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Connecticut House Bill HB05258

Connecticut 2020 Regular Session

Connecticut House Bill HB05258 Compare Versions

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55 General Assembly Raised Bill No. 5258
66 February Session, 2020
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1010 Referred to Committee on JUDICIARY
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1313 Introduced by:
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1919 AN ACT CONCERNING TH E UNIFORM COMMERCIAL REAL ESTATE
2020 RECEIVERSHIP ACT.
2121 Be it enacted by the Senate and House of Representatives in General
2222 Assembly convened:
2323
2424 Section 1. (NEW) (Effective October 1, 2020) Sections 1 to 28, inclusive, 1
2525 of this act, may be cited as the Uniform Commercial Real Estate 2
2626 Receivership Act. 3
2727 Sec. 2. (NEW) (Effective October 1, 2020) As used in sections 1 to 28, 4
2828 inclusive, of this act: 5
2929 (1) "Affiliate" means: 6
3030 (A) With respect to an individual: 7
3131 (i) A companion of the individual; 8
3232 (ii) A lineal ancestor or descendant, whether by blood or adoption, of 9
3333 (I) the individual; or (II) a companion of the individual; 10
3434 (iii) A companion of an ancestor or descendant described in 11
3535 subparagraph (A)(ii) of this subdivision; 12
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4242 (iv) A sibling, aunt, uncle, great aunt, great uncle, first cousin, niece, 13
4343 nephew, grandniece or grandnephew of the individual, whether related 14
4444 by the whole or the half blood or adoption, or a companion of any of 15
4545 them; or 16
4646 (v) Any other individual occupying the residence of the individual; 17
4747 and 18
4848 (B) With respect to a person other than an individual: 19
4949 (i) Another person that directly or indirectly controls, is controlled 20
5050 by, or is under common control with the person; 21
5151 (ii) An officer, director, manager, member, partner, employee or 22
5252 trustee or other fiduciary of the person; or 23
5353 (iii) A companion of, or an individual occupying the residence of, an 24
5454 individual described in subparagraph (B)(i) or (B)(ii) of this subdivision. 25
5555 (2) "Companion" means the spouse of an individual. 26
5656 (3) "Court" means the Superior Court. 27
5757 (4) "Executory contract" means a contract, including a lease, under 28
5858 which each party has an unperformed obligation and the failure of a 29
5959 party to complete performance would constitute a material breach. 30
6060 (5) "Governmental unit" means an office, department, division, 31
6161 bureau, board, commission or other agency of this state or a subdivision 32
6262 of this state. 33
6363 (6) "Lien" means an interest in property which secures payment or 34
6464 performance of an obligation. 35
6565 (7) "Mortgage" means a record, however denominated, that creates or 36
6666 provides for a consensual lien on real property or rents, even if the 37
6767 record also creates or provides for a lien on personal property. 38
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7474 (8) "Mortgagee" means a person entitled to enforce an obligation 39
7575 secured by a mortgage. 40
7676 (9) "Mortgagor" means a person that grants a mortgage or a successor 41
7777 in ownership of the real property described in the mortgage. 42
7878 (10) "Owner" means the person for whose property a receiver is 43
7979 appointed. 44
8080 (11) "Person" means an individual, estate, business or nonprofit 45
8181 entity, public corporation, government or governmental subdivision, 46
8282 agency, instrumentality or other legal entity. 47
8383 (12) "Proceeds" means the following property: 48
8484 (A) Whatever is acquired on the sale, lease, license, exchange or other 49
8585 disposition of receivership property; 50
8686 (B) Whatever is collected on, or distributed on account of, 51
8787 receivership property; 52
8888 (C) Rights arising out of receivership property; 53
8989 (D) To the extent of the value of receivership property, claims arising 54
9090 out of the loss, nonconformity or interference with the use of, defects or 55
9191 infringement of rights in, or damage to, the property; or 56
9292 (E) To the extent of the value of receivership property and to the 57
9393 extent payable to the owner or mortgagee, insurance payable by reason 58
9494 of the loss or nonconformity of, defects or infringement of rights in, or 59
9595 damage to, the property. 60
9696 (13) "Property" means all of a person's right, title and interest, both 61
9797 legal and equitable, in real and personal property, tangible and 62
9898 intangible, wherever located and however acquired. "Property" includes 63
9999 proceeds, products, offspring, rents or profits of or from the property. 64
100100 (14) "Receiver" means a person appointed by the court as the court's 65
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107107 agent, and subject to the court's direction, to take possession of, manage 66
108108 and, if authorized by sections 1 to 28, inclusive, of this act or court order, 67
109109 transfer, sell, lease, license, exchange, collect or otherwise dispose of 68
110110 receivership property. 69
111111 (15) "Receivership" means a proceeding in which a receiver is 70
112112 appointed. 71
113113 (16) "Receivership property" means the property of an owner which 72
114114 is described in the order appointing a receiver or a subsequent order. 73
115115 "Receivership property" includes any proceeds, products, offspring, 74
116116 rents or profits of or from the property. 75
117117 (17) "Record", used as a noun, means information that is inscribed on 76
118118 a tangible medium or that is stored on an electronic or other medium 77
119119 and is retrievable in perceivable form. 78
120120 (18) "Rents" means: 79
121121 (A) Sums payable for the right to possess or occupy, or for the actual 80
122122 possession or occupation of, real property of another person; 81
