A Receiver is an executive officer of the court. See Union Trust Co. v. Illinois M. R. Co., 117 U.S. 434, 469 6 S. Ct. 809, 29 L. Ed. 963 (1886); Ramirez v. Burnside & Rishebarger, L.L.C., 2005 Tex. App. LEXIS 6065, at *3 (Tex. App.—San Antonio Aug. 3, 2005, no pet.) (A receiver: 1) is an agent of the court; 2) is intimately associated with the judicial process; and 3) exercises discretionary judgment comparable to that of the judge); Shell Petroleum Corp. v. Grays, 87 S.W.2d 289, 292 (Tex. App.—Waco 1935, writ dism’d) (A receiver is the officer of the court that appoints him and derives all of his authority from its decrees and orders and is accountable to it alone for the faithful administration of his office…”); Delcourt v. Silverman, 919 S.W.2d 777, 781 (Tex. App.—Houston [14th Dist.] 1996, writ denied) (Court appointed receivers are “Officers of the court who are integral parts of the judicial process”); Phillips v. Lamar, 27 Ga. 228 (Ga. 1859) (“[A]receiver is a special officer of a court”); Schwartz v. Keystone Oil Co., 25 A. 1018, 1018-1019 (Pa. 1893) (“A receiver is the officer, the executive hand, of a court of equity.”); Farmers’ Loan Co. v, Pac. R.R. Co., 48 P. 706,707 (Or. 1897) (A receiver is more than a mere custodian of the property, like a sheriff holding under a writ); Walsh v. Raymond, 20 A. 464 (Conn.1889) (“A receiver is uniformly regarded as an officer of the court. He is the servant to whom the court entrusts the property in custodia legis, of which the court itself is the guardian. He is regarded as the executive officer of a court of chancery…”); see State ex rel. Burkhardt v. Brown, 1988 Ohio App. LEXIS 2656 (Ohio App. June 30, 1988):
“A duly appointed receiver is merely a ministerial officer, a servant, agent, creature, arm, or hand of the court from which he received his appointment for the benefit of whoever may be ultimately determined to be entitled to the subject of the receivership…”
A Receiver is a public servant entitled to the same protection as other public servants. See State v. Weed, 2012 Tenn. Crim. App. LEXIS 600 (2012) (“[T]he defendant, a licensed attorney, was serving as a receiver for various types of receivership estates…In cases where the defendant was acting as a receiver in this capacity he was acting as a public official or public servant.”); State v. Truman, 4 S.W.2d 433, 435 (Mo. 1928) (“A receiver appointed by the Federal Court is a Federal officer.”); Gohe v. State, 2011 Tex. App. LEXIS 2840, at *9 (Tex. App.—Fort Worth 2016, pet. ref’d) (Purpose of the Texas retaliation statute – Tex. Penal Code Ann. § 36.06(a)(1)(A) – is to encourage a certain class of citizens to perform vital public duties without fear of retribution, protecting public servants, such as Judges, and applies to threats made both in and out of court).
A Receiver is the medium through which the court acts. See Cantilo & Bennett, L.L.P., 492 S.W.3d 755, 760-761 (Tex. App.—Austin 2016, pet. denied); Spigener v. Wallis, 80 S.W.3d 174, 183 (Tex. App.—Waco 2002, no pet.) (“The receiver is the agent of the trial court…”); Texas Trunk Railway Co. v. Lewis, 16 S.W.647 (Tex. 1891) (“When the court in such cases appoints a receiver… The receiver then becomes merely an agent through whom the court acts…”).
A Receiver is a disinterested person. Estate of Hoskins, 501 S.W.3d 295, 302 (Tex. App.—Corpus Christi 2016, no pet.) (Citations omitted) (“By statutory definition—as well as necessity—a receiver must be both a non-party and disinterested in the outcome of the case.”); Zanes v. Mercantile Bank & Trust Co., 49 S.W.2d 922, 928 (Tex. Civ. App.—Dallas 1932, writ ref’d) (Receiver “is an indifferent person, between the parties to a cause…”); cf. Kitchens v. Gassaway, 128 S.W. 679 (Tex. Civ. App. 1910) (The receiver’s counsel should be entirely disinterested in the matter). However, “in an involuntary proceeding as in case of a receivership… appointed by the court, the proceeding is adverse to the debtor. The receiver is the embodiment of creditors; he stands as and for them.” Central-Penn Nat’l Bank v. N.J. Fid. & Plate Glass Ins. Co. 119 N.J. Eq. 265 (Ch. 1935).
The Receiver is often referred to as the “hand” or “arm” of the Court. See Temple v. Glasgow, 80 F. 441, 447 (4th Cir. 1897) (“The receiver is but the hand of the court itself.”); Durand & Co. v. Howard & Co., 216 F. 585, 588 (2nd Cir. 1914) (“The receivers are but the arm and the hand of the court, a part of the machinery of the court to work out the ends of justice.”); Davis v. Bayless, Bayless & Stokes, 70 F.3d 367, 373 (5th Cir. 1995) (“Court appointed receivers act as arms of the court…”); In the Interest of A.W.L., 2018 Tex. App. LEXIS 509, at *16 (Tex. App.—Dallas Jan. 17, 2018, no pet.) (“Court-appointed receiver acts as an arm of the court and is immune from liability for actions grounded in his conduct as receiver… and only lose derived immunity when they act in the “clear absence” of their jurisdiction.”); Davis v. West, 317 S.W.3d 301, 307 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (Court-appointed receiver acts as an arm of the court); Accord Durand & Co. v. Howard & Co., 216 F. 585, 588 (2nd Cir. 1914) (“The receivers are but the arm and the hand of the court, a part of the machinery of the court to work out the ends of justice.”); cf. Hamm v. J. Stone & Sons Live-Stock Co., 35 S.W. 427, 428 (Tex. Civ. App.—San Antonio 1896, no writ) (“The receiver is a servant of the court from which he derives his power”). In re Thalmann, 469 B.R. 677, 683 (Bankr. S.D. Tex. 2012);(Turnover receivers [appointed under Texas Civil Practice & Remedies Code § 31.002] act as officers of the court, subject to that Court’s control, to collect the Judgment that the Court awarded.) cf. Ranking Spicer & Pegler’s The Rights and Duties of Liquidators, Trustees and Receivers, p. 363 (22nd ed. 1958) (After the creditor has obtained judgment, the appointment is made to enable the creditor to secure payment of the judgment); Accord Smith v. Meader Pen Corp., 255 A.D. 397, 399 (N.Y. App. Div. 1938) (“[R]eceiver steps into the shoes of the debtor, and is vested with his property as the arm of the court for the benefit of the creditor.”).
