CONLEE CONSTRUCTION COMPANY, A FLORIDA CORPORATION, HAROLD OSTER, INDIVIDUALLY, AND AS TRUSTEE, JOSEPH SEGAL, ARTHUR HAUPT AND JOHN SERBIN, APPELLANTS,
v.
SYLVAN B. KRAUSE, INDIVIDUALLY, AND AS TRUSTEE, AND J. LEON KAHN, APPELLEES
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In this interlocutory appeal, the Florida District Court of Appeal reversed a lower court's order appointing a corporate receiver pendente lite for Conlee Construction Company, holding that the chancellor abused his discretion by appointing a receiver based solely on allegations in an unsworn complaint without evidence of insolvency or clearly established fraud or mismanagement.
A corporate receiver pendente lite should not be appointed absent insolvency or clear establishment of actual fraud or mismanagement amounting to fraud upon minority stockholders' rights that reasonably portends imminent danger to corporate assets. The appointment must be made only when exigencies demand it and no other court protection can be devised, and such appointment requires a hearing with evidence, not merely unsworn allegations.
“the power to appoint a corporate receiver should be exercised only where exigencies demand it and no other protection to applicant can be devised by the court”
Establishes the narrow circumstances under which a receiver can be appointed
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Join FLexlaw to unlock all legal intelligenceMinority stockholders Sylvan B. Krause and J. Leon Kahn sued Conlee Construction Company and its directors, alleging that company president Harold Ost…
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This is an interlocutory appeal from an order appointing a receiver pendente lite to marshall assets of the Conlee Construction Company and operate and manage said company.
Plaintiffs, Sylvan B. Krause and J. Leon Kahn brought this action as minority stockholders of Conlee Construction Company against the company and its directors requesting, inter alia, that the chancellor appoint a receiver during the pendency of the case to take charge and manage the affairs of the company.
In their complaint the plaintiffs allege that the defendant, Harold Oster, president of the company, has converted company funds to his own use and refused to account to the plaintiffs as to the disposition of said funds. Further, the plaintiffs believe that unless the defendants are restrained by the court, pending the outcome of these proceedings, the defendants will make commitments for the company and obligate it to its detriment. Finally, the plaintiffs allege that the defendants are not handling or attempting to handle the affairs of the company to the best interest of all its stockholders.
The defendants contend that the lower court erred in appointing a corporate receiver pendente lite where there is no allegation of insolvency and where the court heard no testimony nor received any evidence concerning the allegations of mismanagement in plaintiffs’ unsworn complaint.
The power to appoint a corporate receiver at the instance of a stockholder is a discretionary one. However, in McAllister Hotel v. Schatzberg, Fla.1949, 40 So.2d 201, the Supreme Court held that the power to appoint a corporate receiver should be exercised only where exigencies demand it and no other protection to applicant can be devised by the court The court also stated on page 2031:
“The Chancellor should be exceedingly cautious where, as here, there, is no suggestion of insolvency of any of the defendants. The general rule is that a Corporate Receiver pendente lite will not ordinarily he appointed unless the defendants, or at least the primary offending defendant or defendants, be shown to be insolvent. However, there are some exceptions. One of them which is well recognized is that a Receiver may be appointed to wind up the affairs of a corporation or manage and operate its business when actual fraud, or mismanagement amounting to fraud upon the rights of a minority stockholder or creditor which may reasonably portend imminent danger of loss of corporate assets *332and seriously threaten corporate existence, is clearly established.”
On the basis of the record before us which includes no more than allegations in an unsworn complaint and argument of counsel we conclude that the chancellor abused his discretion by appointing a corporate receiver pendente lite. Further proceedings should be held to determine whether plaintiffs can sufficiently establish fraud or mismanagement amounting to fraud upon their rights which may reasonably portend imminent danger of loss. The chancellor should also determine whether the appointment of a receiver can be avoided by devising other protection to the plaintiffs.
Accordingly, the order appointing a receiver pendente lite is reversed and the cause is remanded for further proceedings.
Reversed and remanded.
Cases With Similar Vibessemantic neighbors from the corpus
Citator
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Recarey v. Rader, 320 So. 2d 28 (Fla. 3d DCA 1975)…. 2d 85; McAllister Hotel v. Schatzberg, Fla. 1949, 40 So. 2d 201; Deauville Corporation v. Blount, 1946, 157 Fla. 322, 25 So. 2d 812; Tampa Waterworks Co. v. Wood, 1929, 97 Fla. 493, 121 So. 789; Conlee Construction Company v. Krause, Fla.App.1966, 192 So. 2d 330; 65 Am.Jur.2d, Receivers, § 59; and 27 Fla.Jur., Receivers §§ 7-8. In light of the rules set forth above and after a careful reading of the record, all points in the briefs and arguments of counsel, it is our opinion that the trial court could have…
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Bird Rd. Commercial Sites, Inc. v. Feldstein, 214 So. 2d 658 (Fla. 3d DCA 1968)…t of equity. Generally, the showing of mismanagement or insolvency must be demonstrated by those seeking the appointment of the receiver. McAllister Hotel v. Schatzberg, Fla. 1949, 40 So. 2d 201; Conlee Construction Company v. Krause, Fla.App. 1966, 192 So. 2d 330. However, this rule must be coupled with the premise that the findings of a court of equity come to an appellate court clothed with the presumption of correctness that requires a clear showing of abuse to be overturned. Prudential Insurance Co. of A…
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ALL Seasons Condo. Ass'n, Inc. v. Busca, 8 So. 3d 434 (Fla. 3d DCA 2009)…a N. R.R. Co. v. Sommers, 79 Fla. 816, 85 So. 361 (1920)(appointment of a receiver improper in absence of fraud, self dealing, or waste of secured asset); McAllister Hotel v. Schatzberg, 40 So. 2d 201 (Fla.1949) (same); Conlee Constr. Co. v. Krause, 192 So. 2d 330 (Fla. 3d DCA 1966) (same). Reversed.…
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- Tampa Water Works Co. v. Wood, 97 Fla. 493 (Fla. 1929)
- Deauville Corp. v. IVY T. Blount, 157 Fla. 322 (Fla. 1946)
- Jones v. Harvey, 82 So. 2d 371 (Fla. 1955)
- Diran Papazian v. Kulhanjian, 78 So. 2d 85 (Fla. 1955)
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