Parties to cases involving a receivership can, if warranted, assert a claim for damages against the receiver. Luxury Townhomes v. McKinley Properties, 992 N.E.2d 810 (Ind. Ct. App. 2013) delves into the procedure applicable to addressing a party’s concerns with a receiver’s performance.
Objection. In Luxury, following a settlement between the lender and the borrower in a commercial foreclosure case, the receiver filed its final report. The borrower objected to the report and also sought permission to assert independent claims against the receiver. The trial court held a three-day evidentiary hearing on the matters. The court ended up approving the final report and discharging the receiver, and also denying the borrower leave to bring a subsequent action against the receiver for negligent performance. The borrower appealed the trial court’s denial of the motion for leave.
Discharge. For a good overview of Indiana authority relating to receiverships, read the Luxury opinion. In Indiana, before discharge can occur, a receiver must file a final report with the court. Ind. Code § 32-30-5-14. Interested parties can file objections to that report, but they must do so within thirty days of filing. I.C. § 32-30-5-18(a). “If objections are not filed within thirty days, they are forever barred.” If a trial court approves a receiver’s final report, this constitutes a release and discharge of the receiver and its surety “for all matters and things related to or contained in” the report. I.C. § 32-30-5-20. Upon the trial court’s approval, the receiver is discharged, subject to the right of appeal.
Barred. The receiver in Luxury contended that the borrower was barred from raising any subsequent claims. Again, the borrower sought to pursue a collateral lawsuit attacking the adequacy of the receiver’s performance. However, that issue had already been considered by the trial court during the evidentiary hearing. In accepting the final report, “the trial court determined that [the receiver] had acted in an appropriate fashion and that [the receiver] had adequately performed his duties as receiver.” That factual determination precluded any subsequent determination that the receiver had acted negligently in its administration of the receivership estate. In legalese, this is known as res judicata.
Takeaway. The Court of Appeals in Luxury basically held that the borrower could not have another bite at the apple. The performance of the receiver had already been considered by the trial court during the hearing on the borrower’s objection to the receiver’s final report. The Court effectively prohibited a subsequent suit against the receiver for alleged negligence in the administration of the receivership estate. If, as a lender or a borrower, you have a beef with the performance of the receiver, you must raise it within thirty days of the filing of the final receiver’s report. Otherwise, according to Luxury, the receiver is fully and finally released and discharged.