1

Filed 10/28/20 (unmodified opn. attached)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

COUNTY OF SONOMA

, Plaintiff and Respondent

,

v.
JAMES QUAIL

, Defendant;

U.S. BANK N.A., as Trustee, etc.,

Appellant ;

CALIFORNIA RECEIVERSHIP GROUP, INC.,

Respondent. A 15 5837 , A157245

( Sonoma County Super. Ct.

No. SCV256085 )

ORDER MODIFYING OPINION [NO CHANGE IN JUDGMENT]

BY THE COURT:

It is ordered that the published opinion filed herein on October 8 , 20 20

,
be modified as follows:

The caption of the opinion should be modified to conform with the

caption of this order.

On page 18, after the last paragraph in section B.i and immediately

preceding section B .ii, insert the following language:

At oral argument and in its petition for rehearing, U.S. Bank emphasized the principle that a receiver “ ‘takes the
property cum onere , in the plight and condition existing at the

t ime of [the receiver’s] appointment, subject to all liens and2

equities.’ ” ( Wright v. Standard Engineering Corp . (1972) 28 Cal.App.3d 244, 248.) While we agree with this general proposition, we fail to see how it limits a court’s power to authorize super

- priority borrowing in an appropriate case as recognized by Title Ins. & Trust . The receivership in this matter did not arise out of a private dispute between competing lienholders with purely monetary interests in the property, a fact U.S. Bank largely i gnores. Rather, as noted above, the purpose of a section 17980.7 receivership “is to protect the health and safety of residents who might be substantially endangered by unsafe building conditions.” ( Jen

, supra , 135 Ca1.App.4th at p. 311.) The power of a court of equity to issue certificates of indebtedness on a priority basis has long been recognized at common law where the receivership addresses matters of public concern. (See,

e.g., Clifford v. West Hartford Creamery Co . (Vt. 1931) [153
A. 205, 209] [ explaining that authority for super

- priority borrowing exists in a railroad receivership because “the maintenance of the roadway and equipment and the continuation of the business and operation of the road are essential, not only to the preservation of the mortgage securities, but also to the welfare and comfort of the general public,” citing Wallace v.

Loomis (1878) 97 U.S. 146, 162]; Union Trust Co. v. Illinois Midland Ry. Co . (1886) 117 U.S. 434, 455

– 456 [confirming authority of railroad receiver to issu e certificates with priority over other lienholders and explaining that because a railroad “is a matter of public concern,” the court has the power “to make such repairs as are necessary to keep the road and its structures in a safe and proper condition to serve the public. Its power to do this does not depend on consent, nor on prior notice. Consent is desirable, but is seldom practicable, where the debts exceed the value of the property.”].)

Finally, we reject U.S. Bank’s suggestion that the priority of its lien could not be impacted in these proceedings because it is not a formal party and did not consent to the subordination of its interests. U.S. Bank was notified that a receivership was being sought, appeared at the hearing on the receivership pet ition, did not object to the appointment of a receiver, and did not appeal from the appointment order. Thus, even if its consent were required

— a question we need not decide

— substantial evidence supports the conclusion that U.S. Bank acquiesced in the3

rece ivership proceedings below. (See Schreiber v. Ditch Road

Investors (1980) 105 Cal.App.3d 675, 679 [“where a receiver is lawfully appointed at the instance and for the benefit of lien creditors, all proper charges, expenses, and liabilities incurred as

inc ident to duly conferred receivership powers and duties are a charge on the earnings and corpus of the property superior to the lien creditors, who take part in, or expressly or impliedly consent
to, or acquiesce in , the receivership proceedings” (italics a dded)].)

On page 2 6 , after the first full para graph, add a footnote, which will

read:

In its petition for rehearing, U.S. Bank suggests that we incorrectly rely on the bill author’s May 1990 statement quoted above to explain the later June 1990 amendment which replaced the term “judgment lien” with “lien.” That is incorrect. Indeed, U.S. Bank appears to misapprehend the purpose of our review of the legislative history in this matter. By expressly granting a section 17980.7 receiver the broad p owers of a Code of Civil Procedure section 564 receiver and permitting borrowing secured by an unspecified lien with court approval, section 17980.7 on its face allows for super

- priority borrowing in an appropriate case. We surveyed the legislative histor y to determine if it contained a clear statement of legislative intent contrary to this apparent meaning. Since the legislative history is, at best, equivocal on this question, it does not support U.S. Bank’s claim that the Legislature clearly intended to foreclose super

- priority borrowing under both receivership statutes. In short, U.S. Bank needed a smoking gun to prevail on its claim. It failed to uncover one.

This modification does not change the judgment.

The petition for rehearing is denied.

Da ted:

___________________________ Humes , P. J.1

Filed 10/8/20 (unmodified opinion)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

COUNTY OF SONOMA

, Plaintiff and Respondent

,

v.
U.S. BANK N.A., as Trustee, etc.,

Defendant and Appellant.

CALIFORNIA RECEIVERSHIP GROUP, INC.,

Defendant and Respondent. A15 5837

( Sonoma County Super. Ct.

No. SCV256085 )

COUNTY OF SONOMA

, Plaintiff,

v.
U.S. BANK N.A., as Trustee, etc.,

Defendant and Appellant.

CALIFORNIA RECEIVERSHIP GROUP, INC.,

Defendant and Respondent. A15 7245

( Sonoma County Super. Ct.

No. SCV256085 )

After many unsuccessful attempts by the County of Sonoma (County) to

compel James Quail to abate numerous hazardous and substandard

conditions on his real property, the County sought and obtained the2

appointment of a receiver pursuant to Health and Safety Code 1 section

17980.7 and Code of Civil Procedure section 564 to oversee the necessary

abatement work. In these consolidated appeals, U.S. Bank National

Association, as Trustee, Deutsche Alt

- A Securities Mortgage Loan Trust,

Series 2007

- 2 Mortgage Pass T hrough Certificates Series 2007

- 2 (U.S. Bank),

challenges the superior court’s order authorizing the receiver to finance its

rehabilitation efforts through a loan secured by a “super

- priority” lien on the

property. U.S. Bank also challenges the court’s su bsequent order authorizing

sale of the property free and clear of U.S. Bank’s lien.

It has long been recognized that trial courts enjoy broad discretion in

matters subject to a receivership, including the power to issue a receiver’s

certificate with pri ority over preexisting liens when circumstances warrant

this extraordinary step. We conclude that the trial court did not abuse its

discretion in subordinating U.S. Bank’s lien and confirming the sale of the

property free and clear of all liens so that th e receiver could remediate the

nuisance conditions on the property promptly and effectively. However, the

court’s order prioritizing the County’s enforcement fees and costs on equal

footing with the receiver finds no basis in the receivership statutes. W e

therefore affirm the judgment in part, reverse in part, and remand for a

determination of the sale distribution consistent with this opinion.

I. FACTUAL AND

PROCEDURAL BACKGROUND

A. Failure to Remediate Hazardous Conditions on Property

Quail was the owner of a 47,480

- square

- foot lot with two houses, large

garages, and several outbuildings in an unincorporated area of Sonoma

1 All statutory references are to the Health and Safety Code unless otherwise specified.3

County. The property came to the County’s attention in May 2013 when an

inspection of one of its seven structures revealed hazardous and unpermitted

electrical wiring, hazardous decking and stairs, unpermitted kitchens and

plumbing, broken windows, and lack of power. In December 2013, this

structure was destroyed in a fire and two large outbuildings, unlawfully

being used as residential dwellings, were also damaged. One report

described the conditions on the property as follows:

“The [p]roperty .

. . exists as a makeshift, illegal mobile home park and

junkyard. The list of unaddressed violations is extensive, and i ncludes

substandard building conditions, substantial fire damage and risk, and a

massive accumulation of junk and debris throughout the homes and exterior

of the [p]roperty. There are multiple motorhomes, trailers and other vehicles

that are not currently registered and many of these are in very poor shape.

The property consists of six buildings. In total, there are three dwelling

- like

units: one fire

- damaged barn and two houses, each of these homes with

occupants and multiple illegal and unsanitary liv ing conditions. One of the

buildings is being occupied by one James Quail and is a legal albeit

non

- conforming structure with four bedrooms and two bathrooms, that would

require significant work to get it up to code. Another structure is being

unlawfully occupied by a family, including several young children. .

