Public and Private Sales of Real Property by Federal Court Receivers

 

By John C. Murray and Kenneth R. Jannen**

 

© 2011

 

 

Introduction

 

The election by lenders and special servicers to work out defaulted loans through the use of a court-appointed receiver (either state or federal) to manage, operate, market and sell mortgaged real property before the completion of a foreclosure proceeding is a growing trend in the current depressed commercial real-estate market. Some of the arguments in favor of such a strategy are that it: 1) avoids lender-liability claims because the receiver is an officer of the court and  the buyer is purchasing the property “as is” with no representations or warranties as to the condition of the property and no recourse to the lender for such matters as environmental contamination or construction-defect liability; 2) enables third-party professionals to protect, preserve, operate, manage and market the distressed property efficiently and expeditiously to obtain the best possible price; 3) avoids the delays and expenses involved in completing a foreclosure; and 4) provides for consolidation of receivership proceedings with respect to mortgaged property located in more than one county or, with respect to federal receiverships, more than one state. For virtually all lenders, a sale of property through a receiver (where available) is preferable to filing and completing a real-estate foreclosure proceeding against the borrower (especially in connection with special-purpose properties such as hotels, gas stations, amusement parks and marinas). Lenders also are seeking the appointment of a receiver as an alternative to a bankruptcy filing by or against the borrower. This article will focus on the appointment, rights, and duties of receivers with respect to public and private sales of real property in connection with federal foreclosure proceedings.[1]

 

Use of Receivers in Connection With Defaulted CMBS Loans

 

The use of receivers may be especially advantageous in connection with workouts of commercial mortgage-backed securities (“CMBS”) loans, because the existing debt can be kept in place and the loan modified when the receiver sells the property (and the buyer assumes the mortgage).[2] CMBS loans are held in real estate mortgage investment conduits (“REMICs”), which are special-purpose vehicles used for the pooling of mortgage loans and issuance of mortgage-backed securities, i.e., they are investment vehicles that hold commercial and residential mortgages in trust and issue securities representing an undivided interest in these mortgages. The Internal Revenue Code provisions that govern REMICs forbid them from issuing new debt or making new loans, but certain modifications of an existing defaulted loan are permissible (e.g., reduction of principal, extension of term, or reduction in interest rate) as long as they do not result in the deemed reissuance of the loan for general tax purposes.[3] In 2009, the Internal Revenue Service issued new guidelines giving REMICs greater flexibility in modifying mortgage loans to prevent defaults.[4] Such flexibility allows for the restructuring of the mortgage loan, depending on the REMIC and the particular Pooling and Servicing Agreement (“PSA”) requirements. A REMIC trust is static, and once the pool of mortgage loans has been established the REMIC trust is (as noted above) barred from making new loans or issuing new debt. When the REMIC trust completes a foreclosure sale and the debt has been terminated, either partially or wholly, there is no ability to make a new loan as “seller financing.” If, on the other hand, the property is sold through a receiver (or even by the borrower directly), the mortgage loan can be modified and restructured. This procedure often achieves a much higher net present value of the REMIC trust as compared to a cash sale. Receivership therefore has become an attractive option for such lenders, who wish to avoid foreclosing on properties that are worth far less than the outstanding indebtedness. This trend should continue for at least the next few years because of the continuing decline in the residential and commercial real estate markets.

 

Use of Federal Court Receivers for Real Estate Sales

 

The appointment of a receiver by a federal court generally is considered an extraordinary remedy and is granted only where the plaintiff can establish a clear necessity of protecting its interest in the property pending its final disposition.[5] Sales of real property and other assets by federally appointed receivers are based on and governed by specific federal statutes[6], as well as federal common law.

Although there is no federal statutory post-sale right of redemption, federal courts may permit a foreclosure redemption period under equitable principles and federal common law, which may include state redemption rights in the case of foreclosure actions involving private parties and not government agencies.[7]

The receiver, as an appointed officer of the federal court, has a fiduciary duty to the court to act in the best interests of all the parties, and the party seeking the receiver has no control over the actions and responsibilities of the receiver.[8] As an appointed officer of the court, the receiver is authorized to manage and operate the property in accordance with the laws of the state where the property is located.[9] Therefore, a federally appointed receiver is bound by the substantive laws of the state where the property is located regarding management and operation of the property, to the extent that such laws do not conflict with federal statutes or place an undue burden on federal receiverships.[10]

The authority of a federal receiver to market and sell real property involves a two-step process: 1) a final court order appointing the receiver and authorizing the receiver to market the property and conduct a public or private sale, in the manner provided by applicable federal statute(s) and court rules (and case law, to the extent applicable); and 2) the court’s final order confirming the sale pursuant to a contract executed by the receiver.[11] The proper jurisdiction for obtaining a federal court receivership, and the necessary elements of the motions for the appropriate court orders (as well as of the orders themselves), are discussed below.

Because most receivership orders are drafted by counsel for the secured lender, they often contain provisions seeking to protect the interests of the lender (and provide expansive powers to the receiver).  A federal receiver may not be a clerk or deputy of the court, a federal employee or person employed by the appointing judge, or a person related to the judge by consanguinity within the fourth degree. [12]

 

Jurisdiction of Federal Court

 

To commence an action in federal court, the court must have jurisdiction. Once federal-court jurisdiction over the matter is established, the federal court has ancillary jurisdiction to appoint a receiver and has jurisdiction over all actions commenced by the receiver in carrying out the receiver’s duties. A lender often will seek to have a receiver appointed in connection with a federal judicial action to foreclose the lender’s mortgage.[13]  

Federal law governs the issue of whether to appoint a receiver in a federal diversity action, i.e., federal courts are not bound by state law in determining whether an equitable remedy exists.[14] Once the receiver has been appointed, he or she becomes an officer of the court who manages and operates the property in accordance with the laws of the state where the property is located. Where federal common law is to be applied, it should incorporate the applicable state law unless there is a compelling federal interest to the contrary.  Under federal law, receiverships can also provide for the management, operation (and even the sale) of troubled assets.[15]

  The court must have diversity jurisdiction over the borrower and the holders of all subordinate liens and interests, pursuant to applicable federal statutes and case law.[16] Because appointment of a receiver is merely a tangential action, and not an outcome-affecting, substantive right, a federal court with diversity jurisdiction over a case must comply with the federal rule governing the appointment of receivers, even if state receivership law would produce a different result.[17]

fed. r. civ. p. 66 is instructive regarding the appointment of federal receivers,[18] because it provides that (1) the Federal Rules of Civil Procedure govern an action in which the appointment of a receiver is sought or a receiver sues or is sued; (2) the practice in administering an estate by a receiver or a similar court-appointed officer must accord with the historical practice in federal courts or with a local rule; and (3) an action in which a receiver has been appointed may be dismissed only by court order.[19]

