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 Post subject: Court May Appoint Receiver - When 708.620
PostPosted: Mon Dec 29, 2008 3:48 pm 
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CCP 708.620

The court may 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, the appointment of a receiver is a reasonable method to obtain the fair and orderly satisfaction of the judgment.

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 Post subject: 708.620 Legislative Committee Comments
PostPosted: Fri May 29, 2009 6:04 pm 
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LEGISLATIVE COMMITTEE COMMENTS--ASSEMBLY

1982 Addition

Section 708.620 supersedes portions of Section 564 that authorized the appointment of a receiver to enforce a judgment. It eliminates as a prerequisite to the appointment of a receiver a showing that a writ of execution has been returned unsatisfied or that the judgment debtor refuses to apply property in satisfaction of the judgment as was formerly required by subdivision 4 of Section 564. See Olsan v. Comora, 73 Cal.App.3d 642, 647-49, 140 Cal.Rptr. 835 (1977).

Under Section 708.620, a receiver may be appointed where a writ of execution would not reach certain property and other remedies appear inadequate. A receiver may also be appointed in examination proceedings under Article 2 (commencing with Section 708.110) where the requisite showing is made under this section. Cf. Tucker v. Fontes, 70 Cal.App.2d 768, 771-72, 161 P.2d 697, 699 (1945); Medical Finance Ass'n v. Short, 36 Cal.App.2d Supp. 745, 747, 92 P.2d 961, 962 (1939) (appointment of receiver in supplementary proceedings under former law). A receiver may be appointed to enforce a charging order against a partnership under Corporations Code Section 15028. See Section 708.310 (charging orders). As to the appointment of a receiver where necessary to preserve the value of property, see Section 699.070.

A receiver may also be appointed to enforce a judgment for the possession or sale of property. See Section 712.060. See also Section 708.920 (receiver for enforcement against franchise granted by public entity). [16 Cal.L.Rev.Comm. Reports 1530 (1982)].

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 Post subject: 1989 Lebbos v Judges - Receiver Not Unconstitutional
PostPosted: Fri May 29, 2009 6:59 pm 
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Lebbos v. Judges of the Superior Court, 883 F.2d 810 (9th Cir. 1989)

United States Court of Appeals,

Ninth Circuit.

Aida Madeleine LEBBOS; Garth Rease; C. Jonlyn Karr; Betsey Warren Lebbos; Genyses Corporation, Plaintiffs-Appellants,

v.

JUDGES OF the SUPERIOR COURT, SANTA CLARA COUNTY; Conrad Rushing, Judge of the Santa Clara Superior Court; Jack Komar, Judge of the Santa Clara Superior Court; Peter Stone, Judge of the Santa Clara Superior Court; John Miller; Mary Ann Grilli; V. Timothy Keene; Lisa Wharton; Jeradlin Spradlin; Linda Wooten; Alan Munn, Defendants-Appellees.

No. 87-2105.

Argued and Submitted March 14, 1989.

Decided Aug. 28, 1989.

*811 Betsey Warren Lebbos, San Jose, Cal., for plaintiffs-appellants.

Vanessa Ann Zecher, Deputy County Counsel, San Jose, Cal., John Miller, Palo Alto, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before POOLE, FERGUSON and WIGGINS, Circuit Judges.

WIGGINS, Circuit Judge:

Appellants appeal the district court's dismissal of their suit for failure to state a claim and based on the Younger abstention doctrine. This action springs from the appointment by Santa Clara Superior Court Judge Conrad Rushing of appellee Alan Munn as receiver to aid in the collection of a judgment rendered in favor of appellee Linda Wooten against appellant Betsey Lebbos. Appellants challenge the constitutionality of Cal.Civ.Proc. § 708.620 (West 1987) and Cal.Civ.Proc. § 568 (West 1979),FN1 which together permit the court appointment of, and vest broad authority in, a receiver to aid a successful litigant in the collection of an unpaid judgment. Appellants also challenge the constitutionality of the order appointing Munn as receiver and a subsequent order delineating Munn's authority. Appellants request that the statutory provisions and orders be declared unconstitutional, and that the Santa Clara Superior Court judges be enjoined from invoking the statutory provisions and from enforcing the orders. Appellants also seek an injunction to stop several state court proceedings initiated by Munn to collect Betsey Lebbos's unpaid debt. They allege various constitutional claims under 42 U.S.C. § 1983 (1982) for which they seek compensatory and punitive damages. We affirm the dismissal of the claims for declaratory and injunctive relief, and also the claims for damages against the judges. We also affirm the dismissal of the claims for damages against the remaining defendants except with respect to Betsey Lebbos's due process claim against Munn, Wooten, and Wooten's attorneys.

FN1. Section 708.620 provides:

The court may 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, the appointment of a receiver is a reasonable method to obtain the fair and orderly satisfaction of the judgment.

Section 568 states:

The receiver has, under the control of the Court, 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.

I

Betsey Lebbos is an attorney. Sometime in 1983 she brought an action against Wooten*812 in Santa Clara Superior Court to recover attorney fees allegedly owed her from a previous action in which Lebbos had successfully represented Wooten. Wooten filed a counterclaim. Following a jury verdict in favor of Wooten, Lebbos was required to rebate $13,628 of the $29,000 previously paid by Wooten to Lebbos. In attempting to collect her judgment, Wooten hired appellees John Miller and Mary Grilli of the law firm Miller & Grilli. The interaction between Miller and Lebbos during the ensuing three years was less than cordial to say the least. In her complaint, Lebbos sets forth in great detail the various attempts made by Miller to collect the judgment against Lebbos. Apparently unsuccessful in collecting the debt, Miller filed an ex parte motion in Santa Clara Superior Court seeking the appointment of a receiver pursuant to Cal.Civ.Proc.Code § 708.620 (West 1987). Judge Rushing granted the motion on July 15, 1986, appointing Munn, an attorney, as receiver. According to the complaint, Munn, along with Miller and his employees, sought to collect the debt by improperly invading Lebbos's business affairs and by seizing real property owned in trust by her daughter, appellant Aida Lebbos. Betsey Lebbos claims she is an “activist attorney” and that the appellees' actions were designed to discourage her efforts in exposing certain (unspecified) “abuses and deficiencies” in the Santa Clara Superior Court.

Betsey Lebbos, her daughter Aida, and the other plaintiffs, Garth Rease, C. Jonlyn Karr, and Genyses Corporation filed this action on October 2, 1986. Rease is a tenant of Aida Lebbos and leases a house owned by Lebbos in San Jose. Karr was the trustee of Aida Lebbos's trust from its inception in 1973 until 1985. While acting as trustee, she purchased two properties from the proceeds of the trust. In May 1977 she purchased the property in San Jose, and in December 1983 she purchased a house located in Menlo Park. Martha McCutcheon apparently also is a tenant of Aida Lebbos's. Genyses Corporation was the entity through which Betsey Lebbos operated her trust account for her legal practice.

Named as defendants are “the judges of the Santa Clara Superior Court”; Superior Court Judges Rushing, Jack Komar, and Peter Stone; attorneys Miller and Grilli; Timothy Keene, a process server utilized by Miller & Grilli; Elizabeth Wharton, an employee of Miller & Grilli; Jeradlin Spradlin, an associate with Miller & Grilli; Wooten; and Munn.

