Receiver has two distinct legal definitions:
1) A neutral person (often a professional trustee) appointed by a court to manage a party’s legal interests in a court proceeding. The Middle District of North Carolina in SEC v. Elfindepan, S.A., in citing the American Jurisprudence 2d on Receivers, defined receiver as “an officer of the court occupying a position of a custodian of the property in receivership.” The court continued in explaining the duties of a receiver as “owing to all persons interested in such property a discharge of her duties in good faith and impartially insofar as they are concerned.” This means, the court clarified, that a receiver “is not the exclusive agent or representative of either party to the suit. . . and she is not appointed for the benefit of either party.” Rather, the court explained, “a receiver receives her power and authority directly from the court. . . [and] therefore is subject to the court’s directions and orders.” A court may appoint a receiver to manage the receivership generally, or may appoint the receiver for a specific task—for example to manage property subject to a particular mortgage, as in First Interstate Bank v. Heritage Square, Ltd.
Receivers may be appointed in a broad range of contexts, and state statutes normally establish the situations where a party may request a receiver. For example, California Code of Civil Procedure § 564 lays out the scenarios and requirements for when a court may appoint a receiver. To illustrate, § 564(b)(2) allows the court to appoint a receiver “[i]n an action by a secured lender for the foreclosure of a deed of trust or mortgage and sale of property upon which there is a lien under a deed of trust or mortgage, where it appears that the property is in danger of being lost, removed, or materially injured”; § 564(b)(5)–(6) allow the court to appoint a receiver where a corporation has been dissolved or where a corporation is insolvent, or in imminent danger of insolvency; § 564(b)(10) serves as a catchall provision and allows a court to appoint a receiver “[i]n all other cases where necessary to preserve the property or rights of any party.”
In the context of federal courts, Federal Rule of Civil Procedure Rule 66, and 28 U.S.C. §§ 754 & 959 empower federal courts to appoint a receiver. However, Rule 66 only states that the appointment of receivers must “accord with the historical practice,” so the considerations of when to appoint a receiver in federal court is largely based on case law. Federal courts have fashioned considerations in determining whether to appoint a receiver, which the Eighth Circuit in Aviation Supply Corp. v. R.S.B.I. laid out. The court there stated that federal courts first determine whether they may exercise jurisdiction and then consider the following factors: “(1) the probability that fraudulent conduct has occurred or will occur; (2) the validity of the claim by the party seeking the appointment; (3) whether there is an imminent danger that property will be concealed, lost, or diminished in value; (4) the inadequacy of [alternative] legal remedies; (5) the lack of a less drastic equitable remedy; and (6) the likelihood that appointing the receiver will do more good than harm.”
Once appointed, the receiver owes a fiduciary duty to the interested parties to manage and preserve their property. For example, the Supreme Court of Hawai’i in Hawaii Ventures, LLC v. Otaka, Inc. explains:
The ultimate purpose of a receivership is to enable the court to accomplish, so far as practicable, complete justice between the parties before it[,] which includes the preservation and proper disposition of the subject of litigation. This goal includes the providing of full protection to the parties’ rights to the property until a final disposition of the issues[,] and it is essentially a question of whether the appointment of a receiver would serve a useful purpose. Thus, a receivership seeks to prevent injury to the thing in controversy and to preserve it, pendente lite or after judgment, for the security of all parties in interest, to be finally disposed of as the court may direct and to ensure that the rights of parties are more secure.
2) In criminal law, receiver can refer to one who commits the crime of receiving stolen goods knowing they were obtained illegally. For example, California Penal Code § 496 provides for one-year maximum imprisonment for “[e]very person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained. . .” In adjudicating a conviction under this crime, the California Court of Appeals in People v. Bussey explained that “the difference in treatment between petty thieves and receivers of stolen property [Under Penal Code § 496] is easily rationalized.”
[Last updated in December of 2020 by the Wex Definitions Team]