CPS Signage & Marketing Corp. v. Cynthia Seablom

Case Number: KC063482    Hearing Date: August 19, 2014    Dept: J

Re: CPS Signage & Marketing Corp. v. Cynthia Seablom, et al. (KC063482)

MOTION FOR ORDER: (1) APPROVING RECEIVER’S FINAL ACCOUNT AND REPORT; (2) APPROVING RECEIVER’S AND RECEIVER’S COUNSEL’S FEES AND COSTS; (3) FINDING THAT ALL OF THE RECEIVER’S ACTS, TRANSACTIONS AND ALL OF HIS ACTIONS AS RECEIVER, INLCUDING THE ACTIONS OF HIS EMPLOYEES AND AGENTS BE RATIFIED, CONFIRMED AND APPROVED; (4) DISCHARGING RECEIVER; (5) EXONERATING BONDS; AND (6) ORDERING DEFENDANT CYNTHIA SEABLOM AND CROSS-DEFENDNT CHRISTINE WENDEL, JOINTLY AND SEVERALLY, TO REMIT THE CASH DEFICIT TO THE RECEIVER

Moving Party: Court Appointed Receiver Todd D. Donell

Respondent: Cross-Defendant Christine Wendel

POS: Moving OK; Opposing served by regular mail contrary to CCP § 1005(c)

The Complaint herein alleges that Defendant Cynthia Seablom (“Seablom”) is a minority shareholder with access to Plaintiff’s customer database, which she is using to compete against Plaintiff. The Complaint, filed 4/2/12, asserts causes of action for:

1. Preliminary and Permanent Injunction
2. Breach of Fiduciary Duty
3. Breach of the Implied Covenant of Good Faith and Fair Dealing
4. Interference with Contract/Prospective Advantage
5. Fraudulent Concealment
6. Conversion
7. Unfair Competition

On 5/2/12, Defendant Seablom filed a Cross-Complaint against Plaintiff and Christine Wendel asserting causes of action for:

1. Breach of Fiduciary duty (Improper Use of Corporate Funds)
2. Breach of Fiduciary Duty (Failure to Comply with B&P C § 7031)
3. Fraud
4. Conversion
5. Failure to Comply with Corp C § 1602
6. Involuntary Dissolution
7. Accounting and Appointment of Receiver
8. Misappropriation of Corporate Assets

Trial is set for 9/8/14.

The duly appointed and acting receiver, Todd. D. Donell (the “Receiver”) now moves for an order: (1) approving the Receiver’s Final Account and Report; (2) approving the Receiver’s and Receiver’s counsel’s fees and costs; (3) finding that all of the Receiver’s acts, transactions and all of his actions as Receiver, including the actions of his employees and agents be ratified, confirmed and approved; (4) discharging the Receiver; (5) exonerating bonds; and (6) ordering Defendant Cynthia Seablom (“Seablom”) and Cross-Defendant Christine Wendel (“Wendel”), jointly and severally, to remit the cash deficit to the Receiver.

A receivership terminates upon completion of the duties for which the receiver was appointed; or at any time, upon court order. Receivers must prepare, serve and file (by noticed motion or stipulation of all parties) a “final account and report, a request for discharge, and a request for exoneration of the receiver’s surety.” If the report seeks allowance for compensation to the receiver or attorneys for the receiver, it must state in detail what services were rendered and whether previous allowances have been made. (CRC 3.1184(d).) These documents must be served on all parties to the action and to any others whom the receiver knows have a substantial, unsatisfied claim that will be affected by the order or stipulation. (CRC 3.1184.) No memorandum in support of the motion or stipulation need be submitted unless ordered by the court. (CRC 3.1184(b).) At the hearing, the court will determine any objections or claims made against the receivership and approve or disapprove the report and account. After approval of the receiver’s report and accounting, the receiver is discharged. The bond is released upon completion of disbursements and other requirements in accordance with the order approving the final report and account. (Coburn v. Ames (1881) 57 Cal. 201, 202–203.)

Receivers are entitled to compensation for their own and their attorneys’ services. (City of Chula Vista v. Gutierrez (2012) 207 Cal.App.4th 681, 685.) In the usual case, the receiver’s costs are paid from the receivership estate. (Ibid.) However, courts have discretion to impose the receiver’s costs on the party who sought appointment of the receiver or to apportion the costs among the parties based on the circumstances. E.g., “(a) court may require one or more parties to pay for receiver fees where the property subject to the receivership is inadequate to compensate the receiver and/or where other equitable circumstances support imposing fees on a party.” (Id. at 685–686.)

The Receiver represents that at this time, and primarily due to the current financial condition of the receivership estate, the Receiver believes that no benefit will be obtained by continuing the receivership. (Motion, Donell Decl. ¶ 32.)

The Receiver has substantially satisfied all the requirements of CRC 3.1184. The Receiver has noticed a motion for order approving the final report and accounting, discharging receiver, and exonerating bonds. The application is accompanied by a final accounting and report, a request for the discharge, and a request for exoneration of the Receiver’s surety. Notice was given to all parties to the action. The report seeks allowance for compensation to the Receiver and attorneys for the Receiver, and states in detail what services were rendered and whether previous allowances have been made.

The Receiver proposes that Seablom and Wendel, jointly and severally, be ordered to pay the outstanding expenses including the Receiver and legal fees and costs totaling $110,794.75 since: (1) as the party that requested the Receiver’s appointment, Seablom is responsible, (2) throughout this matter, and prior to taking specific action, the Receiver informed counsel for Seablom of the specific actions proposed to be taken, the fact that significant fees and costs would be incurred, and counsel for Seablom did not object; and (3) the conduct of Wendel was the direct cause of a significant amount of the fees and costs incurred by the Receiver and his counsel. Additionally, the Receiver proposes that any claim of CPS against Martinez Sign be assigned to the Receiver and that any amounts recovered by the Receiver from Martinez Sign reduce the amount owed to the Receiver by Seablom and Wendel. (Motion, Donell Decl. ¶ 33.)

It appears that the receivership should be terminated at this time and that no benefit will be obtained by continuing the receivership. It also appears that the Receiver’s proposal for payment of the outstanding expenses is fair and equitable under the circumstances of this case.

Wendel, in opposition, does not dispute any of the Receiver’s contentions, but contends that because the order appointing receiver is on appeal, all further matters pertaining to the receivership are stayed by the appeal. However, a bond or undertaking must be posted to stay a judgment or order appointing a receiver (CCP § 917.5), but Wendel has not posted a bond or given an undertaking.

Thus, the motion is granted.

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