The Receiver is presumed to “do the right thing.” Brand v. Fernandez, 91 S.W.2d 932, 940 (Tex. Civ. App.—San Antonio 1935, writ dism’d by agreement) (“This court must presume that the receiver, an arm of the court below, will proceed in good faith…”); cf. Madison v. Phillips Petr. Co., 88 F.2d 515, 518 (5th Cir. 1937) (Person “entitled to rely upon the presumptions that sworn officers of the law would do their duty…”).
A Receiver has judicial immunity. Because a receiver is the hand of the Court, receivers are protected by judicial immunity. See Glasstex, Inc. v. Arch Aluminum & Glass Co., 2016 Tex. App. LEXIS 1869, at *10-11 (Tex. App.—Corpus Christi Feb. 25, 2016, no pet.) … (“When a receiver acts as an arm of the court and the suit is based on actions taken within the scope of the receiver’s authority, as in this case, derived judicial immunity shields the court-appointed receiver.”); Rehabworks, LLC v. Flanagan, 2009 Tex. App. LEXIS 1394, at *7-8 (Tex. App.—Austin Feb. 26, 2009, pet. denied) (“Like a court-appointed bankruptcy trustee acting within his authority as trustee, a court-appointed receiver acts as an arm of the court and is immune from liability for actions grounded in his conduct as receiver.”); See generally Dall. County. v. Halsey, 87 S.W.3d 552, 554 (Tex. 2002) (citations omitted):
“When entitled to the protection of derived judicial immunity, an officer of the court receives the same immunity as a judge acting in his or her official judicial capacity — absolute immunity from liability for judicial acts performed within the scope of jurisdiction. The policy reasons for judicial immunity are also implicated when a judge delegates or appoints another person to perform services for the court or when a person otherwise serves as an officer of the court. The person acting in such a capacity also enjoys absolute immunity, known as derived judicial immunity.”
Logsdon v. Owens, 2016 Tex. App. LEXIS 6171, at *5 (Tex. App.—Fort Worth June 9, 2016, no pet.) (“When a function is entitled to derived judicial immunity, that absolute immunity covers ‘every action taken with regard to that function—whether good or bad, honest or dishonest, well-intentioned or not.’”); Accord Brown v. Tennessee, 2013 U.S. Dist. LEXIS 120064, at *17 (M.D. Tenn. Aug. 23, 2013) (Judicial immunity protects receivers from being held civilly liable for their judicial acts, even though their acts may be in excess of their jurisdiction or allegedly done maliciously or corruptly).
Although the Judge may take suggestions for who to appoint as Receiver, the selection of who serves as Receiver is the Judge’s choice. See Akin, Gump, Strauss, Hauer and Feld, L.L.P. v. E-Court, Inc., 2003 Tex. App. LEXIS 3966, at *18 (Tex. App.—Austin May 8, 2003, no pet.) (“At its core, [a judge’s] discretion means choice.”); Fite v. Emtel, Inc., 2008 Tex. App. LEXIS 7343, at *27 (Tex. App.—Houston [1st Dist.] Oct. 2, 2008, pet. denied) (Trial Court has discretion to determine if Receiver is qualified to serve); See, e.g. SEC v. Current Fin. Servs., Inc., 783 F. Supp. 1441, 1446 (D.D.C. 1992) (“In the hope that the parties can agree upon an individual to serve as receiver, the Court will allow seven days within which to submit a joint recommendation. If no agreement can be reached, each side may propose two names. The Court will select a receiver from the proposed candidates or will name its own choice.”). However, the Judge must employ procedural safeguards to insure that appointments “are made impartially and on the basis of merit.” See Texas Judicial Ethics Opinion No. 290 (2004); Vincent R. Johnson, America’s Preoccupation with Ethics in Government, 30 St. Mary’s L. J. 717, 737 (1998) (“[J]udges are precluded from making appointments on any basis except that of merit.”) (Citing ABA Model Code of Judicial Conduct Canon 3C(4) (1998). The need for merit selection is heightened in Receiverships, given the judicial acknowledgement that Receiverships are complex. See S.E.C. v. W. L. Moody & Co. Bank, 374 F. Supp. 465, 484 (S.D. Tex. 1974), aff’d without opinion, 519 F.2d 1087 (5th Cir. 1975) (“An equitable receivership is by its very nature, a legally complex process.”)
The Texas Receivership Statute (Chapter 64 of the Texas Civil Practice & Remedies Code §64.021(a)(1)-(2)) requires that a Receiver must:
“be a citizen and qualified voter of this state at the time of appointment; and not be a party, attorney, or other person interested in the action for appointment of a receiver.”
