RECEIVERSHIP APublicationofthe … Op i no s 20 TheReceiverStrikes Back: ... wins. TheCourt,5-4 ......

he Receivership News is extremely pleased topresent the following interview with thedistinguished jurist, Chief Bankruptcy JudgePeter H. Carroll of the United States Bankruptcy

Court for the Central District of California. Jeff Goldenasked Judge Carroll about his role as Chief Bankruptcy Judgeand his perspective on key trends in the future.

Chief Judge Carroll, a fourth generation nativeCalifornian, is among the most learned and experienced Bankruptcy Judges. He was appointed to thebench on August 1, 2002. He earned his A.B. from UC Berkeley in 1974 and obtained his JurisDoctor from St. Mary's University in 1978. He spent 17 years in private practice in San Antonio,Texas, before leaving his position as a shareholder with the Brite & Drought firm to join the U.S.Department of Justice in 1993. Chief Judge Carroll served as the Assistant U.S. Trustee in Fresno,California from 1994, until his appointment to the bench. He received the Director's Award forManagement Excellence from the U.S. Department of Justice in 1999. He is a member of the StateBar of California, Texas and Colorado. He is widely honored and recognized by the community andhis peers. He is certified as a specialist in both consumer and business bankruptcy law by the American

n Stern v. Marshall, 131 S. Ct. 2594(2011), the Supreme Court held thatbankruptcy courts cannot issue finaljudgments on state law counterclaims

even though they are “core proceedings” under§157 of the Bankruptcy Act. The reach andimplications of Stern v. Marshall are uncertainand creating great confusion in bankruptcyproceedings across the country.

The case received media attention becauseVickie Lynn Marshall, also known as AnnaNicole Smith, had married a much older man,J. Howard Marshall. Although he lavished giftsand significant sums of money on Vickie

during their courtship and marriage, J. Howarddid not include anything for Vickie in his will.Before J. Howard passed away in August 1995,Vickie filed suit in Texas probate court,claiming that Pierce Marshall—J. Howard’syounger son—fraudulently induced his fatherto sign a living trust that did not include her.She maintained that J. Howard meant to leaveher half of his estate. Pierce denied anyfraudulent activity and defended the trust and,after his father’s death, the will.

Soon after J. Howard died, in January 1996,Vickie filed a petition for bankruptcy in theUnited States District Court for the Central

Spring 2012 • Issue 43

A Publication of the

California Receivers Forum

RECEIVERSHIP

I n s i d e

4Part I

"Receiver's Sales" –

Mirage and Major

Hazard for Both

Lenders and

Receivers

10Tips to Get the Most

Out of Your Real

Estate Broker in

Receivership Sales of

Real Property

17

The List22

No. California

Commercial Real

Estate Forecast

Program: Office,

Industrial, Hotel & Ag

18Recent Unpublished

California Court

of Appeal

Receivership

Opinions

20The Receiver Strikes

Back: Navigating

Coordinated Tenant

Rent–Strikes Through

a Receivership

16 Ask the Receiver

23 Heard in the Halls

13 Professional Profile

David A. Gill

I

T

Continued on page 3...

Interview with theHonorable Peter H. CarrollChief Judge of the UnitedStates Bankruptcy Court,Central District of CaliforniaBY JEFF GOLDEN*

The Honorable Peter H. Carroll


Stern v. Marshall: Uncertain Reach & ImplicationsBY ERWIN CHEMERINSKY,* DEAN AND DISTINGUISHED PROFESSOR OF LAWUNIVERSITY OF CALIFORNIA, IRVINE SCHOOL OF LAW

NEWS

This issue is published to coincide with the annual InsolvencyConference hosted by the California Bankruptcy Forum. As such,this issue has a distinct bankruptcy flavor to it. The CBFcommunity makes up about 50% of the readership of ReceivershipNews (“RN”) so we are pleased to provide this importantperspective. The center point of this focus on bankruptcy is atimely article by University of California at Irvine Law SchoolDean Erwin Chemerinsky regarding a recent US Supreme Courtdecision that could have an impact on the future role of bankruptcyjudges. RN is honored to have Dean Chemerinsky, generallyconsidered one of the nation’s leading experts on the SupremeCourt, author an article for our publication. The profiles of CentralDistrict Presiding Bankruptcy Judge Peter Carroll and prominentbankruptcy trustee (and Receiver) David Gill round out thebankruptcy orientated issue. RN wishes to thank bankruptcylawyer, trustee and receiver Jeff Golden for his contribution infacilitating the Chemerinsky and Judge Carroll articles.

The last two issues of RN have provided a point and counter point regarding the issue: Cana rents, issues and profits receiver sell real property and sell it free and clear of liens.Traditionalists say there is not a basis in the law, and proponents point out that State CourtJudges are routinely signing orders that authorize receivers to proceed with a sale and to sell freeand clear. In this issue we have the first in a two part series from the perspective of another“traditionalist” who argues “no way.” I am encouraging the development of a panel of statecourt judges from around the state to opine on the “sale” issue in order to provide a judicialperspective – stay tuned.

RN continues to set records – this time in terms of the number of articles submitted by CRFmembers for publication. As a result of this unanticipated good fortune, we plan to add a mid-summer issue in order to provide a timely publication for the articles that have been submitted.As part of this unprecedented demand, we acknowledge the continuing effort of our new Editorin Chief, Kathy Phelps, who continues to do yeoman’s work in her role as Editor of this augustpublication (and who must be wondering right about now why she volunteered for thisassignment). Enjoy the issue. RPM

We again revisit the issue of receiver sales in this issue.And I again must remind our readers that the views expressedin all of our articles are those of the authors only. The dialogueand debate over the appropriateness of sales by rents and profitsreceivers is alive and well. We have received well-reasoned,well-written articles weighing in on the issue, and we lookforward to a continuing dialogue. It is our hope that thesearticles containing differing opinions will assist our readers informing their own conclusions, and perhaps in developing theirown arguments in briefs yet to be written. RN takes noposition on who is right and who is wrong, but rather, isthankful for the high caliber of contributions from thecommunity on this controversial issue. Please keep your lettersand articles coming. You can send them directly to me [email protected].

Receivership NewsPublished by

California Receivers Forum954 La Mirada St.

Laguna Beach, CA 92651949.497.3673 x 200www.Receivers.org

PublisherRobert P. Mosier

[email protected]

EditorKathy Bazoian Phelps, Editor

[email protected]

Judicial EditorHon. Ann I. Jones

Los Angeles Superior Court

Associate EditorCraig Collins, CPA

Associate PublishersGordon Dunfee

Beverly McFarlandRon OlinerKevin Singer

Contributing ColumnistsAlan Mirman, Heard in the HallsPeter Davidson, Ask the Receiver

OfficersNancy Hotchkiss, Chair

Gordon Dunfee, Chair ElectBruce Cornelius, TreasurerKirk Rense, SecretaryChristopher Seymour,Projects Director

Graphic Design & LayoutRegina S. Roland

Web ServicesCDR Marketing

Receivership News is publishedquarterly by the CaliforniaReceivers Forum, a not-for-profitassociation. Articles in thispublication express the opinionsof their authors and do notnecessarily reflect the views of thedirectors, officers or members of theCalifornia Receivers Forum.Articles are intended as a sourceof general information and shouldnot be construed as specific advicewithout further inquiry and/orconsultation with professionalcounsel.

© Copyright 2012California Receivers Forum

All rights reserved.

Publisher’s CommentsBY ROBERT P. MOSIER, PUBLISHER*

Editor’s CommentsBY KATHY BAZOIAN PHELPS*

• Spring 2012

Robert P. Mosier*Robert P. Mosier is aSouthern California trusteeand receiver and principal ofMosier & Company, Inc.,a firm that has specialized inmanaging and turningaround troubled companiesfor more than 25 years.

*Kathy Bazoian Phelpsis a partner at Danning,Gill, Diamond & Kollitz,LLP, Los Angeles, and theco-author of The PonziBook: A Legal Resourcefor Unraveling PonziSchemes. She frequentlyrepresents receivers andtrustees.

Kathy Bazoian Phelps

Spring 2012 •

District of California. In June 1996, Pierce filed a proof of claimin the federal bankruptcy proceeding, alleging that Vickie haddefamed him when attorneys representing Vickie told membersof the press that Pierce had engaged in forgery, fraud, andoverreaching to gain control of his father's assets. Vickieanswered, asserting truth as a defense. She also filedcounterclaims, among them a claim that Pierce had tortiouslyinterfered with a gift she expected. She contended that Pierceessentially imprisoned J. Howard against his wishes; surroundedhim with hired guards for the purpose of preventing contact withVickie; made misrepresentations to J. Howard; and transferredproperty against J. Howard's expressed wishes.

The Bankruptcy Court granted summary judgment in favorof Vickie on Pierce’s claim and, after a trial on the merits,entered judgment for Vickie on her tortious interferencecounterclaim. The court awarded Vickie compensatory damagesof more than $449 million—less whatever she recovered in theongoing probate action in Texas—as well as $25 million inpunitive damages.

The District Court concluded that the Bankruptcy Courtlacked the authority to issue a final judgment on Vickie’scounterclaim and thus said that it would treat the BankruptcyCourt’s judgment as “proposed rather than final” and engaged inan “independent review of the record.”

However, subsequent to the Bankruptcy Court decision, butprior to the decision of the District Court, the Texas ProbateCourt had conducted a jury trial and ruled in favor of Pierce.The District Court, however, did not give preclusive effect tothis decision and agreed with the Bankruptcy Court that Piercehad tortiously interfered with Vickie’s inheritance. The DistrictCourt reduced the damages to approximately $88 million,divided equally between compensatory and punitive damages.

The issue before the Supreme Court concerned preclusion.If the Bankruptcy Court had the authority to issue a finaljudgment, then its ruling was preclusive of the Texas probatecourt’s decision, and Vickie’s estate wins. But if the BankruptcyCourt lacked the authority to issue a final judgment, then therewas no preclusion of the Texas probate court, and Pierce’s estatewins.

The Court, 5-4, took the latter approach. The Court saidthat the Bankruptcy Act in § 157(b)(2)(c) expressly makescounterclaims “core” proceedings over which the bankruptcycourt could issue a final judgment. But the Court found thatthis violated the Constitution because bankruptcy judges do nothave life tenure. Chief Justice Roberts’ majority opinion beganby stressing the essential nature of Article III protections forseparation of powers and the protection of individual liberties.

Continued from page 1.

Stern v. Marshall...


