IN THE 

ARIZONA COURT OF APPEALS DIVISION ONE

PAUL MASHNI, Court-appointed receiver, Petitioner, 

v.

THE HONORABLE GEORGE H. FOSTER, Judge of the SUPERIOR 

COURT OF THE STATE OF ARIZONA, in and for the County of 

MARICOPA, Respondent Judge, 

SUNNYSLOPE HOUSING LIMITED PARTNERSHIP, an Arizona limited 

partnership; FIRST SOUTHERN NATIONAL BANK, Real Parties in 

Interest. 

No. 1 CA-SA 13-0250 

 

Petition for Special Action from the Superior Court in Maricopa County 

No. CV2010-028618 

The Honorable George H. Foster, Judge 

JURISDICTION ACCEPTED; RELIEF GRANTED 

COUNSEL 

Quarles & Brady LLP, Phoenix 

By John M. O’Neal, Walter J. Ashbrook 

Counsel for Petitioner 
2 

Lewis Roca Rothgerber LLP, Phoenix 

By Susan M. Freeman, Eric Wanner 

Counsel for Real Party in Interest Sunnyslope Housing Limited Partnership 

Gallagher & Kennedy, P.A., Phoenix 

By John R. Clemency, Janel M. Glynn 

Counsel for Real Party in Interest First Southern National Bank

OPINION 

Presiding Judge Peter B. Swann delivered the opinion of the Court, in 

which Judge Maurice Portley and Judge Samuel A. Thumma joined. 

S W A N N, Judge: 

¶1 This case requires us to examine the limits of the immunity 

afforded to court-appointed receivers. 

¶2 Receiver Paul Mashni petitions for special action relief from 

the superior court’s ruling denying him immunity from suit for alleged 

mismanagement of receivership assets. The court’s order permitting the 

damage action against Mashni to proceed was not based upon a finding 

that he had exceeded his powers under the order of appointment, but 

rather on the theory that a receiver can face liability if actions taken 

pursuant to the order cause a “material detriment” to any “interested 

party.” We accept jurisdiction and grant relief. We hold that a courtappointed receiver is immune from suit unless the appointing court finds 

that the receiver has acted outside the scope of the order of appointment. 

We further hold that the court cannot charge a receiver with a fiduciary 

duty to maximize economic benefit for adverse parties simultaneously. 

Finally, we hold that a party aggrieved by a receiver’s actions must 

promptly inform the court and seek its intervention before bringing an 

action for damages. 

FACTS AND PROCEDURAL HISTORY 

¶3 Since 2005, Sunnyslope Housing Limited Partnership 

(“Sunnyslope”) has been involved in the construction and operation of an 

apartment complex in Phoenix. Sunnyslope financed the construction 

with a senior private loan, guaranteed by the federal government and 

secured by a deed of trust on the apartment complex, and two junior loans 
MASHNI v. FOSTER 

Opinion of the Court 

3 

from the Arizona Department of Housing and the City of Phoenix, 

respectively. Sunnyslope intended to operate the apartment complex as a 

low-income-housing project to qualify for the Low Income Housing Tax 

Credit (“LIHTC”) program. See I.R.C. § 42. This investment strategy was 

purportedly worth several million dollars. Partly to ensure continued 

LIHTC eligibility, Sunnyslope and the junior lenders agreed to and 

recorded covenants requiring the entire apartment complex to be leased to 

low-income households. The covenants were expressly subordinated to 

the senior private loan, but “binding upon the Owner’s successors in title 

and all subsequent owners and operators.” Under the agreement, the 

covenants were to automatically terminate in the event of foreclosure. 

¶4 Sunnyslope defaulted on the senior loan after completing 

construction. The federal government fulfilled its loan guarantee 

obligation and sold the senior debt to First Southern National Bank (“First 

Southern”), which shortly thereafter filed a motion to appoint Mashni as 

receiver of the apartment complex. Before the hearing on the motion, 

Sunnyslope e-mailed First Southern’s counsel to confirm that it “agree[d] 

to a stipulated receivership per the proposed order appointing the 

receiver.” Sunnyslope did not appear at the appointment hearing, and at 

no point sought to amend the appointment order or change the bond 

amount. 

