Appointing a Neutral Receiver

Explore:  Receivership

QUESTION: I just received notice that the lender to one of my clients is seeking to have a receiver appointed over my client’s shopping center. I think the proposed receiver is in the lender’s pocket and will not be neutral. The lender has used her many times, and in negotiations to restructure my client’s debt, comments were made that if an agreement could not be reached the lender would have “its receiver” take over and run the property. Is there anything I can do to prevent the lender’s receiver from being appointed if I cannot defeat the receivership’s motion?

ANSWER: Yes. You can propose a different receiver at the hearing. Indeed, I am surprised defendants’ counsel don’t do this more often. When a party moves to have a receiver appointed, it suggests (“nominates”) who it wants the court to appoint. Who is appointed is up to the court, because the receiver is the court’s agent. The court can appoint who the moving party nominates, who the responding party nominates, or someone completely different. This is specifically provided for in California Rules of Court, Rule 3.1177 which provides: “At the hearing of an application for appointment of a receiver on notice or at the hearing for confirmation from an ex parte appointment, each party appearing may, at the time of the hearing, suggest in writing one or more persons for appointment or substitution as receiver, stating the reasons. The party’s suggestion is without prejudice to its objection to the appointment or confirmation of a receiver.” Therefore, if you think the proposed receiver might not be neutral, say so and why, but also propose one or more other choices for the court and explain why you believe they would be good choices to act as the court’s receiver given the facts of the case.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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