| Case Descriptions
The following is organized by type of case (Receiverships [four
different categories], Other Court Appointments, and Bankruptcy
Appointments. In many instances, a specific example(s) of a case is
mentioned within a category. You may review the case specifics by
clicking on it. A few cases fit into more than one category, or a
particular aspect of a case may fit into several categories.
Receivership
Regulatory Receiverships: A regulatory receivership
occurs when an oversight agency (SEC, FTC, IRS or similar federal or
state organization) seeks the appointment of a Receiver to take charge
of an entity that is found to be committing fraud, gross
misrepresentation or operating a Ponzi scheme (paying off old
investors with money generated from new investors). In nearly all
instances the Receiver will shut down the operation or the portions of
it that are found to be operating in violation of state or Federal
law. Divisions of the entity may be uncontaminated and savable for
sale as a going concern. Samples of Regulatory Receiverships include
(a) SEC vs. Private Equity Management Group (PEMGroup), (b)
SEC vs.
National Financial Systems, Inc.; and (c)
United States of America
(IRS) vs. Hargis.
Operating Company Receiverships:
Turnarounds: It is possible to turnaround a business in a
receivership. While it is not as procedurally pure or conclusive as
the Federal Bankruptcy Code, it can provide greater flexibility at
significantly less cost. Each case is fact specific, and it generally
requires a cooperative creditor body that wants the company to
succeed. Examples of Mosier & Company’s turnaround Receivership
experience include Computer Mainframe Leasing.
Dissolutions: Dissolution of a business is a more popular use
of a Receivership. This can involve sale of assets, sale of assets as
a going concern or sale of the company’s stock. The proceeds from the
sale are generally distributed to the creditor body in their order of
priority with secured creditors generally in first place (potentially
subject to any tax liens or payroll-related expenses up to a certain
dollar limit). The advantage of the use of a receiver versus an
assignment for the benefit of creditors (“ABC”) to dissolve a business
is having the Court oversee the process and resolve any disputes. The
advantages of a dissolution receivership versus a bankruptcy are (i)
cost – the receivership can be significantly less expensive than a
bankruptcy and (ii) the ability to recommend a specific receiver.
Examples of a dissolution receivership include: (a)
National Investors
Financial, Inc.; (b) Wheel Rim Manufacturer, (c) the
Reynolds
Building.
Ownership Dispute: An ownership dispute generally occurs when a
money-source partner and the idea person/operator partner achieve
financial success; the operator typically becomes distraught over the
equity split since the money source no longer contributes to the
success of the company but is still entitled to a large share of the
profits. The result can be a lock out, diversion of corporate
opportunities or theft. The Receiver is appointed to take charge of
the operation. There are generally three options: (a) the idea partner
buys out the money source (if possible) or visa versa; or (b) divide
the company (if possible) or (c) sell to a third party such as a
competitor who may already be in the business or desires to be in this
segment of the business. The Receiver’s job is also to protect the
company from the ownership litigation until the dispute is resolved.
Examples of ownership disputes include (a)
Fertility Clinic and (b)
CSA.
Real Estate Receiverships:
Rents and Profits (Property Management): This is the most
common application of a Receivership and the most broadly used. The
appointment of a Rents and Profits Receiver typically occurs when a
real estate project (commercial or residential) goes into default on
its mortgage. The lender moves for the appointment of a Receiver to
protect its cash collateral while it commences foreclosure proceedings
to take ownership of the property. The Receiver is charged with
collecting rents and preserving and protecting the property until the
foreclosure is accomplished at which point the Receiver typically
releases custody of the property to the lender. Examples of rents and
profits receiverships include (a) 351 California Street, (b)
West LA
Apartment Building and (c) West LA Strip Center.
Build-out Receiverships: Typically, a lender moves to have a
receiver appointed over a stalled construction site (either
residential or commercial) to assess the project to determine if it
can be completed (and at what cost) and then sold. Usually, the lender
must put up new money (which is secured by a Receiver’s Certificate)
to complete the project. To sell the individual units in state court,
it is generally beneficial to have the cooperation of the Defendant
(original builder). This accommodation is typically negotiated in
exchange for some item of interest to the borrower such as a release
of personal guarantees. Some state courts are split on the question of
whether a State Court Judge has authority to convey title via court
order to a third party. However, in the current downturn, this
approach (selling in State Court) seems to have become the preferred
solution. When dealing with condominiums, the issues become complex
such as having the Receiver sign the papers required by the Department
of Real Estate and establishing a homeowners’ association – entities
that need to be properly noticed at the time of the Receiver’s Final
Account and Report in order to foreclose any trailing liability.
