Kentucky Court of Appeals Addresses Standard for Appointment of Receiver

Kentucky Court of Appeals Addresses Standard for Appointment of Receiver

      In a decision rendered last week by the Kentucky Court of Appeals, if it affirmed the trial court’s determination that the appointment of a receiver for a limited partnership would not be set aside because the standard for doing so is abuse of discretion, and that was not shown. Sandra B. Hammond in her capacity as Conservator for Linda Owen Miller v. Owen Family Limited Partnership, No. 2017-CA-000438-MR, 2019 WL 1423100 (KY. App. March 29, 2019).

      Miller filed suit against her brother David, general partner of the subject Florida limited partnership, seeking damages and an accounting, all arising out of an alleged misappropriation of rental income. After filing her complaint, she filed a motion seeking the appointment of a receiver. David and the partnership then filed an answer, attaching a copy of the agreement of limited partnership. Linda sought to file an amended complaint adding claims for breach of that partnership agreement. Shortly after granting permission to file the amended complaint, the Circuit Court denied the motion for appointment of a receiver, but did not provide therein findings of fact and conclusions of law.

      The Court of Appeals began its analysis by noting that whether or not a receiver will be appointed is a matter within the discretion of the trial court, and that the decision, one way or another, would not be set aside absent a showing that it “was arbitrary, unreasonable, unfair, or unsupported by sound legal principles.” 2019 WL 1423100, *2 (citations omitted). The court would go on to find, however, that under the applicable rules of civil procedure, the order either granting or denying the appointment of a receiver need not be accompanied by findings of fact and conclusions of law.

      On the merits, it was found that the plaintiff had not made the necessary showing of imminent danger of loss justifying the appointment of a receiver. In consequence, in the absence of evidence justifying the receivership, it was not an abuse of discretion to deny that relief. Rather:

Finally, appellant failed to make the essential showing that the partnership’s property was “in imminent danger of being lost, removed or materially injured, and that only the immediate appointment of a receiver could avert and prevent a harmful result to [her] rights.” Dulworth & Burress Tobacco Warehouse Co. v. Burress, 369 S.W.2d 129, 132 (Ky. 1963). At the hearing, the circuit court heard argument of counsel that appellant intended to file an amended complaint; that the parties were litigating at least five cases with a global settlement conference scheduled for late March, 2017; that the appellant had yet to be deposed; that the partnership was not insolvent; and that David had, at least temporarily, stopped making the expenditures to which she was objecting. Aside from the fact that there was no evidence adduced at the hearing, absolutely nothing argued by counsel for appellant would allow this Court to conclude that the circuit court’s denial of appellant’s request “was arbitrary, unreasonable, unfair, or unsupported by sound legal principles.” [Commonwealth v.] English, supra [993 S.W.2d 941] at 945 [Ky. 1999]. Id.

      As a point of disclosure, I served as an expert witness in a different aspect of the litigation involving the disputes between Linda Owen Miller and her brother David Owen, but I was not involved in this dispute with respect to the appointment of a receiver.