Court Opinion

ID: 2740991
Source: CourtListenerOpinion
Date Created: 2014-10-09 00:02:54.684536+00
Date Added: 2024-06-11T09:29:18.058907
License: Public Domain

Filed 10/8/14 Urtecho v. Guerrero CA2/3
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                DIVISION THREE

FRANK URTECHO et al.,                                                 B247997

         Plaintiffs,                                                  (Los Angeles County
                                                                      Super. Ct. No. EC051322)
         v.

GABRIEL GUERRERO,

         Defendant and Appellant;

DAVID J. PASTERNAK, as Receiver, etc.,

         Movant and Respondent;

         APPEAL from an order of the Superior Court of Los Angeles County,
William D. Stewart, Judge. Affirmed.

         Roger N. Golden for Defendant and Appellant.

         Pasternak & Pasternak and David J. Pasternak for Movant and Respondent.
                                            _____________________
                                    INTRODUCTION
       Gabriel Guerrero appeals from an order requiring him to pay a portion of the fees
and expenses incurred by a court-appointed receiver, David Pasternak (the Receiver).
Guerrero contends he was no longer the owner of the receivership real property when the
Receiver was appointed and, therefore, he obtained no benefit from the creation or
operation of the receivership. Accordingly, Guerrero argues it was an abuse of discretion
to hold him liable for the Receiver’s fees. The trial court concluded Guerrero should be
charged because the Receiver was appointed to effectuate a conditional judgment
concerning disposition of the receivership real property to which Guerrero was a party
and beneficiary. We find no abuse of discretion. The order is affirmed.
                   FACTS1 AND PROCEDURAL BACKGROUND
       This appeal arises from a lawsuit by Frank and Leticia Urtecho (the Urtechos)
against Guerrero concerning a multi-family residential property that they co-owned (the
Property). The Property consists of 15 apartment units in three separate buildings.
       On January 28, 2010, the Urtechos and Guerrero entered into a stipulation for
settlement, whereby they agreed to sell their joint interest in the Property. The stipulation
acknowledged that Guerrero owned 60 percent of the equitable and legal title to the
Property, while the Urtechos owned the remaining 40 percent. Guerrero was to have
“sole and exclusive power to market the [P]roperty and take such actions as shall be
reasonably necessary to consummate a sale thereof for a period of 12 months.” The
stipulation specified, however, that “if either party receives an offer for the [P]roperty
which is less than $1.55 million, both parties shall be required to agree on a sales price.”
The parties also agreed that Guerrero would remediate “certain non-complying units” to
ensure that the Property had 15 legal units in advance of the anticipated sale. The parties

1
        In accordance with the applicable abuse of discretion standard of review (see
Baldwin v. Baldwin (1947) 82 Cal. App. 2d 851, 856 (Baldwin)), we state the relevant
facts in the light most favorable to the trial court’s ruling, and draw all reasonable
inferences in support of it. (Stephen Slesinger, Inc. v. Walt Disney Co. (2007)
155 Cal. App. 4th 736, 765.)

                                              2
were to bear the price of remediation according to their respective ownership interests—
i.e., 60 percent by Guerrero, 40 percent by the Urtechos. The parties also acknowledged
there were delinquent property taxes and agreed to pay the taxes through escrow entirely
from Guerrero’s share of the sale proceeds.
       On July 29, 2010, the trial court entered a conditional judgment pursuant to the
stipulation for settlement. (See Code Civ. Proc., § 664.6.) The parties, however, failed to
jointly sell the Property in accordance with the conditional judgment. Accordingly, on
November 10, 2011, the trial court entered a minute order appointing the Receiver to
“ ‘complete the terms of the Conditional Judgment re sale of [the Property].’ ” On
December 7, 2011, the court entered a formal order of appointment, which Guerrero’s
attorney approved as to form.
       Notwithstanding the terms of the conditional judgment, on June 29, 2011, roughly
five months before the trial court appointed the Receiver, Guerrero purported to transfer
his 60 percent interest in the Property to a third party, Winfield Schey, by quitclaim
deed.2 Guerrero claimed he was compelled to sell only his interest due to “his difficult
financial condition” and because the Urtechos would not consent to Schey’s offer to
purchase the entire Property for $1.5 million—an amount which, according to the terms
of the conditional judgment, required all parties’ agreement. At the time of the transfer,
Guerrero had not remediated the non-complying units as required by the conditional
judgment.
       On January 10, 2012, the Los Angeles County Health Inspector inspected the
Property and cited it for numerous habitability violations. Though the Receiver
attempted to resolve these issues with the limited funds available in the receivership
estate, the Health Inspector found ongoing habitability violations when he re-inspected
the Property on February 16, 2012.

2
      It is not apparent from the record whether Guerrero advised the trial court of the
purported transfer when the court appointed the Receiver.

