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Temporary Receiverships

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  • Posted on: Sep 20 2019

A temporary receivership, which is one of the provisional remedies available during litigation, is governed by Article 64 of the CPLR.  CPLR 6401 addresses the “appointment and powers” of a temporary receiver and provides, in pertinent part:

(a) Appointment of temporary receiver; joinder of moving party. Upon motion of a person having an apparent interest in property which is the subject of an action in the supreme or a county court, a temporary receiver of the property may be appointed, before or after service of summons and at any time prior to judgment, or during the pendency of an appeal, where there is danger that the property will be removed from the state, or lost, materially injured or destroyed. A motion made by a person not already a party to the action constitutes an appearance in the action and the person shall be joined as a party.

(b) Powers of temporary receiver. The court appointing a receiver may authorize him to take and hold real and personal property, and sue for, collect and sell debts or claims, upon such conditions and for such purposes as the court shall direct. A receiver shall have no power to employ counsel unless expressly so authorized by order of the court. Upon motion of the receiver or a party, powers granted to a temporary receiver may be extended or limited or the receivership may be extended to another action involving the property.

A temporary receiver’s powers are limited to those “granted pursuant to statute (CPLR 6401[b]), as delimited by court order.”  Jacynicz v. 73 Seaman Assoc., 270 A.D.2d 83 (1st Dep’t 2000) (some citations omitted).  Further, a temporary receiver is “an officer of the court and not an agent of [the party that moved for the appointment of the receiver].”  Jacynicz, 270 A.D.2d at 85 (citations and internal quotation marks omitted).  The temporary receiver’s duty is to “preserve and operate the property, within the confines of the order of appointment and any subsequent authorization granted to him by the court.”  Jacynicz, 270 A.D.2d at 85 (citations and internal quotation marks omitted).

Suissa v. Baron, 107 A.D.3d 689 (2nd Dep’t 2013), was a partition action in which plaintiff moved to appoint a receiver “to, among other things, maintain the real property and ensure that all items contained within the property remain therein, and authorized the receiver to collect the reasonable value of use and occupancy of the property from any and all occupants of said property.”  Suissa, 107 A.D.3d at 689.  The Suissa Court noted that the appointment of a temporary receiver is “an extreme remedy” because it results “in the taking and withholding of possession of property from a party without an adjudication on the merits.”  Suissa, 107 A.D.3d at 689 (citations and quotation marks omitted).  Accordingly, a motion for a temporary receiver should only be granted “where the moving party has made a clear evidentiary showing of the necessity for the conservation of the property at issue and the need to protect the moving party’s interests.  Suissa, 107 A.D.3d at 689 (citations and quotation marks omitted).  Finding that the plaintiff met its burden of establishing the need for a receiver, the Suissa Court affirmed supreme court’s appointment of a receiver.

The Court in, in Schachner v. Sikowitz, 94 A.D.2d 709 (2nd Dep’t 1983), an action for specific performance of a contract, reversed supreme court’s appointment of a temporary receiver because the “general accusations set forth by the plaintiffs have not sufficiently established by clear and convincing evidence the need for such a drastic remedy.”  Schachner, 94 A.D.2d at 709.

Similarly, the Second Department, in Board of Managers of Nob Hill Condominium Section II v. Board of Managers of Nob Hill Condominium Section I, 100 A.D.3d 673 (2012), reversed supreme court’s appointment of a temporary receiver to “operate and maintain certain recreational facilities.”  The Court noted that a “party moving for the appointment of a temporary receiver must submit clear and convincing evidence of irreparable loss or waste to the subject property and that a temporary receiver is needed to protect their interests.”  Board of Managers, 100 A.D.3d at 673 (citations and internal quotation marks omitted).  The Board of Managers Court, however, found that “plaintiff failed to offer any nonspeculative allegations or evidence indicating that the defendants were committing waste or that there was a danger that the subject recreational facilities would be dissipated or lost absent the appointment of a temporary receiver.”  Board of Managers, 100 A.D.3d at 673.

On September 18, 2019, the Court in Manning-Kranes v. Manning-Franzman, reversed an order granting plaintiff’s motion for the appointment of a temporary receiver in an action for the partition and sale of real property.  The Manning-Kranes Court found that plaintiff failed to meet her burden because her “speculative and conclusory assertions about certain expenditures the defendants made of rental income derived from the property were insufficient to demonstrate that the defendants were using that income for their own personal benefit.”  Further, the Court found that plaintiff failed to demonstrate that expenditures made for renovations to the subject property were “unnecessary or wasteful” and that other challenged expenditures “were not so significant as to present an imminent danger of irreparable loss or waste” (citation and internal quotation marks omitted).

It should be noted that there are other types of receiverships, but those addressed herein relate to temporary receiverships under Article 64 of the CPLR, which do “not continue after final judgment unless otherwise directed by the court.”  CPLR 6401(c).

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