When funds need to be borrowed to finish a project how, as the receiver, do I get paid? By Davidson, Peter* Q: I was appointed receiver for
an unfinished housing development. I have convinced the Plaintiff (Bank)
to advance funds to pay for guards, insurance and to complete
construction, as well as to pay for my and my counsel’s fees, because
there are presently no funds in the receivership estate. Plaintiff was
only willing to advance funds on the condition that it is given receiver’s
certificates for the funds it advances. My counsel filed a motion so that
I would have authority to borrow the needed funds and issue the receiver’s
certificates. While the court authorized the borrowing and the issuance of
the receiver’s certificates, it stated that the borrowed funds could not
be used to pay my or my counsel’s fees, indicating that receiver’s
certificates can only be used to fund the necessary care and preservation
of the property. Is this correct? How do I get paid? Because the issuance of the receiver’s certificates is discretionary, the court can, if it chooses, limit the use of the funds for what the court deems to be necessary to carry out the primary object of the Receiver’s appointment. One could argue that if construction is taking place the Receiver needs to supervise it and may need to use counsel, if for nothing else, to file the motion to have a receiver’s certificates issued, and this is part of the primary object of his appointment and, therefore, the borrowed funds should be able to be used to pay the receiver and the receiver’s counsel. Indeed, the Nevada Supreme Court in Gordon v. Como Consol Mines Co., 55 Nev. 13 (1933) held: “It is well established that the compensation of receiver and the compensation of his attorney are a part of the cost of a receivership and must be accorded priority of payment over receiver’s certificates.” The court cites a number of cases including a Washington Supreme Court case where the court held: “It is, we think, a universal rule of law that the necessary and proper compensation of a receiver and his attorneys is a part of the cost of the receivership and is entitled to priority, even over receiver’s certificates.” The Nevada Supreme Court also sites Clark on Receivers which states: “Generally speaking, receiver’s certificates are subject, in the first instance, to the payment of court costs, receiver’s fees and his counsel’s fees.” Clark on Receivers, § 471. Unfortunately, Clark sites no authority for this statement. However, see 24 A.L.R. 1174 which states: “The general rule is that compensation of a receiver, being a part of the taxable costs in the proceeding, is entitled to priority over receiver’s certificates” [citing cases]. The court also sites an old California Supreme Court case, McLane v. Plasserville, etc., R.Co., 66 Cal. 606 (1885) for the same proposition that a receiver and his counsel’s fees are a lien upon the receivership estate; however, the McLane case was a railroad case. In the future, you may be able to
convince the Plaintiff to fund the estate by making advances on its Deed
of Trust, in which case you would not need to obtain receiver’s
certificates. Otherwise, you need to try to convince the court that the
cost of the Receiver and his counsel are not only necessary costs for
preserving and caring for the property, but that it makes no sense not to
allow those fees to be paid out of the funds generated from the sale or
issuance of the receiver’s certificates, since it is clear that the
Receiver’s and his or her counsel’s fees have a priority over the
receiver’s certificates. Absent that, you and your counsel may just have
to wait until later in the case to be paid, when some of the assets of the
estate are sold, at which time the funds could be used to pay fees and
expenses, since they have a priority over the receiver’s certificates.
Worse case, you will have to wait until the end of the case, at which time
either the funds in the estate can be used to pay your fees or you will
have to file a motion to have the Plaintiff pay for your fees, because the
Plaintiff sought your appointment. |