2010 California Code
Business and Professions Code
Article 6.5. Real Property Securities Dealers: Conservatorship And Liquidation Proceedings

10239.  The provisions of this article shall apply to all real
property securities dealers, or persons purporting to act as real
property security dealers in this State, or in the process of
organization with intent to do such business therein, or from whom
the commissioner's authority is required for the transaction of such
business, or whose authority is revoked or suspended.



10239.1.  The superior court of the county in which is located the
principal office of such person in this State shall, upon the filing
by the commissioner of the verified application showing any of the
following conditions hereinafter enumerated to exist, issue its order
vesting title to all of the assets of such person, wheresoever
situated, in the commissioner or his successor in office, in his
official capacity as such, and direct the commissioner forthwith to
take possession of all of its books, records, property, real and
personal, and assets, and to conduct, as conservator, the business of
said person, or so much thereof as to the commissioner may seem
appropriate, and enjoining said person and its officers, directors,
agents, servants, and employees from the transaction of its business
or disposition of its property until further order of said court:
   (a) That such person has refused to submit its books, papers,
accounts, or affairs to the reasonable inspection of the commissioner
or his deputy or examiner.
   (b) That such person has neglected or refused to observe an order
of the commissioner made pursuant to authority granted by this
division.
   (c) That such person, without first obtaining the consent in
writing of the commissioner, has transferred, or attempted to
transfer, substantially its entire property or business or, without
such consent, has entered into any transaction the effect of which is
to merge, consolidate, or reinsure substantially its entire property
or business in or with the property or business of any other person.
   (d) It appears to the commissioner that the dealer is in an unsafe
condition or is conducting his business in an unsafe or injurious
manner such as to render its further proceeding hazardous to the
public or to any or all persons dealing with him.
   (e) The dealer or any manager or any managing officer, partner, or
managing representative or agent thereof refuses to be examined upon
oath concerning the affairs of his business.
   (f) The dealer or any officer or representative or agent of the
dealer has embezzled, sequestered, or wrongfully diverted any of the
assets of the dealer, or funds of others held in trust by the dealer.
   (g) The commissioner finds that the dealer, after investigation,
is insolvent in that assets are impaired to such an extent that they
are inadequate to pay debts as they fall due in the general course of
business or insolvent in that the aggregate of his business property
subject to legal process without his consent, exclusive of property
transferred, removed, concealed, or permitted to have been so done,
shall not at a fair market value be sufficient in amount to pay all
business debts.


10239.2.  Said order shall continue in force and effect until, on
the application either of the commissioner or of such person, it
shall, after a full hearing, appear to said court that the ground for
said order directing the commissioner to take title and possession
does not exist or has been removed and that said person can properly
resume title and possession of its property and the conduct of its
business.



10239.3.  Whenever it appears to the commissioner that any of the
conditions set forth in Section 10239.1 exist or that irreparable
loss and injury to the property and business of a person specified in
Section 10239.1 when performing any of the acts specified in Article
6 (commencing with Section 10237) of this chapter has occurred or
may occur unless the commissioner so act immediately, the
commissioner, without notice and before applying to the court for any
order, forthwith shall take possession of the property, business,
books, records and accounts of such person, and of the offices and
premises occupied by it for the transaction of its business, and
retain possession subject to the order of the court. Any person
having possession of and refusing to deliver any of the books,
records or assets of a person against whom a seizure order has been
issued by the commissioner, shall be guilty of a misdemeanor and
punishable by fine not exceeding one thousand dollars ($l,000) or
imprisonment not exceeding one year, or both such fine and
imprisonment.



10239.4.  Whenever the commissioner makes any seizure as provided in
Section 10239.3, it shall, on the demand of the commissioner, be the
duty of the sheriff of any county of this State, and of the police
department of any municipal corporation therein, to furnish him with
such deputies, patrolmen or officers as may be necessary to assist
the commissioner in making and enforcing any such seizure.




10239.5.  Immediately after such seizure, the commissioner shall
institute a proceeding as provided for in Section 10239.1 and
thereafter shall proceed in accordance with the provisions of this
article.


10239.6.  If at any time after the issuance of an order under
Section 10239.1, or if at the time of instituting any proceeding
under this article, it shall appear to the commissioner that it would
be futile to proceed as conservator with the conduct of the business
of such person, he may apply to the court for an order to liquidate
and wind up the business of said person. Upon a full hearing of such
application, the court may make an order directing the winding up and
liquidation of the business of such person by the commissioner, as
liquidator, for the purpose of carrying out the order to liquidate
and wind up the business of such person.



