Spring - California Receivers Forum

A Primer on Receivers andReceiverships in a NutshellPart I: Overview of the Appointment Process

(This is the first of a three-part analysis of receivership law and practice)

BY EDYTHE L. BRONSTON*

receiver is an agent of the court,acting for the court, holding assetsin custodia legis, generally to pre-serve the status quo, but some-times to maximize benefit to the

estate, depending on the type of receivership.The receiver is neutral, represents neitherparty, and is a fiduciary to all persons or enti-ties who or which are ultimately shown tohave interest in the property or fund whichcomprises the receivership estate, or the pro-ceeds of same. The receiver obtains the rightto possession of the property, but not title.Receiverships are an ancillary remedy and arecreated only where authorized by statute orequity. The statutory bases run through theCalifornia Codes. Both the California Rulesof Court and the Local Court Rules shouldalways be consulted. Historically, impositionof a receiver has been considered a harsh,

expensive remedy. It is easier today to obtaina rents, issues and profits receiver, but thecourt always has discretion and will balancethe equities.

An order granting appointment of areceiver is appealable under CCP§904.1(a)(7). An order denying appoint-ment is non-appealable. An order refusing tovacate a prior appointment is ordinarily non-appealable. City and County of San Franciscov. Shers, 38 Cal.App. 4th 1831 (1995)]. Anorder discharging a receiver is appealablewhen it has the effect of being a final judg-ment. Hibernia S&L Soc. v. Ellins EstateCo., Cal. 216 Cal. 280, 281-282 (1932). Anorder appointing a receiver in aid of execu-tion may be appealable as to the particularreceiver.

There are many advantages to having a

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Spring 2003 • Issue 9

A Publication of the

California Receivers Forum

RECEIVERSHIP

A

I n s i d e NEWSReceivership

Flexibility

Heard in the Halls

From the Publisher

The List

Ask the Receiver

A Tribuite to Robert

Chauncey Warren II

12 Worth the Cost?

14 Receivership

Professional Profile

Page 2 • Spring 2003

The New and ImprovedCalifornia Receivers ForumNewsletterBy Robert P. Mosier, Publisher

Receivership NewsPublished by

California Receivers Forum954 La Mirada St.

Laguna Beach, CA 92651949.497.3673 x 200

PublisherRobert P. Mosier

[email protected]

EditorKirk S. Rense

[email protected]

Associate PublishersPeter Ito

Kenton JohnsonBeverly McFarland

Rob Warren, III

Contributing ColumnistsAlan Mirman

Heard in the HallsPeter Davidson

Ask the Receiver

OfficersMike Essary, President

Kyle Everett, Chair ElectEdythe L. Bronston, Treasurer

James Lowe, SecretaryMarilyn R. Bessy, Project Manager

Receivership News is publishedquarterly by the California

Receivers Forum, a not-for-profitassociation. Articles in this publica-

tion express the opinions of theirauthors and do not necessarily

reflect the views of the directors,officers or members of the California

Receivers Forum. Articles areintended as a source of generalinformation and should not be

construed as specific advice withoutfurther inquiry and/or consultation

with professional counsel.

© copyright 2003 California Receivers Forum.

All rights reserved.

Continued on page 3 ...

am particularly pleased to introducethis inaugural issue of the new andimproved California Receivers ForumNewsletter featuring the followingchanges:

State and Federal judges throughout Californiahave been added to our circulation.

Substantive articles on receiverships andreceivership law are aimed at informing andeducating judges, receivers, receiver’s counseland accountants about the nature, require-ments and legal nuances of this unusual disci-pline.

Highlights of a member’s career and accom-plishments will be featured in each issue.

The latest in both personal and legalreceivership news is presented for members of the

California Receivers Forum and the judiciary.

In addition to these strategic goals andchanges, we have also introduced memberadvertising in uniform, tasteful tombstone adsin a dedicated section. This allows our mem-bers – receivers, attorneys, accountants andmany others — to showcase a case or two thatthey have either been appointed to or have justcompleted work on. Members of the Forum areeligible to list themselves as active receivers, byregion. We are also allowing vendor advertisingfor businesses that can be invaluable in the suc-cessful administration of a case.

These advertising dollars will assist in fund-ing our State organization as well as coveringthe cost of publication. We believe these adsand listings will help keep both our membersand the judiciary informed.

I

An excellent program was presented in San Diego on January 6,2003, titled Receiver Law in California. Presenters includedKatherine A. Bacal, a member of the Litigation Practice Group ofBaker & McKenzie, Martin Goldberg, Receiver, ForensicAccountant and owner of Goldberg Consulting, and Bryan D.Sampson, owner of the law office of Sampson & Associates.

The full-day program covered topics such as, The History andOrigin of the Receiver, Mechanics of Appointing a Receiver,Handling the Receiver’s Estate, Receiver Ethics and Liability, ThePost-Judgment Receiver, Large Scale Receiverships, andBankruptcy and Receivers. Also included in the excellent handoutmaterial were 20 exhibits ranging from Ex Parte Application to

Appoint Receiver to Memorandum of Points and Authorities inSupport of Motion for Final Custodian Fees.

Bryan Sampson, Esq., indicated that he is available to providethe presentation in other areas of California.You can reach Bryan at (619) 557-9420.

Dan Close, founder and shareholder of EconomicDispute Resolution, Inc., specializes in ForensicAccounting, Business Valuation andReceiverships. He has testified in Superior andFederal Court in California and Nevada manytimes since 1993. ■

An effective staffing organization is crucial to the success ofthis enhanced Newsletter. The staff, all of whom are volunteeringtheir time and energy to make all of this happen, is:

Robert P. Mosier, Publisher – That’s me.I have served as a court-appointed fiduciary inboth state and federal courts for more thaneighteen years. I am a businessman with overthirty years of experience in turnarounds, andbring substantial business experience to eachassignment. I am headquartered in OrangeCounty and am a founding member of theCalifornia Receivers Forum and a past co-chair of the Los Angeles/Orange CountyChapter.

