Enforcing the Divorce Property Settlement Via Receivership
Receiverships have been in the news over the past few months due to a particularly high-profile case. A receiver is a court-appointed professional who takes control of a judgment debtor's assets to satisfy a judgment.
Former President Donald Trump's New York civil fraud trial is getting cranked-up this week. Trump's fraud case is limited to evidence of damages incurred by plaintiffs; the trial judge has already determined that the plaintiffs have proven that Defendant Trump is liable for fraud, leaving only the amount of damages Trump must pay to the victims.
That places the former president in the position of having his companies and real estate holdings placed into receivershp. The receiver will take control of Trump's assets to ensure they are not secreted, dissolved, liquidated or otherwise transferred by the judgment debtor to evade satisfying the judgment.
In family court, judges have broad latitude to enforce their judgments. There are many tools at a family court judge's disposal to make sure that the terms of a divorce judgment is carried out. A receivership is one such tool.
Over the decades, our law firm has been involved in many high-asset divorce cases. We have represented judgment creditors and judgment debtors. Receivers have occasionally been appointed in some of these cases.
The family court's power to appoint a receiver is established by both statute and court rule. Receivers have powers that are tailored via court order pursuant to the receivership statute and court rule. Many times, the receiver's order of appointment and scope of powers are tailored to the particular company or industry involved in the case.
In the cases that involve receiverships, there is often a company owned by one of the spouses or a family-owned business. Receivers, however, can also be appointed to perform simple tasks such as selling real estate.
For the judgment debtor, a receivership is a drastic and costly enforcement mechanism. For the judgment creditor, the receivership often involves delay and the stress that comes with protracted litigation. Usually, it is a proverbial "lose-lose" situation.
For most family court judges, a receivership is a drastic option; used after all other efforts to satisfy the court's divorce judgment have failed.
Michigan caselaw has many examples of how family court judges have used receivers. Here are some well-known examples of receiverships used in post-judgment divorce proceedings:
Judge appointed a receiver to recover the fixtures that wife removed from the marital home;
Judge appointed a receiver to collect husband's monthly pension checks and to apply them to his spousal support obligation;
In one of our cases, the judge appointed a receiver to take control of and to sell husband-debtor's business to satisfy the provisions of the property settlement agreement that husband refused to pay;
Judge appointed the local Friend of the Court as a receiver to collect and distribute husband's workers compensation benefits and to divide them between the parties in accord with the divorce judgment;
Many times, courts have appointed receivers to sell the marial home given the breakdown in cooperation between the now-divorced parties.
Receivers are entitle to reasonable compensation for their efforts. Therefore, appointment of a receiver injects a layer of cost into the post-judgment proceeding.
Sometimes, in particularly high-conflict high-asset cases, when we know there will be problems with enforcing a judgment, we seek language in the divorce judgment that identifies the circumstances in which a receiver will be appointed; identify the receiver to be appointed; and clarify how the receiver will be paid.
Generally, appointment of a receiver is a "last resort" for the family court judge and the parties. Nevertheless, each case has its own unique circumstances. For example, if the receiver is appointed to sell the former marital home, her fees will usually be paid off-the-top of the net proceeds. This depends, however, on whether there is any equity in the home to be sold.
So there are always layered considerations when deciding whether to use the drastic tool of a receivership. The best approach is to be cautious when considering the rights and duties you are asked to assent to in your divorce judgment. Once you agree, do your best to comply with the terms of the judgdment if you are the one that is assigned a duty to make payments or transfer an asset.
If you are divorced and have enforcement issues, contact our law firm to schedule a free consultation. We can learn more about your specific circumstances and discuss your legal options.