CHAPTER 9.06. Receiver

• Jurisdiction: United States

9.06. Receiver

A lender may apply to the Court of Chancery for the appointment of a temporary receiver pendent lite to preserve the property involved in litigation over its loan.⁴⁸ Although not necessary, Delaware mortgages often contain language providing for the appointment of a receiver in the event of default. The court will consider such receiver provisions in the mortgage when determining whether to appoint a receiv-er.⁴⁹ No case law in Delaware suggests that the lender is entitled to the appointment of a receiver as a matter of right.⁵⁰ Accordingly, the Court of Chancery will use its equitable powers and weigh the merits of each case.

The lender must make an application for the appointment of a receiver in a verified complaint it files with the court.⁵¹ The court may require the defendant to show cause why the receiver should not be appointed.⁵² After the hearing, and based on the facts of the case, the court will grant or deny the lender's application for the appointment of a receiver.⁵³ Any person who is appointed as a receiver by the court must be a resident of Delaware.⁵⁴ Once the receiver has complied with all orders and decrees of the court, the receiver may be discharged by the court upon the receiver's petition.⁵⁵

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Notes:

^[48] Lichens Co. v. Standard Commercial Tobacco Co., 40 A.2d 447, 451 (Del. Ch. 1944).

^[49] See Dover Associates Joint Venture v. Ingram, 768 A.2d 971, 973 (Del. Ch. 2000).

^[50] The author has seen the court appoint a receiver with no showing of need but merely on the basis of the loan documents providing for the appointment as a remedy.

^[51] Del. Ch. R. 149.

^[52] Id.

^[53] Id.

^[54] Del. Ch. R. 150.

^[55] Del. Ch. R. 168.