GE LIFE & ANNUITY v. Ft. Collins Assemblage

• Decision Date: 06 December 2001
• Docket Number: No. 01CA0081.,01CA0081.
• Citation: 53 P.3d 703
• Parties: GE LIFE AND ANNUITY ASSURANCE COMPANY, formerly The Life Insurance Company of Virginia, a Virginia corporation, Plaintiff and Counterclaim-Defendant-Appellee, v. FORT COLLINS ASSEMBLAGE, LTD., Defendant and Counterclaim-Plaintiff-Appellant.
• Court: Colorado Court of Appeals

53 P.3d 703

GE LIFE AND ANNUITY ASSURANCE COMPANY, formerly The Life Insurance Company of Virginia, a Virginia corporation, Plaintiff and Counterclaim-Defendant-Appellee, v. FORT COLLINS ASSEMBLAGE, LTD., Defendant and Counterclaim-Plaintiff-Appellant.

No. 01CA0081.

Colorado Court of Appeals, Div. I.

December 6, 2001.

Certiorari Denied August 19, 2002.

Isaacson, Rosenbaum, Woods & Levy, P.C., Pamela A. Johnson, Denver, CO, for Plaintiff and Counterclaim-Defendant-Appellee.

Fairfield & Woods, P.C., John M. Tanner, Anna S. Itenberg, Denver, CO, for Defendant and Counterclaim-Plaintiff-Appellant.

Opinion by Judge TAUBMAN.

Defendant, Fort Collins Assemblage, Ltd. (FCAL), appeals the trial court's order granting the request of plaintiff, GE Life and Annuity Assurance Company (GE), to appoint a receiver. FCAL also appeals the judgment entered against it and in favor of GE. We reverse and remand for further proceedings.

GE was the holder of a promissory note in the original principal sum of $1,000,000. Originally executed by a third party in 1985, the promissory note was secured by a deed of trust on a property in El Paso County. In 1989, FCAL purchased the property from the third party and subsequently made monthly payments to GE pursuant to the note until early 2000.

The deed of trust provided that:

in the event of a default in any of the Loan Documents, Trustees and Noteholder, individually or collectively, as Noteholder shall determine, are hereby vested with the power to seek and obtain the appointment of a receiver as a matter of right and regardless of the adequacy of the security for the indebtedness hereby secured.

FCAL did not make monthly payments for the first two months of 2000. In March, GE sent FCAL a notice of default indicating that it was accelerating the amount due under the note and that, if the default were not corrected, GE would initiate foreclosure proceedings and seek appointment of a receiver.

FCAL submitted a partial payment to GE in the amount of $23,449 on March 23. No payment was made in April.

On April 28, GE filed a verified complaint and an ex parte motion for appointment of a receiver. In its motion, GE stated, among other things, that FCAL was in default on the promissory note, that GE had initiated foreclosure proceedings, that GE was entitled to appointment of a receiver as a matter of right, and that GE had faxed FCAL notice of the motion on April 27. The trial court granted GE's motion and appointed a receiver on April 28, 2000; the receiver took charge of the property pursuant to the order. However, the trial court did not approve the bond of the receiver until May 9, 2000.

FCAL filed a motion to dismiss on May 26, 2000, alleging that the receiver was improperly appointed for several reasons, including that it had not received any notice from GE, by fax or otherwise, before GE filed its motion for appointment of a receiver. Shortly thereafter, FCAL obtained a loan to cure the alleged default on the property. In June 2000, the parties filed a joint motion to vacate the order appointing the receiver. The trial court granted the motion but kept the action open until the receiver made a final accounting. After the receiver submitted his final report, GE moved to discharge the receiver, and the trial court did so.

On August 5, 2000 FCAL filed an objection to the discharge of the receiver and also filed two counterclaims against GE and a third-party complaint against the receiver. FCAL alleged that the receiver had breached his fiduciary duties and that GE had initiated a wrongful foreclosure and a wrongful receivership. GE subsequently filed a motion to dismiss, which the trial court treated as a summary judgment motion and granted, dismissing all claims against the receiver and GE. On appeal, FCAL only appeals the judgment with respect to GE.