Kirk S. Rense, Editor – Mr. Rense is alawyer specializing in insolvency and in repre-senting court-appointed fiduciaries, with morethan twenty years of experience. He also has abackground in journalism as an editor andnewspaper reporter, before attending lawschool at the University of SouthernCalifornia Law Center. Kirk is a former boardmember of the California Receivers Forum,

LA/OC Chapter.

Kenton Johnson, Associate Publisher,LA of the LA/OC Chapter – KentonJohnson’s 30-year career in business andbanking has included responsibility at all lev-els including chief executive officer, divisionmanager, and project manager. Since January1996, Mr. Johnson has been a member ofRobb Evans and Associates LLC. The firmserves as a fiduciary, usually as receiver ortrustee, in regulatory or creditor legal actions.

Robert C. Warren III is Serving asAssociate Publisher, OC of the LA/OCChapter – Robert C. Warren III, is Presidentof Investors’ Property Services, a SouthernCalifornia management resource for over 20years. He holds a BA in economics, an MA inBusiness Administration and is a CertifiedProperty Manager. He has served as a receiverin over 250 cases in California and the west-ern United States.

Beverly N. McFarland, AssociatePublisher, Sacramento/Fresno Chapters –Ms. McFarland served as the Chair of CRF for2001-2002 and was one of the founding direc-tors and Chair of the Sacramento ValleyChapter. She has 30 years’ experience in thefinancial industry and serves as receiver in fed-eral and state courts. Ms. McFarland is alsothe CEO of The Beverly Group, Inc., an assetmanagement company in business since 1983.

Peter Ito, Associate Publisher, San Diego – Mr. Ito’s bio is fea-tured in this initial issue.

Associate Publisher, San Francisco – Open, and we will wel-come a motivated volunteer.

The Newsletter will also feature two regular columns — Heardin the Halls, written by Alan Mirman, and Ask the Receiver, writtenby Peter Davidson. A brief bio of the contributing author appearsafter each article.

I am both pleased and excited about this new and (I hope)improved Receivers Forum Newsletter for the California ReceiversForum. Please give me your thoughts on this inaugural issue. My e-mail address is [email protected] and I welcome your feedbackabout what you liked and didn’t like. In the meantime, pleaseenjoy this inaugural issue. ■

Continued from page 2..

New and Improved...

Spring 2003 • Page 3

San Diego —CRF NewswireBy Dan Close

sing a court appointed receiverto temporarily operate a commu-nity association is a creative andcost-effective way to address achronic repair issue, litigation or

governance dispute. A receiver is appointedand supervised by a court and the receiver’sduties are circumscribed by the court’sappointing order. Community or home-owner’s associations sometimes face a prob-lem that (a) cannot be addressed effectivelyby volunteer homeowners (who typicallylack legal or technical expertise), (b) wherethe volunteer board may have an “agenda”that is in conflict with the best interest ofthe Association, or (c) where the boarditself is conflicted and cannot effectivelytake action. A receiver can act to addressthe troubling issue in place of the board.

Why should a volunteer director be placed atrisk of losing his or her assets if there is a prob-lem within the association?

Even sophisticated volunteer directorsmay prefer to have a receiver address certainproblems so as to avoid personal liability iftheir decisions are later (sometimes yearslater) attacked in a lawsuit. Use of areceiver can insulate these directors frompersonal liability and the association bene-fits because the appointing court mustapprove the receiver’s decisions.

A good example of the value of areceiver arises in the case of constructiondefect litigation and decisions concerningthe scope of repair. Such decisions caninvolve huge sums of money and have long-term implications for the association.Lawsuits filed years later challenging earlierdecisions made by volunteer directors as“grossly negligent” and seeking to hold thedirectors personally liable for the damagesare not uncommon. What volunteer direc-tor would choose to serve on a board ormake decisions in the face of such potentialliability?

If the issue is construction repair, theboard must decide the scope of the repairsto be undertaken. Obviously, the boarddoes not want to waste money and performrepairs beyond the scope of what isabsolutely needed. Conversely, the boarddoes not wish to spend too little and fail toproperly address the defects. No matterwhat amount the board decides to spend,their decision may be called into questionyears later if there is new or continuingdamage to the property. Homeowners orthird parties that suffer damages will natu-rally look to the individual members of theboard that made the subject decisions,claiming that they were grossly negligent indetermining an inadequate scope of repair.Such a lawsuit is difficult and expensive forthe association to defend and may result inenormous personal liability for a director ifsuccessful.

May a receiver shield volunteer directors frompersonal liability?

A receiver can make these critical deter-minations and obtain court approval forsuch decisions. This insulates the individ-ual board members from personal liability,and protects the association in future litiga-tion by providing evidence that the scope ofrepair was reasonable under the circum-stances known at the time. The associa-tion’s defense to a future lawsuit would be topoint out that not only did a disinterested

receiver determine the necessary scope ofrepair, but the appointing court alsoapproved the receiver’s recommendation.This is powerful evidence that the associa-tion was not negligent, and the individualdirectors would be insulated from liabilitysince they did not make the decision.

The receiver is also in a better positionto amend CC&R’s and the governing docu-ments of the association. Normally theserequire either 100% approval of the home-owners or such a high percentage ofapproval that, as a practical matter, amend-ments may be impossible. A receiver cansimply obtain a court order on notice to thehomeowners allowing amendment of theCC&R’s or other governing documents.

Sometimes it is better to use a professional todeal with weighty legal and business problems.

The receiver can also act on behalf ofthe association in dealing with municipalagencies, or opposing parties in litigation.Often these parties will be more deferentialto a receiver, who is operating under courtappointment, and then they would be to aboard comprised of volunteer homeownerslacking legal or technical sophistication.And managing outside counsel can be adaunting task for a board unfamiliar withthe intricacies of association law. This taskcan be delegated to a Receiver.