 A federal receiver properly appointed in any civil action or proceeding involving real, personal or mixed property situated in different districts will, upon giving bond as required by the court, be vested with complete jurisdiction, possession and control of all such property.[20] Because a secured lender’s enforcement of its mortgage loan through a foreclosure proceeding usually is not based on a federal question, diversity and the minimum amount in controversy must be established under 28 U.S.C. § 1332 in order for the court to obtain jurisdiction over the matter.[21] The U.S. Supreme Court has held that diversity jurisdiction is determined at the time the suit is commenced in federal district court and that this rule applies even when a non-diverse party is later substituted as the plaintiff. Thus, a post-filing transfer of the plaintiff’s interest to a non-diverse party, who was not an indispensable party at the time of filing, would not deprive the district court of jurisdiction based on lack of diversity of citizenship. [22]

 

Public and Private Sales by Federal Receivers

 

Pursuant to 28 U.S.C. § 2001, property in the possession of the receiver may be sold at either a public sale or a private sale. The public sale of real property by a federally appointed receiver “shall be upon such terms and conditions as the court directs.”[23]

A public sale of real property by a federally appointed receiver must be conducted in the district where the receiver was first appointed, or in some other district if so ordered by the court. Notice of such sale must be published once a week for at least four weeks prior to the sale in at least one newspaper in the county, state, or judicial district where the real estate is located. The notice must be substantially in such form and contain a description of the property by reference or otherwise as the court approves.[24]

The applicable federal statute concerning private sales by federal receivers, 28 U.S.C. § 2001(b), states that:

After a hearing, of which notice to all interested parties shall be given by publication or otherwise as the court directs, the court may order the sale of such realty or interest or any part thereof at private sale for cash or other consideration and upon such terms and conditions as the court approves, if it finds that the best interests of the estate will be conserved thereby.

Thus, there must be a hearing with notice to all interested parties before the court can authorize a private sale. The request for a private sale should be supported by appropriate evidence (i.e., affidavits), and appropriate notice to the borrower and other interested parties.  The hearing and the motion for a private sale involve separate relief from the appointment of a receiver.

The motion to authorize a private sale by the receiver could be made by: 1) the lender concurrently with the motion to appoint a receiver; 2) the lender after the appointment of a receiver; or 3) counsel for a property management receiver seeking to expand the receiver’s authority. For example, the lender might seek the appointment of a receiver for the management and operation of the mortgaged property during the foreclosure proceedings, and later seek to authorize the receiver to sell the receivership property.

With respect to sales of personal property, 28 U.S.C. § 2004 provides that “Any personalty sold under any order or decree of any court of the United States shall be sold in accordance with section 2001 of this title, unless the court orders otherwise.” The court has discretion as to the terms and method of conducting the sale, including whether appraisals are required to sell personal property.[25]

 

Motion for Order Appointing Receiver

 

 Notice of the Motion for Order Appointing Receiver must be given to all necessary parties, consistent with applicable federal statutes and procedural rules. The Motion for Order Appointing Receiver should ask the court to, or authorize the receiver to, where applicable:

  • Investigate and evaluate whether the best interests of the parties are served through a public or private sale (as provided by federal statute).[26]
  • Engage three independent appraisers to establish a value for purposes of the minimum sales price at a private sale, as provided by statute.[27]
  • Engage professional property-management companies and other     professionals to manage and operate the property on a day-to-day basis.[28]
  • Market the property in a commercially reasonable manner and negotiate and execute a contract to sell the property, subject to further order of the court confirming the sale and authorizing delivery of a conveyance deed by the receiver. This authority also might include the authority of the receiver to engage a real estate broker to market the property.

The Motion for Order Appointing Receiver also should:

  • Request that the court rule that the borrower is in default of its obligations under the note and mortgage (or loan agreement) and that the plaintiff lender is entitled to a judgment of foreclosure (without actually ordering a sale).
  • Set forth the amount of principal, interest, costs and fees due, and further interest to accrue. This information should be supported by evidence in the form of an affidavit from an appropriate officer of the plaintiff lender.
  • Unless waived by the borrower, request that the court provide for a redemption period for the borrower and also request that the court state the amount necessary to redeem[29].  (Note: the Motion need not reference redemption rights if they have been properly waived in a state that permits post-default waiver of such rights by the borrower.)[i][30]
  • If there are subordinate liens and the property is to be sold free and clear of those liens without payment and discharge, provide for a redemption period for the holders of such liens[31]

As noted earlier, once the receiver is appointed by the federal district court the receiver becomes an officer of the court who manages and operates the property in accordance with the laws of the state where the property is located. It is important to consider whether the initial Order Appointing Receiver is a final order such that an appeal may be taken pursuant to federal statutes and court rules.[32]

 

Order Appointing Receiver

 

            The Order Appointing Receiver should include the following statements and findings:

  • Proper jurisdiction was obtained based on diversity of the parties to the action and the amount in controversy.
  • All defendants received notice of the Motion for Order Appointing Receiver.
  • The borrower is in default of its obligations under the note and/or loan agreement and mortgage and the lender is entitled to a Final Judgment and Decree of Foreclosure.
  • The lender is granted the relief requested in the Motion for Order Appointing Receiver.
  • The receiver is not a clerk or deputy of the court, a federal employee or person employed by the appointing judge, or a person related to the judge by consanguinity within the fourth degree.
  •  How the receiver is to be compensated.
  •  The receiver’s reporting responsibilities.
  • The amount of a bond that the receiver must post.
  • A description of the receivership property.
  • A reference to the applicable federal statute(s) and court rules permitting    the appointment of the receiver.

Motion for Order Confirming Sale by Receiver

 

Pursuant to 28 U.S.C. § 2001(b), the court must, before confirmation of a private sale, appoint three disinterested persons to appraise the subject property, and the terms of the sale must be published in such newspaper of general circulation as the court directs at least ten days before confirmation. [33] Also, a private sale cannot be confirmed by the court if the price is less than two-thirds of the appraised value. Furthermore, the court cannot confirm the sale if a bona fide offer is made, under conditions provided by the court, which guarantees at least a ten-percent increase over the price offered at the private sale.[34] Query: If the borrower/owner and all lienholders consent to a private sale, does the court still need to follow the appraisal process set forth above, i.e., can the federal statutory requirements be waived or modified?[35] If the borrower/owner and all lienholders do not consent, the lender should (as noted earlier) in its Motion for Order Appointing Receiver, ask the court to appoint appraisers to establish a value for purpose of the minimum sales price at the private sale.[36] The Confirmation Order should (in connection with a private sale) state that the price was at least two-thirds of the appraised value and that no bona fide offer was made at a price that was at least a ten-percent increase over the price offered at the private sale.[37]

Notice of the Motion for Order Confirming Sale by Receiver should be given to all necessary parties, consistent with applicable federal statutes and procedural rules. The Motion for Order Confirming Sale by Receiver should allege the following statements of fact and must be supported by an affidavit of the receiver (and if required by the court, an authorized representative of the lender), confirming such facts and providing detailed information supporting the reasons for requesting the sale of the property:

  •  All defendants received notice of the Motion.
  • The sale is in the best interest of the parties.
  • The property was marketed in a commercially reasonable manner.[38]
  •   A private sale is specifically authorized under applicable federal statutes and rules of civil procedure.
  • The purchaser is not related to the plaintiff by blood, marriage, or any employment or ownership interest.
  • The borrower and all lienholders have consented to the sale, or have been provided an adequate redemptive period and the borrower’s and lienholders’ rights of redemption are foreclosed (or have been waived, if permissible under applicable state law).
  • Whether the sale is to be subject to the plaintiff’s mortgage.
  • If there are contested liens, provide that the property is to be sold free and clear of such liens, which will attach to the sale proceeds. The proceeds will be held in escrow by a specifically designated person or entity and the priority of such liens will be determined by further order of the court.

