2 FILED & ENTERED
4 SEP 13 2022
CLERK U.S. BANKRUPTCY COURT 6 C Be Yn b t r a a k l c D h i es lt l r i c Dt E o Pf UC Ta Yli f Cor Ln Eia RK 7 NOT FOR PUBLICATION 8 UNITED STATES BANKRUPTCY COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 LOS ANGELES DIVISION 11 Case No. 2:12-bk-16195-RK 12 In re: Chapter 7 13 DAVID A. WILSON, Adv. No. 2:12-ap-01317-RK 14 Debtor. ORDER DENYING MOTION FOR 15 APPOINTMENT OF RECEIVER AND 16 TEMPORARY RESTRAINING ORDER REGARDING REAL PROPERTY LOCATED 17 AT 24352 SANTA CLARA AVENUE, DANA POINT, CA 92629 18
19 THOMAS I. MCKNEW, IV, et al., Hearing 20 Date: September 13, 2022 Plaintiffs, Time: 2:30 p.m. 21 vs. Place: Courtroom 1675 22 (and via ZoomGov) DAVID A. WILSON, Roybal Federal Building 23 255 East Temple Street Defendant. Los Angeles, CA 90012 24
25 This adversary proceeding came on for hearing on September 13, 2022 before 26 the undersigned United States Bankruptcy Judge on Judgment Creditor Thomas I. 27 McKnew, IV’s Motion for Appointment of Receiver and Temporary Restraining Order 28 1 || Regarding Real Property Located at 24352 Santa Clara Avenue, Dana Point, CA 92629 2 || (Docket No. 699). Michael Wallin, of the law firm of Wallin & Russell, LLP, appeared for 3 || Movant Thomas |. McKnew, IV. Roger B. Frederickson, of the law firm of Frederickson 4 Hamilton, LLP, appeared for Respondent and Interested Party Beata Wilson. 5 || Christopher A. Dias, Attorney at Law, appeared for Respondent David A. Wilson, 6 || Debtor. Having considered the moving and opposing papers and the oral arguments of 8 the parties, the court denies the motion without prejudice for the reasons stated in the 9 court’s tentative ruling posted on the court’s website before the hearing (copy of text of 10 the tentative ruling is attached hereto) and for the reasons stated on the record at the 11 hearing. 12 13 IT |S SO ORDERED.
14 Hitt 15 16 17 18 19 20 21 22 23
25 Date: September 13, 2022 26 United States Bankruptcy Judge 27 28
1 ATTACHMENT – TENTATIVE RULING 2 Updated tentative ruling as of 9/9/22.
3 Regarding judgment creditors’ motion for appointment of a receiver and temporary 4 restraining order, the court must first address whether it has jurisdiction to appoint a receiver as 11 U.S.C. § 105(b) states: "Notwithstanding subsection (a) of this section, a 5 court may not appoint a receiver in a case under this title." No party raised this 6 jurisdictional question, but the court must examine its jurisdiction on its own. This court has recently held by Judge Wallace that based on the plain language of 11 U.S.C. § 7 105(b), it does not have jurisdiction to appoint a receiver not just for the entire 8 bankruptcy case, but any portion of the bankruptcy case, including adversary proceedings. In re Halvorsen, 607 B.R. 680 (Bankr. C.D. Cal. 2019) (Wallace, J.). 9 However, the weight of authority construes 11 U.S.C. § 105(b) differently and holds that its language "a case under this title" applies to the entire bankruptcy case only as 10 opposed to adversary proceedings. In re Memorial Estates, Inc., 797 F.2d 516 (7th Cir. 11 1986); Craig v. McCarty Ranch Trust (In Cassidy Land & Cattle Co.), 836 F.2d 1130 (8th Cir. 1988); In re Kellogg-Taxe, No. 2:12-bk-51208-RN, 2014 WL 1329822 (Bankr. 12 C.D. Cal. Mar. 28, 2014) (Neiter, J.); 2 Levin and Sommer, Collier on Bankruptcy, ¶ 13 105.06 (online edition 2022) (observing the legislative history of the 1978 Bankruptcy Code for Section 105(b) was not to allow circumvention of established procedures for 14 administering a bankruptcy estate through appointment of trustees by appointing 15 receivers). Although the court is inclined to follow the weight of authority on this issue, the court felt it necessary to raise the issue since it is jurisdictional, and the parties 16 should have the opportunity to address this jurisdictional issue. 