10239.7.  In his application for an order for the liquidation of a
domestic corporation, or at any time thereafter, the commissioner may
apply for, and the court shall make an order dissolving such
corporation.


10239.8.  The recording in the office of a county recorder of any
county in the State of an order entered pursuant to Sections 10239.1,
10239.6, or 10239.7 shall impart the same notice that would be
imparted by the recordation of a deed, bill of sale or other evidence
of title duly executed by such person.



10239.9.  Upon the issuance of an order of liquidation under Section
10239.6, the rights and liabilities of any such person and of
creditors, policyholders, shareholders and members, and all other
persons interested in its assets, including the State of California,
shall, unless otherwise directed by the court, be fixed as of the
date of the entry of the order in the office of the clerk of the
county wherein the application was made.



10239.10.  Upon the issuance of an order either under Section
10239.1 or 10239. 6, or at any time thereafter, the court shall issue
such other injunctions or orders as may be deemed necessary to
prevent any or all of the following occurrences:
   (a) Interference with the commissioner or the proceeding.
   (b) Waste of assets of those persons.
   (c) The institution or prosecution of any actions or proceedings.
   (d) The obtaining of preferences, judgments, attachments, or other
liens against that person or its assets.
   (e) The making of any levy against any such person or its assets.
   (f) The sale or deed for nonpayment of taxes or assessments levied
by any taxing agency of property:
   (1) Owned by that person.
   (2) Upon which that person holds an encumbrance.
   (3) Upon which that person has prior thereto commenced an action
to foreclose any deed of trust or mortgage or has exercised the power
of sale under any trust deed or mortgage, which sale or foreclosure
proceedings have not yet been completed or upon which no trustee's
deed or judgment of court or sheriff's certificate of sale has been
issued. "Taxing agency," as used in this section, has the meaning
ascribed to it by Section 121 of the Revenue and Taxation Code. The
injunctions or orders authorized by this subdivision may be modified,
dissolved, or rescinded by the court on motion of the commissioner,
the Controller, the person charged with the collection of taxes or
assessments on the property, or any person beneficially interested in
the property. The recording in the office of the county recorder of
this injunction or order shall constitute service of the order or
injunction upon any taxing agency with respect to property or
interests therein located in the county.



10239.11.  Upon the making of an order to liquidate the business of
such person, the commissioner shall cause to be published notice to
its policyholders, creditors, shareholders, and all other persons
interested in its assets. Such notice shall require claimants to file
their claims with the commissioner, together with proper proofs
thereof, within six months after the date of first publication of
such notice, in the manner specified in this article.



10239.12.  Such notice shall be published in a newspaper of general
circulation, published in the county in which the proceeding is
pending, not less than once a week for four successive weeks. A copy
of the notice, accompanied by an affidavit of due publication,
including a statement of the date of first publication, shall be
filed with the clerk of the court.



10239.13.  A claim shall set forth, under oath, on the form
prescribed by the commissioner:
   (a) The particulars thereof, and the consideration therefor.
   (b) Whether said claim is secured or unsecured, and, if secured,
the nature and amount of such security.
   (c) The payments, if any, made thereon.
   (d) That the sum claimed is justly owing from such person to the
claimant.
   (e) That there is no offset to the claim.
   (f) Such other data or supporting documents as the commissioner
requires.



10239.14.  Unless such claim is filed in the manner and within the
time provided in Section 10239.11, it shall not be entitled to filing
or allowance, and no action may be maintained thereon. In the
liquidation, pursuant to the provisions of this article, the
commissioner shall, within 30 days after the last day set for the
filing of claims, make a list of the persons who have not filed
proofs of claim with him and to whom, according to the books of said
dealer, there are amounts owing, and he shall set opposite the name
of each person the amount so owing to such person. Each person whose
name shall appear upon said list shall be deemed to have duly filed,
prior to the last day set for the filing of claims, a claim for the
amount set opposite his name on said list.