 

Order Confirming Sale by Receiver (“Confirmation Order”)

 

The Confirmation Order should contain the following statements, information, conditions, and/or findings:

  • The statements of fact in the Motion for Order Confirming Sale must be included in the Confirmation Order as findings of the court.
  • Proper jurisdiction was obtained based on diversity of the parties to the action and the amount in controversy.[39]
  • If the Confirmation Order provides that the sale will be subject to the foreclosing lender’s mortgage, the borrower must be released from its obligation at the time of assumption by the purchaser (which, in all likelihood, will be at a reduced amount) or its obligation must be reduced by the net proceeds of the sale.  Another alternative, more likely in the case of consent by a cooperating buyer, may be a covenant not to sue the borrower for personal liability on the note.   
  • A direction to the receiver to convey pursuant to a specific contract with all material terms of sale, including parties, sale price, broker’s commissions, disposition of liens (including the foreclosing lender’s lien) and closing date. It must state that, upon delivery of the receiver’s deed, the sale will stand as final and confirmed.[40]
  • A statement that the Confirmation Order is a final order and shall not be stayed unless (a) a timely motion for rehearing or a timely appeal as of right is filed and (b) the court issues a stay within such period upon the posting of a bond in the amount of the purchase price and upon such other conditions as are deemed appropriate by the court in accordance with applicable statutes and court rules.

Any objection must be heard and overruled and there must be no stay. The appeal period must expire without a Notice of Appeal having been filed.

 

Title Insurance for Federal Receivership Sales

 

            The lender should consult with its title insurer at the beginning of any action to obtain a federal court receiver in connection with a contemplated sale of the mortgaged property. The lender should determine whether the title insurer will be able and willing to commit to insure, under the facts of the particular transaction -- and subject to full compliance with all statutory and regulatory requirements and the title insurer’s internal underwriting requirements -- that a sale of the property by the receiver pursuant to federal court order prior to completion of the foreclosure proceedings is valid. The authors suggest that the lender provide all required motions and orders of the court, pursuant to the requirements set forth in this article, to the title insurer for review in advance of submission to the court.[41] Note also, that it is unlikely that a title insurer will insure title unless and until any applicable appeal periods have expired with respect to the Confirmation Order.


 

Exhibit A

 

ACKNOWLEDGMENT OF WAIVER OF REDEMPTION RIGHTS

AND CONSENT TO SALE BY RECEIVER*

 

This Acknowledgment of Waiver of Redemption Rights and Consent to Sale by Receiver (the “Waiver and Consent”) dated as of _________, 20__ is executed by                                                 [Borrower], a                                                                                                                company, whose address is ____________________, c/o ______________________________________________________, in favor of                                                                                                                       [“Lender”], and its successors and assigns, whose address is                                                                                         .

 

Recitals:

 

    1. This Waiver and Consent pertains to certain real estate located in               ,                        County,                                    , being more particularly described on Exhibit 1 attached hereto (the “Real Estate”).
    2. Borrower granted Lender [Lender’s predecessor in interest] a mortgage lien against the Real Estate by virtue of a certain Mortgage   (“Mortgage”), dated                    , and recorded                      , at [Book] [Liber]                         , Page             ,                       County Records Office.  [The Mortgage was subsequently assigned to Lender. ]
    3. Borrower acknowledges that it is in default of the Mortgage and the loan documents.
    4. Due to Borrower’s default, the Lender filed pleadings with the                                               Court at Case No.                                         seeking to, among other things, foreclose the Mortgage and have a receiver appointed over the Real Estate.
    5. On                               , the Court entered an Order Appointing Receiver. 
    6. On                               , the Court entered a Supplemental Order Granting Receiver Authority to Sell the Receivership Property (the “Supplemental Order”) which granted the receiver the authority to sell the Real Estate subject to certain conditions.
  1.             In consideration of the payment of $10.00 and for other good and valuable consideration, the receipt and adequacy of which are acknowledged, IT IS AGREED:

     

    * This form was supplied by James L. Allen, Esq., a partner in the Miller, Canfield, Paddock & Stone law firm in Troy, Michigan.

    Agreements:

  2. Borrower absolutely, unconditionally and irrevocably waives any and all equitable and statutory rights of redemption with respect to the Real Estate.
  3. Borrower consents to the provisions of the Order Appointing Receiver and the Supplemental Order.  Borrower agrees that the Real Estate may be sold in accordance with the terms of these Orders.
  4. Borrower was not acting under any misapprehension as to the effect of this Waiver and Consent and acted freely and voluntarily and was not acting under coercion or duress.
  5. Borrower was represented by counsel of its own choice with respect to this Waiver and Consent and the transaction described in this Waiver and Consent.
  6. The undersigned is an authorized signatory of Borrower and has full and complete authority to execute this Waiver and Consent on Borrower’s behalf.
  7. This Waiver and Consent is binding upon Borrower and its successors and assigns and for the benefit of the Lender and its successors and assigns.

Executed as of the date first stated above.

 

Borrower:

 

[Signature Block]

 

 

 

 

STATE OF ______________)

                                                          ) 

COUNTY OF ____________         )

                                                                       

Before me, a Notary Public in and for the State of ________________ and a resident of ___________ County, _________________, personally appeared the                               , of                                                                                                                              , and acknowledged execution of the foregoing Acknowledgment of Waiver of Redemption Rights and Consent to Sale by Receiver.

                                                          

            Witness my hand and Notarial Seal this ______________ __, 20     .

 

                                                                        ____________________________

                                                                        Signature

 

My Commission Expires:___________________

___________________, Notary Public

(print name)

 

 

 

This instrument was prepared by and return to:


 

Exhibit 1

 

Real estate located in ________________, __________ County, ______________, described more particularly as:

 



* Nothing contained in this Article is to be considered as the rendering of legal advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. This Article is intended for educational and informational purposes only. The views and opinions expressed in this Article are solely those of the Authors, and do not necessarily reflect the views, opinions, or policies of the Authors’ employer, First American Title Insurance Company.

** John C. Murray is Vice President and Special Counsel for the First American Title Insurance Company, National Commercial Services, in Chicago, Illinois. Kenneth R. Jannen is Vice President--Counsel, Associate Senior Underwriter, Home Office Staff, First American Title Insurance Company, in Sunrise, Florida. The authors would like to express their appreciation to James L. Allen, Esq., a partner at the Miller, Canfield, Paddock & Stone law firm in Troy, Michigan, for his invaluable assistance with and contributions to this article.

[1] No uniform standards for the appointment, rights, and duties of receivers appointed in connection with foreclosure proceedings exist among the states.

