IN RE: the MARRIAGE of Margaret Dorothy and J. T. Carlisle JONES. (1980)

Margaret Dorothy Jones appeals from various orders of the court made following the entry in 1971 of an interlocutory judgment of dissolution of her marriage to J. T. Carlisle Jones. These orders include: (1) The court's order that $90,000 of funds collected by the receiver appointed to enforce the interlocutory decree be paid to Mrs. Jones' attorneys; (2) an order denying the motion of Mrs. Jones to terminate the receivership and to turn over to her the balance of the funds collected by the receiver; and (3) orders denying her motions pursuant to Code of Civil Procedure sections 170.6 and 170, subdivision (5), to disqualify Judge Olson from further participation in hearing the receivership or related matters. These matters have been consolidated on appeal.

FACTS

The present appeal relates to orders of the court made in the course of an ongoing receivership which was instituted ostensibly to protect the interests of the wife in property awarded her in marital dissolution proceedings after her former husband carried out his threats to abscond with the assets and flee the jurisdiction. The dispute centers around wife's desire to terminate the receivership and to avoid the payment of a claim for attorney fees by her former counsel against whom she instituted a malpractice action which culminated in a substantial settlement in her favor.

The record discloses that in early 1968 the law firm of Raskin & Lichtig filed a complaint for divorce on behalf of Margaret Jones. On the basis of representations of their client that her husband had threatened to secrete or dissipate community assets, Raskin & Lichtig applied for a temporary restraining order and thereafter obtained an injunction pendente lite restraining her husband from disposing of community property. The divorce action, later modified by operation of law to an action for dissolution, culminated in a lengthy trial before Judge Olson which concluded on March 19, 1971.

At the conclusion of trial, Judge Olson at a conference in chambers informed counsel of the contents of his written memorandum of intended decision. The court by its memorandum decision found that the bulk of the property held by J. T. Jones, including more than 30 thoroughbred horses and a magazine subscription business composed of various entities collectively referred to as the Jones Organization and valued at $3 million, constituted community property. It distributed to wife the family residence and furnishings and cash and marketable stocks in the Jones Organization valued at $1 million together with other miscellaneous assets, and ordered that husband equalize the property distribution with a promissory note payable to wife. To husband it distributed the stock of all the Jones Organization companies subject to wife's interest, and certain other assets. It ordered the sale of the race horses. The court further observed that since the protracted litigation in the case was materially and significantly increased by husband's conduct, it would be unfair to have the community bear the entire legal expenses and therefore except for $40,000 ($20,000 each) as attorney's fees and $6,000 for other experts it found all other legal and related fees properly chargeable to husband's share of the community and to his separate property. The court disclosed its intentions in view of the substantial potential tax liabilities which might result from the proposed division of property in the hope that the parties by settlement might avoid these consequences.

When no settlement was reached by the parties, Judge Olson on April 8, 1971, filed his memorandum of decision and directed counsel for wife to prepare and present a proposed interlocutory judgment. The interlocutory judgment prepared by wife's attorneys was signed by the court on the date and in the form presented on May 24, 1971, and was recorded on June 8, 1971. That decree ordered the sale of the race horses in accord with the memorandum decision and the proceeds deposited in an account at Security Pacific National Bank in West-wood (hereinafter referred to as the Bank) for disposition pursuant to the court's order. Husband was ordered to pay wife $1 million for the redemption of her one-half interest in the stock of the Jones Organization companies and was to give her a 10-year promissory note for nearly $500,000 to equalize the property distribution. The value placed on the interest of wife in the community was over $1,700,000. Paragraph 11 of the interlocutory decree enjoined husband and the various business entities comprising the Jones Organization from transferring or encumbering assets and provided for the imposition on property awarded to husband of a primary lien in favor of wife's attorneys and a secondary lien in favor of wife to secure husband's performance of his obligations under the interlocutory decree.

The preliminary injunction which had issued pendente lite prohibiting husband from wasting or dissipating community assets was in effect at the time the memorandum of intended decision was disclosed on March 19, 1971, and it remained in effect in the interim. Husband nonetheless took the opportunity to use the period between April 8 and June 8 to liquidate and sequester the proceeds of liquidation of all the community assets he could immediately lay his hands on. He withdrew substantial sums of cash from community bank accounts, sold the Jones Organization companies and the El Dorado and Bel Air Country Club memberships and liquidated interests in various other properties prior to the time the interlocutory judgment was entered.

On June 18, 1971, Raskin & Lichtig made a motion for an order appointing a receiver after judgment to prevent loss or dissipation of assets and to carry the interlocutory judgment into effect because J. T. Jones refused to apply his property to satisfy the judgment and was attempting to place the assets beyond reach of the court.¹ On June 29, 1971, this motion was granted and Gilbert Robinson was appointed receiver with general powers to take possession of and do all things necessary in his discretion to safeguard and preserve property standing in the name of husband or his companies and to comply with the interlocutory decree or further orders of court.²

Community funds in the amount of approximately $75,000 received from the sale of a horse had been sequestered by the trial court during the dissolution proceedings and were turned over to the receiver. He also collected from various sources, including tax refunds due the parties, approximately $60,000. The court on petition of the receiver ordered that he institute actions and claims against various third parties, including the Bank, Cadence Industries, El Dorado Country Club, and Bel Air Country Club, which had allegedly cooperated with husband in the liquidation of community assets; and wife assigned to the receiver any interest she might have in such claims. The court also ordered the receiver to pay Raskin & Lichtig from the amount then in the receiver's possession the sum of $75,000 for legal fees to wife on the basis of the primary lien accorded through the interlocutory decree.

