiver or (b) the party that obtained appointment of the receiver to initiate contempt proceedings where the receivership estate is interfered with or named parties are not complying with the court s receivership order? I prefer that the receiver initiate any action for contempt proceedings where the receivership estate is interfered with, to bring the matter before the court. This avoids a situation where one side may use such an allegation or the receiver as a tool to gain a tactical advantage. I prefer that the receiver brings such a situation to the court s attention. Is the relationship between the court and a receiver appointed pursuant to a lender s contract rights (to protect its income stream and collateral pending foreclosure) different than the court s relationship with a receiver appointed for other, equitable reasons? Does one type of receiver have more latitude of action than the other? Yes. gain I ll draw upon my state court experience. Usually a receiver is appointed in state court where there is an apartment house and the court must deal with issues of withheld rent and purposeful waste. There are lots of housing codes and housing law liabilities where the lender or the owner could be held accountable. I always appoint a receiver under those circumstances. What are your views on receiver liability? It appears generally accepted that a receiver has personal exposure for his or her deliberate tortuous conduct. But does the receiver enjoy quasi-judicial immunity for merely negligent actions undertaken within the bounds of the appointing order (leaving only the receivership estate liable) in your view? In state court, a person cannot sue the receiver without asking permission of the appointing court to do so. In federal court you can sue the receiver without obtaining permission. ny receiver who puts his hand in the pot or engages in tortious conduct will be sued and has personal liability. Every receiver should have both a posted bond and an errors and omissions insurance policy. Where a receiver is negligent, that receiver has personal liability to any injured parties. I believe that a receiver has personal liability for negligent conduct. If suit is brought against a receiver you have appointed, do you favor transfer or removal of that action to your court for adjudication? Yes, I do. I m in a better position than another judge to know how the estate was administered, and in a better position to evaluate the receiver s actions. ELITE PROPERTIES RELTY The Seymour Group Insolvency Division The Seymour Group has the breadth of experience to meet the unique and complex needs of the Insolvency Community, providing guidance/expertise in the disposition of commercial and residential real estate assets. Receivers, Partition Referees and Bankruptcy Trustees Please Contact: PHIL SEYMOUR Executive Vice President/Managing Director 148 South Beverly Drive Beverly Hills, C Phone: ext.130; Fax: Web: Page 16 Summer 2005
17 Resolution of Dissolution?... Continued from page 15. according to Family Law Code However, courts' sua sponte orders for appointment of a receiver have been upheld on appeal. The heart of these cases requiring appointment of a receiver is the parties' apparent dysfunction, an inability to stipulate to anything despite the presence of skilled counsel and / or the willingness of one of the parties to cooperate. Many times a receiver is invaluable in protecting property than can be used to satisfy a support order. See, generally, Huellmantel v. Huellmantel 124 C. 583; 57 P.582 (1899); lderson v. lderson, 180 Cal.pp.3d 450 (1986). Other significant California family law decisions relating to receiverships include: Venza v Venza, 94 Cal. pp. 2d 878, 883, 211 P2d 913 (1949), providing that a receiver may be appointed on the court's own motion, though appointment often is accomplished by ex parte application. Nichols v Superior Court, 1 Cal. 2d 589, (1934), where the soonto-be-ex-husband moved out of California, and the wife was successful in having a receiver appointed to keep the husband from disposing of community property. In this case a receiver was used to preserve the community property so the court could properly divide marital property. uaglino v. uaglino, 88 Cal pp. 3d 542, (1979), where the husband / father murdered his wife. The father was imprisoned and the children sued their incarcerated father for support. The children were successful in having a receiver appointed to take charge of the imprisoned father's properties before a court order for support was made, to allow the court to gather sufficient information on which to base its support order. The court ruled that, under Civil Code 4380 and Code of Civil Procedure 564, appointment of a receiver is appropriate to preserve assets that might be used to satisfy future support obligations, even though a specific order for support had not yet been entered. Cases dealing with factual situations outside the family law arena also provide guidance in situations that may require a receiver. In