123123 (B) Sums payable to a mortgagor under a policy of rental-interruption 82
124124 insurance covering real property; 83
125125 (C) Claims arising out of a default in the payment of sums payable 84
126126 for the right to possess or occupy real property of another person; 85
127127 (D) Sums payable to terminate an agreement to possess or occupy 86
128128 real property of another person; 87
129129 (E) Sums payable to a mortgagor for payment or reimbursement of 88
130130 expenses incurred in owning, operating and maintaining real property 89
131131 or constructing or installing improvements on real property; or 90
132132 (F) Other sums payable under an agreement relating to the real 91
133133 property of another person which constitute rents under the law of this 92
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140140 state other than sections 1 to 28, inclusive, of this act. 93
141141 (19) "Secured obligation" means an obligation the payment or 94
142142 performance of which is secured by a security agreement. 95
143143 (20) "Security agreement" means an agreement that creates or 96
144144 provides for a lien. 97
145145 (21) "Sign" means, with present intent to authenticate or adopt a 98
146146 record: 99
147147 (A) To execute or adopt a tangible symbol; or 100
148148 (B) To attach to or logically associate with the record an electronic 101
149149 sound, symbol or process. 102
150150 (22) "State" means a state of the United States, the District of 103
151151 Columbia, Puerto Rico, the United States Virgin Islands or any territory 104
152152 or insular possession subject to the jurisdiction of the United States. 105
153153 Sec. 3. (NEW) (Effective October 1, 2020) (a) Except as provided in 106
154154 subsection (b) of this section, the court may issue an order under 107
155155 sections 1 to 28, inclusive, of this act only after notice and an opportunity 108
156156 for a hearing that the court deems appropriate in the circumstances. 109
157157 (b) The court may issue an order under sections 1 to 28, inclusive, of 110
158158 this act: 111
159159 (1) Without prior notice if the circumstances require issuance of an 112
160160 order before notice is given; 113
161161 (2) After notice and without a prior hearing if the circumstances 114
162162 require issuance of an order before a hearing is held; or 115
163163 (3) After notice and without a hearing if no interested party timely 116
164164 requests a hearing. 117
165165 Sec. 4. (NEW) (Effective October 1, 2020) (a) Except as provided in 118
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172172 subsection (b) or (c) of this section, sections 1 to 28, inclusive, of this act 119
173173 apply to a receivership for an interest in real property and any personal 120
174174 property related to or used in operating the real property. 121
175175 (b) Sections 1 to 28, inclusive, of this act do not apply to a receivership 122
176176 for an interest in real property improved by one to four dwelling units 123
177177 unless: 124
178178 (1) The interest is used for agricultural, commercial, industrial or 125
179179 mineral-extraction purposes, other than incidental uses by an owner 126
180180 occupying the property as the owner's primary residence; 127
181181 (2) The interest secures an obligation incurred at a time when the 128
182182 property was used or planned for use for agricultural, commercial, 129
183183 industrial or mineral-extraction purposes; 130
184184 (3) The owner planned or is planning to develop the property into 131
185185 one or more dwelling units to be sold or leased in the ordinary course 132
186186 of the owner's business; or 133
187187 (4) The owner is collecting or has the right to collect rents or other 134
188188 income from the property from a person other than an affiliate of the 135
189189 owner. 136
190190 (c) Sections 1 to 28, inclusive, of this act do not apply to a receivership 137
191191 authorized by the law of this state other than sections 1 to 28, inclusive, 138
192192 of this act in which the receiver is a governmental unit or an individual 139
193193 acting in an official capacity on behalf of the governmental unit. 140
194194 (d) Sections 1 to 28, inclusive, of this act do not limit the authority of 141
195195 a court to appoint a receiver under the law of this state other than 142
196196 sections 1 to 28, inclusive, of this act. 143
197197 (e) Unless displaced by a particular provision of sections 1 to 28, 144
198198 inclusive, of this act, the principles of law and equity supplement 145
199199 sections 1 to 28, inclusive, of this act. 146
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206206 Sec. 5. (NEW) (Effective October 1, 2020) The court that appoints a 147
207207 receiver under sections 1 to 28, inclusive, of this act has exclusive 148
208208 jurisdiction to direct the receiver and determine any controversy related 149
209209 to the receivership or receivership property. 150
210210 Sec. 6. (NEW) (Effective October 1, 2020) (a) The court may appoint a 151
211211 receiver: 152
212212 (1) Before judgment, to protect a party that demonstrates an apparent 153
213213 right, title or interest in real property that is the subject of the action, if 154
214214 the property or its revenue-producing potential: 155
215215 (A) Is being subjected to or is in danger of waste, loss, dissipation or 156
216216 impairment; or 157
217217 (B) Has been or is about to be the subject of a voidable transaction; 158
218218 (2) After judgment: 159
219219 (A) To carry the judgment into effect; or 160
220220 (B) To preserve nonexempt real property pending appeal or when an 161
221221 execution has been returned unsatisfied and the owner refuses to apply 162
222222 the property in satisfaction of the judgment; or 163
223223 (3) In an action in which a receiver for real property may be appointed 164
224224 on equitable grounds. 165
225225 (b) In connection with the foreclosure or other enforcement of a 166