. . There

is an additional motorhome and other trailers with occupants inside. The

exterior of the [p]roperty alone has approximately 150 yards of debris, and

the amount of debris inside of the s tructures (not counting trailers and motor

homes) equates to a similar amount. There is an illegal homeless

encampment across the street in a field that has been problematic to the

[p]roperty, which occupants both relay concern over but simultaneously see m

to involve themselves with.”4

Multiple attempts by the County to gain access to the property for a full

inspection were unsuccessful. In December 2013, the County issued two

notices and orders for substandard buildings, notifying Quail that the

buildings were not to be occupied and di recting him to obtain permits either

to bring the buildings up to code or to remove them. After Quail continued to

deny access to the property, the County filed an ex parte request for an

inspection warrant. In support of its request, the County noted th at the

sheriff’s department had responded to 412 “events” concerning the property

from 2008 to 2014, including suspicious persons, warrant attempts, and other

disturbances. The fire department had responded to the property over 30

times on calls for medic al aid. An inspection warrant was issued in July

2014. The resulting inspection revealed a litany of code violations and

hazardous conditions.

In September 2014, the County filed a complaint seeking to enjoin the

code violations and abate the public n uisances on the property. The parties

entered a stipulated judgment in December 2014 in which Quail was

permanently enjoined from maintaining violations of the County’s building,

fire, and zoning codes on the property. He was ordered to abate all violati ons

on the property within 90 days.

Quail failed to abide by the terms of the stipulated judgment.

Following inspections in January and February 2017, the County sent letters

requesting abatement of violations. When the County reinspected the

property in June 2017, not only had the violations set forth in the stipulated

judgment not been abated, but the County found more occupied trailers and

recreational vehicles and more individuals living in uninhabitable structures

that had been ordered vacated. G iven these dire circumstances, the County

notified Quail

— with copies to U.S. Bank, its loan servicer, and all other5

lienholders on the property

— of its intent to seek a court

- appointed receiver to

oversee the necessary abatement work on the property and to “record a lien

against the [p]roperty for the amount of those clean

- up efforts” if Quail was

unable to pay them. (Italics and bolding omitted.)

B

. Appointment of Receiver and Request for Super

- priority Lien

Over the next five months, the County receive d no response from any of

the noticed parties. The property’s substandard buildings, unlawful and

hazardous constructions, unlawful occupancies, fire hazards, and

accumulation of junk, garbage, and debris had been left unattended. Finding

an “urgent need ” to abate the extensive code violations on the property, the

County filed a petition in Sonoma County Superior Court in November 2017

seeking appointment of a receiver under the authority of both section 17980.7

and Code of Civil Procedure section 564. T he petition sought authorization

for the receiver to finance the necessary repairs and clean

- up with a loan

secured by a lien with priority over all other previously recorded liens on the

property

— i.e., a “super

- priority lien.” The petition requested perm ission for a

receiver’s certificate of $30,000 with first priority to cover the initial costs of

securing the property and beginning the remediation process. And it asked

that all receiver and County fees and expenses also be granted super

- priority

status , to be paid first out of any proceeds from sale. Copies of the pleadings

and all supporting materials were served on U.S. Bank in early January

2018.

On January 19, 2018, the trial court granted the County’s petition for

appointment of a receiver purs uant to section 17980.7, subdivision (c), and

Code of Civil Procedure section 564. The court found that the property was in

a condition which substantially endangered the health and safety of the

public. The order authorized the receiver to exercise the powers granted to6

receivers by section 17980.7, subdivision (c)(4), and Code of Civil Procedure

section 568. It authorized the receiver to borrow funds to finance the

necessary remediation on the property and to fund a $30,000 receivership

certificate to cover initial costs. The order further provided that the County

was entitled to recover its attorney fees and costs and that such enforcement

fees would be given the same priority as those of the receiver. The court

denied, however, the County’s request to issue the receiver’s certificate on a

super

- priority basis. 2 No appeal was taken from the appointment order.

In May 2018, the receiver filed a motion requesting authorization to

obtain a receiver’s certificate in the amount of $115,000, secured by a super

priority lien, to ameliorate the nuisance conditions on the property.

According to the receiver, he had attempted to negotiate a resolution with the

owners and occupants of the property, as well as with U.S. Bank to foreclose

on the property, to no avail. The receiver came to the conclusion that the

occupants would not vacate and U.S. Bank would not foreclose. 3 Moreover,

the receiver was unable to obtain financing to carry out the abatement work

because no lender would fund the $30,000 receiver’s certificate authorized by

the court on a nonpriority basis, given the amount of debt already secured by

the property.

The receiver’s motion laid out three possible options for remediation of

the property. The receiver recommended an intermediate option in which the

junkyard conditions would be removed, the most damaged structure on the

2 U.S. Bank had appeared at the hearing and objected only to the court issuing a super

- priority receiver’s certificate . It did not object to the appointment of a receiver.

3 Notices of default and sale had been issued against the property in 2012, 2013, and 2016, but no lienholder, including U.S. Bank, had exercised its right of foreclosure.7

property demolished, the current occupants relocated, and the property sold

as

- is to a buyer with the resources to complete the remaining remediation.

The receiver estim ated clean

- up and demolition costs of approximately

$46,000, and relocation costs and security of an additional $15,000. What

remained would fund the receiver’s fees and other costs. The receiver

informally estimated the market value of the property afte r partial

remediation to be $249,000, and therefore the property would have sufficient

equity to fund the intermediate option. However, since there were several

existing liens on the property

— including U.S. Bank’s recorded lien for

approximately $663,000

— no lender would fund the necessary receiver’s

certificate without being granted priority status.

A second option

— complete demolition of all structures and sale of the

property as a vacant lot with an estimated value of $250,000

— was disfavored

because it would cost more to complete the demolition and would remove

potentially salvageable homes from the housing stock available to

fire

- damaged victims in the County. 4 A third option allowing for complete

remediation of all substandard conditions would result in an estimated

market value of $450,000, but would substantially increase both demolition

and remediation costs. This option appeared to be economically infeasible

due to low property values in the area and a lack of lenders willing to fund at

this leve l. The receiver believed the intermediate option would result in the

best outcome for the parties and the community as it would address the

nuisance conditions quickly and enable the p roperty to be put back into use

in an efficient manner.

4 On our own motion, we t ake judicial notice of the fact that the Sonoma County wildfires occurred in October 2017. (Evid. Code, §§ 452,
subd. (h), 459, subd. (a).)8

U.S. Bank opposed the receiver’s motion, arguing that there was no

statutory authority for issuance of a priority certificate and that granting a

super

- priority lien would be inequitable. U.S. Bank also asserted that the

motion was premature and argued that a formal appraisal of the property’s

value was needed before a determination could be made about the super

priority status of the receiver’s lien.

At the June 2018 hearing on the motion, the t rial court indicated that

although it had the ability to authorize a super

- priority lien, it needed more

information before doing so. The County expressed concern that the property

had remained in such horrible condition for years and emphasized that U.S.

Bank had refused to do anything to help clean it up. U.S. Bank suggested

that any necessary remediation be financed by the County or Quail. The

receiver responded that it had explored other options for funding, but there

were no public funds or nonprofi t monies available. After hearing, the court

authorized a receiver certificate in the amount of $115,000, but denied

without prejudice the request to give the certificate priority over existing

lienholders. U.S. Bank was ordered to obtain an appraisal an d file it with the

court prior to the next hearing in September 2018.

U.S. Bank did not file the appraisal as ordered. At the September 21,

2018 hearing, the receiver reported that the appraiser had just recently been

to the property. The receiver subm itted pictures showing the continuing

nuisance conditions on the site and explained that although he had sent

letters requesting that the occupants vacate the uninhabitable structures, the

receiver had no resources to enforce removal or enable relocation. The

County reiterated its concerns regarding the ongoing health and safety issues

on the property. The trial court stated it was very concerned about conditions

on the property and did not intend “to delay this matter one minute further.”9

At U.S. Bank’s request, the court allowed a short continuance to October 5,

2018.