10239.15.  Claims founded upon unliquidated or undetermined demands
must be filed within the time limit provided in this article for the
filing of claims, but claims founded upon such demands shall not
share in any distribution to creditors of a person proceeded against
under Section 10239.6 until such claims have been definitely
determined, proved and allowed. Thereafter, such claims shall share
ratably with other claims of the same class in all subsequent
distributions.
   An unliquidated or undetermined claim or demand within the meaning
of this article shall be deemed to be any such claim or demand upon
which a right of action has accrued at the date of the order of
liquidation and upon which the liability has not been determined the
amount thereof liquidated.



10239.16.  A claim of a secured claimant shall not be allowed in a
sum greater than the excess over the value of the security of the
amount for which the claim would be allowable if unsecured, unless
the claimant surrenders the security to the liquidator. Upon such
surrender the claim may be allowed in the full amount for which it is
valued.



10239.17.  The value of the security to be credited upon such claim
shall be determined by an appraiser appointed by the liquidator and
approved by the court. Such claimant shall elect to accept the
security or to release it to the liquidator.




10239.18.  In all cases of mutual debts or mutual credits between
the person in liquidation under Section 10239.6 and any other person,
such credits and debts shall be set off and the balance only shall
be allowed or paid, but no setoff shall be allowed in favor of such
other person where any of the following facts exist:
   (a) The obligation of the person in liquidation to such other
person does not entitle such other person claiming such setoff to
share as a claimant in the assets of such person in liquidation.
   (b) The obligation of the person in liquidation to such other
person was purchased by, or transferred to, such other person.
   (c) The obligation of such other person to the person in
liquidation is to pay an assessment levied aginst such other person
or to pay a balance upon a subscription for shares of the capital
stock of the person in liquidation.


10239.19.  When a claim is rejected by the commissioner, written
notice of rejection shall be given by mail, addressed to the claimant
at the address set forth in his claim. Within 30 days after the
mailing of the notice the claimant may apply to the court in which
the liquidation proceeding is pending for an order to show cause why
the claim should not be allowed.



10239.20.  Claims allowed in a proceeding under this article shall
be given preference in the following order:
   (a) Expense of administration.
   (b) Taxes due to the State of California.
   (c) Claims having preference by the laws of the United States and
by laws of this State.
   (d) All other claims.
   Upon the issuance of an order appointing a conservator or
liquidator for any person under the provisions of either Sections
10239.1 or 10239.6 or both such sections, the lien of taxes due to
the State of California imposed by Article 4 (commencing with Section
12491) of Chapter 4 of Part 7 of Division 2 of the Revenue and
Taxation Code shall become subordinate to the reasonable
administrative expenses of the proceeding under said order.



10239.21.  After the issuance of an order of liquidation under
Section 10239.6, any of the following transactions occurring within
four months prior to the application for such order shall be voidable
by the commissioner if such transaction has the effect of giving to
or enabling any creditor of such person to obtain a preference over
any other creditor of the same class, or a greater percentage of his
debt than any other creditor of the same class:
   (a) A transfer of property of such person.
   (b) The creation of a lien on the property of such person.
   (c) The suffering of a judgment against such person.



10239.22.  In any proceeding under this article, the commissioner
shall have the power to appoint and employ under his hand and
official seal, special deputy commissioners, as his agents, and to
employ such clerks and assistants and to give to each of them such
power as may by him be deemed necessary. The compensation of special
deputy commissioners, clerks, and assistants appointed to carry out
the provisions of this article, and all expenses of taking
possession, of conserving, conducting, liquidating, disposing of or
otherwise dealing with the business and property of such person under
this article, shall be fixed by the commissioner, subject to the
approval of the court, and shall be paid out of the assets of such
person. In the event the property of such person does not contain
cash or liquid assets sufficient to defray the cost of the services
required to be performed under the terms of this article, the
commissioner may at any time or from time to time pay the cost of
such services out of the appropriation for the maintenance of the
Department of Real Estate. Any amounts so paid shall be deemed
expense of administration and shall be repaid to said fund out of the
first available moneys in the estate.



10239.23.  The Attorney General shall have the power to appoint and
employ such legal counsel as may by him be deemed necessary to assist
the commissioner in the performance of his duties under this
article. The compensation of such legal counsel shall be fixed by the
Attorney General, subject to the approval of the court, and shall be
paid out of the assets of the person against whom the commissioner
has proceeded under this article.



