Receivership and Order Appointing Receiver in New York

What Is a Receivership or Order Appointing Receiver?

Background

“Article 64 of the CPLR supplies the provisional remedy of receivership. The Article 64 receiver is a person appointed by the court to take control of designated property and see to its care and preservation during litigation.... The powers of a temporary receiver, which are more circumscribed than those of a permanent one, are set forth in CPLR 6401(b).” (Wells Fargo Bank v. Ambrosov, 2010 N.Y. Slip Op. 50008, 2 [N.Y. Sup. Ct. 2010] citing generally Siegel, New York Practice 4th § 322 Temporary Receivership.)

“Unlike a CPLR Article 64 temporary receiver, whose predominant duty is to ‘take and hold’ of the property that is the subject of the receivership during the pendency of an action so as to preserve it and protect against misappropriation, waste or other harmful dissipation, a CPLR 5106 post-judgment receiver's sole duty is to enforce the terms of the judgment with respect to such property, including any direction for its sale.” (Bethpage Fed. Credit Union v. Fiorello, 2015 N.Y. Slip Op. 25068, 4 citing Richard C. Reilly, Practice Commentaries McKinney's Cons. Laws of NY, Book 7B, CPLR C5228:4; C5106:1.)

General Information for Complaints and Motions

“CPLR § 6401(a) provides that a receiver may be appointed ‘upon motion of a person having an apparent interest in the property which is the subject of an action in the Supreme Court ... where there is danger that the property will be removed from the state, or lost, materially injured or destroyed.’” (Id.)

“It is well established that ‘courts ... exercise extreme caution in appointing receivers ... because such appointment [generally] results in the taking and withholding of possession of property from a party without an adjudication on the merits.’” (Jacobowitz v. Jacobowitz (2004) 5 Misc 3d 1012 (A) citing Hahn v. Garay (1996) 54 A.D.2d 629.)

Accordingly, “the provisional remedy of receivership may be invoked only in cases where the moving party has made a clear evidentiary showing of the necessity of conserving the property and protecting the party's interests.” (Id., citing, Kristensen v. Charleston Square, Inc. (2000) 273 A.D.2d 312.)

“The drastic remedy of the appointment of a receiver is to be invoked only where necessary for the protection of the parties ... [t]here must be danger of irreparable loss, and courts of equity will exercise extreme caution in the appointment of receivers, which should never be made until a proper case has been clearly established.” (Id. citing, In Re Armienti (2003) 309 A.D.2d 659.)

Property as Subject Matter Requirement

“A receiver may only be appointed in an action which has property as its subject matter, therefore, it is the general rule that a receiver cannot be appointed in an action for a sum of money. If, however, the action effects specific money, e.g., the proceeds of the sale of specific securities, a receiver over the proceeds may be appointed (Wells Fargo Bank v. Ambrosov, 2010 N.Y. Slip Op. 50008, 3 [N.Y. Sup. Ct. 2010] citing generally Joseph M. McLaughlin, Practice Commentaries, McKinney's CPLR C6401:1 at 406 citing Meurer v. Meurer (1964) 21 A.D.2d 778.)

Standard of Review and Burdens of Proof

“The appointment of a receiver pursuant to New York's CPLR 5228(a) is wholly a matter of the court's discretion.” (Booth v. Ling–Shan Li (2012) 36 Misc. 3d 1212 citing United States v. Zitron (1990) 1990 WL 13278.)

“In exercising that discretion, however, New York courts have considered such factors as:

alternative remedies available to the creditor ...
the degree to which receivership will increase the likelihood of satisfaction ... and
the risk of fraud or insolvency if a receiver is not appointed.”

(Id.)

“Consideration of these factors bolsters the notion that a motion to appoint a receiver should only be ‘granted ... when a special reason appears to justify one.’” (Booth v. Ling–Shan Li (2012) 36 Misc. 3d 1212 citing Seigel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C5228:1 at 324.)

The Court’s Decision

“[T]he powers and duties of the receiver appointed pursuant to the court's equity powers are formulated as a matter of judicial discretion and the court ‘is vested with inherent plenary power to fashion any remedy necessary for the proper administration of justice.’” (P Morgan Chase Bank v. Faith Ministries, Inc., 2010 N.Y. Slip Op. 31902, 9-10 citing Domansky v. Berkovitch (1999) 259 A.D.2d 331; 64 B Venture v. American Realty Co. (1993) 194 A.D.2d 504.)

“Courts do proceed with ‘extreme caution’ in determining whether to appoint a temporary receiver because of the drastic incursion it imposes on the defendant's interests prior to determination of the underlying action on the merits.” (Mitzvah B'Hidur, LLC v. 13th Ave. Seforim ONC., 2018 N.Y. Slip Op. 31916, 3 citing Hahn v. Garay (1976) 54 A.D.2d 629.)

“The appointment must be ‘necessary’ to protect the property from waste, dissipation or disappearance. In re Armienti (2003) 309 A.D.2d 659, 661.) Thus, courts require clear and convincing evidence of the danger of irreparable loss or damage. See, e.g., McBrien v. Murphy (1989) 156 A.D.2d 140.) They are particularly hesitant to appoint a receiver with respect to a profitable, ongoing business.” (See, e.g., Martin v. Donghia Associates, Inc. (1980) 73 A.D.2d 898.)

Documents for Receivership (Order Appointing Receiver) in New York

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Redhill Biopharma Ltd. v. Kukbo Co., Ltd. document preview

EXHIBIT(S) - AA - Part 4 - RedHill 20-F Annual Report RHB00135740 - RHB001…

92 pages

FILED: NEW YORK COUNTY CLERK 04/30/2024 12:11 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 157 RECEIVED NYSCEF: 04/30/2024 EXHIBIT AA Part 4 RHB00135740 - RHB00135830 FILED: NEW YORK COUNTY CLERK 04/30/2024 12:11 PM INDEX NO. 653200/2022 NYSCEF DOC. NO. 157 …