Arizona Court of Appeals Division Two holds that superior court cannot enter an order disgorging a receiver’s fees when the receiver has not been named as a party.

The superior court appointed Robert Itkin of MCA Financial Group as a receiver in a case in which a creditor claimed a debtor defaulted on a loan.  Itkin left MCA and joined another firm.  When Itkin filed a receivership report detailing his fees and expenses, the creditor (which had paid MCA’s bills) objected and requested disgorgement of MCA’s fees.  The creditor argued that MCA’s fees were excessive.  Although MCA was not a party to the action, it entered a special appearance to respond to the creditor’s allegations.  The superior court agreed with the creditor and held that MCA’s fees were excessive and that MCA did not execute its duties appropriately.  The court ordered disgorgement of more than $100,000 in MCA’s fees.

MCA appealed, arguing that the superior court lacked jurisdiction since MCA was not a party to the action in which the court ordered disgorgement.  The creditor responded by arguing that the superior court had authority over the receiver because the receiver’s authority stemmed from the court.  The Court of Appeals, Division Two, agreed with MCA and reversed.  It held that MCA was not subject to the superior court’s jurisdiction because MCA had not been joined as a party and had not been served with process.  It rejected the creditor’s argument because the order appointing the receiver, which read, “Robert Itkin of MCA Financial Group, Ltd., is hereby appointed Receiver,” appointed Itkin rather than MCA.  In light of the reversal on jurisdictional grounds, the Court of Appeals did not address whether MCA’s fees were excessive or whether MCA executed its duties appropriately.  Those questions likely will be addressed in an action naming MCA itself, either on remand or in a new action.

In light of the unusual posture of the case, the Court of Appeals also addressed appellate jurisdiction.  It quickly concluded that the non-party MCA could properly appeal because it had a direct interest that would benefit from reversal of the judgment.  It gave more discussion to the question whether the disgorgement order was an appealable order.  Under A.R.S. § 12-2101(A)(4), appeal may 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.”  It held that the disgorgement order was a final order as to MCA and that the litigation qualified as a “special proceeding” under the statute because it could have been filed as a separate action. 

Judge Espinosa authored the opinion.  Judges Miller and Brammer concurred.