226226 mortgage, a mortgagee is entitled to appointment of a receiver for the 167
227227 mortgaged property if: 168
228228 (1) Appointment is necessary to protect the property from waste, loss, 169
229229 transfer, dissipation or impairment; 170
230230 (2) The mortgagor agreed in a signed record to appointment of a 171
231231 receiver on default; 172
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238238 (3) The owner agreed, after default and in a signed record, to 173
239239 appointment of a receiver; 174
240240 (4) The property and any other collateral held by the mortgagee are 175
241241 not sufficient to satisfy the secured obligation; 176
242242 (5) The owner fails to turn over to the mortgagee proceeds or rents 177
243243 the mortgagee was entitled to collect; or 178
244244 (6) The holder of a subordinate lien obtains appointment of a receiver 179
245245 for the property. 180
246246 (c) The court may condition appointment of a receiver without prior 181
247247 notice under subdivision (1) of subsection (b) of section 3 of this act or 182
248248 without a prior hearing under subdivision (2) of subsection (b) of section 183
249249 3 of this act on the giving of security by the person seeking the 184
250250 appointment for the payment of damages, reasonable attorneys' fees 185
251251 and costs incurred or suffered by any person if the court later concludes 186
252252 that the appointment was not justified. If the court later concludes that 187
253253 the appointment was justified, the court shall release the security. 188
254254 Sec. 7. (NEW) (Effective October 1, 2020) (a) The court may not appoint 189
255255 a person as receiver unless the person submits to the court a statement 190
256256 under penalty of perjury that the person is not disqualified. 191
257257 (b) Except as provided in subsection (c) of this section, a person is 192
258258 disqualified from appointment as receiver if the person: 193
259259 (1) Is an affiliate of a party; 194
260260 (2) Has an interest materially adverse to an interest of a party; 195
261261 (3) Has a material financial interest in the outcome of the action, other 196
262262 than compensation the court may allow the receiver; 197
263263 (4) Has a debtor-creditor relationship with a party; or 198
264264 (5) Holds an equity interest in a party, other than a noncontrolling 199
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272272 (c) A person is not disqualified from appointment as receiver solely 201
273273 because the person: 202
274274 (1) Was appointed receiver or is owed compensation in an unrelated 203
275275 matter involving a party or was engaged by a party in a matter unrelated 204
276276 to the receivership; 205
277277 (2) Is an individual obligated to a party on a debt that is not in default 206
278278 and was incurred primarily for personal, family or household purposes; 207
279279 or 208
280280 (3) Maintains with a party a deposit account, as defined in 209
281281 subdivision (29) of subsection (a) of section 42a-9-102 of the general 210
282282 statutes. 211
283283 (d) A person seeking appointment of a receiver may nominate a 212
284284 person to serve as receiver, but the court is not bound by the 213
285285 nomination. 214
286286 Sec. 8. (NEW) (Effective October 1, 2020) (a) Except as provided in 215
287287 subsection (b) of this section, a receiver shall post with the court a bond 216
288288 that: 217
289289 (1) Is conditioned on the faithful discharge of the receiver's duties; 218
290290 (2) Has one or more sureties approved by the court; 219
291291 (3) Is in an amount the court specifies; and 220
292292 (4) Is effective as of the date of the receiver's appointment. 221
293293 (b) The court may approve the posting by a receiver with the court of 222
294294 alternative security such as a letter of credit or deposit of funds. The 223
295295 receiver may not use receivership property as alternative security. 224
296296 Interest that accrues on deposited funds must be paid to the receiver on 225
297297 the receiver's discharge. 226
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304304 (c) The court may authorize a receiver to act before the receiver posts 227
305305 the bond or alternative security required by this section. 228
306306 (d) A claim against a receiver's bond or alternative security must be 229
307307 made not later than one year after the date the receiver is discharged. 230
308308 Sec. 9. (NEW) (Effective October 1, 2020) On appointment of a receiver, 231
309309 the receiver has the status of a lien creditor under: 232
310310 (1) Article 9 of title 42a of the general statutes as to receivership 233
311311 property that is personal property or fixtures; and 234
312312 (2) Any provision of the general statutes that provides for filing on 235
313313 the land records of a town a certificate as to receivership property that 236
314314 is real property. 237
315315 Sec. 10. (NEW) (Effective October 1, 2020) Except as provided by the 238
316316 law of this state other than sections 1 to 28, inclusive, of this act, property 239
317317 that a receiver or owner acquires after appointment of the receiver is 240
318318 subject to a security agreement entered into before the appointment to 241
319319 the same extent as if the court had not appointed the receiver. 242
320320 Sec. 11. (NEW) (Effective October 1, 2020) (a) Unless the court orders 243
321321 otherwise, on demand by a receiver: 244
322322 (1) A person that owes a debt that is receivership property and is 245
323323 matured or payable on demand or on order shall pay the debt to or on 246
324324 the order of the receiver, except to the extent the debt is subject to setoff 247
325325 or recoupment; and 248
326326 (2) Subject to subsection (c) of this section, a person that has 249
327327 possession, custody or control of receivership property shall turn the 250
328328 property over to the receiver. 251
329329 (b) A person that has notice of the appointment of a receiver and owes 252