                                              3
       On January 19, 2012, the mortgage lender, Opus Bank, gave notice of its election
to accelerate the indebtedness and call the loan. The notice of acceleration asserted the
loan agreement had been “breached by transfer(s) of a beneficial interest in the Property
without the knowledge or written consent of the Lender and non-payment of Property
taxes.” Around the same time, the Receiver stopped paying Opus Bank because the
receivership estate lacked adequate funds to make the monthly mortgage payments and
maintain the Property.
       In February 2012, the Receiver requested financing from the Urtechos, Guerrero
and Opus Bank to remedy the habitability violations and meet other expenses necessary
to properly operate the Property. All refused to provide the emergency funding. At a
March 2012 status conference, Schey—the purported owner of Guerrero’s interest in the
Property—asserted he had the financing to purchase the Urtechos’ remaining interest, and
that he would be able to close escrow before the end of April. At the status conference,
Opus Bank agreed to forbear foreclosure to allow the transaction to proceed. However,
contrary to this commitment, on March 16, 2012, the bank recorded a notice of default on
the Property. Citing the notice of default as one of its reasons, Schey’s proposed lender
refused to proceed with the financing.
       On April 12, 2012, the Los Angeles Housing Department cited the Property for
numerous Health and Safety Code violations, and ordered extensive abatement to be
completed by June 11, 2012. At that time, the receiver estimated the abatement costs
would total between $30,000 to $40,000. Though the Receiver made efforts to
rehabilitate the Property, these efforts were hindered by the lack of funds in the
receivership estate and the parties’ unwillingness to provide the necessary funds for
remediation.
       On April 24, 2012, the Housing Department sent another letter notifying the
Receiver that the Property was zoned for only eight—not 15—units. Based on a real
estate broker’s opinion of value, the Receiver determined the Property would be worth
significantly less than the existing Opus Bank loan unless the zoning issues could be
resolved.

                                             4
       On July 26, 2012, the trial court issued an order directing the Receiver to take no
action to halt Opus Bank’s trustee’s sale of the Property.
       On August 2, 2012, the Urtechos filed for bankruptcy. During the pendency of the
bankruptcy case, the Receiver remained in possession of the Property with the agreement
of the Urtechos’ bankruptcy trustee, who prohibited the Receiver from expending funds
to improve or maintain the Property. On November 20, 2012, Opus Bank successfully
moved for relief from the automatic stay and leave from the bankruptcy court to foreclose
on the Property. On December 19, 2012, the Urtecho’s bankruptcy case was closed.
       On November 2, 2012, the trial court entered an order releasing the Property from
the receivership estate and instructing the Receiver to file a final report and accounting.
On January 2, 2013, the Receiver filed his final report, wherein he claimed a total of
$154,486.89 for all unpaid fees and costs incurred in connection with the receivership.
The final report stated $90,236.91 remained in the receivership estate for partial payment
of the unpaid fees and costs.
       Because the Property had been released from the receivership estate and was not
available to satisfy any part of the claim, and because the Urtechos could not be charged
with the unpaid fees due to their bankruptcy discharge, the Receiver requested an order
requiring Guerrero to pay the $64,249.98 shortfall. Guerrero opposed the claim on the
principal ground that he sold his interest to Schey before the Property went into
receivership. The Receiver responded that Guerrero was not authorized to sell only his
interest in the Property, because the conditional judgment, which the Receiver had been
appointed to effectuate, required Guerrero to take such actions as were necessary to
consummate a sale of the entire Property.
       At the hearing on the final report, the trial court agreed with the Receiver that the
conditional judgment was the driving force behind the receivership.~(RT 13)~ Because
Guerrero was a party to the conditional judgment, the court held he was responsible for
the shortfall in payment of the Receiver’s fees and costs.

                                              5
                                       DISCUSSION
        A receiver is an agent and officer of the court, and is under the court’s control and
supervision. (Code Civ. Proc., § 568; Cal. Rules of Court, rule 3.1179.) The receiver
also is a fiduciary who must act for the benefit of all parties interested in the property
subject to the receivership. (Shannon v. Superior Court (1990) 217 Cal. App. 3d 986,
992.)
        Receivers are entitled to compensation for their services. (Venza v. Venza (1951)
101 Cal. App. 2d 678, 680.) Generally, the costs of a receivership are paid from the
property in the receivership estate. (See Andrade v. Andrade (1932) 216 Cal. 108, 110;
McCarthy v. Poulsen (1985) 173 Cal. App. 3d 1212, 1219-1220, fn. 3.) However, courts
also may impose the receiver’s costs on a party who sought the appointment of the
receiver or apportion them among the parties for whose benefit the receivership was
created, depending upon the equitable circumstances presented. (Stanton v. Pratt (1941)
18 Cal. 2d 599, 603 (Stanton); Baldwin, supra, 82 Cal.App.2d at pp. 854-855; see also
Ephraim v. Pacific Bank (1900) 129 Cal. 589, 593 [“ ‘While the estate in the receiver’s
hands is the primary fund out of which his proper expenses and compensation are to be
paid, if the estate be insufficient or fail, the parties for whom he has acted may be
compelled to pay the expense incurred for their benefit.’ ”].) Trial courts are vested with
broad discretion in determining who is to pay the expenses of a receivership, and the
court’s determination must be upheld in the absence of a clear showing of an abuse of
discretion. (Baldwin, at p. 856; see Melikian v. Aquila, Ltd. (1998) 63 Cal. App. 4th 1364,
1368; People v. Riverside University (1973) 35 Cal. App. 3d 572, 587.)
        Guerrero contends it was an abuse of discretion to charge him with paying the
shortfall in the Receiver’s fees, since he sold his entire interest in the Property five
months before the court appointed the Receiver. Because he purportedly had no interest
in the Property when the Receiver was appointed, Guerrero argues the receivership was
neither created nor operated for his benefit, and he cannot be held liable for satisfying the
shortfall. We disagree.

