O.C.G.A. § 9-8-3 (2019)

Annotations

Law reviews. For article, “Buying Distressed Commercial Real Estate: What are the Alternatives?,” see 16 (No. 4) Ga. St. B.J. 18 (2010).

JUDICIAL DECISIONS Former Civil Code 1910, § 5479 (see O.C.G.A. § 9-8-3) was an exception to rule of former Civil Code 1910, § 5495 (see O.C.G.A. § 9-5-6) which stated that creditors without liens generally cannot enjoin their debtors from disposing of property. Isaac Silver & Bros. Co. v. Kalmon, 175 Ga. 244, 165 S.E. 434, 1932 Ga. LEXIS 227 (1932). Appointment of receiver determines no right as between parties, nor does it affect the title in any way. The purpose of a receivership is to preserve the property contested for pendente lite until the final disposal of all questions, legal or equitable. Jones v. Wilson, 195 Ga. 310, 24 S.E.2d 34, 1943 Ga. LEXIS 481 (1943). Appointment discretionary. - The power of appointment under this section is discretionary and will not be interfered with unless abused. Rhodes v. Lee, 32 Ga. 470, 1861 Ga. LEXIS 212 (1861); Reid v. Reid, 38 Ga. 24, 1868 Ga. LEXIS 42 (1868); Cohen v. Meyers, Cohen & Co., 42 Ga. 45 (1871); Esterlund v. Dye, 56 Ga. 284, 1876 Ga. LEXIS 266 (1876); Gunby v. Thompson, 56 Ga. 316, 1876 Ga. LEXIS 279 (1876); McCaskill v. Warren, 58 Ga. 286, 1877 Ga. LEXIS 82 (1877); Hammack v. Simmons, 102 Ga. 575, 27 S.E. 668, 1897 Ga. LEXIS 605 (1897) (see O.C.G.A. § 9-8-3). Large discretion is vested in the trial court in granting injunctions and appointing receivers; and unless some principle of substantial equity has been violated, the appellate court will not control the judge’s discretion unless clearly abused. Crockett v. Wilson, 184 Ga. 539, 192 S.E. 19, 1937 Ga. LEXIS 569 (1937). Appointment of receiver can be made regardless of prayer therefore. - The appointment of a receiver rests in the discretion of the trial court and can be made for the protection of the parties even though there is no prayer for a receiver made in the complaint. Dixie-Land Iron & Metal Co. v. Piedmont Iron & Metal Co., 233 Ga. 970, 213 S.E.2d 897, 1975 Ga. LEXIS 1500 (1975). Receiver appointed only where need clearly shown. - A receiver

should not be appointed to take possession of property unless it is clearly made to appear that a receiver is required in order to protect the rights of those interested in the property. Bird v. General Disct. Corp., 194 Ga. 282, 21 S.E.2d 651, 1942 Ga. LEXIS 578 (1942); Jones v. Wilson, 195 Ga. 310, 24 S.E.2d 34, 1943 Ga. LEXIS 481 (1943). Evidence of partner’s misappropriation of law firm property justified appointment of receiver. - Evidence that a partner misappropriated a law firm’s funds before the partners decided to dissolve the firm; borrowed money on the firm’s line of credit without the other partner’s permission and without notifying the bank that the firm was going to be dissolved; and took records from the firm, including most personal injury files, supported the appointment of a receiver under O.C.G.A. §§ 9-8-1 and 9-8-3. Fulp v. Holt, 284 Ga. 751, 670 S.E.2d 785, 2008 Ga. LEXIS 1019 (2008). Evidence sufficient to authorize appointment of receiver. - Appointment of receiver authorized where there was evidence that the uncompleted house subject to materialmen’s liens had been vandalized and left unrepaired and was at risk of further damage and where the possibility of fraudulent collusion between the owner and the construction company existed. Kruzel v. Leeds Bldg. Prods., Inc., 266 Ga. 765, 470 S.E.2d 882, 1996 Ga. LEXIS 351 (1996). Receivership was proper for the subsidiary of a non-profit health care sharing ministry given allegations that a licensing contract had been terminated but that the former licensee was continuing to control the subsidiary’s customers and funds, and funds were needed to pay health care costs. Aliera Healthcare, Inc. v. Anabaptist Healthshare, 355 Ga. App. 381, 844 S.E.2d 268, 2020 Ga. App. LEXIS 319 (2020). Receiver ordinarily should not be appointed without notice and hearing; however, it can be done under extraordinary circumstances. Dixie-Land Iron & Metal Co. v. Piedmont Iron &