330330 a debt that is receivership property may not satisfy the debt by payment 253
331331 to the owner. 254
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338338 (c) If a creditor has possession, custody or control of receivership 255
339339 property and the validity, perfection or priority of the creditor's lien on 256
340340 the property depends on the creditor's possession, custody or control, 257
341341 the creditor may retain possession, custody or control until the court 258
342342 orders adequate protection of the creditor's lien. 259
343343 (d) Unless a bona fide dispute exists about a receiver's right to 260
344344 possession, custody or control of receivership property, the court may 261
345345 sanction as civil contempt a person's failure to turn the property over 262
346346 when required by this section. 263
347347 Sec. 12. (NEW) (Effective October 1, 2020) (a) Except as limited by court 264
348348 order or law of this state other than sections 1 to 28, inclusive, of this act, 265
349349 a receiver may: 266
350350 (1) Collect, control, manage, conserve and protect receivership 267
351351 property; 268
352352 (2) Operate a business constituting receivership property, including 269
353353 preservation, use, sale, lease, license, exchange, collection or disposition 270
354354 of the property in the ordinary course of business; 271
355355 (3) In the ordinary course of business, incur unsecured debt and pay 272
356356 expenses incidental to the receiver's preservation, use, sale, lease, 273
357357 license, exchange, collection or disposition of receivership property; 274
358358 (4) Assert a right, claim, cause of action or defense of the owner which 275
359359 relates to receivership property; 276
360360 (5) Seek and obtain instruction from the court concerning 277
361361 receivership property, exercise of the receiver's powers and 278
362362 performance of the receiver's duties; 279
363363 (6) On subpoena, compel a person to submit to examination under 280
364364 oath, or to produce and permit inspection and copying of designated 281
365365 records or tangible things, with respect to receivership property or any 282
366366 other matter that may affect administration of the receivership; 283
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373373 (7) Engage a professional, as provided in section 15 of this act; 284
374374 (8) Apply to a court of another state for appointment as ancillary 285
375375 receiver with respect to receivership property located in that state; and 286
376376 (9) Exercise any power conferred by court order, sections 1 to 28, 287
377377 inclusive, of this act or the law of this state other than sections 1 to 28, 288
378378 inclusive, of this act. 289
379379 (b) With court approval, a receiver may: 290
380380 (1) Incur debt for the use or benefit of receivership property other 291
381381 than in the ordinary course of business; 292
382382 (2) Make improvements to receivership property; 293
383383 (3) Use or transfer receivership property other than in the ordinary 294
384384 course of business, as provided in section 16 of this act; 295
385385 (4) Adopt or reject an executory contract of the owner, as provided in 296
386386 section 17 of this act; 297
387387 (5) Pay compensation to the receiver, as provided in section 21 of this 298
388388 act and to each professional engaged by the receiver, as provided in 299
389389 section 15 of this act; 300
390390 (6) Recommend allowance or disallowance of a claim of a creditor, as 301
391391 provided in section 20 of this act; and 302
392392 (7) Make a distribution of receivership property, as provided in 303
393393 section 20 of this act. 304
394394 (c) A receiver shall: 305
395395 (1) Prepare and retain appropriate business records, including a 306
396396 record of each receipt, disbursement and disposition of receivership 307
397397 property; 308
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404404 (2) Account for receivership property, including the proceeds of a 309
405405 sale, lease, license, exchange, collection or other disposition of the 310
406406 property; 311
407407 (3) File on the land records of the town where the real property is 312
408408 located a copy of the order appointing the receiver and, if a legal 313
409409 description of the real property is not included in the order, the legal 314
410410 description; 315
411411 (4) Disclose to the court any fact arising during the receivership 316
412412 which would disqualify the receiver under section 7 of this act; and 317
413413 (5) Perform any duty imposed by court order, sections 1 to 28, 318
414414 inclusive, of this act or the law of this state other than sections 1 to 28, 319
415415 inclusive, of this act. 320
416416 (d) The powers and duties of a receiver may be expanded, modified 321
417417 or limited by court order. 322
418418 Sec. 13. (NEW) (Effective October 1, 2020) (a) An owner shall: 323
419419 (1) Assist and cooperate with the receiver in the administration of the 324
420420 receivership and the discharge of the receiver's duties; 325
421421 (2) Preserve and turn over to the receiver all receivership property in 326
422422 the owner's possession, custody or control; 327
423423 (3) Identify all records and other information relating to the 328
424424 receivership property, including a password, authorization or other 329
425425 information needed to obtain or maintain access to or control of the 330
426426 receivership property, and make available to the receiver the records 331
427427 and information in the owner's possession, custody or control; 332
428428 (4) On subpoena, submit to examination under oath by the receiver 333
429429 concerning the acts, conduct, property, liabilities and financial condition 334
430430 of the owner or any matter relating to the receivership property or the 335
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438438 (5) Perform any duty imposed by court order, sections 1 to 28, 337
