Chapter 8-9 Receivership

• Jurisdiction: United States

8-9 Receivership

8-9:1 Overview

A receiver is a person, appointed by the court, who receives and preserves property that is the subject of ongoing litigation.³³⁹ The appointment of a receiver is necessarily ancillary to another substantive cause of action. Because of the ancillary nature of receiverships, all receiverships are temporary in the eyes of the law and terminate following the adjudication of the dispute.³⁴⁰ Once appointed, a receiver acts as the agent of the trial court.³⁴¹ A receiver only has authority over property expressly mentioned in the trial court's order appointing the receiver.³⁴²

8-9:1.1 Related Causes of Action

Judicial Winding up of Partnership, Bankruptcy

MUST READ CASES & STATUTES

Tex. Civ. Prac. & Rem. Code Ann. §§ 64.001-64.108

Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014)

8-9:2 Elements

8-9:2.1 Common Law Appointment

(1) The receivership is necessary to preserve property or protect the rights of persons having claim to that property.

• The receivership is necessary to preserve property or protect the rights of persons having claim to that property.³⁴³

• This element requires findings that:

• The property is in danger of being lost, removed or materially injured;
and
• The extraordinary remedy of receivership is necessary to preserve the property.³⁴⁴

• All circumstances bearing on the necessity of the receivership must be considered by the court.
• A receiver is not necessary when:

• No advantage may be gained from the receiver's appointment;³⁴⁵
• There is an adequate remedy at law;³⁴⁶ or
• A less intrusive equitable remedy is available.³⁴⁷

(2) There is no adequate remedy at law.

• A receiver may only be appointed if there is no adequate remedy at law.³⁴⁸

8-9:2.2 Statutory Appointment

(1) Statutory grounds exist

• The appointment of a receiver may be governed by statute.
• Despite the legal nature of the statutes which authorize the appointment of receivers, an ex parte appointment of a receiver is also governed by the rules of equity.³⁴⁹

(1)(a) The Texas Civil Practice and Remedies Code

• A court of competent jurisdiction may appoint a receiver:

• In an action by a vendor to vacate a fraudulent purchase of property;³⁵⁰

• The applicant must:

• Be the plaintiff or a party to such suit;
• Have a probable interest in or right to the property or fund; and
• The property or fund must be in danger of being lost, removed or materially injured.³⁵¹

• In an action by a creditor to subject any property or fund to his claim;³⁵²

• The applicant must:

• Be the plaintiff or a party to such suit;
• Have a probable interest in or right to the property or fund; and
• The property or fund must be in danger of being lost, removed or materially injured.³⁵³

• In an action between partners or others jointly owning or interested in any property or fund;³⁵⁴

• The applicant must:

• Be the plaintiff or a party to such suit;
• Have a probable interest in or right to the property or fund; and
• The property or fund must be in danger of being lost, removed or materially injured.³⁵⁵

• In an action by a mortgagee for the foreclosure of the mortgage and sale of the mortgaged property, only if;³⁵⁶
• It appears that the mortgaged property is in danger of being lost, removed or materially injured; or
• The condition of the mortgage has not been performed and the property is probably insufficient to discharge the mortgage debt.³⁵⁷
• For a corporation that is insolvent, is in imminent danger of insolvency, has been dissolved, or has forfeited its corporate rights;³⁵⁸ or
• In any other case in which a receiver may be appointed under the rules of equity.³⁵⁹
• In all cases, the court has considerable discretion in appointing a receiver.³⁶⁰

(1)(b) The Business Organizations Code—Specific Property

• A court that has jurisdiction over specific property of a domestic or foreign entity may appoint a receiver in an action:

(1) By a vendor to vacate a fraudulent purchase of the property;³⁶¹
(2) By a creditor to subject the property or fund to the creditor's claim;³⁶²
(3) Between partners or others jointly owning or interested in the property or fund;³⁶³
(4) By a mortgagee of the property for the foreclosure of the mortgage and sale of the property, when:³⁶⁴

• It appears that the mortgaged property is in danger of being lost, removed or materially injured;³⁶⁵ or
• It appears that the mortgage is in default and that the property is probably insufficient to discharge the mortgage debt;³⁶⁶ and

(5) In which receivers for specific property have been previously appointed by courts of equity:³⁶⁷

• Additionally, a court may only appoint a receiver in one of the abovemen-tioned actions if:

• In (1), (2), or (3):

• The applicant shows that the property or fund is in danger of being lost, removed or materially injured;³⁶⁸

• Circumstances exist that are considered by the court to necessitate the appointment of a receiver to conserve the property or fund and avoid damage to interested parties;³⁶⁹
• All other requirements of law are complied with;³⁷⁰ and
• The court determines that other available legal and equitable remedies are inadequate.³⁷¹

(1)(c) The Business Organizations Code—Rehabilitation

• A district court in the county of the entity's registered office or principal place of business may appoint a receiver to rehabilitate an entity if:

• In an action by an owner or member of the domestic entity, it is established that:
• The entity is insolvent or in imminent danger of insolvency;
• The governing persons of the entity are deadlocked in the management of the entity's affairs, the owners or members of the entity are unable to break the deadlock, and irreparable injury to the entity is being suffered or is threatened because of the deadlock;
• The actions of the governing persons of the entity are illegal, oppressive or fraudulent;
• The property of the entity is being misapplied or wasted; or
• With respect to a for-profit corporation, the shareholders of the entity are deadlocked in voting power and have failed, for a period of at least two years, to elect successors to the governing persons of the entity whose terms have expired or would have expired on the election and qualification of their successors;

• In an action by a creditor of the domestic entity, it is established that:

• The entity is insolvent, the claim of the creditor has been reduced to judgment, and an execution on the judgment was returned unsatisfied; or
• The entity is insolvent and has admitted in writing that the claim of the creditor is due and owing;
• Courts of equity have traditionally appointed a receiver.³⁷²

• A court may only appoint a receiver in one of the abovementioned actions if:

• Circumstances

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