Opinion ID: 1959668
Heading Depth: 1
Heading Rank: 4

Heading: Contractual Obligations of the Receiver

Text: In its petition, Matos contended that the receiver, regardless of his fiduciary status, is bound to his contract like any other citizen, citing Onanian v. Leggat, 2 Mass.App.Ct. 623, 317 N.E.2d 823 (1974) (holding that, although the defendant-executor was under a duty to obtain the highest possible price, he was not excused from performing an existing agreement when he subsequently received a higher offer than the plaintiff's). The court explained that [t]he fiduciary duty of an executor or administrator is separate and distinct from the contractual duty he may incur when he enters into agreements with third persons. The first is owed to and enforceable by the beneficiaries of the estate, while the second is owed to and enforceable by a stranger to the estate. Id. at 825. On his part, the receiver argued that he had a fiduciary duty to the court and to the creditors of the receivership estate and therefore was obligated to maximize the repayment of debt. By the time petitioners indicated their willingness to waive the tax abatement, higher purchase offers had been received for the parcels by the receiver, and the town would have benefited from refusing the tax relief and having the agreement declared void. Accordingly, the receiver argued, because this condition precedent benefited petitioners as well as the receiver, it could not be unilaterally waived. This argument, however, assumes that the receivership status allows the obligation of a contract to be impaired, a proposition we must reject, notwithstanding any alleged overriding fiduciary duty to creditors on the receiver's part or any disputed condition precedent regarding the town's abatement of taxes. In the context of employment law, this Court has stated that [t]he authority of the receiver is limited and the rule is general that one dealing with a receiver is bound to take notice of the extent of his authority. The authority to make the contract of employment included the usual obligations of such acontract. Anderson v. Polleys, 53 R.I. 182, 185 165 A. 436, 437 (1933). Noting the absence at that time of cases exactly on point  a situation that applies even with the case before us  the Court went on to explain that [a] reason for the lack of precedents may be that the principle involved is fundamental in the law of contracts of employment either by individuals or receivers. Id. Further, the status of a receiver has been described as that of one who stands in the shoes of the person over whose estate he has been appointed, and is clothed with only such rights of action as might have been maintained by such person. Frank v. Broadway Tire Exchange Co., 42 R.I. 27, 31, 105 A. 177, 178 (1918); see also Vitterito v. Sportsman's Lodge & Restaurant, Inc., 102 R.I. 72, 228 A.2d 119 (1967) (holding that a receiver applying for a renewal of an alcoholic beverage license was bound by the same legislative requirements to which the debtor would be subjected); Ryder v. Ryder, 19 R.I. 188, 192, 32 A. 919, 921 (1895) (holding that in the absence of fraud and of statutory regulations, [receivers] take only the debtor's rights, and consequently are affected with all claims, liens and equities, which would affect the debtor if he himself were asserting his interest in the property). The Legislature has granted broad powers of control to enable the court in a receivership proceeding to conserve the interests of all parties involved. It is the court's obligation to establish the terms and conditions of sale as it determines appropriate. Bogosian v. Woloohojian, 901 F.Supp. 68, 72 (D.R.I.1995), appeal dismissed, vacated without opinion, 86 F.3d 1146 (1st Cir.1996). Applying these principles to the case before us, it becomes clear that once the Superior Court had approved the sale of the property and granted the receiver's petition, the receiver was bound by the conditions embodied in the court's order. In his initial petition to the Superior Court to sell the property in receivership free and clear of liens, the receiver determined that it is in the best interest of the creditors of the Defendants to sell theReal Estate based upon the terms and conditions of the offers. He further requested that notice of the hearing on the petition should be given to all parties with recorded liens and encumbrances against the estate, and that such parties be directed to execute and deliver to the Receiver    lien releases    and all other documents reasonably necessary to effectuate the release and discharge of such interests    without prejudice to or waiver of any such interests    against the sale proceeds. Finally, the receiver sought a declaration that upon consummation of the sale, all interests of the secured creditors be declared to be released and discharged. At the May 20, 1998 hearing, the receiver made the following statement about the Town of Bristol's tax lien: [B]ecause of the desire to try to have this property re-zoned, we understand that [the town is] prepared to seriously consider waiving all, if not most, of the taxes; and they have been very helpful and intimately involved with the receivership in this situation because although the price is not substantial, it is taking a property that has an enormous liability and hopefully turning it into productive industrial property. We've received no objection to the sale.  (Emphasis added.) Thus, the receiver represented to the initial trial justice that, regardless of the sales bids or the taxes owed to the town, there were considerable other benefits that rendered the agreements advantageous to all parties. The town was not represented at these proceedings and, in the absence of any objection, two orders granting the receiver's petition were issued, authorizing the receiver to sell the real estate free and clear of all interests, claims, liens and encumbrances which were thereby transferred to the proceeds of the sale. These May 20, 1998 orders approving the agreements authorized the sale of the properties with all interests, claims, liens and encumbrances    transferred to the proceeds thereof in the same priority as prior to such transfer. The town had the right, as did any other creditor or bidder, to objectto the sale up to the time of the court's approval. [6] But the town failed to object. Any bids submitted after the agreement was approved by the court entered too late. Moreover, the receiver had no authority to repudiate the terms of the original court orders, but was bound by the original conditions of the sale. Consequently, the trial justice who entered the February 11, 1999 interlocutory order erred in interpreting the tax abatement discussions as constituting a bilateral agreement rather than a condition that could be waived by the buyers. Therefore, although the receiver was unable to secure an abatement, the petitioners have waived this condition. Hence, the November 3, 1999 order authorizing the receiver to sell the properties to LM Development, L.L.C., was also in error. Consequently, Matos and Mt. Hope are entitled to receive deeds without tax abatements, following which they can proceed to negotiate any settlement on taxes with the town.