[2] However, there may be provisions such as due-on-sale-and-encumbrance clauses in the original mortgage loan documents that prohibit or restrict the sale or further mortgaging of the property. These provisions, if stated in the loan documents, must be carefully reviewed to determine what is permitted by the lender and if the lender’s prior consent is required, although it would be expected that the lender would not enforce such provisions because it would be the party requesting the sale of the property to the purchaser subject to assumption of the existing mortgage.

[3] See Steve J. Jackson, New Permitted Loan Modifications and Revised Loan Lien Release Rule for REMICs, Financial Markets/Federal Income Tax Update, Orrick, Herrington & Sutcliffe LLP, Sept. 18, 2009. This article states as follows, at pages 2-3 (see also note 2, infra):

In a separate revenue procedure (Revenue Procedure 2009-45) issued concurrent with the final regulations [regarding REMICs, effective Sept. 16, 2009] the IRS provided additional guidance as to when modifications of troubled commercial loans will not present REMIC or investment trust qualification or prohibited transaction tax issues, which under certain circumstances may include modifications of currently performing loans. The revenue procedure covers commercial loan modifications effected on or after January 1, 2008 where, based on all the facts and circumstances, the holder or servicer of the loan reasonably believes that (1) there is a significant risk of default of the pre-modification loan upon maturity of the loan or at an earlier date and (2) the modified loan presents a substantially reduced risk of default, as compared with the pre-modification loan. The revenue procedure notes that in determining the significance of the risk of a default, one relevant factor is how far in the future the possible default may be, but that there is no maximum period after which default is per se not foreseeable.

It should be noted that the relief provided by the revenue procedure does not appear to supersede the additional restrictions on real property lien releases contained in the final regulations described above. As a result, it appears that modifications that involve releases of real property collateral and that otherwise qualify for relief under the revenue procedure may also need to satisfy the "principally secured" requirement of the final regulations in order to avoid disqualification of the loan for REMIC purposes.

The revenue procedure does not cover residential mortgage loans, nor does it cover a REMIC or investment trust if more than 10% of its startup assets consisted of 30+ day delinquent loans or loans with respect to which default was reasonably foreseeable.

Of course, a servicer will still be required to adhere to the relevant servicing standards under applicable contractual arrangements and may not have the authority to make a loan modification even if it is otherwise permitted under the revenue procedure.

[4] See Steve J. Jackson, New Permitted Loan Modifications and Revised Loan Lien Release Rule for REMICs, supra note 3 at page 1:

The IRS has issued final regulations under section 860G of the Internal Revenue Code (T.D. 9463), effective September 16, 2009, that provide for two new categories of loan modifications that will be permitted without presenting qualification or prohibited transaction concerns for REMICs that hold such loans even where a modification results in a deemed re-issuance of the loan for general tax purposes. The two new categories of permitted modifications are (1) a change (release, substitution, addition or other alteration) in credit enhancement for the loan and (2) a change in the nature of the loan from recourse to non-recourse (or vice versa), in each case so long as the loan continues to be principally secured by an interest in real property following such a change as determined pursuant to standards set forth in the new regulations.

The final regulations also provide for a new exception to an existing anti-abuse rule that may otherwise disqualify a loan for REMIC purposes if the REMIC releases its lien on real property securing the loan. This is in addition to an existing exception for certain defeasances. Under the new exception, a real property lien release will not disqualify the loan if made in a modification that is not considered significant under the REMIC rules (e.g., if the modification does not give rise to a deemed reissuance of the loan for general tax purposes or if it falls under one of the six categories of permitted modifications specified in the REMIC rules), so long as the loan continues to be principally secured by an interest in real property following the modification as determined pursuant to standards set forth in the new regulations.

See also Mark Heschmeyer, Distressed CMBS Loans Now Returning Less Than Half Their Value, CoStar Group, June 9, 2010, at P.1 (“The amount of losses on distressed CMBS loans resolved in the past year has jumped 33% to where noteholders are now recovering approximately 43 cents on the dollar”).

[5] Factors considered by federal courts in connection with a request for appointment of a receiver include 1) the existence of a valid claim by the moving party; 2) fraudulent conduct on the part of the defendant; 3) imminent danger that the property may be lost, concealed, injured, diminished in value, or squandered; 4) inadequacy of available legal remedies; 5) the probability that harm to the plaintiff by denial of the appointment is greater than the injury to the parties opposing appointment; 6) the plaintiff’s probable success in the action; and 7) possibility of irreparable injury to the plaintiff’s interest in the property. See, e.g., the following cases, which list the factors considered in deciding whether to appoint a federal receiver: Waag v. Hamm, 10 F.Supp. 2d 1191, 1193 (D. Colo. 1998); Resolution Trust Corp. v. Fountain Circle Assoc. Ltd. P’ship, 799 F.Supp. 48, 50-51 (N.D. Ohio 1992). Cf. U.S. v. Berk & Berk, 767 F.Supp 593, 598 (D.N.J. 1991) (ruling that under federal law, appointment of receiver is not a drastic remedy).
[6] See 28 U.S.C. § 2001 (Sale of realty generally), 28 U.S.C. § 2002 (Notice of sale of realty) and 28 U.S.C. § 2004 (Sale of personalty generally). These statutes govern public and private sales of assets by receivers and contain specific provisions that must be complied with in connection with, e.g., notice requirements and appraisals. There is some flexibility in connection with the procedures under these statutes. See, e.g., Liberte Capital Group, LLC v. Capwill, 421 F.3d 377, 382 (6th Cir. 2005) (“a district court has broad powers in fashioning relief in an equity receivership proceeding”); Tanzer v. Huffines, 412 F.2d 221, 222-23 (3rd Cir. 1969) (permitting receiver to sell property without complying with 28 U.S.C. §§ 2001 and 2004, because of extraordinary circumstances, and holding that District Court did not abuse its discretion); See also Kay Standbridge Kress, Federal Receivership, ABA Section of Business Law Spring Meeting, March 31-April 3, 2005: Bankruptcy Alternative: Federal Receivership and State Law Remedies, pp. 8-10 (discussing statutory requirements in connection with sales of assets by federal receiver, and stating that “federal [c]ourts are generally liberal with respect to receivership sales”).

[7] See United States v. Heasley, 283 F.2d 422, 427 (8th Cir. 1960) (“As to right of redemption where land is sold at a [federal] judicial sale, a sufficient answer is that no such right exists by federal law”). Cf.  United States v. Victory Highway Village, Inc., 662 F2d 488, 498 (8th Cir. 1981) (stating that “[u]nder federal law, no statutory right of redemption exists,” and that “state redemption statutes are not applicable to foreclosure of federally held or insured loans under the National Housing Act,” but also ruling that common law redemption rights do apply); United States v. Vilhauer, 57 Fed. Appx. 711, 713, 2003 WL 548973 (C.A. 8 (N.D.), 2003) (concluding “that there is no federal statutory right of redemption after a foreclosure,” but noting that “[i]n the instant case, the district court exercised its discretion and provided a post-sale equitable period of redemption”); United States v. Elverud, 640 F.Supp. 692, 695 (D. N. Dak. 1986) (holding that North Dakota’s one-year redemption period did not apply to foreclosure of Farmers Home Administration loan, but noting that “when there is little need for a nationally uniform body of law, state law may be incorporated as the federal rule”; court granted 60-day redemption period under circumstances of the case). See also Beef Growers Sugar Co. v. Columbia Trust Co., 3 F.2d 755, 757 (9th Cir. 1925) (ruling that state statute allowing time to redeem property after federal foreclosure sale was not applicable, and stating that:

The receiver was appointed with the consent of the appellant, and the suit was converted into a general receivership to protect and determine the rights of all parties to the suit and to wind up the appellant’s affairs. To this procedure the appellant consented, and it made no objection).