Receivership Flexibility

Using A Receiver To Resolve CommunityAssociation DisputesBY STEVEN LINKON, ESQ.*

U



Continued from page 4.

Receivership Flexability...

There are costs to having a receiverappointed.

The cost of a receiver must be consid-ered. One should be employed only wherethe scope of the problem justifies the cost.A receiver’s compensation can be limitedin many ways — either a fixed hourly rate,a sliding hourly rate or by a flat rate. Thereceiver’s duties can also be limited by thecourt’s appointing order to specific tasks orresponsibilities.

In short, the receiver is a

powerful tool with a myriad

of uses to solve a particular

problem facing an

association.

Statutory basis for appointment.

Several provisions in CCP § 564 maybe argued to authorize appointment of areceiver to protect a homeowner’s associa-tion in light of the facts described above.CCP §564(b)(6) provides that a receivermay be appointed where a corporation isinsolvent, or in imminent danger of insol-vency. CCP § 564(b)(9) provides that areceiver can be appointed where suchreceiver is necessary to preserve the prop-erty or rights of any party.

Typically, homeowners’ associationsexperiencing management problems areinsolvent on a balance sheet basis. Thereare also often facts suggesting that the cur-rent board of directors may not be actingproperly to preserve the property of theassociation.

Alternatively, one may look to thecatch-all provision, CCP § 564(a), whichprovides that a receiver may be appointedin any case in which the court is empow-ered by law to appoint a receiver. TheCalifornia Supreme court has held that acourt of equity has the power to appoint areceiver of a going corporation upon ashowing that there are such dissensions inits governing body as to create a virtual

suspension of its business. Golden StateGlass Corporation v. Superior Court 13Cal. 2d 384, 393 (1939). 1

A court of equity also has authority toappoint a receiver to preserve assets of acorporation and prevent irreparable loss orinjury, pending suit. Misita v. DistillersCorp., 54 Cal. App. 2d 244, 250. Anappellate court will not disturb the trialcourt’s appointment of a receiver, providedthere was no abuse of discretion resultingin a miscarriage of justice. (See Misita, Id,at 249.)

Misita involved a challenge to thevalidity of an ex parte appointment of areceiver to mange and conserve the assetsof a business corporation where there wasconsiderable dissension between stock-holders and a deadlock in the corporatedirectorate. In upholding the validity of anex parte appointment, the court statedthat the ability to appoint a receiver topreserve the assets of a corporation, andprotect the rights of the stockholders iswell established in California jurispru-dence in situations where internal dissen-sions deadlock or frustrate the corporation.Dissension, or even honest differences ofopinion that make it impossible for thecorporation to carry on its business toadvantage (or to carry it on at all), are suf-ficient to invoke the action of a court ofequity. Misita, Id. at 251; see, also,Pomeroy’s Equity Jurisprudence, 4th ed.,§§ 1537, 1541, 1543, 1545; Boyle v.Superior Court, 176 Cal. 671 [170 P.1140].

The Golden State trial courtappointed a receiver, and request for a writof prohibition followed. Although theSupreme Court granted the writ, itaffirmed that the trial court was authorizedto appoint a receiver in such cases wherecourts of equity had previously done so,including the appointment of a receiverfor a going corporation. Here, an uncon-troverted showing that the corporationwas being conducted in a solvent fashionplaced the need for a receiver in doubt.The Supreme Court held that strongerproof was needed to justify a receiverwhere specific and detailed evidence thatthe corporation’s business was being suc-cessfully conducted is presented in opposi-tion to the appointment of a receiver. ■

CALIFORNIA RECEIVERS FORUM

SACRAMENTO VALLEY

CHAPTER

Kim Sackett, Chapter Administrator

(916) 779-1154

is pleased to announce that in the firsttwo months of 2003, members have been

appointed in 12 cases as Receiver, Referee or Provisional Director.

Counsel was retained in six cases.

Superior Court: Counties of Alameda, El Dorado, Placer,

Sacramento, Sonoma, Sutterand Yuba.

A court of equity also

has authority to appoint

a receiver to preserve

assets of a corporation

and prevent irreparable

loss or injury...

STEVEN K. LINKON of the Wolf Firm hassubstantial experience representingreceivers and obtaining the appointment ofreceivers in various matters. He has served as aregulatory receiver for the Securities andExchange Commission and the Federal TradeCommission.


• Give us your feedback as to our newlyrevamped and expanded Newsletter. It isthe result of the creativity and hard workof Bob Mosier (the first co-President ofthe Forum), and a long time state BoardMember. If you’d like to see any otherfeatures, or changes, I think Bob wouldwelcome your input…

• The new statewide Receivership Rulesseem to be well accepted. What has beenyour experience with them, and with thenew forms? Any controversies? Somerevisions to the Rules are in the draftingstages, and should go to public commentstage soon. We’ll keep you posted…

• We were shocked and saddened at theearly passing of Bob Warren, a foundingBoard member of the Forum. You will read more about Bob else-where in this Newsletter. The good news is that the LA/OCBoard has voted Bob’s son, an eminently qualified receiver, to joinour Board. Robert C. (“Rob”) Warren III is President of Investors’Property Services, a Southern California management resource forover 20 years. He holds a masters degree in business administra-tion and is a Certified Property Manager. He has served as areceiver in over 250 cases in California and the Western UnitedStates…

• How’s this for a gig: Edythe Bronston of the LA/OC Chapter hasbeen appointed receiver to complete two television movies whichwill be shown on ABC, based on the “Eloise” stories, starring JulieAndrews. They are in post-production and the first one isexpected to air April 27…

• Movers and shakers: Peter Ito of the San Diego Chapter justchanged firms and is now with Foley Lardner to head up theirwest coast insolvency practice. Also, Judge John C. Woolley,Orange County Superior Court, who handled the TeachersManagement, Inc. receivership a couple of years ago has retiredand is planning to become a private judge with JAMS after May1, 2003, and after he runs in the Boston Marathon. Good luckJudge Woolley…