Wife at the time the receiver was appointed, although not entirely destitute, was placed in an agonizing predicament. Despite an award of $1,700,000, her husband's defalcation had left her in possession of only around $150,000 of separate property and the family residence with a net equity of $140,000. Meanwhile the receiver initiated litigation and entered upon settlement negotiations with respect to certain claims of wife against third parties and paid claims for fees for his own and other professional services, including a substantial payment to Raskin & Lichtig. Wife, however, did not receive any payment from the moneys collected by the receiver.

Finally in the spring of 1975 wife consulted her present counsel who, on June 26, 1975, instituted on behalf of his client a malpractice action against Raskin & Lichtig. Plaintiff wife in the malpractice complaint (Jones v. Raskin & Lichtig, L.A. Super. Ct. No. C128168) in summary alleged that the acts of Raskin & Lichtig constituted a proximate cause of the defalcation of her former husband, J. T. Jones; that the conduct of wife's attorneys subsequent to the entry of the interlocutory judgment and with respect to the receivership violated their legal, ethical and fiduciary responsibilities to wife; and that wife was entitled to reimbursement of $1,700,000 representing wife's interest in the community property plus additional damages. Wife further offered, upon payment of said damages, to relinquish to Raskin & Lichtig any interest that wife might have in the case against the Bank.

At the time wife consulted Hillel Chodos, who filed the malpractice action against Raskin & Lichtig, all litigation matters, consisting principally of claims against third parties for collusion and assistance to her husband in liquidation of assets, had been resolved except two. These were wife's $9,000 claim against the Bel Air Country Club and her claim for $1 million against the Bank arising from husband's withdrawal of funds in bank accounts. At the request of the receiver, wife had assigned her interest in these claims to him. Wife's new attorney did not intervene in these matters but concurrently with the filing of the malpractice complaint he requested that Raskin & Lichtig agree to a substitution of attorneys and turn over their records relating to the Jones dissolution proceedings to him.

While Raskin & Lichtig did not actively oppose the substitution of attorneys, they refused to provide at their own expense a complete set of files and records until the court so ordered on September 27, 1976. From June 26, 1975, until an official substitution of attorneys in the dissolution proceedings was filed in September 1976 wife's new counsel proceeded with the malpractice action.

Once the substitution was filed he also instituted various claims and objections to the conduct of the receivership. Among other things he filed on behalf of his client on January 3, 1977, a complaint against defendants Gilbert Robinson, the receiver, and the law firm of Wyman, Bautzer, Rothman & Kuchel (hereinafter referred to as Wyman, Bautzer) which had handled the litigation of several claims instituted by the receiver, seeking damages for allegedly unnecessary charges by the receiver, legal fees improperly paid Raskin & Lichtig by the receiver, and losses incurred in the prosecution of certain claims together with damages for emotional distress.

Ultimately the litigation against the Bank was concluded with a $250,000 settlement. Wyman, Bautzer claimed and deducted their one-third contingency fee. The balance of the funds from settlement of litigation against the Bank and others, along with the unused portion of a reserve for costs (approximately $22,000) held by Wyman, Bautzer, was turned over to the receiver who thus came into possession of approximately $192,000. This sum represented the net liquidated balance of all the assets and claims which had come into the receiver's possession and control, except a small claim against Bel Air Country Club. No substantial claims remained for the receiver to pursue, husband having accomplished his goal of liquidating and absconding with all the other assets of the community or his separate estate.

On February 10, 1977, Mrs. Jones filed a notice of motion for termination of the receivership. It was therein alleged that the receiver lacked jurisdiction to adjudicate in the receivership proceedings the claims of Raskin & Lichtig for legal fees for services rendered to wife. Wife in her motion indicated her desire that the receiver, upon delivering his final account acceptable to her, should be discharged without prejudice to any claims he and wife might have against one another, and that upon discharge of the receiver all funds in his hands should be turned over to wife.

Prior to the hearing on the motion to terminate receivership, the receiver filed various petitions including, inter alia, petitions for approval of his fifth interim report and account; for receiver's fees; for authority to employ additional counsel to de-end against the lawsuit filed by wife against him and to retain $75,000 of funds collected to pay for that defense; for authority to employ a second special counsel to handle wife's anticipated challenge to his application and to retain additional funds for this purpose; and he sought orders to pay additional fees and costs to Wyman, Bautzer. Wyman, Bautzer filed a petition for appointment of special counsel to represent them in the Jones v. Robinson litigation and requested that funds in the hands of the receiver be sequestered for this purpose. And Raskin & Lichtig filed a petition for the payment to them of approximately $137,000 representing the balance of fees and accumulated interest thereon allegedly due under the interlocutory decree. Robinson opposed termination of the receivership on the ground that he was liable to surcharge in the event of distribution of the assets to wife in the face of conflicting claims of creditors, including governmental tax claims, which remained to be resolved before it could be finally determined who was entitled to the assets.