C

. Order Authorizing a Receiver’s Certificate on a Priority Basis

In advance of the October 2018 hearing, U.S. Bank notified the court

that the property had been appraised at $400,000. It requested permission to

foreclose on the property and either retain possession and repair the property

itself or sell the property as

- is to a buyer who would remediate the existing

code violations. At the hearing, the court stated that the condition of the

property was unacceptable and that it “absolutely intend[ed] to move forward

with action necessary to abate this condition.” The County objected to U.S.

Bank’s proposal, fearing that U.S. Bank would not itself remedy the situation

and might do a shor t sale to a party who would likewise fail to remediate the

nuisance conditions. The receiver continued supporting its proposal as

outlined in its May motion and report. He observed that U.S. Bank had

failed to foreclose despite multiple default and forec losure notices filed on the

property. U.S. Bank explained that it had not foreclosed previously because

several different bankruptcies had listed the property, requiring it to seek

relief repeatedly from the automatic stay. It claimed it now wanted to

fo reclose, evict, bring the property up to code, and sell it. For his part, Quail

maintained that he had control of the property, having lived there for 50

years, and that there were no problems on it.

The court remarked that the matter had not “been mov ed along in a

reasonable manner” and had reached a stalemate because of “inactions” and

the absence of funds. Although it agreed that the receiver’s request should

not be done lightly, it granted the motion “based on the nature of this

property, based on the nature of the current status, based on the history of

the inability of the proper authorities[, and] based on previous Court rulings

that were made months ago, if not longer.” On October 10, 2018, the court10

issued an order authorizing the receiver to obtain a receiver’s certificate in

the amount of $115,000, secured by a super

- priority lien, to finance the

necessary rehabilitation of the property. U.S. Bank appealed from this order.

The receiver filed its second report in advance of the December 201 8

status conference. After a lengthy and complicated process, the receiver

reported that all residents on the property, including Quail, had been

relocated or otherwise removed. In January 2019, the receiver reported that

the demolition work had been com pleted, all buildings had been secured , and

the property had been placed on the market, receiving several offers above

the list price of $249,000

.

D

. Order Confirming the Sale of the Property

Prior to the February 2019 status conference, the receiver

recommended that the court authorize sale of the property to a group of

buyers, including a neighbor, for $315,000, the highest and best of five offers.

According to the receiver, no one in the proposed buyer group had a history of

code violation s or other issues which might call into question their ability to

finish the necessary remediation of the property, and the neighbor, in fact,

had purchased the adjoining property from Quail 25 years before and

successfully corrected the violations there. The receiver provided the listing

agreement and sales contract to the court and asked it to confirm the sale.

Given the lack of financial resources available from Quail 5 or the property,

the receiver saw no other option than to sell the property as

- is w ith the

assurance from the buyer that the remaining nuisance abatement work

would be completed post sale. Since there was no way to pay off all of the

liens on the property (which approached $1 million), the receiver requested

5 The receiver had paid for a series of motels for Quail to assist in his
relocation after his removal from the property

. Quail ’s whereabouts at the time of the report were unknown.11

that all liens be stripped f rom the property to effectuate the sale and be

attached to the proceeds for later review and distribution by the court. The

court continued the matter so that the receiver’s request to confirm the sale

could be formalized by noticed motion.

After the m otion to confirm sale was filed and briefed by the parties,

the court heard argument on April 12, 2019. In rendering its decision, the

court emphasized the long history of the substandard conditions on the

property, concluding that the property had “final ly reached a stage, through

the efforts of the Receiver and the County and others, to be in a position

where, finally, it can be marketed for sale and to abate the numerous,

ongoing nuisances and problems with the property.”

The court observed that after initially denying the receiver a priority

lien, it granted the request because of the ongoing substandard conditions

and the inability of the receiver to “move forward in a meaningful manner to

address the problems.” It noted that U.S. Bank was aware throughout the

pendency of the matter of these problems and had opportunities at various

points to act. Given “really what is an infamous history of this property and

historic litigation,” the court found the sale of the property proper. Moreover,

the court found that the receiver had been systematic in the manner in which

he listed and marketed the property, while U.S. Bank had supplied nothing

concrete to contradict the receiver’s efforts.

On April 19, 2019, the court issued its order confirming the sale of the

property as proposed by the receiver, free and clear of all liens and

encumbrances. The order directed that unsatisfied liens on the property

would attach to the sale proceeds. The receiver was authorized “to pay the

outstanding receivership fees and costs, including the County of Sonoma’s

demand for fees and costs” per the terms of the January 2018 order12

appointing the receiver. All remaining sale proceeds were to be held by the

receiver pending a court determinatio n regarding appropriate distribution.

Potential claimants were directed to submit their claim for funds to the

receiver within 30 days.

W e granted U.S. Bank’s petition for a writ of supersedeas, staying the

distribution of all proceeds from the sale of the p roperty pending resolution of

this appeal. The Bank then filed a second appeal from the sale order, and we

consolidated both matters for argument and decision. 6 In February 2020, we

granted the request of Bay Area Receivership Group to file an ami cus brief in

this matter, supporting the actions of the trial court.

II. DISCUSSION

A. Standards of Review

U.S. Bank raises several issues involving statutory construction, which

we review de novo. ( Wells Fargo Financial Leasing, Inc. v. D & M Cabinets

(2009) 177 Cal.App.4th 59, 66 ( D & M Cabinets ); see City of Desert Hot

Springs v. Valenti (2019) 43 Cal.App. 5th 788, 793 [ “ Our determination of the

proper scope of the trial court ’ s authority and inquiry under section

17980.7(c) is a matter of statutory construction we review de novo.” ] .)

However , “[m]ost matters related to receiverships rest in the sound discretion

of the trial court” and will not be disturbed on appeal absent an abuse of that

discretion. ( City of Sierra Madre v. SunTrust Mor tgage, Inc. (2019)

6 In their initial briefing, the parties disputed whether the trial court’s order subordinating U.S. Bank’s lien was appealable under the collateral order doctrine. (See Koshak v. Malek (2011) 200 Cal.App.4th 1540, 1545 .) In light of U.S. Bank’s second appeal from the court’s order confirming sale and our consolidation of both appeals, there appears to be no dispute that the
entire matter is now properly before us for review. (See Fish v. Fish (1932) 216 Cal. 14, 16 [ order to pay a receiver ’ s fees and sell property constitute s a collateral, appealable order ] .)13

32 Cal.App.5th 648, 657

– 658, 660 ( SunTrust ); City of Santa Monica v.

Gonzalez (2008) 43 Cal.4th 905, 9 31 ( Gonzalez ) [court ruling on receivership

matters typically “afforded considerable deference on review ” ].) “Such

deference is the rule, even where the court confirms extraordinary action by

the receiver, such as a sale of real property.” ( Gonzalez , at p. 931.)

As summarized by our high court, court orders in receivership

proceedings rest “ upon the court ’ s ‘ sound discretion exercised in view of all

the surrounding facts and circumstances and in the interest of fairness,

justice and the rights of the respective parties. [Citation.] The proper

exercise of discretion requires the court to consider all materia l facts and

evidence and to apply legal principles essential to an informed, intelligent,

and just decision. [Citation.] Our view of the facts must be in the light most

favorable to the order and we must refrain from exercising our judgment

retrospective ly. ’ [Citations.] Where there is no evidence of fraud, unfairness,

or oppression, the court has wide discretion in approving the receiver ’ s

proposed actions.” ( Gonzalez

, supra , 43 Cal.4 th a t p. 931. )

B

. Trial Courts May Issue Receivership Certificates with Priority Over All Other Liens in Appropriate Circumstances

Section 17980.7 authorizes the judicial appointment of a receiver in

situations where substandard conditions on a property substantially

endanger the health and safety of the pub lic, and the property owner has

been unable or unwilling to remediate those conditions. The law permits the

appointment of a receiver to assume control of the property and abate the

nuisance conditions or to take other appropriate actions as may be author ized

by the court. (§§ 17980.6, 17980.7; Gonzalez

, supra , 43 Cal.4th at p. 912.)

U.S. Bank argues that this remedial statute does not authorize the

court to issue a super

- priority lien to fund the receiver’s remediation efforts.

According to U.S. Bank, lien priority is a creature of statute and the statutory14

language of section 17980.7, when read as a whole, supports the conclu sion

that the Legislature intended the ordinary rules of lien priority to apply.

