1546.2
. (a) It is the intent of the Legislature in enacting this
section to authorize the department to take quick, effective action
to protect the health and safety of residents of community care
facilities and to minimize the effects of transfer trauma that
accompany the abrupt transfer of clients through a system whereby the
department may apply for a court order appointing a receiver to
temporarily operate a community care facility. The receivership is
not intended to punish a licensee or to replace attempts to secure
cooperative action to protect the clients' health and safety. The
receivership is intended to protect the clients in the absence of
other reasonably available alternatives. The receiver shall assume
the operation of the facility in order to bring it into compliance
with law, facilitate a transfer of ownership to a new licensee, or
ensure the orderly transfer of clients should the facility be
required to close.
(b) (1) Whenever circumstances exist indicating that continued
management of a community care facility by the current licensee would
present a substantial probability or imminent danger of serious
physical harm or death to the clients, or the facility is closing or
intends to terminate operation as a community care facility and
adequate arrangements for the relocation of clients have not been
made at least 30 days prior to the closing or termination, the
director may petition the superior court for the county in which the
community care facility is located for an order appointing a receiver
to temporarily operate the community care facility in accordance
with this section.
(2) The petition shall allege the facts upon which the action is
based and shall be supported by an affidavit of the director. A copy
of the petition and affidavit, together with an order to appear and
show cause why temporary authority to operate the community care
facility should not be vested in a receiver pursuant to this section,
shall be delivered to the licensee, administrator, or a responsible
person at the facility to the attention of the licensee and
administrator. The order shall specify a hearing date, which shall be
not less than 10, nor more than 15, days following delivery of the
petition and order upon the licensee, except that the court may
shorten or lengthen the time upon a showing of just cause.
(c) (1) If the director files a petition pursuant to subdivision
(b) for appointment of a receiver to operate a community care
facility, in accordance with Section 564 of the Code of Civil
Procedure, the director may also petition the court, in accordance
with Section 527 of the Code of Civil Procedure, for an order
appointing a temporary receiver. A temporary receiver appointed by
the court pursuant to this subdivision shall serve until the court
has made a final determination on the petition for appointment of a
receiver filed pursuant to subdivision (b). A receiver appointed
pursuant to this subdivision shall have the same powers and duties as
a receiver would have if appointed pursuant to subdivision (b). Upon
the director filing a petition for a receiver, the receiver shall
complete its application for a provisional license to operate a
community care facility. For purposes of a provisional license issued
to a receiver, the licensee's existing fire safety clearance shall
serve as the fire safety clearance for the receiver's provisional
license.
(2) At the time of the hearing, the department shall advise the
licensee of the name of the proposed receiver. The receiver shall be
a certified community care facility administrator or other
responsible person or entity, as determined by the court, from a list
of qualified receivers established by the department, and, if need
be, with input from providers of residential care and consumer
representatives. Persons appearing on the list shall have experience
in the delivery of care services to clients of community care
facilities, and, if feasible, shall have experience with the
operation of a community care facility, shall not be the subject of
any pending actions by the department or any other state agency, and
shall not have ever been excluded from a department licensed facility
nor have had a license or certification suspended or revoked by an
administrative action by the department or any other state agency.
The receivers shall have sufficient background and experience in
management and finances to ensure compliance with orders issued by
the court. The owner, licensee, or administrator shall not be
appointed as the receiver unless authorized by the court.
(3) If at the conclusion of the hearing, which may include oral
testimony and cross-examination at the option of any party, the court
determines that adequate grounds exist for the appointment of a
receiver and that there is no other reasonably available remedy to
protect the clients, the court may issue an order appointing a
receiver to temporarily operate the community care facility and
enjoining the licensee from interfering with the receiver in the
conduct of his or her duties. In these proceedings, the court shall
make written findings of fact and conclusions of law and shall
require an appropriate bond to be filed by the receiver and paid for
by the licensee. The bond shall be in an amount necessary to protect
the licensee in the event of any failure on the part of the receiver
to act in a reasonable manner. The bond requirement may be waived by
the licensee.
(4) The court may permit the licensee to participate in the
continued operation of the facility during the pendency of any
receivership ordered pursuant to this section and shall issue an
order detailing the nature and scope of participation.
(5) Failure of the licensee to appear at the hearing on the
petition shall constitute an admission of all factual allegations
contained in the petition for purposes of these proceedings only.
(6) The licensee shall receive notice and a copy of the
application each time the receiver applies to the court or the
department for instructions regarding his or her duties under this
section, when an accounting pursuant to subdivision (i) is submitted,
and when any other report otherwise required under this section is
submitted. The licensee shall have an opportunity to present
objections or otherwise participate in those proceedings.