¶5 The superior court appointed Mashni as receiver in October 

2010. The appointment order authorized Mashni to, among other tasks: 

“enter into, modify and/or reject contracts affecting any party or the 

Property and to exercise rights existing under such contracts, including 

but not limited to filing suit thereon, and/or evicting tenants from the 

Property”; “market and rent, as [he] believe[d was] in the best interests of 

the Receivership Estate”; and “use such measures, legal or equitable, as 

[he], in consultation with and with the consent of [First Southern], 

deem[ed] appropriate, desirable, [or] necessary . . . to implement and 

effectuate the provisions of the Loan Documents [relating to the senior 

loan].” The order defined in great detail the property that Mashni took 

possession of, but excluded any reference to the low-income-housing 

covenants or related tax credits. 

¶6 Mashni knew that Sunnyslope had operated the apartment 

complex as low-income housing before the receivership appointment, but 

he began to lease the apartments at market rates almost immediately after 

his appointment. Mashni later testified that he understood the 

appointment order authorized him to stop operating the apartment 

complex as low-income housing: 
MASHNI v. FOSTER 

Opinion of the Court 

4 

I knew it was low income housing, but I knew it had 

also failed as low income housing so one of the stipulations 

that we made to even be considered to be the receiver was 

we had to have the ability to run it as a market rate 

property. . . . [I d]idn’t have an agreement with anybody 

except for the fact that when I was asked to be the Receiver I 

made sure that the receivership order allowed me to run it 

as a market property. 

¶7 Sunnyslope initially learned of Mashni’s noncompliance 

with the low-income-housing covenants when he filed his first 

receivership report in December 2010, approximately two months after his 

uncontested appointment. Days after receiving the report, Sunnyslope 

contacted Mashni’s counsel to confirm whether Mashni was disregarding 

the covenants. His counsel replied that “[a]ll new leases [were] being 

completed at market rates on conventional leases.” 

¶8 Mashni had scheduled a foreclosure sale of the apartment 

complex for February 1, 2011, but it never took place because Sunnyslope 

sought Chapter 11 bankruptcy reorganization the day before. Sunnyslope 

commenced the bankruptcy to prevent the foreclosure, which would have 

automatically terminated the covenants meant to preserve LIHTC 

eligibility. Mashni remained in possession of the apartment complex 

while the bankruptcy case was pending, and in May 2011 the bankruptcy 

court ruled that Mashni had to comply with the low-income-housing 

covenants. The following month Mashni relinquished possession to 

Sunnyslope’s designee and began winding up the receivership estate. 

¶9 At the end of 2011, the bankruptcy court vacated the 

automatic stay to permit Mashni to move for discharge of the receivership. 

The bankruptcy court ordered Mashni to obtain from the superior court 

“such other determinations as may be necessary to wind up the 

receivership, including, without limitation, findings of fact confirming 

whether [he] acted at all times during the Receivership Action in 

accordance with, and within the scope of, the Receivership Order.” It 

further ordered that “[a]ny claims the Debtor may assert against the 

Receiver . . . shall be raised by the Debtor in connection with the Wind-Up 

Proceedings in the Superior Court.” 

¶10 Accordingly, Mashni moved the superior court to discharge 

the receivership, exonerate the receiver’s bond, and approve payment of 

various receivership expenses. Sunnyslope objected, primarily on 

grounds that Mashni had jeopardized its LIHTC eligibility by failing to 
MASHNI v. FOSTER 

Opinion of the Court 

5 

operate the apartment complex in compliance with the low-incomehousing covenants. Sunnyslope further alleged that Mashni had 

improperly settled an insurance claim, and that he had improperly used 

receivership funds to pay for the preparation of the foreclosure sale. 

Before the matter proceeded to oral argument, Sunnyslope also filed a 

third-party complaint against Mashni raising similar allegations. 

¶11 The superior court eventually dismissed Sunnyslope’s thirdparty complaint, reasoning that 

[t]he order appointing the Receiver in this case is very broad. 

