Amended in Senate April 2, 2013

Senate Bill No. 489

Introduced by Senator Fuller

February 21, 2013

An act to amend Section 564 of the Code of Civil Procedure, and to amend Section 855 of the Public Utilities Code, relating to water and sewer system corporations.

LEGISLATIVE COUNSEL’S DIGEST

SB 489, as amended, Fuller. Water corporations: sewer system corporations: appointment of receiver.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including water corporations and sewer system corporations. Whenever the commission determines that a water corporation or sewer system corporation is unable or unwilling to adequately serve its ratepayers or has actually or effectively been abandoned by its owners or is unresponsive to the rules or orders of the commission, existing law authorizes the commission to 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 the corporation’s property and to operate its system upon such terms and conditions as the court prescribes.

This bill would begin delete instead end delete begin insert additionally end insert authorize the begin insert court appointment of a receiver if the water or sewer system corporation has failed to provide safe and adequate service, as confirmed by the commission, and would, as an alternative to the appointment of a receiver, authorize the end insert commission to appoint begin delete a receiver to assume possession of the corporation’s property and to operate its system upon such terms and conditions as the commission prescribes. The bill would make other conforming changes. end delete begin insert another water or sewer system corporation, or other qualified entity, to serve as an interim operator of the water or sewer system. The bill would require the commission to issue decisions and orders that it deems necessary and proper to permit the interim operator to abate any danger to the public health and safety and to provide adequate service to the customers of the water or sewer system corporation. The bill would provide that the interim operator shall have the powers of a receiver and require that the interim owner assist the commission in its search for a responsible owner or operator to purchase the water or sewer system, the sale of which would be subject to the commission’s approval. end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 564 of the Code of Civil Procedure is
amended to read:

564.  

(a) A receiver may be appointed, in the manner provided
in this chapter, by the court in which an action or proceeding is
pending in any case in which the court is empowered by law to
appoint a receiver.

(b) A receiver may be appointed by the court in which an action
or proceeding is pending, or by a judge of that court, in the
following cases:

(1) In an action by a vendor to vacate a fraudulent purchase of
property, or by a creditor to subject any property or fund to the
creditor’s claim, or between partners or others jointly owning or
interested in any property or fund, on the application of the
plaintiff, or of any party whose right to or interest in the property
or fund, or the proceeds of the property or fund, is probable, and
where it is shown that the property or fund is in danger of being
lost, removed, or materially injured.

(2) In an action by a secured lender for the foreclosure of a deed
of trust or mortgage and sale of property upon which there is a lien
under a deed of trust or mortgage, where it appears that the property
is in danger of being lost, removed, or materially injured, or that
the condition of the deed of trust or mortgage has not been
performed, and that the property is probably insufficient to
discharge the deed of trust or mortgage debt.

(3) After judgment, to carry the judgment into effect.

(4) After judgment, to dispose of the property according to the
judgment, or to preserve it during the pendency of an appeal, or
pursuant to the Enforcement of Judgments Law (Title 9
(commencing with Section 680.010)), or after sale of real property
pursuant to a decree of foreclosure, during the redemption period,
to collect, expend, and disburse rents as directed by the court or
otherwise provided by law.

(5) Where a corporation has been dissolved, as provided in
Section 565.

(6) Where a corporation is insolvent, or in imminent danger of
insolvency, or has forfeited its corporate rights.

(7) In an action of unlawful detainer.

(8) At the request of the Public Utilities Commission pursuant
to begin insert subdivision (a) of Section 855 or end insert Section 5259.5 of the Public
Utilities Code.

(9) In all other cases where necessary to preserve the property
or rights of any party.

(10) At the request of the Office of Statewide Health Planning
and Development, or the Attorney General, pursuant to Section
129173 of the Health and Safety Code.

(11) In an action by a secured lender for specific performance
of an assignment of rents provision in a deed of trust, mortgage,
or separate assignment document. The appointment may be
continued after entry of a judgment for specific performance if
appropriate to protect, operate, or maintain real property
encumbered by a deed of trust or mortgage or to collect rents
therefrom while a pending nonjudicial foreclosure under power
of sale in a deed of trust or mortgage is being completed.

(12) In a case brought by an assignee under an assignment of
leases, rents, issues, or profits pursuant to subdivision (g) of Section
2938 of the Civil Code.

(c) A receiver may be appointed, in the manner provided in this
chapter, including, but not limited to, Section 566, by the superior
court in an action brought by a secured lender to enforce the rights
provided in Section 2929.5 of the Civil Code, to enable the secured
lender to enter and inspect the real property security for the purpose
of determining the existence, location, nature, and magnitude of
any past or present release or threatened release of any hazardous
substance into, onto, beneath, or from the real property security.
The secured lender shall not abuse the right of entry and inspection
or use it to harass the borrower or tenant of the property. Except
in case of an emergency, when the borrower or tenant of the
property has abandoned the premises, or if it is impracticable to
do so, the secured lender shall give the borrower or tenant of the
property reasonable notice of the secured lender’s intent to enter
and shall enter only during the borrower’s or tenant’s normal
business hours. Twenty-four hours’ notice shall be presumed to
be reasonable notice in the absence of evidence to the contrary.