In their complaint, appellants challenge the constitutionality of Cal.Civ.Proc. §§ 708.620 and 568 under the due process and equal protection clauses of the fourteenth amendment, and seek to enjoin the judges of the Santa Clara Superior Court from enforcing either statute. They raise similar arguments and request similar relief with respect to the order entered by Judge Rushing on July 15, 1986, appointing Munn receiver, as well as a subsequent order entered by Judge Rushing on September 29, 1986, modifying the July 15, 1986, order. They also seek an injunction precluding appellees from prosecuting: (1) Munn, Court Appointed-Receiver v. Lebbos, Lebbos, Rease and McCutcheon, an unlawful detainer action pertaining to the San Jose property; (2) Wooten v. Betsey Lebbos, Jonlyn Karr, and Aida Lebbos, a “Complaint for Failure of Garnishee to Deliver Attached Property and Fraudulent Conveyance,” also pertaining to the San Jose property; and (3) from enforcing the judgment in the original proceeding, Lebbos v. Wooten. Appellants base their request for an injunction in each of these actions on the unconstitutionality of sections 708.620 and 568 and the orders relating to the appointment of Munn. Appellants allege various constitutional claims under 42 U.S.C. § 1983 (1982) against Miller, Grilli, Keene, Wharton, Spradlin, Wooten, and Munn (private defendants) for which they seek compensatory and punitive damages. FN2

FN2. As we make clear below, we do not believe any claim for damages was alleged against the judges by appellants in their complaint. Any such claim, however, has been waived by appellants. See supra, at 13-14.

*813 The district court granted appellees' motion to dismiss with leave to amend on April 14, 1987. The court dismissed with prejudice the claims against the unnamed judges, concluding that the complaint failed to allege any facts demonstrating the judges were actively involved in appellants' proceedings. The court also dismissed any claims for damages against the named judges finding them immune from liability. The court abstained from reaching the appellants' claims for injunctive and declaratory relief against the individual judges and constitutional claims against the other appellees under Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). The court concluded that appellants had the opportunity to present their federal claims in the state proceedings, that they offered no evidence that the judges acted in bad faith in the state proceedings, and that the challenged statutes did not flagrantly violate express constitutional prohibitions. Appellants amended their complaint, but it was dismissed again by the district court. The court held that the amended complaint failed to rectify the deficiencies in the original complaint. The court also held that the complaint failed to state a claim for relief under section 1983. This appeal followed. FN3 The district court had jurisdiction under 28 U.S.C. §§ 1331, 1343 (1982),FN4 and we have jurisdiction under 28 U.S.C. § 1291 (1982).

FN3. Only the judges have filed a responding brief.

FN4. Accordingly, we need not determine whether subject matter jurisdiction may also be premised on diversity of citizenship. New Alaska Dev. Corp. v. Guetschow, 869 F.2d 1298, 1301 (9th Cir.1989).

II

The district court dismissed appellants' action on several bases. In its initial order of dismissal, it dismissed (1) the claims against the unnamed judges and the claim for damages against the named judges based on the failure to state a claim; and (2) the claims for injunctive and declaratory relief against the individual judges and the claims for damages against the private defendants under the Younger abstention doctrine. In its second order, the court affirmed its prior order and also held that the complaint failed to state a claim under section 1983.

In order to facilitate a more orderly analysis of appellants' arguments, we discuss the various claims for injunctive and declaratory relief separately from the claims for damages under section 1983.

A. Prospective Relief FN5

FN5. The judges are not immune from appellants' claims for prospective relief. Pulliam v. Allen, 466 U.S. 522, 541-42, 104 S.Ct. 1970, 1980-81, 80 L.Ed.2d 565 (1984) (“[J]udicial immunity is not a bar to prospective injunctive relief against a judicial officer acting in her judicial capacity.”).

[1] Appellants claim the court improperly abstained from considering whether injunctive and declaratory relief is proper. The decision whether to abstain under the Younger abstention doctrine is reviewable de novo. See World Famous Drinking Emporium, Inc., v. City of Tempe, 820 F.2d 1079, 1081 (9th Cir.1987). Because “the same equitable principles relevant to the propriety of an injunction must be taken into consideration by federal district courts in determining whether to issue a declaratory judgment,” Samuels v. Mackell, 401 U.S. 66, 73, 91 S.Ct. 764, 768, 27 L.Ed.2d 688 (1971), we consider together appellants' arguments that the district court erred in abstaining from their requests for both injunctive and declaratory relief.

Abstention is appropriate based on “interests of comity and federalism [that] counsel federal courts to abstain from jurisdiction whenever federal claims have been or could be presented in ongoing state judicial proceedings that concern important state interests.” Hawaii Housing Auth. v. Midkiff, 467 U.S. 229, 237, 104 S.Ct. 2321, 2327-28, 81 L.Ed.2d 186 (1984). “Abstention from the exercise of federal jurisdiction is the exception, not the rule,” and “[a]bsent significant countervailing interests, the federal courts are obliged to exercise their jurisdiction.” World Famous Drinking Emporium, 820 F.2d at 1082.

*814 [2] [3] Based on the teaching in Middlesex County Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423, 432, 102 S.Ct. 2515, 2521, 73 L.Ed.2d 116 (1982), this court has stated that three requirements must be satisfied before a federal court may properly invoke the Younger abstention doctrine: “(1) ongoing state judicial proceedings; (2) implication of an important state interest in the proceedings; and (3) an adequate opportunity to raise federal questions in the proceedings.” World Famous Drinking Emporium, 820 F.2d at 1082; accord Walnut Properties, Inc. v. City of Whittier, 861 F.2d 1102, 1106 (9th Cir.1988), cert. denied, --- U.S. ----, 109 S.Ct. 1641, 104 L.Ed.2d 157 (1989). Even if these requirements are met, abstention is inappropriate if bad faith prosecution or harassment is present, or where a statute is flagrantly and patently violative of constitutional prohibitions. See Huffman v. Pursue, Ltd., 420 U.S. 592, 611, 95 S.Ct. 1200, 1211, 43 L.Ed.2d 482 (1975); World Famous Drinking Emporium, 820 F.2d at 1082.

[4] Appellants request three different injunctions: (1) an injunction precluding appellees from prosecuting the three actions pending in state court; (2) an injunction preventing enforcement of the two orders pertaining to the appointment of Munn; and (3) an injunction precluding the judges of the Santa Clara Superior Court from implementing sections 708.620 and 568. The first two requested injunctions, and obviously the third, are premised on appellants' constitutional attack on sections 708.620 and 568. We conclude that the district court properly abstained from considering each of appellants' requested injunctions because appellants could have challenged the constitutionality of sections 708.620 and 568 in the unlawful detainer action pertaining to the San Jose property.

The unlawful detainer action was filed by Munn against Betsey Lebbos, Aida Lebbos, Rease, and McCutcheon, and sought to remove them from the San Jose property. The unlawful detainer action was filed well before this action, and clearly constitutes an ongoing state proceeding. See Midkiff, 467 U.S. at 238, 104 S.Ct. at 2328.

The second prong under Middlesex is also satisfied. Although Younger involved an ongoing criminal prosecution, “[t]he policies underlying Younger are fully applicable to noncriminal judicial proceedings when important state interests are involved.” Middlesex, 457 U.S. at 432, 102 S.Ct. at 2521; accord Pennzoil Co. v. Texaco Inc., 481 U.S. 1, 11, 107 S.Ct. 1519, 1526, 95 L.Ed.2d 1 (1987) (application of Younger abstention is proper “not only when the pending state proceedings are criminal, but also when certain civil proceedings are pending, if the State's interests in the proceeding are so important that exercise of the federal judicial power would disregard the comity between the States and the National Government”). The Supreme Court “repeatedly has recognized that the States have important interests in administering certain aspects of their judicial systems.” Pennzoil, 481 U.S. at 12-13, 107 S.Ct. at 1526-27. In Juidice v. Vail, 430 U.S. 327, 97 S.Ct. 1211, 51 L.Ed.2d 376 (1977), the Court held that a federal court should have abstained from adjudicating a challenge to a state's contempt process. The Court held that “[a] State's interest in the contempt process, through which it vindicates the regular operation of its judicial system, ... is surely an important interest.” Id. at 335, 97 S.Ct. at 1217. The Court reasoned:

Contempt in these cases, serves, of course, to vindicate and preserve the private interests of competing litigants, but its purpose is by no means spent upon purely private concerns. It stands in aid of the authority of the judicial system, so that its orders and judgments are not rendered nugatory.

Id. at 336 n. 12, 97 S.Ct. at 1217 n. 12 (citations omitted).