Examples of build-out receivership include (a)
W-23 Condo Project, (b)
Bellagio of Palmdale.
Land Entitlement Receiverships: To dispose of raw land, the
property’s value is generally enhanced by completion of the
entitlement process and obtaining a temporary or final map. With a
supporting Court order, the Receiver can work through the process and
achieve a better result for the parties. Examples of land entitlement
projects include: Antiock Development — Shea Homes and
DMC Trust.
Hospitality Receiverships: The operation of a hotel, resort or
golf course is a category of Receivership that is a hybrid between an
operating company and a real estate project. Here the emphasis is to
provide acceptable levels of customer service to keep the property
competitive while working through its foreclosure or sale. Examples of
hospitality receiverships include: NIFI Golf course.
Substandard Housing: This category of Receiver is typically
brought about by a complaint by a housing authority (City, County or
State) where the goal of the Receiver is to determine if a substandard
housing project can be improved or should be shutdown. If improved,
the Receiver will typically have to borrow money from a new through a
Receiver’s Certificate (that may prime the first-place lender) to
accomplish the required work. Normally, the Court will make the
decision to proceed based upon the Receiver’s recommendation. These
issues can be tricky as the initial bid to improve the property may
expand as the full scope of the project becomes known only after the
renovation is commenced. There are two cases, both in Santa Ana,
involving the renovation of apartment complexes to address health and
safety issues.
Other Receivership Applications:
Judgment Creditor: This Receiver is appointed to take charge of
a business or real estate project with the goal to aid a judgment
creditor to collect a perfected judgment that has been awarded by a
Court. This typically involves an analysis to determine if the
business or real estate project can generate enough cash to enter into
a meaningful payment plan or should the business/project be liquidated
as the best way to satisfy the judgment creditor. An examples of a
judgment creditor is: ABC.
ii. Dissolution Receivership: Rather than an adversarial
action, the California Code of Civil Procedure allows for the
voluntary appointment of a Receiver to windup the affairs of a
corporation, sell the assets, collect the accounts receivable and pay
the bills. This is an “In Re” application rather than a contested
lawsuit. The Receivership provides the benefit of an orderly
liquidation, usually of a solvent entity where the claims/creditors
can be paid off in full and the entity can achieve a Certificate of
Dissolution. An example is Dissolution of an engineering company.
iii. Criminal Court Receivership: The California Penal Code
provides for the appointment of a Receiver to take custody of a
criminal defendant’s property (business and or real estate) while the
alleged criminal is prosecuted. If found guilty, the property is
generally sold to satisfy a monetary fine or sanction. If found
innocent of the charges, the property is returned to the individual.
An example of a criminal receivership is: Petronella Roofing.
Other State Court Appointments
Partition Referee: The partition referee is typically appointed
by a Superior Court to dispose of a piece of real property with two or
more owners where one or more owners want to sell and the others do
not. Another use of a partition referee is where one owner wants to
sell, but the other owner(s) cannot be located. The property can
either be divided physically with each getting a share commensurate
with their percent of ownership or sold either conventionally or at
public auction. Proceeds from a sale for the benefit of unknown owners
are typically placed with the Court.
Probate Trustee: The interim appointment of a trustee in
Probate is closely akin to a Receiver except that the appointment
takes place in Probate Court that places the interim trustee or
Trustee Ad Litem in charge of cash and assets that are in dispute
between heirs of an estate. This can involve the operation and sale of
a company or real estate or merely taking custody of cash in a probate
estate until the probate matter is settled.
Shirley’s Bagels and
DMC
Trust.
Family Law Receiver: A receiver appointed in Family Court
generally has the same duties and responsibilities as a receiver
appointed in an insolvency or dispute with the exception that the
company or real estate project may have become mired in the
dissolution of the marriage. Typically in these cases, the spouses
work in the business or one spouse has excluded the other from the
spoils of the business. In family law matters there is typically an
overlay of emotion that is generally superior to pure business
interests. Examples of cases in Family Law include the following:
Real
Estate Disposition Reynolds Building and Pacific Rim Cable Importer.
