What Every Lawyer Should Know about Receivership Law
by Edythe L. Bronston
(County Bar Update, December 2005, Vol. 25, No. 11)

 

What Every Lawyer Should Know about Receivership Law

 

By Edythe L. Bronston of The Law Offices of Edythe L. Bronston in Sherman Oaks. She is a longtime member of the Executive Committee of the Provisional & Post-Judgment (now known as Remedies) Section and is a founding director and president of the California Receivers Forum. The opinions expressed are her own.

 

County Bar Update thanks the Remedies Section for its assistance.

 

1. What is a receiver?
A receiver is an agent of the court acting for the court, holding assets in custodia legis, generally to preserve the status quo but sometimes to maximize benefit to the estate, depending on the type of receivership and the specifics of the appointing order. The receiver is neutral and is a fiduciary to all parties ultimately shown to have an interest in the property or fund (or the proceeds of same) that constitute the receivership estate.

 

2. When does it make sense to move for appointment of a receiver?
Although receiverships can be expensive, they are extremely effective, especially in partnership or family law disputes, when a real estate foreclosure is pending or when a lender has concerns about its collateral and refuses to continue financing unless a neutral person is in control of that collateral. When the person who was in control finds himself or herself to be ousted, receivership is often a catalyst for settlement of underlying litigation. Be sure to ask your proposed receiver for input before finalizing the appointing order, as the receiver undoubtedly has more experience than you in knowing the scope of anticipated issues.

 

3. How is a receiver appointed?
Receiverships are an ancillary remedy and are appointed only where authorized by statute or equity. A complaint must be filed requesting, inter alia, appointment of a receiver, and a separate motion must be filed requesting same with admissible evidence to support the request. As part of the motion, a specific receiver should be nominated, and the amount of the receiver's bond should be addressed.

 

4. Who pays for the receiver?
The receiver's fees and expenses are "administrative" and are paid from cash flow. If, however, cash flow is insufficient, the court will determine who will compensate the receiver, usually the moving party but sometimes split between the parties.

 

5. How to choose a receiver.
It is important to choose a receiver who has experience in the particular business or in dealing with the type of asset to be administered. If you have not dealt with receivers in the past or do not have a colleague who can recommend a receiver, an excellent California Receivers Forum can be reached at www.receivers.org or (949) 497-3673.

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