IKOLA, J.
The court entered judgment for receiver's fees and costs in the amount of $88,253.31 in favor of receiver Millard P. Thacker. Two of the judgment debtors, W&W Properties of Orange County, LLC (W&W Properties), and Wallace B. Roedecker IV, appeal the award on the following grounds: (1) the court should have ordered the receiver's fees and costs to be paid out of the receivership estate (or by the other parties), not solely by plaintiff W&W Properties and affiliated individuals; (2) there is no legal basis for adding Roedecker IV, a principal of W&W Properties, as a judgment debtor, as he was not a party to the underlying lawsuit; and (3) the receiver's fee request was not sufficiently detailed under California Rules of Court, rules 3.1182(a)(3) and 3.1184(d). We agree Roedecker IV should not have been named as a judgment debtor, but otherwise affirm the judgment.
In April 2005, W&W Properties invested as a limited partner in Coalinga School Farm, LP (Coalinga Partnership), which was established to "acquire, plan, and develop in excess of 200 acres of land located in Coalinga, California."
In May 2007, W&W Properties sued the general partner of the Coalinga Partnership, the other limited partners in the Coalinga Partnership, and certain individuals involved in the management of the Coalinga Partnership for: breach of fiduciary duty; breach of contract; conversion; constructive fraud; and dissolution, accounting, appointment of receiver, and injunctive relief in winding up of partnerships. W&W Properties alleged defendants committed various misdeeds in relation to the Coalinga Partnership.
In April 2008, W&W Properties moved for an order appointing a receiver to replace one of the defendants as the managing partner of Coalinga Partnership. One stated reason for the need for receivership was the danger of imminent foreclosure on the acreage in Coalinga. The court granted the motion in July 2008, appointing Thacker as a receiver empowered to replace the existing managing partner of Coalinga Partnership, to take possession of all partnership assets, and "to manage, control, care for, preserve, and maintain the Coalinga Partnership, its assets, and the subject property; to incur the expenses necessary for the management, control, care, preservation, and maintenance of the Coalinga Partnership, its assets, and the subject property . . . ." In September 2008, the court entered a supplemental order expanding the receiver's authority, authorizing him to retain counsel and to begin preparations for an auction to sell all Coalinga Partnership assets. W&W Properties acknowledges the appointment of Thacker as receiver was at its request.
In October 2008, the receiver requested instructions from the court with regard to its performance of duties (as well as other relief). The receiver represented that the receivership estate was "without any capital to operate or undertake any necessary and related tasks (including the proposed sale of the Receivership property)." W&W Properties declined to infuse additional capital to allow the receiver to conduct an auction of the assets of the Coalinga Partnership. The sole asset of the Coalinga Partnership, 195 acres of undeveloped land, was estimated by the receiver to be subject to secured debt in the amount of $6,900,000. The receiver also estimated "this property may bring something more than $7,000,000 at auction sale at best." The proposed auction would include a minimum reserve bid of the value of the secured debt, plus costs of sale and seller's commission. The costs of conducting an auction were estimated at $20,000. The receiver requested instructions from the court "regarding the continuing administration of this estate in light of the lack of any assets at this time, and the possibility that the apparent sole asset of the subject partnership has no equity over and above the amount of the secured debt against same."
W&W Properties filed a memorandum of points and authorities supporting the receiver's activities but rejecting the suggestion that W&W Properties should be called upon to pay for the costs of the auction or the receivership generally. W&W Properties claimed: (1) it was premature to claim there were no assets in the receivership estate; and (2) if any party were to be called upon to advance funds to the receiver, it should be the defendants.
The parties did not provide us with a reporter's transcript for the hearing on the receiver's motion for instructions. The receiver served a notice of ruling, which explained the court's order as follows: "The Court directed Plaintiff W&W Properties . . . to advance the sum of $20,000 as a loan to the Receivership Estate on or before November 17, 2008 to pay costs of the proposed auction sale of the Receivership real property, and to advance to the Receiver the additional sum of $80,000 within 90 days thereafter to cover costs of receivership administration incurred as of this date and to be incurred thereafter. Said advances are to have a repayment priority senior to all partnership distributions from Receivership Estate assets. The Receiver was directed to immediately initiate steps to cause said real property to be sold at auction at the earliest appropriate date, not to be more than 45 days from on and after November 7, 2008."
The receiver was unable to sell the Coalinga Partnership real property for the minimum price of $7,500,000, either at auction or through private solicitations made to industry contacts. Following the unsuccessful auction, the first deed of trust holder foreclosed on the property. The receiver did not uncover any other partnership assets.
W&W Properties provided the receiver with the $20,000 ordered by the court for the costs of the auction, but never provided the additional $80,000 for the receiver's other costs.
In October 2009, the receiver moved to discharge the receivership. The receiver requested $88,253.31, which included $49,282.00 for fees and costs of the receiver, and $38,971.31 in fees and costs for the receiver's attorney. The receiver requested that the court order W&W Properties and its individual principal officers to pay the receiver's costs. In January 2010, the court entered an order discharging the receiver and approving his final report and compensation requests. The court ultimately entered judgment against W&W Properties, Wallace R. Roedecker, Wallace B. Roedecker IV, and William L. Bohrk, in the amount of $88,253.31, with interest accruing at 10 percent from the date of judgment.