(d) A person shall not impede the operation of a receivership
created under this section. The receiver's access to, or possession
of, the property shall not be interfered with during the term of the
receivership. There shall be an automatic stay for a 60-day period
subsequent to the appointment of a receiver of any action that would
interfere with the functioning of the facility, including, but not
limited to, cancellation of insurance policies executed by the
licensees, termination of utility services, attachments or setoffs of
client trust funds and working capital accounts, and repossession of
equipment in the facility.
(e) When a receiver is appointed, the licensee may, at the
discretion of the court, be divested of possession and control of the
facility in favor of the receiver. If the court divests the licensee
of possession and control of the facility in favor of the receiver,
the department shall immediately issue a provisional license to the
receiver. Notwithstanding the applicable sections of this code
governing the revocation of a provisional license, the provisional
license issued to a receiver shall automatically expire upon the
termination of the receivership. The receiver shall possess the
provisional license solely for purposes of carrying out the
responsibilities authorized by this section and the duties ordered by
the court. The receiver shall have no right to appeal the expiration
of the provisional license.
(f) A receiver appointed pursuant to this section:
(1) May exercise those powers and shall perform those duties
ordered by the court, in addition to other duties provided by
statute.
(2) Shall operate the facility in a manner that ensures the safety
and adequate care for the clients.
(3) Shall have the same rights to possession of the building in
which the facility is located, and of all goods and fixtures in the
building at the time the petition for receivership is filed, as the
licensee and administrator would have had if the receiver had not
been appointed.
(4) May use the funds, building, fixtures, furnishings, and any
accompanying consumable goods in the provision of care and services
to clients and to any other persons receiving services from the
facility at the time the petition for receivership was filed.
(5) Shall take title to all revenue coming to the facility in the
name of the receiver who shall use it for the following purposes in
descending order of priority:
(A) To pay wages to staff. The receiver shall have full power to
hire, direct, manage, and discharge employees of the facility,
subject to any contractual rights they may have. The receiver shall
pay employees at the same rate of compensation, including benefits,
that the employees would have received from the licensee or wages
necessary to provide adequate staff for the protection of the clients
and compliance with the law.
(B) To preserve client funds. The receiver shall be entitled to,
and shall take, possession of all property or assets of clients that
are in the possession of the licensee or operator of the facility.
The receiver shall preserve all property, assets, and records of
clients of which the receiver takes possession.
(C) To contract for outside services as may be needed for the
operation of the community care facility. Any contract for outside
services in excess of five thousand dollars ($5,000) shall be
approved by the court.
(D) To pay commercial creditors of the facility to the extent
required to operate the facility. Except as provided in subdivision
(h), the receiver shall honor all leases, mortgages, and secured
transactions affecting the building in which the facility is located
and all goods and fixtures in the building of which the receiver has
taken possession, but only to the extent of payments which, in the
case of a rental agreement, are for the use of the property during
the period of receivership, or which, in the case of a purchase
agreement, come due during the period of receivership.
(E) To receive a salary, as approved by the court.
(F) To do all things necessary and proper to maintain and operate
the facility in accordance with sound fiscal policies. The receiver
shall take action as is reasonably necessary to protect or conserve
the assets or property of which the receiver takes possession and may
use those assets or property only in the performance of the powers
and duties set out in this section and by order of the court.
(G) To ask the court for direction in the treatment of debts
incurred prior to the appointment, if the licensee's debts appear
extraordinary, of questionable validity, or unrelated to the normal
and expected maintenance and operation of the facility, or if payment
of the debts will interfere with the purposes of receivership.
(g) (1) A person who is served with notice of an order of the
court appointing a receiver and of the receiver's name and address
shall be liable to pay the receiver, rather than the licensee, for
any goods or services provided by the community care facility after
the date of the order. The receiver shall give a receipt for each
payment and shall keep a copy of each receipt on file. The receiver
shall deposit amounts received in a special account and shall use
this account for all disbursements. Payment to the receiver pursuant
to this subdivision shall discharge the obligation to the extent of
the payment and shall not thereafter be the basis of a claim by the
licensee or any other person. A client shall not be evicted nor may
any contract or rights be forfeited or impaired, nor may any
forfeiture be effected or liability increased, by reason of an
omission to pay the licensee, operator, or other person a sum paid to
the receiver pursuant to this subdivision.
(2) This section shall not be construed to suspend, during the
temporary management by the receiver, any obligation of the licensee
for payment of local, state, or federal taxes. A licensee shall not
be held liable for acts or omissions of the receiver during the term
of the temporary management.