439439 inclusive, of this act or the law of this state other than sections 1 to 28, 338
440440 inclusive, of this act. 339
441441 (b) If an owner is a person other than an individual, this section 340
442442 applies to each officer, director, manager, member, partner, trustee or 341
443443 other person exercising or having the power to exercise control over the 342
444444 affairs of the owner. 343
445445 (c) If a person knowingly fails to perform a duty imposed by this 344
446446 section, the court may: 345
447447 (1) Award the receiver actual damages caused by the person's failure, 346
448448 reasonable attorneys' fees and costs; and 347
449449 (2) Sanction the failure as civil contempt. 348
450450 Sec. 14. (NEW) (Effective October 1, 2020) (a) Except as provided in 349
451451 subsection (d) of this section or ordered by the court, an order 350
452452 appointing a receiver operates as a stay, applicable to all persons, of an 351
453453 act, action or proceeding: 352
454454 (1) To obtain possession of, exercise control over or enforce a 353
455455 judgment against receivership property; and 354
456456 (2) To enforce a lien against receivership property to the extent the 355
457457 lien secures a claim against the owner which arose before entry of the 356
458458 order. 357
459459 (b) Except as provided in subsection (d) of this section, the court may 358
460460 enjoin an act, action or proceeding against or relating to receivership 359
461461 property if the injunction is necessary to protect the property or facilitate 360
462462 administration of the receivership. 361
463463 (c) A person whose act, action or proceeding is stayed or enjoined 362
464464 under this section may apply to the court for relief from the stay or 363
465465 injunction for cause. 364
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472472 (d) An order under subsection (a) or (b) of this section does not 365
473473 operate as a stay or injunction of: 366
474474 (1) An act, action or proceeding to foreclose or otherwise enforce a 367
475475 mortgage by the person seeking appointment of the receiver; 368
476476 (2) An act, action or proceeding to perfect, or maintain or continue 369
477477 the perfection of, an interest in receivership property; 370
478478 (3) Commencement or continuation of a criminal proceeding; 371
479479 (4) Commencement or continuation of an action or proceeding, or 372
480480 enforcement of a judgment other than a money judgment in an action or 373
481481 proceeding, by a governmental unit to enforce its police or regulatory 374
482482 power; or 375
483483 (5) Establishment by a governmental unit of a tax liability against the 376
484484 owner or receivership property or an appeal of the liability. 377
485485 (e) The court may void an act that violates a stay or injunction under 378
486486 this section. 379
487487 (f) If a person knowingly violates a stay or injunction under this 380
488488 section, the court may: 381
489489 (1) Award actual damages caused by the violation, reasonable 382
490490 attorneys' fees and costs; and 383
491491 (2) Sanction the violation as civil contempt. 384
492492 Sec. 15. (NEW) (Effective October 1, 2020) (a) With court approval, a 385
493493 receiver may engage an attorney, accountant, appraiser, auctioneer, 386
494494 broker or other professional to assist the receiver in performing a duty 387
495495 or exercising a power of the receiver. The receiver shall disclose to the 388
496496 court: 389
497497 (1) The identity and qualifications of the professional; 390
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504504 (2) The scope and nature of the proposed engagement; 391
505505 (3) Any potential conflict of interest; and 392
506506 (4) The proposed compensation. 393
507507 (b) A person is not disqualified from engagement under this section 394
508508 solely because of the person's engagement by, representation of, or other 395
509509 relationship with the receiver, a creditor or a party. Sections 1 to 28, 396
510510 inclusive, of this act do not prevent the receiver from serving in the 397
511511 receivership as an attorney, accountant, auctioneer or broker when 398
512512 authorized by law. 399
513513 (c) A receiver or professional engaged under subsection (a) of this 400
514514 section shall file with the court an itemized statement of the time spent, 401
515515 work performed and billing rate of each person that performed the work 402
516516 and an itemized list of expenses. The receiver shall pay the amount 403
517517 approved by the court. 404
518518 Sec. 16. (NEW) (Effective October 1, 2020) (a) In this section, "good 405
519519 faith" means honesty in fact and the observance of reasonable 406
520520 commercial standards of fair dealing. 407
521521 (b) With court approval, a receiver may use receivership property 408
522522 other than in the ordinary course of business. 409
523523 (c) With court approval, a receiver may transfer receivership property 410
524524 other than in the ordinary course of business by sale, lease, license, 411
525525 exchange or other disposition. Unless the agreement of sale provides 412
526526 otherwise, a sale under this section is free and clear of a lien of the 413
527527 person that obtained appointment of the receiver, any subordinate lien 414
528528 and any right of redemption, but is subject to a senior lien. 415
529529 (d) A lien on receivership property which is extinguished by a 416
530530 transfer under subsection (c) of this section attaches to the proceeds of 417
531531 the transfer with the same validity, perfection and priority the lien had 418
532532 on the property immediately before the transfer, even if the proceeds 419
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539539 are not sufficient to satisfy all obligations secured by the lien. 420
540540 (e) A transfer under subsection (c) of this section may occur by means 421
541541 other than a public auction sale. A creditor holding a valid lien on the 422
542542 property to be transferred may purchase the property and offset against 423
