Court Opinion

ID: 4657606
Source: CourtListenerOpinion
Date Created: 2021-02-04 21:02:41.260207+00
Date Added: 2024-06-11T08:01:21.323388
License: Public Domain

Filed 2/4/21
               CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

               SECOND APPELLATE DISTRICT

                          DIVISION TWO

MEDIPRO MEDICAL                    B305910
STAFFING LLC et al.,
                                   (Los Angeles County
     Plaintiffs and                Super. Ct. No. BC667851)
Respondents,

       v.

CERTIFIED NURSING
REGISTRY, INC., et al.,

     Defendants and
Appellants.

     APPEAL from an order of the Superior Court of Los
Angeles County, Edward B. Moreton, Jr., Judge. Reversed.

     Khouri Law Firm, Michael J. Khouri and Michael Tran for
Defendants and Appellants.

      Verus Law Group, Holly Walker and Mark N. Strom for
Plaintiffs and Respondents.

                            ******
       By statute, a trial court has the discretion to appoint a
receiver to aid in the collection of a judgment if doing so “is a
reasonable method to obtain the fair and orderly satisfaction of
the judgment.” (Code Civ. Proc., §§ 564, subd. (b)(3) & (4),
708.620.)1 Does a trial court abuse that discretion if it appoints a
receiver to aid in the collection of a money judgment where the
record contains no evidence that the judgment debtors had
obfuscated or frustrated the creditor’s collection efforts and no
evidence that less intrusive collection methods were inadequate
or ineffective? We hold it does. Accordingly, we reverse the trial
court’s order appointing a receiver and its subsidiary injunction
obligating the judgment debtors to cooperate with the receiver.
         FACTS AND PROCEDURAL BACKGROUND
I.     The Underlying Judgment
       In July 2017, Medipro Medical Staffing, LLC (Medipro)
sued Certified Nursing Registry, Inc. (Certified), which was one
of its competitors in the nurse staffing industry, and Certified’s
founder, Christina Sy (Sy), for a variety of business torts. A jury
awarded Medipro $2 million in damages against Certified and
$450,000 in damages against Sy. These amounts do not include
costs, interest, or the $650,000 damages award against the other
two defendants for which Certified and Sy are jointly and
severally liable. The trial court entered judgment on March 8,
2019, and we affirm that judgment in a separate opinion filed
today. (Medipro Medical Staffing, LLC v. Certified Nursing
Registry, Inc. (Feb. 4, 2021, B294391) [nonpub. opn.].)

1    All further statutory references are to the Code of Civil
Procedure unless otherwise indicated.

                                 2
II.    Initial Collection Efforts
       After filing a writ of execution on April 26, 2019, Medipro
thereafter (1) served levies on 10 financial institutions regarding
accounts associated with Certified or Sy, (2) served levies on 11
hospitals to whom Certified provided staffing services regarding
their accounts payable to Certified, and (3) obtained a charging
order against Sy’s interest in a limited liability company (LLC)
owned by her husband. Medipro did not serve any
interrogatories requesting information to aid in the collection of
the judgment (§ 708.020), did not place liens on any of Certified’s
or Sy’s property (§ 695.010 et seq.), and did not seek to compel
Sy’s or her husband’s appearance at debtors’ examinations
(§ 708.110), although it unsuccessfully tried to serve Sy 25 times
and served her husband but had yet to conduct the examination.
       For a time, Medipro’s collection efforts bore fruit. By
September 2019, Medipro had obtained $35,171.77 from the
financial institution levies and $374,200.86 from the hospital
levies. However, the collections from the hospital levies started
to dwindle in August 2019 and stopped altogether in September
2019.
III. Motion for Appointment of Receiver and for
Complementary Injunctive Relief
       A.    Briefing and evidence
       On Halloween 2019, Medipro filed a motion with the trial
court to obtain (1) an order appointing a receiver authorized to
“take possession” of Certified’s “funds,” “books and records” and
to enforce the charging order against Sy’s interest in the LLC,
and (2) a complementary preliminary injunction requiring
Certified and Sy to “giv[e] the receiver access” to “all books and
records” of Certified and the LLC. In support of its motion,
Medipro submitted the declaration of its attorney, who

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represented that (1) “Certified is currently conducting its
business as usual, and providing staffing” to the hospitals, (2)
Certified must be “billing under the name of another entity or
person[] to circumvent” Medipro’s levies because an employee
named “Lisa” at one of the hospitals told her that Certified had
“canceled” a September 2019 invoice and did not issue any
invoices in October 2019, and (3) based on information and belief,
the LLC had eight real properties that generated rents but the
LLC had not forwarded any distributions to Sy and the attorney
“expected that Sy’s husband will not comply with the charging
order.”
      Certified and Sy opposed the motion. In support of this
opposition, Sy submitted a declaration indicating that Certified’s
business had “significantly diminished since Medipro began
serving levies on the hospitals,” causing three of its hospitals to
stop business altogether and the remainder to have so few
assignments that Certified was no longer sending weekly
invoices. Also in support of the opposition, Sy’s husband
submitted a declaration indicating that the LLC was “financially
struggling” and had made “[no] distributions.”
      Medipro submitted a reply, which included deposition
testimony from a Certified independent contractor stating that
she was still providing consulting services to Certified and that
Certified had issued her paychecks for those services in
September, October and November of 2019.
      B.     Ruling
      After a hearing, the trial court issued its ruling. As a
preliminary matter, the court sustained Certified’s evidentiary
objections and struck Medipro’s counsel’s statements that
Medipro was conducting “business as usual,” counsel’s hearsay

