legal news


Register | Forgot Password

Lee v. Wien Bakery

Lee v. Wien Bakery
11:25:2013





Lee v




 

Lee v. Wien Bakery

 

 

 

 

 

 

 

 

 

 

Filed 11/4/13  Lee v. Wien Bakery CA2/4

 

 

 

 

 

 

NOT TO BE PUBLISHED IN THE OFFICIAL
REPORTS


 

California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b).  This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.

 

 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

 

SECOND APPELLATE DISTRICT

 

DIVISION FOUR

 

 
>










SUNG J. LEE,

 

                  Plaintiff and Appellant,

 

v.

 

WIEN BAKERY LLC, et al.,

 

                Defendant;

 

KEVIN SINGER, as receiver
etc.,

 

                 Movant and Respondent.


      B241325

      (Los Angeles County

      Super. Ct. No. BC407761)

 


 


 


 

          APPEAL from an
order of the Superior Court of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles,
Elizabeth Allen White, Judge.  Affirmed.

          Henry M. Lee
and Robert Myong for Plaintiff and Appellant.

          Ervin Cohen
& Jessup, Byron Z. Moldo and Matthew J. Eandi for Movant and Respondent.

 

 

 

          Appellant
Sung J. Lee appeals the trial court’s order approving and settling the final
report and accounting of the receiver, respondent Kevin Singer, and approving
final compensation for respondent. 
Appellant contends the court abused its discretion in requiring him to
pay the fees and expenses incurred by respondent in taking over and operating a
business owned by appellant’s judgment debtor, which generated insufficient
income to provide either a recovery for appellant or payment to
respondent.  Finding no abuse of
discretion, we affirm.

 

>FACTUAL AND PROCEDURAL BACKGROUND

          Appellant
obtained a judgment against his former employer, the Wien Bakery LLC (the
Bakery), in the amount of $362,364, representing unpaid wages and penalties.href="#_ftn1" name="_ftnref1" title="">[1]  The judgment provided for appointment of a
receiver pursuant to Business and Professions Code section 17203.href="#_ftn2" name="_ftnref2" title="">[2]  Appellant moved ex parte for an order
appointing respondent Singer as the receiver.href="#_ftn3" name="_ftnref3" title="">[3]  

 

          A.  Order
Appointing Receiver


          By
order dated February 2, 2011, the court granted appellant’s request to have respondent
appointed as receiver.  The order stated
that respondent was to “take immediate possession and complete control of [the
Bakery].”  He was instructed to “manage,
control, care for, preserve, [and] maintain” the Bakery’s business operations
and property; to “incur the expenses necessary for the management, control,
care for [sic], preservation, and maintenance of [the Bakery],” and “specifically,
to operate the business, including employing or terminating labor as [he]
deem[ed] fit, purchase supplies, and incur the risks and obligations ordinarily
incurred by owners and managers of similar businesses . . . .” 

          The order also
stated respondent’s “primary duty” as receiver was “to treat [appellant] as the
first creditor to whom payments of any monies shall be made from the business
operations.”  In this regard, it went on
to state: “Satisfaction of this primary duty may include, but is not limited to
seizure of all income and receivables, closing the business operations
completely until payment is made, removing/terminating any and all managers and
employees, preventing Defendant’s access to and possession of the business and
its assets, and removal and sale of Defendant’s assets.  However, [respondent] shall at all times use
his best efforts to ensure that operations continue to the extent possible to
satisfy [appellant’s] judgment.” 

          With respect
to distribution of any income collected, the order stated respondent would
“retain, or apply and disburse [it] in the order of priority as follows”:  “a.  To
satisfaction of [appellant’s] judgment; [¶] b. All business operating expenses,
as [respondent] sees fit, to preserve, protect and continue business
operations, including employee wages, rent . . . suppliers . . . ;
[¶] c. Retention by [respondent] of a working capital fund, in any amount
deemed necessary by [respondent]; [¶] d. Any and all accounts payable (both
delinquent and current) that [respondent] determines is in the best interest of
the Estate to pay; [¶] e. Real estate taxes and any other tax related to any
property which [respondent] reasonably determines are necessary and proper in
such priority and in such amounts as [respondent] deems appropriate; [¶] f.
Payment of any other reasonable expenses to preserve and to protect the assets
of the Estate; [¶] g. Maintenance of insurance and payment of premiums thereon;
[¶] h. For payment of monthly interest and fees (if any) due from the business
to any financial institution.”