• Legal and practical issue … the LA/OC Chapter recently pre-sented a program that addressed the pros and cons of whether acourt can grant super-priority status to a receiver’s certificate.Can the lien of a receiver’s certificate trump an existing first lien?This issue is of particular importance in cases in which the prop-erty is substandard housing, and it is likely there is no equity to

support a new loan, unless super-priority isgiven. The statute [Health & Safety CodeSection 17980.7(c)(4)(H)] relating to sub-standard housing provides for the creationof a lien, but was amended during the leg-islative process to strike the word “first” inreferring to that lien. A 1915 case, how-ever, still stands for the proposition that alien of a receiver’s certificate can be a firstlien. Lots of arguments on each side of thisone…

• From our Sacramento Chapter, we hearthat Judge Loren E. McMaster was the firstappointment by Governor Gray Davis tothe Sacramento County Superior Court.He had a distinguished career specializingin public employment law issues. JudgeMcMaster succeeded Judge John Lewis asone of the two law and motion judges and

s an avid fan of the San Francisco 49ers…

• We can introduce another new Board member in LA/OC,Howard Grobstein, CPA who is a partner at Grobstein, Horwath& Company LLP, and specializes in insolvency and litigation sup-port. Howard represents receivers, trustees, creditors, creditorcommittees, debtors and debtors-in-possession, and is frequentlyhired by attorneys in insolvency and litigation type engage-ments…

• Last, but not least…Bob Mosier reports another two settlementsin the Class Action receivership of a large real estate syndication.Roughly 5,600 individuals reportedly invested $100 million inseveral real estate projects that proved to be less than spectacular.Settlements with various professional firms that assisted thedefendants have produced over $13 million, in addition toapproximately $15 million in property sales. The five-year oldcase has one piece of litigation pending before closure ...

Until next time...

*Alan M. Mirman is a partner in the Calabasaslaw firm of Horgan, Rosen, Beckham & Coren,LLP, and specializes, not surprisingly, inCreditor’s Rights. He is a founding director ofthe California Receiver's Forum. His practiceincludes various aspects of provisional remedies,representation of receivers, litigation, loan andlease documentation, and the like.

Heard in the HallsNotes, Observations, and Gossip Relayed by Alan M. Mirman*

This is the ninth edition of Heard in the Halls, an informal compendium of thoughts, questions and information contributed by CaliforniaReceiver’s Forum members, and not official Forum announcements. Don’t rely on any quasi-official pronouncements in this column! Send metidbits you would like to see in future issues, such as: procedures in various courtrooms, questions on legal issues, rank gossip, firm transitions andupdates on practitioners, receivers, etc. Provide your input by telephone, mail, fax, or E-mail as follows: Alan M. Mirman, Horgan, Rosen,Beckham & Coren at 23975 Park Sorrento, Suite 200, Calabasas, California 91302. Phone: (818) 591-2121; Fax: (818) 591-3838; E-mail:[email protected]

Here is what we have Heard in the Halls . . .

receiver appointed, not the least of whichis that the lender is insulated from beingdeemed a mortgagee in possession. Thisprotects a lender from the increasedexposure of application of a prudent busi-ness standard and responsibility for lossescaused by the lender’s negligence. Inaddition, the receiver will make certainthat the property is insured and main-tained and, in the case of a non-rentsreceivership, that the business is appro-priately operated. In addition, a receiver-ship order can specify that senior liens areto be kept current and real property taxespaid. Further, the lender will be keptinformed as to the status of the propertyor business.

Conversely, a receivership is an addi-tional layer of expense for which thelender may ultimately be held liable,should the receivership estate be insol-vent. Ephraim v. Pacific Bank, 129 Cal.589, 592 (1900). In addition, shouldanything out of the ordinary arise, areceiver will undoubtedly petition his orher appointing court for instructions,which can lead to delay and extraexpense. Note that Civil Code §2938,effective 1997, deals with perfection of alender’s rights to rents, issues and profitsof real property, and also addresses inSubsections (c) and (d) the rights of alender/assignee of rents to collect andreceive rents, issues and profits whichhave accrued but remain unpaid anduncollected on the date on which anenforcement step is taken. Thoseenforcement steps include appointmentof a receiver, obtaining possession of therents, issues or profits, delivery of a writ-ten demand to one or more tenants, anddelivery of a written demand to theassignor/borrower. The statute, whichapplies to contracts entered into on orafter January 1, 1997, also provides thatany of the enforcement actions taken by alender/assignee do not have the effect ofmaking that assignee a mortgagee in pos-session unless the assignee obtains actualpossession of the real property. CivilCode § 2938 (e)(1). Further, rents col-lected under this statute may be receivedand applied by the lender/assignee with-out the risk of a CCP §726 violation.

Be aware, however, that although“perfection” protects the security interest

against an intervening third party, anadditional enforcement step is mandatedto allow the creditor to begin collectingthe assigned rents. Federal NationalMortgage Assn. V. Bugna, 57 Cal.App.4th 5291 (1997). Under Civil Code§2938 (g) once a lender has availed itselfof these enforcement rights, the bor-rower/assignor can demand that the rentsbe used for the reasonable costs of pro-tecting and preserving the property.Lenders will probably want a receiver tooversee this process . . . there is statutoryauthority for appointment of such areceiver pursuant to CCP §564(b)(11). ■


Continued from page 1..

A Primer...

There are many

advantages to

having a receiver

appointed...