In Pennzoil the Court found abstention appropriate in an action brought by Pennzoil to enjoin Texaco from executing a Texas court judgment in Texaco's favor pending appeal of that judgment to the state appellate court. Pennzoil, 481 U.S. at 17, 107 S.Ct. at 1529. The Court found the reasoning of Juidice controlling.

[ Juidice ] rests on the importance to the States of enforcing the orders and judgments*815 of their courts. There is little difference between the State's interest in forcing persons to transfer property in response to a court's judgment and in forcing persons to respond to the court's process on pain of contempt. Both Juidice and this case involve challenges to the processes by which the State compels compliance with the judgments of its courts. Not only would federal injunctions in such cases interfere with the execution of state judgments, but they would do so on grounds that challenge the very process by which those judgments were obtained.

Id. at 13-14, 107 S.Ct. at 1527 (footnotes omitted).

In filing the unlawful detainer action, Munn was acting in his capacity as court-appointed receiver. Like Juidice and Pennzoil, this action involves a challenge to the “process[ ] by which the State compels compliance with the judgments of its courts.” Id. (footnote omitted). Indeed, the facts of this case are even stronger than those in Pennzoil. In Pennzoil the state had not yet become actively involved in attempting to compel compliance with its judgment. Here, on the other hand, several years had elapsed since the verdict had been rendered, and the court found it necessary to appoint a receiver to aid in the collection of Wooten's judgment. The state court's interest in ensuring “that its orders and judgments are not rendered nugatory,” Juidice, 430 U.S. at 336 n. 12, 97 S.Ct. at 1217 n. 12 is further heightened in this case. The second requirement of Younger abstention is therefore satisfied.FN6

FN6. In Goldie's Bookstore, Inc. v. Superior Court, 739 F.2d 466, 469 (9th Cir.1984), we found abstention inappropriate in a suit brought by Goldie's Bookstore to enjoin its lessor from executing, pending appeal, an unlawful detainer judgment entered against it in state court. Our conclusion in that case that the proceedings did not implicate important state interests, id. at 470, appears to have been substantially undermined by the Supreme Court's holding in Pennzoil. In any event, this case is clearly distinguishable from Goldie's. There, the unlawful detainer action was filed by a private party; the case did not involve a court-appointed receiver.

The inquiry under the third prong is whether the unlawful detainer action provided appellants a sufficient forum for raising their federal constitutional challenges. “Where vital state interests are involved, a federal court should abstain ‘unless state law clearly bars the interposition of the constitutional claims.’ ‘[T]he ... pertinent inquiry is whether the state proceedings afford an adequate opportunity to raise the constitutional claims....' ” Middlesex, 457 U.S. at 432, 102 S.Ct. at 2521 (quoting Moore v. Sims, 442 U.S. 415, 426, 430, 99 S.Ct. 2371, 2379, 2380, 60 L.Ed.2d 994 (1979)). The burden rests on appellants to show that they were barred from raising their federal claims in the unlawful detainer action.

California's unlawful detainer statute is contained at Cal.Civ.Proc.Code §§ 1159-1179a (West 1982 & Supp.1989). Because an unlawful detainer action is a summary proceeding designed to facilitate owners in obtaining possession of their real property, cross-complaints, countercomplaints, and affirmative defenses are inadmissible. S.P. Growers Ass'n v. Rodriguez, 17 Cal.3d 719, 723, 552 P.2d 721, 723, 131 Cal.Rptr. 761, 763 (1976). This general rule, however, is subject to a limited exception that “permits the court to inquire into equitable considerations in an unlawful detainer suit.” Union Oil Co. v. Chandler, 4 Cal.App.3d 716, 722, 84 Cal.Rptr. 756, 760 (1970). Construing a federal constitutional defense to be based on a “broad equitable principle,” the California courts have permitted a defendant in an unlawful detainer action to raise a defense based on constitutional considerations. See Abstract Investment Co. v. Hutchinson, 204 Cal.App.2d 242, 22 Cal.Rptr. 309, 313-14 (1962) (permitting defendant to raise defense of racial discrimination); see also Union Oil Co., 4 Cal.App.3d at 723, 84 Cal.Rptr. at 761 (citing Hutchinson ). Appellants have therefore failed to show that they were not afforded an adequate opportunity to raise their federal claims regarding the constitutionality of sections 708.620 and 568.

Appellants allege that the issuance of the order appointing Munn receiver and vesting in Munn broad powers to collect the *816 debt owed by Betsey Lebbos constitutes bad faith. Judge Rushing, however, was acting pursuant to state statute. He had nothing to do with the alleged conduct of Munn. When Lebbos appeared before Judge Rushing to request that Munn's powers be limited, the court issued such an order. Appellants' assertion that the judges' conduct was guided by their desire to discourage Betsey Lebbos from exposing certain practices of the court is unsupported by any facts in the complaint. Bad faith was therefore not present.

The three requirements justifying abstention are accordingly satisfied. FN7 Additionally, we conclude that none of the exceptions apply. There was no bad faith prosecution or harassment and the statutes and orders are not blatantly unconstitutional. Abstention from issuing any of the requested injunctions or granting declaratory relief was therefore proper.FN8

FN7. Our conclusion that the three Younger predicates have been satisfied finds support in our decision in Worldwide Church of God, Inc. v. California, 623 F.2d 613 (9th Cir.1980) (per curiam), where we upheld a district court's abstention in an action to enjoin the enforcement of a court-ordered receivership. There the California Attorney General filed an action in state court seeking an accounting of the finances of the Worldwide Church of God (Church) and its affiliates based on the belief that certain members of the Church were diverting Church assets to their own personal benefit. Id. at 614. The court appointed a receiver following an ex parte proceeding. Id. The Church filed an action in federal court seeking, in part, to enjoin the enforcement of the state receivership order. We affirmed the district court's decision to abstain under Younger. Id. at 615. We concluded that “[i]mposition of the receivership was an integral element of the ongoing state litigation. Enjoining enforcement of the receivership order would violate the principles of federalism, equity, and comity that Younger and related cases seek to preserve.” Id. Our holding in Worldwide Church counsels in favor of abstaining from appellants' request that enforcement of the orders pertaining to the appointment of Munn be enjoined.

FN8. Although it is true that appellant Karr was not a party to the unlawful detainer action, her interest as trustee of Aida Lebbos's trust is sufficiently related to the interest of Aida Lebbos that Karr should be subject to the same Younger considerations that govern Aida Lebbos. Cf. Doran v. Salem Inn, Inc., 422 U.S. 922, 928-29, 95 S.Ct. 2561, 2566, 45 L.Ed.2d 648 (1975). Similarly, the interest of Genyses Corporation is sufficiently similar to that of Betsey Lebbos that the Younger considerations that pertain to Lebbos are equally applicable to Genyses Corporation.

B. Section 1983

We note at the outset that there is some confusion over whether appellants' claims for damages under section 1983 apply to the judges. The appellees argued in their motion to dismiss and the district court agreed that (1) the claim for damages against the unnamed judges did not state a claim; and (2) the claims for damages against the three named judges were barred by absolute judicial immunity. It is evident from reading the prayer for relief contained in appellants' complaint, however, that the section 1983 claims apply only to the private defendants. Additionally, appellants waived any claims for damages against the judges in their response to appellees' motion to dismiss below, Appellants' Responding Brief, December 4, 1986, at 3, and acknowledge that waiver in their brief filed with this court. Appellants' Brief at 23. Any claim for damages against the judges has therefore been waived.