However, an objection to the appointment of a “person interested in the action” can be waived, if the objection is not “seasonably” made. See James v. Roberts Tel. & Electr. Co., 206 S.W. 933, 935 (Tex. Comm’n App. 1918, judgm’t adopted).
A receiver must maintain actual residence in Texas during the receivership. Tex. Civ. Prac. & Rem. Code § 64.021(c).
When the Judge signs a Receivership Order, the Receiver gains the immediate right to possession and control of property. The signing of a Receiver Order perfects a lien in the judgment debtor’s non-exempt property and establishes the Receiver’s control of that property. Meaning, all nonexempt property comes into the constructive possession of the court in which the receivership is pending as of the signing of the receivership order. First Southern Properties v. Vallone, 533 S.W.2d 339, 341-343 (Tex. 1976); Texas Trunk Railway Co. v. Lewis, 16 S.W. 647, 648-649 (Tex. 1891) (“[P]ossession of the property was not essential to the right of the court to control it… The order of the court either impliedly or expressly takes the title from the parties and rests it in the receiver from that moment”); Texas American Bank/West Side v. Haven, 728 S.W.2d 102, 104 (Tex. App.—Fort Worth 1987, writ dism’d w.o.j.) (Once a receiver is appointed, the judgment debtor’s property is in custodia legis, or in the custody of the court); Ranking Spicer & Pegler’s The Rights and Duties of Liquidators, Trustees and Receivers, p. 364 (22nd ed. 1958) (“The appointment of the Receiver operates as an injunction to restrain the judgment debtor from himself receiving moneys due and prevents him from dealing with the money to the prejudice of the judgment creditor and receiver.”); Huffmeyer v. Mann, 49 S.W.3d 554, 560 (Tex. App.—Corpus Christi 2001, no pet.) (“The title of the receiver is of the date at which it is ordered that a receiver be appointed. Then the title of the parties to control dies, and the title of the court and of its agent and officer immediately succeeds.”); Accord Dickie v. Flamme Bros., 560 N.W.2d 762, 767 (1997) (“Once appointed, a receiver becomes entitled to the custody and control of a debtor’s property.”); See generally In re Meter Maid Indus., Inc., 462 F.2d 436, 438 (5th Cir. 1972) (The doctrine of custodia legis refers to the power of court to assume complete control over the Debtor’s assets). Any unauthorized transfers of property made after a Receivership Order is signed are not merely voidable, they are void. Title does not transfer. Southern Properties at 341.
Unless the Receivership Order limits the authority of the Receiver, the Receiver takes over all the judgment debtor’s property rights. Sunflower Oil Co. v. Wilson, 142 U.S. 313, 325, 12 S. Ct. 235 (1892) (“By his order of appointment, the receiver was authorized to take possession of the money and assets and all other rights and property of the railway company, wherever the same might be found, including its equitable interests, things in action, and other effects; and he is as much entitled to recover moneys due upon contracts made…”); Pa. Tpk. Com. v. Evans, 13 Pa. D. & C.2d 290, 298-299 (C.P. 1957) (“A debtor in Receivership is no longer in control of its own property. The receiver stands in the shoes of the corporation or person whose property is in receivership with exactly the same rights and obligations, with respect to such property, that such person had at the inception of the receivership…”); Rich v. Cantilo & Bennett, L.L.P., 492 S.W.3d 755, 761 (Tex. App.—Austin 2016, no pet.) (Receiver “stands in the shoes” of the Debtor).
When the Receivership is over an entity, the Receiver displaces management of that judgment debtor and any entity wholly owned by that judgment debtor. See United States v. Florida, 178 F. Supp. 627, 632 (E.D. Ark. 1959) (“With the receiver in control of the stock, he can exercise all rights that the owners thereof could exercise.”); cf. In re Statepark Building Group, Ltd., 316 B.R. 466, 471 (Bankr. N.D. Tex., 2004) (“Under Texas law, the appointment of a general receiver displaces and supercedes in its entirety the pre-receivership management of an entity.”); A.P.I., Inc. v. Home Ins. Co., 706 F. Supp. 2d 926, 938 (D. Minn. 2010) (citing to the Minnesota Supreme Court’s explanation of the role of receivership):
“When a corporation is placed in receivership, the court which grants the remedy and appoints the receiver also receives by operation of law constructive possession of the corporate assets. This corpus of property is the receivership res. It is well settled that once the res comes within the possession of the court, no action of any kind may be maintained which would interfere with this possession…”
The Receiver’s powers come from several sources. Ex parte Griffitts, 711 S.W.2d 225 (Tex. 1986) (“[R]eceivers derive their powers from several sources…”); In re Global Grounds Greenery, LLC, 405 B.R. 659, 665-666 (D. AZ. Bankr. 2009) (Citing Clark on Receivers):
“[A] receivers’ powers derive from five possible sources:
First: Those powers and duties directly stated in the order of court appointing the receiver and such subsequent powers and duties as may from time to time be given.
Second: Those powers and duties clearly implied from the order or orders of court appointing the receiver and which are clearly and reasonably necessary to the carrying out of such order or orders.
Third: Such powers as are given to the receiver by applicable provisions of federal or state statutes.
Fourth: Those powers which a long line of decisions and a uniform course of practice in the courts of chancery, both in this country and in England have pointed out and defined with some accuracy.
