◀ Back    Trigild eTips Stipulating to a Receiver

Question: borrower is willing to stipulate to the appointment of a receiver. Is this a good idea?

Answer: It can be an excellent idea as it saves time, money and uncertainty. It can be a good carrot to hold out to the borrower in exchange for relieving the borrower of an obligation or right that you feel fairly certain you will not be able to get anyway. For instance, you have a borrower with a personal guarantee but the guarantee is of little value because of his financial position, a flaw in the loan documents, or something that cannot be legally enforced. Do not, however, agree to negotiate the terms of the Order Appointing Receiver.

We’ve often seen borrowers who are genuinely concerned about their employees and the receiver can give the borrower a comfort level that the employees will be taken care of. Also, borrowers are frequently past due on taxes (payroll, etc.) and, depending on the extent and cost, you may elect to assume those debts and relieve

Question: What are the odds of having a receiver appointed by ex parte action?

Answer: Generally judges will not appoint a receiver without notice to the borrower because it is considered an extreme action to take away possession of the borrower’s property without the borrower having a reasonable time to prepare a response. Therefore, often trying to appoint a receiver ex parte wastes time. We recommend that your legal counsel have a backup plan to schedule a hearing upon normal notice to the borrower. However, that being said, there are circumstances when you may want to move for an ex parte motion based on some “emergency” that endangers the value of the secured asset. Examples would include impending loss of a franchise, loss of a critical vendor or supplier, failure to meet a payroll, a taxing authority or other party has filed a lien, or otherwise given notice of potential action. Needless to say, the abandonment of the property would also be cause. The court will decide if your definition of an emergency is adequate.

Legal Definitions

Receiver: A disinterested person appointed by a court, or by a corporation or other person, for the protection or collection of property that is the subject of diverse claims.

Ex parte: (eks pahr-tee) Done or made at the instance and for the benefit of one party only, and without notice to, or argument by, any person adversely interested; of or relating to court action taken by one party without notice to the other, usu. for temporary or emergency relief.