In Resolution Trust Corp. v. Bermel Investment Co., 1991 WL 557610 (D. Minn.) at *2, the court noted “that the Victory Highway [supra] line of case authority involved loans which the federal government had originated and not transactions between private lenders and customers.” The court noted that the U.S. Supreme Court, in United States v. Kimbell Foods, 440 U.S. 715, 728-29 (1979), articulated three factors to determine whether federal or state law would control the rights of the parties to the action, i.e.: (1) Does the nature of the federal program require a nationally-uniform rule of law?; (2) Would the application of state law frustrate specific objectives of the federal program? and (3) Would application of a federal rule disrupt commercial expectations? The U.S. Supreme Court, in Kimbell Foods, ruled that federal law applies regarding the priority of liens under nationwide federal programs, but in cases where federal law governs and there is no federal statute supplying applicable law, it is up to the courts to fashion the applicable rule. The court in Kimbell  Foods stated that:

We conclude that the source of law is federal, but that a national rule is unnecessary to protect the federal interests underlying the loan programs. Accordingly, we adopt state law as the appropriate federal rule for establishing the relative priority of these competing federal and private liens.

Id. at 718. The court in Bermel acknowledged that “the RTC must act according to state law in its capacity as receiver,” 1991 WL 557610 at *3, but noted that in this case the RTC was acting as an involuntary creditor, which suggests the need for the uniform application of federal law.” Id. But the court acknowledged that the mortgage executed by the parties provided that it was to be construed under Minnesota law, which was a factor in the defendant’s favor because of the expectations of the parties regarding the applicability of state law. Nonetheless, the court held that under all the facts of this case, state law must give way to “an overriding federal concern, i.e., that “[a] long redemption period frustrates lenders by decreasing the money recovered and delaying recovery.”  Id.  But having concluded that federal law applied and the Minnesota statute would not be adopted as federal law, the court stated that “common law (pre-sale) redemption rights do [apply].” Id. The court concluded that in this case a short period of seven days from the date of the order of the court confirming the sale would be appropriate because the court’s rejection of the Minnesota statutory redemption period (which in this case was 12 months after sale of the property) was based on “the deleterious effects of its length and the “frustration of the RTCs objectives.” Id. The court rejected the defendants’ allegations of inconsistency based on the RTCs plan to use and obtain the benefit of certain of Minnesota’s statutory procedures, stating that “the issue is redemption, not whether the RTC must completely reject state law” Id. at *4. See also United States v. Curry, 561 F.Supp. 429, 430-31 (D. Kansas 1983) (granting 180-day post-sale redemption period -- as opposed to 12-month period under Kansas foreclosure law -- in connection with foreclosure action brought by United States on behalf of Farmer’s Home Administration because “to hold that the debtors are entitled to no redemption rights would be unnecessarily harsh,” and noting that “contractual waivers of state redemption rights in mortgages to federal agencies are effective notwithstanding state law to the contrary” (citations omitted));      Resolution Trust Corp. v. Johnson, 844 F.Supp. 535, 538 (D. Minn. 1992) (holding that mortgagors were not entitled to state statutory period of redemption even though note and mortgage expressly provided that they were governed by Minnesota law, but granting mortgagors right of redemption within 90 days from date of court’s order confirming sale): United States v. Weiss, 1991 WL 504865 (W.D. Wis. 1991) (holding that, with respect to rights of United States under Farmers Home Administration program, “[s]tate redemption statutes are not applicable to the foreclosure of federally held or insured loans”). Cf. United States v. Molitor, 157 B.R. 427, 428-29 (W.D. Wisc. 1992) (holding that Wisconsin foreclosure statute, including redemption rights, applied as federal rule of decision in determining rights of Federal Home Administration mortgagors and mortgagees); Kamen v. Kemper Financial Services, 500 U.S. 90, 98 (1991) (“[t]he presumption that state law should be incorporated into federal common law is particularly strong in areas in which private parties have entered legal relationships with the expectations that their rights and obligations would be governed by state-law standards”).    

[8] See, e.g.,Waag v. Hamm, supra note 5, 10 F.Supp. 2d at 1193 (holding that receiver, whether in state or federal case, is an officer of the court that appoints it and receiver’s fiduciary duties run to the court, not to any particular creditor, not to the defendant debtor, and not to any other party in interest); Compton v. Paul K. Harding Realty Co.,  6 Ill.App.3d 488, 498 (Ill. App. 1972) (“A receiver is defined to be an indifferent person between the parties, appointed by the court, and on behalf of all parties, and not of the complainant or one defendant only, to receive the thing or property in litigation pending the suit”); Booth v. Clark, 58 U.S. 322, 331 (1854) (“A receiver is an indifferent person between parties appointed by the court to receive the rents, issues, or profits of land, or other thing in question ... pending the suit, where it does not seem reasonable to the court that either party should do it”). See also amjur receivers § 1:

As a general matter, a "receiver" is an indifferent person between parties appointed to receive rents, issues, or profits of land, or other things in question pending suit, where it does not seem reasonable that either party should do it. In other words, a receiver is an officer of the court subject only to its direction and control and he is a mere custodian and agent whose functions are limited to the care of the property committed to its charge; he owes allegiance to the court and not to the one who sought his appointment.

[9] See infra note 15 and accompanying text.
[10] See, e.g., Resolution Trust Corp. v. Fountain Circle Assoc, Ltd. P’ship, supra note 5, 799 F.Supp. at 50 (“Congress has specifically provided that a Federal Equity Receiver, once appointed, is to manage and operate the property according to the laws of the state where the property is located. However, the appointment is to be measured by federal standards.”); Fed. Home Loan Mtg. Corp. v. 550 Riverside Owners Corp., 1991 WL 258779 (S.D.N.Y. 1991) at *1 (“the [federally appointed] receiver is fully bound by the laws of the City and State of New York”)
[11] The right to sell real estate assets is within the scope of the receiver’s complete control over receivership assets under 28 U.S.C. § 754. See S.E.C. v. American Capital Investments, 98 F.3d 1133, 1144 (9th Cir. 1996) (“we conclude that the power of sale is within the scope of a receiver’s ‘complete control’ of receivership assets under § 754, a conclusion firmly rooted in the common law of equity receiverships”). In the case of a private sale, 28 U.S.C. § 2001(b) requires a hearing, with notice to all interested parties and finding by the court that a private sale would be in the best interest of the estate.

