Opinion
NOT TO BE PUBLISHED
Super. Ct. No. CI52345
NICHOLSON, J.
The trial court granted a request by the Public Utilities Commission to appoint a receiver for a small water company. Years later, it granted the receiver’s application for further instructions to refine the scope of his duties and powers. Orville A. Figgs, the owner and former operator of the water company, appeals from that order.
We find no error in the court’s order and affirm.
BACKGROUND
This action involves the operation of Ponderosa Sky Ranch Water System, a privately-owned utility located east of Red Bluff, California, that provides drinking water and fire flow protection to about 83 customers.
The water company is owned by defendant Orville A. Figgs and his brother, Kevin, who inherited it from their father and began operating it sometime after 1997. Prior to the events at issue here, Orville owned in excess of 700 acres in the community of Sky Ranch.
Orville subsequently sold approximately 222 acres to a third party.
Proceedings Before the Public Utilities Commission
The water company came to the attention of the Public Utilities Commission (PUC) after it received complaints from customers in 1999 about irregular billing. In 2001, Orville sought an emergency rate increase so the water company could pay its electricity bill, but he failed to provide the necessary documentation. The water company’s power was cut off in November 2001, and customers complained to the PUC that they had no water. Concerned that the “‘water company is not earning sufficient revenue to pay the PG&E electric bill, water testing bills and other operational expenses necessary to provide adequate service’” to customers, the PUC soon issued an Order Instituting Investigation and Order to Show Cause re appointment of a receiver, noting that the Figgses “‘have a history of non-compliance with Department of Health Services (DHS) Rules and Orders’” and “‘consistently fail[ed] to meet bacteriological standards, file annual reports and conduct the required monitoring of the system’” and that, because they had failed for seven years to pay property taxes on the parcel where the company’s “source-of-supply” well was located, county tax officials intended to auction the parcel.
The order to show cause was initiated pursuant to section 855 of the Public Utilities Code, which provides in pertinent part: “Whenever the commission determines, after notice and hearing, that any water or sewer system corporation is unable or unwilling to adequately serve its ratepayers or has been actually or effectively abandoned by its owners, or is unresponsive to the the [sic] rules or orders of the commission, the commission may petition the superior court for the county within which the corporation has its principal office or place of business for the appointment of a receiver to assume possession of its property and to operate its system upon such terms and conditions as the court shall prescribe. . . .” It alleged that all three conditions justifying the appointment of a receiver existed: the inability to serve customers adequately, actual or effective abandonment of the system, and unresponsiveness to PUC orders.
In its written decision issued following the order to show cause hearing, the PUC concluded (among other things) that the allegations of unresponsiveness to its rules and orders and mismanagement -- including the water system’s failure to render timely water bills, to conduct required bacteriological tests, and to pay its property tax and power bills -- “were not seriously dispute[d]” by Orville and that “there is ‘no alternative to requesting that the Superior Court appoint a receiver.’”
The PUC also concluded that Kevin, but not Orville, effectively abandoned the water system.
The PUC ordered that “[i]n accordance with Public Utilities Code section 855, the Commission’s General Counsel is directed to petition the Superior Court of Tehama County to appoint a receiver to assume possession of and operate the Ponderosa Sky Ranch Water Company.”
Proceedings in the Superior Court
In September 2003, the superior court heard the PUC’s petition for appointment of a receiver. Following a contested hearing, the court granted the PUC’s request, and appointed John W. Richardson receiver of the water company. Its order is brief: it provides for the receiver’s compensation and authorizes him to bill customers of the water system and to apply for rate changes. The court’s order also states (as relevant here): “That no personal liability shall be borne by the receiver for any good faith, reasonable effort to assume possession of and to operate the Ponderosa Sky Ranch Water System including contracting for repairs to be made to the system, performing testing in compliance with primary drinking water standards, paying all bills or fines current or past, and otherwise operating the system in compliance with the Court’s order, Commission requirements and applicable state law.”
Richardson is referred to hereafter as receiver.
The order did not require the receiver to post a bond, and made no mention of the requirement that he prepare and file an inventory with the court (Cal. Rules of Court, rule 3.1181).
In January 2006, the receiver filed a status report with the court of his activities the previous year. He reported repairs (including replacement of a major pump, distribution lines, meters, valves and fittings), water testing, reduction of indebtedness to the power company, and preparation of an application to the PUC for a general rate increase. He requested compensation and attached detailed billing statements.
The receiver also reported that he had “prepared and submitted three separate applications for funding through the State Revolving Fund (SRF) and Proposition 50 which are administered by State agencies. If approved, funds would be available for much needed upgrades and replacement of dilapidated system components such as storage tanks and transmission lines. If in fact these area improvements could occur it could dramatically increase the ability of the system to handle additional connections.” The attached applications for funding show that the third application sought grant funds for developing a second well, because the existing system has a single remote well, which is served by overhead power lines and thus vulnerable to forest fires. Instead, the receiver urged, “[t]he system must have two independent sources of supply at very different locations to provide a reliable source of supply, especially in emergencies.”
