The California Code of Civil Procedure Section 564 lists many of the traditional types of cases in which receivers may be appointed. They include, but are not limited to, the following: Preservation of a common fund or property in dispute and in danger of injury or dissipation;Rents, Issues and Profits (Real Estate);Substandard Housing – The…
What is the legal standard for the appointment of a California equity court receiver over a corporation?
Cal. Code Civ. Proc., § 564 provides:
(a) A receiver may be appointed, in the manner provided in this chapter, by the court in which an action or proceeding is pending in any case in which the court is empowered by law to appoint a receiver.
(b) A receiver may be appointed by the court in which an action or proceeding is pending, or by a judge thereof, in the following cases:
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(6) Where a corporation is insolvent, or in imminent danger of insolvency….
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(9) In all other cases where necessary to preserve the property or rights of any party.
As the California Supreme Court explained in Goldman State Glass Corp. v. Superior Court of Los Angeles County (1939) 13 Cal.2d 384, 393:
Section 564 of the Code of Civil Procedure vests jurisdiction in the superior court to appoint receivers under certain enumerated conditions. …. By numerous authorities, the principle is unequivocally announced that, from the standpoint of the business welfare of a defendant corporation, the appointment of a receiver on an ex parte application is so dangerous an expedient that it should be done only in cases of the greatest emergency and where, without such appointment, irreparable injury will unquestionably result.’ (Citation.)
It is established, however, that a court of equity has power to appoint a receiver of a going corporation upon a showing that there are such dissensions in its governing body as to create a virtual suspension of its business.
See also Anmaco, Inc. v. Bohlken (1993) 13 Cal.App.4th 891, 900 fn. 3 (“The usual remedies available in the case of deadlock in a small corporation include…appointment of a receiver….”).
A receivership can be structured in a variety of ways based on the nature of the dispute, the goals and objectives of the parties, the type of asset(s) that will be placed under the control of a receiver as well as the ruling of the court. There are two core types of receiverships – a…