Metal Co., 233 Ga. 970, 213 S.E.2d 897, 1975 Ga. LEXIS 1500 (1975). Court may create temporary receivership without notice. - As soon as a court of equity has before it a petition as to persons or a subject matter of which it has jurisdiction, it can, without notice, grant a temporary restraining order, or appoint temporary receivers. Williams v. Jenkins, 11 Ga. 595, 1852 Ga. LEXIS 68 (1852); Webb v. Hicks, 117 Ga. 335, 43 S.E. 738, 1903 Ga. LEXIS 229 (1903). If the danger of dissipating assets before an interlocutory hearing can be had is great, the court in the exercise of sound discretion may, without notice, grant a temporary restraining order or appoint a temporary receiver in order to preserve the status quo until the interlocutory hearing. Edwards v. United Food Brokers, Inc., 195 Ga. 1, 22 S.E.2d 812, 1942 Ga. LEXIS 686 (1942). When responsible party is nonresident or resident evading service, court may appoint temporary receiver for the assets within the jurisdiction of the court. Bettis v. Leavitt, 230 Ga. 607, 198 S.E.2d 296, 1973 Ga. LEXIS 1002 (1973). If there is danger of dissipating assets, appointment of receiver may be ex parte. Dixie-Land Iron & Metal Co. v. Piedmont Iron & Metal Co., 235 Ga. 503, 220 S.E.2d 130, 1975 Ga. LEXIS 912 (1975). Emergency appointment without notice based on equitable principles. - The last sentence of this section, permitting appointment of a receiver without notice, under extraordinary circumstances is merely confirmatory of the equitable principle authorizing the appointment of receivers in cases of urgent emergency. Mann v. Gaddie, 158 F. 42, 1907 U.S. App. LEXIS 3972 (5th Cir. 1907) (see O.C.G.A. § 9-8-3). Joinder of parties. - Nothing in O.C.G.A. § 9-8-3 requires the joining of all creditors to an action seeking a receiver. Lemans Assocs. v. Lemans Apts., 268 Ga. 396, 489 S.E.2d 831. Uninsured building not “manifest danger of loss” justifying appointment. - The fact that the building is uninsured, and in the event of its destruc-

tion by fire the land could not be sold for a sum sufficient to pay the amount claimed, does not constitute such a “manifest danger of loss,” as would warrant an appointment of a receiver. Ray v. Carlisle, 125 Ga. 316, 54 S.E. 119, 1906 Ga. LEXIS 149 (1906). Appointment not justified if administrator failed to support beneficiaries according to terms of will, even though the administrator and the administrator’s sureties were insolvent. Harrup v. Winslet, 37 Ga. 655, 1868 Ga. LEXIS 31 (1868). Appointment not justified if appointment to provide fund for meeting obligations, which it is probable will arise in future at a time when a corporation will have no solvent stockholder. Tichenor v. Williams Block Pavement Co., 1116 Ga. 303, 42 S.E. 505 (1902). To authorize appointment of receiver for property conveyed by bill of sale to secure debt, upon the application of the grantee, both insolvency of the grantor and inadequacy of the security must appear. Wicks v. Community Loan & Inv. Corp., 189 Ga. 620, 7 S.E.2d 385, 1940 Ga. LEXIS 372 (1940). Receiver not appointed for secured property where no proof of inadequate security or debtor’s insolvency. - As a general rule, a receiver will not be appointed for property embraced in security deed, upon the application of the holder thereof, in the absence of allegation and satisfactory proof of the inadequacy of the security and insolvency of the debtor. Dickson v. Hutchinson, 173 Ga. 644, 161 S.E. 139, 1931 Ga. LEXIS 374 (1931). Appointment of receiver for secured property not determinative of final rights thereto. - The appointment of a receiver for property on behalf of one holding a security deed thereto, in aid of a suit on the indebtedness, does not determine the rights of the parties or adjudicate the issues or right and title to the property or the income thereof, the purpose of a receivership being merely to preserve the property and its income, pendente lite, and to await final judgment of the court. Prudential Ins. Co. of Am. v.