( See Civ. Code, § 2897 [“ O ther things being equal, different liens upon the

same property have priority according to the time of their creation.” ) Thus,

U.S. Bank contends, the trial court erred when it granted the receiver’s

request to borrow funds on a super

- priority basis, thereby displacing U.S.

Bank as senior lienholder.

U.S. Bank’s arguments miss the mark for two reasons. Fi rst,

U.S. Bank ignores that the receiver was appointed here under both section

1 7980. 7 and Code of Civil Procedure section 564 , the general receivership

statute. Under well

- established principles, trial courts enjoy broad discretion

in matters subject to a receivership, includ ing the power to issue receiver ’s

certificates with priority over preexisting liens. Second, as we address in

section B. ii

. post , section 179 8 0.7 is consistent with this established authority

and nothing about its statutory language or legislative history suggests that

the Legislature intended to circumscribe the traditional powers of a

receivership recognized under C ode of Civil Procedure section 56 8

.
i. Traditional Authority Vested in a Receivership Includes the Power to Issue Certificates with First Priority

A receiver is an officer and agent of the appointing court and is under

the direct control and supervision of the court. ( Gonzalez

, supra , 43 Cal. 4th

at p. 930; see Sun Trust

, supra , 32 Cal.App.5th at p. 656 [“ a receiver only has

those powers granted to it by statute or an order of the court”].) The receiver

is not an agent of any particular party but rather acts for the benefit of all

parties inter ested in the property. ( City of Chula Vista v. Gutierrez (2012)

207 Cal.App.4th 681, 685; Cal. Rules of Court, rule 3.1179(a).)

“ S ection 568 of the Code of Civil Procedure

— first enacted in 1872

— gives a receiver appointed under section 564 very broad powers .” ( SunTrust

,15

supra , 32 Cal.App.5th at p. 659.) Specifically, “[t] he receiver has, under the

control of the c ourt, power to bring and defend actions in his own name, as

receiver; to take and keep possession of the property, to receive rents, collect

debts, to compound for and compromise the same, to make transfers, and

generally to do such acts respecting the property as the court may authorize .”

( Code Civ. Proc., § 568, italics added.) “ Courts also have substantial

discretion to authorize a receiver to borrow money to fund the preservation

and management of property in the receivership estate, particularly where,

as here, the estate does not produce income. In that circumstance, the

receiver may ask the court to authorize the issuance of a receiver’s certificate

to the lender as security for money loaned to the estate.” ( SunTrust , at

p. 657.)

For over 100 years, these powers have been interpreted to include a

court’s authority to fund a receivership on a super

- priority basis in the

appropriate circumstance. In Title Ins. & Trust Co. v. California

Development Co. (1915) 171 Cal. 227 ( Title Ins. & Trust ), the Supreme Court

affirmed a trial court’s decision authoriz ing receiver’s certificates with

priority over existing bonded indebtedness, stating that “ there can be no

question of the right of the court to give priority to certificates issued to

enable the receiver to carry out the primary object of [the receiver’s]

appointment, viz., the care and preservation of the property.” ( Id. at p. 231;

see SunTrust

, supra , 32 Cal.App.5th at p. 657, citing Title Ins. & Trust and

quoting 12 Miller & Starr, Cal. Real Estate (4th ed. 2018) § 41.12, p. 41

- 33

[“Receivership certificates are then issued as evidence of the indebtedness

and become liens on the subject property when issued under the direction and

control of the court, usually with priority over all other liens, including

preexisting liens.”].) Decisions regarding the issuance and priority of16

receiver’s certificates are committed to the sound discretion of the trial court

. ( Title Ins. & Trust Co. , a t p. 233; see ibid. [the trial court, “ upon a

c onsideration of all the facts, determined that the certificates should

equitably be given priority over the bonds, and we think its conclusion should

not be interfered with” ]; 12 Miller & Starr, Cal. Real Estate, supra , at

pp. 41

- 33 to 41

- 34 [“Whether rece iver’s certificates should be issued, and

whether those certificates when issued should be given priority over the other

indebtedness already of record against the property, are decisions that rest

largely in the discretion of the court.”].)

U.S. Bank’s attempts to distinguish Title Ins

. & Trust are unavailing.

It argues that the case strictly limits the use of receiver’s certificates with

priority over other liens to expenditures required for the “necessary care and

preservation” of receivership propert y, and that such certificates are

therefore inappropriate in the context of a section 17980.7 receivership,

which by statutory design exists solely to improve property through the

remediation of existing code violations. We have little difficulty concludi ng,

however, that a receiver’s efforts pursuant to section 17980.7 to ameliorate

property conditions which substantially endanger public health and safety

— the “primary object” of the receiver’s appointment

— are taken as part of the

“necessary care and prese rvation” of the receivership property. Similarly

unpersuasive is U.S. Bank’s claim that Title Ins. & Trust is limited by its

facts to situations where a majority of existing lienholders request the

receivership and agree to subordinate their interests to fund it. Nothing in

the Supreme Court’s analysis makes such facts necessary or controlling. At

most, specifics regarding the creation of the receivership were among “all the

facts” that were considered by the trial court in the exercise of its broad

disc retion. ( Title Ins. & Trust

, supra, 171 Cal. a t p. 233.)17

Indeed, t he Second District recently followed Title Ins. & Trust under

facts strikingly similar to the present case

. (See SunTrust

, supra ,

32 Cal.App.5th 648. ) Like the instant action, SunTrust involved the

appointment of a receiver pursuant to section 17980.7 and Code of Civil

Procedure section 564 to undertake remediation of a residential property

after the owners refused to abate existing nuisance condition s. ( SunTrust, at

pp. 651

– 652, 658.) As here, the senior lienholder (SunTrust) did not

challenge the appointment of the receiver but objected only when the receiver

proposed to borrow $250,000 on a super

- priority basis to fund the

remediation. ( Id. at p. 652.) The receiver argued that because there was

insufficient equity in the property, no lender would loan funds to the receiver

unless the indebtedness was given priority over all preexisting liens. ( Id. at

pp. 654

– 655.) The trial court granted the re ceiver’s request. ( Id. at p. 655.)

On appeal, SunTrust argued that no statute allows the issuance of a

super

- priority lien, pointing to the absence of any provision in section 17980.7

expressly authorizing such a funding mechanism. ( SunTrust

, supra ,

32 Cal.App.5th at p. 658.) The appellate court concluded, however, that it

was “unnecessary to engage in a lengthy statutory analysis of [section

17980.7] because

. . . the receiver was also appointed under Code of Civil

Procedure section 564.” ( SunTrust

, at p. 659.) Citing Title Ins. & Trust and

the broad language of Code of Civil Procedure section 564, the appellate court

concluded that this authority allowed a receiver to issue a super

- priority lien

“in appropriate circumstances.” ( SunTrust

, at p. 65 9.)

Although the SunTrust court acknowledged that “the use of super

priority liens should be infrequent because the disturbance of preexisting

liens may bring harsh consequences” ( SunTrust supra , 32 Cal.App.5th at

p. 568), it concluded that the trial cou rt did not abuse its discretion in18

authorizing super

- priority borrowing under the circumstances presented. ( Id.

at pp. 660

– 661.) The court pointed out that after the property owners refused

to abate the nuisance conditions, SunTrust chose not to take any action

against them, despite the fact that the owners were clearly in breach of their

deed of trust. (

Id. at p. 660.) Because neither the owners nor SunTrust were

willing to fund the costly remediation and the property did not produce

income, no lender would finance the receiver’s remediation efforts except on a

super

- priority basis. ( Ibid .) Finally, in rejecting SunTrust’s contention that

its interest in the property was inequitably displaced, the court observed that

SunTrust’s lien was nearly worthle ss because the costs of remediation

exceeded the value of the unimproved land. It concluded that SunTrust’s

suggestion

— that it should remain the senior lienholder and “benefit from the

increased property value provided by the remediation while bearing non e of

the cost”

— was “simply untenable.” ( Id. at p. 661.)

