First v. Sunnyslope
1 CA-CV 15-0562
Ariz. Ct. App.Dec 13, 2016Background
- Sunnyslope Housing LP owned a LIHTC apartment complex and defaulted on its senior loan; First Southern National Bank (FSNB) obtained appointment of Paul Mashni as state-court receiver.
- The state Appointing Order authorized the receiver to hire counsel, pay receivership expenses from funds coming into his hands, and submit fee claims to the superior court for approval.
- Mashni operated the property, settled a hail-insurance claim (≈$663,000), paid taxes, and negotiated a sale that Sunnyslope blocked by filing Chapter 11.
- The bankruptcy court ordered turnover of the property, required Mashni to relinquish control, and authorized him to seek winding-up relief and fee approval in superior court.
- Mashni filed a Final Report seeking exoneration of his bond and approval of his and his counsel’s fees; the hail proceeds were turned over to the bankruptcy estate and Sunnyslope opposed fee awards as moot or within bankruptcy jurisdiction.
- The superior court approved the Final Report and exonerated the bond but denied fee approval as moot (receivership estate depleted) and deferred to the bankruptcy court; Mashni appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Mashni’s superior-court fee application was moot | Mashni: ruling could affect recovery (possible payment from bankruptcy estate or other sources); superior court may set fees when terminating receivership | Sunnyslope: receivership estate is depleted, so no fund exists; only bankruptcy court can award fees | Not moot — court may set fees; lack of receivership funds does not preclude a merits ruling |
| Whether Appointing Order limited recovery strictly to then-existing receivership funds | Mashni: Appointing Order allows payment from funds coming into receiver’s hands and permits court to order just termination relief including fees | Sunnyslope: Order confines payment to receivership estate funds only, so no recovery possible once funds transferred | Appointing Order does not foreclose other avenues of recovery; it does not limit recovery to a depleted estate |
| Whether superior-court ruling would be an improper advisory opinion given bankruptcy review | Mashni: superior court was asked by bankruptcy court to decide fees and is best positioned to assess state-court receiver work | Sunnyslope: any state-court ruling could be overridden by the bankruptcy court, making it advisory | Not advisory — superior court had jurisdiction and was required to decide fees under Arizona Rule 66(c)(3); bankruptcy’s ability to review does not moot the matter |
| Whether Mashni is entitled to appellate attorneys’ fees under the Appointing Order | Mashni: seeks fees incurred on appeal under Appointing Order provision | Sunnyslope: provision governs superior-court fee approval, not appellate fees | Denied — Appointing Order does not authorize appellate fee awards; costs on appeal awarded conditional on ARCAP 21 compliance |
Key Cases Cited
- Mashni v. Foster, 234 Ariz. 522, 323 P.3d 1173 (App. 2014) (receiver immune from claims asserted in Sunnyslope’s third-party complaint)
- Taylor v. Sternberg, 293 U.S. 470 (1935) (bankruptcy filing can transfer jurisdiction over receiver compensation to bankruptcy court)
- Hall v. World Sav. & Loan Ass’n, 189 Ariz. 495, 943 P.2d 855 (App. 1997) (mootness doctrine — case moot when court action would have no practical effect)
- Progressive Specialty Ins. Co. v. Farmers Ins. Co. of Ariz., 143 Ariz. 547, 694 P.2d 835 (App. 1985) (advisory-opinion doctrine explained)
- In re 400 Madison Ave. Ltd. P’ship, 213 B.R. 888 (S.D.N.Y. 1997) (post-bankruptcy receivers remain subject to prepetition appointment orders regarding duties and powers)