(d) Any action by a secured lender to appoint a receiver pursuant
to this section shall not constitute an action within the meaning of
subdivision (a) of Section 726.

(e) For purposes of this section:

(1) “Borrower” means the trustor under a deed of trust, or a
mortgagor under a mortgage, where the deed of trust or mortgage
encumbers real property security and secures the performance of
the trustor or mortgagor under a loan, extension of credit, guaranty,
or other obligation. The term includes any successor in interest of
the trustor or mortgagor to the real property security before the
deed of trust or mortgage has been discharged, reconveyed, or
foreclosed upon.

(2) “Hazardous substance” means any of the following:

(A) Any “hazardous substance” as defined in subdivision (h)
of Section 25281 of the Health and Safety Code.

(B) Any “waste” as defined in subdivision (d) of Section 13050
of the Water Code.

(C) Petroleum including crude oil or any fraction thereof, natural
gas, natural gas liquids, liquefied natural gas, or synthetic gas
usable for fuel, or any mixture thereof.

(3) “Real property security” means any real property and
improvements, other than a separate interest and any related interest
in the common area of a residential common interest development,
as the terms “separate interest,” “common area,” and “common
interest development” are defined in Section 4095, 4100, and 4185
of the Civil Code, or real property consisting of one acre or less
that contains 1 to 15 dwelling units.

(4) “Release” means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing into the environment, including continuing
migration, of hazardous substances into, onto, or through soil,
surface water, or groundwater.

(5) “Secured lender” means the beneficiary under a deed of trust
against the real property security, or the mortgagee under a
mortgage against the real property security, and any successor in
interest of the beneficiary or mortgagee to the deed of trust or
mortgage.

SEC. 2.  

Section 855 of the Public Utilities Code is amended
to read:

855.  

begin insert (a) end insert begin insert   end insert Whenever the commission determines, after notice
and begin insert evidentiary end insert hearing begin insert pursuant to an order to show cause end insert , that
any water or sewer system corporation is unable begin delete or end delete begin insert , is end insert unwilling
begin delete to adequately serve its ratepayers or end delete begin insert , or has failed to provide safe
and adequate service, as confirmed by the commission, or that the
water or sewer system corporation end insert has been actually or effectively
abandoned by its owners, or is unresponsive to begin delete the end delete begin insert , or fails to
comply with, those end insert rules or orders of the commission begin insert relating to
an action taken by the water or sewer system corporation that
compromises its ability to provide safe and adequate service end insert , the
commission may begin delete appoint end delete begin insert petition the superior court for the county
within which the corporation has its principal office or place of
business for the appointment of end insert a receiver to assume possession
of its property and to operate its system upon the terms and
conditions that the begin delete commission end delete begin insert court end insert shall prescribe. The
begin delete commission end delete begin insert court end insert may require, as a condition to the appointment
of the receiver, that a sufficient bond be given by the receiver and
conditioned upon compliance with the orders of the begin insert court and the end insert
commission, and the protection of all property rights involved.
The begin delete commission end delete begin insert court end insert shall provide for disposition of the facilities
and system in like manner as any other receivership proceeding
in this state. begin insert The court shall presume that any finding, conclusion,
or determination in a final decision or order of the commission
pursuant to this section is true and correct. Pursuant to subdivision
(a) of Section 1759, the superior court does not have authority to
modify any action or determination by the commission as to the
ability of the owner or operator to continue to operate the water
or sewer system and provide safe and reliable service. end insert

begin insert

(b) The commission may, as an alternative to the appointment
of a receiver pursuant to subdivision (a), enter into an agreement
with another water or sewer system corporation, or other qualified
entity, to serve as an interim operator of the water or sewer system.
The commission shall issue those decisions and orders that it deems
necessary and proper to permit the interim operator to abate any
danger to the public health and safety and to provide adequate
service to the customers of the water or sewer system corporation.
The interim operator shall have the powers of a receiver and shall
assist the commission in its search for a responsible owner or
operator to purchase the system, the sale of which is subject to the
commission’s approval. Before any sale is consummated, the
commission may authorize the interim operator to obtain an
independent appraisal of the water or sewer system corporation.
The transfer of a water or sewer system corporation pursuant to
this subdivision shall only occur when the commission has
determined that the owner cannot operate the system in accordance
with the rules and regulations of the commission.

end insert