We agree with SunTrust that the trial court may exercise its broad

discretion under Code of Civil Procedure section 568 and Title Ins. & Trust to

authorize the issuance of a receiver’s certificate w ith priority over all

preexisting liens to fund the preservation and management of property in the

receivership estate. This authority applies equally to receiverships appointed

in parallel with section 17980.7 to remediate property conditions which

subst antially endanger the health and safety of the public.

ii. Section 17980.7 Does Not Circumscribe or Displace the
Traditional Powers of a Receivership

U.S. Bank faults the SunTrust court for failing to examine the

statutory language and legislative history of section 17980.7 and the broader

statutory scheme giving local governments many options for addressing

nuisance properties. It contends that the Legislature, by enacting section

17980.7, intended both to prohibit the use of super

- priority liens and to19

occupy the field with respect to these types of health and safety receiverships.

Neither the language nor the legislative history of section 17980.7 supports

this view. 7

“The fundamental purpose of statutory construction is to ascertain the

intent of the lawmakers so as to effectuate the purpose of the law. [Citation.]

‘We begin by examining the statutory language, giving the words their usual

and ordinary meaning. [Cit ation.] If there is no ambiguity, then we presume

the lawmakers meant what they said, and the plain meaning of the language

governs. [Citation.] If, however, the statutory terms are ambiguous, then we

may resort to extrinsic sources, including the osten sible objects to be achieved

and the legislative history. [Citation.] In such circumstances, we “ ‘select the

construction that comports most closely with the apparent intent of the

Legislature, with a view to promoting rather than defeating the general

purpose of the statute, and avoid an interpretation that would lead to absurd

consequences.’ ” ’ ” ( City and County of San Francisco v. Jen (2005)

135 Cal.App.4 th 3 05, 310 ( Jen ).)

Sections 17980.6 and 17980.7 “ compose a statutory scheme providing

certain remedies to address substandard residential housing that is unsafe to

occupy. Pursuant to section 17980.6 , an enforcement agency may issue a

notice to an owner to repair or abate property conditions that violat e state or

local building standards and substantially endanger the health and safety of

7 In April 2019, we granted U.S. Bank’s request that we take judicial

notice o f selected portions of the legislative history for section 17980.7. On our own motion, we take judicial notice of the entire legislative history of
A ssembly Bill No. 3492 (1989

- 1990 Reg. Sess

. ). (Evid. Code, §§ 452,
subds. (a) & (c), 459; see Alford v. Superior Court (2003) 29 Cal.4th 1033, 1041, fn. 4 , disapproved on another ground in Facebook, Inc. v. Superior Court (Touchstone) (2020) 10 Cal.5th 329, 345, fn. 6 .)20

residents or the public. Section 17980.7 provides that, if the owner fails to

comply with the notice despite having been afforded a reasonable opportunity

to do so, th e enforcement agency may seek judicial appointment of a receiver

to assume control over the property and remediate the violations or take

other appropriate action.” ( Gonzalez

, supra , 43 Cal.4th at p. 912; accord City

of Crescent City v. Reddy (2017) 9 Cal .App.5th 458, 465

– 466.) “The obvious

and stated purpose of section 17980.6 [and section 17980.7] is to protect the

health and safety of residents who might be substantially endangered by

unsafe building conditions.” ( Jen

, supra , 135 Cal.App.4th at p. 311 .)

Subdivision (c)(4) of section 17980.7 enumerates a set of “powers and

duties” that a receiver must follow in the “order of priority” listed “unless the

court otherwise permits.” The receiver is empowered by statute to “take full

and complete control of the substandard property”; to “manage the

substandard building” and pay its operating expenses, taxes, insurance,

utilities and debt servicing; to “secure cost estimates” and “enter into

contracts” to abate the code violations; to “collect all rents and i ncome” and to

“use all rents and income from the substandard building to pay for the cost of

rehabilitation and repairs”; and t o “ borrow funds to pay for repairs necessary

to correct the conditions cited in the notice of violation and to borrow funds to

pa y for any relocation benefits authorized by paragraph (6) [of the statute] .”

(§ 17980.7, subd. (c)(4) (A)

- (G).) Moreover, “ with court approval, ” the receiver

is authorized to “ secure that debt and any moneys owed to the receiver for

services performed pur suant to this section with a lien on the real property

upon which the substandard building is located. The lien shall be recorded in

the county recorder’s office in the county within which the building is

located. ” ( § 17980.7, subd. (c)(4)(G).)21

U.S. Bank points out that section 17980.7 makes no mention of

authorizing liens on a super

- priority basis, and it notes that the law

prioritizes paying “debt secured by an interest in the real property”

(§ 17980.7, subd. (c)(4)(B)) before borrowing funds and se curing the debt with

a lien on the real property ( id. , subd. (c)(4)(G)). “Far from showing an intent

to allow receivers to extinguish the interests of secured creditors,” U.S. Bank

contends, “the Legislature .

. . affirmatively showed its intent to protec t

them.” We disagree.

As discussed above, the primary object of a section 17980.7 receivership

is to remediate code violations on a property that “are so extensive and of

such a nature that the health and safety of residents or the public is

substantial ly endangered” (§ 17980.6; see § 17980.7)

— not to ensure that

debt payments are not missed. ( Gonzalez

, supra , 43 Cal.4th at p. 912 ; Jen

,

supra , 135 Cal.App.4th at p. 311.) While section 17980.7 generally directs

that remediation expenses should first be paid out of the rents and income

derived from the property before funds are borrowed, the statute expressly

allows the receiver to proceed by another manner when “the court otherwise

permits.” (§ 17980.7, subd. (c)(4).) This flexibility is further confirm ed by

section 17980.7, subd. (c)(4)(H), which authorizes the receiver “[t]o exercise

the powers granted to receivers under Section 568 of the Code of Civil

Procedure.” By its own terms, section 17980.7 incorporates the traditional

power of receivers “ to d o such acts respecting the property as the C ourt may

authorize

. ” (Code Civ. Pro c ., § 568 .) In sum, we do not read section 17980.7

to preclude the use of a super

- priority lien when it is authorized by the trial

court in an appropriate circumstance.

The l egislative history of section 17980.7 does not compel a different

result. When first introduced as Assembly Bill No. 3492, the original draft22

provided an express procedure for super

- priority borrowing by receivers.

Specifically, before a receiver could b orrow funds, the bill required the

receiver to give existing lienholders the opportunity to increase their debt to

pay for the necessary repairs or to foreclose. (See Assem. Bill No. 3492 (1989

- 1990 Reg. Sess.) (Assembly Bill 3492) as introduced Feb. 28, 1990 at pp. 4

– 5.)

The draft legislation further provided: “If the existing lienholders decide not

to provide the funds for repair and if they choose not to foreclose their

security, the receiver may borrow funds and secure the debt with an

encumbrance on the real property upon which the substandard building is

located which shall constitute a lien on that real property, superior to all

prior liens and encumbrances, except taxes.” ( Id. at p. 5.)

This language was later deleted after opposition from the Ca lifornia

Bankers Association. (See Assembly Bill 3492, as amended Apr. 30, 1990 at

pp. 5

- 6; see also Maurine C. Padden, Cal. Bankers Assn., letter to Chairman

Dan Hauser, Assem. Housing and Community Development Comm., Apr. 11,

1990. ) U.S. Bank argues that this sequence of events evidences a legislative

intent to disallow super

- priority borrowing by section 17980.7 receivers. U.S.

Bank omits an important part of the story.

When Assembly Bill 3492 was amended to delete reference to su per

priority borrowing, the relevant subsection of the statute was also amended

to provide that receivers could secure debt only with court approval and only

with a lien hav ing “ the force, effect, and priority of a judgment lien. ”

( Assembly Bill 3492 as a mended Apr. 30, 1990, at p. 5.) Because a judgment

lien is generally subject to the first

- in

- time rule of lien priority (Civ. Code,

§§ 2897, 2898; see Isaac v

. City of Los Angeles (1998) 66 Cal.App.4th 586,

600

– 601), the proposed amendment would not have allowed trial courts to

give receivership liens super

- priority status.23

However, another amendment subsequently deleted the reference to

judgment lien priority and required immediate service of any petition

requesting appointment of a receiver on all pers ons with a recorded interest

in the subject real property. (Assembly Bill 3492 as amended June 28, 1990

at pp. 3

– 4.) This left the borrowing provision as it was ultimately enacted.

