Opinion ID: 2106827
Heading Depth: 1
Heading Rank: 5

Heading: 367 Cause of Action Against Receiver Joseph G. Koll

Text: The plaintiff alleges that Joseph G. Koll was appointed receiver of the property of the plaintiff including, but not limited to all of the shares of stock of Bill's Sporting Goods, Incorporated; that defendant Koll knowingly and willfully acted in contravention of s. 273.04, Wis. Stats.; that as receiver he did knowingly and willfully continue to operate as a going business the aforementioned Bill's Sporting Goods, Incorporated, without authority and in violation of the laws of . . . Wisconsin; and that as a result the plaintiff's property heretofore identified as Bill's Sporting Goods, Incorporated, lost value and was wasted all to the damage of . . . $500,000.00. [23, 24] A receiver appointed under sec. 273.04, Stats., 1973 can be given the power to take possession of the judgment debtor's assets in order to apply it to the judgment, but he cannot be vested with authority to operate the business of the judgment debtor as a going concern. United States Rubber Products, Inc. v. Twin Highway Tire Co., supra at 241. The implication of such a rule is that a Chapter 273 receiver who operates an asset as a going business concern without authority can be liable for damages caused by his unauthorized control. Furthermore, a receiver to whom the judgment debtor has actually turned over possession or control of specific property acts as a trustee of that property for the benefit of both the judgment creditor and debtor and must exercise ordinary care to preserve the value of the property. 3 Clark on Receivers, sec. 392 (c) (3d ed. 1959). If and when Mr. Koll took control of the plaintiff's stock, he had a duty to exercise ordinary care to preserve its value in disposing of it. In addition, if Mr. Koll took unauthorized control of the management of the corporation, the  corporation would have a cause of action against him to recover whatever damage to the corporate assets his wrongful control may have caused. [25] The plaintiff's complaint does not allege either of these causes of action. Though it alleges that a receiver was appointed for the plaintiff's property, it does not allege that this receiver took actual possession of Mr. Candee's stock. The complaint does not allege a diminution in the value of the plaintiff's shares. It alleges mismanagement of the business contrary to the powers of a receiver in aid of execution and waste of the corporate assets. However, the injury thus alleged belongs to the corporation and not to the plaintiff. The injury alleged would support a derivative suit but not a direct action by the plaintiff that is alleged in this complaint. Rose v. Schantz, 56 Wis.2d 222, 201 N.W.2d 593 (1972). The trial court correctly sustained the demurrer to the cause of action against Joseph G. Koll. Since it is conceivable that either a derivative or a direct cause of action could be alleged, the trial court correctly sustained the demurrer without prejudice.