(3) Upon petition of the receiver, the court may order immediate
payment to the receiver for past services that have been rendered and
billed, and the court may also order a sum not to exceed one month's
advance payment to the receiver of any sums that may become payable
under the Medi-Cal program.
(h) (1) A receiver shall not be required to honor a lease,
mortgage, or secured transaction entered into by the licensee of the
facility and another party if the court finds that the agreement
between the parties was entered into for a collusive, fraudulent
purpose or that the agreement is unrelated to the operation of the
facility.
(2) A lease, mortgage, or secured transaction or an agreement
unrelated to the operation of the facility that the receiver is
permitted to dishonor pursuant to this subdivision shall only be
subject to nonpayment by the receiver for the duration of the
receivership, and the dishonoring of the lease, mortgage, security
interest, or other agreement, to this extent, by the receiver shall
not relieve the owner or operator of the facility from any liability
for the full amount due under the lease, mortgage, security interest,
or other agreement.
(3) If the receiver is in possession of real estate or goods
subject to a lease, mortgage, or security interest that the receiver
is permitted to dishonor pursuant to paragraph (1), and if the real
estate or goods are necessary for the continued operation of the
facility, the receiver may apply to the court to set a reasonable
rent, price, or rate of interest to be paid by the receiver during
the duration of the receivership. The court shall hold a hearing on
this application within 15 days. The receiver shall send notice of
the application to any known owner of the property involved at least
10 days prior to the hearing.
(4) Payment by the receiver of the amount determined by the court
to be reasonable is a defense to any action against the receiver for
payment or possession of the goods or real estate, subject to the
lease or mortgage, which is brought by any person who received the
notice required by this subdivision. However, payment by the receiver
of the amount determined by the court to be reasonable shall not
relieve the owner or operator of the facility from any liability for
the difference between the amount paid by the receiver and the amount
due under the original lease, mortgage, or security interest.
(i) A monthly accounting shall be made by the receiver to the
department of all moneys received and expended by the receiver on or
before the 15th day of the following month or as ordered by the
court, and the remainder of income over expenses for that month shall
be returned to the licensee. A copy of the accounting shall be
provided to the licensee. The licensee or owner of the community care
facility may petition the court for a determination as to the
reasonableness of any expenditure made pursuant to paragraph (5) of
subdivision (f).
(j) (1) The receiver shall be appointed for an initial period of
not more than three months. The initial three-month period may be
extended for additional periods not exceeding three months, as
determined by the court pursuant to this section. At the end of one
month, the receiver shall report to the court on its assessment of
the probability that the community care facility will meet state
standards for operation by the end of the initial three-month period
and will continue to maintain compliance with those standards after
termination of the receiver's management. If it appears that the
facility cannot be brought into compliance with state standards
within the initial three-month period, the court shall take
appropriate action as follows:
(A) Extend the receiver's management for an additional three
months if there is a substantial likelihood that the facility will
meet state standards within that period and will maintain compliance
with the standards after termination of the receiver's management.
The receiver shall report to the court in writing upon the facility's
progress at the end of six weeks of any extension ordered pursuant
to this paragraph.
(B) Order the director to revoke or temporarily suspend, or both,
the license pursuant to Article 5 (commencing with Section 1550) and
extend the receiver's management for the period necessary to transfer
clients in accordance with the transfer plan, but for not more than
three months from the date of initial appointment of a receiver, or
14 days, whichever is greater. An extension of an additional three
months may be granted if deemed necessary by the court.
(2) If it appears at the end of six weeks of an extension ordered
pursuant to subparagraph (A) of paragraph (1) that the facility
cannot be brought into compliance with state standards for operation
or that it will not maintain compliance with those standards after
the receiver's management is terminated, the court shall take
appropriate action as specified in subparagraph (B) of paragraph (1).
(3) In evaluating the probability that a community care facility
will maintain compliance with state standards of operation after the
termination of receiver management ordered by the court, the court
shall consider at least the following factors:
(A) The duration, frequency, and severity of past violations in
the facility.
(B) History of compliance in other care facilities operated by the
proposed licensee.
(C) Efforts by the licensee to prevent and correct past
violations.
(D) The financial ability of the licensee to operate in compliance
with state standards.
(E) The recommendations and reports of the receiver.
(4) Management of a community care facility operated by a receiver
pursuant to this section shall not be returned to the licensee, to
any person related to the licensee, or to any person who served as a
member of the facility's staff or who was employed by the licensee
prior to the appointment of the receiver unless both of the following
conditions are met:
(A) The department believes that it would be in the best interests
of the clients of the facility, requests that the court return the
operation of the facility to the former licensee, and provides clear
and convincing evidence to the court that it is in the best interests
of the facility's clients to take that action.