• Spring 2012

IntroductionThe notion of a receiver's sale conducted by a rents-and-

profits receiver appointed pursuant to a California trust deedmay seem an inviting alternative to trustees’ sales and judicialforeclosure auction sales. And since a receiver’s sale mayinvolve at least some of the trappings of a non-distress sale,such a sale may seem an oasis that will provide shelter againstthe harshness of foreclosure auctions and mandatory lenderelections of remedies between judicial foreclosure and trustee’ssale. But the seemingly lush enticements of a receiver’s sale area mirage. And those beguiled into heading for that mirage putthemselves and their clients at tremendous risk.

The first part of this two-part article will explore case lawand statutory authorities to develop the case why “receiver’ssales” are improper under California law, and why case andstatutory authorities concerning sales by general equityreceivers have no applicability in California mortgage and trustdeed litigation and receiverships. In the second part of thearticle—to be published in the next issue—we will detail morefully the hazards and potential consequences of receiver’s sales,attempted or completed.

Receiver's Sales Are Unlawful And Fraught WithRisk For A Variety Of Contractual, Conceptual,And Statutory Reasons

The reasons why “receiver's sales” are both unlawful anddangerous are legion.

The best starting point to evaluate most commerciallitigation remedies is in the language of the applicable contract.A review of the language of customary commercial andproprietary forms of deed of trust used in California (and of theoccasional mortgage) will establish that the security documentcreates an assignment of rents as security (often couched as an“absolute” assignment) and often contains provisions for theappointment of a receiver to take possession of the security, tocollect the rents, and to preserve the property against wastepending foreclosure. What is conspicuous by its absence fromsuch "rents and profits" clauses is language providing for thereceiver’s sale of the security or for the imposition of areceivership over the person of the borrower. Since securedlenders typically seek appointment of a receiver by way ofrequest for specific performance of the provisions of the deed oftrust, the absence of language about a receiver selling thesecurity is a critical omission. See Turner v. Superior Court, 72

Cal. App. 3d 804, 812 (1977) (the “contractual agreements”between lender and borrower show “the purpose for which thereceiver was appointed;” in the absence of consent from theborrower the court “exceeds its jurisdiction” by purportedlyauthorizing a rents and profits receiver to exercise control over“property which is not hypothecated in the deed of trust”). Inasking the court to authorize a receiver sale, the lender istypically asking the court to specifically enforce something forwhich the contract does not provide.

The distinction between a receivership over identifiedproperty, on the one hand, and a receivership over the personof a corporation or other legal entity, on the other hand, is acritical one. The former is a rents and profits receivership, andthe latter is usually referred to as a "general equity"receivership. The distinction between “rents and profits”receiverships and “general equity” receiverships is far from amerely semantic or minor one Rather, the distinction describesfundamental conceptual and legal differences between anarrangement for dealing with the preservation of identifiedproperty, on the one hand, and an arrangement for handlingand resolving the business affairs of a legal person. See Turner,supra, 72 Cal. App. 3d at 813, 817 (twice rejecting propositionthat “a receiver is a receiver regardless of the purpose for whichhe was originally appointed”). Given the profound difference inthe nature and the objectives of the two types of receivership, itshould come as no surprise that the role and powers of the twotypes of receiver are markedly different.

When borrowers resist imposition of a receivership based ona defaulted deed of trust by citing receivership cases treatingthe remedy of receivership as “harsh” and “extraordinary,”lenders frequently emphasize and take advantage of thedistinction between the concepts of a rents and profitsreceivership and a general equity receivership. Lenders andtheir attorneys argue—correctly—that the appointment of arents and profits receiver following a trust deed default shouldbe more or less routine when the trust deed or other loandocuments contain a valid "rents assignment" provision, andthat cases setting exacting standards for the appointment of ageneral equity receivership are inapposite to the appointmentof a rents and profits receiver under a defaulted trust deed.Lenders will commonly argue—again correctly—that case lawholding that the appointment of a receiver is a harsh andextraordinary remedy to be applied sparingly (see e.g., City &County of San Francisco v. Daley, 16 Cal. App. 4th 734, 745(1993)) is inapplicable to a rents and profits receiver both


Part I

"Receiver's Sales" – Mirage and MajorHazard for Both Lenders and ReceiversBY CHARLES A. HANSEN AND KEVIN R. BRODEHL*

Spring 2012 •

Board of Certification. He is a frequent lecturer and has publishednumerous articles on bankruptcy topics for various publications,including the American Bankruptcy Institute and the CaliforniaBankruptcy Journal.

He has published many notable decisions including In re ValleyHealth Systems, 383 B.R. 156 (Bankr. C.D. Cal. 2008) (chapter 9eligibility); In re Count Liberty, LLC, 370 B.R. 259 (Bankr. C.D.Cal. 2007) (duties of chapter 11 DIP counsel); and In re Perrine,369 B.R. 571 (Bankr. C.D. Cal. 2007) (Rule 2016(b) disclosure).

Chief Judge Carroll was kind enough to allow himself to beinterviewed recently at the George E. Brown, Jr. U.S. Courthouseand Bankruptcy Court in Riverside, California.

GOLDEN: How was the transition to Chief Bankruptcy Judge ofthe Central District?

JUDGE: Well, I was appointed on January 3, 2011, andsucceeded Judge Vincent P. Zurzolo who had done an excellent jobas chief. He understands the real challenges facing the district, andpossesses a strong institutional knowledge of the bankruptcy courtin the Central District dating back to 1988. Being able to bouncethings off of Judge Zurzolo has been very helpful to me.

GOLDEN: What challenges do you see as Chief BankruptcyJudge?

JUDGE: When I took over, we had just completed a record yearin 2010, with 142,790 filings. That just completely destroyed ourprior record of 120,987 set in 1998. We thought that 2011 wasgoing to be another record year because the filings continued toincrease during the first three to four months of 2011, but filingsstarted to flatten by summer and then slowly headed down byOctober. We ended 2011 with 134,600 total filings in the fivedivisions of the Central District – just short of the 2010 record.Year-to-date filings for 2012 are down about 17.9% over the sameperiod last year. We expect filings to trend down through 2012,and then start ticking back up in 2013. We are predicting thatfilings will increase for two reasons: First, the banks are expected toramp up foreclosures later this year; and secondly, the 8-year periodbefore receiving another chapter 7 discharge will expire in 2013 forall those who rushed to file chapter 7 in 2005, prior to the effectivedate of BAPCPA, and they may need to file again given theeconomic downturn in the interim.

GOLDEN: It seems as though our Bankruptcy Court has a largenumber of new judges.

JUDGE: Yes. Our court, which has always been the largestbankruptcy court in the nation, got even larger in 2011. We nowhave 24 active bankruptcy judges. Nine of our 24 judges have beenappointed since February of 2010, so they have two years or lessexperience as judges on the bench. Our newest judges do not havethe institutional knowledge that our veteran judges have, but theybring a lot of talent and new ideas to the bench from privatepractice and government. We also receive invaluable assistancefrom four recalled judges and an active judge from Missouri whohelps us on a temporary inter-circuit assignment from the EighthCircuit.

GOLDEN: What opportunities do you see for the CentralDistrict?

JUDGE: This is a challenging time to be the chief judge. Weare finally up to full strength with all 24 judges on board. We donot expect another retirement for a few years. As far as I can tell,the composition of the bench will remain fairly consistent for thenext seven years or so. The recession and political climate has hadan impact on the way we do business. Congress is not giving us thekind of money that we need to run the courts, and we need to figureout how to do things differently. Now is the time to review ourstrategic plan and to redefine the strategic direction of the court forthe next seven years or so. We need to examine our current model,how we do things, and determine whether that model is sustainablegiven what we believe will be the political, social, economic andcultural environment of the Central District of California in thenext ten years. We intend to reach out and get everyone involvedin the process, and to develop a new model with defined goals so wecan meet the challenges in the years ahead.

GOLDEN: What areas do you expect the strategic plan toaddress?

JUDGE: My sense is that we need to focus on five areas. Thefirst is administration of justice. We serve an increasingly large anddiverse population. We probably will not have the physical spacein the future to do things the way we've always done them in the


Honorable Peter H. Carroll...


past. What we must do is evaluate how we can provide justiceeffectively and efficiently to the public given the increased demandsthat we have and our reduced resources.

The second area is access to justice and service to the public.How can the Court insure that justice remains accessible to everyone that we serve given the shifting demographics and socio-economic changes in the district? Over 30% of our current filingsare pro se. We've been lucky enough to have a pro se clinic in LosAngeles. Judge Tighe has been tireless in her efforts to maintain apro se clinic in Woodland Hills. We were able to start one in theRiverside Division in conjunction with the District Court. There isalso a pro se clinic in Orange County. We'd like to see a pro seclinic of some type developed in each of the five divisions and thateach of those clinics ultimately be self supporting.

We have a lot of forms and the most exhaustive local rules ofany district in the country. Sometimes, if forms and rules are noteasily understandable and readily available, that may present in andof itself a barrier. So what we're doing in that regard, at least as afirst step, is redesigning the Court's website with input from the barand the public. There will be areas in the website where peoplewho speak Spanish, for example, can go to get instructions andinformation in Spanish. We're going to have to evaluate how manylanguages that we can put on the website, but that's the direction

we're going so as to provide access in an understandable format.Judge Tighe has been working on a pilot project through the

Administrative Office of the U.S. Courts known as the “Pro SePathfinder Project” which would assist pro se debtors in preparingand filing bankruptcy petitions electronically. We wanted to makecertain that whatever is ramped up on a national level meets ourneeds.

The third strategic issue is the judicial workforce of the future.We've got judges, experienced managers, and Court personnel thatwe need to retain. It's difficult to retain those people when youdon't have any money. The judges are leaving the bench becausethere's more money to be made in private practice. The same istrue with Court personnel. The issue is how can we retain a highlyskilled team of judges and Court personnel who are committed topublic service given increased fiscal challenges and changing careerexpectations?

Fourth, we need to evaluate our space needs in all five divisionsand develop a solid infrastructure to achieve administrativeefficiencies, provide a safe and secure environment, and enhancethe public’s access to court information and services.

And finally, fifth, we need to increase public understanding,trust and confidence in the judicial system by community outreachand by involving our stakeholders more into the process. Forexample, we recently set up an IT Committee with two bankruptcypractitioners serving on the committee. They know whattechnology they are using in their offices, and we need to design oursystems to best interface with the technology used by the attorneysand people we serve.

So those are some of the ideas I have about our strategic plan forthe future. But again, this is a long-term process, and we're going tohave not only input from all the judges and staff, but also thelawyers and other constituents.

GOLDEN: What procedural challenges do you see in the Court'sfuture?