17 The court is tentatively inclined to hold that it has jurisdiction under applicable state law 18 to entertain a claim for relief to appoint a receiver to enforce the judgment under California Code of Civil Procedure §§ 564(b)(4) and 708.620 and Federal Rule of Civil 19 Procedure 69(a), made applicable to this adversary proceeding by Federal Rule of 20 Bankruptcy Procedure 7069. 21 However, the recent opinion of the California Court of Appeal in Medipro Medical Staffing LLC v. Certified Nursing Registry, Inc., 60 Cal.App.5th 622, 628 (2021) 22 regarding appointment of receiver to enforce a money judgment is instructive: "Because 23 the appointment of a receiver transfers property—or, in this case, a business—'out of the hands of its owners’ and into the hands of a receiver, the appointment of a receiver 24 is a very ‘drastic,’ ‘harsh,’ and costly remedy that is to be ‘exercised sparingly and with 25 caution.’" Id., citing inter alia, Golden State Glass Corp. v. Superior Court, 13 Cal.2d 384, 393 (1939). 26 The court in Medipro Staffing also stated: "Due to the ‘extraordinary’ nature of this 27 remedy and the special costs it imposes, courts are strongly discouraged—although not 28 strictly prohibited—from appointing a receiver unless the more intrusive oversight of a receiver is a ‘necessity’ because other, less intrusive remedies are either ‘inadequate or 1 unavailable.’" Id. (citation omitted). The court further stated: "In light of the sheer number of enforcement mechanisms for collecting money judgments under the 2 Enforcement of Judgments Law (which range from levies to liens to wage garnishment 3 (§§ 695.010 et seq., 697.010 et seq., 699.010 et seq., 699.510 et seq., 706.020 et seq.); . . . appointment of a receiver is rarely a ‘necessity’ and, as a consequence, ‘may 4 not ordinarily be used for the enforcement of a simple money judgment.’" Id., citing inter 5 alia, White v. White, 130 Cal. 597, 599, 62 P. 1062 (1900). Moreover, the court stated: "Instead, the appointment of a receiver to enforce a money judgment is reserved for 6 ‘exceptional’ circumstances where the judgment creditor's conduct makes a receiver 7 necessary—and hence ‘proper.’ This occurs when the judgment debtor has frustrated the judgment creditor's collection efforts through obfuscation or through otherwise 8 contumacious conduct that has rendered feckless the panoply of less intrusive 9 mechanisms for enforcing a money judgment." Id., citing inter alia, Bruton v. Tearle, 7 Cal.2d 48, 52, 59 P.2d 953 (1936) (debtor "entered into a conspiracy" with his employer 10 to arrange wage payments in a manner that "defeat[ed] the collection" of judgment; 11 receiver appropriate); City and County of San Francisco v. Daley, 16 Cal.App.4th 734, 744 (1993) (debtors transferred title of property "to avoid responsibility" and "thumb[ ] 12 their noses" at creditor's inspection efforts; receiver appropriate). 13 "[S]ince a receivership is an equitable remedy, the equitable considerations in an 14 injunction proceeding apply—i.e., there must be a showing of irreparable injury and inadequacy of other remedies." Edmon and Karnow, Rutter Group California Practice 15 Guide: Civil Procedure Before Trial, ¶ 9:759 (online edition, June 2022 update), citing Alhambra-Shumway Mines, Inc. v. Alhambra Gold Mine Corp., 116 Cal.App.2d 869, 16 872, 254 P2d 599, 602 (1953).