Fifth: A receiver appointed by the court may have certain statutory duties to perform which follow his control, possession and operation of the defendant’s property.”
cf. Ex parte Hodges, 625 S.W.2d 304, 306 (Tex. 1981) (“A receiver has only that authority conferred by the Court’s order appointing him.”); Liberte Capital Grp., LLC v. Capwill, 99 F. App’x 627, 633 (6th Cir. 2004) (“A receiver has the powers and duties directly stated within a court’s order. He also has any implied powers clearly and reasonably necessary to meet his duties.”); cf. Prince v. Forman, 119 S.W.2d 102, 105 (Tex. Civ. App.–Dallas 1937, writ dism’d w.o.j.) (“[A]s a general rule, a receiver must obey the orders of the court in which the receivership is pending–even an order which is erroneous.”). See also Am. Bridge Prods. v. Decoulos, 328 B.R. 274, 331 (D. Mass. Bankr. 2005) (Citing Clark on Receivers) (“Considered officers of the appointing court, receivers are subject to the court’s directions and orders and ‘at all time are entitled to apply to the court for instructions.’”).
If the Receivership Order requires the Receiver to post bond, the Receiver has no authority to act until the bond is posted (or satisfied by cash deposit in lieu of Bond). See generally:
- • Jones v. City of Dallas, 310 S.W.3d 523, 529 (Tex. App.—Dallas 2010, pet. denied) (TEX. CIV. PRAC. & REM. CODE ANN. 64.022, 64.023 requires a receiver to be sworn and post a bond before assuming duties);
- • Hawkins v. Twin Mont., 810 S.W.2d 441, 443 (Tex. App.—Fort Worth 1991, no writ) (Before Receiver enters his duty, he must file an oath and bond);
- • Rogers v. Boykin, 286 S.W.2d 440, 443 (Tex. Civ. App.—Eastland 1956, no writ) (Appointment of Receiver is not effective until he files the required oath and bond); and
- • Zeigler v. Trio Realty Group, 2011 Ohio App. LEXIS 4524 at *4-5 (Ohio Ct. App., Stark County Oct. 24, 2011) (Receivers actions “null and void” when the Receiver failed to execute bond).
This is significant, because, without authority, there is no immunity. California v. Hodari D., 499 U.S. 621, 631 n.6, 111 S. Ct. 1547, 113 L. Ed. 2d 690 (1991); cf. Schack v. Starr, 440 F.2d 378, 379 (5th Cir. 1971) (Emphasis added) (“[A] duly appointed state officer, is immune from suit regarding matters relating to his official duties…”); Henshaw v. Wayne County, 2009 U.S. Dist. LEXIS 92505, at *13 (D. Utah Oct. 1, 2009) (For quasi-judicial immunity to apply, the officer must have authority to carry out the action).
To Pursue, Collect and Protect: You can expect the Receiver to be taking possession of assets and pursuing claims owned by the Receivership. See Wheeler v. Am. Nat’l Bank, 347 S.W.2d 918, 924 (Tex. 1961) (Duty of Receiver to collect all claims); Cocke v. Wright, 39 S.W.2d 590, 592 (Tex. Comm’n App. 1931, judgm’t adopted) (“Receiver is under the duty to collect all of these moneys insofar as he can.”); Fed. Sav. & Loan Ins. Corp. v. Le Feve, 676 F. Supp. 764, 765 (S.D. Miss. 1987) (“Receiver has the power and duty to collect all obligations and money owed…”); Am. Bridge Prods. v. Decoulos, 328 B.R. 274, 331-332 (Bankr. D. Mass. 2005) (“A receiver has a duty to find assets and bring them under his control”) (Citing Clark on Receivers); Tex. Am. Bank/West Side v. Haven, 728 S.W.2d 102, 104 (Tex. App.—Fort Worth 1987, writ dism’d w.o.j.) (“[T]he receiver must protect his possession of the property as long as the order requiring him to hold it remains in force.”); In re Paramount-Publix Corp., 10 F. Supp. 504, 509 (S.D.N.Y. 1934) (“The receivers were officers appointed by the court into whose possession in this instance it put vast properties. It was unquestionably the duty of the receivers, through their attorneys, to endeavor to maintain their status as the appointed fiduciaries of those properties against all attacks.”); Herring v. New York, L. E. & W. R. Co., 12 N.E. 763 (N.Y. App. 1887):
“Jewett was appointed receiver, in that action, of the mortgaged property, and he was specially authorized to receive and enforce possession of whatever he was bound to receive, to run and operate the railway, to institute, as he might deem needful, whatever suits or proceedings he by counsel might be advised to be necessary and proper in the appropriate discharge of his duty as receiver, and to defend and resist any suit or proceedings which he should be so advised and should believe would otherwise be prejudicial to the property, interests or franchises committed to his charge, and generally to do and cause to be done in a lawful manner as receiver, what might be reasonable and needful in and about the care and preservation of the rights, interests and franchises on which the mortgages were a lien, or the discharge of his duty as receiver might render needful.”
Haarhuis v. Cheek, 820 S.E.2d 844, 850 (N.C. Ct. App. 2018):
“our Supreme Court has stated that “[i]t is an important part of the duties of the receiver to take possession and get control of the property of the judgment debtor, whether in possession or action, as soon as practicable, and to bring all actions necessary to secure and recover such property as may be in the hands of third parties, however they may hold and claim the same[.]”
To Account: See Shell Petroleum Corp. v. Grays, 87 S.W.2d 289, 292 (Tex. App.—Waco 1935, writ dism’d) (Where funds or property have come into the Receiver’s hands, “he should be required to account therefor to the court that appointed him.”).
See Chicago Title Trust Co. v. Goldman, 272 Ill. App. 457, 465 (Ill. App. Ct. 1933) (“It is the duty of a court appointing a receiver to protect him in the discharge of his duties…”); Corser v. Russell, 1887 N.Y. Misc. LEXIS 127, at *4 (1887) (“Receivers are officers of the court and entitled to protection.”); Sunbelt Sav. FSB, Dallas v. Amrecorp Realty Corp., 730 F. Supp. 741, 745 (N.D. Tex. 1990) (“Even where the receiver is not entitled to statutory protection, the Fifth Circuit has extended the common law to provide the same protection.”).