Byrd, 188 Ga. 527, 4 S.E.2d 175, 1939 Ga. LEXIS 563 (1939). Evidence supported depositing all fees originated by law firm with receiver. - Although a partnership agreement entitled each of the two law partners to one-half of the fees generated by the law firm, evidence that one partner had misappropriated some of the firm’s funds authorized the trial court to order that all fees originated by that firm be deposited with the receiver. Fulp v. Holt, 284 Ga. 751, 670 S.E.2d 785, 2008 Ga. LEXIS 1019 (2008). Absent agreement, failure to insure secured property not grounds for receivership. - In absence of a covenant by debtor to keep insured buildings on a farm embraced in a security deed, fact that debtor has permitted insurance on the dwelling to lapse does not authorize the appointment of a receiver, in the absence of allegation that the debtor is insolvent and that the lands embraced in the security deed are not worth the secured debt; nor does fact that the defendant has abandoned the farm and is allowing the same to lie idle authorize the appointment of a receiver, in the absence of an allegation of the debtor’s insolvency and of the inadequacy of the security. Dickson v. Hutchinson, 173 Ga. 644, 161 S.E. 139, 1931 Ga. LEXIS 374 (1931). Appointment of receiver appropriate to protect creditor-wife’s interest in property of debtor-husband. - Petition charging that defendant husband was seeking to place his property where it could not be reached by his wife (his judgment creditor) presented a situation where upon proof a court could grant prayers for setting aside alleged fraudulent conveyance and transfer to out-ofstate resident, as well as alleged fraudulent claims of lien for attorneys’ fees, and for appointment of a receiver to take charge of defendant’s assets and under the direction of the court sell enough to pay the petitioner the amount now due under her two judgments. Peoples Loan Co. v. Allen, 199 Ga. 537, 34 S.E.2d 811, 1945 Ga. LEXIS 342 (1945). Appointment of receiver not disturbed where there is conflicting evidence of fraud and insolvency. - Where the grantee in the deed is a nonresident, and the petitioner in the cross-

action alleged a conspiracy to defraud the petitioner, participated in by the grantor and the grantee’s purported agent, and the evidence is conflicting in many material particulars as to insolvency and fraud, the judgment granting the injunction and appointing a receiver at the interlocutory hearing will not be disturbed. Levitsky v. Turk, 182 Ga. 873, 187 S.E. 107, 1936 Ga. LEXIS 584 (1936). Receiver could be appointed even when question remained as to investor’s interest in company. - Because a question of fact as to the existence of an investor’s ownership interest in a company was created by evidence that the company owner admitted that the investor owned 47 percent of the company, and based on evidence that the owner was sending company funds to Greece, the trial court erred in granting summary judgment to the owner and in denying the investor’s request for a receiver to protect the investor’s investment on the basis of a lack of interest in the company. McElvaney v. Roumelco, LLC, 331 Ga. App. 729, 771 S.E.2d 419, 2015 Ga. App. LEXIS 225 (2015), cert. denied, No. S15C1202, 2015 Ga. LEXIS 616 (Ga. Sept. 8, 2015). Appeal from order directing accounting. - O.C.G.A. § 5-6-34(a)(3), allowing direct appeal of a judgment or order “directing that an accounting be had,” does not provide for a direct appeal of all orders appointing an auditor; thus, the relief requested in the complaint must be reviewed to determine the appropriateness of a direct appeal. Parmar v. Khera, 215 Ga. App. 71, 449 S.E.2d 894, 1994 Ga. App. LEXIS 1115 (1994). Receiver appointed where vendee of property insolvent. - When the vendee of property is insolvent and is receiving the rents and profits, the vendor retaining purchase-money notes, a receiver will be appointed to take charge of the property, and to hold the proceeds thereof until final decree. Crockett v. Wilson, 184 Ga. 539, 192 S.E. 19, 1937 Ga. LEXIS 569 (1937). Receivership permissible pending bankruptcy proceedings where homestead exemption waived. - While pending the bankruptcy proceeding the creditor cannot maintain a suit at law