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2 FILED & ENTERED
4 SEP 13 2022
CLERK U.S. BANKRUPTCY COURT 6 C Be Yn b t r a a k l c D h i es lt l r i c Dt E o Pf UC Ta Yli f Cor Ln Eia RK 7 NOT FOR PUBLICATION 8 UNITED STATES BANKRUPTCY COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 LOS ANGELES DIVISION 11 Case No. 2:12-bk-16195-RK 12 In re: Chapter 7 13 DAVID A. WILSON, Adv. No. 2:12-ap-01317-RK 14 Debtor. ORDER DENYING MOTION FOR 15 APPOINTMENT OF RECEIVER AND 16 TEMPORARY RESTRAINING ORDER REGARDING REAL PROPERTY LOCATED 17 AT 24352 SANTA CLARA AVENUE, DANA POINT, CA 92629 18
19 THOMAS I. MCKNEW, IV, et al., Hearing 20 Date: September 13, 2022 Plaintiffs, Time: 2:30 p.m. 21 vs. Place: Courtroom 1675 22 (and via ZoomGov) DAVID A. WILSON, Roybal Federal Building 23 255 East Temple Street Defendant. Los Angeles, CA 90012 24
25 This adversary proceeding came on for hearing on September 13, 2022 before 26 the undersigned United States Bankruptcy Judge on Judgment Creditor Thomas I. 27 McKnew, IV’s Motion for Appointment of Receiver and Temporary Restraining Order 28 1 || Regarding Real Property Located at 24352 Santa Clara Avenue, Dana Point, CA 92629 2 || (Docket No. 699). Michael Wallin, of the law firm of Wallin & Russell, LLP, appeared for 3 || Movant Thomas |. McKnew, IV. Roger B. Frederickson, of the law firm of Frederickson 4 Hamilton, LLP, appeared for Respondent and Interested Party Beata Wilson. 5 || Christopher A. Dias, Attorney at Law, appeared for Respondent David A. Wilson, 6 || Debtor. Having considered the moving and opposing papers and the oral arguments of 8 the parties, the court denies the motion without prejudice for the reasons stated in the 9 court’s tentative ruling posted on the court’s website before the hearing (copy of text of 10 the tentative ruling is attached hereto) and for the reasons stated on the record at the 11 hearing. 12 13 IT |S SO ORDERED.
14 Hitt 15 16 17 18 19 20 21 22 23
25 Date: September 13, 2022 26 United States Bankruptcy Judge 27 28
1 ATTACHMENT – TENTATIVE RULING 2 Updated tentative ruling as of 9/9/22.
3 Regarding judgment creditors’ motion for appointment of a receiver and temporary 4 restraining order, the court must first address whether it has jurisdiction to appoint a receiver as 11 U.S.C. § 105(b) states: "Notwithstanding subsection (a) of this section, a 5 court may not appoint a receiver in a case under this title." No party raised this 6 jurisdictional question, but the court must examine its jurisdiction on its own. This court has recently held by Judge Wallace that based on the plain language of 11 U.S.C. § 7 105(b), it does not have jurisdiction to appoint a receiver not just for the entire 8 bankruptcy case, but any portion of the bankruptcy case, including adversary proceedings. In re Halvorsen, 607 B.R. 680 (Bankr. C.D. Cal. 2019) (Wallace, J.). 9 However, the weight of authority construes 11 U.S.C. § 105(b) differently and holds that its language "a case under this title" applies to the entire bankruptcy case only as 10 opposed to adversary proceedings. In re Memorial Estates, Inc., 797 F.2d 516 (7th Cir. 11 1986); Craig v. McCarty Ranch Trust (In Cassidy Land & Cattle Co.), 836 F.2d 1130 (8th Cir. 1988); In re Kellogg-Taxe, No. 2:12-bk-51208-RN, 2014 WL 1329822 (Bankr. 12 C.D. Cal. Mar. 28, 2014) (Neiter, J.); 2 Levin and Sommer, Collier on Bankruptcy, ¶ 13 105.06 (online edition 2022) (observing the legislative history of the 1978 Bankruptcy Code for Section 105(b) was not to allow circumvention of established procedures for 14 administering a bankruptcy estate through appointment of trustees by appointing 15 receivers). Although the court is inclined to follow the weight of authority on this issue, the court felt it necessary to raise the issue since it is jurisdictional, and the parties 16 should have the opportunity to address this jurisdictional issue. 17 The court is tentatively inclined to hold that it has jurisdiction under applicable state law 18 to entertain a claim for relief to appoint a receiver to enforce the judgment under California Code of Civil Procedure §§ 564(b)(4) and 708.620 and Federal Rule of Civil 19 Procedure 69(a), made applicable to this adversary proceeding by Federal Rule of 20 Bankruptcy Procedure 7069. 