On April 15, 1977, following a hearing and argument, the court made the first of the series of orders which are the subject of this appeal: The court granted motions by the receiver to employ special counsel, both to defend him in Jones v. Robinson and in connection with his report and petition for fees; and the court denied the petition of Wyman, Bautzer to employ special counsel in connection with the litigation instituted by Mrs. Jones. The other matters were continued to April 28, 1977.

The court on April 28 following further argument denied the motion to terminate the receivership, authorized payment to Wyman, Bautzer of attorney fees in connection with litigation which had been settled; and set the receiver's account and petition for fees down for further evidentiary proceedings. The court overruled wife's objection to the claim of Raskin & Lichtig for payment of the balance of fees pursuant to the interlocutory decree, and ordered the receiver to pay $90,000 to Raskin & Lichtig in partial satisfaction of such fees. The court ordered the receiver to retain the balance of approximately $100,000 on hand as a reserve for future payment of anticipated legal fees in defense of the civil litigation in Jones v. Robinson and the defense of his report and petition for receiver's fees.

On May 20, 1977, Mrs. Jones filed with this court a petition for writ of mandate (2 Civ. No. 51170) challenging the orders of April 15 and 28, 1977, on grounds, inter alia, that the trial court judge was not qualified by virtue of bias or prejudice to participate in these or any other matters evolving out of the Jones marital dissolution because he had become, whether consciously or not, a participant in an alleged fraud on the wife. Following the denial of the petition for mandate, wife on June 2, 1977, noticed an appeal from the court's orders.

On July 6, 1977, pending decision on the appeal, she filed objections to further participation by and a declaration for the disqualification of the trial judge (Code Civ. Proc., § 170.6) claiming that by reason of his bias or prejudice a fair and impartial trial could not be had before him on matters pertaining to the marital dissolution and subsequent receivership. The trial judge filed an answer to the objections on July 7, 1977, and at the same time ordered the Code of Civil Procedure section 170.6 challenge stricken as not having been timely filed.

The matter of the objections and a second challenge to the judge's qualifications (Code Civ. Proc., § 170, subd. (5)) was heard before Judge Hupp on August 18, 1977. The court following hearing found that it had not been made to appear probable that by reason of bias or prejudice a fairly impartial trial could not be had before Judge Olson and denied the challenge to his qualifications.

ISSUES

Mrs. Jones on appeal contends that: (1) The original appointment of the receiver was improper in that it was not, as represented by Raskin & Lichtig, necessary to protect her interests, and that she is entitled to immediate termination of the receivership; (2) the court's order for the payment of $90,000 to Raskin & Lichtig pursuant to their claim constituted an abuse of discretion; (3) the court is without jurisdiction to determine the fee claims of Raskin & Lichtig, of Robinson as receiver, and of Wyman, Bautzer as legal counsel in the action against the Bank in the receivership proceedings; (4) the court's order directing the balance of the funds in the hands of the receiver (approximately $100,000) be retained to cover future claims, including legal fees which may be incurred in defense of wife's objections to account and complaint for mismanagement against the receiver and Wyman, Bautzer constitutes an abuse of discretion; (5) the peremptory challenge to Judge Olson was improperly stricken on grounds that it was not timely (Code Civ. Proc., § 170.6); and (6) the trial court erred in denying the petition to disqualify Judge Olson (Code Civ. Proc., § 170, subd. (5)).

DISCUSSION

It has been a dozen years since Mrs. Jones instituted in good faith the proceedings which culminated in the dissolution of her marriage of over twenty years and it has been more than nine years since the entry of the interlocutory decree. In the interim the matter has, due to the fulfillment by her husband of his threats to flee the jurisdiction with the marital assets, evolved into an ongoing series of proceedings reflecting the efforts of the hapless wife to use the only means at her disposal to recover the property to which she was entitled by virtue of the interlocutory decree. Since these proceedings are intimately related, this court to the extent deemed necessary to achieve a balanced perspective, takes judicial notice of the court files in the related litigation.

Mrs. Jones initially reposed in her attorneys her faith and confidence and acquiesced in their decision, once it became apparent that her husband had liquidated in excess of one-half of the community assets and was turning the proceeds to his own use in a foreign jurisdiction, to have a receiver appointed. It is uncontradicted that despite the appointment of the receiver, his pursuit of claims and assets remaining in the jurisdiction, and his collection of approximately half a million dollars, Mrs. Jones received not a penny of the proceeds. For over two years following the receiver's appointment, and despite her comparative financial straits, the wife made no complaint which is apparent from the record.