To the extent the district court's decision to dismiss the section 1983 claims against the private defendants is based on Younger abstention, it must be rejected. The Supreme Court has not yet decided whether the principles under Younger apply with equal force to claims for damages under section 1983. See Tower v. Glover, 467 U.S. 914, 923, 104 S.Ct. 2820, 2826, 81 L.Ed.2d 758 (1984); Juidice v. Vail, 430 U.S. 327, 339 n. 16, 97 S.Ct. 1211, 1219 n. 16, 51 L.Ed.2d 376 (1977). We considered this issue in Mann v. Jett, 781 F.2d 1448 (9th Cir.1986) (per curiam), and concluded that Younger does apply to section 1983 damage claims. The plaintiff in Mann filed suit in federal court against an attorney and legal assistant in the county attorney's office alleging that he was denied counsel in a criminal proceeding in violation of the sixth amendment. Id. at 1449. He sought declaratory relief and damages under*817 section 1983. We held that the district court properly abstained from considering Mann's request for a declaratory judgment under Younger and Samuels v. Mackell, 401 U.S. 66, 69, 91 S.Ct. 764, 766, 27 L.Ed.2d 688 (1971). Mann, 781 F.2d at 1449. While noting that the Supreme Court had not yet decided the issue, we recognized that several of the other circuits have abstained where an action for damages would have a “substantially disruptive effect upon ongoing state criminal proceedings.” Id. We concluded that abstention was appropriate under the circumstances of the case because Mann could “adequately litigate in the ongoing state criminal proceedings his underlying claim of unconstitutional deprivation of counsel, and ‘the potential for federal-state friction [resulting from federal intervention] is obvious.’ ” Id. (quoting Guerro v. Mulhearn, 498 F.2d 1249, 1253 (1st Cir.1974)).

[5] Unlike in Mann, we do not think abstention is appropriate with respect to appellants' claims for damages. As we have pointed out above, it appears that in California a constitutional defense may be raised by a defendant in an unlawful detainer action. We find no authority, however, that would lead us to believe that claims for damages arising from alleged constitutional torts-especially, as in this case, claims whose constitutional bases are wholly unrelated to the constitutional basis comprising the defense to the action-may also be raised in such an action. Additionally, we do not believe that consideration of the section 1983 damage claims against the private appellees will in any way interfere with the state proceedings. The interests of comity and federalism underlying Younger abstention are therefore inapplicable.

That abstention was inappropriate with respect to appellants' claims for damages does not end the matter. The district court also found dismissal proper based on its finding that appellants failed to state a claim. In order to state a claim under section 1983,FN9 “a plaintiff must show (1) that the conduct complained of was committed by a person acting under color of state law; and (2) that the conduct deprived the plaintiff of a constitutional right.” New Alaska Dev. Corp. v. Guetschow, 869 F.2d 1298, 1305 (9th Cir.1989) (quoting Balistreri v. Pacifica Police Dep't., 855 F.2d 1421, 1424 (9th Cir.1988)). It is difficult to ascertain from appellants' self-fashioned long and prolix forty-four page complaint exactly what constitutional claims are alleged. After careful review of the complaint, we understand appellants to allege a violation of (1) their right to free speech under the first amendment; (2) their right not to be subjected to unreasonable searches and seizures; and (3) their rights to privacy, equal protection of the laws, and not to be deprived of their property without due process of law under the fourteenth amendment. Only Betsey Lebbos's due process claim withstands appellees' motion to dismiss.

FN9. The Court reviews a dismissal for failure to state a claim de novo. Fort Vancouver Plywood Co. v. United States, 747 F.2d 547, 552 (9th Cir.1984).

[6] Appellants' allegations that the actions taken by the private defendants were in retaliation for Betsey Lebbos's efforts to “clean up” the Santa Clara Superior Court and thus violative of the first amendment is not supported by any facts in the complaint. Additionally, this claim appears to have been directed at the judges, against whom the section 1983 claims have been dropped. We find appellants' equal protection claim equally unsupportable by any facts in the complaint and that it too was properly dismissed. See id. at 1305 n. 10 (affirming dismissal of equal protection claim due to failure of appellants to allege any facts in support of the claim).

[7] Appellants' allegation that their fourth amendment right not to be subjected to unlawful searches and seizures and fourteenth amendment right to privacy were violated are based primarily on appellees' activities in attempting to serve documents on appellants while trying to collect the judgment against Betsey Lebbos. With respect to the fourth amendment, appellants fail to allege that any search or seizure took place. As to the right to *818 privacy claim, we do not think appellants' conduct in attempting to serve the documents, as alleged by appellees, rises to the level of a violation of any right to privacy. Appellants cite no authority in support of such a claim. In short, we do not think the conduct cited by appellants amounts to a deprivation under either the fourth or fourteenth amendments. See Baker v. McCollan, 443 U.S. 137, 144-45, 99 S.Ct. 2689, 2694-95, 61 L.Ed.2d 433 (1979) (not all torts rise to the level of constitutional deprivations).

[8] [9] Betsey Lebbos has, however, successfully made out claims under both the procedural and substantive aspects of the due process clause of the fourteenth amendment. “The Fourteenth Amendment protects one from deprivations of property or liberty without procedural due process. Due process requires an opportunity to be heard at a meaningful time and in a meaningful manner.” Roley v. Pierce County Fire Protection Dist. No. 4, 869 F.2d 491, 494 (9th Cir.1989) (citations omitted). Appellant Betsey Lebbos's allegations regarding the invasion of her business affairs, including the confiscation of her mail and disruption of financial transactions without notice, is sufficient to establish a procedural due process violation. FN10 Although these allegations are directed mainly at Munn, we think the complaint sufficiently implicates Wooten's attorneys also to withstand dismissal as to these appellees.FN11 See Fonda v. Gray, 707 F.2d 435, 438 (9th Cir.1983) (“To prove a conspiracy between private parties and the government under § 1983, an agreement or ‘meeting of the minds' to violate constitutional rights must be shown.”); accord Woodrum v. Woodward County, 866 F.2d 1121, 1126 (9th Cir.1989) (citing Fonda ).

FN10. Because Munn was acting in his capacity as court-appointed receiver, he was acting under color of state law.

FN11. See Amended Complaint at 10 (“[U]nlawful campaign to deprive Plaintiff/Attorney Lebbos and all plaintiffs of their constitutional rights....”).

[10] “Substantive due process refers to certain actions that the government may not engage in, no matter how many procedural safeguards it employs.” Blaylock v. Schwinden, 862 F.2d 1352, 1354 (9th Cir.1988). Substantive due process “protects a liberty or property interest in pursuing the ‘common occupations or professions of life.’ ” Benigni v. City of Hemet, 868 F.2d 307, 312 (9th Cir.1988) (quoting Schware v. Board of Bar Examiners, 353 U.S. 232, 238-39, 77 S.Ct. 752, 755-56, 1 L.Ed.2d 796 (1957)); see also Chalmers v. City of Los Angeles, 762 F.2d 753, 757 (9th Cir.1985). In order to prove a substantive due process claim, appellants must plead that the government's action was “clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare.” Village of Euclid v. Ambler Realty Co., 272 U.S. 365, 395, 47 S.Ct. 114, 121, 71 L.Ed. 303 (1926). Betsey Lebbos's allegations that appellees' actions deprived her of the ability to practice law thus states a substantive due process claim.

III

The district court properly abstained from granting the injunctive and declaratory relief requested by appellants. Because appellant's request for prospective relief was properly denied and appellants waived any alleged claims for damages under section 1983 against the judges, the dismissal of the judges was proper. The dismissal of appellants' section 1983 claims against the private defendants is affirmed, except for Betsey Lebbos's procedural and substantive due process claims against Munn, Miller, Grilli, Wharton, and Wooten. We remand these latter claims for consideration by the district court. Each party shall bear its own costs on appeal.

AFFIRMED in part, REVERSED in part, and REMANDED.

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 Post subject: 2004 - Berger v. Cullen - UNPUBLISHED - Receiver Appointed
PostPosted: Fri May 29, 2009 7:10 pm 
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Berger v. Cullen, Unreported, 2004 WL 424096 (Cal.App. 5 Dist. 2004)

Not Officially Published; California Rules of Court, rule 8.1115, restricts citation of unpublished opinions in California courts.

Court of Appeal, Fifth District, California.

Paul J. BERGER, Plaintiff and Respondent,

v.

Robert J. CULLEN, Defendant and Appellant.

No. F041216.

