Appealability, Receivers, Special Fee Shifting Statutes: Grant Of Attorney’s Fees And Expenses To City Of Indio And Against Property Lender/Receivership Estate In Public Abatement Action Reversed As A Matter Of Law

Two Health And Safety Code Fee Shifting Statutes And Indio Municipal Fee Shifting Provision Did Not Provide Bases For Fees/Expenses Against Lender/Receiver.

            In Kaura v. Stabilis Fund III, LLC/City of Indio (as intervenor), Case No. E065751 (4^th Dist., Div. 2 June 13, 2018) (partially published; appealability discussion not published), lender with a deed of trust on a 75-unit apartment complex sued the property owners/borrowers because the loan was in default and sought a receiver to make sure the property was properly maintained. A receiver was appointed based on lender’s motion for such an appointment. City of Indio (City) intervened, alleging that the property was a public nuisance, successfully moving to modify the receivership by instructing the receiver to remedy certain illegal hazardous and substandard conditions. City then moved for an award of attorney’s fees and expenses in the total amount of $98,190.47, with the trial court granting the full request against the receivership estate and, if the estate did not have sufficient funds, then by lender.

            Lender appealed, arguing that the three fee entitlement predicates did not allow for a fee award against it. The appellate court agreed and reversed.

            The first basis for the fee award, Health and Safety Code section 17980.7(c)(11), did not apply because (1) City did not obtain appointment of a receiver (a qualifying trigger), but only the modification of a receivership (with Health and Safety Code section 568.3 later enacted to cover this deficiency); and (2) it does not allow for an award of litigation expenses in any event.

            The second basis for the fee award, Health and Safety Code section 17980.7(d)(1), did not apply because lender was not the property owner and was not a “successor in interest” as used in the statutory scheme; lenders and receivers are not successors in interest, given that lender had an existing deed of trust after discovery of the substandard conditions and had no effective control over the property at the time.

            The third basis for the fee award, Indio Municipal Code section 10.20(C), did not apply because lender and the receivership estate were not “non-prevailing parties in the action to abate a public nuisance” because that count by City still remained pending and relief was not granted on that count. Beyond that, neither of these entities maintained or created the nuisance, the owner did, such that the municipal code provision could not be read to expand nuisance liability any more broadly.

            Finally, in the unpublished portion of the opinion, the 4/2 DCA decided that the fee order was appealable under the collateral order doctrine.