Q: I am a receiver for a partnership. I was appointed pursuant to a stipulation between the current partners and a secured creditor. After an extensive investigation, I have sued the former managing partner and her mother to recover fraudulent transfers, for breach of fiduciary duty and for usurping partnership opportunities. They are contending, in defense, that I cannot maintain my lawsuit because my appointment is not valid, because the current partners, having purportedly wrongfully removed the former managing partner, had no right to stipulate to my appointment. Can they attack my appointment in this manner?

A: Orders and judgments can be attacked in two ways. Directly, by writ or appeal, or, sometimes, collaterally. A collateral  attack attempts to avoid the effect of an issued order or judgment. Collateral attacks are disfavored because the law wants finality of orders and judgments. This is especially true regarding orders appointing receivers. Orders appointing receivers are directly appealable. Cal. Code of Civil Procedure § 904.1(7); Raff. v. Raff, 61 Cal. 2d 514, 518 (1964). To directly appeal, one must be a party or an intervener. Collateral attacks on receivership orders are only permitted if the appointing court lacked jurisdiction to make the appointment, which is rarely the case. Mines v. Superior Court, 216 Cal. 776, 780-81 (1932) (“[T]he court had jurisdiction to appoint a receiver, it is not now possible to argue that it was in error in making the order…the contemplated action of the court below must be tested by the principles governing collateral attack, and it is only where the orders are totally void that collateral attack is permissible.”); Mesnager v, DeLeonis, 140 Cal. 402,404 (1903) (If the court had jurisdiction, collateral attack on an order appointing receiver is improper); see also, Posey v. Fargo, 187 La. 122,131 (1937) (“Whenever the court has jurisdiction of the subject matter and of the necessary parties, its actions in regard to the appointment of a receiver, whether erroneous or not, cannot be questioned in a collateral proceeding… The fact that a receiver is appointed by consent does not render his authority subject to collateral attack in another jurisdiction…”[citations omitted]). These same rules apply in federal court. Pacific Coast Pipe Co. v Conrad City Water Co., 245 F. 846, 848 (9th Cir. 1917) (rejecting an attack on a receiver’s appointment) (“We are discussing the power of the court to act, not the wisdom of its actions. If the state court erred in its findings of fact or conclusions of law, or improvidently exercised its discretion, those are considerations for an appellate court; with them were are not concerned. On the face of the record the court had jurisdiction and in a collateral attack upon its judgment we are not a liberty to inquire further.”).

          Therefore, because it appears the court that appointed you had jurisdiction to do so, the defendants cannot collaterally attack your appointment in your lawsuit against them. The prohibition on collateral attacks applies in other contexts. For example, defendants cannot defend against the appointment of an ancillary receiver by challenging the validity or wisdom of the foreign receiver’s appointment, nor can an appointment be attacked by creditors of the entity placed into receivership.

NOTE: Readers are encouraged to cite, copy and use Ask the Receiver articles and information. However, please provide appropriate attribution when you do so. If you copy or use articles in pleading, cite to them (and maybe attach copies, as some courts may not have access to them). Failure to cite articles relied on could lead to the imposition of sanctions. Makhnevich v. Arrowood Indemnity Company, 2024 WL 1020577 *2 ( S.D.N.Y. 2024).