Specializing in Receiver, Civil and Miscellaneous Bonds

Contact:

CHRISTOPHER M. HAENELRUTH ADONIS

License No. 0D58538

Bond Services of California, LLC900 Wilshire Blvd., Suite 1400Los Angeles, California 90017Fax (213) 628-2977

(213) 628-2970

BOND SERVICES OF CALIFORNIA, LLC

Edythe L. Bronston is a Founding Directorand Past President of the CaliforniaReceivers Forum L.A./Orange County anda Founding Director of the State organiza-tion. She is an attorney in Sherman Oaks,California and also acts as a receiver, court-appointed referee, and mediator.

Page 8 • spring 2003

Clifford E. Bressler

Clifford E. Bressler &Associates

Tel: 559.298.1089

Is pleased to announce the appoint-

ment

as administrator of

Alta Healthcare District,a liquidation

Federal Bankruptcy Court Northern District, Fresno

Edythe L. Bronston

Law Office of Edythe L.Bronston

Tel: 818.528.2893

Is pleased to announce theappointment as Receiver for

ABC v. Eloise Productions, Inc.and Handmade Films, Inc.,

a completion of films receiver-ship

Superior CourtCounty of Los Angeles

Burbank

M. Daniel Close, CPA,

CVA, Receiver

Economic DisputeResolution, Inc.

Tel: 858.792.6800

Is pleased to announce the completion of duties as a

Receiver for

Waterguard Corporation,Post Judgment receivership

Superior Court County of Orange

James H. Donell

Jalmar Properties, Inc.

Tel: 310.207.8481

Is pleased to announce the

appointment as Receiver for the

United States Security & Exchange

for J.T. Wallenbrock and

Citadel Capital Management Group,

an equity receivership

U.S. District Court

Central District of California

Mike Essary

Calsur Management & Realty

Tel: 858.560.1178


appointment as Receiver for

TJ&W v. Silverado Investment

Group, for construction completion

Superior Court

County of San Bernardino

Robb Evans

Robb Evans & Associates LLC

Tel: 818.768.8100



La Luz de Oro,

for asset collection and distribution

Superior Court

County of Los Angeles

Peter Ito

Foley & Lardner

Tel: 619.685.6456

Is pleased to announce that

he has joined the San Diego

Office of Foley & Lardner.

Mr. Ito will head the firm’s

West Coast bankruptcy,

creditors’ rights and financial

restructuring practice.

Douglas Morehead

Optima Asset Management

Services

Tel: 949.852.0900


completion of duties as Receiver for

Thomas & Kellogg,

an operating company

Superior Court

County of Orange

Robert P. Mosier

Mosier & Company, Inc.

Tel: 714.432.0800



Crystal Cove Pools and Spas;


Superior Court

County of Orange

Family Division

David J. Pasternak

Pasternak Pasternak & Patton

Tel: 310.553.1500



Death Row Records,


Superior Court

County of Los Angeles

David L. Ray

Saltzburg Ray & Bergman

Tel: 310.481.6700



Solution Central Media, Inc.,

a liquidation

Superior Court

County of San Mateo

Thomas A. Seaman, CFA,

Receiver

Thomas Seaman CompanyTel: 949.222.0551



Pasadena Village Assisted Living

Community, an operating company

Superior CourtCounty of Los Angeles,

Northern District

Steve Speier

Squar Milner

Tel: 949.222.2999



Riverside Communications,

a partnership liquidation

Superior Court

County of Riverside

Robert C. Warren III

Investors’ Property Services

Tel: 714.708.0180


appointment as Receiver for the

former Ramada Inn, Santa Ana,

a rents and profits receivership

Superior Court

County of Orange

Douglas P. Wilson

Douglas Wilson Companies

Tel: 619.641.1141



Vallco Fashion Park,

a rents and profits receivership

Superior Court

County of Santa Clara

Douglas P. Wilson

Douglas Wilson Companies

Tel: 619.641.1141



Car Wash of America LLC,


Superior Court

County of San Diego

Douglas P. Wilson

Douglas Wilson CompaniesTel: 619.641.1141

Is pleased to announce thecompletion of duties of

construction management and litigation support consultant for

Ocean Trails Golf Course,an operating company

Consultant for Credit SuisseFirst Boston

Andrew R. Zimbaldi

Alden Management Group

Tel: 714.751.7858



Regency Highlands,

a completion of construction

receivership

Superior Court

County of Riverside



AREA/E-MAIL PHONE

Bay Area

David A. Summers 925-933-2875

[email protected]

Sacramento Valley

* Beverly N. McFarland 916-408-3755

[email protected]

Kevin J. Whelan [email protected]

Fresno Area

Clifford E. Bressler 559-298-1089

[email protected]

* Steve Franson [email protected]

James S. Lowe III [email protected]

Los Angeles/Orange County

* Edythe L. Bronston 818-528-2893

[email protected]

Robert Crane [email protected]

Richard K. Diamond [email protected]

James H. Donell [email protected]

Steve Donell [email protected]

Howard M. Ehrenberg [email protected]

Robb Evans & Associates [email protected]

* David A. Gill [email protected]

* Randal James Lee 323-930-2671, ext. [email protected]

* George R. Monte [email protected]

* Douglas C. Morehead [email protected]

AREA/E-MAIL PHONE

Los Angeles/Orange County

* Robert P. Mosier [email protected]

* David J. Pasternak [email protected]

Gary A. Plotkin [email protected]

* David L. Ray [email protected]

* Les Rodin [email protected]

Thomas A. Seaman [email protected]

* Steven M. Speier [email protected]

* William E. Turner [email protected]

* Robert C. Warren III [email protected]

* Richard Weissman [email protected]

* Adrian Young [email protected]

Andrew R. Zimbaldi [email protected]

San Diego Area

M. Daniel Close [email protected]

* Mike Essary [email protected]

* Martin Goldberg [email protected]

* Richard M. Kipperman [email protected]

* Thad L. Meyer [email protected]

Douglas P. Wilson [email protected]

THE LISTWhile there is no court-approved list of Receivers, the following is a partial list of Receivers

who are members of the California Receivers Forum:

* The asterisk indicates those receivers who completed acomprehensive 16-hour course on receivership administra-tion and procedures presented at Loyola Law School inApril 2000

Have a receivership questionyou want answered? E-mailit to [email protected] your question and theanswer may appear in anupcoming column.

