Not Dead Yet ...

S. Cal. Sunbelt Developers v. Banyan Ltd. P'ship, No. G051260 (D4d3 Feb. 16, 2017)

This dispute over a joint venture has been going on for twenty years. A receiver was ultimately appointed to wind the thing down. At the bitter end, one question remained: Who pays?

The order appointing the receiver was appealed and affirmed. As is customary for receiverships, it ordered the receiver to be paid out of the estate. But now, at the end of the case, the prevailing party seeks to shift the receivership expenses as a cost under Code of Civil Procedure §§ 1032 and 1033.5. That raises two issues: 1. Does collateral estoppel bar the argument, because the court’s appointment order was already affirmed? And 2. are receivership expenses shift-able costs under the CCP?

On the first question, the court goes through a lengthy discussion about the law that governs payment of receivership costs. They are generally paid out of the res, because the parties don’t control the receiver, whose work is for the benefit of the estate. But there are a bunch of equitable exceptions to that rule, many of which arise during the course of the receivership, not at the beginning. Under those circumstances, it can’t be said that the exceptions are necessarily decided at the time of the appointment, so collateral estoppel shouldn’t apply.

On the second, § 1032 says that a prevailing party can recover its costs. Section 1033.5 then defines what counts as a cost. It includes stuff that is always a cost, as well as stuff that can be considered to be a cost in the trial court’s discretion. Pertinent here, § 1033.5(c)(4) includes a catchall  that “[i]tems not mentioned in this section and items assessed upon application may be allowed or denied in the court’s discretion.” This provision has been used to shift fees for various court-appointed assistants, such as referees, special masters, and arbitrators. And the court here holds—as a seeming matter of first impression—that § 1033.5(c)(4) gives the trial court a procedural vehicle to shift receivership fees consistent with the equitable doctrines in the law of remedies that permit fee-shifting as a matter of substance.

Which means the case has to go back to the trial court once again, to apply these standards to the receivership costs.

Reversed and remanded.