543543 the purchase price part or all of the allowed amount secured by the lien, 424
544544 if the creditor tenders funds sufficient to satisfy in full the reasonable 425
545545 expenses of transfer and the obligation secured by any senior lien 426
546546 extinguished by the transfer. 427
547547 (f) A reversal or modification of an order approving a transfer under 428
548548 subsection (c) of this section does not affect the validity of the transfer 429
549549 to a person that acquired the property in good faith or revive against the 430
550550 person any lien extinguished by the transfer, whether the person knew 431
551551 before the transfer of the request for reversal or modification, unless the 432
552552 court stayed the order before the transfer. 433
553553 Sec. 17. (NEW) (Effective October 1, 2020) (a) In this section, "timeshare 434
554554 interest" means an interest having a duration of more than three years 435
555555 which grants its holder the right to use and occupy an accommodation, 436
556556 facility or recreational site, whether improved or not, for a specific 437
557557 period less than a full year during any given year. 438
558558 (b) Except as provided in subsection (h) of this section, with court 439
559559 approval, a receiver may adopt or reject an executory contract of the 440
560560 owner relating to receivership property. The court may condition the 441
561561 receiver's adoption and continued performance of the contract on terms 442
562562 appropriate under the circumstances. If the receiver does not request 443
563563 court approval to adopt or reject the contract within a reasonable time 444
564564 after the receiver's appointment, the receiver is deemed to have rejected 445
565565 the contract. 446
566566 (c) A receiver's performance of an executory contract before court 447
567567 approval under subsection (b) of this section of its adoption or rejection 448
568568 is not an adoption of the contract and does not preclude the receiver 449
569569 from seeking approval to reject the contract. 450
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576576 (d) A provision in an executory contract which requires or permits a 451
577577 forfeiture, modification or termination of the contract because of the 452
578578 appointment of a receiver or the financial condition of the owner does 453
579579 not affect a receiver's power under subsection (b) of this section to adopt 454
580580 the contract. 455
581581 (e) A receiver's right to possess or use receivership property pursuant 456
582582 to an executory contract terminates on rejection of the contract under 457
583583 subsection (b) of this section. Rejection is a breach of the contract 458
584584 effective immediately before appointment of the receiver. A claim for 459
585585 damages for rejection of the contract must be submitted by the later of: 460
586586 (1) The time set for submitting a claim in the receivership; or 461
587587 (2) Thirty days after the court approves the rejection. 462
588588 (f) If at the time a receiver is appointed, the owner has the right to 463
589589 assign an executory contract relating to receivership property under the 464
590590 law of this state other than sections 1 to 28, inclusive, of this act, the 465
591591 receiver may assign the contract with court approval. 466
592592 (g) If a receiver rejects under subsection (b) of this section an 467
593593 executory contract for the sale of receivership property that is real 468
594594 property in possession of the purchaser or a real-property timeshare 469
595595 interest, the purchaser may: 470
596596 (1) Treat the rejection as a termination of the contract, and in that case 471
597597 the purchaser has a lien on the property for the recovery of any part of 472
598598 the purchase price the purchaser paid; or 473
599599 (2) Retain the purchaser's right to possession under the contract, and 474
600600 in that case the purchaser shall continue to perform all obligations 475
601601 arising under the contract and may offset any damages caused by 476
602602 nonperformance of an obligation of the owner after the date of the 477
603603 rejection, but the purchaser has no right or claim against other 478
604604 receivership property or the receiver on account of the damages. 479
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611611 (h) A receiver may not reject an unexpired lease of real property 480
612612 under which the owner is the landlord if: 481
613613 (1) The tenant occupies the leased premises as the tenant's primary 482
614614 residence; 483
615615 (2) The receiver was appointed at the request of a person other than 484
616616 a mortgagee; or 485
617617 (3) The receiver was appointed at the request of a mortgagee and: 486
618618 (A) The lease is superior to the lien of the mortgage; 487
619619 (B) The tenant has an enforceable agreement with the mortgagee or 488
620620 the holder of a senior lien under which the tenant's occupancy will not 489
621621 be disturbed as long as the tenant performs its obligations under the 490
622622 lease; 491
623623 (C) The mortgagee has consented to the lease, either in a signed 492
624624 record or by its failure timely to object that the lease violated the 493
625625 mortgage; or 494
626626 (D) The terms of the lease were commercially reasonable at the time 495
627627 the lease was agreed to and the tenant did not know or have reason to 496
628628 know that the lease violated the mortgage. 497
629629 Sec. 18. (NEW) (Effective October 1, 2020) (a) A receiver is entitled to 498
630630 all defenses and immunities provided by the law of this state other than 499
631631 sections 1 to 28, inclusive, of this act for an act or omission within the 500
632632 scope of the receiver's appointment. 501
633633 (b) A receiver may be sued personally for an act or omission in 502
634634 administering receivership property only with approval of the court 503
635635 that appointed the receiver. 504
