Maybe this was an appealable order but it’s a stretch and the court’s labored analysis does little to help sell the idea.

Enterprise was sued for debt under a deed of trust that called for a receiver to be appointed. The court appointed Itkin, an MCA employee. MCA put up Itkin’s bond and Enterprise paid MCA for his services and those of other MCA employees. Itkin then moved to another firm and continued as the receiver. When Itkin made his receiver’s report to the court Enterprise objected that it had been overcharged; it asked the court to order MCA to disgorge fees. Since it wasn’t a party to the case MCA filed a special appearance to object. The court ruled for Enterprise. MCA filed a motion to intervene so that it could appeal, then appealed before the motion was heard.

The Court of Appeals first looks at two jurisdictional questions: whether MCA can appeal and whether the order is appealable.

It finds that MCA can appeal. A non-party with a “direct, substantial, and immediate” interest who “would be benefitted by reversal” can appeal. This is not new law; the court takes it from an old case.

As to appealablility, MCA relied on 12-2101(A)(4), under which appeal can be taken from “a final order affecting a substantial right made in a special proceeding or on a summary application in an action after judgment.” The court decides that the disgorgement order was final by analogy to cases holding that an order to a receiver to pay a claim is final. It decides that Enterprise’s disgorgement motion (which it refers to as “the disgorgement proceeding”) was a “special proceeding”  by relying on language from Johnson (1948) that when someone “institutes a proceeding against the person in charge of the funds to obtain moneys from the receivership or estate,  . . . such action is a separate proceeding in the same sense that it would have been had an independent suit been filed.” Why is the equivalent of an independent suit the equivalent of a special proceeding? Because Black’s Law Dictionary says that a “special proceeding” is “[a] proceeding that can be commenced independently of a pending action and from which a final order may be appealed immediately.” So a special proceeding is something that can be appealed and this is appealable because it was a special proceeding. Got that?

For some reason the court then spends a paragraph deciding that the “after judgment” language of the statute doesn’t apply to the “special proceeding” clause even though there is an “or” between them and even though the court admits that “a plain reading” of the statute indicates that they’re separate notions and even though entertaining the possibility that “after judgment” goes with “special proceeding” throws into question the court’s “special proceeding” analysis (the court doesn’t mention that last part).

Analyzing the substantive issue, the court points out that MCA was never served with anything in the lawsuit, including the disgorgement motion (which it now refers to as a “disgorgement motion”). “Therefore, under basic principles of due process and in personam jurisdiction [MCA] was not subject to the trial court’s jurisdiction.” The trial court had jurisdiction over the receiver but the Court of Appeals finds as a factual matter that the trial judge was clearly in error to think that anything or anyone other than Itkin was the receiver. That’s because when Itkin left MCA MCA didn’t move to amend the order appointing the receiver, it merely filed a notice of Itkin’s change of address. So the forms that MCA did or didn’t file control its substance. Got that?

In a footnote the court mentions that the various things that MCA – rather than Itkin – did “may have caused confusion regarding the receiver’s identity” but it was, evidently, clearly erroneous confusion. But if its clearly erroneous then how . . . well, let’s just not go there.

The court denies fees to MCA because since it wasn’t the receiver it had no contract with Enterprise.

(link to opinion)