                                 4
recounting of what “Lisa” said, and counsel’s conjecture that
Medipro must be billing its hospital clients under another name.
The court nevertheless appointed a receiver and issued injunctive
relief. Specifically, the court appointed a receiver to “take
possession, custody and control” of the “accounts receivable and
business accounts,” to “enter and gain access to [the o]ffices,” to
“take possession of all bank accounts,” to “collect” “all mail,” and
to “take possession of all the books and records” of both Certified
and the LLC. The court also enjoined Certified and the LLC from
interfering with the receiver’s performance of his duties.
IV. Appeal
       Certified and Sy filed this timely appeal.
                            DISCUSSION
       Certified and Sy argue that the trial court erred (1) in
appointing the receiver and issuing the complementary
preliminary injunction, and (2) in granting relief beyond what
Medipro requested. Because the preliminary injunction issued in
this case is merely an adjunct to the appointment of the receiver
and because the challenge to the breadth of the receiver’s powers
presupposes that the appointment was proper, Certified and Sy’s
appeal presents a threshold question: Did the trial court err in
appointing the receiver?
       It is undisputed that the trial court had the authority to
appoint a receiver to aid in collection of the judgment. By
statute, a court “may” appoint a receiver “[a]fter judgment”
“pursuant to the Enforcement of Judgments Law” (§ 564, subd.
(b)(4)), and the Enforcement of Judgments Law (§ 680.010 et seq.)
empowers a court to appoint a receiver “to enforce the judgment
where the judgment creditor shows that, considering the
interests of both the judgment creditor and the judgment debtor,

                                 5
the appointment of a receiver is a reasonable method to obtain
the fair and orderly satisfaction of the judgment” (§ 708.620).
(Accord, Tucker v. Fontes (1945) 70 Cal.App.2d 768, 772 (Tucker)
[so noting].) It also is undisputed that the trial court had the
authority to appoint a receiver to enforce the charging order as
part of Medipro’s collection efforts. By statute, a court “may”
“[a]ppoint a receiver of the distributions” to a member of a limited
liability company if “necessary to effectuate the collection of
distributions pursuant to a charging order.” (Corp. Code,
§ 17705.03, subd. (b)(1).)
       What we must decide is whether the trial court in this case
properly exercised this authority in the post-judgment collections
context. Because trial courts enjoy a “large measure” of
discretion, albeit “not an entirely uncontrolled one,” in deciding
when to exercise their authority to appoint a receiver (Golden
State Glass Corp. v. Superior Court of Los Angeles County (1939)
13 Cal.2d 384, 393 (Golden State)), we review the decision to
appoint one solely for an abuse of that discretion (City and
County of San Francisco v. Daley (1993) 16 Cal.App.4th 734, 744
(Daley)).
       Because the appointment of a receiver transfers property—
or, in this case, a business—“out of the hands of its owners” and
into the hands of a receiver (Golden State, supra, 13 Cal.2d at p.
393), the appointment of a receiver is a very “drastic,” “harsh,”
and costly remedy that is to be “exercised sparingly and with
caution.” (Jackson v. Jackson (1967) 253 Cal.App.2d 1026, 1040
(Jackson); Golden State, at p. 393; Cohen v. Herbert (1960) 186
Cal.App.2d 488, 495 (Cohen); Morand v. Superior Court (1974) 38
Cal.App.3d 347, 351 (Morand).) Due to the “extraordinary”
nature of this remedy and the special costs it imposes, courts are

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strongly discouraged—although not strictly prohibited—from
appointing a receiver unless the more intrusive oversight of a
receiver is a “necessity” because other, less intrusive remedies
are either “‘inadequate or unavailable.’” (Jackson, at pp. 1040-
1041; Cohen, at p. 495; Morand, at p. 351; Rogers v. Smith (1946)
76 Cal.App.2d 16, 21; cf. Daley, supra, 16 Cal.App.4th at p. 745
[“[T]he availability of other remedies does not, in and of itself,
preclude the use of a receivership”]; Gold v. Gold (2003) 114
Cal.App.4th 791, 808 [same].)
       In light of the sheer number of enforcement mechanisms
for collecting money judgments under the Enforcement of
Judgments Law (which range from levies to liens to wage
garnishment (§§ 695.010 et seq., 697.010 et seq., 699.010 et seq.,
699.510 et seq., 706.020 et seq.); accord, Tucker, supra, 70
Cal.App.2d at p. 773 [“ordinarily a judgment creditor is able to
collect money . . . by way of garnishment or levy of execution”]),
appointment of a receiver is rarely a “necessity” and, as a
consequence, “may not ordinarily be used for the enforcement of a
simple money judgment.” (Jackson, supra, 253 Cal.App.2d at p.
1040; accord, White v. White (1900) 130 Cal. 597, 599 [receiver
may not be appointed to collect a money judgment under section
564, subdivision (b)(3)].) Instead, the appointment of a receiver
to enforce a money judgment is reserved for “exceptional”
circumstances where the judgment creditor’s conduct makes a
receiver necessary—and hence “proper.” (Jackson, at p. 1041;
Olsan v. Comora (1977) 73 Cal.App.3d 642, 647; Daley, supra, 16
Cal.App.4th at p. 744.) This occurs when the judgment debtor
has frustrated the judgment creditor’s collection efforts through
obfuscation or through otherwise contumacious conduct that has
rendered feckless the panoply of less intrusive mechanisms for