          The order
stated that “[a]ll funds collected by [respondent] shall be immediately
forwarded to [appellant’s] counsel on a bi-monthly basis on or about the 15th
and last day of each month . . . .”  Respondent
was also authorized to pay expenses “‘as incurred’” each month from Bakery
funds and to pay his own fees from business operations after preparation and
service of “periodic interim statements.”  

          The February 2
order contained a provision concerning retention of counsel:  “[Respondent] may employ, without further
order of this court, the law firm of Ervin Cohen & Jessup LLP [ECJ] as his
general counsel.  Except that
[respondent] shall first notify [appellant’s] counsel prior to retaining [ECJ]
of the reasons for retaining counsel, and proposed budget for legal
services.  [Appellant’s] counsel may
object to the employment of legal counsel by [respondent], in which case,
[respondent] shall petition the court to obtain approval to hire legal
counsel.”

          The order
approved an hourly rate of $250, plus expenses, for respondent’s services.  It further provided that respondent or
appellant “may at any time, apply to this Court for further or other
instructions or orders and for further powers necessary to enable [respondent]
to perform [respondent’s] duties properly on an ex parte basis.”

 

          B.  Respondent’s
Initial Report


          On July 8,
2011, respondent filed an initial report and notice of intent to pay his own fees
and expenses.  The report stated that the
Bakery had filed for bankruptcy shortly after the February 2 order and that initially,
respondent had been unable to assume his role as receiver.  However, the bankruptcy petition was
dismissed after a hearing on May 3, 2011, at which the defendants failed to appear
or file a plan, and respondent begun acting as receiver for the Bakery on May 4.  

          The July
report stated that respondent had cut costs in an attempt to increase revenue,
that he was still trying to determine whether the Bakery could be profitably run,
and that he had been in “constant communication with the parties” to make them
aware of “the challenges that the business is currently facing.”href="#_ftn4" name="_ftnref4" title="">[4]  Attached to the report were respondent’s billings
through May 2011, which totaled approximately $15,000.href="#_ftn5" name="_ftnref5" title="">[5]  The billings included some hours worked by
respondent’s support staff, billed at $150 per hour. 

 

          C.  Application
for Shut Down Order and Second Bankruptcy


          On
July 20, 2011, respondent filed an ex
parte
application for an order authorizing him to shut down the business
and sell its assets.  The moving papers
indicated that the Bakery had generated sales of $136,462 from May 16, 2011 to
June 30, 2011, and that immediate operating expenses -- primarily, payroll,
payroll taxes, suppliers and workers’ compensation insurance -- totaled $124,005,
leaving $12,457.href="#_ftn6" name="_ftnref6"
title="">[6]  However, the Bakery owed more than $15,000
per month for leased equipment and an undetermined amount for rent, neither of which
had been paid.  As the Bakery was not
generating sufficient income to support the equipment lease payments or monthly
rent, respondent recommended terminating the Bakery’s operations and selling its
assets.  Based on an appraisal,
respondent concluded the Bakery’s equipment was worth approximately $15,000
more than current liens, leaving a few thousand to go toward respondent’s fees
and appellant’s judgment after incurring the costs of selling the equipment.  

          Respondent submitted
a declaration stating that he had spent significant time and resources
operating the business and determining its financial viability.  He described his activities as “overseeing
the operations of the business, monitoring and protecting the income of the
Business, interacting [with] and monitoring the employees, and communicating
with the parties to try and make the Business operate at a profit for the
benefit of all parties.”  He stated he
had personally advanced funds to pay immediate expenses.  He attached his billings for June and July
(through the 20th), which totaled $4,340 and $4,050 respectively, increasing
the total billings by respondent to $23,376.

          Before this
motion could be heard, the Bakery petitioned for Chapter 11 reorganization.  Respondent turned over the business and any
remaining funds in his possession to the debtor-in-possession.href="#_ftn7" name="_ftnref7" title="">[7]

 

          D.  First
Motion for Order Approving and Settling Final Report and
Accounting


          On September
9, 2011, respondent moved for an order approving and settling his final report
and accounting.  This initial motion
indicated the Bakery was still in Chapter 11 bankruptcy, that the defendant was
in possession of the business and that respondent had therefore “fulfilled his
duties and should be discharged.” 
Respondent calculated his total unpaid fees and expenses to be $28,951,
of which only $1,468.34 had been paid from Bakery operations, leaving a
$27,482.76 balance.href="#_ftn8" name="_ftnref8"
title="">[8]  Respondent requested that appellant be
ordered to pay the balance of his fees and expenses. 