Special Master or Referee: These are titles applied to Court
appointments where the circumstances warrant Court supervision but may
fall short of appointing a full-fledged Receiver (generally viewed by
most Judges to be an extreme remedy). Special Masters have a defined
scope and generally report to the Judge. The Court can also appoint
its own expert witness to help resolve litigation issues.
Orange
County Building Permits Case.
Provision Director: The Court may appoint a Provisional
Director where a company’s board of directors is deadlocked. The
Provisional Director has the full duties of a Director but can have a
tether to the Court to resolve issues that are strategic to the case.
CSA, Hasco Oil,
Premier So. Cal. Home Building,
Scrap Metal
Processor, and Sound System Manufacturer.
Bankruptcy
Appointments
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President & CEO: This position generally notes that the
President of the debtor corporation has a tarnished reputation and the
creditor body has lost confidence in working with and relying on that
individual. Rather than appoint a Chapter 11 Trustee (where both the
debtor and creditors can lose control of a case), a successor
management team may be a preferred answer. The goal is to employ
someone who has a reliable reputation and is knowledgeable about the
bankruptcy system. It is generally prudent, if not required, to get
this change of management approved by the Bankruptcy Court. Cases:
UES, Premier Laser Systems, and a
Private Four-Year University.
-
Chief Responsible and/or Chief Restructuring Officer: If the
appointment of a new President introduces a “change of control” risk,
a less abrasive option is to appoint a Chief Responsible Officer while
leaving the President in place but subordinated, or a Chief
Restructuring Officer whose primary function is to design a successful
plan of reorganization in concert with the Debtor, counsel and the
creditors’ committee. Case: Bethany LLC.
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Chapter 11 Bankruptcy Trustee: When a debtor has failed to
follow bankruptcy rules or has proven to be dishonest or unreliable,
the creditors or the Office of the United States Trustee can move for
the appointment of a Chapter 11 Trustee. This individual steps into
the shoes of the Debtor and is guided by the Bankruptcy Code that
clearly outlines the duties and obligations of the Chapter 11 Trustee
that in general are to obtain the best recovery for the creditors. In
the 90s, Chapter 11 Trustee appointments numbered approximately fifty.
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Examiner: Many Bankruptcy Courts appoint an Examiner before
appointing a Chapter 11 Trustee to provide the Court and the parties
with a careful review of the Debtor’s operation and specifically the
allegations that may warrant the appointment of a Trustee. Case:
El
Toro Materials and Real Estate Developer.
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Mediator: A mediator can be appointed by a Judge to assist to
resolve a case by achieving agreement of the parties. Mr. Mosier
attended the Bankruptcy Mediation Program and updates sponsored by
Pepperdine Law School’s mediation division. Mr. Mosier has also
handled a few dozen mediations both within and outside the Bankruptcy
area with approximately an 80% success rate measured by settlement.
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Plan Agent: This is a court-appointed individual who takes
charge of assets of a Bankruptcy Estate to execute the terms of an
approved plan of reorganization. This may involve the sale of assets,
and or the transfer of assets in kind to pay off the creditors of the
approved plan or reorganization. Mr. Mosier has served in several
cases as Plan Agent all involving disposition of real estate in order
to pay creditors.
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Chapter 7 Trustee: Mr. Mosier served on the panel of Trustees
in the late 1980s and early 1990s and processed over 4,000 chapter 7
filings. Several of these proved to be large asset cases with both
real estate and operating companies. Mr. Mosier served in a number of
large chapter 7 bankruptcies in the early 90’s involving disposition
of real estate and disposition of assets of operating companies
Other Assignments:
The broadest term is Consultant where the goal is to
monitor a situation and advise either the company or the lender –
these are typically not court appointments. In a Federal Case in
Florida, the appointment was as Independent Fiduciary to take charge
of assets of a defunct company and manage settlement proceeds for the
victims in the Metacor Case. Other special
assignments include being hired to defend a lawsuit to break a lease
(Litigation Management for a $48 million office building), to advise a
board of directors on the liquidation value of a division of a public
company (Injected Molded Plastics) and to assist in the dissolution of
a large law firm (Consultant to Law Firm Dissolution).
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