(Super. Ct. No. CV 46590).

March 9, 2004.

APPEAL from a judgment of the Superior Court of Tuolumne County. Eleanor Provost, Judge.

Robert J. Cullen, in pro. per., and Mark R. Moore for Defendant and Appellant.

Paul J. Berger, in pro. per.; Greenbaum & Ferentz and Stuart A. Katz for Plaintiff and Respondent.

OPINION

THE COURT.FN*

FN* Before Harris, Acting P.J., Gomes, J. and Dawson, J.

*1 A judgment debtor appeals an order (1) assigning his rights to payment to the judgment creditor, (2) directing him to turn over certain property to the judgment creditor's attorney or levying officer, and (3) approving the appointment of a receiver to be named and installed at a later date.

The judgment debtor contends the order constitutes an abuse of discretion because (1) the receiver could be installed without a full hearing on the receiver's neutrality, (2) the appointment of the receiver is in conflict with the terms of the assignment and turnover orders, (3) the judgment creditor failed to show the requisite level of need to justify the order, and (4) the order did not identify what property was exempt.

We conclude the trial court did not abuse its discretion and, consequently, the May 22, 2002, order is affirmed.

FACTS AND PROCEEDINGS

Respondent Paul J. Berger filed a suit against appellant Robert J. Cullen alleging breach of contract, intentional misrepresentation and false promises in connection with the sale of a small private aircraft. On February 2, 2001, a jury found in Berger's favor on a contract claim for cancellation and damages as well as intentional misrepresentation and false promises theories. The jury also found that Cullen did not commit oppression in the conduct upon which it based its finding of liability for fraud and did not assess punitive damages.

On July 19, 2001, a judgment was filed granting Berger recovery of the sum of $88,558.49 as damages on the breach of contract claim, $129,000 as damages for fraud arising from intentional misrepresentation and false promises, $7,100 as prejudgment interest, $1,658.94 as costs of suit, and $85,287.50 as attorney fees. The total amount of the final judgment is $311,604.93 and that amount accrues interest at the rate of 10 percent per annum from the date of its entry until paid.

On March 25, 2002, Berger filed a motion for appointment of a receiver to enforce the judgment pursuant to Code of Civil Procedure section 708.620, FN1 an assignment order pursuant to section 708.510, and a turnover order pursuant to section 699.040.

FN1. All further statutory references are to the Code of Civil Procedure unless otherwise indicated.

Cullen filed an opposition to this motion and supported that opposition with his own declaration and the declaration of his attorney, Mark R. Moore. These declarations indicated that (1) asset, banking and accounting information was provided to Berger pursuant to a notice to produce at trial and the court's order thereon, (2) Cullen does business in Corona, California in a one-story building, normally from the hours of 10:00 a.m. to 5:00 p.m., (3) Cullen's personal and business assets are subject to a State of California tax lien of approximately $2 million and garnishments are made on his bank accounts to satisfy this lien, and (4) Cullen does no cash business. Neither declaration attached a copy of the tax lien or presented other documentary evidence of its existence.

In his opposition, Cullen contended that (1) Berger made no assertion in his moving papers that his counsel had reviewed the financial information provided pursuant to the notice to produce at trial and attempted any collection efforts based on that information; (2) the attempt of a process server to serve him with an order of examination was made at the wrong location and he is more than willing to respond to any summons for examination; (3) any receiver appointed would be required to pay the State of California under the tax lien before it could make any distribution to Berger; and (4) seizing his only source of income is inappropriate without a showing the order is necessary and not subject to prior liens of the State of California or the exemptions to which he is entitled by law.

*2 In his reply to Cullen's opposition, Berger asserted (1) the opposition lacked substance in that the financial information submitted at trial was over 15 months old and had little to do with Cullen's present business operations; (2) Cullen provided nothing to refute the necessity of an assignment of rights for Berger to receive payment of his judgment; (3) the assignment order is needed to give Berger the right to collect payment under the various financial arrangements that Cullen may have made in connection with his business as a commissioned broker; and (4) the turnover order would work in tandem with the assignment order by providing Berger the documents and information necessary to enforce any right to payment assigned and verify the accuracy of the transfers effected by the assignment. In addition, Berger states that Cullen was served with postjudgment interrogatories in August 2001 and never responded, which undermines Cullen's claim that he is willing to cooperate in a judgment debtor's exam.

The motion was heard on April 15, 2002. Subsequently, counsel for Berger submitted a form of order to the court. The record does not reflect that Cullen made any objections to the form of order submitted by Berger.

On May 22, 2002, the superior court executed FN2 the order. It stated that a receiver shall be appointed to take control of Cullen's business known as Corona Aircraft Sales and to control all nonexempt real or personal property of Cullen owned by him directly or indirectly through Corona Aircraft Sales. The order also stated that Berger “shall select an experienced State Court Receiver and submit, ex parte, a request for appointment with the Receiver's resume, qualifications and declaration of willingness to serve.” The order also granted the motion for an assignment order and the motion for a turnover order. Specifically, the order assigned from Cullen to Berger any and all rights to payments, not otherwise exempt, and directed Cullen to turn over to the levying officer or Berger's attorney all nonexempt personal property together with the documentary and electronic evidence reflecting or related to Cullen's beneficial or legal interests in such property.

FN2. Though executed on May 22, 2002, the order was filed on May 23, 2002.

On August 6, 2002, Cullen filed a notice of appeal from the May 22, 2002, order.

DISCUSSION

I. Standard of Review

A. Appointment of a Receiver

Section 708.620 provides that the “court may 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, the appointment of a receiver is a reasonable method to obtain the fair and orderly satisfaction of the judgment.”

The trial court's decision to appoint a receiver to carry a judgment into effect is reviewed for an abuse of discretion. (See § 564, subd. (b)(3); City and County of San Francisco v. Daley (1993) 16 Cal.App.4th 734, 744.)

An order appointing a receiver “will not be overturned unless the appellant shows (1) he or she has a right to the property; (2) the court abused its discretion in appointing a receiver; and (3) appellant has been injured as a result of the appointment. [Citations.]” (Ahart, Cal. Practice Guide: Enforcing Judgments and Debts (The Rutter Group 2003) ¶ 4:911, p. 4-170.1.)

B. Orders of Assignment and Turnover

*3 Section 708.510, subdivision (a) provides that “[e]xcept as otherwise provided by law, upon application of the judgment creditor on noticed motion, the court may order the judgment debtor to assign to the judgment creditor or to a receiver appointed pursuant to Article 7 (commencing with Section 708.610) all or part of a right to payment due or to become due....” (Italics added.)

Similarly, section 699.040, subdivision (b) provides that the “court may issue an order [directing the turn over of possession of property and documents] upon a showing of need for the order.” (Italics added.)

We construe the use of the word “may” in sections 708.510 and 699.040 to indicate a legislative intent to provide trial courts addressing motions relating to the enforcement of judgment with discretion to order the assignment of rights to payment and the turn over of possession of property and documents. (See In re Richard E. (1978) 21 Cal.3d 349, 354 [the ordinary import of “may” is a grant of discretion].) The construction of a statute is a question of law that is subject to the independent determination of the reviewing court on appeal. (E.g., Twedt v. Franklin (2003) 109 Cal.App.4th 413, 417.)

In light of the statutory grant of discretion, we review the trial court's determinations in connection with the assignment and turnover orders under an abuse of discretion standard. (See generally 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 356, pp. 404-405.) In reviewing the trial court's order for an abuse of discretion, an appellate court presumes the order is correct, indulges all intendments and presumptions to support it on matters as to which the record is silent, and requires the appellant to affirmatively show error. ( Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) These principles of appellate practice are well established and are derived in part from the constitutional doctrine of reversible error. ( Ibid.)

II. Issues Raised by Cullen on Appeal

Cullen's opening appellate brief identifies six issues to be addressed on appeal.

First, did the trial court err in appointing an unnamed receiver who would be specifically identified in a subsequent ex parte application?