          Appellant
opposed, contending respondent had failed to fulfill his “primary duty” of
paying appellant the proceeds from business operations or obey the portion of
the order requiring funds to be forwarded to appellant’s counsel bi-monthly.  Appellant contended that respondent knew early
on that the Bakery would be unable to meet its financial obligations and
satisfy appellant’s judgment, but that he nonetheless continued to operate the
business and “squandered” the funds collected.  Appellant also objected to specific aspects of
respondent’s fee request.  He contended
that retaining an attorney and incurring attorney fees had not been properly approved
and that the $150 hour charge for support staff was unapproved and unwarranted.href="#_ftn9" name="_ftnref9" title="">[9]  Appellant contended that, in any event, the
motion could not go forward, because the bankruptcy court had exclusive
jurisdiction over whether respondent’s fee was reasonable and whether any
disbursements made by respondent were in violation of the Bankruptcy Code,
requiring respondent to obtain relief from the bankruptcy stay. 

          Respondent
agreed that the automatic stay resulting from the second bankruptcy petition
precluded the trial court from ruling on respondent’s request and withdrew the
motion.

 

          E.  Second
Motion for Order Approving and Settling Final Report and        Accounting


          On
February 21, 2012, respondent filed a second motion for an order approving and
settling his final report and accounting.  Respondent presented evidence of having
obtained relief from the bankruptcy stay. 
Respondent included additional billings through February 2012 of $4,565,
roughly $2,000 of which was incurred in reviewing appellant’s opposition to the
first motion and drafting the second motion. 
At the time of the second motion, respondent sought $32,956 for his fees
and expenses and an additional $2,074 billed by ECJ.href="#_ftn10" name="_ftnref10" title="">[10]

          The moving
papers responded to the contentions raised in appellant’s opposition to the
initial motion.  With respect to appellant’s
contention that respondent had not complied with the February 2 order governing
retention of counsel, respondent presented evidence that appellant had been on
notice since early 2011 that ECJ had been hired as respondent’s general
counsel.href="#_ftn11" name="_ftnref11"
title="">[11]  With respect to the contention that
respondent had not complied with his duties under the February 2 order, the moving
papers explained why appellant was “misguided” in thinking respondent could
perform his duties of preserving and maintaining the Bakery if all funds
collected were forwarded directly to appellant or his counsel:  sending all income received to appellant
“would have forced [respondent] to close the doors of the [Bakery] immediately
upon taking it over, without being able to analyze the viability of the [Bakery],
let alone managing, controlling, and preserving the [Bakery].”  Respondent explained that many tasks necessary
to operating and evaluating the Bakery were assigned to his associates and
support staff to avoid having him bill time to perform them at $250 per hour.

          Appellant
opposed the second motion, again contending respondent should be surcharged or
have his fees reduced due to “misconduct [and] mismanagement.”  Appellant continued to assert that respondent
had failed to comply with his obligation under the order to forward monies
received from operation of the Bakery to appellant’s counsel on a bi-monthly
basis.  Appellant faulted respondent for
returning funds to the defendants after the Chapter 11 bankruptcy was filed and
contended all fees incurred after July 20, 2011 (the date of the application
for a shut-down order) were unreasonable and unauthorized.  Appellant continued to protest the $150 per
hour charged for respondent’s support staff and the assessment of attorney
fees.

          Appellant’s
counsel did not appear at the hearing. 
Addressing appellant’s objections, respondent’s counsel explained that
the order required him to “to manage, control, care, preserve, maintain, et
cetera, the business,” and that it would have been impossible to comply with
the order to operate the business if “every penny [went] immediately to
[appellant].”  The court agreed that
respondent could not have “simply siphon[ed] off, for the benefit of
[appellant], funds that need[ed] to go to pay payroll and things that the
business [was] obligated to pay by law.”  The court’s order approved the final report
and accounting and required appellant to pay fees and costs in the amount of $32,956.36,
plus the outstanding legal fees to ECJ in the amount of $2,074.45.href="#_ftn12" name="_ftnref12" title="">[12]  This appeal followed.