(B) The court finds that the licensee has fully cooperated with
the department in the appointment and ongoing activities of a
receiver appointed pursuant to this section, and, if applicable, any
temporary manager appointed pursuant to Section 1546.1.
(5) The owner of the facility may at any time sell, lease, or
close the facility, subject to the following provisions:
(A) If the owner closes the facility, or the sale or lease results
in the closure of the facility, the court shall determine if a
transfer plan is necessary. If the court so determines, the court
shall adopt and implement a transfer plan consistent with the
provisions of Section 1556.
(B) If the licensee proposes to sell or lease the facility and the
facility will continue to operate as a community care facility, the
court and the department shall reevaluate any proposed transfer plan.
If the court and the department determine that the sale or lease of
the facility will result in compliance with licensing standards, the
transfer plan and the receivership shall, subject to those conditions
that the court may impose and enforce, be terminated upon the
effective date of the sale or lease.
(k) (1) The salary of the receiver shall be set by the court
commensurate with community care facility industry standards, giving
due consideration to the difficulty of the duties undertaken, and
shall be paid from the revenue coming to the facility. If the revenue
is insufficient to pay the salary in addition to other expenses of
operating the facility, the receiver's salary shall be paid from the
emergency client contingency account as provided in Section 1546.
State advances of funds in excess of five thousand dollars ($5,000)
shall be approved by the director. Total advances for encumbrances
and expenditures shall not exceed the sum of forty-nine thousand nine
hundred ninety-nine dollars ($49,999) unless approved by the
director in writing.
(2) To the extent state funds are advanced for the salary of the
receiver or for other expenses in connection with the receivership,
as limited by subdivision (g), the state shall be reimbursed from the
revenues accruing to the facility or to the licensee or an entity
related to the licensee. Any reimbursement received by the state
shall be redeposited in the account from which the state funds were
advanced. If the revenues are insufficient to reimburse the state,
the unreimbursed amount shall constitute grounds for a monetary
judgment in civil court and a subsequent lien upon the assets of the
facility or the proceeds from the sale thereof. Pursuant to Chapter 2
(commencing with Section 697.010) of Division 2 of Title 9 of Part 2
of the Code of Civil Procedure, a lien against the personal assets
of the facility or an entity related to the licensee based on the
monetary judgment obtained shall be filed with the Secretary of State
on the forms required for a notice of judgment lien. A lien against
the real property of the facility or an entity related to the
licensee based on the monetary judgment obtained shall be recorded
with the county recorder of the county where the facility of the
licensee is located or where the real property of the entity related
to the licensee is located. The lien shall not attach to the
interests of a lessor, unless the lessor is operating the facility.
The authority to place a lien against the personal and real property
of the licensee for the reimbursement of any state funds expended
pursuant to this section shall be given judgment creditor priority.
(3) For purposes of this subdivision, "entity related to the
licensee" means an entity, other than a natural person, of which the
licensee is a subsidiary or an entity in which any person who was
obligated to disclose information under Section 1520 possesses an
interest that would also require disclosure pursuant to Section 1520.
(l) (1) This section does not impair the right of the owner of a
community care facility to dispose of his or her property interests
in the facility, but any facility operated by a receiver pursuant to
this section shall remain subject to that administration until
terminated by the court. The termination shall be promptly
effectuated, provided that the interests of the clients have been
safeguarded as determined by the court.
(2) This section does not limit the power of the court to appoint
a receiver under any other applicable provision of law or to order
any other remedy available under law.
(m) (1) Notwithstanding any other provision of law, the receiver
shall be liable only for damages resulting from gross negligence in
the operation of the facility or intentional tortious acts.
(2) All governmental immunities otherwise applicable to the State
of California shall also apply in the use of a receiver in the
operation of a facility pursuant to this section.
(3) The licensee shall not be liable for any occurrences during
the receivership except to the extent that the occurrences are the
result of the licensee's conduct.
(n) The department may adopt regulations for the administration of
this section. This section does not impair the authority of the
department to temporarily suspend licenses under Section 1550.5 or to
reach a voluntary agreement with the licensee for alternate
management of a community care facility including the use of a
temporary manager under Section 1546.1. This section does not
authorize the department to interfere in a labor dispute.
(o) This section does not apply to a residential facility that
serves six or fewer persons and is also the principal residence of
the licensee.
(p) This section does not apply to a licensee that has obtained a
certificate of authority to offer continuing care contracts, as
defined in paragraph (8) of subdivision (c) of Section 1771.