Fontana v. Wright, et al.

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On February 16, 2024, the City filed an amendment naming Doe 1 as Commercial Loans LLC (Commercial). On June 14, 2024, the City filed another amendment naming Doe 2 as National Development Fund, LLC (National). On February 4, 2026, Eric Beatty, the court-appointed receiver (Receiver), filed the instant Motion for an Order (1) Approving the Final Report and Final Accounting, (2) Approving Receiver’s Fees and Costs, (3) Exonerating Receiver’s Undertaking and (4) Discharging the Receiver (Motion). Commercial and National (collectively, Respondents) filed their Opposition to the Motion on March 10, 2026. No reply has been filed at this time. On March 23, 2026, the court continued the instant hearing for Plaintiff to file an objection to any order that the City pay a portion of the subject fees. On April 10, 2026, Plaintiff filed a Response to Court Receiver’s Discharge Motion (Response). The Receiver filed his Reply on April 22, 2026, along with a declaration from the Receiver regarding the late filing of his Reply.1

DISCUSSION Statement of Law “A receiver may be appointed by the court in which an action or proceeding is pending, or by a judge thereof, in the following cases: ... (9) In all other cases where necessary to preserve the property or rights of any party.” (Code of Civil Procedure, sect. 564, subd. (b)(9).) “[A]ny federal, state, or local enforcement agency, may file a motion in a receivership action for the purpose of seeking further instructions or orders from the court, if either of the following is true: (a) Substandard conditions exist, as defined by Section 17920.3 or 17920.10 of the Health and Safety Code.” (Code of Civil Procedure, sect.568.3.) “A receiver must present by noticed motion or stipulation of all parties: (1) A final account and report; (2) A request for the discharge....” (California Rules of Court, rule 3.1184(a).) “Notice of the motion or of the stipulation must be given to every person or entity known to the receiver to have a substantial, unsatisfied claim that will be affected by the order or stipulation, whether or not the person or entity is a party to the action or has appeared in it.” (California Rules of Court, rule 3.1184(c).) “If any allowance of compensation for the receiver or for an attorney employed by the receiver is claimed in an account, it must state in detail what services have been performed by the receiver or the attorney and whether previous allowances have been made to the receiver or attorney and the amounts.” (California Rules of Court, rule 3.1184(d).)

1 The court ordered the Receiver to file his Reply by April 20, 2026, but it was not filed until April 22, 2026. (See Minute Order dated March 23, 2026.) I recommend the court consider the Receiver’s late filed Reply. The court, in its discretion, may refuse to consider late-filed papers in ruling on a motion. In such event, the court’s minutes or order must so indicate. (Cal. Rules of Court, rule 3.1300(d).) A court’s decision to disregard late-filed papers may not be exercised arbitrarily. (Kapitanski v. Von’s Grocery Co., Inc. (1983) 146 Cal.App.3d 29, 32-33). However, some courts have held that a court has discretion to consider late-filed papers even without a Section 473 showing. (Juarez v. Wash Depot Holdings, Inc. (2018) 24 Cal.App.5th 1197, 1202 [filing 2 days late with no showing of prejudice by other side supported court’s discretion in “view of the strong policy of the law favoring the disposition of cases on the merits”].) Here, the Receiver indicates he was ill and this resulted in him being unable to file the subject reply on time. As there is no showing of prejudice, the Court chooses to exercise its discretion and consider the reply.