Finally in October 1973, Mrs. Jones respectfully requested an audience with the trial court to make known directly and without the intervention of her counsel her own wishes in the matter. The meeting was held in open court without counsel present. At that time her former husband was still nominally represented by counsel of record despite the fact that neither had physically appeared in court since the conclusion of the trial and filing of the interlocutory decree. Mrs. Jones at the meeting in chambers informed the court that the district attorney's office refused to pursue her husband (who was believed to be in Mexico), that the receiver failed to respond to her telephone calls, that she had found it necessary in order to survive to borrow against insurance policies, that she desired to have a voice in selection of counsel to pursue litigation on claims she had assigned to the receiver, and that she wanted and needed some of the cash which the receiver had collected. The court, while expressing sympathy and concern with Mrs. Jones' appalling predicament, rebuffed her requests and expressed the belief that her attorneys, the receiver and the law firm employed by the receiver were doing their best. She was informed that no assets could be released to her pending satisfaction of the claims of the receiver and counsel.

It was not until 1975 that Mrs. Jones, while attending a trial in Riverside of one of her claims against third parties, was apprised of the fact that the substantial losses she had sustained by virtue of her husband's conduct resulted partly, if not wholly, from the failure of Raskin & Lichtig to take the appropriate legal steps to protect her interests prior to and following entry of the interlocutory decree. Insofar as the record discloses, not until then did she consult another attorney with the aim of obtaining an independent consultation and review of the actions of her legal representatives.

The malpractice action instituted June 26, 1975, culminated in July 1979 in a settlement of $1,800,000 in favor of Mrs. Jones. The trial court subsequently ordered apportionment of the damages among insurance carriers pursuant to their request for declaratory relief. In arriving at an equitable apportionment, the court took into consideration those factors which would bear upon the value of the various claims of wife arising out of the conduct of her attorneys both prior to and following the entry of the interlocutory judgment, including the amounts attributable, respectively, to reimbursement and to damages for emotional distress. In so doing, the trial court took specific note of the fact that the relentless pursuit of legal fees by Raskin & Lichtig throughout the receivership prior to the disbursement of any funds to their client was likely to create an understandably unfavorable impression on the jury, and that on the basis of the complaint the award to Mrs. Jones necessarily incorporated a substantial sum for emotional distress for the bad faith and outrageous, rather than merely negligent, behavior of her attorneys.³

The appellate court in its review of the record enjoys the advantage of a similar perspective, and cannot fail to be impressed with the glaring inequities involved in the fee claims presented by Raskin & Lichtig in the receivership proceedings. Raskin & Lichtig at every step of the proceedings in receivership maintained and renewed their claim for the attorney fees. Each time they were paid a portion of their claim, the proceeds were applied first to interest and then to principal and they brought their receivership claim up to date accordingly. Therefore, despite the prior payment by the receiver to Raskin & Lichtig of a total of $250,000, the claim of Raskin & Lichtig as of April 1977 was for the sum of $132,604.24 representing their computation of the balance, including accumulated interest, then due. It is obvious that, despite apparent acquiescence of their client, an incipient conflict of interests arose at the time that the interlocutory judgment incorporation the paragraph relied upon by Raskin & Lichtig to give them a primary lien on husband's assets was filed. The conflict was activated when J. T. Jones absconded with the liquidated proceeds derived from his sales of community assets and the receivership became the vehicle by means of which the attorneys enforced their lien at the expense of Mrs. Jones and despite her protests in 1973 to the trial court.

Although no appellate brief has been filed on behalf of Raskin & Lichtig, who appear to be real parties in interest with respect to the court's order for the payment to them of $90,000 by the receiver, their claim filed with the trial court on March 17, 1977, makes it clear that they rely on the finality of the interlocutory decree, the enforceability of the primary lien which they claim thereunder, and the fact that their lien priority was upheld by the trial court on September 3, 1974, when it accepted the third interim report of the receiver. It is notable that Raskin & Lichtig apparently felt no reluctance to file this claim for the unpaid balance of their fees despite the filing nearly 21 months earlier of the claim for malpractice.

The lien which Raskin & Lichtig assert was not attacked by Mrs. Jones when her attorneys initially presented their claims for payment by the receiver. In view of the obvious conflicts of interest which had arisen in this regard, it appears that Mrs. Jones is not estopped by her acquiescence in earlier orders of the court for payment of fees to Raskin & Lichtig pursuant to their alleged lien. At the time the settlement of the malpractice action was announced counsel made clear to that court that by provisions of the settlement Mrs. Jones and Raskin & Lichtig reserved the right to litigate separately the fee claim. However, this appeal is timely solely with respect to the order of April 25, 1977, and her counsel has indicated that by settlement she waived all claims with respect to payments made to Raskin & Lichtig pursuant to earlier orders of the court.⁴

According to the interlocutory decree Raskin & Lichtig were paid certain sums in the course of the dissolution proceedings and the interlocutory decree provided that “the remaining sum of $210,000.00 shall be paid by [husband] in the manner hereinafter set forth and charged to his share of the community property or his separate property.” The decree provides for payment of $52,665.50 of that amount from specific funds in an account at the Bank impounded by the court, directs an additional payment of $50,000 by husband on or before June 1, 1971, and declares that all additional moneys due, owing and unpaid on account of the total are to be paid from the proceeds of the sale of the horses. Thereafter, in paragraph 11 of the decree, husband and his various named businesses are enjoined from disposing of or encumbering the community assets except in compliance with the provisions of the decree or for common necessities. Paragraph 11 declares further “A primary lien is hereby imposed on the property herein awarded to Respondent Husband in favor of Petitioner's attorneys, Petitioner's accountants, Petitioner's appraisers, and each of them, until the provisions hereof in favor of each of them have been satisfied as hereinabove provided.” A secondary lien is imposed to secure the performance by husband of the provisions in favor of Mrs. Jones.