1.Can a receiver beassigned to a referee bystipulation, and takeinstruction from the ref-eree?

Answer: A receiver isan officer of the court,appointed by and directed

by the court. After the receiver’s appointment, the receivershipproceeding can be assigned to a referee, either by stipulation orotherwise. The receiver as an officer of the court cannot takeinstructions directly from the referee, however. Any instruction ororders issued by the referee and intended for the receiver must firstbe submitted to the court for review and approval. In effect, thereferee may make a report and recommendation to the court,which then may (or may not) issue the recommended order. Seegenerally, C.C.P. ¶¶639, 643, and 644. For the same reasons,receivers cannot be appointed by arbitrators or take instructionfrom arbitrators. Marsch v. Williams, 23 Cal. App. 4th 238 (1994).

2. Which of these constitutes adequate notice of hearing onan ex parte receivership application: (i) telephone messages to on-site property manager who states that he or she will tell owner(when lender does not know owner’s whereabouts); (ii) telephonemessage on owner’s answering service; (iii) telephone message onowner’s home answering machine; (iv) message by carrier pigeon?

Answer: A telephone message to the on-site property managerdoes not constitute proper notice. If the lender does not know theowner’s whereabouts, the lender must take other steps to find theowner prior to giving ex parte notice. A telephone message givento the owner’s answering service is sufficient notice. A telephonemessage on the owner’s home answering machine may not be suffi-cient. As to carrier pigeon, that notice is acceptable so long as thepigeon in question will sign a declaration re notice, under penaltyof perjury, and will be available to testify in court should the noticebe questioned. See, Cal. Rules of Court, Rule 379. ■

Peter A. Davidson, located in Los Angeles, is a receiver and an attorneywho specializes in representing receivers in state and federal court. Theviews of Mr. Davidson are not necessarily those of the CaliforniaReceivers Forum or the California Receivers Forum Newsletter. Nor arethe views expressed by Mr. Davidson intended to be relied upon as legaladvice.


Virtually every receiver, receiver’s counseland state and federal judge in SouthernCalifornia knew and respected the late RobertChauncey “Bob” Warren II, a prominentmember of the receivership community for morethan 20 years. Mr. Warren passed away onFebruary 24, 2003 just shy of his 74th birth-day. Rob Warren, Mr. Warren’s son and busi-ness partner, provided the CaliforniaReceivership News with this personal commen-tary on his late father’s life and career.

Many of us know Bob Warren fromworking with him as a receiver and propertymanager over the last twenty years. Butthere is a great deal more about my fatherthat people ought to know. Robert C.(Bob) Warren II was born in Little Rock,Arkansas in 1929. He grew up in PineBluff, Arkansas and Jackson, Mississippi,and attended Rice University, graduating in1952 with a bachelor’s degree in English.

While there he met his wife-to-be, Barbara,who was also a student at Rice.

They married in Alexandria, Virginia in1953 – after Bob had joined the Army andcompleted Officer Candidate School. Aftera tour in Korea with the Army Corps ofEngineers (Bob had put “Eng” for his degreeon his application), Bob and Barbara livedfor a time in Texas, Mississippi andMissouri, as Bob worked in national radioand in local television as a newscaster. Heloved the news and he loved broadcasting,but it took time away from his family. Heand his family later lived for a time inIllinois, Minnesota and Iowa, as Bobmoved from newscasting to public relationswork to property management. His travelsfinally took him and his family toCalifornia in 1975, when Bob took a job asgeneral property manager for the IrvineCompany. He subsequently opened his

own business, Investors’ Property Services,in 1980.

Bob was the proud father of two sons,Kyle and me, and was the proud grandfatherof three girls, Sally Jean, Robyn and Rachel.He was a man of many loves and manydreams. He never stopped dreaming aboutnew things and new ideas. He was passion-ate about his family, about seeing thebeauty of the desert mountains, and aboutthe open sky. He completed his lifelongdream of obtaining his private pilot’slicense a few years ago at the age of seventy.Bob was an eternal optimist and a vibrantencourager. He loved life, and he lookedforward to the surprises of each day and tothe warmth of his relationships with hisfriends and coworkers. He never lost thesame passion for living that had been withhim since his youth. He was special, and hewill be greatly missed. ■

A TRIBUTE TO ROBERT CHAUNCEY WARREN II

ASK THE RECEIVERBY PETER A. DAVIDSON, REIN EVANS & SESTANOVICH LLP


t the expense of waxing philo-sophic, life often hands peoplesituations in which there areonly two kinds of choices: bad orworse. It is certainly the case in

business when hard times or internal dis-putes threaten the viability and even thesurvival of a company.

The choices facing companies in finan-cial or organizational crises are not pleasantand, therefore, not easy to make. Onerecurring problem is that companies waitfar too long to seek an effective means todeal with whatever the problem is, prefer-ring instead to plod along in denial. Then,when this deferred attention takes the com-pany to the brink of insolvency, businessowners often conclude they have no choicebut to rush into bankruptcy court, ignoringother options such as a receivership.

It is not a case of ignorance as much asit is a common belief among business own-ers that a receivership is a very expensiveprocess and that the owners whose businessis being affected loses all control during theterm of a receivership.

True or not?

It depends. Actually, there are manyreceivership cases that can be cost effectivefor a troubled company, and where manage-ment continues to play a meaningful roleduring the process.

For example, a receivership is a cost-effective alternative to bankruptcy wherethere is a true conflict or dispute betweenor among the business’s partners.Economics may be the core of their dispute,but not necessarily. It may well be a con-trol squabble, or, just as likely, differencesover the strategic direction the businessshould take in any number of situations.