[12] See 28 U.S.C. § 458 (Relative of justice or judge ineligible to appointment; no person shall be employed in any office or duty in any court who is related by affinity or consanguinity within the degree of first cousin to any justice or judge of such court); 28 U.S.C. § 957 (Clerks ineligible for certain offices; a clerk of a court or any of his deputies shall not be appointed as a . . . receiver in any case, unless there are special reasons requiring such appointment . . .); 28 U.S.C. § 958 (Persons ineligible as receivers; a person holding any civil or military office or employment under the United States or employed by any justice or judge of the United States is ineligible to act as a federal receiver); and 28 U.S.C. § 1910 (Nepotism in appointment of receiver or trustee; any judge who appoints as receiver, or trustee, any  person related to such judge by consanguinity, or affinity, within the fourth degree, shall be fined or imprisoned not more than five years, or both). Also, to qualify as a receiver the individual must execute a receiver’s oath and post a bond from an insurer. 28 U.S.C. § 754. Although the lender typically moves for appointment of an individual that it has selected as receiver, the receiver should not be biased in favor of any party. See Liberte Capital Group, LLC v. Capwill, supra note 6, 462 F.3d at 551 n. 2 (6th Cir. 2006):

A receiver is an indifferent person between parties, appointed by the court to receive the rents, issue, or profits of land, or other thing in question, pending the suit, where it does not seem reasonable to the court that either party should do it. 1 Clark on Receivers § 11(a) (3d ed.1959).

[13] See Morris A. Ellison, Lawrence M. Dudek and Samuel H. Levine, ‘Tis Better to Receive – The Use of a Receiver in Managing Distressed Real Estate, paper presented at Fall 2009 Annual Meeting of American College of Real Estate Lawyers, http://www.acrel.org/. According to the authors:

Harking back to a court’s general equity jurisdiction, a federal court will not appoint a receiver in equity unless the appointment is ancillary to some form of final relief which is appropriate for equity to give [citation omitted]. In other words, the appointment of a receiver is only a means to reach some legitimate end sought through the exercise of the power of a court of equity. It is not an end in itself [citation omitted].

Id. at p. 7. See also Gordon v. Washington, 295 U.S. 30, 37 (1935), stating that:

A receivership is only a means to reach some legitimate end sought through the exercise of the power of a court of equity. It is not an end in itself. Where a final decree involving the disposition of the property is appropriately asked, the court in its discretion may appoint a receiver to preserve and protect the property pending its final disposition. For that purpose, the court may appoint a receiver of mortgaged property to protect and conserve it pending foreclosure.

But see Chapin v. Stuckey, 286 Ark 359, 362 (Ark. 1985), where the court stated:

We take no exception to the basic principle that receivership is not an end in itself, but is ancillary to some proceeding over which the court has jurisdiction. We believe it is a broad statement of the law which is generally true, but it is neither categorically nor invariably so. It is not, as appellant insists, a characteristic to be rigidly applied.

[14] See Canada Life Assur. Co. v. LaPeter, 563 F.3d 837, 843 (C.A. 9 (Idaho) 2009) (“federal law governs the issue of whether to appoint a receiver in a diversity action”); Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc., 999 F.2d 314, 316 (8th Cir.1993) (the appointment of a receiver in a diversity case is a procedural matter governed by federal law and federal equitable principles” (citations omitted)); Nat’l Partner v. Nat’l Housing, 153 F.3d 1289, 1291-92 (11th Cir. 1998) (“Of those circuits that have directly addressed the issue, each has held that the appointment of a receiver in a diversity action is governed by federal law”).
[15] See 28 U.S.C.§ 959 (Trustees and receivers suable; management; State laws). Sec. 959(b) grants the receiver the right to “manage and operate the property in his possession as such . . . receiver . . . according to the requirements of the valid laws of the State in which such property is situated, in the same manner that the owner or possessor thereof would be bound to do if in possession thereof.”  

[16] See 28 U.S.C. § 1332 (Diversity of Citizenship; amount in controversy; costs), the relevant portion of which states as follows:

(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between--

(1) citizens of different States;

(2) citizens of a State and citizens or subjects of a foreign state;

(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and

(4) a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a State or of different States.

For the purposes of this section, section 1335, and section 1441, an alien admitted to the United States for permanent residence shall be deemed a citizen of the State in which such alien is domiciled.

(b) Except when express provision therefor is otherwise made in a statute of the United States, where the plaintiff who files the case originally in the Federal courts is finally adjudged to be entitled to recover less than the sum or value of $75,000, computed without regard to any setoff or counterclaim to which the defendant may be adjudged to be entitled, and exclusive of interest and costs, the district court may deny costs to the plaintiff and, in addition, may impose costs on the plaintiff.

(c) For the purposes of this section and section 1441 of this title--

(1) a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business, except that in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of the State of which the insured is a citizen, as well as of any State by which the insurer has been incorporated and of the State where it has its principal place of business; and

(2) the legal representative of the estate of a decedent shall be deemed to be a citizen only of the same State as the decedent, and the legal representative of an infant or incompetent shall be deemed to be a citizen only of the same State as the infant or incompetent.

The diversity statute applicable specifically to national banks is 28 U.S.C. § 1348, which provides, in pertinent part, that “[a]ll national banking associations shall, for the purposes of all other actions by or against them, be deemed citizens of the States in which they are respectively located.” Prior to 2006, federal circuit courts of appeals had been split on the issue of the citizenship of national banks for diversity purposes under 28 U.S.C. § 1348. See Jill Holly, The Circuit Split Over the Citizenship of National Banks for Diversity Jurisdiction Purposes Under 28 U.S.C. § 1348, 46 santa clara l. rev.205, 206-07 (2005) (“Differing judicial interpretations of § 1348 have made it unclear whether cases based solely on state law and involving branch locations of a national bank may be removed to federal court when jurisdiction otherwise exists . . . [T]he federal courts of appeals are split on whether the term “located” . . . establishes the citizenship of a national bank in every state in which it operates a branch”; Bradley J. Johnson and George Brandon, National Banks and Diversity Jurisdiction Revisited: More Authority for Remaining in Federal Court, 122 banking l.j. 879, 894-901 (reviewing statutory history of 28 U.S.C. § 1348 and conflicting case law, and arguing that nothing in the history of the statute indicates that “located” should be interpreted to mean that a national bank is a citizen of every state in which it has a branch office). On January 17, 2006, in Wachovia Bank, N.A. v. Schmidt, 546 U.S. 303 (2006), the U.S. Supreme Court resolved the conflict among the federal circuit courts of appeals, ruling that under U.S.C. sec. 1348), a national bank is “located” in the state designated in its articles of association as the locus of its main office, and thus is a citizen of that state for purposes of diversity jurisdiction; a national bank is not a citizen of every state where it has branch offices. The Supreme Court noted in its decision that national banks are “corporate entities chartered not by any State, but by the Comptroller of the Currency of the U.S Treasury.” Id. at 306. The Supreme Court also noted that “Were we to hold, as the Court of Appeals did, that a national bank is additionally a citizen of every State in which it has established a branch, the access of a federally chartered bank to a federal forum would be drastically curtailed in comparison to the access afforded state banks and other state-incorporated entities. Congress, we are satisfied, created no such anomaly.” Id. at 307.  (Note: changes to the location of a national bank’s main office are made by amending the bank's articles of association.) But the Supreme Court’s ruling in Wachovia dealt only with national banks, not with federally chartered companies (such as federally chartered savings banks). See, e.g., Lehman Bros. Bank, FSB v. Frank T. Yoder Mortg.  415 F.Supp.2d 636, 642 (E.D. Va., 2006) (“extending Wachovia in this manner would run counter to Congress' trend to narrow, not enlarge, federal diversity jurisdiction with respect to federally chartered corporations.”) See also Excelsior Funds, Inc. v. JP Morgan Chase Bank, N.A.  470 F.Supp.2d 312, 322-323 (S.D.N.Y. 2006). In this case, the court held that 28 U.S.C. § 1348 is a specific provision that precisely defines the citizenship of national banking associations, while, on the other hand, § 1332(c)(1) is a general provision governing the citizenship of corporations for diversity purposes generally. The court stated that “There is no clear indication that Congress ever intended to extend the general provision of § 1332(c)(1) to national banks. On the contrary, the language in § 1332(c)(1) appears not to apply to national banks because it provides that a corporation shall be deemed to be a citizen of ‘any State by which it has been incorporated .’ National  banking associations, which are federally chartered entities, are not incorporated by ‘any State’ (citation omitted). Therefore, given that Congress has ‘discretely provided’ for the citizenship of national banks in § 1348 (citation omitted), the more general provision of § 1332(c)(1) does not apply to national banking associations.”