(§ 17980.7, subd. (c)(4)(G) [authorizing receiver to “borrow funds . . . and,

with court approval, secure that debt and any moneys owed to the receiver for

services performed pursuant to this section with a lien on the real property

upon which the substandard building is located” ].) 8 The removal of the

specific authorization for super

- priority borrowing from Assembly Bill 3492

was explained by the author as follows: “I have added author’s amendments

. . . to delete a first priority for a lien secured by a receiver. Such blanket

autho rity may not be appropriate in certain cases, so the bill now specifies

that any financing arrangement by a receiver would be subject to court

approval.” (Assem. Comm. on Ways and Means, Author Hearing Notice for

Assembly Bill 3492, May 6, 1990, at pp. 1

– 2.)

T his legislative history indicates that the Legislature did not foreclose

the use of super

- priority liens to fund section 17980.7 receiverships, but

rather intended any financing arrangement to be reviewed and approved by

the court under the particul ar facts of each case and only after mandatory

notice to all affected lienholders. The Civil Code defines “lien” generally as “ a

8 As enacted, Assembly Bill 3492 provided for service of a receivership petitio n on all persons with a record interest in the real property at least three days before the filing of any petition seeking a receivership. (See Stats. 1990, ch. 1334, § 1, p. 5785.) Effective October 8, 2019, this requirement was
amended to allow for not ice by first class mail on all persons with a record interest, posting on the property, and service on the owner. (See § 17980.7, subd. (c); Stats. 2019, ch. 620, § 4 (Assem. Bill No. 957 (2019

- 2020 reg. sess.).)24

charge imposed in some mode other than by a transfer in trust upon specific

property by which it is made security for the perf ormance of an act

. ” (Civ.

Code, § 2872.) On the other hand, w hen the Legislature wants to treat a lien

like a judgment lien

, it clearly knows how to do so. ( See, e.g., Gov. Code,

§ § 25845, subd s

. (e)

, (g) [authorizing recordation of an abatement lien with

“ the same priority as a judgment lien on real property”], 38773.1, subds. (a),

(c) [authorizing nuisance abatement lien, which “from the date of recording

shall have the force, effect, and priority of a judgment lien”] & 54988,

subds. (a)(1), ( c) [same ] .)

That the Legislature chose to eliminate similar language from

Assembly Bill 3492, keeping the type of lien unspecified, argues in favor of a

construction which leaves lien priority in this context to the discretion of the

trial court. (See Hicks v. E.T. L egg & Assocs. (2001) 89 Cal.App.4th 496, 507

[ “ ‘ “It is a well recognized principle of statutory construction that when the

Legislature has carefully employed a term in one place and has excluded it in

another, it should not be implied where excluded. ” ’ ”]; see also Campbell v.

Zolin (1995) 33 Cal.App.4th 489, 497 [ “Ordinarily, where the Legislature uses

a different word or phrase in one part of a statute than it does in other

sections or in a similar statute concerning a related subject, it must be

presumed that the Legislature intended a different meaning.” ] .) 9

9 U.S. Bank points to a statement in the R epublican Analysis of Assembly Bill 3492 that “ ‘Senate amendments make any lien filed against the property a standard lien . . . so that it does not have priority over other loans.’ ” However, the full statement reads as follows: “Senate amendments

make any lien filed against the property a standard lien, instead of a judgment lien, so that it does not have priority over other loans.” (Assem. Comm. on Housing and Community Development, Republican Analysis of Assembly Bill 3492, Aug. 29, 1990.) We disag ree with this statement. As discussed above, the decision to omit how a receivership lien should be25

Our reading of the legislative history is further bolstered by the fact

that, as enacted, section 17980.7 expressly authorizes section 17980.7

receivers “[t]o exercise the powers granted to receivers under Section 568 of

the Code of Civil Procedure” (§ 17980.7, subd. (c)(4)(H))

— a statute that, as

discussed above, has long been interpreted to authorize the funding of a

receivership on a super

- priority basis in an appropriate case. (See Title Ins.

& Trust

, supra , 171 Cal. at p. 231.) “We do not presume that the Legislature

intends, when it enacts a statute, to overthrow long

- established principles of

law unless such intention is clearly expressed or necessarily implied.”

( People v. Superior C

ourt ( Zamudio ) (2000) 23 Cal.4th 183, 199.) Thus,

nothing in the text or legislative history of section 17980.7 suggests an intent

by the Legislature to circumscribe or displace the traditional powers of a

receiver appointed under Code of Civil Procedure section 564.

On the contrary, legislative committee reports repeatedly acknowledge

that section 17980.7 was intended to reconfirm the trial court’s authority

under Code of Civil Procedure section 564 to appoint receivers to remediate

substandard properties. (See, e.g. , Concurrence in Sen. Amends. for

Assembly Bill 3492, as amended Aug. 24, 1 990, at p. 1 [“Currently, Section

564 of the Code of Civil Procedure authorizes the superior court to appoint a

receiver for a number [] of causes, including ‘.

. . where it is shown that the

property or fund is in danger of being lost, removed, or material ly injured. ’ ” ];

Sen Comm. on Judiciary, Rep. on Assembly Bill 3492, as amended June 28,

1990, at p. 2 (Sen. Comm. on Judiciary Analysis) [same].) Because judges

appeared reluctant to appoint receivers pursuant to the general authority of

Code of Civil Pr ocedure section 564, Assembly Bill 3492 was proposed to

treated signals a legislative intent to allow the trial court to determine in its discretion the priority status of such a lien.26

make the authority for appointing a receiver under these circumstances

“more explicit.” (Sen. Comm. on Judiciary Analysis, supra , at p. 2 [“ The

purpose of this bill is to give courts explicit authori ty to appoint a receiver to

oversee repairs of a substandard building where the o wner has refused to do

so. ”].) 10

In sum, both the text and legislative history of section 17980.7 evince a

legislative intent to supplement rather than supplant the traditi onal powers

of a receiver under Code of Civil Procedure section 568. (§§ 17980.7,

subd. (c)(4)(H) [ authorizing receivers “[t] o exercise the powers granted to

receivers under Section 568 of the Code of Civil Procedure ]; 17980.7 , subd. (g)

[ “ These remedies shall be in addition to those provided by any other law ”];

see City and County of San Francisco v. Daley (1993) 16 Cal.App.4th 734,

742, fn. 6 ( Daley ) [citing § 17980.7, subd

. (g) in concluding that § 17980.7

“does not affect the availabilit y of a receiver under Code of Civil Procedure

section 564 ” ]. )

Finally, h aving concluded that a court’s authority to impair property

rights subject to receivership in an appropriate case has been recognized for

over 100 years, we decline U.S. Bank’s suggestion that a different

interpretation of the relevant statutes is required by the constitutional

10 Since Assembly Bill 3492 was enacted to address an unmet need with respect to the rehabilitation of substandard residential properties, it is
apparent that the existing tools available to local governments in this

arena

— such as abatement or eminent domain

— were n ot always sufficient to ameliorate this significant health and safety issue. (S ee, e.g., Dept. of Housing and Community Development, Enrolled Bill Report on Assembly Bill 3492, as amended Aug. 24, 1990, at p. 3 [noting “that many legal service practitione rs in the housing field share the belief that current code
enforcement mechanisms are often ineffective”].) U.S. Bank’s contention that the existence of these other options somehow argues against the availability of priority financing thus misses the poin t of the legislation

.27

avoidance canon. (See People v. Engram (2010) 50 Cal.4th 1131, 1161 [“a

statute must be construed, if reasonably possible, in a manner that avoids a

serious constitutional question”].) U.S. Bank’s relatively undeveloped

assertion t hat the exercise of such authority by a court supervising a health

and safety receivership constitutes an unconstitutional taking (Cal. Const.,

art. I, § 19(a); U.S. Const., 5th Amend.) and/or an impairment of contract

(Cal. Const., art. I, § 9; U.S. Const ., art I, § 10, cl. 1), or “at least raise[s] a

significant constitutional issue,” does not persuade us to part ways with this

longstanding precedent.

C

. The Subordination Order Was Not an Abuse of Discretion

Having concluded that the trial court was a uthorized to secure the

receiver’s borrowing with a super

- priority lien under both receivership

statutes, we turn to the question whether the trial court abused its discretion

by giving the receiver’s certificate first priority over all other liens. We

co nclude that it did not.

