Is a Receiver Disqualified if He or She is Related to a Party or a Judge?

by Ervin Cohen & Jessup LLP
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QUESTION: My cousin, who is a lawyer, asked me to act as a receiver in a case where he represents the plaintiff. Is there some prohibition on my doing so? Am I ineligible to act as receiver because of our family relationship?

ANSWER: In California, Code of Civil Procedure § 566(a) sets forth who is ineligible to be appointed a receiver. It provides: “No party, or attorney for a party, or a person interested in an action, or related to any judge of the court by consanguinity or affinity within the third degree, can be appointed receiver therein without the written consent of the parties, filed with the clerk.” As you can see, the prohibition for familial relationships relates to the judge, not to attorneys or a party. So long as you are not a party, the attorney for a party or a person “interested in an action” and are not related to any judge of the court by consanguinity or affinity within the third degree, you can be appointed receiver. California Rules of Court, Rule 3.1177, also deals with who can be nominated as a receiver, but places no similar restrictions. It simply provides that each party appearing may, at the time of the hearing, suggest in writing one or more persons for appointment or substitution as receiver, stating the reasons. If you are being nominated by your first cousin, I think it would be in everyone’s best interest if that was disclosed up front, so the court can make an informed decision on who to appoint. Even though you are not disqualified because of the familial relationship, the court might not be pleased to discover that fact after your appointment. The best thing to do in these types of situations is disclose, disclose, disclose.

I always get confused as to exactly who is related by consanguinity or affinity within the third degree. Two people are related to each other by consanguinity if one is a decedent of the other, or they share a common ancestor. Two people are related by affinity if they are married to each other, or if one is related by consanguinity to the other person’s spouse. As a result, consanguinity to the third degree includes father, mother, son or daughter (and spouse), grandparents, grandchildren, aunts and uncles, first cousins, nieces and nephews, brothers and sisters and great grandparents, great grandchildren, great aunts and uncles, second cousins, children of first cousins, and grand nephews and grandnieces. Affinity to the third degree includes spouse, spouse’s parents and children, grandparents, grandchildren, aunts, uncles, first cousins, nephews, nieces, brothers, sisters, great grandparents, great grandchildren, great aunt, great uncle, children of great aunt and uncle, second cousin, children of first cousin, and grandnephew or niece.

There are different statutory restrictions if your case is in federal court. 28 U.S.C. § 958 provides: “A person holding any civil or military office or employment under the United States or employed by any justice or judge of the United States shall not at the same time be appointed a receiver in any case in any court of the United States.” The statute which was originally adopted in 1896, and then amended 1948, provides that no employee of the United States whether in a civil capacity or military capacity can act as a receiver. It would seem, therefore, that if someone is a reserve officer in one of the military services or is employed in any other capacity for the United States government, that person cannot act as a receiver. Interestingly, the statute, when it was amended, eliminated the words “janitor of any Government building”, as being covered by the words “person holding any civil or military office or employment under the United States.” I guess back in 1896 there was a problem having janitors appointed as receivers. While this statute was enacted in 1896, there appear to be no reported cases. A related statute 28 U.S.C. § 957 provides: “A clerk of a court or any of his deputies shall not be appointed commissioner, master, referee or receiver in any case, unless there are specific reasons requiring such appointment which are recited in the order of appointment.” There are a few reported cases where this occurred. See U.S. v. Jacobs, 187 F. Supp. 630, aff’d. 298 F.2d 469 (D.C. Md. 1959), where the District Court appointed a clerk as receiver of a check deposited in court to save the expense of an outside receiver, where the only duty required of the receiver was to endorse the check and deposit it into the registry of court.

While neither statute has the familial relationship bar on the appointment of receivers, it is covered, tangentially, in 18 U.S.C. § 1910 which provides that it is a crime for a United States court judge to appoint any person as receiver who is related to such judge by consanguinity or affinity, within the fourth degree. The fourth degree includes third cousins.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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