After the U.S. Supreme Court’s Wachovia Bank decision, several Courts of Appeals have cited the Court's holding that a national bank is a citizen of the state in which its main office, as set forth in its articles of association, is located. However, those cases did not have to decide whether the principal place of business was also a basis for citizenship of a national bank, and none of these cases examined this particular issue. See, e.g., See Halifax Corp. v. Wachovia Bank, N.A., No. 05-1952, 2006 WL 1818202, at *1 (4th Cir. June 28, 2006) (unpublished opinion); Hicklin Engineering, L.C. v. R.J. Bartell, 439 F.3d 346, 348 (7th Cir.2006); Hinton v. Wachovia Bank of Del. Nat'l Ass'n, No. 05-5750, 2006 WL 1751293, at *6 n. 6 (6th Cir. June 27, 2006) (unpublished opinion). But see Excelsior Funds, Inc. v. JP Morgan Chase Bank, N.A.  470 F.Supp.2d 312, 317 (S.D.N.Y., 2006), where the court held that a  national bank is a "citizen," for purposes of diversity jurisdiction, only of the state in which its main office is located as designated in its articles of association, and not the state in which its principal place of business is located, if that state differs from the location of its main office.

[17] See Sterling Sav. Bank v. Citadel Development Co., Inc., 656 F.Supp.2d 1248, 1254 (D. Or. 2009) (“Requiring courts to adhere to the ‘normative standard’ of historical practice in federal courts ensures uniform appointment of receivers”); Canada Life Assur. Co. v LaPeter, supra note 14, 563 F.2d at 843 (“to the extent Rule 66 dictates what principles should be applied to federal receiverships, courts must comply with the rule even in the face of differing state law” (internal quotations and citation omitted)). fed. r. civ. p. 66  states as follows:

These rules govern an action in which the appointment of a receiver is sought or a receiver sues or is sued. But the practice in administering an estate by a receiver or a similar court-appointed officer must accord with the historical practice in federal courts or with a local rule. An action in which a receiver has been appointed may be dismissed only by court order.

(FRCP 66 was amended effective December 1, 2007.) The Federal Rules of Civil Procedure govern procedural matters in connection with a federal receivership. Rule 66 does not create a substantive right to the appointment of a receiver, which right must be established by statute, contract, or pursuant to principles of equity. See Charles Alan Wright, Arthur R. Miller, and Richard L. Marcus, 12 federal practice and procedure § 2983 (2d ed. 2009 update).

[18] See Id.
[19] Id.
[20] Thus federal court receiverships are especially useful if the receivership assets are located in more than one state. See 28 U.S.C. § 754 (Receivers of property in different districts), which vests complete jurisdiction and control of all property (real, personal or mixed) in a receiver appointed in any federal civil action or proceeding. See also Haile v. Henderson Nat’l Bank, 657 F. 2d 816, 822-24 (6th Cir. 1981) (ruling that once federal court jurisdiction over subject matter has been established, court has ancillary jurisdiction to appoint receiver and obtain jurisdiction over actions commenced by receiver in carrying out receiver’s duties, and court's geographical jurisdiction is extended to all districts where receivership property is found).

[21] 28 U.S.C. § 1332. Federal district courts may appoint receivers in cases commenced by governmental entities such as the Federal Deposit Insurance Corporation, without regard to diversity of citizenship and the amount in controversy. See, e.g., subsection (b)(2) of 12 U.S.C. § 1819 (Corporate powers), which states as follows:

(2) Federal court jurisdiction

(A) In general

Except as provided in subparagraph (D), all suits of a civil nature at common law or in equity to which the Corporation [Federal Deposit Insurance Corporation], in any capacity, is a party shall be deemed to arise under the laws of the United States.

(B) Removal

Except as provided in subparagraph (D), the Corporation may, without bond or security, remove any action, suit, or proceeding from a State court to the appropriate United States district court before the end of the 90-day period beginning on the date the action, suit, or proceeding is filed against the Corporation or the Corporation is substituted as a party.

(C) Appeal of remand

The Corporation may appeal any order of remand entered by any United States district court.

[22]  See Freeport-McMoRan Inc. v. KN Energy, Inc., 498 U.S. 426, 428 (1991) (“the well-established rule [is] that diversity of citizenship is assessed at the time the action is filed. We have consistently held that if jurisdiction exists at the time an action is commenced, such jurisdiction may not be divested by subsequent events”); Brough v. Strathmann Supply Co., 358 F.2d 374 (3d Cir. 1966) (finding that diversity jurisdiction continued where non-diverse minor was substituted for his diverse guardian upon reaching maturity). But see Halleran v. Hoffman, 966 F.2d 45, 47 (C.A. 1 (Mass.), 1992) (“A challenge to federal subject matter jurisdiction may be raised at any time, including for the first time on appeal”); American Fiber & Finishing, Inc. v. Tyco Healthcare Group, L.P., 362 F.3d 136, 140 (1st Cir. 2004) (stating that “it is firmly settled that challenges to federal subject matter jurisdiction may be raised for the first time on appeal,” and concluding that “procedural circumstances and ratio decidendi of Freeport-McMoRan limit its precedential value. They make it clear that when the Court declared that ‘subsequent events’ do not divest the district court of diversity jurisdiction, it was referring mainly to post-filing transfers of interest -- not to all post-filing additions of non-diverse parties. Accordingly, we join several other courts of appeals that have read Freeport narrowly and restricted its precedential force . . .”) See generally Charles Alan Wright, Arthur R. Miller, Edward D. Cooper, Richard D. Freer, Joan E. Steinman, Catherine T. Struvel, and Vikram David Amar, The Time for Determining Diversity Jurisdiction, 13E fed. prac. & proc. Juris § 3608 (3d ed.) (current through 2010 Update) (compiling and discussing case law in this area).
[23] 28 U.S.C. § 2001(a).
[24] 28 U.S.C. § 2002.
[25]  See Revere Copper & Brass v. Adriance Mach. Works, 68 F.2d 708, 709 (C.C.A. 2nd Cir. 1934) (“the method of conducting a judicial sale rests in the discretion of the court”).  Article 9 of the Uniform Commercial Code (“UCC”) also governs sales of personal property. See, e.g, the notice requirements set forth in  UCC § 9-611 et seq.
[26] See 28 U.S.C. § 2001(b). This would apply in the situation where counsel for the receiver intends to file a motion, on the receiver’s behalf, seeking authority to expand the receiver’s duties to include a private sale.
[27] See Id.