With regard to the underlying lawsuit, the court entered default judgment against two of the defendants for $2,080,000, and a stipulated judgment against another defendant in the amount of $1,000,000 (due and payable by January 1, 2014). As part of this judgment, the court ordered that any payments made by the defendants should be made by check to the receiver "until such time as a total of $88,253.31 has been paid to Mr. Thacker on behalf of Plaintiff W&W Properties . . . ."
The Code of Civil Procedure authorizes the appointment of a receiver to, among other things, "preserve the property or rights of any party." (Code Civ. Proc., § 564, subd. (b)(9).) "In a civil action, a receiver is an agent and officer of the court, and property in the receiver's hands is under the control and continuous supervision of the court." (People v. Stark (2005) 131 Cal.App.4th 184, 204.) "[T]he appointment of a receiver is a drastic remedy to be employed only in exceptional circumstances. . . . `[R]eceivers are often legal luxuries, frequently representing an extravagant cost to a losing litigant.'" (City and County of San Francisco v. Daley (1993) 16 Cal.App.4th 734, 744.)
We are presented with three issues: (1) the propriety of ordering W&W Properties to pay for the costs of the receivership; (2) the propriety of naming Wallace B. Roedecker IV, a principal agent/owner of W&W Properties who was not a party in the underlying lawsuit, as a judgment debtor; and (3) the adequacy of the receiver's evidentiary showing in support of the amount requested ($88,253.31).
"As a general proposition the costs of a receivership are primarily a charge upon the property in the receiver's possession and are to be paid out of said property. However, this is not an invariable rule. In many cases a direct liability is imposed upon the parties to the action, or upon some of them, for the remuneration of the receiver. Such direct liability may result from an irregularity in the appointment, insufficiency of the property, agreement of the parties, etc." (Andrade v. Andrade (1932) 216 Cal. 108, 110.)
"`Courts generally are vested with large discretion in determining who shall pay the cost and expenses of receiverships. The court may assess the costs of a receivership against the fund or property in receivership or against the applicant for the receivership, or it may apportion them among the parties, depending upon circumstances.'" (Baldwin v. Baldwin (1947) 82 Cal.App.2d 851, 856 [plaintiff obtained appointment of receiver to control alleged community property based on false factual representations]; see also Andrade v. Andrade, supra, 216 Cal. at pp. 111-112 [plaintiff ultimately found not to have any interest in subject real property; it would be inequitable to charge receiver's expenses to rightful owner of property]; Ephraim v. Pacific Bank (1900) 129 Cal. 589, 592-593 [insufficiency of fund justifies receiver looking to party obtaining appointment to pay costs].)
W&W Properties claims the court erred because the circumstances of this case do not line up precisely with the circumstances discussed in the aforementioned cases. But the court was well within its discretion. Here, there was no value in the property managed by the receiver; thus, the receiver could not recover his costs from this fund. W&W Properties requested the receiver. Although W&W Properties did not actually benefit from the receivership, W&W Properties would have benefitted had the receiver been able to successfully sell Coalinga Partnership's property for a sufficient sum. And the court was concerned the receiver would not get paid for the services it provided if W&W Properties were not separately ordered to pay the receiver's costs.
W&W Properties also speculates that the receiver could have found more property in the Coalinga Partnership had he looked harder. There is no support in the record for this bald assertion. Finally, W&W Properties speciously argues it cannot be held liable for an obligation of the Coalinga Partnership because of its legal status as a limited partner. (See Corp. Code, § 15903.03, subd. (a).) This argument wrongly assumes the receiver's compensation is akin to a contract obligation entered into solely by the Coalinga Partnership. Trial courts may impose the costs of a receivership directly on the parties to the lawsuit.
Of course, there may be circumstances in which it would be an abuse of discretion to force a party to pay directly for the receiver's costs. (See McCarthy v. Poulsen (1985) 173 Cal.App.3d 1212, 1219-1220, fn. 3 [instructing trial court that "it would not appear appropriate to impose [receiver's costs] directly on the litigants because they did not seek a receivership, did not create the situation which gives rise to the present legal predicament, and are not parties in the ordinary sense"].) This is not such a case.
Although three individuals were named as judgment debtors in the judgment for receiver's fees and costs, apparently only Roedecker IV appealed the court's judgment. The parties were unable to provide this court with any authority directly addressing the propriety of the court's decision to order nonparties to pay the receiver's costs.
The court explained its decision as follows: "It is appropriate . . . to hold not just the plaintiff, but its officers, directors and shareholders responsible because it was they, the plaintiffs, who came in asking for this receiver, this very receiver that I appointed, because they opposed the person proposed by the defense . . . . The plaintiffs never posted the money I said to post. They knew they weren't going to do it. They let the court's receiver proceed with all this work, never came in to the court and said . . . we are unable to fund the amounts the court ordered and are unable to fund what are anticipated to be the receiver's fees; and, therefore, . . . the receiver should no longer be acting as the court's right arm and incurring these fees because he's going to get stiffed. [¶] I am not pleased. I made a point in this case . . . that the receiver is the court's right arm. And, therefore, the parties better not disregard or act in a manner discourteous to him because that's discourteous to the court. [¶] So now I've got a receiver, who under my direction engaged in all of that activity, who's going to get stiffed."
