Court Appointed Fiduciary
A receiver is sometimes appointed to preserve property during litigation between two parties who appear to have an equal right to use the property but who are unwilling to acknowledge each other’s interest. A judge can appoint a receiver following the filing of an application, or petition, with the court.
Courts appoint receivers to take custody, manage, and preserve money or property that is subject to litigation so that when the final judgment is rendered, the property remains available to accomplish what has been ordered. The power to appoint a receiver is rarely utilized by the courts, and only upon a showing that it is required to preserve the property. Receivership cannot properly be used to coerce a party or to gain control of a business from someone who is capable of managing it. Receivership is an extraordinary remedy, designed to benefit everyone involved. It is, however, a harsh remedy, since it involves restraining an individual’s property, removing it from his control, and causing additional legal expenses.
The appointment of a receiver, which is a provisional remedy to be exercised while litigation is pending, is ordinarily prescribed by statute, as are a receiver’s powers. Ordinarily a receiver can be appointed only after a lawsuit is initiated.
According to the statutes of different states, receivers have been appointed in actions for Divorce, the removal of a trustee, or the foreclosure of a mortgage and in proceedings for the dissolution of a corporation, for an accounting of partnership money, or for a creditor’s suit. The appointment of a receiver is justified when property in dispute is allowed to deteriorate to the extent where emergency repairs are necessary, and where there is good reason to suspect that the property is going to be sold, wasted, taken out of state, misused, or destroyed if the court does not act to preserve it. A receiver can also be appointed in situations where it appears that no one with a legal right to manage certain property is present, or no mentally competent adult is entitled to hold it. A receiver is sometimes appointed to preserve property during litigation between two parties who appear to have an equal right to use the property but who are unwilling to acknowledge each other’s interest.
A judge can appoint a receiver following the filing of an application, or petition, with the court. In certain instances, all those who are interested in a case join together, and in the event that the court has jurisdiction over the property and the parties, an appointment can proceed upon their consent.
An application for the appointment of a receiver is often submitted by a creditor. It might be Fraud or collusion for a debtor to have a friendly creditor nominate an individual the debtor chooses. A receiver generally should not be appointed unless notice is served on all interested parties and a hearing is conducted where a judge determines the merits of the case. On good evidence that an emergency exists, however, a judge can grant the petition for a receivership and hold a hearing as soon as possible thereafter.