Nothing requires him to maintain any of the tax credits. It is 

argued that the Receiver elected not to continue seeking 

such credits in an effort to rent the units in the complex as a 

means to make it viable. The complex, it is alleged, had 

fallen into disrepair and resources were needed to operate it 

properly. The Defendant has not submitted any facts or 

submitted any authority that compels the Receiver to 

continue with the Section 8 program in the event the 

Receiver decides that in his business judgment that program 

need not be continued. . . . [Moreover,] the Defendant failed 

at any time to come in seeking any form of protection or 

relief until the Receiver sought to be released and his bond 

exonerated. Suffice it to say that the Court is not persuaded 

that the Receiver has any personal liability and that any 

liability extends beyond the amount of the bond. 

¶12 The court then found that Sunnyslope was entitled to a 

hearing on Mashni’s motion to exonerate the receiver’s bond and allowed 

limited discovery. At the bond-exoneration hearing, Mashni argued that 

the court’s earlier ruling confirmed his immunity from suit. The court 

responded: 

[Y]ou read this order too broadly. This Court never ruled 

that as a matter of law it finds that the Receiver has 

immunity. That is not in this order. . . . [W]hether or not the 

Receiver is going to be immune is a question of fact for the 

Court to decide in consideration of the facts. And we never 

had any evidence taken as to what happened. 

 . . . . 

 The purpose of [this] hearing . . . is to find out 

whether the Receiver complied with the order appointing 

him, whether the Receiver properly discharged those duties 
MASHNI v. FOSTER 

Opinion of the Court 

6 

or not. And if he didn’t, then the matter . . . of his 

receivership should not be discharged . . . . 

Ultimately, the court found that “sufficient evidence exist[ed] to make a 

prima facie case against the Receiver” and denied Mashni’s motion. In 

relevant part, the minute entry provides: 

While the order appointing the Receiver allows him 

to reject certain agreements, he has another responsibility, 

which is to protect the rights of . . . all the parties to the 

transaction, including the Defendant. Thus, if rejecting a 

contract results in a material detriment to the title holder or 

any other interested party, then the Receiver may be 

culpable. Simply put, just because the order says the 

Receiver may reject contracts does not mean he should do 

this on whim and caprice, or as in this case, because he had 

never operated a project of this type and perhaps did not 

know how. 

In this case, the Court finds the failure to operate the 

property under the affordable housing program and 

rejecting the requirements of the various covenants that 

attached to the land, compromised the ability of the 

Defendant to realize and earn substantial tax credits that 

could be worth over millions of dollars. . . . Nothing in this 

decision should be taken, however, to establish as a matter 

of law a breach of fiduciary duty. Rather, the Court finds 

there is sufficient evidence in the record that the Receiver 

did not faithfully discharge his duties taking into account 

the requirements of the law such that this Court finds he is 

not immune. A trier of fact will have to determine causation 

and the actual damages, if any, that have been suffered by 

the Defendant. 

Neither the minute entry nor the hearing transcript contains a finding by 

the court that Mashni violated the order of appointment. The court 

allowed Sunnyslope to file a new third-party complaint against Mashni, 

and this special action followed. 

DISCUSSION 

¶13 Mashni contends that the superior court abused its 

discretion by denying him immunity from suit for alleged 

mismanagement of the receivership. We agree. 
MASHNI v. FOSTER 

Opinion of the Court 

7 

¶14 We accept jurisdiction over this special action because when 

one is erroneously forced to stand trial, he has lost the benefit of 

immunity, even if he is found not liable. Henke v. Superior Court (Kessler), 

161 Ariz. 96, 99-100, 775 P.2d 1160, 1163-64 (App. 1989). “Consequently, a 

defendant who asserts an immunity has no adequate remedy at law by 

direct appeal after trial.” Salt River Valley Water Users’ Ass’n v. Superior 

Court (Shoemaker), 178 Ariz. 70, 73, 870 P.2d 1166, 1169 (App. 1993). 

¶15 Under Ariz. R. Civ. P. 66 and A.R.S. § 12-1241, a court may 

appoint a receiver as an equitable remedy to protect property subject to 

pending litigation. The appointing court determines the receiver’s 

authority, Sawyer v. Ellis, 37 Ariz. 443, 448, 295 P. 322, 324 (1931), and 

allows the receiver to “share[ ] the judge’s judicial immunity” so long as 

the receiver acts within the scope of the appointment order, Kohlrautz v. 

