10.9 Property in the Hands of a Receiver

• Library: Enforcement of Liens and Judgments in Virginia (Virginia CLE) (2019 Ed.)

10.9 PROPERTY IN THE HANDS OF A RECEIVER

10.901 The Receivership Does Not Alter Creditor Priorities. Subject to the special rules of Fosdick v. Schall, ¹⁵³ the creation of a receivership and appointment of a receiver do not alter a creditor's vested rights, nor does the receivership affect the order of priority with respect to existing creditor liens. ¹⁵⁴ In

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Rawls, Inc., ¹⁵⁵ the court held that a lien, which the creditor perfected two hours before the appointment of an emergency receiver with the knowledge that a motion to immediately appoint a receiver would be made that day, was valid and created a priority lien over the general creditors who did not attempt to perfect before the appointment of the receiver.

10.902 The Assets Held by the Receiver Are Immune from Creditor Interference. It is a general rule that no lien can be perfected after the appointment of a receiver. ¹⁵⁶ Moreover, judgments obtained after the appointment of a receiver are not liens on the receivership assets. ¹⁵⁷ The receivership thus acts as a de facto "automatic stay," although the courts customarily enter injunctions on request.

10.903 The Receiver Holds the Property Subject to the Court's Directions. A receiver holds the subject matter property in custodia legis, and the receiver's possession of the property is derived from the orders of the court that appointed the receiver. ¹⁵⁸ The receiver has control over only the real estate identified by the court because "an order appointing a receiver of realty has no extraterritorial operation and cannot affect the title of real property which is located beyond the jurisdiction of the court by which the order was made." ¹⁵⁹ Title to subject matter property does not pass to the receiver, but remains with the dissolved corporation or other debtor. ¹⁶⁰ Finally, contracts entered into by the receiver with respect to property cannot be annulled at the pleasure of another state court, as long as the contracts are within the scope of the receiver's designated powers. ¹⁶¹

10.904 Preservation and Distribution of Real Estate.

A. Completing Development of the Entity's Real Property. The cases discussed above demonstrate that there is authority for the receiver to complete the construction of buildings or development of property. ¹⁶² This is especially true if the failure to complete the buildings will result in great "loss and

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damage" to the property. ¹⁶³ Nevertheless, a receiver should first seek permission from the court before expending funds to make repairs to property on the real estate. ¹⁶⁴

B. No Power to Partition Real Estate and Then Distribute It in Kind. A partition in kind divides lands between two or more persons who jointly own the land as...