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What is the legal standard for the appointment of a judgment enforcement receiver in California?

Section 564 permits the appointment of a receiver “in any case in which the court is empowered by law” to do so. Cal. Civ. Proc. Code § 564(a). Section 708.620 so empowers this Court to appoint a receiver to enforce a money judgment if, upon consideration of the parties’ interests, the appointment is “a reasonable method to obtain the fair and orderly satisfaction of the judgment.” Cal. Civ. Proc. Code § 708.620. The receiver acts as a custodian of property under the court’s control and effectively becomes “clothed with the title of the debtor.” Wright v. Standard Eng’g Corp., 28 Cal. App. 3d 244, 248 (1972).

The Enforcement of Judgments Law (“EJL”) references Sections 564 through 571, which govern all aspects of receivership to aid with the enforcement of a money judgment. Cal. Civ. Proc. Code § 708.610. A receiver may be appointed under broad circumstances, including, without limitation: to carry a judgment into effect (Cal. Civ. Proc. Code § 564(b)(3)); to dispose of property pursuant to a judgment (Cal. Civ. Proc. Code § 564(b)(4)); when an entity is insolvent or in immediate danger of insolvency (Cal. Civ. Proc. Code § 564(b)(6)); and “all other cases where necessary to preserve the property or rights of any party” (Cal. Civ. Proc. Code § 564(b)(9)). A receiver can be authorized to take and keep possession of the property, real or personal, over which they are appointed and make transfers as needed. Cal. Civ. Proc. Code § 568. Real property in the receiver’s possession may be sold, pursuant to a court order, in accordance with the procedures set forth by the EJL. Cal. Civ. Proc. Code § 568.5. Appointing a receiver to take over the totality of an entity is an “extraordinary” and “drastic” remedy that should only be utilized in “exceptional circumstances.” Medipro Med. Staffing LLC v. Certified Nursing Registry, Inc., 60 Cal. App. 5th 622, 628 (2021). Alter ego entities have been held as the exception to the general rule against appointing a receiver over an entity. Pats. Process, Inc. v. Superior Court, 101 Cal. App. 541, 546 (1929) (appointing receiver over alter ego distinguished from adherence to rule in Elliot v. Superior Court, 168 Cal. 727, 734 (1914)). When an entity is created as an alter ego of another, the appointment of a receiver over that alter ego entity is appropriate “for the purpose of reaching the man behind the mask and compelling him to do equity” when all other remedies at law are inadequate. Id. Since then, the Medipro court has outlined a two-prong analysis to justify a receiver taking over a non-alter ego entity, its entire business, and all its corporate assets, which requires sufficient evidence that (1) a debtor has obfuscated or frustrated collection efforts, and (2) less intrusive collection methods will be inadequate or ineffective. Medipro, at 624–25.

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