                                7
enforcing a money judgment. (See Bruton v. Tearle (1936) 7
Cal.2d 48, 52 [debtor “entered into a conspiracy” with his
employer to arrange wage payments in a manner that “defeat[ed]
the collection” of judgment; receiver appropriate]; Tucker, at pp.
772-774 [debtor received money from his business customers and
from property, but had structured them to render them immune
to ordinary collection mechanisms; receiver appropriate]; In re
Ferguson (1954) 123 Cal.App.2d 799, 802, 804 [debtor gave
“‘manifestly evasive’” testimony at debtor’s examination; receiver
appropriate]; Daley, at pp. 744-745 [debtors transferred title of
property “to avoid responsibility” and “thumb[] their noses” at
creditor’s inspection efforts; receiver appropriate]; see also Sachs
v. Killeen (1958) 165 Cal.App.2d 205, 214 [party subject to
receiver “conceal[ed] . . . actual profits of the business”; receiver
pendente lite appropriate].)
       The trial court in this case abused its discretion in
appointing a receiver to enforce Medipro’s money judgment
because there was no evidence—let alone the substantial
evidence necessary to sustain a proper exercise of discretion
(Shoen v. Zacarias (2019) 33 Cal.App.5th 1112, 1118)—that
Certified or Sy had engaged in obfuscation or other obstreperous
conduct to the degree that the other collection mechanisms
available under the Enforcement of Judgments Law were
ineffective. Excising the evidence the trial court ruled
inadmissible, the remaining evidence in support of Medipro’s
motion showed, at best, that (1) Certified’s accounts receivable
had slowed in August 2019 and stopped in September 2019, even
though Certified continued to have funds to pay its consultant,
and (2) the LLC did not make any distributions to Sy. But the
court did not have before it any evidence as to why, and, more

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specifically, did not have before it any evidence that Certified or
Sy had actually earned accounts receivable or distributions
despite the slowdowns or that they had engineered these
slowdowns to confound Medipro’s collection efforts. Indeed, the
only evidence in the record on these points came from Certified
and Sy, and indicated that the slowdowns were due to factors
beyond their control—namely, that Medipro’s collection efforts
had severely crippled Certified’s business and reduced the
frequency and amount of its accounts receivable, and that the
LLC had not turned any profit that would allow for a
distribution.
       Medipro argues that the trial court could have reasonably
inferred that the slowdowns in Certified’s accounts receivable
and the LLC’s distributions were due to nefarious conduct by
Certified or Sy, but this inference is based on nothing but
speculation and thus is not a reasonable inference. (People v.
Redmond (1969) 71 Cal.2d 745, 755 [speculation is “not a
sufficient basis for an inference of fact”]; Advent, Inc. v. National
Union Fire Ins. Co. of Pittsburgh, PA (2016) 6 Cal.App.5th 443,
459 [“Speculation also differs from a reasonable inference”].)
Medipro’s fear that Sy’s husband might try to subvert its
collection efforts in the future is based on nothing more than its
counsel’s “information and belief,” and is thus also “insufficient.”
(A.G. Col Co. v. Superior Court (1925) 196 Cal. 604, 614-615.)
And Medipro offered no evidence that the remaining arrows in its
Enforcement of Judgments Law quiver would be insufficient; nor
could it, as Medipro had barely sought to employ any of them.
       In sum, Medipro’s evidentiary showing demonstrated that
it had, at most, encountered some difficulty in its initial efforts to
collect on its money judgment. If this was sufficient to constitute

                                  9
the “necessity” required to justify the “extraordinary” remedy of
the appointment of a receiver to take over a judgment debtor’s
business, it is difficult to see how the appointment of receivers
would not become a routine part of the collection of judgments—a
result at odds with the solid wall of precedent holding to the
contrary. The trial court accordingly abused its discretion in
appointing a receiver on the record in this case.2
                            DISPOSITION
      The order is reversed, without prejudice to Medipro filing a
subsequent motion for appointment of a receiver. Certified and
Sy are entitled to their costs on appeal.
      CERTIFIED FOR PUBLICATION.

                                     ______________________, J.
                                     HOFFSTADT

We concur:

_________________________, P. J.
LUI

_________________________, J.
ASHMANN-GERST

2    This holding in no way precludes Medipro from re-
submitting a motion for appointment of a receiver based on
competent evidence that meets the standards set forth above.

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