JUDGE: As far as law and procedure, probably the biggestquestion that's been hanging over us since last June is what do wedo about Stern v. Marshall. The District Court really doesn't knowwhat to do about Stern v. Marshall, and the bankruptcy judges havedifferent views. The Southern District of New York came up with ageneral order that has been adopted in one form or another by otherdistricts to deal with the issues raised in Stern v. Marshall. At somepoint, the District Court’s general order referring bankruptcy casesand proceedings to the Bankruptcy Court in the Central District ofCalifornia may have to be amended to address the situation. In themeantime, I think bankruptcy judges have one of three alternativesin light of Stern v. Marshall—make findings of fact and conclusionsof law; instruct the parties to file a motion with the District Courtseeking a withdrawal of the reference; or abstain.

I have a serious concern given the language of Stern v. Marshallwhether or not a bankruptcy judge can get informed consent fromthe parties to enter a binding final judgment on a non-core claim.This is a topic that will be discussed next week at the Chief Judges'Conference. Also, Chief Judge Kozinski asked for amicus briefs lastNovember in a case called Executive Benefits Ins. Agency v. Arkison(In re Bellingham Ins. Agency, Inc.). My understanding is that a



• Spring 2012Continued on page 7...

decision in that case is forthcoming. So we're all waiting to seewhat the Ninth Circuit says in Bellingham before we take the nextstep.

I don't think the holding in Stern v. Marshall is as narrow as themajority seems to think it is, or they say it is. The majority says thisis a very narrow holding and it will not have any significant impactat all on the Bankruptcy Court. It’s having a big impact; a hugeimpact. There are a lot more non core matters in Bankruptcy Courtthan the Supreme Court might think, and judges have a bigdisagreement as to whether or not parties can truly give bindingconsent to a bankruptcy judge to exercise Article III power over aparticular issue.

GOLDEN: Do you predict more chapter 9's in the CentralDistrict's future?

JUDGE: I think the Vallejo case created a scare. It scared theunions and it scared a lot of creditors. That's why we've hadlegislation. Assembly Bill 155 was introduced in response to Vallejofor the specific purpose of limiting immediate access to chapter 9 bymunicipalities in the state. That bill died and now we haveAssembly Bill 506 which was signed into law last November as acompromise. To qualify under state law for chapter 9 relief, amunicipality must now go through a neutral evaluation process orvote to declare a fiscal emergency after a public hearing.

California’s access to chapter 9 was pretty liberal before the Vallejocase. I don't think this legislation will, in and of itself, stop chapter9's from happening in California. In 2010, total municipal debtoutstanding exceeded $2.9 trillion and almost 20% of that debt wasin California. But I think the consequences of filing a chapter 9 areenormous, and a municipality is not going to do it unless it's justsimply the last resort.

GOLDEN: Do you enjoy being Chief Bankruptcy Judge?JUDGE: I never thought I would like the management aspect of

the practice of law, but I served as a managing partner of the firmwhile in private practice and ended up enjoying management as anAssistant U.S. Trustee. I thought well maybe I'd like to have thatexperience again, at least for four years, as chief judge. I've enjoyedit. I understand the Court a lot better than I did prior to myappointment as chief, and I'll probably take away from theexperience a better understanding of Courtadministration and a deeper appreciation for thededicated individuals who serve the Court.

Spring 2012 •



Triple Crown Insurance

Triple Crown Insurance Services prides itself on its stability, knowledge,professionalism and staying power in today's changing insurance environment.We treat our clients as partners.

We can handle the most challenging business situations and opportunitiesimaginable. We develop solutions that take advantage of the current insurancemarkets and provide competitive insurance policies so your business can besuccessful.

Triple Crown Insurance Services is licensed for property/casualtyinsurance in all 50 states as well as the District of Columbia.

Triple Crown Insurance Services, Inc.6151 Fairmount Ave., #211San Diego, CA 92120

Phone: 619-280-8700 • Fax: [email protected]

Call for a free quote

Our Insurance Clients:ReceivershipsAccountantsLenders with REO & OREO PropertiesAsset ManagersConflict Resolution SpecialistsProblem Resolution Specialists

* Jeff Golden is a partner of Weiland, Golden, Smiley,Wang Ekvall & Strok, LLP. He is a former law clerk to theHonorable Peter M. Elliott and Calvin K. Ashland, Judgesof the United States Bankruptcy Court, and co-editor in chiefof the California Bankruptcy Journal. Jeff Golden

because the borrower has already agreed to the appointment inthe loan documents and because the purpose of a rents-and-profits receiver is a limited one focusing on the preservation ofthe property and the collection and preservation of rents. Seee.g., Turner supra, 72 Cal. App. 3d at 812-814 (a rents andprofits receiver is “limited and special;” the rents and profitsemanating from the property are impounded for the benefit ofthe mortgagee, but the debtor retains its other property).

Having obtained the appointment of a receiver, however,many lenders and their attorneys quickly change their tunesand assert that the rents and profits receivership is not limitedand that the receiver can do anything a general equity receivercan do. This common reversal of position argument on thenature of a rents-and-profits receivership is a revealing one.

Since the trust deed rarely, if ever, contains languageauthorizing the receiver to actually sell the security, the lendermust rely on statutes and case law that apply to the power ofreceiver for an entity or corporation to sell that corporation'sassets. But this argument disproves itself. A general equity

receiver (or, for that matter, a state law trustee, a bankruptcytrustee, or an attorney in fact) can sometimes sell acorporation's or other person’s property, real or personal, basedon the power and authority to act on behalf the person that isthe owner of the property and thus has the right to sell it on aconsensual basis. But property cannot sell itself. A receiver thatis acting only as a rents and profits receiver for identifiedproperty rather than as a receiver for the person of acorporation or legal person can no more sell the property thanthe property can sell itself.

The centerpiece and foundational concept of mortgage lawis the borrower’s right or "equity" of redemption. That right ofredemption is what makes a mortgage or a deed of trust asecurity interest instead of an ownership interest. The right ofredemption from a mortgage or deed of trust is actually held, inCalifornia, both by the owner of property and by those holdinga lien or other interest in the property inferior in priority to thedeed of trust in question. Cal. Civ. Code §§ 2903-2905; O’Neilv. General Security Corp., 4 Cal. App. 4th 587, 603-605 (1992).It is precisely this equity of redemption that is cut off or“foreclosed” by a valid foreclosure sale. Historically andsemantically, that is how foreclosure came to be calledforeclosure. Nowhere in California law does there exist aprovision that allows a receiver to cut off the equity ofredemption, which is the defining feature of a mortgage or deedof trust. And nowhere in California law can one find any rightanalogous to Bankruptcy Code § 363 permitting the sale ofproperty free and clear of liens or encumbrances or the transferof the lien to the proceeds of that sale. Coppola v. SuperiorCourt, 211 Cal. App. 3d 848 (1989). Thus, even if a rents andprofits receiver’s sale could somehow overcome the absence ofauthorizing language in the deed of trust, there is no basis inCalifornia law to suggest that such a sale would cut off orforeclose junior interests any more than a voluntary deed or adeed in lieu by the borrower.

A general equity receiver who controls the affairs of a legalperson or corporation can properly be empowered to sell thatperson's assets much as can a trustee or a probaterepresentative. That sale by the general equity receiver is, atleast in legal theory, a consensual sale by the personalrepresentative of the person who has a right to sell theproperty. But a rents and profits receiver is not a personalrepresentative of the borrower at all, and is merely an agent ofthe court charged with preserving and protecting the realproperty security pending the outcome of a judicial ornonjudicial foreclosure. A court that has appointed a rents andprofits receiver has no basis in the customary language of thedeed of trust that authorized the appointment and created theinterest in rents and profits, or in either statutory law or in


“Receiver’s Sales”...


• Spring 2012

equity principles, to authorize the receiver to cut off orforeclose out the equity of redemption enjoyed not only by theowner and borrower but also by all of those junior interestswhose rights of redemption would be likewise terminated and“wiped out” by a foreclosure. The purchaser from a rents andprofits receiver purportedly authorized to sell the property will,at best, acquire unmarketable and likely uninsurable title, andmay well look to both the lender and perhaps the receiver asseller for the resulting loss and breach of both the contractualand the deed-based covenants of marketable title. Karoutas v.HomeFed Bank, 232 Cal. App. 3d 767 (1991).

Anyone suggesting that California Code of Civil Procedure§§ 564 et seq. provide an answer to these fundamental problemsshould consider the following questions: Is a rents and profitsreceiver's sale a foreclosure sale? If the answer is “no,” how thendoes such a sale cut off the fundamental equity of redemptionenjoyed by the owner and the holders of junior interests? If theanswer is “yes,” then does the sale trigger the deficiency bar ofCalifornia Code of Civil Procedure § 580d? And, does a rentsand profits receiver’s sale trigger a post-sale right of redemptionunder California Code of Civil Procedure §§ 729.010 et seq?Where in the law do the advocates of “receiver’s sales” suggestwe look to find the answers to these questions?

Whatever answers to these questions may be offered, howdo we know the answers are correct when there is no basissupporting the answers in either statutory language or the caselaw? Additionally, why would the California legislature andCalifornia courts have spent a century and more refining,balancing, and reconciling the procedures of judicialforeclosure and trustee’s sale as an integrated system by virtueof which the lender must make an election of remedies betweenthese two well-mapped remedial choices, but then allow asecured creditor to opt out of the election and check “neitherof the above” in order to pursue a procedure as to which noguidance is available and as to which no checks and balanceshave been created as concerns titles, procedures, deficiencies,or post-sale redemption rights? See Vlahovich v. Cruz, 213 Cal.App. 3d 317, 321-323 (1989). If secured lenders could usereceiver’s sales as a means of opting out of the mandatedelection of remedies between trustee’s sales and judicialforeclosure and the consequences of that election, they wouldhave been doing so conspicuously for the past century. Yet,there is no evidence in the case law that they have been doingso. That is a sure sign of a mirage.

While California Code of Civil Procedure § 568.5generically allows for property sales by a receiver, that statutemust be treated consistently with (and not as eviscerating) therecognized narrow role and purpose of a “rents and profits”receiver and the language of the deed of trust pursuant to

which he is appointed. No California case has applied § 568.5to justify a sale of property by a rents and profits, as opposed toa general equity, receiver. In Turner, supra, the court observedthat cases applying § 568.5 “do not involve rents and profitsreceivers and are distinguishable on that ground,” and notedthe powerful arguments against applying § 568.5 to rents andprofits receivers (including the limited scope of contractualauthorization, the equity of redemption, and § 726), beforeultimately concluding that it need not decide the issue. Turner,supra, 72 Cal. App. 3d at 817-818. A case cited by somereceiver sale proponents, Cal-American Income Property FundVII v. Brown Development Corp., 138 Cal. App. 3d 268 (1982),expressly acknowledged the limited powers of a “rents andprofits” receiver, but noted that the specific language of thetrial court’s appointment order suggested bases and powersbeyond a typical rents and profits receivership. Id. at 273-274.The court, therefore, assumed that the right of sale existedunder the facts before it, and focused instead on whether thereceiver had established an “immediate necessity” for the sale,finding in the negative. Id. at 274-276. No subsequentCalifornia decision has relied on Cal-American to support a saleof property by a “rents and profits” receiver.