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“The receiver must provide monthly reports to the parties and, if requested, to nonparty client lien holders. These reports must include: (1) A narrative report of events; (2) A financial report; and (3) A statement of all fees paid to the receiver, employees, and professionals showing: (A) Itemized services; (B) A breakdown of the services by 1/10 hour increments; (C) If the fees are hourly, the hourly fees; and (D) If the fees are on another basis, that basis.” (California Rules of Court, rule 3.1182(a).) “Interim fees are subject to final review and approval by the court. The court retains jurisdiction to award a greater or lesser amount as the full, fair, and final value of the services received.” (California Rules of Court, rule 3.1183(a).) “Unless good cause is shown, objections to a receiver’s interim report and accounting must be made within 10 days of notice of the report and accounting, must be specific, and must be delivered to the receiver and all parties entitled to service of the interim report and accounting.” (California Rules of Court, rule 3.1183(b).) “The receiver has, under the control of the Court, power to ... to take and keep possession of the property, ... and generally to do such acts respecting the property as the Court may authorize.” (Code of Civil Procedure, sect. 568.) “A receiver may, pursuant to an order of the court, sell real or personal property in the receiver’s possession ... The sale is not final until confirmed by the court.” (Code of Civil Procedure, sect. 568.5.) A receivership terminates upon completion of the duties for which the receiver was appointed. After termination of the receiver’s duties, the receiver must make his final report and accounting and set a hearing upon notice. Discharge occurs upon an order or decree from the court so directing. (See e.g., Hanno v. Sup. Ct. (1939) 30 Cal.App.2d 639, 641 [“‘The end of the suit, its final adjudication, gives cause for the discharge of the receiver, but does not, ipso facto, effect his discharge, which results only from an order or decree of the court so directing ... The dismissal of the action does not discharge the receiver from accountability to the court which appointed him. He is an officer of the court and subject to its orders in relation to the property placed in his hands as receiver until discharged by the court.’"].) Pursuant to California Rules of Court, rule 3.1184(a), to be discharged, the receiver must present either by a noticed motion or stipulation of all parties a final account and report, a request for discharge, and a request for exoneration of the receiver’s bond. No memorandum is required, unless ordered by the Court. (California Rules of Court, rule 3.1184(b).) Notice must be given to every person or entity known to the receiver to have a substantial, unsatisfied claim that will be affected by the order or stipulation, whether or not the person or entity is a party to the action or has appeared in it. (California Rules of Court, rule 3.1184(c).) If any allowances of compensation for the receiver or any attorney employed by the receiver is claimed in an account, then the final report must state in detail what services have been performed by the receiver or the attorney and whether previous allowances have been made to the receiver or attorney and the amounts. (California Rules of Court, rule 3.1184(d).) Generally, a receiver is paid from the profits of the receivership estate. (City of Chula Vista v. Gutierrez (2012) 207 Cal.App.4th 681, 685). The compensation allowed for receivers and their attorneys is primarily within the sound discretion of the trial court. (Venza v. Venza (1951) 101 Cal.App.2d 678, 680.)

Analysis

After consideration of oral arguments at the last hearing and review of the parties’ supplemental pleadings, the Court agrees with Receiver and City that Ca. Health and Safety

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Code section 17984 prevents City from being held liable for any costs incurred by any parties due to the commencement of this action. Also, the Court finds that there is an insufficient legal basis to order Defendants CL and NDF to pay any of the Receiver’s outstanding costs. Here, the evidence shows that CL and NDF did not benefit from any of the Receiver’s efforts. It appears to the Court that Defendants’ own actions resulted in additional costs to themselves. Therefore, the Court will not order Defendants CL and NDF to pay any of the Receiver’s remaining costs. Therefore, the Court grants the Receiver’s Motion in part. The Court approves; 1) the Receiver’s Final Report and Final Accounting, 2) the Receiver’s fees and costs in the amount of $172,463.49; and 3) approves all of the Receiver’s actions and transactions, exonerating the Receiver’s undertaking and discharging the Receiver. As to the remaining unpaid balance of the Receiver’s fees and costs, the Court orders Defendant Wright to pay the unpaid balance of $38,094.99 pursuant to Health and Safety Code section 17980.7(c)(15) because Defendant Wright had $143,970.39 of his child support obligations paid from the proceeds of the sale of the Property.2

RULING

Court rules as follows: (1) Grants the Receiver’s Motion in part as follows: a. approves the Receiver’s Final Report and Final Accounting; b. approves the Receiver’s fees and costs in the amount of $172,463.49; c. approves all of the Receiver’s actions and transactions, exonerating the Receiver’s undertaking and discharging the Receiver; d. orders Defendant Wright to pay the unpaid balance of $38,094.99 pursuant to Health and Safety Code section 17980.7(c)(15); (2) Denies Receivers motion as to Defendants CL and NDF; (3) Orders the Receiver to serve formal notice on all parties with the Court’s ruling and order.

Dated: April 30, 2026

____________________________ Judge Quintana Winter

2 See Exhibit E to the Receiver’s Motion, the Order Approving Receiver’s Sale of Real Property and Instructing the Receiver to Pay Interim City Cost Recovery Demand. Page | 4