Whatever the reason, these conflictshave at least two things in common: If theconflicts are not resolved, the company’sviability will be negatively impacted, andthe conflicts can only be resolved throughoutside intervention in order to assure thecompany’s assets aren’t jeopardized.

A third-party receiver can come in and,based on the scope of the receivershiporder, bring about a resolution. While thereceiver is a neutral party, under the direc-tion of the court and not beholden to theindividual owners, a good receiver commu-nicates openly and proactively with all theparties in order to bring about an effectivesolution through collaboration. The objec-tive here is that all parties will be able tostipulate to the actions taken by thereceiver. Under this scenario, with cooper-ation from the antagonistic parties, thereceiver can accomplish the objectives ofthe receivership at a reasonable cost.

Receiverships also are less

disruptive than bankruptcies

since the company continues

to operate during the

process without any formal

announcement, and the

expenses of the receivership

are funded during its term

with completion of the pay-

ments handled at the time

the receiver files the final

accounting with the court.

Since the company is still operating ona day-to-day basis, its creditor issues arehandled in the regular course of business.In some respects, creditors are just as impor-tant a group of stakeholders as the businessowners. It is not only the business ownerswho may put the business into bankruptcy:creditors also have the option to file aninvoluntary bankruptcy in cases where thecompany’s economics are upside down andcreditors aren’t being paid.

It is important to keep in mind that thereceiver is a single-source solution to theproblems the subject company has. Once abankruptcy proceeding is initiated, volun-tarily or otherwise, all receivership activi-ties that were in place to keep the companyoperating day to day cease immediately.This can have a tremendous cost impact, afact many owners don’t take into accountin deciding whether to pursue a receiver-ship or the bankruptcy process.

On the other hand, a bankruptcy filingimmediately freezes the company’s debtstructure, to allow management time toattempt to develop a reorganization plan.Such proposed plan is then presented to thecreditors and court for approval. Ifapproved and feasible, the plan may allowthe company to emerge from bankruptcyand continue its business operations.

A great deal of cooperation from thecreditors is usually essential in a bankruptcycase, depending on the company’s financialcondition. Along with existing companymanagement, there is a bankruptcy credi-tors’ committee that has a direct influencein determining the future of the company.

In bankruptcies, there is the dreadedissue of liquidation and the resultant situa-tion in which creditors will opt for the bestcurrent value they can achieve. That wellmay not be in the best interests of the com-pany’s owners and management.

Worth the Cost?

Do the Benefits of a ReceivershipOutweigh Expenses of Administration?BY DOUGLAS WILSON AND ROBERT RICHLEY*

A

Continued on page 13 ...


So, what does all this mean?'

Company owners need to think long-term,and in both the best interests of the companyand of themselves, as partners. Bankruptcies areall too often a knee-jerk “let’s-put-it-out-of-its-misery” response on the part of owners, weariedby all the business’s problems and disputes.Owners need to take into account and seriouslyconsider all available options to solve partnershipdisputes and financial problems.

Nor should the initial cost be the sole decid-ing factor. A receivership may appear at first tobe a more costly approach, but it often is morecost effective in the long term. This is especiallytrue where the use of a receiver keeps in place allthe vision, all the hard work, and the financialcommitments that built the company into a suc-cessful-enough enterprise to give rise to such dis-putes and conflicts. The value of this continuityin the life of the business needs to be taken intoaccount when selecting the right tool to resolvebusiness control or financial difficulties.

Douglas Wilson is president and CEO and RobertRichley is COO and general counsel of the DouglasWilson Companies, a diversified real estate and busi-ness services firm specializing in problem resolution,receivership, and conflict resolution. With headquar-ters in San Diego, and offices in San Francisco, LosAngeles and Denver, the company has handled morethan 400 matters and over $3 billion in assetsthroughout the Western United States. They may becontacted at [email protected] and [email protected].


Worth the Cost?

Bankruptcies are

all too often a knee-

jerk “let’s-put-it-out-

of-its-misery”

response...

Douglas Wilson

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eter W. Ito heads the West Coastbankruptcy practice of Foley &Lardner, a national law firm withmore than 1,000 attorneys.During his 15 years of practicing

in the San Diego area, Mr. Ito has worked pri-marily in bankruptcy, financial restructuring,creditors' rights and structured finance. Inaddition, Mr. Ito has significant experience inrepresenting and counseling directors and offi-cers of troubled companies, securitizations, andin provisional and post-judgment remedies.California Receivership News asked Mr. Ito toprovide a biographic sketch for our firstReceivership Professional Profile.

I was born in Denver, Colorado in June1963, where I was adopted by Sueo andTaeko Ito. I have one sister, Emilie. I ammost proud of my parents and their accom-plishments. Both are second generationJapanese Americans. I am so fortunate tohave been adopted by my parents — theprinciples and values that I learned fromthem permeate every facet of my life.

My father was born in Hawaii in 1919,where he started working in the sugar canefields at the age of 7. He earned a degree inagriculture at the University of Hawaii,taught agriculture at that institution, andthen served during World War II as an offi-cer with the Military Intelligence Service.After the war, he served as an interpreter inmany war crimes trials, including the trialof General Yamashita, the infamous “Tigerof Manila.” After leaving the service, myfather attended dental school and, upongraduation, joined his three brothers intheir dental practice in Denver, Colorado.

My mother was born and raised in SanFrancisco. As a teenager, she was interned

along with 112,000 other Americans ofJapanese ancestry, spending four long yearsat a relocation camp in Heart Mountain,Wyoming. She returned to San Franciscoafter the war, staying there until she mar-ried my dad and moved to Colorado, wherethey still reside.