Anyone dealing with the Receiver is deemed to know who they are dealing with. See Cont’l & Comm. Trust & Sav. Bank v. Muscatine, Burlington & S. R.R., 210 N.W. 787, 790 (Iowa 1926) (“Persons dealing with the receiver must, at their peril, take notice of his authority and the jurisdiction of the court.”); In re Acker, 66 F. 290, 296 (D. Montana 1894) (“[A] person who ignorantly resists the receivers of a court cannot justify an account of his ignorance. In a case like this, where the petitioner acted without right or the claim of right, I think this rule should be maintained in contempt cases.”); See generally Spaeth v. State, 2017 Tex. App. LEXIS 9794, at *10 (Tex. App.— Amarillo Oct. 18, 2017, no pet.) (“[T]he courts of this State have long held that persons are presumed to know the law and ignorance of the law excuses no man.”).
This includes the knowledge that “one contracting with a receiver in fact contracts with the court, and thereby becomes a party to the receivership proceedings in so far as such contract and rights thereunder are concerned.” Carpenter v. Pink, 124 S.W.2d 981, 986 (Tex. 1939).
Therefore, if the high bidder in a Receivership Sale does not deliver payment, the Court may compel performance. See 2 Freeman on Executions, §313a (3d ed. 1900):
“Power of Chancery Over Bidders. – A chancery sale is in legal effect a sale in which the court is the vendor; but it does not abide by the maxim that no one should be a judge in his own cause. On the contrary, it regards the bid of the purchaser as bringing him within its jurisdiction with respect to all matter connected with the sale; and it thereafter deals with him in such a manner as will compel him, if possible, to comply with the terms of the sale. This it may do not merely to the extent of compelling the payment of the purchase price, when it is to be paid in money, but the court may also, through its power to bring the purchaser before it to coerce him, if necessary, by attachment and imprisonment, compel him to perform any other condition of the sale, such, for instance, as the execution of any evidence of indebtedness, or any bond or mortgage required by the terms of the sale.”
Because the Receiver is “part of the machinery of the Court,” refusing the Receiver can result in Contempt. See generally, Ex parte Klugsberg, 87 S.W.2d 465, 467 (Tex. 1935) (Refusing to deliver money to the Receiver is a contempt); In re Salkey, 21 F. Cas. 235 (N.D. Ill. 1875) (“[W]hen the debtor is required to surrender his assets to a receiver, in which any refusal to deliver over assets, or satisfactorily account for them, is punished as a contempt.”); Smith v. Brown, 3 Tex. 360, 371 n. (1848) (“Refusal of an officer of a corporation to turn over property belonging to the corporation to a receiver [is a contempt].”); In re Camerick, 34 A.D. 31, 32-33 (N.Y.S. App. Div. 1898) (“the debtor was guilty of disobedience of the order appointing the receiver… debtor was guilty of contempt in refusing to surrender the store and the goods which, by his admission, were owned by him.”); cf. SEC v. Torchia, 2017 U.S. Dist. LEXIS 216285, at *12 (N.D. Ga. Feb. 2, 2017) (“In the context of a receivership action, a non-party may be held in contempt for violating a court order.”).
Any unjustified action that interferes with, hinders, or makes more difficult the operation of the Receivership, is a contempt. See Abbey v. Int’l & G. N. R. Co’s Receivers, 23 S.W. 934 (Tex. Civ. App.—San Antonio 1893, no writ) (“The principle is elementary, that any interference with the possession of property placed in the hands of a receiver is a contempt of the court having control of it.”); Mitchell v. Turbine Res. Unlimited, Inc., 523 S.W.3d 189 (Tex. App.—Houston [14th Dist.] 2017, pet. denied) (Finding respondent in contempt for interfering with the receiver’s performance of his duties); Accord Ex Parte Devoy, 236 S.W. 1070, 1072 (Mo. App. 1921) (“The receiver becomes an officer or arm of the court, and any wilful interference with the performance of the duties of the receiver, or wilful disobedience of the demand of the receiver in the discharge of his duties as set forth in the order appointing him is a direct contempt resulting in the interference with the court’s administration of the res.”); cf. Gottwals v. Manske, 99 P.2d 645,648 (Nev. 1940) (“An attorney on whose advice the receiver’s possession of the property in custody of the law is in any way disturbed is guilty of contempt equally with his client.”).
If a debtor in Receivership sells its property without the permission of the Court, that debtor is in contempt. See In re Coger, 340 F. Supp. 612, 616 (W.D. Va. 1972):
“[T]he property of a person in receivership is in custodia legis, and the receiver’s possession is that of the court appointing him. An order appointing a receiver prevents any alienation or disposition of the property except with consent of the court. Any interference with the control and possession of the receiver, without the permission of the court, is regarded as contempt and will be punished accordingly.”
Once appointed, the Receiver is entitled to fees and expenses. See Rusk v. Runge, 2003 Tex. App. LEXIS 9615, at *6 (Tex. App.—Houston [14th Dist.] Nov. 13, 2003, pet. denied) (“[N]umerous courts have recognized that, when a trial court has jurisdiction, a receiver is entitled to reasonable compensation for services rendered even if the trial court’s appointment of the receiver was in error… even when a trial court lacks jurisdiction to appoint a receiver, and the order is void ab initio, the receiver may still be entitled to payment for services rendered.”); Haw. Ventures, LLC v. Otaka, Inc., 164 P.3d 696 (Haw. 2007) (“Even though a receiver may not have increased or prevented a decrease in [the] value of the collateral, if a receiver reasonably and diligently discharges [her] duties, [she] is entitled to compensation.”) (Citing 65 Am. Jur. 2d Receivers); See, e.g. Donovan v. Robbins, 588 F.Supp. 1268, 1273 (N.D.Ill.1984) (District court awarded the receiver a fee simply for determining how much money to release to a creditor).
