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AUTHORITY TO APPOINT A RECEIVER

The Court’s authority to appoint a Receiver is inherent in its equitable powers.  Ins. Mgnt, Inc. v. Mcleod, 194 So. 2d 16, 17 (Fla. 3d DCA 1967) (holding “ the power to appoint a Receiver is inherent in equity jurisdiction and its exercise lies in the sound discretion of the chancellor to be granted or withheld according to the facts and circumstances of the particular case.”)

In Edenfield v. Crisp, 186 So. 2d 545, 549 (Fla. 2d DCA 1966) “The power to appoint a receiver is always one that is inherent in a Court of equity . . . . ”


PROPERTY HELD BY RECEIVER

Funds and property in the Receiver’s possession are considered to be in the hands of the Court.  Once property is placed under the control of the court, by sequestration or by the appointment of a receiver, the court controls transfer of the property subject to the sequestration or receivership. Sunland Mortgage Corp. v. Lewis, 515 So. 2d 1337- 1339 (Fla. 5th DCA 1987).

The appointment of a Receiver does not itself affect or determine any rights in the property subject to the Receivership and a Receiver’s power does not extend to any property that does not belong to the person or entity subject to the Receivership.  Hamilton v. Flowers, 183 So. 811-817 (134 Fla.328) (Fla. 1938).

Property in the custody of the Receiver is property in the custody of the law, and cannot be reached by the parties in the midst of litigation, execution, or a similar process as long as it is held in this way in the absence of statutory authority.  Tippins v. Belle Mead Dev.t Corp., 150 So. 719, 721 (112 Fla. 372) (Fla. 1933).  (explaining  that  property  in  the  receivership  estate  is held  in  custodia  legis  and  thus  “cannot  be  reached  by  execution  or  other  similar  process  so  long  as so  held,  in  the  absence  of  statutory  authority.”)

When “property is placed under the control of the court, through appointment of a receiver,” the Court maintains and controls the transfers of property.   In re Mariner Enter. of Panama City, Inc., 131 B.R. 190, 191 (Bankr. N.D. Fla. 1989).  “[Creditor] is entitled to sequestration of the rental income until a final judgment is entered.”

A receiver is an arm of the court and the funds in its possession are as though they were in the hands of the court and held for the benefit of all lawful claimants. Columbia Bank for Coop. v. Okeelanta 1339 Sugar Coop., 52 So. 2d 670 (Fla. 1951).

Once property is placed under the control of the court through appointment of a receiver, no creditor may obtain preference by any lien rendered subsequent thereto even if the suit under which the judgment lien is acquired was commenced prior to the date of the order appointing the receiver. Modart, Inc. v. Penrose Industries Corp., 404 F.2d 72 (3rd Cir.1968); Union Carbide Corp. v. Kentuckiana Sales Co., 423 S.W.2d 243 (Ky. 1968).

A sale of property by the receiver may be conducted when it is necessary, can be done efficiently, and can be done with adequate protection of the rights of the parties.  “A sale by a receiver is ordinarily improper, but there are instances in which a sale by receiver is expedient and proper.”  Fugazy Travel Bureau, Inc. v. State of Florida, 188 So. 2d 842, 844 (Fla. 4th DCA 1966).

Bailey v. Treasure, 462 So. 2d 537, 529, 540  (Fla. 4th DCA 1985) (holding that “the sale should be supervised closely by the Court, however, and if the proposed sale is for less than the amount for which the property could reasonably be sold, the sale should not be confirmed except on a showing of necessity”)

Turk v. Barns, 264 So. 2d 875,876 (Fla. 3d DCA 1972) (holding that “it is within the court’s discretion to attempt to secure the most advantageous sale possible, and in the absence of reversible error or abuse of discretion, the court’s supervision of the sale will not be overturned).

However, property should only be turned over when the interests in property have been fully adjudicated.  If a suit is discontinued, then the Receiver is not discharged.  Real Estate Apartments, Ltd. v. Bayshore Garden Apartments, Ltd., 530 So.2d 977, 1978 (Fla.  2d DCA 1988).


