By a MetNews Staff Writer
Difficulty that judgment creditors encountered in their collection efforts were insufficient to justify the appointment of a receiver where there was no evidence that the debtors were employing wrongful tactics to avoid payment, the Court of Appeal for this district held yesterday.
In his opinion for Div. Two, Justice Brian M. Hoffstadt said the appeal raises the question:
“Does a trial court abuse that discretion if it appoints a receiver to aid in the collection of a money judgment where the record contains no evidence that the judgment debtors had obfuscated or frustrated the creditor’s collection efforts and no evidence that less intrusive collection methods were inadequate or ineffective?”
“We hold it does.”
The judgment creditor is Medipro Medical Staffing, LLC. It sued Certified Nursing Registry, Inc. and its founder, Christina Sy, for business torts.
While employed by Medipro, the president and vice president of that company clandestinely recruited some nurses for Sy’s competing enterprise, Certified. Medipro sued Certified, Sy, and its former executives.
It obtained a judgment for lost profits and punitive damages under which Certified and Sy were either solely liable or jointly and severally liable with the executives for more than $3 million.
That judgment was upheld yesterday in an unpublished opinion by Hoffstadt, which found that substantial evidence supports at least one valid basis for the judgment.
In a published opinion, Hoffstadt said that there is a statutory basis for appointing a referee to take possession of a judgment debtor’s assets, but that the procedure is “drastic” and should be utilized only out of necessity.
While Medipro had succeeded in collecting part of the judgment, payments ceased in September 2019. Certified and Sy explained that the business was “struggling” to stay afloat.
“In light of the sheer number of enforcement mechanisms for collecting money judgments under the Enforcement of Judgments Law (which range from levies to liens to wage garnishment…)…the appointment of a receiver to enforce a money judgment is reserved for ‘exceptional’ circumstances where the judgment creditor’s conduct makes a receiver necessary—and hence ‘proper.’…This occurs when the judgment debtor has frustrated the judgment creditor’s collection efforts through obfuscation or through otherwise contumacious conduct that has rendered feckless the panoply of less intrusive mechanisms for [enforcing a money judgment.”
No Supportive Evidence
The jurist said Moreton abused his discretion in appointing a receiver “because there was no evidence—let alone the substantial evidence necessary to sustain a proper exercise of discretion…—that Certified or Sy had engaged in obfuscation or other obstreperous conduct to the degree that the other collection mechanisms available under the Enforcement of Judgments Law were ineffective.”
Medipro argued that the reason Certified lacked funds was that it was billing hospitals using its services in the names of other businesses. But that, Hoffstadt said, was speculation devoid of evidentiary support.
“In sum, Medipro’s evidentiary showing demonstrated that it had, at most, encountered some difficulty in its initial efforts to collect on its money judgment. If this was sufficient to constitute a ‘necessity’ required to justify the ‘extraordinary’ remedy of the appointment of a receiver to take over a judgment debtor’s business, it is difficult to see how the appointment of receivers would not become a routine part of the collection of judgments—a result at odds with the solid wall of precedent holding to the contrary.”
The case is Medipro Medical Staffing, LLC v. Certified Nursing, Inc., B305910.
Lawyers on appeal for Certified and Sy were Michael J. Khouri and Michael Tran of Khouri Law Firm in Irvine. Representing Medipro were Ryan D. Saba and Elizabeth L. Bradley of the Beverly Hills firm of Rosen Saba.
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