Perhaps the lender or receiver will respond and say that a"receiver's sale" is not a foreclosure sale at all but a sui generisform of equitable remedy. If that is the response, the questionthen presented is whether, or how, the receiver sale cuts off orforecloses the rights of redemption enjoyed by both the ownerand all juniors. The issue comes full circle and begs thefundamental question of what a receiver sells and what a buyeracquires in a “receiver’s sale.”

Part 2 will conclude this article in the next RN issue.


“Receiver’s Sales”...

*Charles Hansen is a partner at Wendel, Rosen, Black& Dean in Oakland whose core practice is devoted to lending,mortgages, trust deeds, escrows, title insurance, real estatedevelopments, guaranties, and secured transactions litigation.Since 1985, he has also taught advanced real estate courses tolaw and MBA students at UC Berkeley's Boalt Hall.

*Kevin Brodehl is a partner at Wendel, Rosen, Black& Dean in Oakland specializing in secured transactionslitigation, as well as other litigation involving real estate,business, and intellectual property.

Charles Hansen

Kevin Brodehl

Spring 2012 •

• Spring 2012

Like prior recessions, receiverships have been one of the fewgrowth areas for real estate professionals during the past fewyears. Echoing prior recessions, a new set of real estateprofessionals would like to reap the benefit of the receivershipbusiness. However, a real estate broker selling receivership realproperty has to understand the unique challenges andrequirements that a receivership sale presents.

What is the difference between a conventional andreceivership sale? Actually quite a bit… but the primarydifferences are: (1) receivership sales require court confirmationand possible Overbid; (2) a receiver has no emotional orpersonal history with the property, which has a beneficial effectof making the negotiation process more efficient and effective;and (3) unless the parties settle the case, the receiver is a sellerby a virtue of a court order and not just testing the market as aconventional seller might do.

In light of these differences, a receiver’s Broker must bringunique skills and sensitivity to a receivership sale, and receiversshould communicate with their Brokers freely about the

following issues:• The first part of the assignment to list a property for sale

is the Brokers Opinion of Value (BOV). This should bein conjunction with the Broker’s review of thePreliminary Title Report and all underlying documentsalong with the court order appointing the receiver. Inmost receiverships involving real estate (commercial orresidential) you may want to get a BOVeven before youpost your bond and commence your receivership. If youare a rents issues and profits receiver, it will enable you toadvise the lender of its possible level of recovery. If youare a receiver in aid of execution of a judgment and thereal estate is your only asset, the BOV lets you knowwhether there is likely any equity in the property thatmay determine your ability to get paid and thereforewhether or not to take the case.

• The receiver should establish with the Broker the formand content of the Purchase and Sale Agreement beforetaking any property to market. The terms and conditionsalong with any addendums attached to the Purchase andSale Agreement should be totally familiar to the Broker.If the Broker doesn’t know it, he or she will not be able toexplain it. In the real estate brokerage community, manyare not familiar with the various forms of “As Is” salecontracts used in receivership sales.

• In marketing receivership properties, the Broker shouldfocus on maximizing value while simultaneouslyminimizing any potential resistance to a sale that issubject to court confirmation and possible overbid.“Value Added” components create a strong connection topotential buyers. Engage brokers and principals in allmarketing materials to inquire about the features of theproperty and the sale process.

• All marketing materials must include “Subject to CourtConfirmation.”

• Although receivership sales are generally subject tooverbid, rather than stating “Possible Overbid,” state“Call Agent for Details.” This creates the opportunity forthe Broker to explain (in detail) the confirmation processand the Purchase and Sale Agreement. Buyer’s brokersfrequently ask: “What if my buyer is overbid in court?”Propose an incentive such as a breakup fee to reimburseout-of-pocket expenses for the buyer’s due diligence incase the buyer is overbid. It’s not a perfect answer, but inmany instances it opens the way for an offer.

• Brokers should be aware that their marketing updates areincluded in the Receiver’s monthly report to the courtand should be as detailed as possible. The parties to the

Tips to Get the Most Out of Your Real EstateBroker in Receivership Sales of Real PropertyBY PHIL SEYMOUR*


FRANDZEL ROBINS BLOOM & CSATO, L.C.

6500 Wilshire Blvd. Seventeenth Floor

Los Angeles, CA 90048 Telephone: (323) 852-1000

Fax: (323) 651-2577

100 Bush Street Twenty-third Floor

San Francisco, CA 94104 Telephone: (415) 788-7400

Fax: (415) 291-9153

Real Estate Finance & Transactions

Financial Services

Creditors’ Rights & Commercial Litigation

Equipment Leasing

Bankruptcy & Business Reorganization

Receiver Representation

Service . . . The Final Word

F

B C

R

Contact: Craig A. Welin, Esq.

E-mail: [email protected]

www.frandzel.com

C

Spring 2012 •

litigation that may be opposing the receiver in the sellingof assets will be scrutinizing all marketing efforts to makea case that: (1) the property is priced too low; or (2) theBroker is not using his or her best efforts; or (3) otherissues that they may bring up. As a result, the updates arevery important to show full due diligence in themarketing and selling of the property.

• Whenever escrow becomes non-contingent, the receiverwill petition the court for approval. The Broker shouldnot interrupt the marketing campaign which wouldcompromise an opportunity to produce a potentialoverbid.

• Specific to Single Family Residential Sales: Mostproperties are listed with a local Multiple Listing Service(MLS). One of the MLS rules, states that when aproperty enters escrow, the status has to be changed from“Available” to “In Contract” or “Looking for BackupOffers”. If the status does not show “Available,” it canchill inquiries by brokers and principals that will have animpact on the ability to generate overbids. I havesuccessfully argued the case and the MLS now allowskeeping the status as “Available” even though the

property is in escrow subject to court confirmation.• Even if the Broker has worked for other receivers, both

Broker and receiver must remain aware that no twoproperty sales are the same, as no two receiverships areexactly alike.

• If your Broker is new to representing receivers, don’t feelyou are insulting them by suggesting that they readmaterials that will expand their knowledge andunderstanding of receiverships.

These are just a few, but very important actions a Brokershould take to achieve the best result from real property sales byreceivers. The Broker who covers these bases will better protectthe interest of the receiver and will earn the receiver’s futurebusiness.


Tips..

*Phil Seymour is Executive Vice-President ofElite Properties Realty located in Beverly Hills,California. Phil heads The Seymour Group atElite, which specializes in representing Receivers,Partition-Referees, Bankruptcy Trustees andinstitutional third party sellers. Phil Seymour

• Spring 2012


Stern v. Marshall...

The underlying rationale for this seems dubious. The Court’semphasis on the importance of an independent judiciary wouldmake sense if this were an issue of federal constitutional law,especially one where life tenure might make judges moreinclined to withstand popular pressure and uphold theConstitution. But the issue in Stern v. Marshall was a state lawclaim that by itself would not even fit within the scope of thematters which federal courts are allowed to hear under ArticleIII, section 2 of the Constitution. State law claims are generallyadjudicated by state law judges who rarely have life tenure.What then was so objectionable about Congress authorizingbankruptcy judges without life tenure to hear the matters?

Two questions are key after Stern v. Marshall. First, what arethe areas where bankruptcy courts cannot issue final judgments?Chief Justice Roberts concluded the majority opinion bypainting it as a narrow holding and declaring: “We concludetoday that Congress, in one isolated respect, exceeded [thelimitation of Article III] in the Bankruptcy Act of 1984.” But ifthis provision of the Bankruptcy Act is unconstitutional, thenwhat other provisions are similarly impermissible in givingbankruptcy courts authority to issue final judgments? Bankruptcycourts constantly decide state law questions; after Stern v.Marshall when can they issue final judgments on these matters?

In what is likely the most important language of the opinionin terms of when bankruptcy courts can issue final judgments,the Court said that “the question is whether the action at issuestems from the bankruptcy itself or would necessarily be resolvedin the claims allowance process.” This, though, significantlylimits the ability of bankruptcy courts to issue final judgments.

For example, several courts have now ruled that bankruptcycourts cannot issue final judgments on an action to avoid afraudulent conveyance, and the Ninth Circuit has asked forbriefing on that issue.

Second, the crucial practical question will be whetherconsent can cure this and whether bankruptcy courts can issuefinal judgments with consent of the parties. If so, the effect ofStern v. Marshall will be greatly reduced; if not, the implicationsof Stern v. Marshall are enormous and transcend the bankruptcycontext, including whether magistrate judges can continue tohold civil trials with consent of the parties.

On the one hand, no principle of federal jurisdiction is moreclearly established than that a limit on the power of a federalcourt cannot be overcome by consent. On the other hand, somebankruptcy courts since Stern v. Marshall have held that there isa distinction between the subject matter jurisdiction of abankruptcy court and its power to issue final judgments; consentcannot cure a defect in the former, but it can allow for the latter.

Ultimately, this question, like so many raised by Stern v.Marshall, must wait for further clarification by the Supreme Court.

*Erwin Chemerinsky, Dean and Distinguished Professorof Law, University of California, Irvine School of Law. Erwin Chemerinsky

A founding member of the bankruptcy boutique firm of Danning,Gill, Diamond & Kollitz, LLP, David A. Gill was admitted to theCalifornia Bar in 1961, and is a graduate of UCLA and, followingarmy service, of Stanford Law School. He has been a bankruptcytrustee since 1965, and a receiver since about that time. During thattime, he has also represented trustees and receivers, as well as debtors,creditors, committees, including representation of the creditors’committee of Maxicare (the first of the two filings by that company).David also sat on the Creditors’ Committee in the matter of OrangeCounty, representing bondholders.

As a trustee, he has administered, or represented administrators of,cases running the gamut from individuals - in the days when debtorexaminations were held before the judge - to significantly larger cases.He has run many businesses as trustee, including hotels such asHayward Manor and motels (one with 150% occupancy, which hecould not explain to the judge), a mortuary, convalescent and generalhospitals. He has also run larger cases such as the parent of AmericanSavings & Loan, a national manufacturer of aircraft equipment sellingto the military, and a manufacturer providing key materials to theSpace Station program.