Oilmen Participation Corp., 441 F.3d 827, 836 (9th Cir. 2006) (quoting Anes v. 

Crown P’ship, 932 P.2d 1067, 1071 (Nev. 1997)). Logically, it follows that “a 

receiver may be personally liable if he or she acts outside the authority 

granted by the court.” Id. (quoting Anes, 932 P.2d at 1071); see also 65 Am. 

Jur. 2d Receivers § 295 (2014) (“Personal liability of a receiver 

arises . . . from his or her wrongful acts not within the scope of his or her 

authority as determined by the statutes and orders and directions of the 

court under which he or she acts or omits to act.”). 

¶16 This authority provides that a receiver is immune from suit 

unless the appointing court specifically finds that the receiver has acted 

outside the scope of the appointment order. The superior court in this 

case misconceived the nature of immunity by subjecting Mashni to review 

of his business judgment. No such review was warranted. Like the court 

itself, the receiver’s immunity from suit exists by virtue of the context in 

which he acts, not the content of his actions. See Haw. Ventures, LLC v. 

Otaka, Inc., 164 P.3d 696, 743-44 (Haw. 2007) (holding that a courtappointed receiver is entitled to absolute immunity when acting within 

the scope of and in accordance with the appointment order, even for 

“negligent violations of duties imposed upon her by law”); B.K. v. Cox, 116 

S.W.3d 351, 357 (Tex. App. 2003) (“Generally, once an individual is 

cloaked with derived judicial immunity because of a particular function 

being performed for a court, every action taken with regard to that 

function—whether good or bad, honest or dishonest, well-intentioned or 

not—is immune from suit.”). 

¶17 Whether a receiver has acted within the scope of the 

appointment order is a question of fact. See Kohlrautz, 441 F.3d at 830. In 

this case, the broadly written appointment order authorized Mashni to 
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Opinion of the Court 

8 

“reject contracts affecting any party or the Property.” The low-incomehousing covenants involved in this case are contractual obligations. See 

Pinetop Lakes Ass’n v. Hatch, 135 Ariz. 196, 198, 659 P.2d 1341, 1343 (App. 

1983) (“[A] grantee who accepts a deed containing restrictive covenants 

has entered into a contractual relationship.”). It is generally accepted that 

“possession does not obligate a receiver to carry out the executory 

contracts of the debtor, and subject to the order of the court, he or she may 

have a reasonable time after his or her appointment to elect whether to 

adopt any such contract or reject it.” 65 Am. Jur. 2d Receivers § 164; see also 

D.R. Mertens, Inc. v. State ex rel. Dep’t of Ins., 478 So. 2d 1132, 1134 (Fla. 

Dist. Ct. App. 1985) (“[T]he law is clear that there can be no breach, 

anticipatory or otherwise, of an executory contract by a receiver unless the 

receiver specifically elected to be bound thereby.”); Anes, 932 P.2d at 1069 

(“As a general rule, state law allows receivers to reject, within a reasonable 

time, outstanding executory contracts of the owner of the estate which is 

being administered.”). And a plain reading of Mashni’s appointment 

order authorized him to reject the low-income-housing covenants 

immediately upon taking possession as receiver of the apartment 

complex. Moreover, the appointment order directed Mashni to “market 

and rent, as [he] believe[d was] in the best interest of the Receivership 

Estate,” and to “use such measures, legal or equitable, as [he] . . . deem[ed] 

appropriate, desirable, [or] necessary . . . to implement and effectuate the 

provisions of the Loan Documents [relating to the senior loan].” We agree 

with the superior court’s statement in its order dismissing the original 

third-party complaint that “[n]othing requires him to maintain any of the 

tax credits.” 

¶18 The superior court never found that Mashni had acted 

outside the scope of the appointment order before it stripped him of 

immunity. Instead, the court based its decision on a finding that Mashni 

had a “responsibility . . . to protect the rights of . . . all the parties to the 

transaction, including [Sunnyslope].” But this “responsibility” was 

altogether absent from the appointment order, and we can find no logical 

basis upon which a receiver can be held to such a duty. 