Olsan v. Comora, 73 Cal. pp. 3d 642, (1977), the appellate court affirmed that a receiver can be appointed to collect a simple money judgment. In that case, a judge in Los ngeles County appointed a receiver to take possession of all earnings, cash, bank deposits and checks received by the defendant-appellant for services performed by him as a dentist. The defendant appealed the order appointing the receiver, primarily on the grounds that a receiver cannot be appointed to collect a simple money judgment. The receiver was appointed pursuant to CCP 564(a) which states receiver may be appointed by the court in which an action or proceeding is pending. in the following cases: [ 564(b) (4)] fter judgment, to dispose of the property according to the judgment, or to preserve it during the pendency of an appeal, or pursuant to the Enforcement of Judgments Law Title 9 (commencing with Section ). and [ 564(b) (9)] In all other cases where necessary to preserve the property or rights of any party. [ll code section citations have been updated to reflect current statutes.] Most family law courts with direct calendar assignments coax a case management order, without objection, from the parties that serves the goal of preserving the community property (if not also the sanity of the judicial officer!). Counsel's greatest weakness in these cases is waiting too long to request orders and the appointment of receivers, with significant value and important paper trails being lost because of the delay. Counsel should be creative with their court requests and courts orders. When in doubt, it never hurts to ask. Judges will always be receptive to a receivership when the alternative is a fight without end. ttorney's fees and receiver's fees should be assessed at an early stage in the case, and incremental payments should be ordered so the case does not end up with a large dispute over fees without available liquid assets to pay them. Receiverships in difficult cases may require the approval of retention of experienced civil counsel to represent the receiver in court and in dealings with the parties. n attorney with business savvy is invaluable when the receiver is seeking appropriate direction from the court at significant junctures in the case. Practical spects of a Receivership ccountants and other professionals who act as receivers in family law cases should keep in mind that the primary purposes for their appointment are to (a) prevent premature or deliberate dissipation of community assets and, (b) fulfill court orders. The receiver should work with the court to structure an order that covers the basics of the appointment -- duties, responsibilities, court reporting, discharge, bonding and being paid for services. well-written court order should include the following: description of the business and any personal /real property that will be the subject of the receivership; The amount of the receiver's bond (usually statutory); The receiver's authorization to employ legal counsel; provision that the receiver shall take possession of the business and all related assets, either real, personal, or both; direction that the receiver shall demand and collect all monies due and hereafter coming due from any operations of the business, and to care for, preserve, maintain and incur the expenses necessary for care and preservation of the above-described business assets; If appropriate, a direction that the receiver shall sell all assets of the Continued on page Summer 2005 Page 17
18 Resolution of Dissolution?... Continued from page 17. business (or, as may occur in a marital dissolution, operate the business in order to comply with other court orders, such as payment of child/spousal support and/or to prevent premature disposition of assets until the formal hearing); n appropriately detailed description of the powers of the receiver, such as: to operate and manage the business; to collect / disburse monies; to collect income and profits; to control operation of the equipment or apparatus of the business; to operate, manage and control all books, financial records, writings, etc of the business; to enter into contracts; to reconstruct or trace prior transactions; and to have those other powers granted receivers by California statute, including those found in CCP 564, et. seq.; schedule of when the receiver is to file certain documents with the court and with all parties to the matter; provision that the receiver may, at any time, apply to the court for further instructions or powers necessary to enable the receiver to perform her or his duties properly; dditional provisions specific to the facts of the case. Open, continuing communication with the appointing court and with the parties by the receiver is essential to the successful fulfillment of the goals of a family law receivership. In conclusion, while the appointment of a receiver may be a drastic step to take in a family law matter, receiverships are a tool that should be used by many family law practitioners to assist in the resolution of the case and to prevent future malpractice claims or complaints to the California State Bar. * * G R E T C H E N WELLMN TYLOR is a Superior Court Commissioner in Family Law with the County of Los ngeles and Is a Certified Family Law Specialist. *DNIEL CLOSE, CP/BV, CV is a forensic accountant, receiver and principal of EDR Valuations, Inc. a Southern California valuation and economic consulting firm with offices in San Diego, San Bernardino and Los ngeles. Page 18 Summer 2005