10239.24.  Upon taking possession of the property and business of
any person in any proceeding under this article, the commissioner,
exclusively and except as otherwise expressly provided by this
article, either as conservator or liquidator:
   (a) Shall have authority to collect all moneys due the person, and
to do such other acts as are necessary or expedient to collect,
conserve, or protect its assets, property and business, and to carry
on and conduct the business and affairs of any such person or so much
thereof as to him or her may seem appropriate.
   (b) Shall collect all debts due and claims belonging to the
person, and shall have the authority to sell, compound, compromise or
assign, for the purpose of collection upon such terms and conditions
as he or she deems best, any bad or doubtful debts.
   (c) Shall have authority to compound, compromise, or in any other
manner negotiate settlements of claims against that person upon such
terms and conditions as he or she shall deem to be most advantageous
to the estate of the person being administered or liquidated or
otherwise dealt with under this article.
   (d) Shall have authority without notice, to acquire, hypothecate,
encumber, lease, improve, sell, transfer, abandon, or otherwise
dispose of or deal with, any real or personal property of any such
person at its reasonable market value, or, in cases other than
acquisition, sale, or transfer on the basis of reasonable market
value, upon such terms and conditions as he or she may deem proper.
However, no transaction involving real or personal property shall be
made where the market value of the property involved exceeds the sum
of one thousand dollars ($1,000) without first obtaining permission
of the court, and then only in accordance with such terms as the
court may prescribe.
   (e) Shall have authority to transfer to a trustee or trustees,
under a voting trust agreement, the stock of a dealer heretofore or
hereafter issued to him or her as conservator or as liquidator in
connection with a rehabilitation agreement, or any other proceeding
under this article. The voting trust agreement shall confer upon the
trustee or trustees the right to vote or otherwise represent the
stock, and shall not be irrevocable for a period of more than 21
years.
   (f) May, for the purpose of executing and performing any of the
powers and authority conferred upon him or her under this article, in
the name of the person affected by the proceeding or in his or her
own name, prosecute and defend any and all suits and other legal
proceedings, and execute, acknowledge, and deliver any and all deeds,
assignments, releases, and other instruments necessary and proper to
effectuate any sale of any real and personal property or other
transaction in connection with the administration, liquidation, or
other disposition of the assets of the person affected by the
proceeding; and any deed or other instrument executed pursuant to the
authority hereby given shall be valid and effectual for all purposes
as though it had been executed by the person affected by any
proceeding under this article or by its officers pursuant to the
direction of its governing board or authority. In cases where any
real property sold by the commissioner under this article is located
in a county other than the county wherein the proceeding is pending,
the commissioner shall cause a certified copy of the order of his or
her appointment, or order authorizing or ratifying the sale, to be
filed in the office of the county recorder of the county in which the
property is located.
   (g) Shall have authority to invest and reinvest, in such manner as
he or she may deem suitable for the best interests of the creditors
of the person, such portions of the funds and assets of the person in
his or her possession, and which funds and assets are not
immediately distributable to creditors. However, no such investment
or reinvestment shall be made which exceeds the sum of one thousand
dollars ($1,000) without first obtaining permission of the court, and
then only in accordance with such terms as the court may prescribe.
   (h) Within six months after taking possession of the property and
business of any dealer, the commissioner may terminate or adopt any
executory contract to which the dealer may be a party including
leases of real or personal property. Claims for damages resulting
from the termination of any such contract or lease may be filed and
allowed, but no claim of a landlord for damages resulting from the
rejection of an unexpired lease of real property or under any
covenant of such lease shall be allowed in an amount greater than due
under the lease for a period of one year following the surrender of
the premises.
   The enumeration, in this article, of duties, powers and authority
of the commissioner in proceedings under this article shall neither
be construed as a limitation upon the commissioner, nor shall it
exclude in any manner his or her right to perform and to do such
other acts not herein specifically enumerated, or otherwise provided
for, which he or she may deem necessary or expedient for the
accomplishment or in aid of the purpose of the proceedings.



10239.25.  Any application under Sections 10239.1 or 10239.6 shall
be served upon the person named in such application in the manner
prescribed by law for personal service of summons or as provided by
Section 10239.26.


10239.26.  In lieu of the service required by Section 10239.25,
service may, upon application to said court, be made in such manner
as the court directs whenever it is satifactorily shown by affidavit
(a) in the case of a corporation, that the officers of the
corporation upon whom service is required to be made as above
provided, have departed from the State or keep themselves concealed
therein with intent to avoid the service, or, (b) in the case of a
natural person, that the natural person upon whom service is required
to be made as above provided, has departed from the State or keeps
himself concealed therein with intent to avoid the service.