¶19 A receiver is a ministerial officer of the court who acts under 

the appointing court’s authority, and not to promote the interest of any 

specific party. Sawyer, 37 Ariz. at 448, 295 P. at 324 ; Midway Lumber, Inc. v. 

Redman, 4 Ariz. App. 471, 472, 421 P.2d 904, 905 (1967). 

Generally speaking, [the receiver] is not an agent of any of 

the parties, but is merely a ministerial officer of the court. 

He stands in an indifferent attitude, not representing either 
MASHNI v. FOSTER 

Opinion of the Court 

9 

the owners of the insolvent estate or the creditors, but really 

representing the court and acting under its direction, for the 

benefit of all the parties in interest. The parties to the 

litigation have not the least authority over him, nor have 

they the right to determine what liability he may or may not 

incur; his authority is derived solely from the act of the court 

appointing him, and he is the subject of its order only. 

Sawyer, 37 Ariz. at 448, 295 P. at 324. Put differently, a receiver’s duty is 

fidelity to the court and its orders -- it is not a classic fiduciary duty to any 

party. Like the court itself, the receiver is a neutral whose actions may 

redound to the benefit of some and the detriment of others. When parties’ 

interests are adverse, it is simply impossible to hold a receiver to a 

fiduciary duty to advance the private interests of all. A receiver may 

therefore be liable to interested parties for harm caused by deviation from 

the order of appointment, but cannot be liable for actions taken pursuant 

to the order that benefit some more than others. 

¶20 We further observe that despite ample opportunity to do so, 

Sunnyslope never sought to amend the order of appointment to compel 

Mashni’s compliance with the low-income-housing covenants. In the 

words of the superior court, “[Sunnyslope] failed at any time to come in 

seeking any form of protection or relief until the Receiver sought to be 

released and his bond exonerated.” When a party is aware of a perceived 

defect in a receiver’s performance of his duties, equity demands that the 

court be informed and given an opportunity to right the wrong through 

its supervisory powers. If a party does not afford the court such an 

opportunity, it is difficult to conceive of a case in which it can later seek 

damages for the harm that it failed to take measures to prevent. See Irwin 

v. Pac. Am. Life Ins. Co., 10 Ariz. App. 196, 201, 457 P.2d 736, 741 (1969) 

(“Equity aids the vigilant, not those who slumber on their rights.”). Our 

holding in this regard is guided by the general rule that a receiver cannot 

be sued without permission of the appointing court. Barnette v. Wells 

Fargo Nev. Nat’l Bank, 270 U.S. 438, 441 (1926). It is likewise consistent 

with the notion that the appointing court “is in the best position to clarify 

the scope of its own order and to entertain suggestions that the order be 

modified to meet changing circumstances.” S.E.C. v. Lincoln Thrift Ass’n, 

557 F.2d 1274, 1280 (9th Cir. 1977). 

CONCLUSION 

¶21 We vacate the superior court’s ruling denying Mashni 

immunity from suit and remand this case for further proceedings 
MASHNI v. FOSTER 

Opinion of the Court 

10 

consistent with this opinion. In the exercise of our discretion, we decline 

to address the remaining issues raised in Mashni’s petition for special 

action. 

¶22 Both parties request attorney’s fees and costs, citing ARCAP 

21 and Rule 4(g) of Arizona Rules of Procedure for Special Actions. 

However, neither ARCAP 21 nor Rule 4(g) provides a substantive basis 

for a fee award. See Ezell v. Quon, 224 Ariz. 532, 539, ¶ 31, 233 P.3d 645, 

652 (App. 2010); State v. Shipman, 208 Ariz. 474, 476, ¶ 7, 94 P.3d 1169, 1171 

(App. 2004). Mashni also cites the appointment order, which grants him 

authority to hire counsel “necessary to assist [him] in the discharge of [his] 

duties.” But the order also requires Mashni to obtain court approval for 

receiver’s fees and administrative expenses. In the exercise of our 

discretion, we therefore deny both parties’ requests for attorney’s fees in 

this special action.