636636 Sec. 19. (NEW) (Effective October 1, 2020) A receiver may file or, if 505
637637 ordered by the court, shall file an interim report that includes: 506
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644644 (1) The activities of the receiver since appointment or a previous 507
645645 report; 508
646646 (2) Receipts and disbursements, including a payment made or 509
647647 proposed to be made to a professional engaged by the receiver; 510
648648 (3) Receipts and dispositions of receivership property; 511
649649 (4) Fees and expenses of the receiver and, if not filed separately, a 512
650650 request for approval of payment of the fees and expenses; and 513
651651 (5) Any other information required by the court. 514
652652 Sec. 20. (NEW) (Effective October 1, 2020) (a) Except as provided in 515
653653 subsection (f) of this section, a receiver shall give notice of appointment 516
654654 of the receiver to creditors of the owner by: 517
655655 (1) Deposit for delivery through first class mail or other commercially 518
656656 reasonable delivery method to the last-known address of each creditor; 519
657657 and 520
658658 (2) Publication as directed by the court. 521
659659 (b) Except as provided in subsection (f) of this section, the notice 522
660660 required by subsection (a) of this section must specify the date by which 523
661661 each creditor holding a claim against the owner which arose before 524
662662 appointment of the receiver must submit the claim to the receiver. The 525
663663 date specified must be at least ninety days after the later of notice under 526
664664 subdivision (1) of subsection (a) of this section or last publication under 527
665665 subdivision (2) of subsection (a) of this section. The court may extend 528
666666 the period for submitting the claim. Unless the court orders otherwise, 529
667667 a claim that is not submitted timely is not entitled to a distribution from 530
668668 the receivership. 531
669669 (c) A claim submitted by a creditor under this section must: 532
670670 (1) State the name and address of the creditor; 533
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677677 (2) State the amount and basis of the claim; 534
678678 (3) Identify any property securing the claim; 535
679679 (4) Be signed by the creditor under penalty of perjury; and 536
680680 (5) Include a copy of any record on which the claim is based. 537
681681 (d) An assignment by a creditor of a claim against the owner is 538
682682 effective against the receiver only if the assignee gives timely notice of 539
683683 the assignment to the receiver in a signed record. 540
684684 (e) At any time before entry of an order approving a receiver's final 541
685685 report, the receiver may file with the court an objection to a claim of a 542
686686 creditor, stating the basis for the objection. The court shall allow or 543
687687 disallow the claim according to the law of this state other than sections 544
688688 1 to 28, inclusive, of this act. 545
689689 (f) If the court concludes that receivership property is likely to be 546
690690 insufficient to satisfy claims of each creditor holding a perfected lien on 547
691691 the property, the court may order that: 548
692692 (1) The receiver need not give notice under subsection (a) of this 549
693693 section of the appointment to all creditors of the owner, but only such 550
694694 creditors as the court directs; and 551
695695 (2) Unsecured creditors need not submit claims under this section. 552
696696 (g) Subject to the provisions of section 21 of this act: 553
697697 (1) A distribution of receivership property to a creditor holding a 554
698698 perfected lien on the property must be made in accordance with the 555
699699 creditor's priority under the law of this state other than sections 1 to 28, 556
700700 inclusive, of this act; and 557
701701 (2) A distribution of receivership property to a creditor with an 558
702702 allowed unsecured claim must be made as the court directs according 559
703703 to the law of this state other than sections 1 to 28, inclusive, of this act. 560
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710710 Sec. 21. (NEW) (Effective October 1, 2020) (a) The court may award a 561
711711 receiver from receivership property the reasonable and necessary fees 562
712712 and expenses of performing the duties of the receiver and exercising the 563
713713 powers of the receiver. 564
714714 (b) The court may order one or more of the following to pay the 565
715715 reasonable and necessary fees and expenses of the receivership, 566
716716 including reasonable attorneys' fees and costs: 567
717717 (1) A person that requested the appointment of the receiver, if the 568
718718 receivership does not produce sufficient funds to pay the fees and 569
719719 expenses; or 570
720720 (2) A person whose conduct justified or would have justified the 571
721721 appointment of the receiver under subdivision (1) of subsection (a) of 572
722722 section 6 of this act. 573
723723 Sec. 22. (NEW) (Effective October 1, 2020) (a) The court may remove a 574
724724 receiver for cause. 575
725725 (b) The court shall replace a receiver that dies, resigns or is removed. 576
726726 (c) If the court finds that a receiver that resigns or is removed, or the 577
727727 representative of a receiver that is deceased, has accounted fully for and 578
728728 turned over to the successor receiver all receivership property and has 579
729729 filed a report of all receipts and disbursements during the service of the 580
730730 replaced receiver, the replaced receiver is discharged. 581
731731 (d) The court may discharge a receiver and terminate the court's 582
732732 administration of the receivership property if the court finds that 583
733733 appointment of the receiver was improvident or that the circumstances 584
734734 no longer warrant continuation of the receivership. If the court finds that 585