It is abundantly clear from the record that the court did not, at the time the interlocutory decree was drafted by wife's attorney at the court's direction and presumably in accord with its memorandum of intended decision, contemplate that J. T. Jones would abscond with community assets substantially in excess of the one-half awarded to his former wife. As late as October 1973 the trial court with some chagrin acknowledged that it was deceived by husband's “aura of respectability” and had inadvertently “tipped Mr. Jones off.”⁵

Counsel for Mrs. Jones claims that the primary lien incorporated in the interlocutory decree is inconsistent with the court's memorandum (wherein no such lien is mentioned) and was the result of a deception exercised on the court by Raskin & Lichtig. At least partial support for this view is supplied by the deposition statements of Mr. Raskin incorporated in the record on appeal. The means by which the lien provision came to be incorporated in the decree would be relevant only in a collateral attack on the judgment; the validity of the interlocutory is presumed on this appeal which reaches only subsequent orders of the court. We are not, however, bound by the trial court's prior interpretation or application of this provision in its orders for the payment of fees to Raskin & Lichtig by the receiver.

Taken in the context of the current dispute and in view of the equitable principles which control the conduct of dissolution and receivership matters in general, we view as error the court's order for the payment to Raskin & Lichtig of $90,000, or any other amount, on account of attorneys fees for the representation of wife in the dissolution of her marriage. The “primary lien”, whatever its validity and whether it was by deliberate intent or inadvertence of the court incorporated in the decree, does not under the circumstances of the case at bench support the court's order for payment of their fees from property presently in the possession of the receiver.

Assuming, without determining, that Raskin & Lichtig hold a primary lien enforceable by them, that lien is by the terms of the lien on “the property herein awarded to Respondent Husband.” The language of paragraph 11 can be interpreted only to give Raskin & Lichtig a primary lien on husband's separate property or his one-half of the community assets. It is undisputed that husband liquidated and converted to his own use presumably in a foreign jurisdiction assets valued at well in excess of one-half the community property. It is so obvious as to be beyond further argument that, with the possible exception of the Redondo Beach property found to be separate property of husband, the claims and proceeds of sale which have come into the possession of the receiver could in no event constitute property awarded to husband. Were that logic not irrefutable, there is a further persuasive reason that the primary lien is of no avail to Raskin & Lichtig in their claim for payment by the receiver. When the impounded bank account and other sums initially came into the receiver's possession, it was arguable that this fund constituted community property in which husband might claim a one-half interest and upon which wife's attorneys might claim a lien.

However, it is indisputable that nearly $200,000 in the possession of the receiver on March 17, 1977, could not be so viewed. By that time it was conceded that husband took more than his share of the community, and the $200,000 was not acquired through the liquidation of any community assets in any event. The entire sum was composed of funds which represented the proceeds of settlement of various claims of wife against third parties who had allegedly conspired with or assisted husband in his defalcation and appropriation of community funds to his own use. Although wife was prevailed upon to assign her interest in such claims to the receiver, these fraud claims incorporated components of both general and punitive damages personal to Mrs. Jones and consequently these damages cannot be characterized either as community property or as property awarded to the husband. Accordingly, the trial court erred in ordering the payment of $90,000 or any other sum as attorney fees to Raskin & Lichtig.

The orders of the court approving the appointment of additional counsel to represent the receiver in pending litigation, and in the hearing on objections to his fifth account do not include an order for payment of these attorneys. Only an order after final judgment that fixes fees and requires them to be paid is appealable. (Whitney v. Whitney (1958) 164 Cal.App.2d 577, 586, 330 P.2d 947.) As a consequence, the appeal from these non-appealable orders will be dismissed. (Raff v. Raff (1964) 61 Cal.2d 514, 519, 39 Cal.Rptr. 366, 393 P.2d 678.)

The court appointed the receiver in the case at bench on petition of wife's counsel to carry the interlocutory judgment into effect (Code Civ. Proc., § 564, subd. (3); Civ. Code, § 4380), to dispose of the property according to the judgment and also in aid of execution because the judgment debtor, J. T. Jones, refused to apply his property in satisfaction of the judgment (Code Civ. Proc., § 564, subd. (4)). In view of the fact that these purposes have been accomplished, it appears that the trial court erred in denying the motion to terminate. It is conceded that no other known property of the judgment debtor remains in the jurisdiction from which the judgment may be satisfied. Meanwhile all claims of Mrs. Jones against third parties, except the pending litigation against the Bel Air Country Club, have been settled; the Bel Air Country Club matter was reassigned to wife and is being pursued outside the receivership. Therefore, the collection of assets by the receiver has been completed. In view of the status of other creditors' claims, it appears that only the settlement of the final report and account of the receiver and distribution of assets would remain to be determined were it not for the litigation of Jones v. Robinson.