The Receiver’s fees and expenses are to be paid before anything else. See Jordan v. Burbach, 330 S.W.2d 249, 252 (Tex. Civ. App.—El Paso 1959, writ ref’d n.r.e.) (citations omitted):
“The expense of administering and preserving the property, including receiver’s fees, which are a part of the court costs, is to be charged against the funds on hand of the receivership, and if that is insufficient, then upon the property itself or its proceeds of sale. There can be no doubt that the cost of administration and preserving the property are costs of court… The receiver and his attorney, appointed by the court, are entitled to priority over other creditors of the receiver. There can be no question but that the courts so holding have realized the necessity of appointing qualified receivers, and this raises the obligation of seeing that they are paid, if possible, in the position of preferred creditors.”
Payne v. Little Motor Kar Co., 266 S.W. 597, 598 (Tex. Civ. App.—Waco 1924, writ dism’d w.o.j.):
“The questions of the amounts of fees allowed a receiver and his attorneys in handling the corpus of the property and the way the fees are to be taxed as costs are lodged in the discretion of the trial court, and this court cannot say from the record that the trial court has abused its discretion. Where a receiver has been appointed by the court, he is entitled to be paid his expenses and compensation out of the funds in his hands, regardless of the final outcome of the litigation.”
SEC v. Harris, 2016 U.S. Dist. LEXIS 51708, at *10-12 (N.D. Tex. April 8, 2016) (The commonplace hierarchy for Receivership distributions sets claims for court costs, receiver’s fees, and receiver’s counsel’s fees above all other claims); Jordan v. Burbach, 330 S.W.2d 249, 252 (Tex. Civ. App. —El Paso 1959, writ ref’d n.r.e.) (“There can be no doubt that the cost of administration and preserving the property are costs of court… The receiver and his attorney, appointed by the court, are entitled to priority…”); Parks v. Central Door & Lumber, Co., 102 P.2d 706, 713 (Oregon 1940):
“We are not unmindful of the fact that the defendants’ claims are based upon wages earned, and that a wage earner in a manufacturing plant does not expect to extend credit. We gave those facts earnest consideration in studying the precedents and in endeavoring to find the rule applicable to this case. Our consideration of the briefs of the parties and of the authorities which came to our attention has satisfied us, however, that the law assigns priority to the receiver’s fees and to the taxes, over the defendants’ wages. We are without authority to change the law. By the “receiver’s fees” we mean compensation for him, his attorney, and his auditor.”
Receivership fees are court costs. See Jones v. Strayhorn, 321 S.W.2d 290, 293 (Tex. 1959) (“We think the receiver’s fees must be considered a part of the court costs”); Hill v. Hill, 460 S.W.3d 751, 767 (Tex. App.—Dallas 2015, pet. denied) (“Receiver’s fees are considered court costs and are governed by rules regarding the award of costs.”); In re Primera Energy, LLC, 2018 Bankr. LEXIS 2471, at *19 n.4 (Bankr. W.D. Tex. Aug. 17, 2018) (“[I[t is well-established Texas law that receiver fees are considered ‘court costs.’”).
The Receivership Court has discretion on how to tax receivership fees as well as how the Receiver may collect them. See Evans v. Frost Nat’l Bank, 2015 Tex. App. LEXIS 8391, at *13 (Tex. App.—Dallas Aug. 11, 2015, no pet.) (“Where a receiver is appointed, taxation of costs of the receivership and the manner of their collection are matters entirely within the sound discretion of the trial court.”); Manning v. Lesher, 290 S.W.2d 538, 542 (Tex. Civ. App.—Galveston 1956, no writ). (“The taxation of [Receivership] costs, even were the receivership court to allow them as such, and the manner of their collection would be a matter entirely within the discretion of the trial court.”).
Receivership fees are normally taxed against the judgment debtor.
“The general rule is that expenses of receivership should come from the party whose wrongful act made the appointment of a receiver necessary in order to preserve the property during the litigation.”
Archer v. Ross, 262 S.W.2d 213, 217 (Tex. Civ. App.—Fort Worth 1953, no writ).
The court has discretion to tax Receivership fees against the judgment creditor.
See Jones v. Strayhorn, 321 S.W.2d 290, 293 (Tex. 1959) (“Receivership expenses may be adjudged against one or the other of the parties or apportioned between them in the discretion of the court.”); Calvillo v. De Los Angeles Guerra, 2017 Tex. App. LEXIS 6493, at *6 (Tex. App.—Corpus Christi-Edinburg July 13, 2017) (“Trial court is responsible for adjudicating which party or parties will bear the costs of court.”); Laughlin v. Aectra Tradings & Transp., Inc., 1999 Tex. App. LEXIS 7144, at *8-9 (Tex. App.—Houston [14th Dist.] Sept. 23, 1999, no pet.):
“The court further stated that the total amount it taxed as costs and allocated to the parties represented a fair distribution of the burden of the cost of the receivership based upon the benefits derived by each of the parties. Thus, it is clear that the trial court assessed the receivership costs based on equitable principles. Accordingly, the trial court did not abuse its discretion in taxing Laughlin for a portion of the receiver’s fees.”