"The results of the receiver's actions would have benefitted the plaintiff, the shareholders of plaintiff, and I've got a sneak[ing] suspicion from memory that the shareholders are the officers, directors that make up the plaintiff's actions. So they were all acting as basically a single unit. [¶] And for those reasons, I've decided that while there may not be clear authority . . . I'm going to do it this way. And if the plaintiffs think I'm wrong, that's what the court of appeals exists for, and they can take it up there."
Roedecker IV claims his inclusion in the judgment is reversible for two reasons. First, he notes members of a limited liability company are not personally liable for the obligations of the limited liability company. (Corp. Code, § 17101, subd. (a).) Roedecker IV does not mention that such individual members can be subject to the liabilities of the limited liability company if the court imposes such liability pursuant to common law alter ego principles. (Warburton/Buttner v. Superior Court (2002) 103 Cal.App.4th 1170, 1188; see Corp. Code, § 17101, subd. (b).) But the court did not explicitly undertake an alter ego analysis, and the receiver does not argue that alter ego doctrine supports the inclusion of Roedecker IV in the judgment.
Roedecker IV also claims the judgment violates his due process rights because he was not a party to the action and therefore did not receive sufficient notice of his potential liability or a sufficient hearing. (See, e.g., Spector v. Superior Court (1961) 55 Cal.2d 839, 843-844.)
We note a third reason to question the judgment against Roedecker IV: "California courts have inherent power to `take appropriate action to secure compliance with . . . orders, to punish contempt, and to control its proceedings.' [Citations.] However, our trial courts have no inherent power to impose monetary sanctions." (Vidrio v. Hernandez (2009) 172 Cal.App.4th 1443, 1454-1455 [reversing sanction award against nonparty insurer for failing to negotiate in good faith at mediation].) None of the parties characterize this award as a monetary sanction. And we can find no statutory authority for, in essence, adding Roedecker IV to the judgment as a sanction for his failure to effectuate W&W Properties' payment of $80,000 to the receiver pursuant to the court's prior order. Moreover, the court did not conduct a formal contempt proceeding.
In sum, while we understand the court's frustration with W&W Properties (and its individual owners and agents), there is no legal authority for the court's decision to add Roedecker IV to the judgment as part of the receiver's motion to discharge the receivership. (Cf. In re FairWageLaw (2009) 176 Cal.App.4th 279, 288 [despite individual's "improper and ill-advised actions [he] was nevertheless entitled to the protections afforded every litigant by our usual guarantees of due process"].)
It is also worth noting that, given the real estate crisis and the propensity of investors to utilize separate limited liability entities for each distinct real estate investment in which they participate, the situation presented in this case cannot possibly be unique. A receiver wishing to avoid the risk of nonpayment of fees in such cases might consider demanding adequate assurances of payment prior to accepting appointment to the receivership. California Rules of Court, rule 3.1179(b), arguably precludes a receiver from securing a private contractual guaranty of payment of fees from a financially secure party or related nonparty (or an advance payment of fees). But it is possible the court could condition appointment of the receiver on a financially secure party or related nonparty stipulating to pay such fees if the receivership estate is not sufficient to pay court-approved fees.
"The amount of fees awarded to a receiver is `in the sound discretion of the trial court and in the absence of a clear showing of an abuse of discretion, a reviewing court is not justified in setting aside an order fixing fees.'" (Melikian v. Aquila, Ltd. (1998) 63 Cal.App.4th 1364, 1368.)
With regard to a receiver's final account and report: "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." (Cal. Rules of Court, rule 3.1184(d).) In contrast, a receiver's monthly report should include "[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." (Cal. Rules of Court, rule 3.1182(a)(3).)
Although monthly reports are not at issue here, appellants find fault with the receiver's submission of a final report without breaking down his unpaid expenses into 1/10 hour increments (the rule required for monthly reports). Appellants do not attack any of the work done by the receiver or his attorney as improper, unnecessary, or otherwise unworthy of being reimbursed.
We reject this argument. The receiver never paid himself any fees during the pendency of the receivership; by its own terms, California Rules of Court, rule 3.1182(a)(3), does not apply. The receiver obtained no interim payment for his services over the course of the receivership because W&W Properties failed to comply with the court's order to inject capital into the receivership estate. The court did not abuse its discretion by accepting the evidence presented by the receiver (billing statements from the receiver and his attorney) as a substantial basis for the amount requested under California Rules of Court, rule 3.1184(d).
The judgment is reversed with regard to appellant Wallace B. Roedecker IV. The judgment is otherwise affirmed. In the interests of justice, the parties shall bear their own costs on appeal.
WE CONCUR:
RYLAARSDAM, ACTING P. J.
BEDSWORTH, J.