                                               6
       As discussed, if funds in the receivership estate are insufficient, the trial court has
discretion to impose “liability to pay the expenses and fees of a receivership . . . upon any
or all of the parties for whose benefit the receivership was created.” (Stanton, supra,
18 Cal.2d at p. 603.) Here, though Guerrero purported to transfer his 60 percent
ownership interest in the Property to Schey prior to the Receiver’s appointment, the trial
court reasonably determined that the receivership was nevertheless created and operated
for Guerrero’s benefit in order to effectuate his agreement to jointly sell both his and the
Urtechos’ interests in the Property as required by the conditional judgment. Indeed, the
conditional judgment not only contemplated a joint sale of the entire Property, but it also
provided that “Guerrero shall have and is hereby granted sole and exclusive power to
market the [P]roperty and take such actions as shall be reasonably necessary to
consummate a sale thereof . . . .” (Italics added.) Guerrero acknowledged that he failed
to consummate the mandatory sale, due (he claimed) to the Urtechos’ refusal to accept
Schey’s offer to purchase the Property for $1.5 million. Whatever the reason, as the
parties were unable or unwilling to settle their differences, the trial court appointed the
Receiver to “complete the terms of the Conditional Judgment re sale of [the Property].”
In that respect, the Receiver was appointed to ensure Guerrero’s commitments under the
conditional judgment were met. The trial court reasonably concluded the appointment
was for Guerrero’s benefit in charging him with responsibility to pay the Receiver’s fees
and expenses. (Ibid.)
       Equitable considerations also support the trial court’s decision. (Cf. Baldwin,
supra, 82 Cal.App.2d at pp. 854-855.) As we have discussed, the conditional judgment
contemplated the sale of the entire Property—it did not authorize Guerrero to sell only his
interest without consummating a sale of the Urtechos’ interest as well.3 Perhaps more

3
        Guerrero contends the conditional judgment permitted him to transfer his interest
to Schey as his “designee,” inasmuch as paragraph 5 of the stipulation for settlement
states “Urtecho and Guerrero acknowledge that Guerrero and/or his designee is the
majority owner of the property and owns 60% of the equitable and legal title in and to the
property.” Paragraph 5 is not reasonably susceptible of the interpretation advanced by
Guerrero. A “designee” is one “who has been designated to perform some duty or carry

                                              7
critically from an equities standpoint, Guerrero’s transfer not only violated the
conditional judgment, but it also caused Opus Bank to accelerate the indebtedness and
call the loan, declaring the loan agreement “breached by transfer(s) of a beneficial
interest in the Property without the knowledge or written consent of the Lender.” The
loan acceleration set the stage for Opus Bank to record a notice of default on the
Property, which apparently frustrated Schey’s efforts to obtain financing. The record also
shows that Guerrero failed to remediate the non-complying units before transferring his
interest, despite his commitment to do so under the conditional judgment. This, coupled
with the fact that neither Guerrero nor the Urtechos would furnish emergency funds, left
the Receiver in the unworkable position of trying to maintain a property which, due to its
non-complying units, was worth less than the amount owed to Opus Bank on the
mortgage. All told, the record amply supports a reasonable inference that Guerrero’s
inequitable conduct significantly impaired the Receiver’s ability to sell the Property at a
sufficient profit to cover the receivership fees and expenses. We find no abuse of
discretion in the trial court compelling Guerrero to cover the shortfall.

out some specific role.” (Black’s Law Dict. (9th ed. 2009) p. 512.) The term connotes a
form of agency relationship where the designee acts on behalf of the one who designated
him or her. (See Hayes v. State Dept. of Developmental Services (2006) 138 Cal. App. 4th
1523, 1531 [“A ‘designee’ is ‘one who is designated or delegated.’ [Citation.] To
‘delegate’ means to send as one’s representative.”].) Nothing in paragraph 5 or the other
terms of the stipulation suggests that the parties intended some other meaning by their
reference to Guerrero’s “designee.” Certainly nothing suggests they intended the term to
apply to an unrelated third party like Schey who might purchase Guerrero’s interest in the
Property separate from the Urtechos’ interest.

                                              8
                                  DISPOSITION
     The order is affirmed. Receiver, David Pasternak, is awarded costs on appeal.

     NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                             KITCHING, J.

We concur:

                  KLEIN, P. J.

                  ALDRICH, J.

                                         9