The question of the removal and discharge of a receiver is addressed to the sound discretion of the appointing court. (Sly v. Superior Court (1925) 71 Cal.App. 290, 235 P. 83.) It was an abuse of discretion for the trial court to deny the motion to terminate in the present case, where collection of assets was completed by the time of the hearing and few claims remained, without exploring alternatives which would permit discharge of the receiver with protection to the parties. A receivership may be terminated and the receiver discharged on termination of the action, when his account has been settled, his compensation allowed, and the property in his charge distributed to the parties entitled. (Wiencke v. Bibby (1910) 15 Cal.App. 50, 113 p. 876; Kato v. Busick (1916) 174 Cal. 118, 162 P. 108.) It is established that a court may not, through the medium of a receivership, arbitrarily withhold property from the control and enjoyment of the person entitled thereto for an indefinite or unnecessary period. (Fairbank v. Superior Court (1917) 34 Cal.App. 66, 166 P. 864.) Ordinarily a receivership ought not to continue if less drastic or less expensive alternatives are available. (Rogers v. Smith (1946) 76 Cal.App.2d 16, 172 P.2d 365.)

In determining whether it is feasible for the court to order the termination of the receivership it is necessary to consider the likelihood that claims by persons other than the wife may be made to the assets in the possession of the receiver. The claim of Raskin & Lichtig for legal fees has been disposed of in this opinion and may not be renewed in the receivership. The record discloses that all potential claims except those of the receiver himself were disposed of at the hearing on wife's motion to terminate. There are apparently no claims for the services which other attorneys or their agents rendered in the receivership or related proceedings prior to April 28, 1977, which have not been presented, determined, and made the subject of instructions to the receiver. The judgment debtor, J. T. Jones, is not a potential claimant since by virtue of the fact that the sum collected by the receiver was far less than the amount to which wife was entitled under the interlocutory decree he has no interest in the receivership assets. The court may now order the receiver to prepare and file his final report and account deferring the scheduled hearing on opposition to the receiver's fifth report and any supplement thereto until the final report and account has been filed. (See, e. g., Cal. Rules of Court, rule 240(d).) Immediately following the evidentiary hearing on any opposition to either report and account, the matter of attorney fees for the receiver's counsel can be promptly determined as well as the final fees of the receiver. (See, e. g., Hozz v. Varga (1958) 166 Cal.App.2d 539, 542, 333 P.2d 113.) An order for payment of those specific sums can be entered thereon and this will clear the proceeds of the receiver's administrative expenses and claims.

The receiver may be ordered discharged and his bond exonerated only upon completion of disbursements and other requirements in accordance with the order settling and approving his final report and account. (Pacific Bank v. Madera Fruit etc. Co. (1899) 124 Cal. 525, 57 P. 462.) The receiver opposed the motion to terminate on the ground that at the time the priorities for distribution of the assets could not be determined since the Internal Revenue Service had submitted a claim of uncertain status, the existence of which precluded payment of the receivership assets to Mrs. Jones or others without risk of personal liability despite court approval of his final report and exoneration of his bond. (Kirk v. Kirk (1966) 243 Cal.App.2d 580, 582, 52 Cal.Rptr. 725.) When the matter was explored at the hearing on termination, counsel for the Internal Revenue Service conceded that the claim was against J. T. Jones, that it would be bound by a court ruling that husband had no interest in the funds held by the receiver, and that receipt of proof that the interlocutory decree or an abstract thereof was recorded in 1971, which wife's counsel undertook to obtain, would conclusively rule out the claim.⁶ The determination as to whether this matter was concluded is purely administrative and can presumably be summarily concluded by wife's attorney. An extension of the receivership to deal with every potential or remote contingency such as future ephemeral tax claims is not justified.

The final impediment to the termination of the receivership is the pending litigation in Jones v. Robinson which has resulted in an order of the trial court authorizing the receiver to appoint special counsel. The $100,000 which the court ordered held by the receiver as a reserve was to be applied to such contingencies as the claim of his counsel, in both the opposition to his reports and the civil litigation for mismanagement of the receivership. Of course, these matters may be resolved expeditiously and settled without trial, in which event the reserve for contingencies will be available for immediate distribution. Should that not occur, the question of the need of the receiver for a fund for the payment of fees to counsel representing him in the litigation must be resolved prior to distribution of that portion of the reserved funds which may be allocated to that purpose. It is uncontradicted that Robinson in his petition requested and received from the court authority to appoint as counsel Haight, Dickson, Brown & Bonesteel, the law firm which represents his malpractice carrier, and it is clear that to the extent that the litigation in Jones v. Robinson involves malpractice that firm has an obligation to provide representation without charge. Therefore, and to that extent, it is clear that no reserve is required. The trial court can easily make a determination on this issue and enter an appropriate order for the reservation of funds or posting of a bond to insure payment of those fees.

There appears, in short, to be no convincing reason that the trial court should not conclude the receivership at the earliest possible time. Accordingly, the trial court abused its discretion in summarily denying the motion of Mrs. Jones for termination of this burdensome procedure which has been and continues to be the vehicle for a costly dissipation of the remaining assets of the community.