21 However, the recent opinion of the California Court of Appeal in Medipro Medical Staffing LLC v. Certified Nursing Registry, Inc., 60 Cal.App.5th 622, 628 (2021) 22 regarding appointment of receiver to enforce a money judgment is instructive: "Because 23 the appointment of a receiver transfers property—or, in this case, a business—'out of the hands of its owners’ and into the hands of a receiver, the appointment of a receiver 24 is a very ‘drastic,’ ‘harsh,’ and costly remedy that is to be ‘exercised sparingly and with 25 caution.’" Id., citing inter alia, Golden State Glass Corp. v. Superior Court, 13 Cal.2d 384, 393 (1939). 26 The court in Medipro Staffing also stated: "Due to the ‘extraordinary’ nature of this 27 remedy and the special costs it imposes, courts are strongly discouraged—although not 28 strictly prohibited—from appointing a receiver unless the more intrusive oversight of a receiver is a ‘necessity’ because other, less intrusive remedies are either ‘inadequate or 1 unavailable.’" Id. (citation omitted). The court further stated: "In light of the sheer number of enforcement mechanisms for collecting money judgments under the 2 Enforcement of Judgments Law (which range from levies to liens to wage garnishment 3 (§§ 695.010 et seq., 697.010 et seq., 699.010 et seq., 699.510 et seq., 706.020 et seq.); . . . appointment of a receiver is rarely a ‘necessity’ and, as a consequence, ‘may 4 not ordinarily be used for the enforcement of a simple money judgment.’" Id., citing inter 5 alia, White v. White, 130 Cal. 597, 599, 62 P. 1062 (1900). Moreover, the court stated: "Instead, the appointment of a receiver to enforce a money judgment is reserved for 6 ‘exceptional’ circumstances where the judgment creditor's conduct makes a receiver 7 necessary—and hence ‘proper.’ This occurs when the judgment debtor has frustrated the judgment creditor's collection efforts through obfuscation or through otherwise 8 contumacious conduct that has rendered feckless the panoply of less intrusive 9 mechanisms for enforcing a money judgment." Id., citing inter alia, Bruton v. Tearle, 7 Cal.2d 48, 52, 59 P.2d 953 (1936) (debtor "entered into a conspiracy" with his employer 10 to arrange wage payments in a manner that "defeat[ed] the collection" of judgment; 11 receiver appropriate); City and County of San Francisco v. Daley, 16 Cal.App.4th 734, 744 (1993) (debtors transferred title of property "to avoid responsibility" and "thumb[ ] 12 their noses" at creditor's inspection efforts; receiver appropriate). 13 "[S]ince a receivership is an equitable remedy, the equitable considerations in an 14 injunction proceeding apply—i.e., there must be a showing of irreparable injury and inadequacy of other remedies." Edmon and Karnow, Rutter Group California Practice 15 Guide: Civil Procedure Before Trial, ¶ 9:759 (online edition, June 2022 update), citing Alhambra-Shumway Mines, Inc. v. Alhambra Gold Mine Corp., 116 Cal.App.2d 869, 16 872, 254 P2d 599, 602 (1953). 17 As to the merits of the motion, the motion implicates the ownership rights of a nondebtor 18 third party, debtor’s spouse, Beata Wilson, who is now the sole title owner of the property and previously was a co-owner with the judgment debtor as joint tenants 19 according to the real property profile submitted by the judgment creditors (Exhibit E). 20 Maybe this is the exceptional situation where the judgment debtor has frustrated the judgment creditors’ collection efforts by an alleged post-judgment voidable transfer, but 21 the judgment debtor and the spouse assert that there was a benign reason for the 22 transfer as part of their negotiations with the senior lender. Since the property was previously titled as joint tenancy, there is a factual issue as to the characterization of the 23 property as community or noncommunity property that is not necessarily resolved by the 24 judgment creditors’ showing in their motion. 25 The court is inclined to deny the motion without prejudice because the relief sought to appoint a receiver is a drastic remedy, and in the court’s view, there are unresolved 26 issues regarding property characterization and the spouse’s rights in the property. The 27 spouse in her opposing papers asserts that much of the evidence in the motion was "stale and/or provided piecemeal and without context" (though the court notes that 28 neither opposing party offered any evidence of their own). 