 

>DISCUSSION

          A receiver may
be appointed where there are grounds to believe that a judgment debtor has
control of property which rightfully should be subject to execution but which
cannot be reached by an ordinary levy.  (>Morand v. Superior Court (1974) 38
Cal.App.3d 347, 350.)  The instructions
contained in a court’s order are the receiver’s “procedural directions,” and
while they are binding on the receiver, they do not affect the substantive
rights of the parties.  (>Lesser & Son v. Seymour (1950) 35
Cal.2d 494, 499.)  As against third
parties, the receiver has no greater rights to the judgment debtor’s property than
the judgment creditor would have.  (>Morand v. Superior Court, >supra, 38 Cal.App.3d at p. 350.)  A receiver is considered “an agent and officer
of the appointing court . . . not an agent of any particular
party to the action,” and as such “represents all persons interested in the
property.”  (City of Santa Monica v. Gonzalez (2008) 43 Cal.4th 905, 930.) 

          “Receivers are
entitled to compensation for their own services and the services performed by
their attorneys.  [Citation.]  Generally, the costs of a receivership are
paid from the property in the receivership estate.  [Citation.]  However, courts may also impose the receiver
costs on a party who sought the appointment of the receiver or ‘“apportion them
among the parties, depending upon circumstances.”’  [Citation.]  Courts are vested with broad discretion in
determining who is to pay the expenses of a receivership, and the court’s
determination must be upheld in the absence of a clear showing of an abuse of
discretion.  [Citations.]”  (City
of Chula Vista v. Gutierrez
(2012) 207 Cal.App.4th 681, 685-686.)

          The functions
and powers of a receiver are controlled by the applicable statutes, the order
appointing him or her, and by any order subsequently made by the court.  (Morand
v. Superior Court
, supra, 38
Cal.App.3d at p. 351.)  Moreover, “[w]hen
a receiver does not give proper attention to the conduct of a business,
neglects and mismanages it, he may be refused compensation for his services” or
surcharged for excessive fees taken out of the property or business.  (2 Clark, Law of Receivers (3d ed. 1959), § 641
(g), p. 1098; see Aviation Brake Systems,
Ltd. v. Voorhis
(1982) 133 Cal.App.3d 230, 235 [“[T]he receiver in his
personal capacity may be surcharged for losses to the receivership estate based
upon his misconduct or mismanagement.”]; Credit
Managers Assn. v. Kennesaw Life & Accident Ins. Co
. (9th Cir. 1994) 25
F.3d 743, 751 [“[A] receiver can be held personally liable for his misconduct
or mismanagement of the receivership estate.”].) 

          Appellant
contends respondent was not entitled to fees due to mismanagement and failure
to comply with the court’s order.  He
further contends that ordering him to pay respondent’s fees and expenses was
error.  Finally, he contends that specific
items charged by the receiver were improper or unreasonable.  We conclude he has demonstrated no abuse of
discretion.

 

          A.  Respondent’s
Entitlement to Fees


          With
respect to the alleged mismanagement, appellant essentially faults respondent for
failing to shut down the business and sell its assets -- or seek a shut-down
order -- earlier than July 20, 2011.  We
disagree.  As receiver, respondent could
not been expected to shut down the business and sell off its assets prior to
(1) determining whether the business could be operated to produce sufficient
income to pay its operating expenses and appellant’s judgment, and (2) evaluating
its assets for possible sale.  Based on
the record, the trial court could reasonably find that the roughly two-month
period respondent expended in determining whether the business was viable and
evaluating its assets was not excessive.

          The record
reflects that respondent was unable to take over operations of the Bakery and
begin his evaluation of its financial status until May 4.  By mid-May, respondent reported making
progress in understanding the Bakery’s financial picture and had hired a
professional appraiser to evaluate its furnishings and equipment.  Within weeks, he had laid off employees to
reduce expenses and put a qualified manager in control of the day-to-day
operations.  When those initial measures
failed to produce sufficient income to pay both the immediate costs of operating
the business and the debt to appellant, he recommended waiting until July 15 to
determine if the defendants would offer a settlement.  That did not occur, and he filed the
application for a shut-down order July 20. 
In the meantime, Asset Reliance, Inc. completed its evaluation of the furnishings
and equipment and determined there would be some value once lienholders were
paid.href="#_ftn13" name="_ftnref13" title="">[13]  All of this activity took place within
approximately two months. 