Second, was the appointment of a receiver a reasonable method of obtaining the fair and orderly satisfaction of Berger's judgment?

Third, did the trial court err in assigning Cullen's rights to payment to Berger without determining the impact of that assignment on the duties of the receiver?

Fourth, did the trial court err in assigning Cullen's rights to payment to Berger without determining which amount may be exempt by statute or the amount required to satisfy the judgment?

Fifth, did the trial court err in directing Cullen to turn over his nonexempt property to Berger's attorney or a levying officer without determining the impact of such a turnover on the duties of the receiver?

Sixth, did the trial court err in directing Cullen to turn over his nonexempt property to Berger's attorney or a levying officer without determining which amount may be exempt by statute or without a showing of need?

III. Failure to Name the Receiver Was Not an Abuse of Discretion

*4 Cullen asserts that the trial court's appointment of “a receiver to be named later” in an ex parte application was error because there is no way to tell if the unnamed receiver is capable of managing his aircraft sales business. Cullen further asserts that he is entitled to a full hearing on the merits and qualifications of a proposed receiver.

We reject this argument. First, the relevant statutes and case law applying those statutes do not explicitly authorize or prohibit the appointment of a receiver to be addressed in two stages. Consequently, to address the propriety of the two-stage procedure, we apply the standard generally applicable to determinations of a trial court in connection with the appointment of a receiver, i.e., the abuse of discretion standard. (See § 187.) FN3

FN3. Section 187 provides: “When jurisdiction is, by the Constitution or this Code, or by any other statute, conferred on a Court or judicial officer, all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifically pointed out by this Code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this code.”

The only basis that Cullen asserts for establishing an abuse of discretion is that the ex parte step of the procedure would deprive him of a full and fair hearing on the question of whether or not the receiver is neutral and able to manage the business and property.

Under California law, the power to appoint a receiver on an ex parte application is well established. (6 Witkin, Cal. Procedure, supra, Provisional Remedies, § 439, p. 354.) Furthermore, an undertaking from the applicant can protect the interests of the judgment debtor in a neutral receiver. (See § 566, subd. (b).) Therefore, a two-stage procedure that may involve the ex parte appointment of a receiver is not a prejudicial abuse of discretion on the ground claimed by Cullen.

IV. The Order Regarding the Receiver Was Not an Abuse of Discretion

Cullen argues that the order regarding the receiver is not “a reasonable method to obtain the fair and orderly satisfaction of the judgment” as that phrase is used in section 708.620 and that the court did not consider the interests of both parties, as required by the statute, before entering the order.

Cullen's citation to Snidow v. Hill (1948) 84 Cal.App.2d 702, a case involving the appointment of a receiver pending the outcome of the litigation, does not support his theory of abuse of discretion. Unlike the Snidow case, Berger has established more than a probable right to recovery because he has obtained a final judgment for over $300,000. Also, the appointment of a postjudgment receiver is not limited to situations where “the property is in danger of being materially injured” as was the case with the growing crops in Snidow that needed care, fertilizer and irrigation. ( Id. at p. 708)

The implicit determination by the trial court that the appointment of a receiver was a reasonable and fair method of collecting the judgment is supported by substantial evidence. That evidence includes the difficulties the judgment creditor was having in collecting the judgment under other means. For example, Berger made two unsuccessful attempts to hold a debtor's examination and Cullen did not respond to postjudgment interrogatories. Also, the lack of any collections on the judgment in the nine months preceding the trial court's execution of the May 22, 2002, order is evidence of difficulty.

*5 In addition, assuming for purposes of argument that the availability of financial information about Cullen from documents produced at trial creates an inference that the appointment of a receiver is not reasonable, that inference conflicts with other inferences drawn from the evidence presented to the trial court. Conflicting inferences, however, do not warrant reversal. We will not reweigh the evidence on appeal. The existence of substantial evidence, even if contradicted by other evidence, is sufficient to uphold the trial court's determinations. (See Crawford v. Southern Pacific Co. (1935) 3 Cal.2d 427, 429.)

With respect to whether the trial court considered “the interests of both the judgment creditor and the judgment debtor” as required by section 708.620, we infer the trial court considered those interests, to the extent that evidence concerning those interests was presented to the trial court. In his opposition to Berger's motions, Cullen presented few arguments about his own interests except to say that the motion was an attempt to seize his only source of income. The factual basis for this argument is not supported by any evidence. For instance, the declarations submitted to support the opposition do not state Corona Aircraft Sales is Cullen's only source of income.

Consequently, Cullen has failed to establish that his interests that were properly before the trial court were not considered by the trial court in granting Berger's motion for the subsequent appointment of a receiver.

V. The Order Was Not Required to Identify Exempt Property

Cullen challenges both the order of assignment and the turnover order on the ground that the trial court erred by not determining what property or amounts may be exempt. He asserts “[t]here are no specifics as to what is as [ sic ] is not exempt that would indicate Berger's right to the property.” We reject this argument because it is based on a fundamental misunderstanding of the procedures used for claiming an exemption and for opposing a claim of exemption. (See generally §§ 703.010-703.030; Ahart, Cal. Practice Guide: Enforcing Judgments and Debts, supra, ¶¶ 6:868-6:923, pp. 6E-13 to 6E-23.)

The trial court was not required to determine what property may or may not be exempt prior to ordering an assignment or turnover. Rather, an exemption “may be claimed within the time and in the manner prescribed in the applicable enforcement procedure. If the exemption is not so claimed, the exemption is waived and the property is subject to enforcement of a money judgment.” (§ 703.030, subd. (a).)

For example, when a receiver is appointed to enforce a judgment, the judgment debtor may claim any applicable exemptions “[w]here allowed by the statutory scheme under which the receiver is operating (e.g., an assignment order)....” (Ahart, Cal. Practice Guide: Enforcing Judgments and Debts, supra, ¶ 6:1460.2a, p. 6G-45.) When a right to payment is the subject of an assignment order, a claim of exemption may be made, or waived, in accordance with the requirements of section 708.550.

*6 Accordingly, the failure of the May 22, 2002, order to identify exempt property does not constitute legal error.

VI. Substantial Evidence Supports the Implied Finding of Need for the Turnover Order

Section 699.040, subdivision (b) provides that a turnover order may be issued by the court “upon a showing of need for the order.” Cullen argues that Berger has not shown any need for the order.

The implied finding by the trial court that Berger showed a need for the turnover order is supported by substantial evidence. The evidence discussed in part III, ante, also supports the determination that a turnover order was needed and, therefore, it was within the discretion of the trial court to grant the motion for a turnover order. Accordingly, Cullen has not established reversible error.

VII. The Assignment Order Need Not Specify the Amount Required to Satisfy the Judgment

Section 708.510, subdivision (d) provides that a “right to payment may be assigned pursuant to this article only to the extent necessary to satisfy the money judgment.”

The assignment language in the May 22, 2002, order is qualified by the phrase “in order to satisfy the judgment.” We construe this phrase to limit the collection of money under the assignment to that needed to satisfy the judgment, which fulfills the requirements of section 708.510, subdivision (d). FN4 Because the amount of the judgment is a moving target that changes with the accrual of postjudgment interest, the assignment order need not contain a specific amount to be valid.

FN4. Another, clearer way to phrase this limitation is to state the rights to payment are assigned “until such time as the judgment herein is fully satisfied.” (Ahart, Cal. Practice Guide: Enforcing Judgments and Debts, supra, Form 6:WW, p. Forms-94.)

VIII. The Potential For Conflict Does Not Invalidate the Order

Cullen argues that the net effect of the May 22, 2002, order “is to create an immediate conflict between [himself], the receiver and Berger as to the determination of exempt assets, the management of the business and the distribution of whatever assets are available to satisfy the judgment.”

As discussed in part V, ante, the question of exempt assets may be addressed under other procedures, to the extent that the exemptions that may be claimed have not been waived. To the extent that Cullen may be raising conflicts between himself and the judgment creditor not related to exemptions, it appears those conflicts have been resolved by the terms of the order.