As the record makes clear, the subject property was not capable of

generating income and was underwater, making standard secured borrowing

impossible as a means of financing the remediation of the property. Quail

had no resources to offer and the receiver reported that his efforts to obtain

funding from nonprofits or other sources proved unsuccessful. Adding

urgency to the situation, the property posed a significant hazard to the health

and welfare of the public and its occupants , with several families living in

unsanitary or uninhabitable conditions, a massive accumulation of junk and

debris, fire damaged structures and other attendant fire risks, and frequent

responses to the property by the sheriff’s department and the fire

dep artment. These conditions had persisted for years despite numerous

attempts by the County to enforce the code violations.28

Against this backdrop, the receiver’s plan to obtain priority financing to

fund a partial remediation of the property and to sell t o a buyer willing to

complete the remaining repairs appeared reasonably designed to address the

nuisance conditions quickly and effectively, once and for all. “ ‘ “A s 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. ” ’ ” ( SunTrust

, supra , 32 Cal.App.5th at p. 657, quoting Baldwin v.

Baldwin (1947) 82 Cal.App.2d 851, 855.) Here, the receiver’s plan allowed

the costs of the receivership to be paid by the property, placing any risk of

loss on those with financial interests in the property, and avoided the use of

public monies to enhance the value of those private financial interests.

U.S. Bank nevertheless argues that the court’s subordinat ion order was

an abuse of discretion because it had offered to foreclose and take care of the

problems itself, which would have avoid ed the need for the receiver and its

attendant cost s

. On this record, however, we see no abuse of discretion in the

court’ s rejection of U.S. Bank’s belated proposal. U.S. Bank had notice of the

severe health and safety issues on the property since at least June 2017 and

took no action to address the problems prior to the appointment of the

receiver in January 2018, or befor e the receiver renewed its request for

super

- priority financing in May 2018, or even before the court finally granted

that request in October 2018. It was only at the October 2018 hearing that

U.S. Bank finally asked the court for permission to foreclose and either repair

the property itself or sell to a buyer who could remediate the nuisance

conditions.

Prior to the October hearing, the court had ordered U.S. Bank to obtain

an appraisal of the property, which it failed to do in a timely manner despite

b eing given three months to do so. The County expressed concern that, if left29

to its own devices, U.S. Bank would not remedy the situation and might sell

to a party who would likewise fail to fix the many hazards on the property.

Given U.S. Bank’s extende d history of indifference and inaction, w e cannot

fault the trial court for viewing its last

- minute offer to foreclose with

skepticism. In contrast, it was only through the efforts of the receiver that

the conditions on the property started to improve . W ithin three months of

the court’s order authorizing the receiver’s certificate on a priority basis, the

receiver had removed or relocated all of the occupants on the property,

secured all the buildings, completed the demolition work, listed the property,

a nd was weighing several offers above the asking price. Under the

circumstances, the court acted well within its discretion in concluding that

the process most likely to result in the expeditious and total remediation of

the health and safety issues on the property was the plan put forward by the

receiver.

D

. Order Confirming Sale Free and Clear of All Liens Was Not an Abuse of Discretion

In the second of these consolidated appeals, U.S. Bank attacks the

court’s subsequent order confirming the sale of the property free and clear of

liens. It asserts that the sale confirmation process failed to comply with

statutory requirements. U.S. Bank also contends that the court’s sale order

was not supported by the evidence, making it an abuse of discretion. Both

contentions lack merit.

It is beyond dispute that a court overseeing a health and safety

receivership has the authority to sell receive rship property. (See Gonzales

,

supra , 43 Cal.4th at p. 930 [ holding that section 17980.7 “ empowers the

receiver to sell the property or to take any other action respecting the

property as the court may authorize,” citing § 17980.7, subd. (c)(4)(H) & Code

Civ. Proc., §§ 568, 568.5; see also Cal

- American Income Property Fund VII v.30

Brown Dev elopment Corp. (2008) 138 Cal.App.3d 268, 273

– 274 [“ Code of Civil

Procedure sections 568 and 568.5 authorize the receiver to perform such acts

respecting the property as the court may authorize, including the sale of real

and personal property upon notice and subject to court confirmation.”].)

According to U.S. Bank, any such sale must occur in accordance with the

Enforcement of Judgments Law (Code Civ. Proc., § 680.010 e t seq.) (EJL)

because Code of Civil Procedure section 568.5

— the statute authorizing a

receiver to sell property

— states that all sales must be “in the manner

prescribed by Article 6 (commencing with Section 701.510 ) of Chapter 3 of

Division 2 of Title 9, ” i.e., the sale provisions of the EJL. U.S. Bank is

mistaken.

W hat Code of Civil Procedure section 568.5 actually states is that “[a]

receiver may , pursuant to an order of the court, sell real or personal property

in the receiver’s possession upon the notice and in the manner prescribed by

[the EJL].” (Italics added.) Moreover, Code of Civil Procedure section 568

grants receivers the general power “to do such acts respecting the property as

the Court may authorize.” Read together, these provisions pe rmit a court to

tailor the method of sale of receivership property to the circumstances before

it. Indeed, s everal courts have recognized “the broad power of a court to

determine the manner in which [receivership] property should be sold.”

( People v. Riv erside University (1973) 35 Cal.App.3d 572, 584 ( Riverside ).)

In Lesser & Son v. Seymour (1950) 35 Cal.2d 494 ( Lesser ), for example,

the Supreme Court upheld a court’s authority to confirm a sale of

receivership assets in a manner which conflicted with its prior order of sale

. ( Id. at p. 499.) In doing so, the high court reasoned : “[T]he main function of

the court is to manage or dispose of the estate in the best manner possible

and for the best interest of the parties concerned. To e ffectually perform that31

duty necessarily requires some flexibility and continuity of jurisdiction in

giving instructions to the receiver as to the manner in which the property

should be sold to meet exigencies as they may arise.” ( Ibid .) In support of

th is conclusion, the court noted that “[t] he receiver is a mere agent and the

property in [the rec e iver’s] hands is really under the control and continuous

supervision of the court.” ( Ibid. .)

Thereafter, the appellate court in Riverside

, supra , 35 Cal.App .3d 572,

expressly addressed and rejected the argument U.S. Bank advances here.

Relying on Lesser , the court opined : “ In the absence of more explicit

language, we cannot read section 568.5 as a restriction upon the inherent

equitable power of the court t o prescribe the manner in which a receiver may

sell property. To effectively discharge its responsibility of managing for the

best interest of the parties concerned the assets placed in the hands of a

receiver, the court must, as stated in [ Lesser ]

, necessarily maintain a degree

of flexibility with respect to the time and manner in which property should be

sold to meet exigencies as they arise. [Citing Lesser

, supra , 35 Cal.2d at

p. 499.]” ( Riverside

, at p. 585.) Contrary to U.S. Bank’s position, t he better

reading of Code of Civil Procedure section 568 .5 is that “ unless the court

prescribes a different mode of sale, a receiver, when authorized, must sell

property in the manner provided for sales on execution. ” ( Riverside , at

p. 585.) Given this p recedent, we have no difficulty concluding that the trial

court possessed the authority to confirm the sale of the property in this case

despite the receiver’s failure to follow the specific procedure outlined in the

EJL.

D & M Cabinets

, supra , 177 Cal. App.4th 59 is distinguishable . I n that

case, the receiver was appointed under the EJL itself

— pursuant to Code of

Civil Procedure section 708.620

— to enforce a money judgment . (See D & M32

Cabinets , at p. 62.) The court held under those circumstances that certain

homestead requirements set forth in the EJL applied whether the sale was

conducted by a sheriff or an EJL receiver. ( D & M Cabinets , at p. 73.)

Indeed, the court distinguished Gonzalez

, supra , 43 Cal.4th 905, stating that

Gonza lez “involved a receivership to demolish uninhabitable property due to

building code violations; it had nothing to do with the EJL.” ( D & M

Cabinets

, at p. 76 .)

Nor are we persuaded that, as a general matter, the court’s sale order

amounted to an abuse of discretion. As discussed above, “ [a] n order

authorizing the receiver to sell substandard structures that pose a

substantial health and safety risk is reviewed for abuse of discretion and is

afforded considerable deference.” ( C ity of Riverside v. Horspool (2014)

223 Cal.App.4th 670, 683 ( Horspool ); see Gonzalez, supra , 43 Cal.4th at

p. 931.) U.S. Bank argues that the sale order at issue was an abuse of

discretion because there was insufficient evidence to support the

reasonable ness of the sales price or that the proposed sale would benefit the

receivership estate, facts critical to the trial court’s decision. Ample evidence,

however, supports the court’s approval of both the sales price and the sale

process. Certainly, there i s no evidence of “ fraud, unfairness, or oppression .”