It is within the authority of the court to bring to a conclusion the receivership when it appears that its continuation becomes onerous to the party for whose benefit it was initiated, so long as the court is enabled to determine the proper distribution of assets and make appropriate provisions for discharge of the receiver without undue risk of future claims for which the receiver might be surcharged. In this regard the trial court is urged, in the event it discovers any remaining contingent claims, to explore with counsel alternative avenues for their disposition to remove whatever anticipated impediments remain to the disbursement at long last of the balance of the funds in the receiver's possession to Mrs. Jones.

The peremptory challenge to the trial court judge's further participation in matters relating to the marital dissolution and receivership (Code Civ. Proc., § 170.6) was properly stricken because it was not timely filed. “A challenge under section 170.6 is not timely when made after a judge has heard and ruled on contested issues of law or fact in an action or proceeding. [Citations.]” (Swartzman v. Superior Court (1965) 231 Cal.App.2d 195, 201, 41 Cal.Rptr. 721, 726.) The 1965 amendment to section 170.6 does not as wife contends alter the rule of timeliness under the facts of the case at bench where the trial judge presided over the contested litigation in the marital dissolution. Wife refers to no legal authority to support her argument that each hearing on claims in the receivership which are opposed by her constitutes a mini-trial. Since these are supplemental or continued hearings on matters involved in the original proceeding, an application for disqualification of the same judge who heard the original proceeding is not proper or timely under section 170.6. (Oak Grove School District v. City Title Insurance Co. (1963) 217 Cal.App.2d 678, 692, 32 Cal.Rptr. 288.)

The objections of Mrs. Jones to the continued participation of Judge Olson on the basis of his alleged bias or prejudice were heard by Judge Hupp. The challenge to the trial court's qualification insofar as we understand it was based on the claims, inter alia, that Judge Olson as a percipient witness to all of the events and circumstances of the dissolution and receivership proceedings had developed over a period of time both a view and a bias with respect to the proceedings. Wife's counsel argued that Judge Olson also had developed a personal interest in defending his own prior orders which led him to overlook certain factors in ruling against the petitions and motions filed by Chodos challenging these orders, that this resulted in a conflict between the court and receiver on one hand and Mrs. Jones for whose benefit the receivership in aid of execution was originally established, and that the conflict in interests led the court to make judicial errors as the result of its own prejudices and failure to understand and assume the role appropriate to a court in receivership proceedings of this type. This, argued counsel, prevented Judge Olson from ruling objectively on the fee claims of Raskin & Lichtig or attorneys for the receiver, on receiver's fees, or on the petition for termination.

In response to these various arguments, constituting for the most part rhetoric and conclusionary statements in the presentation by wife's counsel, Judge Hupp responded that it was not made to appear, merely because Judge Olson had to rule based on his previous connection in the case, that he exhibited or was subject to rule on the basis of bias or prejudice. In conclusion the trial court found “that it has not been made to appear probable that by reason of bias or prejudice a fair and impartial trial cannot be had before Judge Olson” and rejected the challenge. In view of the obvious fact that no substantial evidence showing the probable existence of bias or prejudice was introduced, this ruling is patently correct.

DISPOSITION

The order directing the payment of attorneys' fees to Raskin & Lichtig is reversed.

The appeal from the orders of the court authorizing the receiver to appoint additional counsel to represent him in challenges to his fifth report and account and in the action of Jones v. Robinson is dismissed.

The order striking the peremptory challenge to Judge Olson (Code Civ. Proc., § 170.6) is affirmed. The order of Judge Hupp denying the motion to disqualify Judge Olson (Code Civ. Proc., § 170, subd. (5)) is affirmed.

The order denying the motion to terminate the receivership is reversed and remanded to the trial court with directions to reconsider the motion in the light of the views expressed in this opinion.

Each party to bear his or her own costs on appeal.

FOOTNOTES

1.  The motion was made on the ground “that [wife's] interest in the aforesaid property or funds is in danger of being lost, removed or materially injured; that the appointment of a Receiver after entry of the aforesaid Interlocutory Judgment of Dissolution is required to carry the Judgment into effect; that the appointment of a Receiver after Judgment is required to dispose of the property according to the Judgment, or to preserve it during the pendency of an appeal; and upon the further ground that the judgment debtor, J. T. Jones, refuses to apply his property in satisfaction of the judgment and is attempting to place the assets of the parties within his possession and control beyond the reach of this Court and the enforcement of the Court's judgment herein.”

2.  The order appointing the receiver provided that he is appointed “with general powers, to take possession and control of, manage, operate and do all acts necessary in his discretion to safeguard and preserve the property belonging to or standing in the name of [husband or his named companies] and any income arising therefrom; and to sell, liquidate, hypothecate or dispose of and to do such acts respecting the property as may be necessary in his discretion to carry out, perform and comply with the terms of the Interlocutory Judgment of Dissolution of Marriage made and entered herein and such other and further orders as may hereafter be made by this Court for the support of [wife], counsel fees, costs or otherwise, including but not limited to, paying to [wife] and to her counsel and the other persons named therein any and all accrued and unsatisfied amounts due by the said Judgment rendered, and for any and all sums hereafter accruing under the terms of said Judgment, and such other and further orders as may hereafter be made by this Court.”