With respect to Cullen's prediction that the receiver, if and when named and installed, will be subject to responsibilities and have rights that conflict with those given to Berger under the assignment order or with those given to Berger's attorney or levying officer under the turnover order, this court does not address hypothetical situations. Currently, there is no order that actually appoints a receiver and defines that receiver's rights and responsibilities. We do not presume future irreconcilability; instead, we presume the order is correct. The presumption of correctness leads to the deduction that, if and when a receiver is actually appointed, the points of conflict raised by Cullen will be resolved in the terms of the new order relating to the receiver or will be resolved as the result of a modification of the prior orders.

*7 For example, the statutory provision concerning assignment orders states that “the court may order the judgment debtor to assign to the judgment creditor or to a receiver appointed pursuant to [sections 708.610 and 708.620] all or part of a right to payment ....“ (§ 708.510, subd. (a).) The use of the disjunctive in this provision leads to the possible statutory construction that a particular right to payment should be assigned to either the judgment debtor or the receiver, but not both. Because a receiver is not yet installed, we need not address this question of statutory construction or the subsequent question of whether the May 22, 2002, order violates subdivision (a) of section 708.510. The trial court may have intended the assignment in favor of Berger to take effect immediately and also intended that any subsequent order concerning the receiver and its duties would state which rights remained assigned to the judgment creditor and which rights would be assigned to the receiver.

Consequently, the claims of internal conflict within the May 22, 2002, order do not give rise to reversible error.

DISPOSITION

The order of the superior court is affirmed. Respondent shall recover his costs on appeal.

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 Post subject: 2007 - Office Depot -- Receiver Appointed
PostPosted: Fri May 29, 2009 7:11 pm 
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Office Depot, Inc. v. Zuccarini, 2007 WL 2688460 (N.D.Cal. 2007)

United States District Court,

N.D. California.

OFFICE DEPOT, INC., Plaintiff,

v.

John ZUCCARINI, et al., Defendants.

DS Holdings, LLC, Assignee,

v.

John Zuccarini, et al., Defendants.

No. C 06-mc-80356 SI.

Sept. 10, 2007.

Michael Woodrow De Vries, Latham & Watkins LLP, Costa Mesa, CA, for Plaintiff.

John Zuccarini, Stuart, FL, pro se.

Henry M. Burgoyne, III, Karl Stephen Kronenberger, Kronenberger Burgoyne, LLP, San Francisco, CA, for Defendants.

ORDER GRANTING APPLICATION FOR APPOINTMENT OF RECEIVER

SUSAN ILLSTON, United States District Judge.

*1 On September 7, 2007, the Court heard argument on the ex parte application of assignee DS Holdings, LLC (“DS Holdings”) for appointment of a receiver to aid in the turnover of internet domain names owned by judgment debtor John Zuccarini, so that they may be auctioned off to satisfy the judgment. Having considered the arguments of the parties and the papers submitted, and for good cause shown, the Court hereby GRANTS DS Holdings' motion.

BACKGROUND

On December 14, 2000, the District Court for the Central District of California entered a judgment for Office Depot, against Zuccarini individually and d.b.a. “Country Walk,” in the amount of $100,000 with an additional $5,600 due in attorney's fees. Office Depot subsequently assigned the right to receive all payments under the judgment, including interest, to DS Holdings. On December 19, 2006, this Court issued a Writ of Execution of Judgment, pursuant to California Code of Civil Procedure section 699.510, for the recovery of Zuccarini's outstanding debt. On February 20, 2007, this Court issued an order requiring the production and preservation of documents relating to Zuccarini's substantial domain name portfolio. The Court subsequently denied, as procedurally improper, a request by DS Holdings to add pseudonyms used by Zuccarini to the Writ of Execution of Judgment. Most recently, on May 15, 2007, the Court denied DS Holdings' request for a turnover order from the Court requiring third-party domain name “registrars” to turn over internet domain names owned by Zuccarini.

DS Holdings now seeks the appointment of a receiver to aid in the turnover of Zuccarini's domain names. Zuccarini, acting pro se, has filed an opposition to the application, and appeared telephonically at the hearing.

LEGAL STANDARD

Federal Rule of Civil Procedure 69(a) provides for the execution of money judgments. It states, in pertinent part:

Process to enforce a judgment for the payment of money shall be a writ of execution, unless the court directs otherwise. The procedure on execution, in proceedings supplementary to and in aid of a judgment, and in proceedings on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held, existing at the time the remedy is sought, except that any statute of the United States governs to the extent that it is applicable.

Fed.R.Civ.P. 69(a).

California Code of Civil Procedure section 708.620 allows the Court to appoint a receiver to aid in recovery of a money judgment, in certain circumstances. It provides: “The court may 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, the appointment of a receiver is a reasonable method to obtain the fair and orderly satisfaction of the judgment.” § 708.620.

DISCUSSION

In opposition to DS Holdings' application for appointment of a receiver, Zuccarini raises a more fundamental issue: whether the Northern District of California is the appropriate place to levy upon the domain names at issue. FN1 This is apparently an issue of first impression.

FN1. Zuccarini also argues that these proceedings are inappropriate because the district court for the Eastern District of Pennsylvania “retains Federal Jurisdiction for the ownership and use of the domain names that are the subject of this legal action,” Oppo. ¶ 2, and has frozen Zuccarini's assets, including the domain names at issue here. The Court has reviewed the injunctions issued by the Eastern District of Pennsylvania related to Zuccarini, and finds that they do not prevent a change in ownership of the domain names at issue. See Zuccarini Decl., Exs. 1-3. The injunctions prevent Zuccarini from modifying the ownership of the domain names, but they do not prevent this Court from modifying such ownership. Nor do the injunctions award ownership of the domain names at issue to another party.

*2 The California Code of Civil Procedure provides: “after entry of a money judgment, a writ of execution shall be issued by the clerk of the court upon application of the judgment creditor and shall be directed to the levying officer in the county where the levy is to be made ....” Cal.Code Civ. P. § 699.510(a) (emphasis added). Thus, the Northern District is the appropriate place to direct a writ of execution only if it contains “the county where the levy is to be made.” Under the California Code of Civil Procedure, levy is “made” in a variety of ways, depending on the type of property. See id. §§ 700.010-700.200.FN2 In all cases, however, the property exists in some form in the county. See id.

FN2. The categories of property for which the California Code of Civil Procedure provides procedures for levy are: “Growing crops, timber to be cut or minerals,” § 700.020; “Tangible personal property in possession of judgment debtor,” § 700.030; “Tangible personal property in possession of third person,” § 700.040; “Personal property in custody of levying officer,” § 700.050; “Bailed goods not covered by negotiable document of title,” § 700.060; “Tangible personal property of going business,” § 700.070; “Personal property used as dwelling,” § 700.080; “Vehicle, vessel, manufactured home, mobilehome, or commercial coach,” § 700.090; “Chattel paper,” § 700.100; “Instruments,” § 700.110; “Negotiable documents of title,” § 700.120; “Securities,” § 700.130; “Deposit accounts,” § 700.140; “Safe deposit boxes,” § 700.150; and “Deposit accounts and safe deposit boxes not exclusively in name of judgment debtor,” § 700.160.

None of these categories clearly cover domain names, though some are roughly analogous.

The first inquiry here, therefore, is whether domain names constitute “property” for purposes of the California Code of Civil Procedure. If they do, the second inquiry is where the property comprising or containing the domain names exists.

These inquiries first require a basic exploration of what a domain name is. Judge Whyte's decision in Coalition for ICANN Transparency, Inc. v. VeriSign, Inc., 464 F.Supp.2d 948, 951-53 (N.D.Cal.2006), provides a helpful explanation of domain names, registrars, and registries.