[28] See 28 U.S.C. § 959, which provides that a federal receiver “shall manage and operate the property in his possession as such . . . receiver according to the requirements of the valid laws of the State in which such property is situated, in the same manner that the owner or possessor would be bound to do if in possession thereof.” Generally, where federal common law is applied it should incorporate the applicable state law absent a compelling federal interest to the contrary. See, e.g., United States v. Kimbell Foods, Inc., supra note 7, 440 U.S. at 728 (“when there is little need for a nationally uniform body of law, state law may be incorporated as the federal rule of decision”); Fed. Home Loan Mtg. Corp. v. Riverdale Bank, 1992 WL 73539 (N.D. Ill., March 27, 1992) at *2 (“federal common law should incorporate the applicable state law absent a compelling reason to the contrary”). But occasionally federal courts will apply “federal common law” alone if they believe the case is particularly complicated and there is a strong need for uniformity in the treatment of the receiver’s claims because application of varying state and foreign laws could frustrate the receiver’s objectives. See In re Si Yeon Park, Ltd., 198 B.R. 956, 963 (Bankr. C.D. Cal. 1996) (“Conflicting jurisdiction between [the] bankruptcy court and the writs and receivers department of the state court over a specific res is . . . commonplace, not rare. The Bankruptcy Code specifies what is supposed to happen under those circumstances: federal law and jurisdiction prevails”);Terry v. June, 359 F.Supp. 2d 510, 517 (W.D. Va. 2005); amended on reconsideration, 420 F.Supp. 2d 493, motion to amend denied, 2006 WL 1049526) (“when an entity (such as a federal agency) performs federal functions under authority granted by federal statute, the duties and rights of that entity are to be determined by federal law”); Midwest Sav. Ass’n v. Riversbend Assoc. P’ship, 724 F.Supp. 661 (D. Minn. 1989) (holding that mortgage default alone did not meet standards for appointing federal receiver under U.S.C. § 959(b), even though such default may have been sufficient to appoint receiver under Minnesota law). In S.E.C. v. Wealth Management, LLC, 2010 WL 4862623, 8 (C.A. 7 (Wis.), Dec. 1, 2010), the court stated that:

Just as an owner or possessor of property is required to comply with state law, so too must a receiver comply with state law in the “management and operation” of the receivership property in his possession. On its face, § 959(b) has no particular significance for distribution decisions in a liquidation; that is, it does not affect the receiver’s -- or the court’s – classification or subordination of claims.

[Emphasis in text]. 28 U.S.C. § 1692 allows nationwide service in a federal receivership proceeding, and the territorial jurisdiction of the appointing court extends to any judicial district in which receivership property is located. 28 U.S.C. § 959(b).

[29] The authors recommend that the redemption period be no less than the time for redemption under the usual state foreclosure process,
[30] A waiver of redemption rights should be in recordable form in those states that permit a post-default waiver of redemption rights.  A form of such a waiver is attached as Exhibit A. For a comprehensive discussion of redemption rights in connection with public and private sales by federal receivers, see supra note 7 and accompanying text.
[31] See supra note 7 and accompanying text.
[32] See 28 U.S.C. § 1292(a)(2), which provides that the federal courts of appeals have jurisdiction of appeals from “[i]nterlocutory orders appointing receivers, or refusing to wind up receiverships or to take steps to accomplish the purposes thereof, such as directing sales or other disposals of property.” See also Garden Homes, Inc. v. United States, 200 F.2d 299, 300 (1952) (holding that order appointing receiver, although interlocutory, is appealable under 28 U.S.C. § 1292(a)(2)); Appealability of order appointing, or refusing to appoint, receiver, 72 A.L.R.2d 1009 (Originally published in 1960) (compilation and discussion of cases deciding whether an order appointing, or refusing to appoint , federal receiver is subject to direct appeal).
[33] There may be a limited number of interested parties where the appointment of the receiver is ancillary to a pending foreclosure action.
[34] Id.
[35] Id. See Modart, Inc. v. Penrose Industries Corp., 293 F.Supp. 1116, 1119 (D.C. Pa. 1967), aff’d  404 F.2d 72 (3rd Cir. 1968) (holding that rights of creditors to property in possession of receiver are fixed as of moment of appointment; all valid, pre-existing liens of property continue despite receivership; and all other claims continue their status as of the appointment date).
[36] Id.
[37] Id..
[38] A supporting affidavit from the receiver should be attached as an exhibit to the Motion for Order Confirming Sale by Receiver, which affidavit should set forth facts demonstrating; 1) the commercial reasonableness of the efforts utilized to obtain a purchaser for the best possible terms under the circumstances (e.g., the media used, such as print or broadcast, to advertise the sale: 3) the “hits” on a web page; 4) how many “marketing packages” were sent out,; 5) a general description of recipients (such as retail REITS, commercial real estate brokers, etc.); 6) how many responses were received; and 7), as a result of the foregoing, how many of these efforts resulted in offers and why the accepted offer was deemed superior).
[39] This is especially important with respect to larger transactions because a challenge to federal subject matter jurisdiction may be raised at any time, including for the first time on appeal.  Where the record on appeal does not contain facts supporting jurisdiction, a court of appeals must, at a minimum, remand the case for inquiry into jurisdictional facts. See supra note 22 and accompanying text
[40]The parties should make certain that the receiver’s deed is properly indexed and recorded in the public records under the mortgagor’s name (or the mortgagor’s successor, as the case may be) as grantor to assure a clear and unbroken chain of title. The Order Appointing Receiver and the Order Confirming Sale by Receiver should be attached as exhibits to the recorded deed. 
[41] For an excellent discussion of federal (and state) receivership actions generally, see Receivership: Bearish Real Estate Loan Climate Creates Bull Market for Emerging Breed of Realtors, bna’s bankruptcy reporter, June 2, 2010 (discussing increasing use of receivers by lenders and special servicers to work out defaulted CMBS loans): Morris A. Ellison, Lawrence M. Dudek and Samuel H. Levine, ‘Tis Better to Receive – The Use of a Receiver in Managing Distressed Real Estate, supra note 13 (discussing and analyzing the general law regarding both federal and state receivership actions and the utilization of such receiverships to manage, market and dispose of distressed commercial real estate); Kay Standbridge Kress, Federal Receivership, ABA Section of Business Law Spring Meeting, March 31-April 3, 2005: Bankruptcy Alternative: Federal Receivership and State Law Remedies, supra n. 6 (containing comprehensive discussion of appointment, jurisdiction, rights, and obligations of federal receivers).


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