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90 Second Lesson: Deciphering California Receiverships

Understanding California Receiverships Through California CCP

 

Editors’ Note: This is part of our irregular series in which we answer readers’ questions. If you have a question, submit it to [email protected]dailydac.com and we will try to answer it.

Question:

Jeffrey B. asks:  Wwhere is a good starting place to understand California receiverships? 

Let’s address these receiverships and the powers afforded in their appointment. 

Answer:

The California receivership statutory scheme, encompassed in California Code of Civil Procedure (“CCP”) sections 564 to 570 and California Rules of Court sections 3.1175 to 3.1184, is comprehensive. While the provisions of the CCP governing a receiver’s powers and duties are broadly worded, CCP section 564 specifies the exclusive circumstances under which a receiver may be appointed. 

Among other things, receivers can be appointed to enforce an assignment-of-rents provision in a deed of trust, when property is in danger of being lost, removed, or materially injured, or when necessary to preserve the property rights of a party. In general, a receiver has the powers listed under CCP section 568 as well as the specific powers set forth in the appointment order entered by the court. Accordingly, because the statutory scheme provides broad powers to the Court directing the receiver’s activities, the order should be as specific and comprehensive as reasonably practicable in describing the receiver’s powers and should clearly indicate the objective of the receivership.

Case law in this area is still good law, but many of the cases are dated, making it difficult to find cases that are analogous to modern situations. More recent decisions tend to be unpublished and provide minimal precedential value. 

State court jurisdiction over receivership is confined to the territory of the state and often to the territory of the county in which the court and real or personal property is located. Additionally, in California, receiverships are solely an ancillary remedy—there is no substantive right to a receiver and no action for a receiver. A receivership is a statutorily authorized remedy, therefore the appointment of a receiver is incidental to an action.

This overview is from a much broader treatment on the subject by Alan M. Feld, Richard W. Brunette, Jr., Kyle K. Mathews, David J. McCarty and M. Reed Mercado of Sheppard Mullin Richter & Hampton LLP.

[Editor’s Note: This 90 Second Lesson is based, in substantial part, in material reprinted from Commercial Bankruptcy Litigation 2d and Strategic Alternatives for and Against Distressed Businesses, with permission of Thomson Reuters. For more information about these publications, please visit www.legalsolutions.com.

To learn more about this and related topics, you may want to attend the following webinars: A Distressed Company and its Secured Lender and Bad Debtor Owes Me Money! This is an updated version of an article originally published on April 12, 2016.]

 

©All Rights Reserved. July, 2020.  DailyDACTM, LLC

About The DailyDAC Editors

The editors and editorial board of DailyDAC include preeminent restructuring and insolvency professionals, journalists, and editors. They are devoted to providing reliable and plain English education and deal intelligence about assignments, corporate bankruptcy, receiverships, out-of-court workouts and similar topics.

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