As a State Court receiver, he has handled many cases. The mostinteresting, he says, were the liquidations of the law firm Wyman,Bautzer, Kuchel & Silbert and other professional associations andPhysicians Interindemnity Trust, which involved the liquidation of amedical malpractice insurance-like arrangement. With virtually nomoney in the bank at the start, he separately sued 764 physicianmembers, and recovered over $60 million, resulting in payment in fullof principal due all creditors plus 10% annual interest, and even madesubstantial payments to equity. He represented the receiver in thefamous case of Gold v. Gold. In the U.S. District Court, he iscurrently engaged in two SEC-initiated liquidations of Ponzi schemedebtors, including Diversified Lending Group, Inc.

In 1971, David wrote a CEB book on then Chapter XIII and haswritten various other articles over the years on matters relating totrusteeships and receiverships. He has lectured at many programsover the years, most recently concerning the potential liability ofreceivers and the interface between receivership and bankruptcy.David has also been a periodic speaker at the Loyola programsproduced by the California Receivers Forum, of which he is a Boardmember.

When he first became a bankruptcy administrator, under thetutelage of his partner, Curtis B. Danning, the Chandler Act of 1938was still in effect. He says he still can’t unlearn the old Act citations.In those days, receivers and, later, trustees, were appointed in allchapter cases. He comments that during that period there were neverinsolvent administrations because the bankruptcy administrators couldanalyze prospects dispassionately and had a professional stake incontrolling such situations. He recalls that Danning had one suchcase where it turned out that the administration was in fact insolvent.Horrified, Danning, wrote a check to cover the difference.

In those early days, the Bankruptcy Referees (so-called because theDistrict Court referred bankruptcy matters to them) actuallycountersigned all checks and closely administered estates. These days,David notes the transfer back to the District Courts of manybankruptcy matters in light of the recent Stern v. Marshall decision.1

Early in his career, therewere but a few, mostly veryable, bankruptcy admin-istrators, such as Danning,A . J . B umb , G e o r g eDaniels, Gilbert Robinson,Irving Sulmeyer, Irving Bass,Sam Jonas, “Fuzzy” Wiley,and others. The refereeswere mostly former assistant U.S. Attorneys, and the practice wassomewhat more roughshod than it is today. There were very few statecourt receivers active in Los Angeles, the principal ones being R. E.Allen and, later, a young David Ray. When the Bankruptcy ReformAct of 1978 was adopted, Gill joined the Los Angeles panel of trusteesand has served continuously since then under all of the local U.S.Trustees.

He recalls that when he first became involved in the practice,there were still remnants of ethnic and religious discrimination, and itwas highly unusual for a large firm to deign to deal with bankruptcymatters. Small cases could be administered cheaply, unnecessarypaperwork was often avoided, and small matters could be litigated atnon-prohibitive cost. Significantly, the courts knew the bar, and themembers knew each other. He says it would be an exaggeration to saythat everyone trusted everyone, but that certainly everyone knew whocould be trusted. However shocking this may be to counsel in this dayand age, at least in Southern California, the courts were more likely toaccept representations in lieu of proof where they knew the counselmaking the representations. It wasn’t unusual for counsel to have adrink with the judge after (and sometimes prior to) a hearing.

He started as a state court receiver for Judge Robert Wenke,which he found to be in many ways procedurally much simpler thanbankruptcy administration, because of the lack of the ever-increasingprocedural requirements in bankruptcy administration. It took him awhile to understand the difference between the powers of equity andrents receivers, who had no power not granted to them by theappointing judge, and bankruptcy administrators, who had their ownstatutory rights. After 1978, David had to unlearn the axiom that hehad earlier been taught, that the primary job of the receiver is toprotect the judge. He says that he stopped saying that in court when ajudge suggested that it was disrespectful to suggest that a judge neededto be protected, especially by such a humble functionary.

He serves as an equity receiver in federal court matters,particularly enjoying Ponzi cases. He is also an active mediator in theBankruptcy and U.S. District Courts and has served as a provisionaldirector on appointment of the Superior Court. He has been chair ofthe Commercial Law and Bankruptcy Section of the Los AngelesCounty Bar, and has served on various local and national committees.He is a Fellow of the American College of Bankruptcy.

On a personal level, he is married to the former Elaine Ostro.They have four sons and seven grandchildren. He has for many yearsbeen involved in Jewish community activities in Los Angeles, inIsrael, and in Eastern Europe. He and his wife are erstwhile musiciansand like to participate in choral music.

1What goes around, etc. See Stern v. Marshall, 131 S. Ct. 2594 (2011).

Professional Profile

David A. Gill: PioneerInsolvency Problem Solver

Spring 2012 •

David J. PasternakPasternak, Pasternak & Patton, A

Law Corporation

Tel: 310-553-1500

[email protected]

is pleased to announce

his appointment as

Health and Safety Code Receiver

for Sunny Acres Ranch

Superior Court of California

County of San Luis Obispo

Terri L. RikerLee Ventures Realty, Inc.

Tel: [email protected]

is pleased to announcethe completion of her duties as

Rents and Profits Receiver forMSCI 2007-IQ13 Pico Complex

Limited Partnership v.Pico Main Property LPLos Angeles, California

Superior Court of CaliforniaCounty of Los Angeles

Terri L. RikerLee Ventures Realty, Inc.

Tel: 949-337-2518

[email protected]


her appointment as

Rents and Profits Receiver for

David B. Walk v. Dwaine L. Denton

A 6-unit apartment complex in

Palm Springs, California


County of Riverside

Robb Evans & Associates LLC

Tel: 818-768-8100

[email protected]


its appointment as

Special Receiver in the matter of

Renaissance Investment Corp.


County of Riverside - Indio Court

Robb Evans & Associates LLCTel: 818-768-8100

[email protected]


the completion of its duties as

Receiver in the matter of

Cathay Bank v. Concord Enterprises,

Inc., et al.


County of Los Angeles

Robb Evans & Associates LLCTel: 818-768-8100

[email protected]


the completion of its duties as

Rents and Profits Receiver in the

matter of Multibank 2009-1

RES-ADC Venture LLC v.

Rick V. Wilson, et al.



Robb Evans & Associates LLC


is pleased to announceits appointment as

Receiver in the matter ofFederal Trade Commission v. Belfort

Capital Ventures, Inc., et al.A Federal Regulatory Receivership

United States District CourtDistrict of Nevada

David WaldWald Realty AdvisorsTel: 310-230-3400

[email protected]

is pleaseed to announcethat as

Equity Receiver sold ExpoWest LACondominiums: includingconstruction completion,

DRE Approvals & Sale of 22 unitson a “Retail” basis.

Superior Court of CaliforniaCounty of Los Angeles

Robert C. Warren IIIInvestors’ Property Services

Tel: 949-900-6161

[email protected]


his appointment as

Rents & Profits Receiver for

FRC, L.P.


County of Riverside

• Spring 2012

Patrick GalentineCoreland Companies

Tel: 714-573-7780

[email protected]


his appointment as


GE Commerical Finance Business

Property Corp. vs NLA 118


County of Ventura


Tel: 714-573-7780

[email protected]


his appointment as


U.S. Bank vs. UCV Media Tech Center




Tel: 714-573-7780

[email protected]


his appointment as


GCCFC 2007-GG9 Edinger Avenue vs.

GSC Gateway


County of Orange

Robert P. MosierMosier & Company, Inc.Tel: 714 432-0800 [email protected]

is pleased to announcehis appointment as

Receiver to intercept theDefendant’s distributions

from Hino 8 LLCin aid of execution of a judgment

Superior Court of CaliforniaCentral District


Douglas P. WilsonDouglas Wilson Companies

Tel: 619-641-1141

[email protected]


the completion of his duties as

Rents & Profits Receiver for Glynn

Place Mall a regional mall in

Brunswick, Georgia

Superior Court of Georgia

County of Gwinnett




Rents & Profits Receiver forVictorville Pavilion – 24,500 sf. retail

center in Victorville, CA

Superior Court of CaliforniaCounty of San Bernardino

San Bernardino Civil Division




Rents & Profits Receiver forFyre Lake National – A 275+ acreplanned residential development

planned for 234 luxury homes and an18-hole Nicklaus Design golf course

United States District CourtCentral District of Illinois

Rock Island Division

Robert P. MosierMosier & Company, Inc.Tel: 714 432-0800 [email protected]


Receiver for PenningtonConstruction, Inc.

A workout/turnaround of anoperating company

Superior Court of CaliforniaCounty of Orange




Rents & Profits Receiver for VTEPhiladelphia – 92,641 sf. of raw land

in Philadelphia, Pennsylvania

Court of Common Pleas ofPhiladelphia County

First Judicial District ofPennsylvania

Trial Division – Civil

Spring 2012 •

• Spring 2012

I am a real estate broker and just secured my firstreceivership appointment. Instead of listing theproperty in receivership with another broker for sale,can I sell the property myself and get the commission?

Probably not. The compensation that is paid to areceiver is left to the court’s discretion. People v.Riverside University, 35 Cal.App. 3d 572 (1973).Compensation is usually measured by the reasonablevalue and necessity of the services rendered. In

California, courts generally set an hourly rate for the receiver’sservices or, in certain cases, a fixed percentage of the receiver’sreceipts or disbursements. Some states have statutes that setstatutory commissions. While there is no statutory prohibition inCalifornia on your listing and selling the property, you would notbe entitled to a real estate commission unless the court authorizedit in your order of appointment, by a subsequent order prior toyour listing the property, or by stipulation of all parties to theaction and the court’s approval of the stipulation. Receiversgenerally are not entitled to additional compensation for acts thatare nothing more than performing the duties he or she wasappointed to perform. That is not to say that in extraordinarycases additional compensation cannot be awarded by the court,but listing and selling property probably does not fall into thatcategory. If you want to be paid real estate commissions, youshould not expect to get them from acting as a receiver and youshould stick to pursing your career as a broker. You should also beaware of California Rule of Court 3.1179 (b), which prohibitsparties seeking a receiver’s appointment and receivers fromentering into any contract or arrangement concerning how thereceiver will administer the receivership, how much the receiverwill charge, or the role of the receiver with respect to the propertyafter a trustee’s sale or the termination of the receivership. Inother words, you cannot make a deal with the plaintiff that youwill be the broker to sell the property when the receivership ends.

I have been appointed receiver to enforce a judgment.I filed a motion in the case which I served on counselfor the plaintiff (the judgment creditor) and counselfor the defendant (the judgment debtor). The courtdenied my motion, without prejudice, stating that I

need to serve the judgment creditor himself and that service onhis counsel was not good enough. What’s going on? I thoughtservice on counsel for a party constituted service on the party.