A PUC staff report prepared in 2005 following the water system’s request for a general rate increase summarizes the water system’s application for a rate increase as representing that “many improvements are currently needed to update the system. These include a second well to meet supply needs, a new supply line, replacement of the 30,000 gallon tank with a 300,000 gallon tank, and replacement of the gravity distribution system’s mains. The costs of these improvements are not included in this [general rate increase] because the company is currently applying to receive Proposition 50 loans to improve the system.”
At the conclusion of the status report, the receiver stated his intention to seek specific instructions from the court “regarding compliance and funding for bringing the system up to code utilizing SRF or Prop 50 funding,” and to seek an amended order of appointment “to incorporate the specific language the Receiver believes is necessary to operate the system on both the long and short term basis.”
The receiver then brought the instant motion to amend the prior order appointing receiver and for further instructions. In it, he asked the court to modify its 2003 order appointing him receiver so as to “authorize[] the receiver to take steps to bring the water system into compliance with Safe Drinking Water Act, authorize[] the receiver to submit applications for grants or other funding through state or federal programs, authorize[] the receiver to access all components of the water system necessary to operate the system, and [to] preclude[] the defendants from taking actions which prevent, hinder or otherwise interfere with the receiver’s safe operation of the water system.” (Unnecessary capitalization omitted.)
Orville opposed the motion, arguing that the amended order is overbroad because it would give the receiver authority to “create some new alternative source for water despite providing absolutely no evidence for its necessity,” the request for an amended order would allow the receiver to effect an unlawful “taking” of Orville’s property, and the receiver’s status report and previous requests for payment were improper. Orville also denied any interference with the receiver, and asserted that the receiver’s manager has trespassed upon his property.
The receiver responded that the amended order he requested has been necessitated by Orville’s efforts to obstruct the receiver from implementing the court’s order, and such orders are typical of those entered in other water system cases in which he has been appointed receiver. Addressing the claim of overbreadth, the receiver responded that “it is obvious that the system is barely functioning and needs massive capital improvements that a small customer base simply cannot facilitate” so he has “completed the minimal application necessary for low interest/grant funding to help the customers of this system.”
The trial court granted the receiver’s request. It entered an order amending order appointing receiver and for further instructions (the amended order), providing among other things that the receiver (1) “shall take steps to bring the water system into compliance with the Safe Drinking Water Act and the laws and regulations” of the PUC and other state agencies; and (2) “is authorized to submit applications for grants or other funding through State or Federal programs.” (Unnecessary capitalization omitted.)
The moving and opposing papers suggest a contested hearing on this motion was scheduled, but the clerk’s record fails to establish that such a hearing transpired and no reporter’s transcript appears in the record.
DISCUSSION
In this appeal from the amended order, Orville asserts that “the superior court lacks jurisdiction to amend the order of the Public Utilities Commission” and that the receiver’s actions “clearly exceed the authority given him” by the PUC. His underlying assumption is that the PUC decision authorizing its general counsel to seek appointment of a receiver for the water system permanently establishes the parameters of the receiver’s duties and powers. For authority, he relies upon Public Utilities Code section 1759, subdivision (a), which states that no superior court “shall have jurisdiction to review, reverse, correct, or annul any order or decision of the commission . . . .”
His argument misunderstands the source of the receiver’s authority.
California Rules of Court, rule 3.1179(a) provides that a receiver is an agent of the court, is neutral, acts for the benefit of all who may have an interest in the receivership property and holds the assets for the court, not for the plaintiff or the defendant. The receiver is but the hand of the court, to aid it in preserving and managing the subject property involved for the benefit of those to whom it may ultimately be determined to belong. (People v. Stark (2005) 131 Cal.App.4th 184, 204; Gold v. Gold (2003) 114 Cal.App.4th 791, 806; Lesser & Son v. Seymour (1950) 35 Cal.2d 494, 499.)
As receivers are agents of the court, they may be appointed only where authorized by statute. (2 Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2007) ¶ 9.734, p. 9(II)-48.10.) Here, the authorizing statute is Public Utilities Code section 855, which permits the PUC, once it has determined that a water system “is unable or unwilling to adequately serve its ratepayers or has been actually or effectively abandoned by its owners, or is unresponsive to the the [sic] rules or orders of the commission” to “petition the superior court . . . for the appointment of a receiver to assume possession of its property and to operate its system upon such terms and conditions as the court shall prescribe. . . .” (Pub. Util. Code, § 855, italics added.)
Once appointed, the receiver “has, under the control of the Court, power to bring and defend actions in his own name, as receiver; to take and keep possession of the property, to receive rents, collect debts, to compound for and compromise the same, to make transfers, and generally to do such acts respecting the property as the Court may authorize.” (Code Civ. Proc., § 568, italics added.)
These statutes establish that, once the PUC has determined to petition the court to appoint a receiver, and the court grants its request, the receivership is a creature of the court, not the PUC. The court, not the PUC, decides the terms and conditions under which the receiver shall operate, including what powers and duties the receiver shall have.