against the debtor to obtain a judgment against the debtor in personam, but where claim of a creditor is evidenced by a promissory note in which the debtor waives the debtor’s exemption of homestead, the debtor is estopped by the debtor’s waiver to claim an exemption as against the creditor, and the latter has a remedy in a court of equity to obtain a judgment in rem against the exempted property, subjecting it to the debtor’s claim; and where the property is of personalty of a perishable nature, or such that it will be destroyed in the use, the court may enjoin the debtor from disposing of the property, and appoint a receiver to take charge of it until a judgment in rem can be obtained. Nelson v. Brannon, 182 Ga. 195, 184 S.E. 870, 1936 Ga. LEXIS 314 (1936). Where a creditor holds a note containing a waiver of homestead exemption and assignment of property, equity may afford the creditor a remedy by injunction to prevent the bankrupt from receiving the property, and appointment of a receiver to apply to the bankruptcy court for possession of the property to be administered by the court of equity. Such an equitable proceeding, instituted after filing of the petition in bankruptcy and before the property is set apart, is not premature on the ground that it is an unauthorized interference with the jurisdiction of the bankruptcy court. Lyle v. Roswell Store, Inc., 187 Ga. 386, 200 S.E. 702, 1938 Ga. LEXIS 797 (1938). Receivership permissible to collect balance due on promissory notes. - In a suit by dealer against manufacturer and several transferees, instituted before maturity of notes, on the basis of the dealer’s equitable interest therein, to enjoin further payment of the notes by the makers, and for appointment of a receiver to collect the balance due on the notes and apply the proceeds after discharge of the debt due to the finance company, which the dealer had guaranteed, the judge did not err on the pleadings and the evidence, in granting an injunction and appointing a receiver. Walter E. Heller & Co. v. Capital City Supply Co., 193 Ga. 695, 19 S.E.2d 729, 1942 Ga. LEXIS 462 (1942). Receivership permissible where insolvent grantor of secured land sued by spouse. - Where a grantor in a security deed is insolvent, and since the execu-

tion of such deed the land has depreciated to a value which is less than the debt, and where after a default by the grantor, who is a married man living upon the property with his wife, a suit is brought by the wife against him and the grantee for recovery of the land, and such suit is being defended upon sufficient grounds by the grantee, the court, at the instance of the grantee, may appoint a receiver to take charge of the land and to collect the rents and profits thereof pending the outcome of the land suit. Sheffield v. Sheffield, 177 Ga. 202, 170 S.E. 83, 1933 Ga. LEXIS 148 (1933). Court properly refused receivership where no evidence that alleged fraudulent transferee insolvent. - Where plaintiff, claiming to have a judgment against the owner of an equitable interest in described personal property, and alleging that the property was in the possession of another as a fraudulent transferee from such owner, prayed for appointment of a receiver to seize and sell the property and distribute the proceeds according to such priority of claims as the court might determine, there being no allegation or evidence that the alleged fraudulent transferee was insolvent, the court did not err in refusing to appoint a receiver. Blanchard v. Atlanta Casket Co., 184 Ga. 722, 193 S.E. 178, 1937 Ga. LEXIS 627 (1937). Manifest danger of loss, destruction or material injury found. - Finding of “manifest danger of loss, destruction, or material injury” to the former owner of an apartment was warranted by evidence that payments on a promissory note had not been made for nine months, there were unauthorized distributions from the property, substantial repairs were required, and there were insufficient funds to pay taxes and insurance. Lemans Assocs. v. Lemans Apts., 268 Ga. 396, 489 S.E.2d 831. Trial court did not abuse its discretion in finding that a danger existed that the two corporations were causing “loss, destruction, or material injury” to the first partner’s interests by not abiding by a previous court order entered to protect the parties in a dispute over the ownership of an internet-based software program. The

evidence suggested the possibility that the corporations’ assets were being diverted and that assets might be dissipated before the case could be resolved constituted an “extraordinary circumstance,”

authorizing the trial court to appoint a receiver without formal notice. D.C. Micro Dev. v. Lange, 259 Ga. App. 611, 578 S.E.2d 251, 2003 Ga. App. LEXIS 218 (2003).