735735 the appointment was sought wrongfully or in bad faith, the court may 586
736736 assess against the person that sought the appointment: 587
737737 (1) The fees and expenses of the receivership, including reasonable 588
738738 attorneys' fees and costs; and 589
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745745 (2) Actual damages caused by the appointment, including reasonable 590
746746 attorneys' fees and costs. 591
747747 Sec. 23. (NEW) (Effective October 1, 2020) (a) On completion of a 592
748748 receiver's duties, the receiver shall file a final report including: 593
749749 (1) A description of the activities of the receiver in the conduct of the 594
750750 receivership; 595
751751 (2) A list of receivership property at the commencement of the 596
752752 receivership and any receivership property received during the 597
753753 receivership; 598
754754 (3) A list of disbursements, including payments to professionals 599
755755 engaged by the receiver; 600
756756 (4) A list of dispositions of receivership property; 601
757757 (5) A list of distributions made or proposed to be made from the 602
758758 receivership for creditor claims; 603
759759 (6) If not filed separately, a request for approval of the payment of 604
760760 fees and expenses of the receiver; and 605
761761 (7) Any other information required by the court. 606
762762 (b) If the court approves a final report filed under subsection (a) of 607
763763 this section and the receiver distributes all receivership property, the 608
764764 receiver is discharged. 609
765765 Sec. 24. (NEW) (Effective October 1, 2020) (a) The court may appoint a 610
766766 receiver appointed in another state, or that person's nominee, as an 611
767767 ancillary receiver with respect to property located in this state or subject 612
768768 to the jurisdiction of the court for which a receiver could be appointed 613
769769 under sections 1 to 28, inclusive, of this act, if: 614
770770 (1) The person or nominee would be eligible to serve as receiver 615
771771 under section 7 of this act; and 616
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778778 (2) The appointment furthers the person's possession, custody, 617
779779 control or disposition of property subject to the receivership in the other 618
780780 state. 619
781781 (b) The court may issue an order that gives effect to an order entered 620
782782 in another state appointing or directing a receiver. 621
783783 (c) Unless the court orders otherwise, an ancillary receiver appointed 622
784784 under subsection (a) of this section has the rights, powers and duties of 623
785785 a receiver appointed under sections 1 to 28, inclusive, of this act. 624
786786 Sec. 25. (NEW) (Effective October 1, 2020) A request by a mortgagee for 625
787787 appointment of a receiver, the appointment of a receiver or application 626
788788 by a mortgagee of receivership property or proceeds to the secured 627
789789 obligation does not: 628
790790 (1) Make the mortgagee a mortgagee in possession of the real 629
791791 property; 630
792792 (2) Make the mortgagee an agent of the owner; 631
793793 (3) Constitute an election of remedies that precludes a later action to 632
794794 enforce the secured obligation; 633
795795 (4) Make the secured obligation unenforceable; or 634
796796 (5) Limit any right available to the mortgagee with respect to the 635
797797 secured obligation. 636
798798 Sec. 26. (NEW) (Effective October 1, 2020) In applying and construing 637
799799 sections 1 to 28, inclusive, of this act, consideration must be given to the 638
800800 need to promote uniformity of the law with respect to its subject matter 639
801801 among states that enact it. 640
802802 Sec. 27. (NEW) (Effective October 1, 2020) Sections 1 to 28, inclusive, of 641
803803 this act modify, limit and supersede the Electronic Signatures in Global 642
804804 and National Commerce Act, 15 USC 7001 et seq., but do not modify, 643
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811811 limit or supersede Section 101(c) of said act, 15 USC 7001(c) or authorize 644
812812 electronic delivery of any of the notices described in Section 103(b) of 645
813813 said act, 15 USC 7003(b). 646
814814 Sec. 28. (NEW) (Effective October 1, 2020) Sections 1 to 28, inclusive, of 647
815815 this act do not apply to a receivership for which the receiver was 648
816816 appointed before October 1, 2020. 649
817817 This act shall take effect as follows and shall amend the following
818818 sections:
819819
820820 Section 1 October 1, 2020 New section
821821 Sec. 2 October 1, 2020 New section
822822 Sec. 3 October 1, 2020 New section
823823 Sec. 4 October 1, 2020 New section
824824 Sec. 5 October 1, 2020 New section
825825 Sec. 6 October 1, 2020 New section
826826 Sec. 7 October 1, 2020 New section
827827 Sec. 8 October 1, 2020 New section
828828 Sec. 9 October 1, 2020 New section
829829 Sec. 10 October 1, 2020 New section
830830 Sec. 11 October 1, 2020 New section
831831 Sec. 12 October 1, 2020 New section
832832 Sec. 13 October 1, 2020 New section
833833 Sec. 14 October 1, 2020 New section
834834 Sec. 15 October 1, 2020 New section
835835 Sec. 16 October 1, 2020 New section
836836 Sec. 17 October 1, 2020 New section
837837 Sec. 18 October 1, 2020 New section
838838 Sec. 19 October 1, 2020 New section
839839 Sec. 20 October 1, 2020 New section
840840 Sec. 21 October 1, 2020 New section
841841 Sec. 22 October 1, 2020 New section
842842 Sec. 23 October 1, 2020 New section
843843 Sec. 24 October 1, 2020 New section
844844 Sec. 25 October 1, 2020 New section
845845 Sec. 26 October 1, 2020 New section
846846 Sec. 27 October 1, 2020 New section
847847 Sec. 28 October 1, 2020 New section
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854854
855855 Statement of Purpose:
856856 To adopt the Uniform Commercial Real Estate Receivership Act.
857857
858858 [Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
859859 that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
860860 underlined.]
861861