          The fact that
respondent was unable to generate sufficient income from the Bakery’s
operations to pay himself or appellant was not proof of mismanagement.  The business’s expenses simply outweighed its
ability to produce income, particularly when incurring the additional costs of
a receivership.  The trial court
reasonably concluded that the allegations of mismanagement did not represent
sufficient ground to deny respondent compensation.

          Appellant’s alternate
contention is that respondent should not have been compensated because he failed
to strictly comply with the instructions in the February 2 order with respect
to priority of payment.  As discussed, respondent
was told his “primary duty” as receiver was “to treat [appellant] as the first
creditor to whom payments of any monies shall be made from the business
operations.”  He was also told to “incur
the expenses necessary” to “manage, control, care for, preserve, [and]
maintain” the Bakery’s business operations, and was specifically empowered to
employ labor, purchase supplies and pay day-to-day expenses.  The only reasonable interpretation of the
order is that appellant would be paid out of income from operations after the
immediate costs of generating that income were paid.  Respondent could not have performed his
duties of preserving and maintaining the Bakery if every dollar collected had
been forwarded to appellant.  Moreover,
in his position as an agent of the court, a receiver could not be expected to
exploit current employees and suppliers in order to pay appellant’s
judgment.  During the approximately two
months respondent operated the business, he paid out the minimum necessary to
keep the doors open and produce income, primarily paying suppliers, employee
salaries, and certain labor-related expenses, plus the costs of security.  All other significant creditors went
unpaid.  This represented a reasonable
interpretation of and compliance with the court’s order.  (See 2 Clark, Law of Receivers, >supra, § 396(j), p. 684 [“Within the
limitations set out by the court’s order the receiver must necessarily have a
discretion and must exercise his best judgment. 
In such a situation if the receiver obey[s] the court’s order and keep[s]
within the fair and reasonable implications of the order, he will not be liable
for failures.”].)  Appellant’s alternate
interpretation of the order -- that respondent should have generated new debt in
order to pay off old -- was properly rejected by the trial court, who agreed
that respondent had fairly interpreted and complied with the court’s
instructions.

 

          B.  Imposing
Fees on Appellant


          Appellant
cites authority for the proposition that liability for the expenses and fees of
a receivership should not be placed on a plaintiff who has properly obtained
the appointment of a receiver and has established his cause of action.href="#_ftn14" name="_ftnref14" title="">[14]  (See Smith
v. Hill
(1965) 237 Cal.App.2d 374, 387.) 
The majority of courts place no such restriction on the trial court’s
discretion.  (See, e.g., >City of Chula Vista v. Gutierrez, >supra, 207 Cal.App.4th at pp. 685-686; >McCarthy v. Poulsen (1985) 173 Cal.App.3d
1212, 1219-1220, fn. 3.)  “‘As a general
proposition the costs of a receivership are primarily a charge upon the
property in the receiver’s possession and are to be paid out of said
property.  However, this is not an
invariable rule.  In many cases a direct
liability is imposed upon the parties to the action, or upon some of them, for
the remuneration of the receiver.’”  (>Baldwin v. Baldwin (1947) 82 Cal.App.2d 851,
855, italics omitted, quoting Andrade v.
Andrade
(1932) 216 Cal. 108, 110.) 

          Here, the
court concluded that in the absence of any viable alternative for remunerating
the receiver appellant had sought to have appointed, the costs of the
receivership should fall on appellant. 
Not only was appellant the party who requested that a receiver be
appointed, but his attorney personally selected respondent to be the receiver
and was in close communication with him throughout the href="http://www.fearnotlaw.com/">post-judgment proceedings.  We cannot say the court’s decision
represented an abuse of discretion. 

 

          C.  Reasonableness
of Fees


          Appellant
contends the total amount respondent charged for his services was unreasonable,
specifically the fees incurred in preparing two requests for an order approving
and settling his final report and accounting, the attorney fees for ECJ, and
the fees for support staff.  “The amount
of fees awarded to a receiver is ‘in the sound discretion of the trial court
and in the absence of a clear showing of an abuse of discretion, a reviewing
court is not justified in setting aside an order fixing fees.’”  (Melikian
v. Aquila, Ltd
. (1998) 63 Cal.App.4th 1364, 1368.)  “[T]he trial court is ‘in a better position
to know the necessity for the services performed by the receiver and his
attorney and to assess their reasonable value’ [citation] than is a reviewing
court.”  (Venza v. Venza (1951) 101 Cal.App.2d 678, 680, quoting >Kan v. Tsang (1949) 90 Cal.App.2d 538,
541.) 

