Receivers are appointed by the court as a neutral fiduciary, and may be done on a state or federal level. Their duty is to control assets, businesses and other real properties involved in litigation in order to preserve them during the pending outcome of said litigation. These appointments may occur during pre- or post-judgment proceedings, and may be related to Civil, Probate, Real Estate, Class Action or Regulatory actions.
The appointment of this neutral receiver is not a specific cause of action, but rather a provisional remedy provided for by the power of the state or federal court. California particularly has several statutes which provide for this appointment in the event of specific types of litigation against a part or entity.
Specific court language refers to a receiver as the "hands and eyes" of the court, thereby carrying out any necessary actions to preserve the assets of the receivership estate.
It is important to remember that a receiver is not a representative or agent for the party owning these assets or plaintiff; rather, a receiver is granted powers as an officer of the court to benefit all parties involved in the litigation. Receivers are typically required to hold and manage the businesses and assets in question, or sell the assets for liquidation purposes to produce cash.
Placing these real properties, businesses and other assets that are the subject of the litigation at hand into the control of a receiver allows for all parties involved to remain confident they are being managed and preserved properly.
Courts may ask the receiver, as a neutral fiduciary, to research past accounting records to verify where any funds were placed and by whom. They may also be required to discover and search for hidden assets or conduct general discovery for the court.
Due to the fact that the court has granted certain powers to the receiver, any refusals to provide records requested to find this information for the court could result in contempt proceedings against the refusing party.
Receivers are paid with the estate in question's assets, which also relieves a party to the litigation from funding this cost alone. Appointing a receiver is financially advantageous to the court as well, as any requests given the receiver could avoid unnecessary and numerous court appearances by the parties to the litigation.
By reducing the amount of research and cost necessary to discover these items alone, a court appointed receiver reduces cash outlay and angst during the related proceedings for all parties involved.
