Court Refuses to Appoint Receiver Because Misconduct Alleged Was Cured

On November 28, 2023, Justice Ruchelsman of the Kings County Commercial Division issued a decision in Ramirez v. Issa, 2023 NY Slip Op. 34206(U), refusing to appoint a receiver because the misconduct alleged was cured, explaining:

It is well settled that a temporary receiver should only be appointed where there is a clear evidentiary showing of the necessity for the conservation of the property at issue and the need to protect a party’s interests in that property. Thus, a temporary receiver is appropriate where the party has presented clear and convincing evidence of irreparable loss or waste to the subject property and that a temporary receiver is needed to protect their interests. Moreover, a receiver is charged with the responsibility to preserve and protect the property for the benefit of all persons interested in the estate and the receiver’s allegiance is only to the court.

In this case the plaintiffs have failed to present sufficient and clear evidence that a receiver should be appointed to protect their interests. While the plaintiff has accused the defendant of embezzling money that allegation is seriously disputed. Indeed, bank records demonstrate the funds allegedly taken were restored. Moreover, there are: no allegations of any continuing waste or loss that requires a receiver. Other than one accusation of theft, in the past, there is no further allegation of any other impropriety, In fact, the plaintiffs themselves readily admit the restaurant has re-opened. The plaintiffs argue that upon the re-opening of the restaurant the Plaintiffs now desperately and urgently seek the assistance of this Court to designate and appoint a Temporary Receiver for the restaurant and the Defendant Issa, in order to protect the assets of Manhattan Fare Corp. from any further improper diversion of Company funds in violation of the fiduciary and contractual obligations of the Defendant Issa to the Plaintiffs and the Manhattan Fare Corp.. However, the re-opening of the restaurant militates against the waste and loss the plaintiff fears. Other than one instance of disputed improper activity, there is no basis to fear the defendants will cause any loss or waste to the business that necessitates the appointment of a receiver. The re-opening only serves to secure the assets, machinery and items necessary for its successful operation. To the extent the plaintiffs argue the defendants may take profits that are not their full share, mere damages claims will further accrue. That is not a basis for the appointment of a receiver. In truth, the receiver is sought merely to secure the plaintiffs’ share of the restaurant’s business and not to prevent any waste or loss which, as noted, is entirely speculative. Therefore, there is insufficient grounds upon which to seek a receiver.

Thus, there is no clear and convincing evidence a receiver should be appointed. There are significant factual disputes which foreclose the relief sought here and the basis for the appointment is really grounded in speculation. Therefore, the motion seeking the appointment of a receiver is denied.

(Internal quotations and citations omitted).

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