          Respondent
presented sufficient information in the form of detailed billing statements for
the court to determine that the fees and expenses incurred, including the
charges for support staff, were reasonable overall.  By engaging in litigation over every aspect
of the fees charged during the operation of the Bakery, appellant and his
counsel were responsible in large part for the fact that the fees continued to
rise after the Bakery was placed in the hands of the bankruptcy court.  The court did not abuse its discretion in
concluding that the fees were reasonable or in refusing to exclude the specific
items to which appellant objected.href="#_ftn15" name="_ftnref15" title="">[15] 

DISPOSITION

          The
order is affirmed.  Respondent is awarded
costs on appeal.

          NOT
TO BE PUBLISHED IN THE OFFICIAL REPORTS


 

 

 

 

                                                                   MANELLA,
J.

 

We
concur:

 

 

 

 

EPSTEIN,
P. J.

 

 

 

 

WILLHITE,
J.

 





id=ftn1>

href="#_ftnref1"
name="_ftn1" title="">[1]           The judgment was also entered jointly
and severally against Hae Duk Kim and Mee Young Lee, individually and doing
business as the Bakery.  None of the
judgment debtors are parties to this appeal.  

id=ftn2>

href="#_ftnref2"
name="_ftn2" title="">[2]           Section 17203 of the Business and
Professions Code permits the appointment of a receiver “as may be necessary to prevent
the use or employment by any person of a practice which constitutes unfair
competition, as defined in [Chapter 5 of the Business and Professions Code], or
as may be necessary to restore to any person in interest any money or property,
real or personal, which may have been acquired by means of such unfair competition.”

id=ftn3>

href="#_ftnref3"
name="_ftn3" title="">[3]           Appellant’s application contained no
information about the Bakery or its operations. 
Nor did it explain why appellant believed the Bakery would generate
sufficient income to pay his judgment and the costs of a receivership.

id=ftn4>

href="#_ftnref4"
name="_ftn4" title="">[4]           Within two weeks of taking over as
receiver, respondent had written appellant’s counsel that he was “trying to get
[his] hands around the financials of the business” and had been “using a lot of
sources to get control . . . and keep all the equipment from disappearing,”
including 24-hour security and “a great deal of [his] staff and [his]
time.”  He reported hiring a professional
equipment appraiser.  He stated that the
defendants had been paying $9,300 to investors, and that he “need[ed] to
consult with [his] Counsel to see if they still need[ed] to be paid prior to
[appellant’s] payment.”  On June 10,
respondent informed appellant’s counsel that he had terminated some Bakery
employees, but said he could not cut any more without experiencing an increase
in overtime wages, and further stated that there was a “qualified operations
manager in place” whose monthly salary was $4,000.  On July 7, the appraiser hired by respondent,
Asset Reliance, Inc., completed its report on the forced liquidation value of
the Bakery’s furniture, fixtures and equipment. 
A few days prior to filing the initial report, respondent emailed
appellant’s counsel that because “[a]ll the equipment, furniture and fixtures
[were] encumbered with loans,” the best prospect for recovering on appellant’s
judgment was to keep the business open until July 15th, in case the defendants
prevailed in a related bankruptcy and offered appellant a settlement.  If that did not occur, the only option would
be to “clos[e] the business.” 

id=ftn5>

href="#_ftnref5"
name="_ftn5" title="">[5]           The majority of the time was expended
in May.  The billing for that month
totaled $12,258.07. 

id=ftn6>

href="#_ftnref6"
name="_ftn6" title="">[6]           The $124,005 also included
approximately $10,000 for miscellaneous expenses, including security, repairs
and maintenance, accounting and professional services, and utilities.  Security for the period cost approximately
$3,800.

id=ftn7>

href="#_ftnref7"
name="_ftn7" title="">[7]           Appellant criticizes respondent for
turning over the funds in the receivership when the July petition for Chapter
11 bankruptcy was filed.  A custodian,
including a state court-appointed receiver, who has knowledge of the
commencement of a bankruptcy is “barred from taking any further action in the
administration of the debtor’s property and must deliver to the debtor any
assets of the estate in his possession at the time he learns that a bankruptcy
case was filed.”  (In re Lizeric Realty Corp. (Bankr. S.D.N.Y. 1995) 188 B.R. 499,
506.)

