Southern Cal. Sunbelt v. Banyan Limited etc. 2/16/17, 4DCA/3
This case has been going on for about 20 years, involves too many parties to count (including a disbarred lawyer), four trials, two writs and seven appeals – Basically a train wreck, and therefore a must read. It was a good call — this case contains an issue of first impression: Whether the trial court has the authority, under receivership law and Code of Civ. Proc. 1033.5, to tag the losing party with the costs of a receiver ($218,000 in this case). Under receivership law, the receivership estate usually must pay for the costs of a receiver. Moreover, section 1033.5 does not list receivership costs as either an allowed or a prohibited cost. In 2007, a prior trial judge essentially ordered that receivership property would be used to pay for the receiver. On the basis of the prior judge’s order, in 2014, the current trial judge said that it was without authority to award receiver’s costs to the prevailing party. It therefore granted the losing party’s motion to tax costs. Held: Reversed.
Receivership Law
As a general rule, receivership costs are paid from the receivership estate; but the court has broad discretion to place receivership costs on on a party who sought the appointment or to “apportion them among the parties, depending upon circumstances.” The exceptions to the general rule are extensive and turn on various factors – e.g., whether there are sufficient assets in the estate, the litigation conduct of the parties, the merits of the asserted claims, the benefits the parties received by having a receiver, and the relative equities involved. Finally, the fact that a prior trial judge allowed and/or approved that costs being paid from the receivership estate did not bar a subsequent shifting of those costs. A receivership is a provisional remedy and orders concerning their appointment, conduct, discharge and accountings are interim orders.
Ca Code of Civ. Proc 1033.5 and the Issue of First Impression
Section 1033.5 was enacted in 1986 and codified existing case law and set forth the items of costs which may or may not be recoverable in a civil action, including an item not specifically allowable under subdivision (a) nor prohibited under subdivision (b) may nevertheless be recoverable in the discretion of the court if “reasonably necessary to the conduct of the litigation rather than merely convenient or beneficial to its preparation.” Courts have held that costs associated with court-appointed assistants, referees, special masters and even mediators can be recovered under 1033.5(c) and charged against the losing party. 4DCA said that the legal rationale permitting cost awards for referees and mediators should also apply to court-appointed receivers. Receivers are agents of the court not of the parties, and they hold the assets for the court not the parties. Therefore, they can be reasonably necessary to the conduct of the litigation.