10239.27.  At any time after an order is made under Sections 10239.1
or 10239.6, the commissioner may remove the principal office of the
person proceeded against to the City and County of San Francisco or
to the City of Los Angeles. In event of such removal, the court
wherein the proceeding was commenced shall, upon the application of
the commissioner, direct its clerk to transmit all of the papers
filed therein with such clerk to the Clerk of the City and County of
San Francisco or of the County of Los Angeles as the case may
require. The proceeding shall thereafter be conducted in the same
manner as though it had been commenced in the county to which it had
been transferred.



10239.28.  The commissioner shall be the custodian of all moneys
collected by him or coming into his possession in the course of any
proceeding under this article, but he may deposit such moneys, or any
part thereof, in a bank approved by said court.



10239.29.  The commissioner and a special deputy commissioner
appointed pursuant to Section 10239.22 shall have the power to
subpoena witnesses and examine them under oath upon any subject
relating to the affairs and business of any person affected by
proceedings under this article. The penalties provided in Chapter 2
(commencing with Section 1985), Title 3 of Part 4 of the Code of
Civil Procedure shall apply to any witness who fails or refuses to
appear in accordance with such subpoena, or to testify in connection
therewith.


10239.30.  Whenever money or other property is payable to any
claimant out of the assets of any person under the provisions of
Sections 10239.11 or 10239.20, but such person cannot be located or
for any other reason the payment of such money or other property to
such person cannot be made, although assets are available for such
payment, such money or other property shall be deposited in the State
Treasury by the commissioner under the provisions of Chapter 7
(commencing with Section 1500) of Title 10 of Part 3 of the Code of
Civil Procedure, and shall be subject to claim or other disposition
as provided in said Chapter 7 of Title 10. The commissioner may pay
over the money or other property held by him to the persons
respectively entitled thereto at any time prior to such deposit, upon
being furnished satisfactory evidence of their right to the same.



10239.31.  In all proceedings under this article, the commissioner
shall be deemed to be a trustee for the benefit of all creditors and
other persons interested in the estate of the person against whom the
proceedings are pending.


10239.32.  In any proceeding pending under the provisions of this
article, the court in which such proceeding is pending shall have
jurisdiction to hear and determine, in such proceeding, all actions
or proceedings then pending or thereafter instituted by or against
the person affected by a proceeding under this article.




10239.33.  The commissioner, in the performance of any of his duties
under this article, shall be deemed to be a public officer acting in
his official capacity on behalf of the State, and the provisions of
Chapter 2 (commencing with Section 6100) of Division 7 of Title 1 of
the Government Code shall apply to him.


10239.34.  The commissioner shall, through the Secretary of the
Business and Transportation Agency, transmit to the Governor an
annual report showing:
   (a) The names of the persons proceeded against under this article.
   (b) Whether such persons have resumed business or have been
liquidated.
   (c) Such other facts as will acquaint the Governor, the investors,
creditors, shareholders and the public with his proceedings under
this article.


10239.35.  In verification of the matters set forth in Section
10239.34, the commissioner shall annually examine his books and
accounts relating to all proceedings under this article and Part 1
(commencing with Section 10000) of Division 4, and shall file a
report of each such examination with the court in which the
respective proceeding is pending. The expense of examining and
experting the books and accounts of the commissioner as conservator
or liquidator under this article or under Part 1 (commencing with
Section 10000) of Division 4 shall be paid out of the Real Estate
Fund in the State Treasury and shall, upon order of the court or
courts before which the proceedings under those articles are pending,
be ratably reimbursed to the Real Estate Fund out of the assets of
the estates administered by the commissioner as conservator or
liquidator under this article or under Part 1 (commencing with
Section 10000) of Division 4.



10239.36.  (a) This article shall remain operative as long as a
conservatorship or liquidation proceeding pursuant to Article 6.5
(commencing with Section 10239) of Chapter 3 of Division 4, that was
commenced prior to the effective date of the act enacting this
section, remains active.
   (b) Notwithstanding any other provision of this article, no
conservatorship or liquidation proceeding shall be commenced on or
after the effective date of the act enacting this section.
   (c) The commissioner shall determine when the last pending
proceeding described in subdivision (a) is terminated. The
commissioner shall submit a notice of that determination to the
Secretary of State, and this article shall be repealed upon the
receipt of that notice by the Secretary of State.