Moreover, it also is settled that in managing the subject property, all that is required is that the receiver act with ordinary prudence. (Holeman v. Natural Soda Products Co. (9th Cir. 1938) 96 F.2d 277, 279.) Put another way, the receiver is required to exercise the same care and diligence that an ordinary prudent person would exercise in handling his or her own estate under like circumstances. (Vitug v. Griffin (1989) 214 Cal.App.3d 488, 496.) It follows that a receiver does not act improperly by adopting a course of action that, while preserving receivership property, is not the course of action desired by one of the parties.
The proceedings here comport with the statutory scheme: the PUC petitioned the court for appointment of a receiver, the court granted the petition, and it entered an order appointing a receiver. That order did not enumerate the powers and duties of the receiver in detail: his authority to “assume possession of and to operate the Ponderosa Sky Ranch Water System, including contracting for repairs to be made to the system, performing testing in compliance with primary drinking water standards, paying all bills or fines current or past, and otherwise operating the system in compliance with the Court’s order, Commission requirements, and applicable state law” is implicit in the court’s order holding him harmless for those acts.
When the receiver desired clarification and/or expansion of his powers and duties, he properly sought from the court amendment of the order appointing him. (See 2 Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial, supra, ¶ 9.771, p. 9(II)-51 [receivers frequently, and properly, ask the court for instruction “when the powers and duties are vaguely formulated or do not cover a point in issue”].)
Orville’s chief concern about the amended order appears to be that it allows actions by the receiver, including submission of an application for grant monies, which he contends constitute “expansion and not maintenance” of the water company. He made a virtually identical argument in the trial court in opposition to the receiver’s motion to amend the order. By its amended order, the trial court rejected it.
Orville has failed to show that the trial court erred in doing so. On appeal, we must presume that the trial court’s judgment or order is correct. (See Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) An appellant has the burden of showing reversible error and in the absence of such a showing, the judgment or order will be affirmed. (Walling v. Kimball (1941) 17 Cal.2d 364, 373.)
The appellate court’s role is to review the trial court’s rulings concerning receiverships for abuse of discretion. (See Sly v. Superior Court (1925) 71 Cal.App. 290, 294; Cal-American Income Property Fund VII v. Brown Development Corp. (1982) 138 Cal.App.3d 268, 274.) The proper exercise of discretion requires the court to consider all material facts and evidence and to apply legal principles essential to an informed, intelligent, and just decision. (Ibid.) “Our view of the facts must be in the light most favorable to the [trial court’s ruling] and we must refrain from exercising our judgment retrospectively. Reversal is warranted only after concluding the trial court abused its discretion by confirming a fraudulent, unfair, or oppressive [act].” (Ibid.)
The receiver’s past status report to the court emphasized the water company’s inadequate water storage and substandard infrastructure, including distribution lines. By its amended order, the court implicitly accepted that seeking grant funds to add a second water source for the company is a proper action for the receiver to undertake in connection with what he described in his status report as “much needed upgrades and replacement of dilapidated system components such as storage tanks and transmission lines.” Orville has not borne his burden on appeal of showing that the trial court abused its discretion in concluding that, in seeking low-interest loans and grants, the receiver is acting responsibly to upgrade the water company to help ensure it will provide an adequate supply of potable water of acceptable quality and reliability to water company customers.
Orville also complains on appeal that the receiver has never filed an inventory. California Rules of Court, rule 3.1181(a) states that, “A receiver must, within 30 days after appointment, or within such other time as the court may order, file an inventory containing a complete and detailed list of all property of which the receiver has taken possession by virtue of the appointment.”
Neither the order appointing the receiver, nor the amended order makes any mention of the inventory requirement. In his status report, the receiver states that the order appointing him “did not require the Receiver to . . . file an inventory with the court.” The receiver is correct, but the reason for the omission is not apparent from the record. Absent an affirmative indication by the trial court that it intended to exempt its agent, the receiver, from the obligation imposed by the California Rules of Court to prepare and file an inventory, we do not assume the receiver has been excused from this duty. The receiver himself proffers no explanation in his responsive brief on appeal for his failure to comply with inventory requirement imposed by the California Rules of Court.
However, it does not appear from the record before us that Orville has brought this matter to the court’s attention in the first instance. To the extent the amended order unfairly restricts Orville’s ability to sell portions of his real property because, without a receiver’s inventory, Orville cannot know what “property” the receivership is claiming on behalf of the water company, he may seek guidance in the superior court in the first instance.
At oral argument, counsel for the PUC presented the court with an October 4, 2007, superior court order indicating that an inventory was filed by the receiver on July 5, 2007. While we decline to take judicial notice of a document for which none of the requirements of judicial notice were met (see Cal. Rules of Court, rule 8.252), we are encouraged to observe that the matter of the receiver’s inventory is being addressed, as it should be, in the superior court.
DISPOSITION
The judgment (order) is affirmed. Respondents are awarded their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).)
We concur: SCOTLAND, P.J., CANTIL-SAKAUYE, J.