(See Gonzalez

, at p. 931.)

The list price of $249,000 was based on a broker’s price opinion of the

market value of the property after the partial remediation was completed.

The only other valuation evidence in the record was U.S. Bank’s appraisal of

$400,000. It is not clear that the appraisal considered the ongoing nuisance

conditions on the property or the need for any buyer to complete the

remaining remediation post sal e. Indeed, there is some evidence that the

appraisal did not take these factors into account, as the highest of the five33

offers received after the property was marketed for sale was the $315, 000

offer the receiver asked the court to confirm. Moreover, U. S. Bank supplied

no concrete evidence to suggest any irregularity in the receiver’s open market

process. In any event, “ other considerations may outweigh the need to

maximize the sales price to the receivership.” ( People v. Stark (2005)

131 Cal.App.4th 1 84, 207.) Here, it was a matter of utmost importance that

any potential purchaser be willing and able to work with the County to

complete the remaining nuisance abatement, and the potential purchasers

appeared to be excellent candidates in this regard. O n this record, we see no

abuse of discretion in the court’s confirmation of a $315,000 purchase price

. ( Riverside

, supra , 35 Cal.App.3d at p. 582 [“ ‘Generally speaking if no good

reason appears for refusing to confirm a receiver ’ s sale, such as chilling of

bids or other misconduct or gross inadequacy of price, the sale should be

confirmed.’ ”].)

U.S. Bank’s additional argument

— that the approved sale process was

improper because it had offered to foreclose and find a buyer willing to

address the nuisance conditions

— is largely a rehash of the argument we

rejected above

. It is true that “ ‘receivers are often legal luxuries, frequently

representing an extravagant cost to a losing litigant .’ ” ( Daley

, supra ,

16 Cal.App.4th at p. 744.) In this case, however, U.S. Bank did not challenge

the initial appointment of the receiver and proposed foreclosure only when

the primacy of its lien was at risk. As discussed above , the trial court’s

apparent lack of confidence that U.S. Bank would do what it said it would in

a timely and effective manner finds ample support in the record.

Moreover, as the trial court found, the only way to complete the

required rehabilitation was t o sell the property to a third party with the

resources to complete the remaining repairs. This, in turn, could only be34

accomplished by stripping the property of its existing liens, including the lien

held by U.S. Bank. While U.S. Bank argues strenuously that such lien

stripping goes beyond the court’s authority, precedent supports a contrary

view. As our high court confirmed when it upheld a trial court’s decision

under a section 17980.7 receivership to completely demolish a substandard

building, receiv ership orders in this context may involve “extraordinary

action,” and such orders are afforded substantial deference even when they

are “drastic enough to extinguish an owner ’ s interest in property .” ( Gonzalez

,

supra , 43 Cal.4th at p. 931.)

In Horspool

, supra , 223 Cal.App.4th 670, the Fourth District addressed

a situation similar to the instant appeal. The city sought appointment of a

section 17980.7 receivership after the property owner refused to abate

nuisance conditions on a residential pro perty. The receiver obtained

permission from the trial court to sell the partially remediated property

“as

- is” to a buyer willing to complete the repairs. To effectuate the sale, the

court stripped the property of its existing liens

. ( Id. at pp. 675

– 678 .) In

affirming the actions of the trial court, the appellate court expressly opined

that “[a] court of equity has the power to order the sale of property free and

clear of liens and encumbrances.” ( Id. at p. 684.) And in the SunTrust case

discussed abo ve, the appellate court rejected many of the same arguments

that U.S. Bank advances here, upholding the subordination of SunTrust ’s

lien against the lender’s contention it was allowing the lien “ ‘to be essentially

stripped to nothing.’ ” ( SunTrust

, supra , 32 Cal.App.5th at p. 660.) We thus

conclude that the trial court here had the authority to authorize the sale of

property free and clear of all liens and encumbrances, and its decision to do

so in this extraordinary case cannot be characterized as an abuse of its

discretion.35

E

. The Order Prioritizing the County’s Fees and Costs on an Equal Footing with the Receiver’s Was an Abuse of Discretion

We agree with U.S. Bank in one respect. Although we conclude that

Code of Civil Procedure 568 and section 17980.7 allow for the payment of a

receiver’s remediation fees and costs on a super

- priority basis under

appropriate circumstances, we see no such au thority for treating the County’s

attorney fees and costs in a similar fashion. As noted above, the receiver is

an officer of the appointing court, in effect an extension of the court itself.

( Gonzalez

, supra , 43 Cal.4th at p. 930.) Although the County set in motion

the appointment of the receiver in this matter, it does not occupy the same

role as the receiver. Title Ins. & Trust and SunTrust support the notion that

a receivership created pursuant to Code of Civil Procedure sections 564 and

568 may be funded, in an appropriate case, on a super

- priority basis. (See

Title Ins. & Trust

, supra , 171 Cal. at p. 231; SunTrust

, supra , 32 Cal.App.5th

at p. 657 .) These authorities, however , do not address the fees and costs

incurred by an enforcement agency.

Nor does section 17980.7 assist the County. While a receiver appointed

under that statute is given the authority to borrow funds for necessary

repairs and, with court approval, to “ s ecure that debt and any moneys owed to

the receiver for services performed” wit h a lien on the subject property

(§ 17980.7, subd. (c)(4)(G), italics added), by its terms this authorization does

not extend to payment of governmental costs of enforcement. On the

contrary, the statute provides elsewhere that “[i] f the court finds that a

building is in a condition which substantially endangers the health and

safety of residen ts pursuant to Section 17980.6, upon the entry of any order

or judgment, the court shall,” among other things, “[o]rder the owner to pay

all reasonable and actual costs of the enforcement agency including, but not

limited to, inspection costs, investigatio n costs, enforcement costs, attorney36

fees or costs, and all costs of prosecution. ” ( Id.

, subd. (d)(1), italics added; see

also id

. , subd. (c)(11) [“ The prevailing party in an action pursuant to this

section shall be entitled to reasonable attorney’s fees and court costs as may

be fixed by the court.”] .)

As the trial court found, the County’s actions with respect to the

property were instrumental in bringing it to the point where its numerous,

ongoing nuisance conditions could finally be abated. Nevertheless, the trial

court erred in equating the County’s enforcement costs with those of the

receiver, allowing them to be paid on a super

- priority basis without

consideration of the competing claims of other lienholders. We therefore

reverse the trial court’s sale order to that extent. (See Costco Wholesale Corp.

v. Superior Court (2009) 47 Cal.4th 725, 733 [a trial court abuses its

discretion when it applies the wrong legal standard].) The County is of

course free to raise any argument it sees fit before the trial court on remand

with respect to its entitle ment to a share of the remainder of the sale

proceeds.

III. DISPOSITION

We affirm the trial court’s orders authorizing a priority receiver’s

certificate and confirming the sale of the property free and clear of all liens,

and reverse the court’s sale or der to the extent it prioritized the County’s

enforcement fees and costs on an equal footing with the receiver. The matter

is remanded to the trial court for further proceedings consistent with this

opinion

. Our previously granted stay shall dissolve upo n issuance of the

remittitur in this matter. Respondents are entitled to their costs on appea l.37 _________________________ Sanchez, J.

WE CONCUR:

_________________________ Humes, P. J.

_________________________ Margulies, J.

A155837/A157245 County of Sonoma v. U.S. Bank38

Trial Court: Sonoma County Superior Court

Trial Judge: Hon. Patrick M. Broderick

Counsel:

Reed Smith, Raffi L. Kassabian, Kasey J. Curtis, Zachary C. Frampton, Todd S. Kim, for Defendant and Appellant U.S. Bank N.A.

Bruce D. Goldstein, Robert Pittman, County Counsel, Diana E. Gomez, Holly E. Rickett, Deputy County Counsel, for Plaintiff and Respondent

California Receivership Group, Mark S. Adams, Andrew F. Adams, for Defendant and Respondent

A155837/A157245 County of Sonoma v. U.S. Bank