Prior to the entry of judgment you are correct. Serviceon counsel who has appeared for a party in an actionconstitutes service on the client. See generally, Cal.Code Civ. P. § 283. The rules change, however, oncea judgment is entered, a fact many counsel, but not the

court in your case, often overlook. The Enforcement ofJudgments law, Cal. Code Civ. P. § 680.010 et. seq., has specificprovisions concerning the manner of service of notices and other

papers. With regard to a judgment creditor, the normal provisionsregarding service on the counsel of record are continued. Cal.Code Civ. P. § 684.010 provides, subject to some exceptions, thatnotice or other papers to be served on a judgment creditor “shallbe served on the judgment creditor’s attorney of record ratherthan on the judgment creditor if the judgment creditor has anattorney of record.” The rules change, however, with regard to ajudgment debtor. In order to properly serve a writ, notice, orderor other paper on a judgment debtor the items must be served “onthe judgment debtor instead of the attorney for the judgmentdebtor.” Cal. Code Civ. P. § 684.020(a). There is an exception,however, and that is where the judgment debtor has filed with thecourt and served on the judgment creditor’s attorney a requestthat papers be served on the judgment debtor’s attorney and thejudgment debtor’s attorney has signed a consent to receive paperson behalf of the judgment debtor. Cal. Code Civ. P. §684.020(b). The purpose behind this section is to insure that thejudgment debtor has actual knowledge of the enforcementproceedings. Alcalde v. NAC Real Estate Investments &Assignments, Inc., 580 F. Supp. 2nd 969, 972 fn. 5 (C.D. Cal.2008). Therefore, notice of your motion served on the judgmentdebtor’s counsel is not good enough; the judgment debtor has tobe served. To be safe, you should serve the judgment debtor andhis counsel.These provisions apply to you as a receiver in aid of executionbecause receivers in aid of execution are appointed pursuant tothe provisions of Article 7 of the Enforcement of Judgments Law.Cal. Code Civ. P. §§ 708.610 and 708.620.Prejudgment receivership appointments are made pursuant toTitle 7, “Other Provisional Remedies in CivilActions,” specifically, the provisions starting at§564, or provisions in other code sections suchas the California Corporations Code, theBusiness and Professions Code , etc.”

Ask The ReceiverBY PETER A. DAVIDSON*

Q

A

Q

A

Peter A. Davidson

*Peter A. Davidson is a Partner of Ervin Cohen & JessupLLP a Beverly Hills Law Firm. His practice includesrepresenting Receivers and acting as a Receiver in State andFederal Court.

Spring 2012 •

On February 29, 2012, the Bay Area and SacramentoChapters of the California Receivership Forum joined togetherin San Francisco for an evening program and networking event.The topic was:

2012 Nor Cal Commercial Real Estate Forecast: Office,Industrial, Hotel, and Agriculture:

• Which sectors are recovering?• How are lenders approaching these sectors?• Will commercial foreclosures rise or fall?• Is there a CMBS crisis on the horizon?The program was moderated by Clay Dunning, Receiver and

President and founder of Sierra Commercial Real EstateServices, Inc., and was invaluable as specialists in four distinctsectors of commercial real estate brought us up to date of theirmarkets.

We thank our two sponsors: Commercial Solutions InsuranceBrokerage, a full service insurance brokerage specializing ininvestment property insurance, and KL Capital Partners, a realestate capital services firm that provides debt and equityplacement for commercial and residential real estatetransactions.

The speakers were, in order of presentation: Kevin Hatcher,VP of Colliers International in Oakland; Rick Schuil, anAgricultural Real Estate Specialist and Partner with Schuil andAssociates, Inc.; Robert Greeley, Receiver with Greeley,Lindsay Consultant Group; Dennis Gemberling, President andPrincipal of Perry Group International; and Seth Siegel,Executive Director, Capital Markets Group of Cushman &Wakefield of California, Inc.

Kevin focused on the industrial sector. His primary area isthe 880/80 corridor, noting that growth in Northern Californiais predominantly trending east and the Central Valley. Research

and development is the softest of the industrial sectors in thearea but is starting to pick up. Brokers are a great resource forproperty values. Rick focused on the agricultural industry,observing that agricultural values are increasing and sales are up.On the other side, the manufacturing supporting agriculturalproducts, such as cotton gins and tree fruit packaging facilities,has become obsolete and is being repositioned in the industrialmarket for other uses. The dairy market is down.

Bob provided insights for newer receivers and warned of therisks involved with multiple properties, lots of forbearanceagreements, insurance changes after bankruptcy within 30 – 90days, change of insurance required if property is vacant, andother issues receivers need to monitor. Dennis focused on thehotel industry and noted the Bay Area and Sacramento are inthe top 25% of markets, and the valuation for hotels did notdrop significantly over the last couple of years. Hotelforeclosures were down in 2011, and the same is expected for2012. Seth indicated that San Francisco has a 5.5% cap rate,and properties below water are being worked out with theexception of the tertiary markets. The forced bankruptcy ofLehman Brothers preserved the value of some of the assets whichare currently being marketed. The CMBS world is coming backin the office market with much greater scrutiny.

Overall, the event had a large turnout, great food, and was alot of fun in the networking setting. It was nice to meet themembers from Sacramento CRF as well as new members in theBay Area.

*Darcy Keith is a receiver, lawyer, and real estate expert practicing at DJKeithAssociates, PC.

No. California Commercial Real Estate ForecastProgram: Office, Industrial, Hotel & AgBY DARCY KEITH*

The photo of the group in front of the room is from L to R: Mia Blackler,President of Bay Area CRF, Clay Dunning, Moderator, Dennis Gemberling,Speaker, Kevin Hatcher, Speaker, Rick Schuil, Speaker, Robert Greeley,Speaker, and Seth Siegel, Speaker.

Networking...

• Spring 2012

In the experience of at least one receiver (who is the subjectof all of these cases), appeals are becoming more common inreceivership cases. The California Court of Appeal for theSecond Appellate District (which includes Los Angeles County)recently issued three unanimous unpublished opinionsconcerning three very different receiverships – a maritaldissolution receivership; a civil dispute concerning competingfactions for control of a religious temple and its assets; and aHealth and Safety Code receivership. While an unpublisheddecision may not be cited or referred to in any court filing orproceeding, the opinions are still instructive for receivers inother cases, and especially valuable if a similar issue is everpresented to one of the Court of Appeal Justices who ruled inone of these prior cases. Copies of these three unpublishedopinions are posted on the California Receivers Forum website.

In re the Marriage of Andre Deloje and AndreeaDumitrescu (Division Seven, Sept. 19, 2011)

In this case, a receiver was appointed by the family law court

and authorized to sell two of the husband’s real properties tosatisfy court orders for temporary spousal support, attorney fees,forensic accounting fees, and the receiver’s fees. On appeal, thehusband contended that the family law court had erred inconfirming the sale of the real properties because the two realproperties were owned by his private individual retirementaccount and were exempt from execution pursuant to CaliforniaCode of Civil Procedure § 704.115.

In affirming the family law court’s sale order, PresidingJustice Dennis M. Perluss noted that the exemption onexecution of retirement accounts (including IRA accounts) islimited “only to the extent necessary to provide for the supportof the judgment debtor when the judgment debtor retires and forthe spouse and dependents of the judgment debtor, taking intoaccount all resources that are likely to be available for thesupport of the judgment debtor when the judgment debtorretires. . . .” CCP § 704.115(e). In this case, the family lawcourt heard evidence from the receiver valuing the twoproperties to be sold at only approximately 3% of the husband’sreal property asset portfolio.

During the appeal of this order, the husband and wife settledall of their disputes at a mediation at the Court of Appeal heldin connection with this appeal. In footnote 2 to his opinion,Justice Perluss determined that there was still a justiciablecontroversy about whether the properties could be sold solely tosatisfy the unpaid receiver’s fees and expenses. The Courtultimately held that the real properties could be sold solely forthat purpose.

Khmer Buddhist Assn. v. David Pasternak(Division Four, Oct. 24, 2011)

This appeal resulted from contentious litigation between twocompeting factions for control of a Long Beach Buddhist Templeand other real properties owned by the temple. In a prioropinion, long after the trial court’s appointment of a receiver,the Court of Appeal reversed the order appointing the receiveron the grounds that a prior oral stipulation between the partieswas not enforceable under California Code of Civil Procedure §664.6 because one side did not expressly assent to the agreement.Thus, the subsequent order appointing a receiver to enforce thatsettlement was a reversible error. However, in that prioropinion, the Court of Appeal also instructed the trial court thathad erroneously appointed the receiver to supervise thetermination of the receivership (thereby not leaving the receiverin a potentially perilous position).

In this appeal, the disgruntled temple faction asserted thatthe receiver was not entitled to the compensation awarded tohim because his appointment had been improper andimpermissible. In reasoning much appreciated by the receiver,Justice Thomas L. Willhite, Jr.’s Court of Appeal opinion

Recent Unpublished California Courtof Appeal Receivership OpinionsBY DAVID J. PASTERNAK*


Spring 2012 •

affirmed the trial court’s award of compensation to its receiver,stating: “We reversed the order appointing the receiver onlybecause the stipulation to be enforced by the receiver wasreversed, not because of the lack of merit of the appointment.”

In the prior appeal, the Court of Appeal added instructionsto the trial court to supervise the termination of the receivershiponly after the receiver filed a motion in the Court of Appeal forrehearing or clarification of its initial opinion. This was becausethe Court of Appeal’s initial opinion did not so provide, and hadleft the receiver dangling without any certainty that the trialcourt had the jurisdiction and authority to terminate itserroneously appointed receiver.

City of La Habra Heights v. McAlister Investments,Inc. (Division One, Jan. 30, 2012)

In this case, a Health and Safety Code receiver had beenappointed to abate a nuisance where a hillside property hadbeen unlawfully graded and posed a threat to adjoiningresidential real properties. During the course of the receivership,and with both actual and constructive knowledge of thereceivership, McAlister Investments foreclosed on thereceivership real property, and then attempted to stop thereceiver from rehabilitating the property. Unfortunately, all ofthis occurred in 2008, as real property values were sharplydeclining.

While the receiver was given the authority to rehabilitatethe property, as the result of the sudden significant decline inreal property values (especially for undeveloped properties suchas the one in this case), at the conclusion of the work andfollowing the sale of the receivership real property, there wereinsufficient funds to pay any of the receiver’s fees and costs aswell as significant funds due to third parties for otherreceivership obligations. Consequently, upon approving thereceiver’s final report and account, the trial court orderedMcAlister Investments to pay the receiver $221,583.48 for thoseremaining obligations. McAlister Investments appealed,asserting that the trial court erred for multiple reasons.