My life has been pretty boring in com-parison. I spent my entire life in Coloradountil I left to attend law school. I was activein sports as a kid — I participated in littleleague football, was an avid skier like mydad, who holds the rank of Rokudan (SixthDegree Black Belt), I participated in Judo.I started Judo at about the age of 8 and con-tinued until I was about 22. I won numer-ous Colorado state championships duringthat time, and competed in multiplenational championships. I trained with theOlympic judo team at the OlympicTraining Center in Colorado Springs,Colorado, for 18 months leading up to the1984 Los Angeles Olympics. I was in verygood shape at that point in my life (unlikemy current physical condition). I also havefond memories of fishing with my dad onthe rivers of Colorado, Utah and Wyoming,playing golf with my dad and family vaca-tions. These are all things that I now dowith my own family.

I earned a B.A. in political science fromthe University of Colorado in 1986, work-ing as an intern with the Office of theGeneral Counsel for the University duringmy last two undergraduate years. Duringthat time, I became friends with one of theattorneys in the office, who recommendedthat I apply to Washington UniversitySchool of Law in St. Louis, Missouri. I vis-ited the school, met with the professors and

ultimately ended up going to school there.It was a wonderful experience. WashingtonUniversity is the oldest private school westof the Mississippi, has an outstanding repu-tation and is located on a beautiful hilltopcampus overlooking urban Forest Park,which is second in size only to New York’sCentral Park.

I developed life-long friends while atlaw school, one of whom is David Becker,one of my law school professors who I con-sider a mentor and close friend. David ini-tially guided me to a career in bankruptcy.During my second year of law school, hesuggested I intern with one of his formerstudents, Barry Schermer, then a bank-ruptcy judge in St. Louis and now the ChiefJudge of the United States BankruptcyCourt for the Eastern District of Missouri. Itook David’s advice and spent the summerwith Judge Schermer. After my internship,Judge Schermer assisted me in obtaining aone-year appointment as a law clerk for theHonorable Louise DeCarl Adler, bank-ruptcy judge in the United StatesBankruptcy Court for the Southern Districtof California.

My wife and I moved to San Diegoupon my graduation from law school, wherewe have now lived for 14 years. After myclerkship, I joined the bankruptcy depart-ment at an old line San Diego law firmknown as Jennings, Engstrand &Henrikson. Ross Pyle, a former Chief Judgeof the bankruptcy court, headed the groupof eight bankruptcy attorneys. Nearly threeyears later, the bankruptcy lawyers left toform a boutique bankruptcy firm — PyleSims Duncan & Stevenson, where I workedas a partner until leaving to join Baker &

ReceivershipProfessional ProfilePeter Ito – A Mainstay of San Diego’s Receivership

and Bankruptcy Bar

This is the first in a series of profiles of prominent receivers and receivership professionals that willappear regularly in the California Receivership News


P


McKenzie about four years later. In Marchof this year, after nearly five years withBaker & McKenzie, I left to join the SanDiego office of Foley & Lardner. I head theWest Coast bankruptcy practice for Foley.

In May, my wife Ashley and I will cele-brate our 15th wedding anniversary. Wehave been together for 24 years. We havetwo beautiful girls, Kristin (8) and Megan(6), both of whom attend La Jolla CountryDay School. Kristin is in the third gradeand enjoys music, art and math. She playsthe piano and occasionally does printadvertising. She has appeared in a GuessJeans advertisement for Vogue Magazine, alayout in Child Magazine and did anational commercial last Spring with actorGeorge Hamilton for Old Navy. She is fea-tured on the website for Gapkids.com.Megan is in kindergarten. Like her sister,Megan plays the piano. She plays softballand is interested in playing soccer.

As a family, we enjoy skiing and travel.Last year we took a two-week trip to Japanwith my parents — a once-in-a lifetimeexperience. We started in Tokyo andworked our way south, eventually finishing

our trip in Kumamoto, where my parents’relatives still reside. It was great to meet ourrelatives and to experience Japan with myparents. During part of our trip, we stayedtwo nights at a traditional Japanese Inncalled a Ryokan. Thankfully, my parentsspeak fluent Japanese as no one whoworked at the inn spoke English. The foodwas awesome and the culture incredible.

Before the trip we all committed to noteating any Western food — no McDonald’s,no Kentucky Fried Chicken! Surprisingly,we lived up to our commitment. Kristin andMegan did a terrific job; they were greattravelers and ate Japanese food the entiretime. Their favorite was udon noodles.After a couple of scotches with relatives Itried “Bashimi,” which is raw horse meat, aspecialty in Kumamoto.

I am goal-oriented — I have set andcontinue to set both personal and business-related goals. One of my personal goals is tofind ways to thank my parents for their sup-port and the values that they taught me.Another is to give my girls the same oppor-tunities that my parents provided for me. ■

Mr. Ito may be

contacted at

Foley & Lardner

402 West Broadway

Suite 2300

San Diego, CA 92101

Telephone - (619) 685-6456

Facsimile - (619) 234-3510

Email - [email protected]


Professional Profile

S e r v i n g t h e n e e d s o f t h e j u d i c i a l c o m m u n i t yf o r R e c e i v e r s , Tr u s t e e s , P r o v i s i o n a l D i r e c t o r s a n d o t h e r s

i n t h e S a l e , L e a s e a n d M a n a g e m e n t o f C o m m e r c i a l P r o p e r t y.

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Commercia l Investment Serv icesA Full Service Real Estate Firm

148 South Bever ly DriveBever ly Hi l l s , CA 90212-3018

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Web: www.El i teProperty .com

EPIQ Systems, Inc. and Bank of America –celebrating the spirit of success with greatvision for the future.

For more than 10 years, our national mar-keting partnership has combined market-leading banking services, bankruptcy exper-tise and advanced software technology toimprove productivity and streamline case

management activities for the nation'sChapter 7 trustee community.

We would like to thank all of ourclients and associates for making thisdecade of success possible – and welook forward to continuing to servethe bankruptcy community in the yearsahead.

An Alliance of Strength.The Spirit of Success.

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Celebrating 10 Years Together!

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http://www.epiqsystems.com

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600 Peachtree Street / 7th Floor

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Congratulations!

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