What Every Family Lawyer Should Know About Receivers

• Publication year: 2018
• Author: David J. Pasternak

What Every Family Lawyer Should Know About Receivers

David J. Pasternak

David Pasternak is a member of Pasternak, Pasternak & Alsbrook, A Law Corporation in Century City. Since 1982, he has been appointed as a state and federal court receiver, a provisional director, referee, special master, and Bankruptcy Court Custodian hundreds of times, and has represented and advised other receivers and provisional directors in hundreds of other cases. He is a former President of the California State Bar and completed a three-year term as the first member of the California State Bar Board of Trustees appointed by the California Supreme Court. He is a past President of the Los Angeles County Bar Association, a former chair of its Litigation Section, a former President of its Barristers Section, and former Chair of its Senior Lawyers Division.

The use of a receiver in family law cases is a pre-trial and post-trial remedy. It is a valuable tool available to family lawyers and their clients.

What Is A Receiver?

California Family Code section 290 authorizes the court to appoint a receiver to enforce a family law judgment or order. A receivership is an equitable remedy.

The receiver is a neutral agent of the court, and not an agent or representative of any of the parties, even if requested and nominated by one of the parties.¹ As an agent of the court, depending on the case, a family court receiver is typically tasked with gathering actual or potential marital assets, which might include business entities, real estate, personal property, etc., which then become property of the receivership estate in the exclusive custody, possession and control of the receiver and subject only to the supervision of the receivership court.² Once in the receivership estate, the receiver's possession of such property prevents them from being improperly diverted by one of the parties or levied upon by creditors absent the court's permission.³ As discussed further below, receivers are also appointed by the court for various other tasks including investigations and property sales.

When Is A Family Law Receiver Appointed?

There are a number of common scenarios in which family courts typically appoint a receiver. First, receivers are most commonly appointed where one party has failed to make support, equalization or professional payments (including attorney's fees) that the court has ordered. The court can appoint a receiver to take control of that party's separate property, including income, to make such payments. This is often the case where one of the parties is the owner/operator of a business and has control over the business' books and records and distributions, allowing that party to avoid making support or other payments ordered by the court by misreporting revenue or improperly avoiding salary payments or distributions, among many other common tactics. The appointment of a receiver is a powerful enforcement tool in such cases, and often leads formerly uncooperative spouses to quickly take a seat at the settlement table. Individuals generally do not like it when they lose control of their business or other property to a receiver.

Second, family law judges frequently find themselves faced with two parties who present widely contrasting factual evidence regarding the value of actual or potential community assets. For example, one spouse contends that a business or real estate operated by the other spouse is worth millions of dollars, while the spouse in control of that community asset contends that it has no equity or value. By appointing a receiver to either take control of the asset or investigate and report about its value, the court can obtain the opinion of an experienced neutral third party that is often more reliable than those offered by the parties' experts.

A third common scenario is when the parties have agreed to sell a community asset (usually real estate), but they fail to agree upon a sale after a protracted period of time. A variant on this scenario is when the asset, again usually real estate, is facing a pending foreclosure by a secured lender.⁴ The appointment of a receiver to handle such a sale subject to court supervision eliminates the delay caused by the parties' dissension or a recalcitrant party. In addition, an experienced receiver will sell any such asset for its fair market value by marketing it through an experienced realtor (or...