Every computer connected to the Internet has a unique Internet Protocol (“IP”) address. IP addresses are long strings of numbers, such as 64.233.161.147. The Internet DNS FN3 provides an alphanumeric shorthand for IP addresses. The hierarchy of each domain name is divided by periods. Thus, reading a domain name from right to left, the portion of the domain name to the right of the first period is the top-level domain (“TLD”). TLDs include .com, .gov, .net., and .biz. Each TLD is divided into second-level domains identified by the designation to the left of the first period, such as “example” in “example.com” or “example.net.” .... Each domain name is unique and thus can only be registered to one entity.

FN3. Domain name system.

A domain name is created when it is registered with the appropriate registry operator FN4. A registry operator maintains the definitive database, or registry, that associates the registered domain names with the proper IP numbers for the respective domain name servers. The domain name servers direct Internet queries to the related web resources. A registrant can register a domain name only through companies that serve as registrars for second level domain names. Registrars accept registrations for new or expiring domain names, connect to the appropriate registry operator's TLD servers to determine whether the name is available, and register available domain names on behalf of registrants....

FN4. Registry operators are also referred to simply as “registries.”

The majority of domain name registrations for commercial purposes utilize the .com TLD....

....

In the past ICANN FN5 has selected the registry operator for the .com and .net TLDs through a bidding process. Once a registry operator is selected, it serves as the sole registry operator for the applicable TLD registry (.com or .net) until the expiration of the registry agreement. Currently, VeriSign is the registry operator for the .com and .net domains pursuant to written registry agreements between ICANN and VeriSign.

FN5. “ICANN is a private not-for-profit corporation that coordinates the Internet domain name system (‘DNS') on behalf of the United States Department of Commerce.” Id. at 951.

*3 Id. at 951-53 (citations omitted).

In this case, DS Holdings sought a writ of execution in this district because the .net and .com registry, VeriSign, is located here. The registrars of the domain names at issue, however, are not located in this district; they are located in Virginia, Germany, Washington, and Israel. One issue, therefore, is whether the domain names exist at the registry, or at the registrars. Before reaching this issue, however, the Court must address whether, even if they exist in this district, domain names are “property” subject to levy under the California Code of Civil Procedure.

In Kreman v. Cohen, 337 F.3d 1024, 1029 (9th Cir.2003), the Ninth Circuit addressed the issue of “whether registrants have property rights in their domain names,” under California law. The court answered in the affirmative, concluding that a registrant has “an intangible property right in his [or her] domain name ....” Id. at 1030.FN6

FN6. The Supreme Court of Virginia reached the opposite conclusion in Network Solutions, Inc. v. Umbro International, Inc., 259 Va. 759, 529 S.E.2d 80, 86-87 (Va.2000), holding that domain name registration creates merely a contract for services, not an intangible property right, and under Virginia law, contractual rights to services could not be garnished to satisfy a money judgment.

As “intangible property,” domain names appear to be covered by the California Code of Civil Procedure levy provisions. Section 695 .010 thereof provides: “Except as otherwise provided by law, all property of the judgment debtor is subject to enforcement of a money judgment.” (emphasis added). Section 699.710 provides, in pertinent part, that “all property that is subject to enforcement of a money judgment ... is subject to levy under a writ of execution to satisfy a money judgment.” Accordingly, the Court concludes that domain names owned by Zuccarini and existing in California are subject to levy under a writ of execution.

As mentioned, the second issue is whether the domain names are located in this district. DS Holdings contends that because the .com and .net registry, VeriSign, is located in this district, the domain names at issue are also located here. DS Holdings' argument is strongly supported by the Anticybersquatting Consumer Protection Act of 1999 (“ACPA”), 15 U.S.C. § 1125(d). Under ACPA, Congress provided for in rem jurisdiction over domain names, in certain circumstances, “in the judicial district in which the domain name registrar, domain name registry, or other domain name authority that registered or assigned the domain name is located ....” 15 U.S.C. § 1125(d)(2)(A). ACPA also provides: “In an in rem action under this paragraph, a domain name shall be deemed to have its situs in the judicial district in which ... the domain name registrar, registry, or other domain name authority that registered or assigned the domain name is located ....” Id. § 1125(d)(2)(C)-(C) (i). ACPA thus strongly suggests an intent on the part of the United States Congress to treat domain names as property existing in both the location of the registry, and the location of the registrar. See also Mattel v. Barbieclub.com, 310 F.3d 293, 302 (2d Cir.2002) (“it is the presence of the domain name itself-the ‘property that is the subject of the jurisdiction’-in the judicial district in which the registry or registrar is located that anchors the in rem action and satisfies due process and international comity.”).

*4 While ACPA suggests this is the appropriate court to oversee levy of the domain names, Zuccarini argues that practical considerations suggest otherwise. The registrars handle the day to day management of domain names. The registry, in fact, apparently never interacts with domain name owners. Zuccarini argues, therefore, that anyone who wants to alter the ownership of a domain name, including a sheriff or marshal seeking to execute a judgment, must do so through the registrars. This practical consideration is highlighted by the fact that in this case DS Holdings has interacted solely with the registrars in its attempts to levy upon the domain names. To the Court's knowledge, DS Holdings has not interacted with the registry-VeriSign-and does not seek to do so. See, e.g., Mot. at 7:27-8:2 (“If a receiver were appointed, the registrars could change the domain names' registration information to name the receiver instead of Zuccarini.”). As discussed above, writs of execution are directed to the county where levy is to be made. If these proceedings force the registrars to change the ownership of the domain names, then arguably levy will be made at the locations of the registrars, which in this case, all fall outside of the Northern District. See § 701.010 (“when levy is made ... on a third person, the third person .... shall deliver to the levying officer any of the property levied upon that is in the possession or under the control of the third person at the time of levy ....”).

Despite the day to day control registrars exhibit over the ownership of domain names, however, the registry maintains the records that ultimately determine the existence and ownership of domain names. See Mattel, 310 F.3d at 296 n. 2 (“The domain name ‘registry’ ... is the single official entity that maintains a list (‘a registry’) of all ‘top-level’ domain names and that maintains all official records regarding the registrations of such names.”) (citing David Bender, Computer Law § 3D.03[3] at 3D-56). In the internet hierarchy, registrars answer to the registries. Furthermore, under ACPA, at least one district court has forced a registry, rather than a registrar, to change the ownership of a domain name. See America Online, Inc. v. AOL. org, 259 F.Supp.2d 449 (E.D.Va.2003). Thus, if the location of a domain name is determined based on the location of the party with “control” over ownership of the domain name, then the location of the registry is as good as any.

In light of the foregoing, faced with the somewhat metaphysical question of where the intangible property comprising a domain name exists, this Court will follow Congress' suggestion in ACPA that a domain name exists in the location of both the registrar and the registry. As such, this is the appropriate Court to oversee levy upon domain names listed on the VeriSign registry.

The Court also finds that it is appropriate to appoint a receiver, to which the domain names can be transferred. See Kronenberger Decl. ¶ 29. DS Holdings has shown that, “considering the interests of both the judgment creditor and the judgment debtor, the appointment of a receiver appointment of a receiver is a reasonable method to obtain the fair and orderly satisfaction of the judgment.” California Code of Civil Procedure § 708.620. Accordingly, the Court GRANTS DS Holdings' request to appoint Michael W. Blacksburg as receiver. FN7

FN7. The Court is concerned, however, with DS Holdings' ultimate plan to auction off the domain names at issue. As Zuccarini points out, many of the domain names at issue are deliberate misspellings and variations of legitimate domain names, both generic and proprietary. Such names may have legitimate purposes, as counsel argued at the hearing, but they may also be used to misdirect consumers, as apparently Zuccarini himself did.

CONCLUSION

*5 For the foregoing reasons and for good cause shown, the Court hereby GRANTS DS Holdings' request for appointment of a receiver. [Docket No. 18]

IT IS SO ORDERED.

_________________
RISER ADKISSON LLP, 100 Bayview Circle, Suite 210, Newport Beach, CA 92660, Ph: 949-200-7753, Fax: 877-698-0678, E-Mail: jay --at-- risad.com http://www.jayadkisson.com http://www.risad.com http://www.assetprotectionbook.com http://www.quatloos.com


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