Holding that the receivership was a quasi in-rem remedy(i.e., related to the property), and that this foreclosing lenderwas bound by a stipulation of its predecessor-in-interest that anuisance existed (which resulted in the appointment of thereceiver), Justice Jeffrey W. Johnson’s Court of Appeal opinionheld that the foreclosing lender who acquired the real propertyduring the receivership benefited from the receivership eventhough the receiver sold the property and the foreclosing lendernever realized any actual gain from its ownership of theproperty. The obvious lesson is that a lender forecloses onreceivership real property at its peril, and should think carefullybefore embarking on such a course of action.


Recent Opinions...

David J. Pasternak

*David J. Pasternak is a shareholder of Pasternak,Pasternak & Patton and founding Co-Chair of the LosAngeles/Orange County branch of the California ReceiversForum. Mr. Pasternak has acted as a receiver and counselfor receivers for 30 years, and was an extern for CaliforniaCourt of Appeal Justice Clark Stephens during law school.

What doessuccess look like?

Our clients know...

We excel at servicing yourunique needs... deliveringsuperior results.

“Whether it’s selling Residential,

Multi-Family, or Commercial Real

Estate, The Seymour Group at

Elite Properties will ensure your

transactions close and your

objectives are met.”

Contact:Phil SeymourExecutive Vice President/Managing Director

Phone:310.271.4040 Ext. 130

Email:[email protected]

Web:www.theseymourgroup.net

Lic.#00630158

Elite Properties Realty148 S. Beverly DriveBeverly Hills, California 92012

Phone:310.271.4040

Member:California Receivers Forum &California Bankruptcy Forum

• Spring 2012

The following scenario is becoming more common. Uponbeing appointed over a multifamily apartment complex, thereceiver discovers that some or all of the tenants are involved ina coordinated rent strike. Routinely after questioning thetenants, the receiver discovers that they have but one demand –payment of relocation fees; often for a sum in excess of $15,000-$20,000 per tenant. The tenants predicate this demand on thefact that the building is rundown and in need of serious repairs(which is often true). The tenants start throwing aroundlegalese, stating that “there are serious health and safetyconcerns” and that “the landlord has breached the impliedwarranty of habitability;” a sure sign that the tenants have“lawyered-up.”

Further inquiry may reveal that the tenant rent strike beganmonths before the receiver’s appointment, and was, in fact,

likely one of the causes for the receiver’s appointment in thefirst place. Like any good receiver would do, the receiverrequests permission to inspect each unit that is subject to therent strike to determine what repairs are needed to address thehabitability concerns, and to avoid the exorbitant relocationdemands of the tenants.1 This is when things get interesting…

Rather than give access to the receiver as they are requiredto do by law, the tenants flatly refuse entry to the receiver. Thetenants assert that their attorney has instructed them not to letthe receiver into the units for inspection. These “tenant”lawyers are now, admittedly, searching court dockets andidentifying distressed real property assets, many times withforeign-born tenants, to complicate and interfere with theappointed receiver. These lawyers wave around the LosAngeles Municipal Code as a sword, when such codes wereintended to protect and shield tenants.

The receiver calls the tenants’ attorney, and sure enough,the attorney reiterates the same untenable position of thetenants and further states that, “if the receiver enters any unitwithout the tenant’s permission, I will have you arrested.”While such a threat is just that – a threat – it causes thereceiver legitimate concerns. As the party in legal custody(custodia legis) of the Property, the receiver is required to makeany needed repairs, but because of the situation, is preventedfrom doing so by the threat of being arrested, or more likely alawsuit by the tenants.

So what is the receiver to do?There are a few options for the receiver –In a standard rents and profits receivership, the receiver is

given express authority under the Form Orders to undertakeunlawful detainer (“UD”) proceedings against any tenant whodoes not pay rent or who does not allow the receiver access todo necessary repairs. However, the authors recommend that, ifthe receiver chooses to institute UD proceedings, he or she doesso with instruction and support from legal counsel well-versedin UD issues. This is because there are considerable pitfalls inUD proceedings of which these “tenant” attorneys willundoubtedly take advantage.

Falling prey to these pitfalls can be extremely costly to thereceivership. Moreover, an unlawful detainer is not always thebest approach for a receiver in these circumstances because thisis exactly the route the “tenant” attorneys want the receiver totake. Rest assured that the “tenant” attorneys will take all stepsto delay the proceedings and to ratchet up costs to force thereceiver to settle on terms that may not be in the best interestof the receivership Estate.

The Receiver Strikes Back: NavigatingCoordinated Tenant Rent–Strikes Througha ReceivershipBY RICHARD ORMOND AND MICHAEL MUSE-FISHER*


Spring 2012 •

The alternative is for the receiver to seek instructiondirectly from the receivership court. As officers of the courtand backed by the court’s equitable powers, a receiver canoften seek extraordinary relief in these extreme circumstances.

As recognized in Clark Law Of Receiver, 3d. Ed. § 625.1(b)“strangers [which would include tenants] who interfere withreceivership property within the court’s territorial jurisdictionmay be made to desist and give up possession and control to thereceiver by proper proceedings against them by making thestrangers parties to the receivership proceeding or parties to aseparate proceeding.” Going further, “[b]y the appointment of areceiver, the court by its officer, the receiver, acquires possessionand control of the property. No one, whoever he may be, eventhe sheriff, can interfere with it without the sanction of thecourt.” Id. at § 633.

Because the property is in the charge of the court, theconcerns of the drafters of the Los Angeles Municipal Code’seviction procedures are not present, and therefore the receiverand the receivership court should have considerable discretionand latitude to remediate these improper rent strikes. Indeed,there is statutory authority and case law that permits a receiverto be appointed to take possession from a tenant prior to theconclusion of a UD proceeding. See e.g., Cal. Code Civ. P.,§564(b)(6); Telegraph Avenue Corp. v. Raentsch, 205 Cal. 93,100 (1928). Any concerns about prohibiting a landlord’s “self-help” (the reason for which the UD laws were created) areameliorated when the property is in the legal custody of thecourt.

To this end, courts have ruled in favor of the receiverregarding these exact issues, issuing orders which include, interalia¸ the following:

• “This court finds that a refusal by a tenant to admit thereceiver to do the repairs and improvementscontemplated herein… and as set forth and required bythis order is a breach of the tenant’s leaseholdobligations which is not ‘curable’ and which gives rise toan immediate right of eviction in the receiver as a matterof law through unlawful detainer procedure.”

• “A failure to comply with this order or to in any wayobstruct or attempt to obstruct the receiver in hiscarrying out of the specifics of this order and/or the clearintent and purpose of this order as well as his generalduties to repair and maintain, etc. to see the repairscalled for [herein] and/or other needed repairs done maypossibly be found to be a contempt of court andpunishable as such. Contempt if found to apply ispunishable by fines and at times even incarceration.”

• “The receiver may seek the assistance of the local policeif there is any attempt by a tenant or others to physicallyinterfere with entry and/or any other performance underthis order.” 2

The authors recommend that when a receiver faces such arent strike or other coordinated effort by the tenants that is

deleterious to the receivership estate, it is best to engagecompetent counsel, well-versed in these issues and themunicipal code and also to advise the Court immediately andseek appropriate instructions.

1Indeed, if $15,000-$20,000/tenant was put back into the property for repairs,

rather than for relocation costs, the property would be in pristine condition andall parties, including the tenants, would benefit.2 These bullet points are directly from court orders issued by Department 12 ofthe Los Angeles Superior Court.

Michael Muse-FisherRichard Ormond


The Receiver Strikes Back..

* Richard P. Ormond is a shareholder andMichael Muse-Fisher is anassociate in the Los Angeles Office of Buchalter Nemer, P.C.

• Spring 2012

THELIST WHILE THERE IS NO COURT-APPROVED LIST OF RECEIVERS, THE FOLLOWING IS A PARTIAL LIST OF RECEIVERSWHO ARE MEMBERS OF THE CALIFORNIA RECEIVERS FORUM, HAVE THE INDICATED EDUCATIONAL EXPERIENCEAND ARE LIST SUBSCRIBERS.

• This symbol indicates those receivers who completed a comprehensive16-hour course on receivership administration and procedures presentedat Loyola Law School in April 2000.

� This symbol indicates those receivers who completed a comprehensive16-hour course on receivership administration and procedures presentedat Loyola Law School in October 2004.

� This symbol indicates those who facilitated the October 2004 Loyola Law School course.

� This symbol indicates those receivers who completed a comprehensive 16-hour courseon receivership administration and procedures presented at Loyola Law School inJanuary 2009.

� This symbol indicates those who facilitated the January 2009 Loyola Law School course.� This symbol indicated those who completed up to 20 hours of receivership law and

practice, Loyola IV Symposium, at the LA Convention Center in January 2011.� This symbol indicated those who facilitated the January 2011 Loyola IV Symposium

AREA PHONE E-MAIL AREA PHONE E-MAILBay Area• David Bradlow 415-206-0635 [email protected]� Clay Dunning 925-210-0606 [email protected]

David A. Falls 925-933-2875 [email protected]�� Dennis P. Gemberling 415-434-0135 [email protected]��• Beverly N. McFarland 916-759-6391 [email protected]• Donald G. Savage 510-547-2247 [email protected]�� Kevin Singer 415-848-2984 [email protected]

David Summers 925-933-2875 [email protected]� Robert D. Upton 717-833-6173 [email protected]� Douglas P. Wilson 619-641-1141 [email protected]

RJ Wilson 925-942-2600 [email protected] Area��• Marilyn Bessey 916-930-9900 [email protected]�� Michael C. Brumbaugh 916-417-8737 [email protected]�� Robert C. Greeley 916-484-4800 [email protected]� Donald A. Hildebrand 916-705-8160 [email protected]

Mark J. Len 916-927-0997 [email protected]��• J. Benjamin McGrew 916-482-5100 x 15 [email protected]��• Scott Sackett 916-930-9900 [email protected]�� Kevin J. Whelan 916-783-3552 [email protected] Area�• Steve Franson 559-930-8119 [email protected]�� Hal Kissler 559-256-4010 [email protected]� Terence J. Long 559-225-5688 [email protected]�� Jim Lowe 559-269-0484 [email protected] Angeles/Orange County/Inland Empire� Frank Borman 310-295-1676 [email protected]��• Edythe L. Bronston 818-528-2893 [email protected]

Weldon L. Brown 951-682-5454 [email protected] DeCarlo 714-751-2787 [email protected]