3.  Judge Loomis ordered apportionment of the damages, insofar as herein relevant, as follows:“The parties to this proceeding determined prior to the settlement agreement that Mrs. Jones was certain to win her lawsuit and was likely to obtain a large verdict. It was determined that Mrs. Jones' verdict would in all likelihood include not only an amount to reimburse Mrs. Jones for the loss of the property to which she was entitled under the property settlement judgment, but also a sizeable amount as damages for emotional distress.“In determining the possible extent of the damages, one must conclude that, in all likelihood, a jury of laymen would consider it incomprehensible that Mrs. Jones' attorneys collected their fees of over $200,000 in full while Mrs. Jones has yet to receiver her first dollar from the collection activities of the attorneys and of the receiver. A jury would also be unlikely to understand the propriety of an additional fee of about $21,000 received by the attorneys as their share of a contigent fee for the Cadence Industries settlement. The settlement with Mrs. Jones was made largely because of the fear of those involved in the defense that these most-difficult-to-explain circumstances would substantially enhance the amount of a verdict.“To apportion the settlement payment, this court must consider first an apportionment of the total settlement of $1,800,000 between damages for loss of property and damages for emotional distress. According to the transcript of the trial proceedings before Judge Campbell Lucas, the question of damages for emotional distress had been argued at length during in limine proceedings, and Judge Lucas had ruled, in effect, that such damages would lie only upon a showing of bad faith or outrageous conduct on the part of the defendants. He further determined, in accordance with the law, that damages for emotional distress could not be based on mere negligent conduct. Since the claims of bad faith and outrageous conduct are based on alleged conduct occurring after June 10, 1971, potential damages for emotional distress must necessarily be charged to the carriers insuring the defendants after that date.“The value of the property awarded to Mrs. Jones and lost by reason of the abscondence of Mr. Jones is variously computed at figures from $1,114,000 (CNO computation) to $1,530,000 (Chodos' figure) to $1,750,000 (Phoenix computation). If the average of these three figures is used, and a potential award for interest is added, the exposure for damages based upon the abscondence of Mr. Jones is in the area of $2,000,000 to $2,500,000.“Considering the explosive nature of the charges of bad faith and outrageous conduct as a basis for emotional distress damages, this court concludes that the potential verdict exposure for such damages is an additional $1,000,000 to $1,500,000. This court finds, therefore, that a fair allocation of the settlement of $1,800,000 as to type of damages is:“To damages for loss of property$1,200,000“To damages for emotional distress$600,000“The damages for loss of property are based in general on (1) failure of R & L to take necessary steps to protect the properties against abscondence by Mr. Jones (all occurring before June 10, 1971, and (2) failure to take proper or adequate steps to recoup the losses, and failure to allocate the moneys recovered (all occurring after June 10, 1971). The court finds that the portion of the setlement representing damages for loss of property should be allocated one-half to the period before June 10, 1971, and one-half to the period after that date ($600,000 to each period).“It follows that the settlement for the total damages, including those for emotional distress, should be allocated $600,000 to the period before June 10 1971, and $1,200,000 to the period after that date.”

4.  Mr. Chodos made the following representation to the court at the hearing announcing the settlement:“Your Honor, I made reference earlier to the rights of the parties being reserved that they may have under judgments or orders made in the action of Jones v. Jones, and I'd like to explain what I believe is the correct understanding on that point.“There is presently in the custody of the receiver Gilbert Robinson in the Jones action approximately two hundred thousand dollars.“The proper disposition of that money and what is to be done with it is the subject of an order made by Judge Olson which is now on appeal.“In the appeal the parties are actually arguing what should be done with that money. They reserve the right to advance their contentions in that argument and to take the money in accordance with the final result.“Mrs. Jones has agreed, however, that she will not seek any money from Mr. Raskin or Mr. Lichtig that they may have gotten under previous orders, and in fact, she has agreed she will never seek any money from Mr. Raskin and Mr. Lichtig whatsoever hereafter for anything occurring up till now.”

5.  The trial court declared, inter alia:“I tipped Mr. Jones off in a way in that I tried, after I reviewed the case and came to the ultimate decisions that I feel were required, I indicated to counsel for your husband and Mr. Raskin what I was going to do and gave them an opportunity to try and settle it because the tax consequences of doing it by way of judgment were going to be horrendous, and I hate to see people stripped of that. Secondly, where it wasn't going to hurt anyone, that little additional time may be all he needed. But you can't look in a crystal ball. Even as of then I felt that was the appropriate thing to do…”

6.  The pertinent representations in the reporter's transcript are as follows:“THE COURT: All right. And if the court at some point made a determination that J. T. Carlisle Jones has no interest in any of the funds presently, or at whatever time the determination was made, held by the receiver, that would be the end of it as far as that particular receipt held by the receiver; is that correct?“MR. NIESEN [Assistant U. S. Attorney for the United States of America]: That is correct.“…“MR. NIESEN: Yes, Your Honor. If, on the basis of the documentation I receive through counsel, which should be relatively quickly, it is determined by the government we have no sustaining interest in this matter, I would so notify the court so you don't have to spend time on it.“THE COURT: Fine. Thank you.”

L. THAXTON HANSON, Associate Justice.

BERNARD JEFFERSON, Acting P. J.*, and RIMERMAN, J.**, concur.