Receivership fees are measured by the value of the services rendered. Although hours are a factor to be considered, they do not dictate a ceiling on the amount to be paid to the Receiver. The most important factor in determining Receivership obtained is the value of the results obtained. See Moyer v. Moyer, 183 S.W.3d 48, 57 (Tex. App.—Austin 2005, no pet.) (“The receiver’s fee should be measured by the value of the services rendered; the results which are accomplished by the receiver must be considered in determining a reasonable fee.”); S.E.C. v. W. L. Moody & Co. Bank, 374 F. Supp. 465, 480-483 (S.D. Tex. 1974), aff’d without opinion, 519 F.2d 1087 (5th Cir. 1975):
“In general, a reasonable fee is based on all circumstances surrounding the Receivership… [but] results achieved by a receiver [is the most] significant… In receiverships… prompt and intelligent action [is] vital to the preservation of the receivership assets and the discharge of [Receiver’s] obligations… [Defendant’s position that time spent by a receiver is the “all important consideration” in determining his fee reward] would reward slowness in decision and action, …a perversion of the purposes of a receivership.”
Bergeron v. Sessions, 561 S.W.2d 551, 555 (Tex. Civ. App.—Dallas 1977, writ ref’d n.r.e.) (Citations omitted):
A receiver’s compensation is to be determined by the value of his services.The controlling factors in ascertaining this value are:
1. the nature, extent and value of the administered estate
2. the complexity and difficulty of the work;
3. the time spent;
4. the knowledge, experience, labor, and skill required of, or devoted by the receiver;
5. the diligence and thoroughness displayed; and
6. the results accomplished.
Kotz v. Murariu, 2013 Tex. App. LEXIS 14468, at *2-4 (Tex. App.–San Antonio, November 27, 2013, no pet.):
A receiver’s fee should be measured by the value of the services rendered, and there must be evidence to establish the reasonableness of the fee.
Farrar v. Hobby, 506 U.S. 103, 114, 113 S. Ct. 566, 574, 121 L. Ed. 2d 494 (1992) (“‘[T]he most critical factor’ in determining the reasonableness of a fee award ‘is the degree of success obtained.’”).
When a receiver also acts as an attorney for the receivership, the receiver’s compensation for his services as attorney to the receivership should be set separately from that of the compensation for his services as a receiver, and his compensation as an attorney should be reasonable as governed by the Texas Disciplinary Rules of Professional Conduct.
Under the Rules, the relevant factors include:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the attorney;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the attorney or attorneys performing the services; and
(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
Tex. Disciplinary Rules Prof’l Conduct R. 1.04(b).
See also In re Vioxx Prods. Liab. Litig., 760 F. Supp. 2d 640, 656 (E.D. La. 2010) (The “time limitations factor imposed by the client or the circumstances” factor is intended to address “[p]riority work that delays the lawyer’s other legal work’”).
Harassing the Receiver with frivolous claims or demands, can result in contempt. See SEC v. Moody, 374 F. Supp. 465, 474 (S.D. Tex. 1974) (Deliberate efforts to embarrass Receiver in his performance of duties are contemptible obstruction. Criticism of the Receiver’s performance – when totally lacking in substance – is frivolous.); SEC v. Detroit Mem’t Partners, LLC, 2016 U.S. Dist. LEXIS 106613, *25-29 (N.D. Ga. February 11, 2016) (Personal attacks against Receiver, and harassing and extortionate communications to Receiver – the purpose of which was to extract leverage against Receiver – were contemptuous acts of interference with the Receiver in the performance of his duties); Klein v. Weidner, 2010 U.S. Dist. LEXIS 66945, at *27-29 (E.D. Pa. July 2, 2010) (Outrageous threats of suit were reprehensible and contemptible); Nobles v. Roberson, 193 S.E. 420, 421 (N.C. 1937) (Abuse of Receiver, which included accusing receiver of graft or attempted graft, was contemptuous); Kneisel v. Ursus Motor Co., 147 N.E. 243, 246 (Ill. 1925):
“The charges are not accompanied by any supporting facts, but such charges, even if true, were not essential to the preservation of the rights of the petitioner… The attorney who prepared and presented the petition is no less culpable than his client.”
Cf. Ex parte Reposa, 2009 Tex. Crim. App. Unpub. LEXIS 725, at *20 (Crim. App. Oct. 28, 2009) (“Regardless of the fact that the gesture was not directed at [Judicial Officer], it nevertheless was a purposeful act of disrespect and an affront to the dignity of the court. As such, it rises to the level of criminal contempt.”).