RESEARCH REFERENCES Am. Jur. 2d. 65 Am. Jur. 2d, Receivers, §§ 1 et seq., 11 et seq.,, 23 et seq. C.J.S. 75 C.J.S., Receivers, §§ 1 et seq., 21, 49 et seq. ALR. Right to appointment of receiver in action to enforce mechanics’ lien, 1 A.L.R. 1466. Insurance: appointment of receiver, bankruptcy or insolvency proceedings, or assignment for benefit of creditors as change in interest, title, or possession within fire policy, 17 A.L.R. 382. Right of mortgagee to receiver, 26 A.L.R. 33; 36 A.L.R. 609; 55 A.L.R. 533; 87 A.L.R. 1008; 111 A.L.R. 730; 82 A.L.R.2d 1075. Rights in receivership proceeding as between mortgagee and creditor furnishing supplies required or used for operation, maintenance, and upkeep, of railroad or street railway, where there has been diversion of current earnings to benefit of mortgagee, 40 A.L.R. 8. Right of lessor to compensation out of estate for use of premises by receiver or assignee for creditors without adopting lease, 43 A.L.R. 734. Priority of claim for rent during occupancy by receiver over statutory preference, 55 A.L.R. 278. Right of receiver of conditional vendee to avail himself of defect in execution, or filing, or failure to file, contract, 61 A.L.R. 975. Right to and conditions of appointment of receiver of rents and profits for protection of one liable for deficiency of mortgage debt, 78 A.L.R. 872. Fire insurance: insolvency of, or appointment of receiver for, insurer as affecting subsequent losses, 79 A.L.R. 1267. Claim of lessor or privy against receiver of lessee in respect of leasehold which latter elects not to take over, 84 A.L.R. 892; 111 A.L.R. 556.

Priority over preexisting lien or encumbrance of claims for damages arising from operation of railroad before appointment of receiver, 90 A.L.R. 664. Power of receiver or liquidating officer of insolvent bank or trust company to borrow and pledge assets and power of court to authorize him to do so, 91 A.L.R. 1119. Mortgagor in possession as liable to receiver for occupational rent; right to receiver as affected by mortgagor being in possession, 91 A.L.R. 1236. Receiver of insolvent lessee, who elects to take over the lease, as holding under privity of estate within rule allowing termination of assignee’s liability by reassignment of lease, 95 A.L.R. 379. Right of bondholder who is party defendant in suit to foreclose mortgage to apply for appointment of receiver, 103 A.L.R. 1228. Failure to take judgment for deficiency in suit to foreclose mortgage brought after appointment of receiver or trustee in bankruptcy of mortgagor as affecting right to its allowance as claim in insolvency or bankruptcy proceedings, 104 A.L.R. 1141. Appointment of receiver of property of individual debtor or partnership on application of simple contract creditor without lien, 109 A.L.R. 279. Appointment of receiver after decree or judgment, 111 A.L.R. 500. Power of receiver or liquidator or trustee in bankruptcy to exchange collateral, 112 A.L.R. 476. Right to appointment of receiver in action between persons owning or claiming to own undivided or successive interests in property or fund, 127 A.L.R. 1228. Time when interest ceases to run upon obligation secured by lien transferred to proceeds of sale of the property free from liens in receivership, bankruptcy, or other proceedings, 134 A.L.R. 846.

Appointment of receiver at instance of plaintiffs in tort action, 4 A.L.R.2d 1278. Allowance and priority of wage claims of employees of operating receiver, 27 A.L.R.2d 720. Propriety of appointing receiver, at be-

hest of mortgagee, to manage or operate property during foreclosure action, 82 A.L.R.2d 1075. What constitutes waste justifying appointment of receiver of mortgaged property, 55 A.L.R.3d 1041.