Receivers enjoy "quasi-judicial immunity" for good faith acts undertaken in the course of their official Court-ordered capacity. To preserve this immunity a Receiver must maintain his independence and may not allow either plaintiff or defendant to direct or influence his actions. The Receiver's first loyalty must be to the property and to the health, safety and welfare of its occupants, whether residential or commercial. He must operate a property to the best of his ability, in a manner consistent with the "prudent man" rule and the prevailing standard of care for property managers wherever the property is located.

There is a constant push and pull from both sides during a Receivership proceeding. For example, money spent on property improvements during a Receivership reduces the cash distribution available to the lender, and increases the deficiency of the Trustor. It's in the best interest of the Trustor that no improvements be made, and that all cash flow be used to reduce the debt. The lender's interest may be best served by the opposite. The Receiver must decide, based on the best interests of the property, and be prepared to defend those decisions before the judge who appointed him, if and when his actions are challenged. (Choosing a Receiver who knows his way around the courtroom - and who can appear pro se - can translate into substantial savings for the receivership estate.)

As a ministerial officer of the court, a Receiver is second in power only to the judge who appointed him. Well-drafted Receivership Orders typically contain a provision requiring owners and their agents to turn over to the Receiver all security deposits they collected. Failure to turn over deposits is best dealt with by the Receiver filing an Order to Show Cause why the Trustor should not be held in contempt of court for failing to turn over the money. It's no guarantee that you'll get the deposits, but the "fright factor" of the OSC has worked for us. The Contempt OSC may be the most "powerful" tool in the Receiver’s hands.

Another power conferred by a typical Receivership Order is the power to seize and inspect records of the Trustor "or related entities". The Receiver may once again need to file an OSC to compel production, especially when the records sought are held by financial institutions, but the process is simple and the results impressive.

The power of the Receiver to file actions for the protection and conservation of Receivership assets is customarily found in well-drafted Orders. In a recent case this Receiver filed an OSC against a Trustor for "conversion of Receivership assets". The OSC is a quick and "clean" exercise of the Receiver’s powers not otherwise available to litigants without a Receiver. One more reason a lender should never foreclose a property without a Receiver being appointed.

See our recommended Form for Receivership Order

© 2005 -2010 Richard K. Olsen
702 East Orangewood Ave , Phoenix, Arizona  USA  85020
(602) 216-6600,  Fax : 1-888-252-3832,   rko@cox.net 
web design by Web-Writer