Because the trial court is obligated to enforce compliance with the rules of civil procedure, the Receiver – as a special officer of the Court – will likely insist that every party and witness to obey the rules of civil procedure. See In re S.A.P., 2007 Tex. App. LEXIS 7523, at *8 n.5 (Tex. App.—Amarillo Sept. 14, 2007, no pet.) (“The rules of procedure must be observed by litigants acting pro se as well as those represented by counsel.”); Addicks v. Sickel, 2005 Tex. App. LEXIS 2498, at *6 (Tex. App.—Fort Worth Mar. 31, 2005, no pet.) (Litigants must comply with the applicable procedural rules); Williams v. Scott, 1999 Tex. App. Lexis 3643, *2 (Tex. App.—Corpus Christi May 13, 1999, pet. denied) (“The rules of procedure must be adhered to in bringing claims in Texas courts.”); City of Port Arthur v. Sanderson, 810 S.W.2d 476, 485 (Tex. App.—Beaumont 1991, orig. proceeding) (Brookshire, J. dissenting) (“The trial court has an affirmative duty to enforce the Rules of Civil Procedure adopted by the Texas Supreme Court. So do we. These Rules are “orders of court” to the trial judge and to the Court of Appeals. These Rules generally are mandatory on the lower courts…”); Cf. In re Rio Grande Valley Gas Co., 987 S.W.2d 167, 176 (Tex. App.—Corpus Christi 1999, orig. proceeding) (Holding that the trial judge “had a duty to follow and enforce the local rules.”); Accord Long v. Thommessen, 2005 U.S. Dist. LEXIS 29095, at * 4 (N.D. Tex. Nov. 21, 2005) (Lindsay, J.) (Parties must: 1) be familiar with the Federal Rules of Civil Procedure, the Local Civil Rules of the District, and any other rule or statute necessary to the their case; and 2) “comply with all appropriate rules of procedure…”); Gregg v. SBC/Ameritech, 2005 U.S. Dist. LEXIS 12577, at *21-22 (S.D. Ohio June 24, 2005) (Permitting parties to disregard the rules “would effectively mean that the Court has abdicated case management responsibility by elevating the parties’ whims over the Federal Rules of Civil Procedure, the Local Civil Rules, and Court Orders. The Court refuses to endorse such misconduct.”); Porter v. Brancato, 171 F.R.D. 303, 305 (D. Kan. 1997) (Courts “hold parties and their attorneys to a reasonably high standard of diligence in observing the court’s rules of procedure.”); United States v. Robinson, 860 F. Supp. 565, 568 (N.D. Ill. 1994) (“The Federal Rules of Civil Procedure are not window dressings to be viewed, admired but soon forgotten once out of sight.’ …A lackadaisical attitude towards the rules disserves the efficient and proper administration of justice.”); Civil Action No. H-10-4893; J&J Sports Productions, Inc. v. ALAP, Inc. Order [Doc. 39] p. 1 (S.D. Tex. December 4, 2012) (Smith, Mag.) (“The court does not take the Federal Rules lightly.”); Tex. Comm. On Professional Ethics, Op. 415, 47 Tex. B.J. 946 (1984) (“An attorney’s intentional or habitual violation of [a rule of civil procedure] constitutes a violation of the Code of Professional Responsibility.”).
Possibly, depending on the circumstances. Generally, a Receiver must be relentless.
See Wheeler v. Am. Nat’l Bank, 347 S.W.2d 918, 924 (Tex. 1961) (Duty of Receiver to collect all claims); Cocke v. Wright, 39 S.W.2d 590, 592 (Tex. Comm’n App. 1931, judgm’t adopted) (“Receiver is under the duty to collect all of these moneys insofar as he can.”); Fed. Sav. & Loan Ins. Corp. v. Le Feve, 676 F. Supp. 764, 765 (S.D. Miss. 1987) (“Receiver has the power and duty to collect all obligations and money owed…”); Am. Bridge Prods. v. Decoulos, 328 B.R. 274, 331-332 (Bankr. D. Mass. 2005) (“A receiver has a duty to find assets and bring them under his control”) (Citing Clark on Receivers); Tex. Am. Bank/West Side v. Haven, 728 S.W.2d 102, 104 (Tex. App.—Fort Worth 1987, writ dism’d w.o.j.) (“[T]he receiver must protect his possession of the property as long as the order requiring him to hold it remains in force.”); In re Paramount-Publix Corp., 10 F. Supp. 504, 509 (S.D.N.Y. 1934) (“The receivers were officers appointed by the court into whose possession in this instance it put vast properties. It was unquestionably the duty of the receivers, through their attorneys, to endeavor to maintain their status as the appointed fiduciaries of those properties against all attacks.”); Bergeron v. Sessions, 561 S.W.2d 551, 553 (Tex. Civ. App.—Dallas 1977, writ ref’d n.r.e (Courts are to “encourage a receiver to act diligently and promptly in obtaining an early termination of the receivership.”); In re Indian Motorcycle Litig., 307 B.R. 7, 16 (D. Mass. 2004) (Receiver “is not to be punished” for “zealously obeying its duty to preserve and protect the receivership assets.”); SEC v. Roth, 2011 U.S. Dist. LEXIS 61827, at *8 (C.D. Ill. June 2, 2011) (“As the Court stated at the May 19th status conference, it was its intention when it signed the Order Appointing Receiver that the Receiver would be aggressive, protect assets when possible, and pursue legitimate claims that could be made…”); SEC v. Stanford Int’l Bank, Ltd., 2010 U.S. Dist. LEXIS 148228, at *47 (N.D. Tex. Jan. 5, 2010) (“The Court’s Order exempts from the stay the Receiver’s asset-recovery efforts, so the Receiver will continue zealously gathering assets for distribution to creditors and investors.”); SEC v. Art Intellect, Inc., 2011 U.S. Dist. LEXIS 131869, at *30 n.55 (D. Utah Nov. 15, 2011):
“Any assertion on the Defendants’ behalf that the Asset Freeze Order was not fair or valid because the court has yet to fully adjudicate the claims on the merits is simply incorrect. The same can be said for their expressed concern about what they consider an “overly aggressive” receiver. The actions of the Receiver do not go beyond the scope of the Receiver’s rights and obligations under the court’s Asset Freeze Order. The Defendants’ dissatisfaction with the court’s finding is not a valid reason to refuse to comply.”
Cf. Fed. Home Loan Mortg. Corp. v. Dearborn St. Bldg. Assocs., Ltd., 1991 U.S. Dist. LEXIS 14209, at *12 (N.D. Ill. Oct. 4, 1991) (“[Receiver]” failed to achieve control by the time the court vacated its order appointing a receiver on April 19, 1991. [Receiver] would place the blame on defendants’ failure to cooperate, but this court is not convinced that he acted as aggressively as he might have.”).