When Should You Have A Receiver Appointed?

Receivership is a powerful tool for creditors in commercial collections and can be a very valuable tool before or after judgment. In Ohio, you don’t need a judgment in order to request an order from the court to get a receiver appointed.

While a creditor with an unsecured claim should always consider filing a lawsuit against the delinquent business to obtain a judgment, filing a motion for the appointment of a receiver to liquidate, or temporarily operate, the business may also be available to the creditor, depending on the circumstances. Receiverships can be used in situations in business, in situations where real or personal property is being rented, and in other situations.

Section 2735.01 of the Ohio Revised Code governs receiverships in Ohio. That section authorizes the courts in Ohio to appoint a receiver, under certain conditions. The circumstances that are of particular relevance to unsecured creditors that desire a court-appointed receiver to take control of a debtor’s property or business are:

(A) In an action by a vendor to vacate a fraudulent purchase of property, or by a creditor to subject property or a fund to his claim, or between partners or others jointly owning or interested in any property or fund, on the application of the plaintiff, or of a party whose right to or interest in the property or fund, or the proceeds thereof, is probable, and when it is shown that the property or fund is in danger of being lost, removed or materially injured;

(B) In an action by a mortgagee, for the foreclosure of his mortgage and sale of the mortgaged property, when it appears that the mortgaged property is in danger of being lost, removed, or materially injured, or that the condition of the mortgage has not been performed, and the property is probably insufficient to discharge the mortgage debt;

(C) After judgment, to carry the judgment into effect;

(D) After judgment, to dispose of the property according to the judgment, or to preserve it during the pendency of an appeal, or when an execution has been returned unsatisfied and the judgment debtor refuses to apply the property in satisfaction of the judgment;

(E) When a corporation has been dissolved, or is insolvent, or in imminent danger of insolvency, or has forfeited its corporate rights;

(F) In all other cases in which receivers have been appointed by the usages of equity.

R.C. 2735.01 also provides for the appointment of a receiver under other circumstances, less important to unsecured creditors. For example, if property encumbered by a mortgage is the subject of a foreclosure action, and the property is worth less than the debt that the property secures, the mortgage holder may move the court for the appointment of a receiver to take control of the property and its rentals and other income.

Courts in Ohio may appoint a receiver to carry other certain post-judgment remedies into effect, such as carrying out a prejudgment attachment or to prevent assets from being sold. Ohio courts have appointed a receiver for the specific purpose of carrying a judgment into effect. Receivers can bring and defend actions, take and keep possession of property, receive rents, collect and compromise demands, make transfers and do such acts as the court authorizes.

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