RECEIVER AS AGENT OF THE COURT

A Receiver is an agent for the Court that appoints him, rather than a party involved in litigation.   Knickerbocker Trust Co. v. Green Bay Phosphate Co., 56 So. 699 (62 Fla. 519) (Fla. 1911) (holding that “a receiver is the agent of the court, and those who deal with him do so with reference to his authority as a receiver, the nature and extent of which” they must take notice).

The Receiver cannot take sides in the underlying case.  Lehman v. Trust Co. of Am.  49 So. 502-3, (57 Fla. 473) (Fla. 1909) (holding that “a receiver, must be a person who is indifferent between the parties litigating”).

A receiver is not a party in the cause. The receiver is an officer of the court and is subject to the supervision and control of the court. Eppes v. Dade Developers, 1936, 126 Fla. 353.

Fortune Int’l Hospitality, LLC v. M. Resort Residences Condo. Ass’n., Inc., 77 So. 3d 741,744  [2011 WL 5864545] (providing that “the linchpin of a receivership is the principle that a receiver, like the appointing court itself, is a neutral party in the underlying dispute”).


RECEIVER’S BOND

Rescom Invs., Inc. v. Strategic Consulting & Managing, Inc., 635 So. 2d 1061, 1062 (Fla. 2d DCA 1994);  Cohen v. Rubin, 554 So. 2d 4.5 (Fla. 3d DCA 1989) (holding that “the bond generally must be of a sufficiently high amount to protect the opposing party from loss should it ultimately be determined that the Receivership was improvident”).

Comprop Inv.- Props., Ltd. v. First Tex. Sav. Ass’n, 534 So. 2d 418 (Fla. 2d DCA 1988).  “Florida courts have held that the applicant for the appointment of a receiver should be required to provide a bond if the receiver is appointed, sufficient in amount to protect the opposing party from any losses sustained should it ultimately be concluded that the appointment of the receiver was improvident, unless exceptional circumstances are shown which preclude the need or ability to furnish such a bond.” The bond requirement may be waived if exceptional circumstances exist, which “preclude the need or ability to furnish such a bond.”


THE RECEIVERSHIP ESTATE: ACCOUNTING

If the Receiver does not have the money available to pay the property taxes, then the Receiver should report the issue to the Court so that it may take appropriate action.  Gibson v. Cent. Farmers’ Trust Co., 156 So. 714, 716 (116 Fla. 295) (Fla. 1934).

United States. v. Associated Developers of Fla. Inc., 400 So. 2d 17, 19  (Fla. 1st DCA 1980) (holding that “a business operating at a loss is still obligated to account for trust funds collected during the operation of the business to ensure the payment of taxes prior to any other indebtedness”).

Receivership certificates are usually a first lien against the Receivership Estate, but a Court cannot hold that the certificates have priority over a lien created by a prior judgment on property that had been conveyed by the judgment debtor.  Scheiner v. Adamco, Inc., 81 So. 2d 205 (Fla. 1955).

In addition, it is understood that debts arising from operating expenses, including those arising during the period immediately prior to appointment of the Receiver, are preferred claims that have preference even over preexisting mortgages and other liens.  City of Kissimmee v. Dep’t of Envtl Regulation, 753 So. 2d 770, (Fla. 5th DCA 2000).

Orr v. Dade Developers, 190 So. 20,25 (138 Fla. 122) (Fla. 1939) (holding that “when there is no equity in the property, necessary expenses incurred in preserving property have priority over any liens acquired after the date of the appointment of the Receiver”).

Knickerbocker Trust Co. v. Green Bay Phosphate Co., 56 So. 699, (62 Fla. 519) (Fla. 1911) (holding that “all expenses duly authorized and properly incurred by the receiver in the discharge of such duties, including a reasonable compensation for [the receiver’s] services, may constitute a first charge upon the income of the property, if any income, or if none, upon the corpus of the property”).