� Mary Carlston 949-705-5038 [email protected]�� Thomas Henry Coleman 661-284-6104 [email protected]��• Peter A. Davidson 310-273-6333 [email protected]

Richard K. Diamond 310-277-0077 [email protected]�� James H. Donell 310-207-8481 [email protected]�� Steve Donell 310-207-8481 [email protected]

Peter J. Doumani 310-278-6667 [email protected]�� Gordon E. Dunfee 858-456-7111 [email protected]� Howard M. Ehrenberg 213-626-2311 [email protected]�� Robb Evans 818-768-8100 [email protected]� Krista L. Freitag 213-943-1374 [email protected]

Rafael Figueroa 818-298-8896 [email protected]� David M. Frank 800-808-8559 [email protected]� Louis A. Frasco 818-903-1883 [email protected]� Allen Freeman 310-234-8880 [email protected]

Patrick Galentine 714-573-7780 [email protected]��• David A. Gill 310-277-0077 [email protected]�� James Granby 760-484-0678 [email protected]� Robert S. Griswold 858-597-6100 [email protected]

Gary Haddock 310-306-6789 [email protected] F. Hoffner 949-955-2994 [email protected] Hollowell 213-631-6116 [email protected] Ibarra 323-363-2468 [email protected] J. Joseph 310-277-0077 [email protected] Jordan 310-500-284x 202 [email protected]

� Nancy Knupfer 310-284-7330 [email protected]� Lewis D. Lawrence, Jr. 310-567-4249 [email protected]

Andy Lim 310-689-8118 [email protected]� Matthew Mandel 310-276-2990 [email protected]�� Nancy L. Martin 800-791-2751 [email protected]��• Byron Z. Moldo 310-273-6333 [email protected]

Michael D. Myers 909-398-4200 [email protected]

Los Angeles/Orange County/Inland Empire��• George R. Monte 626-930-0083 [email protected]��• Douglas Morehead 949-852-0900 [email protected]��• Robert P. Mosier 714-432-0800 [email protected]��• Dennis M. Murphy 626-794-0288 [email protected]��• David J. Pasternak 310-553-1500 [email protected]�• James L. Peerson, Jr. 323-954-7575 [email protected]�� Theordore G. Phelps 213-629-9211 [email protected]�� Gary A. Plotkin 818-906-1600 [email protected]� John Rachlin 310-552-9064 [email protected]��• David L. Ray 310-481-6700 [email protected]�� Terri L. Riker 949-337-2518 [email protected]

George E. Schulman 310-277-0077 [email protected]�� Thomas A. Seaman 949-265-8403 [email protected]�� Kevin Singer 310-552-9064 [email protected]

Donald N. Soucy II 818-312-5818 [email protected]��• Steven M. Speier 949-222-2999 [email protected]� David Stapleton 213-235-0600 [email protected]

Tim Strader Jr. 949-622-0420 [email protected]�• William E. Turner 714-228-9153 [email protected]�� David D. Wald 310-979-3850 [email protected]��• Robert C. Warren III 949-900-6161 [email protected]� Mark J. Weinstein 310-395-3430x217 [email protected]�� Richard Weissman 310-481-6700 [email protected]

Joseph S. Yarman 310-500-2840x203 [email protected]��• Adrian Young 909-945-4586 [email protected]�� Andrew R. Zimbaldi 714-751-7858 [email protected] Diego Area�� M. Daniel Close 858-792-6800 [email protected]� John O. Cronin 760-745-8103 [email protected]�� Gordon E. Dunfee 858-456-7111 [email protected]��• Mike Essary 858-560-1178 [email protected]��• Martin Goldberg 858-560-7515 [email protected]�� Jim Granby 619-233-3131 [email protected]�� Robert S. Griswold 858-597-6100 [email protected]�� Thomas C. Hebrank 619-400-4922 [email protected]��• William J. Hoffman 858-720-6700 [email protected]��• Richard M. Kipperman 619-668-4500 [email protected]� Lori Lascola 760-747-6468 [email protected]��• George R. Monte 626-930-0083 [email protected]��• Dennis M. Murphy 626-794-0288 [email protected]� Douglas P. Wilson 619-641-1141 [email protected] Barbara/Ventura County�� Gordon E. Dunfee 858-456-7111 [email protected]

Robert Gonzales 805-445-9182 [email protected] Mitchell 805-445-7121 [email protected]

��• George R. Monte 626-930-0083 [email protected]� Rajendra (Bob) Pershadsingh

805-617-0140 [email protected] C. Ricker 805-899-4304 [email protected]

�� Barton Stern 805-484-0477 [email protected]

Spring 2012 •

Heard in the HallsNOTES, OBSERVATIONS, AND GOSSIP RELAYED

BY ALAN M. MIRMAN*

Welcome to the latest edition of Heard in the Halls. Please provide your snippits of news,questions or comments about receivership issues or the professional community bytelephone, mail, fax, or email to: Alan M. Mirman, Mirman, Bubman & Nahmias, LLP.21860 Burbank Blvd, Suite 360, Woodland Hills, CA 91367. Phone: (818) 451-4600;Fax: (888) 451-7624; email: [email protected]

Here is what we have Heard in the Halls …

• The hot topic being discussed in Southern California iswhether rents and profits receivers can sell real propertywithin the receivership estate. A specific Order authorizingsale is obviously needed, but to get that Order, do you needconsent of the parties? Can you sell free and clear of liens? Ifyou want to weigh in on this issue, you know where to write.The LA/OC Chapter recently put on a lunch program inwhich the panelists discussed a receiver’s sale of property inthe context of a partition action, and the questions from theaudience drove the issue to whether a rents and profitsreceiver can sell property, and if so, can it sell free and clear.There seems to be a dichotomy, with much of the argumentbeing stoked by the practical examples of successful motions,sales, and insurability. On the other hand, Susan Uecker ofthe CRF San Francisco Chapter shared with me that sherecently saw a situation in which after the Judge was finallyconvinced to grant a sale free and clear of liens, counselcould not convince a title company to insure the sale. This isa debate which definitely has legs…

• Congratulations to LA/OC member Robb Evans, long aprominent receiver locally and nationally. California Bankermagazine announced that the California Bankers Associationnamed Robb as the 2012 Distinguished Banker of the Year.The article highlights Robb’s career in banking, as a principalof Robb Evans & Associates, LLC, and his work as a Courtappointed trustee or receiver.

• Richard Ormond, Buchalter Nemer, reports of a recentsuccess in Los Angeles Superior Court, when the Judge ruledin favor of a rents and profits receiver responding to acoordinated strike amongst tenants seeking significantrelocation fees from receivers. Prior to this ruling the tenantswere denying the Receiver access to their units to makeneeded repairs, and then the tenants were using this verysame disrepair to seek the exorbitant relocation fees. Theruling gave specific instructions to the Receiver as tocompletion of necessary repairs, to document tenantcooperation (or lack thereof) and, in seeking lawenforcement assistance, if need be, to complete such repairs.

• Again this year, the CRF is presenting a panel onreceivership issues at the California Bankruptcy Forum’sInsolvency Conference on Saturday May 19, 2012 at theWestin Mission Hills Resort in Rancho Mirage. This year,the panel will address unique administration problems andsolutions. The format will include in-depth interviews withfour experienced receivers who will discuss a variety ofsignificant and interesting cases they have administered.

Sample pleadingsdealing with issuesunique to each casewill be provided to attendees. Panelists are lawyer andreceiver Edythe Bronston, Esq., Beverly N. McFarland ofThe Beverly Group, Andrew R. Zimbaldi of The AldenGroup, and Ted Phelps of PCG Consultants.

• Mia Blackler, Buchalter Nemer, of the Bay Area Chapternotes that Eugene Chang, Stein & Lubin, Ed Dean, DSI,Ermel “Don” Doyle, Receiver, and Ivo Keller, BuchalterNemer have been named Chapter Board members.Congratulations.

• More news of non-receivership organizations presentingpanels on receivership: Not only is the TMA RegionalConference in July once again going to include two panels atits July conference in Santa Barbara (with a diverse group ofpanelists, including yours truly), but Ted Phelps (LA/OCChapter) reports that The Association of Insolvency andRestructuring Advisors (AIRA) announced that it will bepresenting a panel of interest to members of the CRF at itsannual conference to be held in San Francisco this year fromJune 6-9. The panel will focus on the use of EquityReceiverships to gain some of the advantages of a Chapter 11filing. The panel will include: Hon. Ann I. Jones, L.A.County Superior Court Department 86, Hon. Marc BarrecaU.S. Bankruptcy Judge, Western District of WashingtonSeattle, CRF Board member Kirk Rense, Esq., Costa Mesa,and Receiver Chip Hoebeke of Rehmann Robson, GrandRapids, Michigan. The panel will be moderated by CRFmember Steve Spector of the Los Angeles office of theBuchalter Nemer firm. More info at www.aira.org.

• Last edition, I reported that Kathy Phelps, our RN editor,along with Hon. Steven Rhodes, has just completed ThePonzi Book: A Legal Resource for Unraveling Ponzi Schemes.Kathy Phelps now advises me that she has started a blog:www.theponzibook.blogspot.com. Check it out.

*Alan M. Mirman is a partner in theWoodland Hills law firm of Mirman, Bubman& Nahmias, LLP, and specializes in creditor’srights. His practice includes provisionalremedies, representation of receivers, litigation,loan and lease documentation, and the like. Alan M. Mirman

We s te r nRegionalConference

T M A2

012

July 11-13, 2012Fess Parker’s Resor tSa n t a B a r b a r a , CA

u a

T M Ac o n f e re n c e . c o m

Ho te l Rese r va t i o n sand Con fe rence Reg i s t r a t i o n

N ow O p e n

Conversation in Action: A Behind the Scenes Look

8 hrs MCLE/CPE**applied for, pending approval

• Enjoy the Opening Day Luncheon Panel Covering An Insider’s View Of Professional

Sports Teams Bankruptcies • Participate in Case Study Sessionsled by Industry Experts • Hear the Key Bankruptcy Issues inAgriculture, Intellectual Property, Ponzi Schemes, and Current

Evolution of Restructuring • Learn the In’s and Out’s of the SaleProcess and the Impact of FINRA • Explore Unique Aspects of

Lower Middle Market Turnarounds • Focus on theImportant Aspects of Receivership & Turnarounds

Re g i s te r N ow !

RECEIVERSHIP APublicationofthe … Op i no s 20 TheReceiverStrikes Back: ... wins. TheCourt,5-4 ......

Documents

Transcript of RECEIVERSHIP APublicationofthe … Op i no s 20 TheReceiverStrikes Back: ... wins. TheCourt,5-4 ......