19 SK THE RECEIVER BY PETER. DVIDSON, ES.* Because there were not enough funds in the receivership estate, the court has ordered the plaintiff to pay my outstanding fees. The plaintiff, however, has refused to pay me. What can I do to get paid? Because the word judgment is defined differently in different sections of the Code of Civil Procedure, you can enforce your order the same as a judgment. Section 577 of the C.C.P. defines a judgment as: The final determination of the rights of the parties in an action or proceeding. Because the receiver is not a party in the action, the court s pronouncement that the plaintiff has to pay your fees would, at first blush, appear not to be a judgment but rather an order; which is defined in 1003 of the C.C.P. as: Every direction of a court or judge, made or entered in writing, and not included in a judgment, is denominated an order. The section further enforces the notion that the court s direction to the plaintiff might not be a judgment by providing that an application for an order is a motion. Because the court s pronouncement was most probably the result of your having filed a motion to approve your final account and report, the direction might seem to be an order. Generally, if parties fail to follow court orders, the method to coerce enforcement is contempt (C.C.P et seq.). Therefore, one might logically assume that only method to enforce the court s order is by instituting a contempt proceeding; which is burdensome, expensive and often unsatisfactory. But wait, this assumes the law is always logical and consistent, which it often isn t. In fact, the Enforcement of Judgments Law (C.C.P et seq.) actually has its own definition of what constitutes a judgment. Judgment means a judgment, order or decree entered in a court of this state. Therefore, voilà, the order is actually a judgment and can be enforced as such. You can record an abstract of judgment, obtain a judgment lien, get a writ of execution, levy on bank accounts and other assets, garnish wages and use all the other enforcement methods granted to a judgment creditor. My suggestion is that you immediately obtain and record an abstract of judgment in all counties where the plaintiff resides or may own real property (C.C.P et seq.) and file with the Secretary of State in order to obtain a judgment lien on personal property (C.C.P et seq.). If you are not in a hurry to get paid, the recording of these liens is an inexpensive way to preserve your rights and ultimately get paid. When the judgment debtor attempts to buy or sell real property, your judgment will have to be dealt with. lso remember, because you have a judgment pursuant to the Enforcement of Judgments Law, you are entitled to interest on the unsatisfied portion of your judgment at 10% per annum (C.C.P ). This alone, if brought to the plaintiff s attention, may persuade him or her not to dally. It is also important to note that while it is customary in insolvent estates for courts to require the plaintiff to be responsible for any unpaid receiver s fees and costs because the plaintiff instituted the proceeding and, arguably, the receivership was for the plaintiff s benefit, the court has the discretion to require either party, or both, to be responsible for paying the receiver s fees and costs. Have a receivership question you want answered? it to and your question and the answer may appear in an upcoming column. I am getting ready to close my receivership and distribute the funds in the estate to the two parties. I have just learned that the Social Security Peter. Davidson number one of the parties gave me is not his. What should I do? s a receiver you are the agent of the court. s such, you must not be a party to any conduct that may not be legal. You should bring this issue to the court s attention by filing a request for instructions as to what you should do with the funds under your custody and whether you should notify the IRS and FTB about what is clearly a violation of the law by one of the parties to the case. Like with all the requests for instructions, you should give the court a recommendation as to how you think you should be instructed. The use of a false Social Security number is a crime. See 42 U.S.C. 408(a)(7)(B). *PETER. DVIDSON, an attorney with Rein Evans & Sestanovich LLP located in Los ngeles, is a receiver and an attorney who specializes in representing receivers in state and federal court. Business checking, savings accounts, investment accounts Summer 2005 Page 19
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