Florida Const. & Realty Co. v. Pournell, 80 So.54 (76 Fla. 395) (Fla. 1918) (holding that “costs and expenses of a Receivership have a preference even over secured claims.  If an operating Receivership is authorized, the operating expenses are a first charge on income and, in certain circumstances, the corpus”).

Director of Office of Thrift Supervision, U.S. Dept. of Treasury v. Lopez, 141 F.R.D. 165 (S.D. Fla. 1992) (holding that “a Court is vested with substantial discretion in who will pay the costs of the Receivership”).


RECEIVER’S POWERS AND IMMUNITY

Capozzi v. Scheiner, 77 So.2d 424 (Fla. 1954) (holding that “the Receiver may appropriately petition the Court for instructions when in doubt as to the respective rights of the claimants”).

A Receiver obtains the rights of actions and remedies that were possessed by the person, corporation, or entity in Receivership, but the Receiver needs the consent of the appointing court.  Camp v. First Nat’l Bank, 44 Fla. 497 (Fla. 1902).  If such Court does not authorize a Receiver to maintain a position in the cause of action, then the Receiver’s involvement in the cause of action is void.  Bayview Homes Co. v. Sanders, 130 So. 234, 235 (102 Fla. 516) (Fla. 1931).

As an agent of the Court, a Receiver is granted immunity for actions taken in his capacity as Receiver, and cannot be sued without leave of the Court appointing him or her in the absence of an enabling statute.  Murtha v. Steijskal, 232 So. 2d 53, 55 (Fla. 4th DCA 1970).

Estate of Studstill v. Am. Package Co., 218 So. 2d 769, 771 (Fla. 4th DCA 1969) (creditors sought to sue the Receiver, but permission was denied as it appears clearly that the claim is without foundation or that the action would serve no purpose.);  Moss v. Ten Assoc., 524 So. 2d 480 (Fla. 3d DCA 1988) (holding that “in the absence of an enabling statute, generally, a Receiver appointed by judicial authority may not be sued without leave of the appointing Court”).

Athanason v. Hubbard, 218 So. 2d 475, 477 (Fla. 2d DCA 1969) (holding that “the receiver is not obligated to carry out the executory contracts of the Receivership unless he or she elects to be bound by them.  Also, holding that “a receiver is not liable for loss resulting from his good faith reliance on the advice of counsel.”


RECEIVER AND RECEIVER’S PROFESSIONALS COMPENSATION

Lewis v. Gramil Corp., 94 So. 2d 174, 176 (Fla. 1957) (holding that “a Receiver is entitled to reasonable compensation for service properly performed”).

Frank v. Feller, 188 So. 2d 17, 18 (Fla. 3d DCA 1966) (holding that “the amount to be rewarded as compensation is within the sound discretion of the Court.  The Court may consider the difficulty of administration, the amount of property involved, and the diligence of the Receiver in carrying out the duties”).

Whitehurst v. Owens, 110 Fla. 113, 116 (Fla. 1933) (holding that a receiver’s compensation is a cost of the receivership estate and may be taxed as such after a proper motion).

In Lewis v. Gramil Corp., 94 So. 2d 174, 177 (Fla. 1957) holding that “a Receiver may be allowed reasonable amounts for attorneys’ fees even if the results of the litigation are adverse to the Receivership Estate, and even if prior Court approval was not obtained before the attorney was employed.”

Receivers have a right to compensation for their services and expenses (including a reasonable sum for attorney’s fees).  Feemster v. Schurkman, 291 So.2d 622, 629 (Fla. 3rd DCA 1974).

A receiver is generally entitled to compensation from the estate for legal service protecting the estate. Tanner v. Ledington, 513 So. 2d 255, 256 (Fla. 2nd DA 1987).

It is generally held that a receiver is entitled to compensation from the estate for the protection of the rights of the estate.   In re Fredcris, Inc., 108 So.2d 901, 904 (Fla. 3rd DCA 1959).