id=ftn8>

href="#_ftnref8"
name="_ftn8" title="">[8]           The final billing for July indicated
an additional $5,400 in fees had been incurred, primarily to draft the motion
for order approving and settling the final report and accounting.  There were no billings for August or September
included.  Apart from the time expended
preparing the motion, respondent described generally the work he had performed
during his tenure as receiver as serving the parties with the appointing order,
conducting a site inspection, opening bank accounts, reviewing the books and
records, conducting an inventory, meeting with employees to determine staffing
needs, performing a financial analysis, negotiating with creditors,
implementing a security plan, obtaining an appraisal of assets, reviewing
public records, monitoring the cash flow and books on a daily basis,
communicating with counsel, and drafting the request for instructions from the
court. 

id=ftn9>

href="#_ftnref9"
name="_ftn9" title="">[9]           Respondent’s initial motion did not
include a request for attorney fees. 
Appellant requested that the time respondent reported being engaged in
consultation with an attorney on his monthly billings -- approximately $900 --
be excluded. 

id=ftn10>

href="#_ftnref10"
name="_ftn10" title="">[10]         The statement from ECJ indicated that
fees were incurred in November and December 2011 obtaining relief from the
bankruptcy stay so that the second motion for an order approving and settling
the final report and accounting could be filed.

id=ftn11>

href="#_ftnref11"
name="_ftn11" title="">[11]         Respondent attached emails sent to
appellant’s counsel in February and May 2011 in which respondent discussed
having consulted an attorney about various bankruptcy issues. 

id=ftn12>

href="#_ftnref12"
name="_ftn12" title="">[12]         Appellant’s counsel later sought relief
under Code of Civil Procedure section 473, contending he had intended to appear
at the hearing, but had miscalendared the date. 
The court denied the motion, observing that it had ruled on the motion
for an order approving and settling the final report and accounting on its
merits, and that its ruling was not affected by appellant’s counsel’s failure
to appear. 

id=ftn13>

href="#_ftnref13"
name="_ftn13" title="">[13]         The estimated value after taking liens
into account was approximately $15,000.

id=ftn14>

href="#_ftnref14"
name="_ftn14" title="">[14]         We note that appellant’s application for
appointment of a receiver -- which was essentially granted without opposition --
did not comply with the requirements of the California Rules of Court governing
the appointment of receivers.  Rule
3.1175 requires an applicant to show “the nature of the emergency and the
reasons irreparable injury would be suffered by the applicant during the time
necessary for a hearing on notice” and “the nature and approximate size or
extent of the business and facts sufficient to show whether the taking of the
property by a receiver would stop or seriously interfere with the operation of
the business.”  (Cal. Rules of Court,
rule 3.1175 (a)(1) & (4).)  Appellant
provided no such information.

id=ftn15>

href="#_ftnref15"
name="_ftn15" title="">[15]         The second motion for order approving
and settling the final report was necessitated by the need to obtain relief
from the bankruptcy stay.  In preparing
the second motion, respondent did not duplicate his previous work, but made an
effort to respond to the objections appellant had raised in his opposition to
the original motion, including the objection to the retention of counsel and
the objection to placing the costs of the receiver on appellant.  With respect to the attorney fees incurred by
ECJ, although respondent failed to strictly comply with the procedures outlined
in the February 2 order, the record reflects that respondent informed
appellant’s counsel as early as February 2011 that he was consulting with a
bankruptcy lawyer.  Appellant raised no
objection, and respondent was entitled to presume that he had none.








Description Appellant Sung J. Lee appeals the trial court’s order approving and settling the final report and accounting of the receiver, respondent Kevin Singer, and approving final compensation for respondent. Appellant contends the court abused its discretion in requiring him to pay the fees and expenses incurred by respondent in taking over and operating a business owned by appellant’s judgment debtor, which generated insufficient income to provide either a recovery for appellant or payment to respondent. Finding no abuse of discretion, we affirm.
Rating
0/5 based on 0 votes.

    Home | About Us | Privacy | Subscribe
    © 2025 Fearnotlaw.com The california lawyer directory

  Copyright © 2025 Result Oriented Marketing, Inc.

attorney
scale