The Arizone Banker - Issue 2 2019

21 ISSUE 2. 2019 estate receiverships operate in Arizona going forward. With that said, some of the provisions that may make the appointment of a receiver a more streamlined remedy include the following: • A court may appoint a receiver based solely on the borrower’s agreement in a loan document to the appointment of a receiver following default; 9 • A receiver appointed under the Act obtains the status of a lien creditor; 10 • The Act authorizes a receiver to (without further order of the court) operate a business constituting receivership property, and (with prior court approval) incur debt and use receivership property outside the ordinary course of business; 11 and • The Act requires the borrower to cooperate with a receiver appointed under the Act or face sanctions. 12 Previously, litigation might have been required to resolve these types of issues. Now, the Act will govern and hopefully reduce disputes. One of the most significant rights conferred by the Act is the ability of a receiver to sell commercial real property. 13 Although Arizona courts generally approved receiver sales in the past, the Act con- firms that sales are absolutely an available remedy. This should give great comfort to secured creditors going forward. One concern about the Act is that it may hinder the ability of courts and receivers to act as a difficult situation may demand. For example, some practitioners fear that courts will not deviate from the strict language of the Act, which could limit the creativity of receivers and counsel when they confront a problematic issue. To counter this concern, the Act expressly provides that principles of equity supplement the express language of the Act. 14 Accordingly, courts and receivers may still rely on equitable concepts that are not expressly part of the Act. All in all, the Act should create certainty for secured creditors going forward. This is especially true for lenders operating in multiple states where the Act has been adopted. Although the Act should not materially change how most receiverships operate in Arizona, it should hopefully reduce disputes and streamline litigation. w 1 Ben Reeves is a partner at the law firm of Snell & Wilmer, L.L.P., where he devotes a significant portion of his practice litigating commercial disputes involving receiverships, creditor rights, and bankruptcy issues. Ben served as the Arizona Bankers Asso- ciation’s Special Advisor regarding the Act as it made its way through the legislature. 2 The most commonly cited statutes for receiverships are A.R.S. §§ 12-1241, 12-1242, and 33-702. 3 The ULC is an organization that strives to provide states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law. For example, the ULC is the entity that drafted the Uniform Com- mercial Code. 4 See, e.g., Shubh Hotels Boca, LLC v. FDIC, 46 So.3d 163 (Fla. Ct. App. 2010) (holding the receiver lacked authority to sell real property). 5 See A.R.S. § 33-2603(A). 6 See A.R.S. § 33-2603(D). 7 See A.R.S. §§ 33-2613 (litigation stay) and 33-2617 (quasi-judicial immunity). 8 See Mashni v. Foster, 234 Ariz. 522 (Ct. App. 2014) (holding that a receiver is entitled to quasi-judicial immunity). 9 See A.R.S. § 33-2605(B)(2). 10 See A.R.S. § 33-2608. 11 See A.R.S. § 33-2611. 12 See A.R.S. § 33-2612. 13 See A.R.S. § 33-2615. 14 See A.R.S. § 33-2603(E). One concern about the Act is that it may hinder the ability of courts and receivers to act as a difficult situation may demand. For example, some practitioners fear that courts will not deviate from the strict language of the Act, which could limit the creativity of receiv- ers and counsel when they confront a problematic issue. To counter this concern, the Act expressly provides that principles of equity supplement the express language of the Act.14 Accordingly, courts and receivers may still rely on equitable concepts that are not expressly part of the Act.

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