I. Appointment of Receiver

FCAL contends that the trial court abused its discretion when it appointed a receiver upon GE's ex parte motion. We agree.

The appointment of a receiver is within the sound discretion of the trial court and will not be disturbed absent a clear abuse of discretion. Jouflas v. Wyatt, 646 P.2d 946 (Colo.App.1982).

However, under Colorado law, a receiver should not be appointed unless the requesting party can demonstrate that the security is clearly inadequate or that the subject property is in danger of being dissipated. § 38-38-601, C.R.S.2001.

An exception to this rule occurs when a contract allows the parties to appoint a receiver under different circumstances. Bank of Am. Nat'l Trust & Sav. Ass'n v. Denver Hotel Ass'n, 830 P.2d 1138 (Colo.App.1992)(trial court did not abuse its discretion in appointing a receiver ex parte where based on contract, bank was entitled to such appointment in the event of default).

Relying on Bank of America, GE argues that it was entitled to the ex parte appointment of a receiver pursuant to a provision in the deed of trust. However, we conclude that Bank of America is distinguishable because the deed of trust language there allowed for the appointment of a receiver "without notice to Grantor." Bank of America, supra, 830 P.2d at 1139.

Here, although the deed of trust permitted the appointment of a receiver, it did not contain similar language allowing appointment of a receiver without notice.

Furthermore, Colorado courts generally disfavor the ex parte appointment of a receiver in the absence of any emergency or exigent circumstances. See Oberto v. Moore, 93 Colo. 93, 97, 23 P.2d 578, 580 (1933)("[A] receivership should not be created unless upon notice that gives ample time for all interested parties to attend and be heard. If there be exceptional cases that require ex parte action, they are limited to momentous emergencies which manifestly threaten dire destruction of health, safety, or irretrievable estate."); Belknap Sav. Bank v. Lamar Land & Canal Co., 28 Colo. 326, 64 P. 212 (1901)(before appointing a receiver, notice must be given to those entitled to be heard); Johnson v. McCaughan, Carter & Scharrer, 672 P.2d 221 (Colo.App.1983)(noting that the ex parte appointment of a receiver may be permissible in emergency situation or where notice is impractical).

While we recognize that the above cases do not consider the ex parte appointment of a receiver in connection with a deed of trust allowing such appointment, other jurisdictions have noted that in enforcing contractual and statutory provisions, a receiver should not be appointed without prior notice and the opportunity to be heard, in the absence of exigent circumstances. See Fed. Home Loan Mortgage Corp. v. Spark Tarrytown, Inc., 813 F.Supp. 234 (S.D.N.Y.1993)

(party seeking ex parte appointment of receiver must demonstrate that notice is impractical because the party involved cannot be found, because there is a bona fide emergency situation, or because prior notice would be likely to result in disappearance of critical evidence or property); Braun v. Pepper, 224 Kan. 56, 578 P.2d 695 (1978)(appointment of a receiver without notice is improper); Indep. Am. Sav. Ass'n v. Preston 117 Joint Venture, 753 S.W.2d 749 (Tex.App.1988)(appointment of a receiver without notice should be exercised with extreme caution and only where great emergency or imperative necessity requires it).

We conclude that these principles should guide us in considering whether the trial court abused its discretion in appointing a receiver, ex parte, where the deed of trust did not provide for such appointment without notice.

Here, FCAL asserts, and GE does not dispute, that it received no notice of GE's motion to appoint a receiver, even though GE asserted in its motion that it had given FCAL notice. Indeed, GE asserts in its brief on appeal that even if it was mistaken in asserting in its complaint that it had sent a fax to FCAL regarding the appointment of a receiver, it was nevertheless entitled to the appointment of a receiver in the event of a default by FCAL. Given this state of the record, we will assume that no prior notice was faxed to FCAL before GE sought the appointment of a receiver. Therefore, without notice, FCAL had no opportunity to request a hearing to contest the appointment of a receiver. In addition, a review of the record demonstrates that GE made no showing of an emergency situation or exigent circumstances. The only ground that GE asserted was that it was entitled to the appointment of a receiver as a matter of right based on the language in the deed of trust. However, we conclude that absent any express language in the deed of trust allowing the...