QUESTION: Should receivers appear only through counsel to avoid civil liability?
ANSWER: In Re Shattuck, 411 B.R. 378 (10th Cir. BAP 2009), which held that a receiver, who is not a lawyer, cannot appear in federal court without a lawyer. The decision was based not only on 28 U.S.C. §1654 but also on the fact that a receiver acting in a representative capacity and, not being a lawyer, cannot represent third parties or entities. In thinking further about this issue it dawned on me, like the boy who suddenly realized “the emperor has no clothes”, what authority does a California receiver have to appear on behalf of a receivership estate in state court? While no case directly on point was found, a number of cases in similar proceedings are explicit that such a representative cannot appear in court without an attorney.
In City of Downey v. Johnson, 263 Cal.App.2nd 775 (1968), the Court held that neither a conservator nor executor of an estate can appear in court to defend or prosecute an action without an attorney. In deciding the case the Court stated: “We have found no California statutory or case authority adjudicating whether a conservator or an executor who is not a licensed lawyer may appear in his representative capacity ‘in propria persona’ in a judicial action or proceeding which is not an interal part of the proceedings within the jurisdiction of the probate court”. The Court went on, however, after examining the law in other jurisdictions to hold: “that in the absence of statutory authorization, neither an executor, administrator, nor a guardian may appear except through a licensed attorney in proceedings involving matters other than his personal rights as such a representative, e.g., accounting to a probate court.” The Court agreed with the philosophy underlying the decisions from other jurisdictions that nominal representatives or even active fiduciaries, not themselves lawyers, should not be permitted to conduct legal proceedings involving the rights or liabilities of others without representation by attorneys duly qualified to practice law. Indeed, the Court held that any pleadings filed by such non attorneys should be stricken and indicated that to allow such pleadings or representation would condone conduct “constituting both a crime and a possible contempt of court”.
Thirty-five years later the Court in Hansen v. Hansen, 114 Cal.App.4th 618 (2003), felt compelled to reemphasize that representatives of an estate cannot appear in court without an attorney. Indeed, the Court of Appeal commenced its decision stating: “We publish our opinion to confirm the principal announced in City of Downey v. Johnson… that a conservator, executor or personal representation of a decedent’s estate who is unlicensed to practice law cannot appear in propria persona on behalf of the estate…” In the case, a personal representative filed a complaint for breach of contract, fraud and breach of fiduciary duty. The Court held that the trial court should have stricken the complaint. The Court not only cited City of Downey v. Johnson, but held that since the passage of the State Bar Act in 1927 non-attorneys may only represent their own interests in legal proceedings. They may not represent the interest of another unless they are active members of the State Bar. The Court further slightly criticized the City of Downey decision where it suggested (but did not hold) that a non-lawyer representative may appear in matters within the probate proceedings. The Court felt this comment was dicta, as was the indication in the decision that the executor might be able to appear without an attorney with regard to activities personal to his or her office, such as seeking fees or filing a final report. The Court indicated that the City of Downey court did not decide that issue and that issue was also not before it.
While these two cases arise in the probate context, their reasoning appears applicable to receivership proceedings. There is no statutory provision permitting a receiver to appear in court without a lawyer, (Calif. Rules of Court, Rule 3.1180 states that, upon court approval, a receiver may employ an attorney). Indeed, Clark on Receivers and other authorities point out that a receiver is not expected to be rendering legal services or practicing law, but is instead expected to manage the estate and hence should hire counsel for all legal matters. “A receivership is a court proceeding. Court proceedings and all matters relating thereto must be conducted according to law, the usages and rules of equity and the rules of procedure laid down by individual courts. It is impossible for one not trained in the law to draw papers and to take part in a legal proceeding unless he has the assistance of a trained lawyer. It, therefore, follows that unless the receiver is himself an attorney he should in most cases have an attorney to assist him.” Clark on Receivers §642 (3rd Ed. 1992). Clark goes on to point out that even if a receiver is an attorney, unless he is specifically hired to perform legal services, he should hire a lawyer to represent him. “It is generally true that when an attorney is appointed receiver, it is expected that he will administer the estate and he is not expected to render legal services to the estate unless he is so directed by the court. If he does render such legal services and intends to charge for them in addition to his services as receiver, he should have a clear understanding with the court before he renders legal services.” Clark at §115. See also, 55, Cal. Jur. 3rd, Receivers §68 (2004) [“It is not proper for the receiver to act as attorney.”]; Shachatv v. Standard Auto Supply Co., 150 A. 183 (N.J. 1930) [“a receiver is not obligated to perform legal services for the benefit of the estate…”].
Based on the above authority, receivers should adopt the practice of employing an attorney in all but the most rudimentary rents, issues and profits cases and the courts should not be as reluctant, as they sometimes are, in allowing a receiver, especially a receiver who is not an attorney, to employ counsel. To do otherwise may subject the receiver to not only civil, but possibly criminal, liability.