Facts: A city inspected an incarcerated owner’s rental property and determined repairs were required to protect the safety of its residents. The court appointed a receiver who vacated all tenants and boarded up the property. The receiver was instructed to record a lien on the property to secure their payment but failed to do so. The owner defaulted and the lender later foreclosed and purchased the property at the foreclosure sale. The lender did not pay the receiver and sold the property.

Claim: The receiver sought full payment of their fees from the lender directly, claiming the lender was required to pay the receivership fees for the property since it became the owner of the property on foreclosure.

Counterclaim: The lender claimed they were not liable to pay the receivership fees since recovery of the fee comes through a lien on the property, which the receiver did not record.

Holding: A California court of appeals held the lender was not liable to pay the receivership fees since the receiver did not record a lien on the property as required for payment.

Also at issue in this case:

Facts: A city inspected an incarcerated owner’s rental property and determined repairs were required to protect the safety of its residents. The court appointed a receiver who vacated all tenants and boarded up the property. The owner defaulted and the lender later foreclosed and purchased the property at the foreclosure sale. The lender did not pay the receiver and sold the property.

Claim:  The receiver sought full payment of receivership fees directly from the lender, claiming the lender was unjustly enriched since it benefitted from the receiver’s services when the lender sold the property.

Counterclaim:  The lender claimed it was not unjustly enriched since it did not request the receivership and was not the owner of the property at the time the receiver provided services.

Holding: A California court of appeals held the lender was not liable for the receivership fees since the lender was not unjustly enriched as the receiver did not request the receivership and was not the owner of the property at the time the receiver provided services. [City of Chula Vista v. Gutierrez (2012) 207 CA4th 681]

Editor’s note – The lender was never liable for the payment of the receiver’s fees since the receiver failed to perfect their rights with a recorded lien on the property. Had the receiver recorded a lien prior to the lender’s purchase of the property, the lender would have foreclosed taking title subject to the lien, requiring it to pay the receiver’s lien which would be in a priority position to the lender’s junior trust deed. 

However, the lien was never recorded and thus the receiver did not have an interest in the property they could enforce against the trust deed lender.

Alternatively, if the lender had requested the receiver’s services, then the receiver may seek payment directly from the lender. However, the court appointed the receiver and instructed the receiver to record a lien, which the receiver did not do to their own detriment. Thus, the lender was not liable for the receiver’s fees, directly or indirectly.