1 The court believes that the judgment creditors’ showing is inadequate at this time because: (1) proper title documents are lacking, i.e., there are no authenticated title 2 documents showing title in the judgment debtor and the spouse, such as the deed 3 showing how they acquired title, and title documents reflecting any change in their title until the quitclaim deed from the judgment debtor to the spouse, and the real property 4 profile is unauthenticated evidence of title that is hearsay; (2) the evidence is 5 inconclusive, if not, generally inadmissible, as to the danger of imminent foreclosure and sale by the senior lender based on the judgment debtor’s statements in the excerpt from 6 his judgment debtor examination to show irreparable injury; (3) the evidence is 7 inconclusive as to whether there was a fraudulent transfer of the judgment debtor’s interest in the property based on the judgment debtor’s statements excerpted from his 8 judgment debtor examination asserting benign reasons for the transfer; (4) the property 9 characterization issues are unresolved, that is, the debtor’s spouse might have had at least a 50% separate property joint tenancy interest not addressed in the motion (the 10 moving papers assume that the property is community property); (5) the evidence is 11 incomplete, and if not, inadmissible, regarding the valuation of the property and the liens and encumbrances on the property to show how much would be realized if a forced sale 12 to enforce the judgment is conducted (a Redfin estimate of value is not competent 13 evidence of value since the identity and qualifications of the Redfin appraiser are unknown, and a valuation opinion of a competent real property professional or appraiser 14 is preferred, Federal Rule of Evidence 702), and there is no evidence of valuation of the liens and encumbrances on the property, i.e., account statements or payoff amounts 15 from lenders); and (6) the showing of necessity to sell the property without compliance 16 with statutory provisions otherwise applicable to execution sales under California Code of Civil Procedure § 699.070(c) is not met here as the evidence that a foreclosure and 17 sale by the senior lender is inadequate. See Local Bankruptcy Rule 9013-1(i)(factual 18 contentions in motions must be supported by admissible evidence). The judgment creditors will need to address these issues in an amended motion before the court 19 would consider granting relief to appoint a receiver. 20 The court is inclined to sustain the objections of Beata Wilson to the declaration of 21 Thomas McKnew for on the grounds of lack of personal knowledge or foundation and hearsay, but deny the motion to strike portions of the motion for lack of legal authority. 22 The court is also inclined to deny the motion for temporary restraining order prohibiting 23 the debtor and his agents from engaging in or assisting further transfers as the 24 judgment creditors are protected by their previously recorded judgment lien pursuant to California Code of Civil Procedure § 697.310(a) and a restraining order against the 25 debtor and his agents would be ineffective since he already transferred his interest in 26 the property. 27 However, the court agrees with the judgment creditors that they are not required to bring an independent action to avoid the transfer to the spouse as they may rely upon 28 California Civil Code § 3439.07 to levy execution on the property. 1 Moreover, the court also agrees with the judgment creditors that property subject to their real property judgment lien that is transferred or encumbered without satisfaction of 2 the lien remains subject to the lien. California Code of Civil Procedure § 697.390(a); 3 see also, Longview International, Inc. v. Stirling, 35 Cal.App.5th 991 (2019); Dieden v. Schmitt, 104 Cal.App.4th 645, 651 (2002). 4 Appearances are required on 9/13/22, but counsel and self-represented parties must 5 appear in person or remotely through Zoom for Government in accordance with the 6 court's remote appearance instructions.
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