Statutory Overview

California Code of Civil Procedure Sections 564-570 governs Receivership and provides in relevant part:

1. A receiver may be appointed, in the manner provided in this chapter, by the court in which an action or proceeding is pending in any case in which the court is empowered by law to appoint a receiver.
2. A receiver may be appointed by the court in which an action or proceeding is pending, or by a judge thereof, in the following cases:
1. In an action by a vendor to vacate a fraudulent purchase of property...
2. In an action by a secured lender for the foreclosure of a deed of trust or mortgage and sale of property upon which there is a lien under a deed of trust or mortgage...
3. After judgment, to carry the judgment into effect.
4. After judgment, to dispose of the property according to the judgment, or to preserve it during the pendency of an appeal, or pursuant to the Enforcement of Judgments Law (Title 9 (commencing with Section 680.010)), or after sale of real property pursuant to a decree of foreclosure, during the redemption period, to collect, expend, and disburse rents as directed by the court or otherwise provided by law.
5. Where a corporation has been dissolved, as provided in Section 565.
6. Where a corporation is insolvent, or in imminent danger of insolvency, or has forfeited its corporate rights.
7. In an action of unlawful detainer.
8. At the request of the Public Utilities Commission pursuant to Section 855 or 5259.5 of the Public Utilities Code.
9. In all other cases where necessary to preserve the property or rights of any party.
10. At the request of the Office of Statewide Health Planning and Development, or the Attorney General, pursuant to Section 129173 of the Health and Safety Code.
11. In an action by a secured lender for specific performance of an assignment of rents provision in a deed of trust, mortgage, or separate assignment document...
12. In a case brought by an assignee under an assignment of leases, rents, issues, or profits pursuant to subdivision (g) of Section 2938 of the Civil Code.
3. A receiver may be appointed, in the manner provided in this chapter, including, but not limited to, Section 566, by the superior court in an action brought by a secured lender to enforce the rights provided in Section 2929.5 of the Civil Code, to enable the secured lender to enter and inspect the real property security for the purpose of determining the existence, location, nature, and magnitude of any past or present release or threatened release of any hazardous substance into, onto, beneath, or from the real property security..
4. Any action by a secured lender to appoint a receiver pursuant to this section shall not constitute an action within the meaning of subdivision (a) of Section 726.

Civ. Code, Sec. 564

Civ. Code, Sec. 567 provides, with respect to the oath and undertaking of court-appointed receivers:

“Before entering upon the duties of a receiver:

1. The receiver must be sworn to perform the duties faithfully.
2. The receiver shall give an undertaking to the State of California, in such sum as the court or judge may direct, to the effect that the receiver will faithfully discharge the duties of receiver in the action and obey the orders of the court therein. The receiver shall be allowed the cost of the undertaking.”

The receiver’s bond is usually fixed high enough to cover the value of any cash or transferable personal property coming into the receiver’s possession. It is the applicant’s responsibility to propose the amount of the bond, but the opposing party may propose a higher amount. (California Rules of Court 1902.5.) Wherever possible, counsel should submit affidavits stating facts justifying the amount of bond. (Id.)

Civ. Code, Sec. 568 sets forth the powers of a receiver:

“The receiver has, under the control of the Court, power to bring and defend actions in his own name, as receiver; to take and keep possession of the property, to receive rents, collect debts, to compound for and compromise the same, to make transfers, and generally to do such acts respecting the property as the Court may authorize.”

It is held that a receiver may not be sued without leave of court. Ostrowski v. Miller (1964) 226 Cal.App.2d 79, 84-85.

Receivership Overview and Caselaw

In the context of a forced sale or winding up of a business entity, “[t]he receiver's powers included enforcing and collecting debts, instituting lawsuits on behalf of [entity] represented to preserve and protect the [...] assets, discharge obligations of business against the funds in [its] possession, and engaging the services of counsel.” (O'Flaherty v. Belgum (2004) 115 Cal.App.4th 1044, 1048.)

Liability for Torts Committed in the Performance of Receivership

“A receiver is an officer of the court possessing the property for the court. (Pacific Indem. Co. v. Workers' Comp. App. Bd. (1968) 258 Cal.App.2d 35, 40.) Consequently, a receiver is liable in tort solely in an official capacity, not a personal one. (Sealite, Inc. v. Finster (1957) 149 Cal.App.2d 612, 617-618; Chiesur v. Superior Court (1946) 76 Cal.App.2d 198, 200-201.) ‘He is not personally liable for torts committed in the performance of his receivership duties; liability is in his official capacity only, to be satisfied from receivership funds.’ (6 Witkin, Cal. Procedure (3d ed. 1985) Provisional Remedies, Sec. 364, at 304-305.).”

A receiver is personally liable if he does not give priority to the tax liens of the United States (31 U.S.C. ss 191, 192, supra; King v. United States, supra, 379 U.S. 329.) Further, the withholding and Federal Insurance Contributions Act taxes accruing during the receivership constitute expenses of administration of high priority and are to be held in trust by the receiver for the United States (Cf., Estate of Dwyer, 168 Ca.App.2d 264, 267.) While California is not armed with such formidable statutes imposing personal liability upon a receiver, it is clear that the state sales taxes and unemployment insurance contributions are entitled to high priority in payment (Cf., Estate of Morris, supra, 37 Cal.App.2d 155, 157—158.)